journal of business models (2018), vol. 6, no. 2, pp. 15-18 15 classifying the business model from a strategic and innovation perspective julio e. cuc, ph.d. candidate1 aleksandr miina, associate professor2 1school of business and governance, department of business administration, tallinn university of technology, tallinn, estonia. e-mail: julio.cuc@ttu.ee 2school of business administration and governance, department of business administration, tallinn university of technology, tallinn, estonia. e-mail: aleksandr.miina@ttu.ee abstract this study explores the relationship between business model, innovation, and strategy. through a systematic literature review and deductive analysis, it classifies business models according to the degree of innovation, and strategic focus, hence providing a framework to evaluate and improve business models. the research outline suggests a practical application. please cite this paper as: cuc, j. e. and miina, a. (2018), classifying the business model from a strategic and innovation perspective, journal of business models, vol. 6, no. 2, pp. 15-18 acknowledgements: thanks to the support of astra “ttü arenguprogramm aastateks 2016-2022” doctoral school in economics and innovation project code: 2014-2020.4.01.16-0032 keywords: business model innovation (bmi), business strategy, business model classification introduction despite the increasing relevance and importance of business model within the business and academic literature, (casadesus-masanell & ricart 2010; magretta 2002; osterwalder & pigneur 2010; osterwalder et al. 2005; teece 2010; zott et al. 2011; spieth et al. 2016), there is still a lack of appropriate frameworks, tools, and conceptual guidelines for assessing business models from the perspective of innovation, and strategy (cortimiglia et al. 2016; mezger 2014; sako 2012). therefore, this study identifies and explores the relationship between these concepts through a systematic literature review, and reduces it into a classification of the business model according to the degree of innovation and strategic focus. the aim of this study is to provide an assessment tool that could help to evaluate and improve the business models. the article ends with a research agenda to find theoretical and practical implications, and in the future, validate the framework with an empirical data. due to a large number of academic resources, it is possible that relevant articles were discarded in this study. journal of business models (2018), vol. 6, no. 2, pp. 15-18 16 approach a systematic literature review was conducted to identify the most relevant business model approaches within the innovation and strategic management literature. the literature review consisted of the following three phases: firstly, explore developments and recent findings regarding the business model concept. secondly, identify and classify the main definitions of the business model based on its ontological and conceptual point of view, and finally, analyze the relationship between business model, innovation, and strategy to identify emerging concepts, produced by these interrelations. a confirmatory analysis was made using a bibliometric analysis of the co-occurrence of keywords and the most cited authors. this method helped to explore, to organize and to analyze the amount of data obtained (daim et al. 2006) from the business model to obtain patterns and visualize the future development of the concept. in total 140 articles were reviewed using ebsco host, google scholar, scopus and web of science computed the keywords of business model, business model innovation, and business model strategy with and without quotes. articles, in english, were chosen within the subject areas of business management, accounting, economics, econometrics, and finance, selected according to its relevance, the most popular authors, and year of publication, using a “snow ball” technique. based on this literature-based investigation, a classification of the business model was made through a deductive analysis. a venn diagram was developed to illustrate the relationship between business model, innovation, and strategy. then, a tri-dimensional representation was created which help to identify the different combinations involved. for an easier understanding of these interrelations, it was analyzed in a two dimensional model (see figure 1). the two-dimensional analysis shows that innovation and strategy influences business models in low and high degrees. the combinations of high and low degrees produce four main categories which can be represented by a matrix classifying business model in four different types according to its purpose: 1. business models for validation (bmv), in which the firms validate their business model in the early stages of their business’ lifecycle (e.g. start-ups), or when they launch new ventures. 2. strategic business models (sbm) the business model is used as a strategy to achieve a sustainable competitive advantage. 3. business model innovation (bmi) consists in the process to improve or renew the business models throughout radical or incremental innovation. 4. strategic business model innovation (sbmi), the process of innovate strategically the business models to improve competitiveness and enhance business performance (see figure 2). the strategic business model innovation (sbmi) matrix allows the development of a conceptual framework to assess innovation success, and strategic decision-making effectiveness on business models in which firms restructure their business models at different degrees, which also helps the firms to make strategic decisions at different levels producing different business model approaches. figure 1: two-dimensional analysis of innovation and strategy on business model source: author’s illustrationl figure 2: sbmi matrix, classification of the business model according to its purpose (based on the degree of innovation and strategic focus). source: author’s illustration journal of business models (2018), vol. 6, no. 2, pp. 15-18 17 key insights the paper explores the relationship between business model, innovation, and strategy, identifying four main categories of business models. based on this relationship, the paper develops a matrix to classify the business model according to the degree of innovation and strategic focus. it could also serve as a framework to assess the innovation success and strategic decisionmaking on business models. the study provides a managerial tool to evaluate and improve business models, allowing the firms to identify its strengths, its opportunities, and its critical issue. this conceptual framework can be a useful guide to identify either internal or external factors so firms can consider during the process of business model design. for the scholars, it provides insights concerning the development of the topic in the management, business and economics academic literature. discussion and conclusions the business model has become a new way to conduct innovation (demil & lecocq 2010), run strategies and even being a subject of innovation by itself (chesbrough 2007). the relationship between the business model with innovation and strategy (teece 2010) has produced emerging concepts such as business model innovation (bmi), strategic business model (sbm), and strategic business model innovation (sbmi). this paper analyses the business model, innovation, and strategy from a holistic approach. it provides a self-assessment tool to help firms to improve or renew their current business model. this study may suggest conceptual insights to further develop the concept of strategic business model innovation (sbmi), and a guide to its practical application. nevertheless, it will be necessary conduct empirical research to validate the framework. further research, quantitative and qualitative studies, is needed to validate and to get a better understanding of strategic business model innovation (sbmi) process. journal of business models (2018), vol. 6, no. 2, pp. 15-18 18 references casadesus-masanell, r. & ricart, j.e., (2010), from strategy to business models and onto tactics. long range planning, vol. 43, no. 2–3, pp. 195–215. chesbrough, h., (2007), business model innovation: it’s not just about technology anymore. strategy & leadership, vol. 35, no. 6, pp. 12–17. cortimiglia, m., ghezzi, a. & frank, a., (2016), business model innovation and strategy making nexus: evidence from a cross-industry mixed-methods study. r&d management, pp. 1–19. daim, t.u. et al., (2006), forecasting emerging technologies: use of bibliometrics and patent analysis. technological forecasting and social change, vol. 73, no. 8, pp. 981–1012. demil, b. & lecocq, x., (2010), business model evolution: in search of dynamic consistency. long range planning, vol. 43, no. 2–3, pp. 227–246. magretta, j., (2002), why business models matter a conversation with robert redford. harvard business review, vol. 80, no. 5, pp. 86–92, 133. mezger, f., (2014), toward a capability-based conceptualization of business model innovation: insights from an explorative study. r and d management, vol. 44, no. 5, pp. 429–449. osterwalder, a. & pigneur, y., (2010), business model generation, john wiley and son, new jersey. osterwalder, a., pigneur, y. & tucci, c.l., (2005), clarifying business models: origins, present, and future of the concept. communications of the association for information systems, vol. 15, no. 1, pp. 1–43. sako, m., (2012), business models for strategy and innovation. commun. acm, vol. 55, no. 7, pp. 22–24. spieth, p., schneckenberg, d. & matzler, k., (2016), exploring the linkage between business model (&) innovation and the strategy of the firm. r&d management, pp. 403–413. teece, d.j., (2010), business models, business strategy and innovation. long range planning, vol. 43, no. 2–3, pp. 172–194. zott, c., amit, r. & massa, l., (2011), the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2018), vol. 6, no. 2, pp. 49-53 49 applying a sustainability lens to the business model associate professor susan lambert adelaide institute of higher education abstract this paper demonstrates how a business model framework based on object-oriented principles can be used to identify and articulate the social and environmental initiatives that are embedded in business models. a mini case study of a small landscaping firm is presented to validate the framework. please cite this paper as: lambert s. (2018), applying a sustainability lens to the business model, journal of business models, vol. 6, no. 2, pp. 49-53 keywords: business model framework, sustainability lens, case study introduction this paper addresses the problem of directors and ceos identifying and communicating to others the sustainability characteristics that exist in the firm and whether existing sustainability policies have been implemented. by incorporating business model object attributes of environmental and social sustainability into a hierarchical business model framework, information on corporate sustainability can be extracted. this effectively applies a sustainability lens to the existing business model representation. the structured, visual approach assists managers to consider all aspects of the organization in the analysis. an authentic case study is used to demonstrate how a hierarchical business model framework that is modelled on object-oriented principles, can be used to identify, extract and communicate the social and environmental contributions of the firm. journal of business models (2018), vol. 6, no. 2, pp. 49-53 50 approach a hierarchically structured business model schematic is proffered as a means of capturing and communicating in a visual form, the social and environmental benefits embedded in the organisation. the business is firstly depicted at a highly abstract level but, because of its hierarchical format (lambert 2012), it can be fleshed out to a very granular level whilst maintaining the integrity of the model. sustainability factors are incorporated into business model representations thereby providing a coherent, understandable picture of sustainability in the business and how this relates to the business model of the enterprise. the sustainability characteristics of the business can be articulated using the same structure used to depict operating and profitability focused aspects of the business – its strength therefore is in the use of common structures and language irrespective of circumstances. the hierarchical business model framework (hbmf) that is used in this paper was developed purposefully to accommodate multiple levels and units of analysis, and multiple conceptual foci and can extend traditional business model representations to reflect sustainability factors that are present in the existing business models of an entity. it does so by utilising object-oriented modelling principles that allow complexity to be abstracted and distilled into an understandable form (lambert 2012). a small to medium sized landscape construction company (lcc) is the subject of the mini case study. in this small business, the hbmf was originally used as a tool to assist the director to decide on the best strategy to grow his business. the business model representation was then modified to identify, record and communicate how the business incorporates environmental and social sustainability factors into its business decisions. the hierarchical nature of the business model representation permits interrogation at a whole-of-business level as well as at a very granular level for selected aspects of the business. figure 1 shows the four value propositions that lcc offers to its two customer types, residential customers and commercial customers. the revenue model is fee for service but there are differences in the timing of the revenue streams from each of the customer types. because of the nature of the services lcc uses a purely physical channel of delivery. lcc must be accredited by the builders’ licencing board and the government certification board (for commercial customers). for each of the four value propositions there is a complex value adding process that is modelled at lower levels of abstraction. the activities that make up the maintenance value adding process, along with the resources and the capabilities of the semi-skilled workers are mapped and modelled in figure 2. lcc originally collected monetary data about their business model objects along with operational details that explain how the business operated. as part of a tendering process the owner was required to include figure 1: landscape construction company business model journal of business models (2018), vol. 6, no. 2, pp. 49-53 51 information about the company’s commitment to social and environmental sustainability. using the hbmf model it had already developed and adding data of a social and environmental sustainability nature, the company was able to quickly identify, document and communicate the social and environmental sustainability aspects of the business and show how the commitment to sustainability was evident throughout the business model of the firm. figure 2 shows the maintenance value adding process with symbols for environmental and social benefits or measures taken. the company did not try to measure the impact of the decisions, it simply identified and described its commitment to social and environmental sustainability through its business model. more details, including impact measures can be included in the individual business model objects using existing tools such as the sustainability balanced scorecard and the environmental management accounting framework both of which measure and compare sustainability factors to benchmarks for external reporting. the benefit of using the business model representation to demonstrate the firm’s commitment to sustainability is that the pervasiveness of the commitment is illustrated. an organisation can show social and environmental initiatives that are embedded into the business model through different value propositions, relationships with third parties, resource and activity choices rather than through a narrative. key insights the hbmf enables the depiction of a business and its sustainability factors using a common language and structure. the use of a visual communication device, the schematic depiction of the business model, capitalises on the increased memory retention and understanding associated with communicating complex concepts through images (agrawala et al. 2011). it is not designed to make an assessment of a business’s performance or categorise and outline the information needs of a business in way that the sustainability balanced scorecard (dias-sardinha et al. 2002; figge et al. 2002; möller & schaltegger 2005) or environmental management accounting framework (burritt et al., 2002) do. however, the modelling capability can combine with other sustainability management tools to increase internal accountability and ensure those charged with corporate governance have a means to assess implementation of sustainability policies in all aspects of the business. figure 2: maintenance value adding process journal of business models (2018), vol. 6, no. 2, pp. 49-53 52 discussion and conclusion this paper introduces a modelling tool which is flexible, adaptive to context, and offers a degree of detail appropriate for managers to understand how sustainability policies and initiatives are incorporated into the very fabric of a business as well as the failure of or dysfunction of such implementation efforts. the social and environmental benefits that are associated with the value propositions themselves, the benefits arising from value adding process choices and the benefits arising from decisions to deal with particular third parties can be identified and categorised. equally importantly from a governance perspective the negative social and environmental impacts of decisions can also be recognised. the mini case study demonstrates the power of the business model to collect and communicate information about social and environmental sustainability characteristics of organisations. however, the implications of this are more far reaching since there is no limit to the number and diversity of lenses that can be applied to the business model representation. the limitation is how much and the type of detail that can be economically collected, stored and retrieved. journal of business models (2018), vol. 6, no. 2, pp. 49-53 53 references agrawala, m., li, w. & berthouzoz, f. (2011), design principles for visual communication, communications of the acm, vol. 54, no. 4, pp. 60-69. burritt, r.l., hahn, t. & schaltegger, s. (2002), towards a comprehensive framework for environmental management accounting—links between business actors and environmental management accounting tools, australian accounting review, vol. 12, no. 27, pp.39-50. dias-sardinha, i., reijnders, l. & antunes, p. (2002), from environmental performance evaluation to eco-efficiency and sustainability balanced scorecards, environmental quality management, vol. 12, no. 2, pp. 51-64. figge, f., hahn, t., schaltegger, s. & wagner, m. (2002), the sustainability balanced scorecard–linking sustainability management to business strategy. business strategy and the environment, vol. 11, no. 5, pp. 269-84. lambert, s.c. (2012) a multi-purpose hierarchical business model framework centre for accounting, governance and sustainability occasional working papers, no 5, university of south australia, adelaide, july. möller, a. & schaltegger, s. (2005) the sustainability balanced scorecard as a framework for eco-efficiency analysis. journal of industrial ecology, vol. 9, no. 4, pp. 73-83. journal of business models (2019), vol. 7, no. 1, pp. 9-12 9 business models for sustainable development: a process perspective frank boons alliance manchester business school and sustainable consumption institute, university of manchester, united kingdom, frank.boons@manchester.ac.uk oliver laasch university of nottingham, ningbo, china, oliver.laasch@nottingham.edu.cn abstract drawing on theories of practice, we develop a process-oriented conceptualization of business models that resonates with the original formulation of sustainable development as a process. please cite this paper as: boons, f. and laasch, o. (2019), business models for sustainable development: a process perspective, vol. 7, no. 1, pp. 1-4 keywords: business models; sustainable development; process perspective introduction business model research shows weaknesses in terms of concept clarity and depth of theorizing (foss and saebi, 2017). this is also true for much of the literature on business models for sustainable development. an overlooked point in this respect is a bias in ontology: most work on business models assumes the existence of entities with comparable and assessable characteristics. in contrast, a process ontology posits that the world of organization and management consists of processes: sequences of events that unfold (langley et al., 2013). process-based ontologies provide different angles for research questions and methodologies (abbott, 2016). a process-based ontology is especially relevant when dealing with questions of sustainability. while the label sustainability suggests that it is a characteristic of entities such as products and organizations, its use stems from the concept of sustainable development, where ‘development’ reveals its inherent processual nature. we aim to provide a consistent process definition of journal of business models (2019), vol. 7, no. 1, pp. 9-12 10 business models, in order to understand how business models may contribute to sustainable development. the process of sustainable development the term ‘sustainability’ is linked to the process of global societal development. sustainable development denotes “not a fixed state of harmony, but rather a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development, and institutional change are made consistent with future and present needs” (brundtland, 1987: 30). sustainability (a noun often used to refer to the nominalized verb sustainable development) needs to be seen as a process where evolving ecological systems interact with changing socio-technological systems and human communities (pirages,1994). this relates directly to the notion of business models for sustainable development in the following way: 1. sustainable development as a multi-stranded dynamic process is at odds with fixed indicators and standards; the formulation, use and assessment of such tools is part of the process of sustainable development. thus, any normative criteria for business models for sustainable development are inherently processual: they propose qualities for how sustainability is organized, and not for the actual products and services that are provided through the business model (boons and lüdekefreund, 2013). 2. the temporality and potentiality of business models for sustainable development requires us to see how they emerge, persist and dissolve in the process of sustainable development. business models as process we view business models as a subset of modes of provision: sets of social practices through which groups provide for their needs (boons and bocken, 2018). social practices are stable combinations of particular meanings, competences and artefacts (reckwitz, 2002). modes of provision include a wide range of practices, such as self-sufficient provision, intimate sharing (price, 1975) and collaborative consumption (botsman and rogers, 2010; leismann, schmitt, rohn, and baedeker, 2013), as well as business models. theories of practice, the collective label for theorizing on social practices (reckwitz, 2002) have a processual quality that at least implicitly emphasizes processes of enactment, enrollment and assemblage (gherardi, 2012; nicolini, 2012; shove, pantzar, and watson, 2012). by understanding management of an organization as social practices (whittington, 2011), we can conceptualize business models as assemblages of social practices coordinating the economic activities that constitute a mode of provision. the sustainability of a mode of provision ultimately depends on the quality of these practices. as further elaborated below, to the extent that practices are inclusive and allow for the consideration of multiple values, they facilitate the participation of the organization in sustainable development. a process definition of business models for sustainable development in four points 1. they consist of a negotiated assemblage of social practices that enables human need provision requiring scarce resources social practices that have emerged specifically to organize parts of the production and consumption exist prior to the formation of a business model; examples include practices associated with strategizing, accounting and waste management. their assemblage into a business model can be an informal process, but it is negotiated, as it requires intentionality, and has consequences for the economic actors involved. a business model for sustainable development requires an inclusive process of negotiated assemblage, and utilizes only social practices of production and consumption that are considered just and within planetary boundaries (rockström et al., 2009) in their operation and outcomes. also, the resulting need provision is equitable in the evaluation of participants. 2. the practices constituting a business model are in need of continuous enrollment to persist and grow a key characteristic of a processual perspective is that persistence of any (assemblage of) practice(s) needs enactment, the need for enrollment (shove, pantzar and watson, 2012). in addition to their continued performance, practices need to acquire journal of business models (2019), vol. 7, no. 1, pp. 9-12 11 additional organizational members, as well as other organizations, to persist. a business model for sustainable development is characterized by inclusive processes of enrollment; it is not selective in what organizational members, consumers, or organizations are sought as participants. this can manifest itself through user-led or open innovation, as well as particular choice of channels to consumers. 3. any business model competes with other business models that provide for overlapping (but never completely similar) needs specific for the economic system presupposed by business models is the logic of competition, relating to business models’ competitive advantage (teece, 2010). competitive dynamic can support a process of sustainable development, for instance, when it drives resource efficiency. conversely, it might support increased consumption. thus, a business model for sustainable development is distinct as it competes with business models with inferior social and ecological impact. in this respect, the notion of co-evolving business models is relevant (schaltegger et al., 2016). 4. any business model has ecological relationships with other business models (i.e. symbiotic, competitive, parasitic) as an assemblage of social practices, a business model necessarily presupposes other social practices. they require other business models that ensure the provision for needs that, if left unfulfilled, would adversely affect the focal business (boons and bocken, 2018). as a consequence, a business model constituted by practices that in themselves are in line with the notion of sustainable development, might depend on, or strengthen, business models that are not in line with sustainable development. an example is when sharing business models require the use of smart devices. these are provided through business models that often use fast replacement cycles of devices as a marketing tool. conclusion the four points above constitute a complete processbased definition of business models. it resonates strongly with the notion of sustainable development, and thus provides a basis for analyzing business models for sustainable development in terms of negotiated assemblage, enrollment, and links to other business models. our four-point definition is as a call for research that aims to: 1. analyze systematically the dynamics through which practices of production and consumption assemble into business models; 2. assess the interaction dynamics between business models that have ecological relationships; 3. understand the way in which the constituting practices intersect with the process of sustainable development; 4. assess how the dynamics of assemblage and ecological interaction affect the process of sustainable development. given the processual nature of sustainable development, such research will provide deeper insight into the particular ways in which social practices can be assembled into business models that advance inclusive provision of needs within planetary boundaries. journal of business models (2019), vol. 7, no. 1, pp. 9-12 12 references abbott, a. (2016) processual sociology. university of chicago press. boons, f. and lüdeke-freund, f. (2013) ‘business models for sustainable innovation: state-of-the-art and steps towards a research agenda’, journal of cleaner production, 45. doi: 10.1016/j.jclepro.2012.07.007. botsman, r. and rogers, r. (2010) ‘what’s mine is yours’, the rise of collaborative consumption. brundtland, g. h. (1987) our common future: report of the world commission on environment and development. doi: 10.1080/07488008808408783. foss, n. j. and saebi, t. (2017) ‘fifteen years of research on business model innovation: how far have we come, and where should we go?’, journal of management, 43(1), pp. 200–227. doi: 10.1177/0149206316675927. gherardi, s. (2012) how to conduct a practice-based study: problems and methods. edward elgar publishing. langley, a. et al. (2013) ‘process studies of change in organization and management: unveiling temporality, activity, and flow’, academy of management journal, 56(1), pp. 1–13. doi: 10.5465/amj.2013.4001. leismann, k. et al. (2013) ‘collaborative consumption: towards a resource-saving consumption culture’, resources. multidisciplinary digital publishing institute, 2(3), pp. 184–203. nicolini, d. (2012) ‘practice theory, work , and organization’, practice theory, work , and organization, (march), pp. 1–272. pirages, d. (1994) ‘sustainability as an evolving process’, futures, 26(2), pp. 197–205. price, j. a. (1975) ‘sharing: the integration of intimate economies’, anthropologica, 17(1), p. 3. doi: 10.2307/25604933. reckwitz, a. (2002) ‘toward a theory of social practices: a development in culturalist theorizing’, european journal of social theory, 5(2), pp. 243–263. doi: 10.1177/13684310222225432. rockström, j. et al. (2009) ‘a safe operating space for humanity’, nature, 461(7263), pp. 472–475. doi: 10.1038/461472a. schaltegger, s., lüdeke-freund, f. and hansen, e. g. (2016) ‘business models for sustainability: a co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation’, organization & environment, 29(264–289), p. 1086026616633272-. doi: 10.1177/1086026616633272. shove, e., pantzar, m. and watson, m. (2012) the dynamics of social practice: everyday life and how it changes. sage publications. teece, d. j. (2010) ‘business models, business strategy and innovation’, long range planning. elsevier ltd, 43(2–3), pp. 172–194. doi: 10.1016/j.lrp.2009.07.003. whittington, r. (2011) ‘the practice turn in organization research: towards a disciplined transdisciplinarity’, accounting, organizations and society. elsevier ltd, 36(3), pp. 183–186. doi: 10.1016/j.aos.2011.04.003. journal of business models (2018), vol. 6, no. 2, pp. 44-48 44 value, what value? university business model in pursuit of advanced internationalization anita juho1 romeo v. turcan2 1 university of oulu, finland; babson college, us 2 aalborg university, dk abstract through business model theoretical lenses, we explore challenges universities face in their pursuit of advanced internationalization into foreign markets. this is a conceptual paper. based on theoretical and empirical insights we conjecture that advanced internationalization of universities is unethical, calling for a revision of business model theory to incorporate ethics. please cite this paper as: juho a., turcan r.v. (2018), value, what value? university business model in pursuit of advanced internationalization, journal of business models, vol. 6, no. 2, pp. 44-48 keywords: advanced internationalization, university autonomy, business model, ethics introduction through business model theoretical lenses, we explore in this paper issues and challenges universities face in their pursuit of advanced internationalization into foreign markets. the context of this paper is defined by universities from developed countries entering developing or emerging countries via advanced international entry modes, such as joint ventures, acquisitions, green field or brown field investments. fifteen-twenty years ago, universities from developed countries ‘jumped on the bandwagon’ of higher education internationalization and globalization. they entered developing and emerging countries by entering joint-venture agreements, acquiring existing facilities or building brand new campuses to deliver joint programmes at bachelor and master levels. this period is also characterised by massive withdrawal or de-internationalisation of these universities from the foreign markets they initially entered by closing down campuses or exiting the joint-venture partnerships (turcan and gulieva, 2016a). in our paper we conjecture that one of the key reasons for exiting foreign markets is due to the incompatibility journal of business models (2018), vol. 6, no. 2, pp. 44-48 45 between the business model university adopts to create, deliver, and capture value (massa et al., 2017)—in this context, academic value – within its national borders and the business model it adopts for the same purpose in the foreign target market. approach this is a theoretical paper. we draw on a number of sources of data to conceptualise issues and challenges universities face in their pursuit of advanced internationalization into foreign markets. first, we build on university autonomy, international business and business model theories to conceptualise the phenomenon of interest. second, we analyse publicly available data, anecdotal evidence where the phenomenon we study is explicitly observable. empirical research of this phenomenon is virtually non-existent. mainly, this is due to the fact that the academic autonomy in the developing foreign target markets is limited, involving “background, subtle, political and social pressures which may, nevertheless, exert a powerful influence” (turcan et al. 2016),p.240). even international scholars from developed countries are reluctant or cannot share their experience as “a measure of direct or effective censorship or recognition of the sensitivities of colleagues, institutions, and/or governments to what they might say” (turcan et al., 2016, 240). the following quotes from turcan et al. (2016, p. 240) capture best these issues and challenges: • “i can’t send you my contribution due to the formal organizational reasons”; • “my [university] senior management informed me that they did not wish me to go ahead with the chapter i had proposed”; • “the material was planned to be quite critical, but it can’t be approved by my [university] administration”; • “i am being held up by the need for others to check what i send out and what i make public and/or keep private”; • “there would have been nothing of any significance left”; • “the rules in my [university] dramatically changed since i agreed to contribute, and now . . . it must be approved by the administration”; • “i was strongly advised not to proceed”; • “[the administration] may not be happy about everything i write becoming available in the public domain.” key insights the business model universities adopt within their national borders to create, deliver and capture academic – teaching, research, and knowledge dissemination – value rests on four pillars of academic freedom. these pillars are: organisational autonomy, financial autonomy, staffing autonomy, and academic autonomy (eua, 2007). organisational autonomy refers to a university’s freedom to decide on its own structures, contracts, election of decision-making bodies, and staff. financial autonomy refers to a university’s freedom to acquire and allocate funding, decide on tuition fees, and accumulate surplus. staffing autonomy refers to a university’s freedom to recruit, set salaries, and promote its staff. academic autonomy refers to a university’s freedom to decide on awarding degrees, curriculum and methods of teaching, as well as on areas, scope, aims, and methods of research. these four pillars of academic freedom define a university, its vision, its mission, what it stands for. within the business model theory, the expected enduring question is whether a business model a university adopts within its national borders can be transferred as-is or adapted to a target, emerging foreign country in the pursuit of advanced internationalization. wearing university autonomy theory lenses on top of business model theory lenses we conjecture that neither is a viable option. transferring own business model as-is to an emerging or developing target market might seem an easy option in which the process and practices will be repeated in a new context. nonetheless, the main challenge is how to ensure organizational, financial, staffing and academic freedom in an environment that is fundamentally different from the home environment? concepts related to university’s core values such as diversity, transparency, integrity, collaboration, and excellence may have a different meaning in the home country than in the host country. notably, the host country’s legislation may limit some organization structures at the university and on the other hand, the legislation journal of business models (2018), vol. 6, no. 2, pp. 44-48 46 may force some additional elements to the curriculum, contracts and decision-making processes. it is important to notice that implementation of university advanced internationalization without people who carry the home organization’s “dna” – hence core business model is impossible and the staff immobility is one of the key challenges (turcan and gulieva 2016a). for example, the authoritarian leadership style, that is relatively common in emerging countries, may not support the parent institutions values which might cause gap both in ethical practice and implementation of the core processes in terms of all four pillars. cultural differences, such as high power distance, may create strong hierarchical structures that will make collaboration between faculty and administrative personnel challenging or collaboration between faculty and leadership team difficult. these challenges may lead to lack of support for faculty and be a threat to academic autonomy and integrity. hence, if the “dna” of a university cannot be ‘exported’, despite the reason, the implementation of the business model as-is, is impossible. for example, in 2005 warwick university declined a generous financial offer from singapore government to establish a campus there due to concerns over the state of human rights and academic freedom in singapore (burton, 2005). adapting own business model in the pursuit of advanced internationalisation would mean to operate changes in the original, home-based organisational, financial, staffing and/or academic settings to tailor them to the institutional university autonomy settings in a target market; hence make changes to the university dna. separated from the pillars of academic freedom the localization of the curriculum as suggested by turcan and gulieva (2016a) is important to create the value for the students and local industry, but the university should not compromise on key aspects of own academic autonomy, freedom, mission, and vision. confusion about the level of control and depth of adaptation may lead to unethical outcomes such as discrimination, nepotism, corruption, inequality among the students, and low quality of teaching or motivational problems from the parent organization’s perspective. adapting the business model challenges the hierarchy and the roles between the parent and daughter organization. adapting the business model in terms of four pillars of academic freedom is too abstract to give clear guidelines for the adapted business model and therefore the implementation is impossible. if the host organization does not have a clear vision of how to adapt the culture, processes, and practices of the parent organization, the leadership may aim to gain short-term victories, such as pleasing students as customers at the cost of the quality of academic performance. this lowers the quality of the institution and leads again to commitment and motivational problems among the staff and students. what is the competitive advantage if the new international unit is merely like any local university rather than following the standards of the parent organization? due to such conflicts with the four pillars of academic freedom in the new context, adapting the business model is also impossible. universities may have another option to consider. in its pursuit of advanced internationalisation to developing countries, a university may design a completely new business model in cooperation with its foreign partner – a new business model that has no resemblance or association with the university home-based business model. to our knowledge, such empirical reality has not been observed or documented yet. nonetheless, this option will be based on a compromise between two different, incompatible, conflicting institutional university autonomy settings raising concerns of individual and university-wide autonomy as well as concerns about the sustainability of university advanced internationalization efforts. as discussed above, such compromise is not a viable option. discussion and conclusions the above theoretical as well as empirical, though anecdotal, insights led us to conjecture that advanced internationalization of universities is unethical. emerging economies with growing middle class and growing young population may look like a low hanging fruit for universities seeking growth from overseas, but implementation of a university business model in pursuit of advanced internationalization is challenging. universities that do adopt foreign direct investment mode of internationalisation and realize – though post-internationalisation – the ethical dilemma they face decide to divest or de-internationalize their international operations and return home to create, deliver and capture the value within the national borders employing the journal of business models (2018), vol. 6, no. 2, pp. 44-48 47 traditional, proven business model. however, withdrawing the international operations is easier said than done. having invested in a high risk, high cost and high commitment entry mode, de-internationalizing or divesting from an international market is an arduous decision to make. due to project, psychological, social and organizational factors that respective universities are exposed to, these universities tend to escalate their commitment to the failing course of action (drummond, 1994). these escalation situations include repeated decision making in the face of negative feedback about prior resource allocations, uncertainty surrounding the likelihood of goal attainment, and choice about whether to continue (brockner, 1992). in other words, universities continue investing and committing resources to their advanced international business model despite negative feedback that emanates from its external and internal environments and stakeholders. investing in and developing a university campus, branch, or joint venture is a long process as instilling a university-autonomy-based organization culture takes time especially if the original home country’s culture and institutions differ substantially from the host country’s culture. from managerial point of view, our conjecture acts as a warning for those universities that wish to pursue advance internationalisation business model into developing countries. as current noise from the field suggests, neither our conjecture nor the above insights will however refrain universities from developed countries to continue ‘jumping and riding the bandwagon’ of advanced internationalization into the emerging, developing countries. in this case, our theoretical and empirical insights could offer number pointers to consider before deciding to pursue advanced internationalisation as well as to aid decision makers in designing an advanced internationalisation business model. for example, since an advanced entry into a foreign market with substantially different, divergent university autonomy settings will demand from the start to adapt, making changes to the original university business model, the internationalizing university will need to put in place internal risk and crises management policies and respective operating procedures. these should be functional before foreign direct investment negotiations commence. during and as part of the negotiation process, the internationalizing university shall insist on developing and agreeing on short-tomedium term aims, objectives, road maps and respective action plans all aimed at achieving joint university autonomy settings that are internationally accepted (see e.g., estermann and nokkala, 2009). proper due diligence, feasibility study and evaluation processes centred on the four pillars of university autonomy will provide a deeper understanding of the target institutional context. even though careful planning is paramount, the implementation is the key denominator between success and failure of the university internationalization process. these, ‘jumping-and-riding-the-bandwagon advanced internationalization of universities,’ as well as other recent trends “in politics (the rise of populism and nationalism in the eu, brexit, and the election of the usa president), science and technology (gm crops, nuclear energy, fracking, global warming, artificial intelligence), health (eating disorders, immunization, resistance to antibiotics), and society (mass migration, extremism, and terrorism) – most of the time with negative signs and negative social impact” (turcan, 2018) – demand a revision of business model theory to include ethical concerns as well as of respective business model design strategies, tools and mechanisms to accommodate such ethical concerns in the process of business model design and innovation. journal of business models (2018), vol. 6, no. 2, pp. 44-48 48 references brockner, j. (1992). the escalation of commitment to a failing course of action: toward theoretical progress. academy of management review, 17:1, 39-62. burton, j. (2005). warwick votes against singapore campus. financial times. october 14, 2005. goo.gl/uogtyr (accessed: march 21, 2013). drummond, h. (1994). too little too late: a case study of escalation in decision making. organization studies, 15:4, 591-607. estermann, & nokkala, t. (2009). university autonomy in europe i. exploratory study. brussels: eua publications. eua (2007). the eua lisbon declaration – europe’s universities beyond 2010: diversity with a common purpose. brussels: european university association. massa, l., tucci, c., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11:1, 73–104. turcan, r. v. (2018). sociology of knowledge perspective on entrepreneurship. in r. v. turcan, & n. m. f. (eds.), the palgrave handbook of multidisciplinary perspectives on entrepreneurship, palgrave macmillan (forthcoming). turcan, r. v., & gulieva, v. (2016a). de-internationalization of universities: an exploratory study. in m. marinov, & o. sørensen (eds.), finding solutions to the challenges of internationalisation, aalborg: aalborg university press, 313-329. turcan, r. v., & gulieva, v. (2016b). university internationalization and university autonomy: toward a theoretical understanding. in r. v. turcan, j. reilly, & l. bugaian (eds.), (re)discovering university autonomy: the global market paradox of stakeholder and educational values in higher education. new york: palgrave macmillan, 215-235. turcan, r. v., reilly, j., & bugaian, l. (eds.) (2016). (re)discovering university autonomy: the global market paradox of stakeholder and educational values in higher education. new york: palgrave macmillan. journal of business models (2016), vol. 4, no. 3, pp. 1-4 1 editorial: new ways of developing and analyzing business model innovation please cite this paper as: lüttgens & montemari (2016), editorial: new ways of developing and analyzing business model innovation, journal of business models, vol. 4, no. 3, pp. 1-4 1 rwth aachen, technology and innovation management, germany; luettgens@time.rwth-aachen.de 2 università politecnica delle marche, department of management, italy; m.montemari@univpm.it guest editors: dirk lüttgens 1 and marco montemari 2 the highly competitive, hyper-dynamic, and global business environment has tremendously increased companies’ awareness of the relevance of business model (bm) innovation (taran et al., 2016). companies are forced to rethink and innovate their bms more frequently and more radically because of ever-shorter lifecycles of products, services, competencies, and work tasks, on the one hand, and highly competitive conditions, on the other (sosna et al., 2010; achtenhagen et al., 2013). over the last few years, large and successful companies have been coming to the realization that their current bms could rapidly become obsolete in the face of competitors who are adopting new and disruptive emerging technologies or bms (cavalcante, 2013). despite the understanding that bm innovation is of great concern to managers and practitioners who aim to secure competitive positioning of their companies in the market place, many issues regarding how the existing bms can be refined, redefined, and renewed need to be further investigated. the following questions were posed to potential contributors: • how can companies identify disruptive bms? • what determines successful pioneer and follower strategies with bm innovations? • how can companies use patterns as tools for developing bms? • how can a transformation of the existing bm be organized to lead companies to success? • which kind of tools, solutions, frameworks, organizational choices and managerial practices can be used to support bm innovation? the aim of this special issue is to expand and advance the current knowledge on these aspects, highlighting work that makes significant theoretical and empirical advances on new ways of developing and analyzing bm innovation. consistently with this aim, the papers included in this special issue address several different new facets and aspects of bm innovation, thus adding new perspectives to this research stream. beyond the question of how new bms can be generated systematically, one of the biggest issues for companies is whether or not their bm still fits the market journal of business models (2016), vol. 4, no. 3, pp. 1-4 2 requirements. in particular, how can managers roughly gauge the performance of their company and their underlying bm? in the paper by schüle et al. an assessment framework is developed with the support of six construction companies. it can be seen as a starting point for a deeper analysis of a company’s bm and as an initial activity that helps to direct a change process within a company. the assessment consists of 19 different design fields which were additionally structured by means of osterwalder and pigneur’s business model canvas. managers will be able to utilize the tool in the future as it allows them to conduct a “health check” of their company’s bm. developing new bms is a risky and uncertain task. if managers know that they have to change their bm, what often remains uncertain is how many and which elements of it they need to change. this question is the starting point of the paper by lüttgens and diener which aims, first, to shed light on how companies are able to overcome bm threats by using bm patterns and second, link these to the value dimensions of a bm. the idea is that innovative bms can be created by rearranging and composing existing patterns. based on the 55 different bm patterns identified by gassmann et al. (2014), lüttgens and diener analyze the effect of such patterns against the threats to a bm by using porter’s five forces. the porter framework describes the competitive forces within an industry and can help to analyze the strength of threats to a company. the quantitative study analyses how bm patterns can be combined in order to counteract porter’s five forces and to create successful bms. as a result of this study, managers are able to not only react to different threats in a systematic way, but also to help companies use systematic combinations of these patterns to mitigate the threats. complementary to the already existing view of bm innovation as a singular and separate management task within one organizational unit, the paper by sachsenhofer analyses the concept of bm portfolios in large firms. large firms have to face several challenges when they start to change their bm logic. in particular, they must consider whether and how changing certain elements of bm a influences elements from bm b within the same company. therefore, the management of bm portfolios opens up a wide range of managerial possibilities. managers of corporate bms are no longer limited by an option space that comprises only restraint, incremental improvement, or abandonment of the existing bm. in order to map the opportunities of developing bm portfolios, sachsenhofer looks at several automotive corporations and their operations. he evaluates the scope of their production in terms of what operations, in the wider ecosystem revolving around the car, are done within the firm and which ones are usually done outside it. in the end, for practical purposes and to show the different types of bm portfolio logics, the bmw ag case offers both a broadened scope of types of interrelation as well as a concise logic of how they interact. based on this analysis, sachsenhofer defines four different types of managerial actions for managing bm portfolios: bm reconfiguration, bm innovation, bm elimination, and bm coordination. finally, when it comes to designing and implementing a process of bm innovation, the demand-side can also play a relevant role. the paper by zalewska-kurek et al. aims to explore how both the market and potential customers can influence decisions concerning bm innovation. while the idea of involving consumers in the creation of value is not new and dates back to the 1980s, bm literature often sees the customers only as the addressees of products and services and, therefore, it does not keep up with the demand of firms to integrate customers in the development of bms. by gathering data from nine firms through interviews and analyzing the data collected by using the grounded-theory method, the authors identify two emerging themes: one regards engaging with the market and the other concerns experimentation with bms and changes made after reviewing the situation on the market (the firm’s responsiveness). taken together, firm responsiveness and market engagement are used to establish four categories of firm types: passive, active, unfocused, and focused. the authors observe that experimenting with bms is high in the first phases of life and dwindles to nearly nothing in the market introduction phase. engaging the market also changes over time, going from being less engaged at the start to having more interaction with customers and/or users at the end. in closing, it can be stated that the field of research concerning bm innovation is currently in a consolidation phase; while it still contains several research gaps, journal of business models (2016), vol. 4, no. 3, pp. 1-4 3 it also offers many possibilities for future research. in our opinion, the following four avenues for future research on bm innovation could be particularly fruitful: • developing and enriching the patterns library: further research is necessary in order to complete the library of bm patterns and to create a tool similar to the well-known triz (“theory of inventive problem solving”) approach. triz is a problem solving method based on logic and data, which relies on the study of patterns of problems and solutions. it is based on the assumption that “somebody somewhere has already solved this problem (or one very similar to it)”; • developing web-based applications: existing tools mostly exist in offline versions which hinder both communication and collaboration outside of entities as well as organizational implementation. furthermore, both existing web-based applications and offline tools are, in most cases, stand-alone solutions. further research should invest in developing integrative web-based applications for the development of new bms. therefore, bm researchers should learn from the oss literature stream, which offers several approaches for open development; • looking more closely at the performance implications of changing a company’s bm: our assumption for future research is that certain types of behavior in terms of bm innovation will lead to differences in performance (e.g., faster time to market, higher customer satisfaction, higher revenues, lower costs); • exploring the levers and the barriers that can enable or hinder the process of bm innovation: future research is needed in order to understand what actually happens in companies in which a process of bm innovation is implemented, to provide insight on what works and does not work, as well as on the reasons for negative or positive experiences. we hope that the reader will find the papers included in this special issue of interest. we would also like to thank all of the reviewers who contributed with their time, effort, and comments to push the authors to do their best. our special thanks go to professor christian nielsen, for his support during the production of this special issue. reference list achtenhagen, l., melin, l. & naldi, l. (2013), dynamics of business models – strategizing, critical capabilities and activities for sustained value creation, long range planning, vol. 46, no. 6, pp. 427-42. cavalcante, s.a. (2013), understanding the impact of technology on firms’ business models, european journal of innovation management, vol. 16, no. 3, pp. 285-300. gassmann, h., frankenberger, k. & csik, m. (2014), the business model navigator, pearson education limited, harlow. sosna, m., trevinyo-rodríguez, r.n. & velamuri, s.r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2, pp. 383-407. taran, y., nielsen, c., montemari, m., thomsen, p. & paolone, f. (2016), business model configurations: a five-v framework to map out potential innovation routes, european journal of innovation management, vol. 19, no. 4, pp. 492-527. journal of business models (2016), vol. 4, no. 3, pp. 1-4 4 dr. dirk lüttgens is an assistant professor in the research area time (technology, innovation, marketing, and entrepreneurship) at rwth aachen university and was a visiting scholar at the haas school of business, university of berkeley, ca. his research focuses on open innovation, business model innovation, and the implications of the current digital transformation on firms. dirk obtained a ph.d. in innovation management from rwth aachen university. he also worked at the university of applied sciences in luzern, switzerland, and has been a lecturer in several executive programs. dirk’s research has been published amongst others in journal of product innovation management and journal of business economics. marco montemari, phd, is a research fellow at the università politecnica delle marche (italy), school of economics “g. fuà”. he was a visiting research fellow at the business model design center, aalborg university, denmark. his research interests concern management accounting, business models and intellectual capital. other relevant interests concern balanced scorecard and performance measurement systems in general, overall with regard to their design and implementation process and to their ability to map and measure the value creation process. marco’s research has been published, amongst others, in journal of intellectual capital and european journal of innovation management. about the authors journal of business models (2018), vol. 6, no. 2, pp. 37-43 37 a qualitative approach to business model dynamics yvonne haas department of strategic management, martin luther university halle-wittenberg, germany abstract we provide a qualitative approach to assess interaction intensities of business model elements based on expert interviews in the retail industry. focusing not on the direction but on the intensity of interactions, we identify robust elements as well as elements with an indictor effect, a leverage effect and both effects. please cite this paper as: haas y. (2018), a qualitative approach to business model dynamics, journal of business models, vol. 6, no. 2, pp. 37-43 keywords: business model dynamics, retailing introduction in the last two decades, the concept of business models has become popular in theory and practice, where it is connected to the creation of competitive advantage, innovation and growth (magretta 2002; johnson et al. 2008; zott and amit 2008; teece 2010; wirtz et al. 2016; foss and saebi 2017). the widespread use and manifold interpretations of the concept have directed the debate on defining the notion (wirtz et al. 2016 and massa et al. 2017 summarize and condense the debate in their reviews) and deriving key elements of business models (e.g., amit and zott 2001; osterwalder et al. 2005; johnson et al. 2008; casadesus-masanell and ricart 2010). however, despite the interpretation of business models as ‘logic of the firm’ (casadesus-masanell and ricart 2010, p. 195) whereby scholars assume ‘(…) multi-layered dependencies among the elements of a business model such that the ‘whole’ (business model) is simply not a sum of its parts (elements)’ (sorescu et al. 2011, p. 4), research about business model dynamics is only at the beginning. especially, little is known about the interactions of the key elements so far (demil and lecocq 2010; cavalcante et al. 2011; aversa et al. 2015; wirtz et al. 2016; nyström and mustonen 2017). we argue that determining the interaction effects between business model elements is essential to understand the interdependencies of a company’s decision areas and corresponding logic as well as to predict the effects of business model change and innovation areas which journal of business models (2018), vol. 6, no. 2, pp. 37-43 38 scholars consider to be of greatest importance in future business model research (wirtz et al. 2016). understanding the company as a complex and dynamic system, which consists of numerous subsystems and elements, all of them with numerous links and feedback effects between them (ulrich 1970), we admit that capturing and describing a company’s business model as a formal representation of the logic of that system is a great challenge. we address this challenge by supplementing previous papers about the interactions of business model elements (e.g., casadesus-masanell and ricart 2010; demil and lecocq 2010; cosenz and noto 2018) with a qualitative approach. the difference of our approach is that we do not focus on the direction but on the intensity of the interactions between business model elements. this means that we do not study which other elements or sub-elements are affected by a change in a particular element but how much they are, in general, affected by a change in a particular element. to do this, we conducted a qualitative analysis with ten expert interviews in the german retail industry. we chose the retail industry because of its inherent dynamic character (mcnair 1931; kumar et al. 2017). the dynamics in the retail industry have even more increased by modern challenges such as digitalization and vertical integration (sorescu et al. 2011; cao 2014), so that there are many business model changes available for studying interaction effects. we chose interviews because we wanted the retailing experts and practitioners to describe business model changes and the corresponding interaction effects of elements unrestrictedly. in this way, we could also assess the background of the effects. in this short-paper, we start with describing our methodology, the data set and the data analysis. we then present and discuss the key findings. we conclude with limitations and future research directions. approach (method and data) adopting a quantitative system analysis approach (‘intensity relation-matrix’ according to vester 2000; ninck 2004) to the business model context qualitatively, allows us to use it as a framework for estimating interaction intensities between business model (sub-) elements. figure 1 shows that depending on whether elements are highly or lowly connected within the business model and whether they have a more active or passive character, we classify them into four different categories (cf., figure 1). we distinguish between elements (i) with an indicator effect (this element is affected by changes of many other elements), (ii) with leverage and indicator effects (this element is affected by changes of many other elements and leads to changes in many other elements), (iii) with a leverage effect (even though this element is affected by only few elements it leads to changes of an over-proportional large number of other elements), and (iv), with overall few effects (robust elements). figure 1: interaction intensities of business model elements in an intensity-relation-matrix journal of business models (2018), vol. 6, no. 2, pp. 37-43 39 we collected our qualitative data by conducting ten face-to-face interviews in the german retail industry. four respondents were leading experts of the german retail industry (the managing director of a retail consultancy, of a scientific retailing institute, a regional department of the german chamber of industry and commerce and an editor-in-chief of a retailing journal) and six were ceos or board members of german retail companies out of the grocery, textile and furniture sector which had a size of national importance. the interviews lasted around one hour each. they were based on a semi-structured questionnaire and on a generic retail business model framework (rbm) that we have developed in a parallel study (haas 2018).1 the questions regarding business model dynamics included which major business model changes the interviewees implemented (for managers) or observed (for industry experts) in the last five years, to which generic (sub-) element they corresponded and which effects on other (sub-)elements they had. we audio-recorded and transcribed all interviews, which yielded a textual data set of 47,730 words. for reducing, condensing and analyzing the data set, we used the qualitative analysis-method gabek® (ganzheitliche bewältigung von komplexität – holistic processing of complexity) and corresponding software winrelan® (zelger 2000). in the coding phase, we began by manually dividing the data set in a way that every single line of thought built one text unit (building text units). for every text unit, we coded keywords in a way that they were free of synonyms and represented the semantic content of the text unit (keyword coding). for every keyword, we further specified whether it was mentioned in a positive or negative context (evaluation coding) and whether it was causally related to other keywords in the text unit, e.g., ‘the more a, the more b’ or ‘a is a cause of b’ (causal coding). in the analysis phase, we used the causal network-analyses provided 1 in a parallel study, we conducted expert interviews in the retail industry and combined our results with theoretical findings about retail business models (sorescu et al. 2011; cao 2014). based on this, we determined the following elements and sub-elements of a generic rbm (1) value proposition (e.g., assortment, services (including personnel decisions), prices, availability of products, store atmosphere, store layout), (2) customer relations, (3) horizontal integration (choice and integration of communication and sales channels), (4) vertical integration (make-or-buy-decisions including, e.g., contract manufacturing, logistics), (5) partner relations, (6) value appropriation. by gabek-winrelan. keywords are interconnected in terms of content and frequency, if they appear together in the same text unit. causal networks consist of those interconnected keywords that are moreover attributed to be in a causal relation. key insights figure 2 shows the causal network of all keywords that were attributed to be in a causal relation with a change in logistics (keyword ‘logistics_changed’). as the interviewees mentioned these keywords when talking about last major changes in their rbms, we interpret the keywords as (sub-)elements (hereinafter, elements) of a generic rbm. the points with arrows indicate the amount of one-sided and two-sided effects for every element. the causal network shows that six elements have an effect on ‘logistics’ (changing them leads to a change in logistics), but the ‘logistics’ have an effect only on ‘personnel’ (changing the logistics leads to changes in personnel). furthermore, there is a two-sided effect between ‘logistics’ and ‘partners and networks’ (changing logistics implies changing partners and/or networks and vice versa). in this context, the interviewees frequently mentioned the example that an adoption of an online-shop as a new sales channel (‘horizontal integration’) necessitates larger warehouses and the introduction of a delivery system (‘logistics’). the new challenges of handling an online-shop and a delivery system necessitate hiring employees with different qualifications (‘personnel’) and starting a cooperation with new shipping partners (‘partners and networks’). in the right table, we further indicate how we assigned the present elements to one of the four categories of the intensity-relation-matrix based on the original approach by vester 2000. if the quotient (q) of effects on other elements (active sum) to effects from other elements (passive sum) was one or more, we assigned the respective element to the active site of the matrix (category ii ‘red’ or iii ‘green’) or vice versa. if the product (p) of active sum and passive sum was ten or more, we assigned the respective element to the highly connected site of the matrix (category i ‘blue’ or ii ‘red’) or vice versa. all results of the analysis are presented in the right column. for example, we could identify ‘logistics’ as an indicator element, ‘prices’ as a leverage element, ‘horizontal integration’ as a leverage and indicator element and ‘personnel’ as a robust element. journal of business models (2018), vol. 6, no. 2, pp. 37-43 40 discussion and conclusions in this study, we took the example of the retail industry to qualitatively analyze interaction intensities between business model elements. we identified how much a change of a particular business model element affected other elements or was affected by other elements. we presented our key findings drawing on the rbm element ‘logistics’ and all of its causally related rbm elements. we base the interpretation of our findings on the systems approach of vester 2000 and its application to a management context by ninck 2004. having identified the ‘logistics’ as an indicator element implies that many changes of the business model became apparent in this element. however, changing the element ‘logistics’ did not have a substantial effect on the overall model, so it would not have been advisable to start here in terms of problem solving or business model revision. ‘horizontal integration’ was an example for an element with both indicator and leverage effects. this means that this element was extensively involved in the overall model so that it could act as a catalyst for developments. in contrast to that, ‘personnel’ or “store layout” were examples for robust elements. even though the interviewees considered them as crucial for a business model, they could make staffing or store layout decisions relatively independent from other decisions. consequently, they did not have a substantial impact on the overall business model. finally, ‘price’ was an example for a leverage element. because of its low interactions but active character, it was suitable as a specific problem solution. this means that changing the ‘price’ enabled a specific revision of the business model without having unmanageable side effects. in total, the study contributed to the field of business model dynamics by assessing interaction intensities of business model elements based on qualitative data. in this way, it expanded this mainly theoretical and case study-based research field with an alternative methodological starting point. it further gave insights into business model dynamics in the retail industry by providing retail-specific elements and sub-elements and by explaining the key findings on the example of a change in ‘logistics’. a first limitation of the study was the data base of ten interviews in the german retail industry. even though it is difficult to convince ceos of big retail companies to talk about sensitive topics like their business models, it would be relevant to substantiate the findings with more interviews in different branches and countries. furthermore, future research efforts should be directed on identifying the interaction intensities not only on the sub-element ‘logistics’ but on all elements and sub-elements of a retail business model. a second limitation is that small and big changes of an element may affect the dynamics within a business model differently, which can lead to strongly varying results of a respective study. taking this into figure 2: causal network of ‘logistics_changed’ with assigned element categories journal of business models (2018), vol. 6, no. 2, pp. 37-43 41 account, we already asked the interviewees to tell us about business model changes that they considered to be essential for the last five years. nevertheless, we identified a need for specifying an ‘element change’ in future studies. a third limitation is that we studied business model dynamics within a fixed timeframe and framework of elements. as business models evolve over time, future research should also examine when and how elements may change their position (e.g., from being a core to a minor element) or their dynamic character (e.g., from being a leverage to an indicator element) within the model. journal of business models (2018), vol. 6, no. 2, pp. 37-43 42 references amit, raphael and zott, christoph, 2001. value creation in e-business. strategic management journal, 22 (6-7): 493–520. aversa, paolo, haefliger, stefan, rossi, alessandro and baden-fuller, charles, 2015. from business model to business modelling: modularity and manipulation. in charles baden-fuller and vincent mangematin: business models and modelling. bingley, emerald, pp 151–185. cao, lanlan, 2014. business model transformation in moving to a cross-channel retail strategy: a case study. international journal of electronic commerce, 18 (4): 69–96. casadesus-masanell, ramon and ricart, joan enric, 2010. from strategy to business models and onto tactics. long range planning, 43 (2-3): 195–215. cavalcante, sérgio, kesting, peter and ulhøi, john, 2011. business model dynamics and innovation: (re)establishing the missing linkages. management decision, 49 (8): 1327–1342. cosenz, federico and noto, guido, 2018. a dynamic business modelling approach to design and experiment new business venture strategies. long range planning, 51 (1): 127–140. demil, benoît and lecocq, xavier, 2010. business model evolution: in search of dynamic consistency. long range planning, 43 (2-3): 227–246. foss, nicolai j. and saebi, tina, 2017. fifteen years of research on business model innovation. journal of management, 43 (1): 200–227. haas, yvonne, 2018. a literature review and qualitative study for developing a generic retail business model. proceedings of the 32nd british academy of management conference (september 4th – 6th), bristol. johnson, mark w., christensen, clayton m. and kagermann, henning, 2008. reinventing your business model. harvard business review, 86 (12): 50–59. kumar, v., anand, ankit and song, hyunseok, 2017. future of retailer profitability: an organizing framework. journal of retailing, 93 (1): 96–119. magretta, joan, 2002. why business models matter. harvard business review, 80 (5): 86–93. massa, lorenzo, tucci, christopher and afuah, allan, 2017. a critical assessment of business model research. academy of management annals, 11 (1): 73-104. mcnair, malcom p., 1931. trends in large scale retailing. harvard business review, 10 (1): 30–39. ninck, andreas, bürki, leo, hungerbühler, roland, mühlemann, heinrich 2004. systemik: vernetztes denken in komplexen situationen. zürich, industrielle organisation nyström, anna-greta and mustonen, miia, 2017. the dynamic approach to business models. ams review, 7 (3-4): 123–137. osterwalder, alexander, petermann, günter and tucci, christopher l., 2005. clarifying business models: origins, present and future of the concept. communications of the association for information systems, 16 (2-40). journal of business models (2018), vol. 6, no. 2, pp. 37-43 43 sorescu, alina, frambach, ruud t., singh, jagdip, rangaswamy, arvind and bridges, cheryl, 2011. innovations in retail business models. journal of retailing, 87 (1): s3-s16. teece, david j., 2010. business models, business strategy and innovation. long range planning, 43 (2-3): 172–194. ulrich, hans, 1970. die unternehmung als produktives soziales system: grundlagen der allgemeinen unternehmungslehre. bern, haupt. vester, frederic, 2000. die kunst vernetzt zu denken: ideen und werkzeuge für einen neuen umgang mit komplexität. stuttgart, dva. wirtz, bernd w., pistoia, adriano, ullrich, sebastian and göttel, vincent, 2016. business models: origin, development and future research perspectives. long range planning, 49 (1): 36–54. zelger, josef, 2000. twelve steps of gabekwinrelan: a procedure for qualitative opinion research, knowledge organization and systems development. in renate buber and josef zelger: gabek ii: zur qualitativen forschung on qualitative research. innsbruck, studien-verlag, pp 205–220. zott, christoph and amit, raphael, 2008. the fit between product market strategy and business model: implications for firm performance. strategic management journal, 29 (1): 1–26. journal of business models (2018), vol. 6, no. 2, pp. 1-4 1 editorial: introduction to the special issue based on papers presented at the business model conference 2018 the 2nd business model conference provided a great opportunity to create constructive discussions on researching and teaching business models, both inside and outside the seminar rooms. more than 60 academics and practitioners attended the conference, with more than 40 papers being presented. two inspiring and challenging keynote speeches were given during the conference: professor joan e. ricart opened the event with a presentation entitled business models in the sharing economy, while professor nicolai j. foss gave a closing keynote on linking top management and business model innovation. the conference was also enriched by a phd colloquium and a teaching forum. the phd colloquium was organized by professor charles baden-fuller and adjunct professor petri ahokangas who sought to provide doctoral students with an opportunity to present and discuss their research with distinguished international faculty. the teaching forum was organized by professor anna b. holm, phd fellow christina m. bidmon and scholarship holder kirstin e. bosbach with the aim of providing scholars with an opportunity to present innovative teaching formats and best practices for teaching business models. all the papers submitted for possible presentation at the conference were reviewed by the scientific committee, with those selected being organized into 12 streams: creativity and innovation; ecosystems; risk and uncertainty; theoretical and conceptual issues; frameworks and tools; the academic sphere; society and sustainability; accounting and disclosure; digitalization; innovation; value drivers; and future scenarios. originality, significance and rigor were the three criteria that informed the scientific committee in the selection process of the 16 papers included in this special issue of the journal of business models. the result is a balanced mix of contributions from different research streams and using different research approaches. let me briefly introduce these papers by focusing mainly on their objectives, methods and respective contributions. bini et al. (2018) propose the concept of business model as a valuable tool for companies to increase the effectiveness of non-financial key performance indicator disclosure. first, the authors argue that the business model enables the identification of indicators that are aligned with strategic objectives. moreover, they maintain that the business model acts as an integrated framework, showing how different capitals are combined to create value. brøndum et al. (2018) present a model for feasibility testing of novel ideas for business model innovators. in journal of business models (2018), vol. 6, no. 2, pp. 1-4 2 particular, the authors suggest a five-step systematic involvement of non-domain-related knowledge intended to deliver more unique ideas that are feasible in the decision-making phase of business model innovation. cuc and miina (2018) explores the relationship between business model, innovation and strategy. through a systematic literature review and deductive analysis, the authors classify business models according to the degree of innovation, and strategic focus, hence providing a framework to evaluate and improve business models. dasilva (2018) investigates prior research and reframes business model innovation through a practitioner lens. reporting on a content analysis of interviews with ceos of small and medium enterprises in the technology industry, the author investigates their definition of business model innovation and contributes to a better understanding of the meaning of business model innovation from a practitioner perspective. di fabio and avallone (2018) investigate the use of business models in accounting through a literature review and discuss the findings considering management and banking research. the authors identify specific streams and areas of improvement by arguing that accounting literature could benefit from the contribution of research in other fields, as the banking one, which has extensively investigated the impact of business model on banks’ performances, developing methodologies to identify the business model itself. doligalski (2018) explores the relations between the business models of internet companies operating in the b2c market and the types of goods they offer (i.e. private, club, common and public goods). his analysis shows that internet companies provide all four types of goods distinguished in the theory of economics. haas (2018) employs a qualitative approach to assess interaction intensities of business model elements based on expert interviews in the retail industry. focusing not on the direction but on the intensity of interactions, the author identifies robust elements as well as elements with an indicator effect, a leverage effect and both effects. juho and turcan (2018) use the business model theoretical lenses to explore the challenges that universities face in their pursuit of advanced internationalization into foreign markets. this conceptual paper conjectures that advanced internationalization of universities is unethical and calls for a revision of business model theory to incorporate ethics. lambert (2018) demonstrates how a business model framework based on object-oriented principles can be used to identify and articulate the social and environmental initiatives that are embedded in business models. the paper also presents a mini case study of a small landscaping firm to validate the framework. migol et al. (2018) present the results of a study of business model design themes of 30 retailers from russia. the authors find a positive relationship between novelty-centered business models and company performance. furthermore, companies achieved the best performance by combining elements of the efficiency and complementarity business model design themes. nielsen et al. (2018) propose a research program for the field of business models by focusing specifically on 4th stage research, which is concerned with the performative notions of business models. five conceptual avenues for further research are depicted: 1) create empirically validated ontologies; 2) create decisionsupport structures; 3) connect key performance indicators to business model configurations; 4) benchmark value creation; and 5) report on the basis of the business model. perätalo and ahokangas (2018) discuss a business model concept in a public smart city context. starting from the consideration that there is no unified understanding of how smart cities create value for their stakeholders, the authors aim to contribute to the research by investigating the content and dynamics of a business model approach for smart cities. raith and siebold (2018) develop a general framework that is suitable for a broad range of sustainable development goals (sdgs) covering social and environment goals. the authors’ strategic approach to business model design around sustainability targets unites the two traditionally distinct research fields of journal of business models (2018), vol. 6, no. 2, pp. 1-4 3 sustainability entrepreneurship and social entrepreneurship. the authors argue that only a unified view will enable to consider and measure the impact of private or public initiatives that address several sdg’s in combination. roslender and nielsen (2018) assert that the business model concept has yet not been invited into the accounting sphere to address a crucial research question: can the profession take value propositions to customers into account? the authors provide a provocative discussion on the relative invisibility of customers within financial accounting and reporting, and on the fact that the business model concept promises to facilitate accounting for value creation for and delivery to customers. the authors argue that narrative approaches to reporting and disclosure may help to account for the intangible or emotional value, the pleasure, the positive sensations that customers experience as they embrace and enjoy appealing value propositions. small-warner et al. (2018) addresses definitions, archetypes and assessments of sustainable business models. then, her contribution summarizes the framework for strategic sustainable development to highlight its systematic, scientific and social strengths. her discussion combines both concepts to conclude with a research approach that may scientifically and socially enhance sustainable business models. williamsson and schaad (2018) address the interplay between the value chain and business model innovation. using a case study, the authors explore how incumbents create a business model for biodiesel production through the re-combination of established value chains. their findings highlight the importance of ownership and cross-industry cooperation for business model innovation. it is noteworthy that this is a special issue composed of short papers, an innovative publication format adopted by the editors of the journal of business models designed to speed up the accumulation of business model research. this objective is reached thanks to a very lean template (max four pages) and a standard content (introduction, approach, key insights, discussion and conclusions, references) that lead authors to focus on a singular clear message. such a format enables a fast-track business model publishing process: decision in 20 days from submission to acceptance; minor revision or rejection; instructions for revision from each reviewer provided in max 100 words; two weeks given for submitting a revised version; inprint versions online instantly. the 3rd business model conference will be held at fordham university, new york city, on june 3-4, 2019. professor bozena mierzejewska and professor christian nielsen will chair the conference. two influential keynote speakers have already been lined up: professor ramon casadesus-masanell (harvard business school, usa) and professor oliver gassmann (university of st. gallen, switzerland). these arrangements promise to maintain the high standards evident at the two previous conferences and within the pages of the journal of business models. in closing, i hope that the reader will find the short papers included in this special issue of value. being part of the scientific committee of the conference gave me the opportunity and the privilege to gain a clear view on which research directions business model researchers are currently focusing their efforts. what i learnt from this experience confirms that business model research is a mature field and the time is ripe for performative contributions that explore what actually happens in companies when business model-related tools are designed, implemented and used, to provide insights on what works and does not work, on the levers and the barriers that can enable or hinder the design, implementation and use of the business model-related tools, as well as on the reasons for negative and positive experiences. i would like to thank all of members of the scientific committee who contributed with their time and effort to the review process of the papers submitted for presentation at the conference and to the selection process of the papers included in this special issue. my special thanks go to professor robin roslender and professor christian nielsen, for their support during the production of this special issue, and to kristian brøndum, for his excellent, conscientious editorial assistance. marco montemari department of management, università politecnica delle marche, ancona, italy journal of business models (2018), vol. 6, no. 2, pp. 1-4 4 references bini l., simoni l., dainelli f., giunta f. (2018), business model and non-financial key performance indicator disclosure, journal of business models, vol. 6, no. 2, pp. 5-9. brøndum k., byrge c., hansen s. (2018), business model creativity: a horizontal insight model, journal of business models, vol. 6, no. 2, pp. 10-14. cuc j.e., miina a. (2018), classifying the business model from a strategic and innovation perspective, journal of business models, vol. 6, no. 2, pp. 15-18. dasilva c. (2018), understanding business model innovation from a practitioner perspective, journal of business models, vol. 6, no. 2, pp. 19-24. di fabio c., avallone f. (2018), business model in accounting: an overview, journal of business models, vol. 6, no. 2, pp. 25-31. doligalski t. (2018), business models of internet companies and types of goods offered, journal of business models, vol. 6, no. 2, pp. 32-36. haas y. (2018), a qualitative approach to business model dynamics, journal of business models, vol. 6, no. 2, pp. 37-43. juho a., turcan r.v. (2018), value, what value? university business model in pursuit of advanced internationalization, journal of business models, vol. 6, no. 2, pp. 44-48. lambert s. (2018), applying a sustainability lens to the business model, journal of business models, vol. 6, no. 2, pp. 49-53. migol e., tretyak o., holm a.b. (2018), business model design themes, value propositions and firm performance, journal of business models, vol. 6, no. 2, pp. 54-58. nielsen c., lund m., schaper s., montemari m., thomsen p., sort j., roslender r., brøndum k., byrge c., delmar c., simoni l., paolone f., massaro m., dumay j. (2018), depicting a performative research agenda: the 4th stage of business model research, journal of business models, vol. 6, no. 2, pp. 59-64. perätalo s., ahokangas p. (2018), toward smart city business models, journal of business models, vol. 6, no. 2, pp. 65-70. raith m.g., siebold n. (2018), building business models around sustainable development goals, journal of business models, vol. 6, no. 2, pp. 71-77. roslender r., nielsen c. (2018), accounting through the business model, journal of business models, vol. 6, no. 2, pp. 78-83. small-warner k. (2018), a review of sustainable business models and strategic sustainable development, journal of business models, vol. 6, no. 2, pp. 84-89. williamson j., schaad g. (2018), re-combining value chains: cross-industry cooperation for business model innovation, journal of business models, vol. 6, no. 2, pp. 90-95 journal of business models (2018), vol. 6, no. 2, pp. 10-14 10 business model creativity: a horizontal insight model kristian brøndum christian byrge søren hansen department of business and management, aalborg university kbk@business.aau.dk, byrge@business.aau.dk, sh@business.aau.dk abstract this paper presents a model for feasibility testing of novel ideas for business model innovators. it suggests a five-step systematic involvement of non-domain-related knowledge intended to deliver more unique ideas that are feasible in the decisionmaking phase of business model innovation. please cite this paper as: brøndum k., byrge c., hansen s. (2018), business model creativity: a horizontal insight model, journal of business models, vol. 6, no. 2, pp. 10-14 keywords: business model innovation, creativity, horizontal knowledge introduction during the last decades, the study of business models has grown attention from both academics and practitioners. as a consequence, companies have started to focus not only on product or process innovation. by innovating operational business models and processes, companies can reinvent themselves in an ever-changing and complex market (taran et al. 2016). business model innovation has become a complement to the more conventional innovation types (amit and zott 2012). creativity seems to play a number of roles as part of innovating and establishing a successful new business (model) (govindarajan, 2010). in particular, creativity is closely linked to the activities before decision making in innovative processes. a key rationale for investing resources in creativity as part of business model innovation is that it results in more alternative ideas to choose from, hence more knowledge to base decisions on. as a result, leaders of business model innovation will be able to make better decisions if they invest resources in creativity prior to decision making. another rationale is that the creativity is likely to lead to more novel solutions. hereby the business model journal of business models (2018), vol. 6, no. 2, pp. 10-14 11 innovator will be able to choose solutions that can drive the company into blue oceans or gain unique competitive advantages in red oceans (kim and mauborgne, 2005). however, the problem with novel ideas is that they often seem unfeasible at first sight because it may be difficult to understand how to produce, process, or organize these ideas. imagine having the idea of ‘paper packaging for beers’. this idea has some novel aspects in terms of value offering including far simpler recycling, cheaper material and more flexible shapes than with glass and metal. this idea, however, seems unfeasible because paper loses its strength when wet and under pressure. established companies in the beer equipment industry may have difficulty handling such novel and seemingly unfeasible ideas because they have created elimination systems for ideas that are ‘[…] financially unattractive for the leading incumbent to pursue, relative to its profit model and relative to other investments that are competing for the organizations’ resources’ (christensen, 2006: 49). this paper suggests a horizontal insight model that provides a systematic creative approach for testing novel ideas for feasibility, to increase the number of novel ideas that are feasible into the decision-making process for inventing or reinventing business models. approach there are a variety of creativity methods to apply in the business model innovation process including brainstorming (osborn, 1953), lateral thinking (de bono, 1992), synectics (gordon, 1961), triz (altshuller et al., 1997), mind mapping (wycoff, 1991), creative problem solving (parnes, 1992), creative checklists (davis and roweton, 1968), analogical reasoning and conceptual combination (martins et al., 2015), business model recipes (baden-fuller and morgan, 2010; sabatier et al, 2010), business model patterns (gassmann et al., 2014), and design thinking (brown 2008). most of these creative methods focus the creative effort on the ideation phase. also, wirtz and daiser (2018) suggest seven phases of a business model innovation process, and they identify creativity as a key ingredient in just one of these phases – the ideation phase. this paper suggests that creativity may play a key role also in the feasibility testing phase. design thinking may currently be the most popular creativity method among practitioners. it seems to suggest that novel ideas may be tested for feasibility by gaining insights from potential users or domain-related experts. for some ideas, this kind of subject-related (vertical) insights may provide a clear answer about whether a novel idea is feasible or not. however, for a feasibility test on an idea like for example “paper packaging for beers”, insights from users and domain-related experts are not likely to give any clear answer. the potential users would probably say that they like the idea because it offers new values not seen in the industry before. however, the domain related experts will reject the idea because their knowledge is based primarily on glass, metal and plastic, and may not include paper construction and paper packaging for food. in other words, they cannot make the necessary new knowledge combinations needed to further develop the idea for how a paper keg may be constructed and function as a packaging. when taking a knowledge perspective on creativity, new ideas can be produced by combining knowledge in new ways (ward and kolomyts, 2010). this perspective is often considered as a cognitive process related primarily to the ideation phase. however, it may also provide a valuable understanding of how to test novel ideas for feasibility. horizontal insights, i.e. knowledge and experiences not directly related to the problem or situation, might be crucial in that process. this type of knowledge typically comes from non-domain-related experts, but can also come from other knowledge sources. for example, an expert in “paper sacks for cement suitable for outdoor storage” is horizontally related to the idea for a “paper packaging for beers”. therefore, this is a horizontal expert that may provide us with insights to test the idea for a “paper packaging for beers” for feasibility and to further develop it into a feasible concept. key insights the horizontal insight model is made up of five steps. before step 1 there may have been some systematic idea production or a collection of ideas from employees or team members. step 1 is a sorting activity where all ideas are categorized according to novelty and feasibility. the purpose of this step is to identify the ideas that are relevant to journal of business models (2018), vol. 6, no. 2, pp. 10-14 12 the following steps. there will be four groups of ideas: (a) ideas that are both novel and feasible; (b) ideas that are novel but unfeasible; (c) ideas that are nonnovel yet feasible; and (d) ideas that are non-novel and unfeasible. the ideas in category b are relevant for the later steps and can move on to the next step in parallel or independently. an example of such an idea may be a “taxi company without a taxi fleet”. this idea was novel at the time, and most people in the taxi business domain would probably have found it unfeasible. step 2 is an abstraction activity where the selected idea is translated into an inter-domain principle. the purpose of this step is to make it possible to search for relevant horizontal insights. a method for translating an idea into an inter-domain principle is to take out the domain related themes like the system being a taxi company, and the resource being a taxi fleet. now we may have an inter-domain principle of a “system that does not own its core resource”, and it is possible to take this on to the next step. step 3 is a searching activity where the inter-domain principle is the search key for identifying horizontal domains where experts who have already tested a similar idea for feasibility in domains not directly related to the taxi industry. the literature on business model narratives, anecdotes, cases or business model recipes can be used as databases to search for existing business models that corresponds to your specific inter-domain principle. however, you may find far more potential horizontal insights when analyzing all kinds of businesses, ngo’s, and public organizations yourself. the principle of a “system that does not own its core resource” may lead us to the knowledge domain of distributed computing, where horizontal experts have designed seti@home as a similar idea and tested it for feasibility. when berkeley seti research center needed to analyze a huge amount of data from radio telescopes in the search for life in the universe, they found that building the necessary supercomputers to analyze this amount of data was simply not an option at the time. seti came up with the idea of an internet-based public volunteer computing system, and they developed a software that could send the millions of chunks of data to be analyzed by volunteer laymen using their private computers as the resource. their inter-domain idea may be a “distributed system supporting and integrating laymen and laymen resources”. this example of a “system that does not own its core resource” can be used in the next step. step 4 is a knowledge combining activity where the new horizontal insights are integrated into the idea development. the purpose is to use the existing insights from a similar horizontal domain to further develop the concept of a “taxi company without a taxi fleet” and make it feasible. this step may be performed at different levels of engagement. the lowest level may be to simply read figure 1: the horizontal insight model journal of business models (2018), vol. 6, no. 2, pp. 10-14 13 about the specific horizontal knowledge from existing sources about seti@home (e.g. details from the business model narrative, anecdote, case or recipe). an intermediate level may be to familiarize with the horizontal expertise, for example from trying out the seti@home software. the highest level may be to gain access to the real horizontal experts, i.e. the specific business model innovators, who participated in key phases of the design and implementation of seti@home. the application of the horizontal knowledge in this step is a creative activity that requires all involved parties to have an open, curious, playful, imaginative and visionary mind. as a result, it may be necessary to facilitate this step as a full creative process, where individual elements of the seti@home business model narrative, anecdote, case or recipe are explored and combined with the idea of a “taxi company without a taxi fleet”. the insights from involving the seti@home concept may lead us to an understanding that the idea of “running a taxi company without any vehicles” could be based on a distributed system (an app) supporting and integrating laymen (as taxi drivers) and laymen resources (their private vehicles as the taxi fleet). the idea of a taxi company without a taxi fleet is easier to accept as feasible now that we can see that a “similar idea” has already been successfully tested in an indirectly related domain. step 5 is an adjustment activity where the categories from step 1 are updated based on the new insights gained through step 2 to 4. the purpose is to prepare a list of ideas for decision making that takes into account any changes in the variables of novelty and feasibility. from the example, we will be able to move the idea of a “taxi company without a taxi fleet” from category (b) to category (a). as a result, we now have one more novel and feasible idea to choose from in the decisionmaking phase. discussions and conclusions this paper offers a systematic model for using horizontal insights in a creative process to test novel ideas for feasibility. the hope is that this model will provide more novel and feasible ideas prior to decision making in business model innovation processes. a key practical implication is related to the reduction of risk and uncertainty for business model innovators. the horizontal insight model may help reduce risk and uncertainty for innovators who desire novel ideas, by making more of these ideas feasible prior to decision making. as a result, the decision-maker will have more novel and feasible ideas to choose from for inventing new or reinventing existing business models. a key theoretical implication is related to the models for inventing new and reinventing business models. it may be possible to include the horizontal insight model as one step or perspective as part of a more comprehensive process or model for understanding how to design and develop new business models. also, the notion of “experts” as something domain related may be challenged by this new model. we may need to reconsider the users and the domain related experts as the key source of new insights for testing novel ideas for feasibility. it may be that each of these sources of insight play a unique (however, sometimes overlapping) role in the development and testing of ideas. finally, a philosophical implication is related to the notion of the role creativity plays in business model innovation processes. we may need to reconsider the general notion that creativity is merely related to the production of ideas – the ideation phase. creativity may provide far more quality to the complex innovative processes of inventing new and reinventing established business models. is there a need for a concept of business model creativity for the attempts to understand this role of creativity? journal of business models (2018), vol. 6, no. 2, pp. 10-14 14 references altshuller, g., shulyak, l., rodman, s., and fedoseev, u. (1997). 40 principles: triz keys to innovation. technical innovation center. amit, r. and zott, c. (2012). creating value through business model innovation, mit sloan management review, 53(3), 41-49. baden-fuller, c. and morgan, m.s. (2010). business models as models, long range planning, 43, 2, 156-171. brown, t. (2008). design thinking, harvard business review, 85-92. christensen, c. m. (2006). the ongoing process of building a theory of disruption, journal of product innovation management, 23, 39-55. davis, g. a., and roweton, w. e. (1968). using idea checklists with college students: overcoming resistance, journal of psychology, 70, 221–226. de bono, e. (1992). serious creativity: using the power of lateral thinking to create new ideas. harper business. gassmann, o., frankenberger, k., and csik, m. (2014). the business model navigator: 55 models that will revolutionise your business, ft press. gordon, w. j. (1961). synectics. harper. govindarajan, v. (2010). innovation is not creativity, harvard business review. kim, w. c., and mauborgne, r. (2005). blue ocean strategy: how to create uncontested market space and make the competition irrelevant. harvard business school press. martins, l. l., rindova, v. o., and greenbaum, b. e. (2015). unlocking the hidden value of concepts: a cognitive approach to business model innovation, strategic entrepreneurship journal, 9, 99-117. osborn, a. f. (1953). applied imagination: principles and procedures of creative problem solving. charles scribner’s sons. parnes, s. j. (1992). a source book for creative problem solving. creative behavior foundation. sabatier, v., mangemtin, v. and rousselle, t. (2010). from recipe to dinner: business model portfolios in the european biopharmaceutical industry, long range planning, 43 2, 431-447. taran, y., nielsen, c. montemari, m. thomsen, p. and paolone, f. (2016). business model configurations: a five-v framework tomp out potential innovation routes, european journal of innovation management, 19, 4, 492-527. ward, t. b. and kolomyts, y. (2010). cognition and creativity. in james c. kaufman & robert j. sternberg, the cambridge handbook of creativity, cambridge university press, 93-112. wirtz, b. w. and daiser, p. (2018). business model innovation processes: a systematic literature review, business model journal, 6, 1, 40-58. wycoff, j. (1991). mind mapping. berkley publishing group. journal of business models (2018), vol. 6, no. 2, pp. 32-36 32 business models of internet companies and types of goods offered tymoteusz doligalski e-business unit, warsaw school of economics abstract the article presents the relations between the business models of internet companies operating in the b2c market and the types of goods they offer (i.e. private, club, common, and public goods). the analysis shows that internet companies provide all four types of goods distinguished in the theory of economics. please cite this paper as: doligalski t. (2018), business models of internet companies and types of goods offered, journal of business models, vol. 6, no. 2, pp. 32-36 acknowledgements: the author wishes to thank everyone who submitted critical remarks on the ideas presented in this article, particularly his colleagues and students at warsaw school of economics. keywords: business models, internet, public good introduction the purpose of this article is to relate the typology of the business models of internet companies operating in the b2c market to the types of goods they offer, as distinguished in the theory of economics. by “internet companies” (pure players) the author understands companies whose only (or at least predominant) environment for developing relations with customers is the internet. the remaining companies can be divided into multichannel (brick-and-click) companies, i.e. those which provide value to their customers using a combination of traditional and interactive channels, and brick-and-mortar companies, which operate largely outside of the internet. the typology of business models of internet companies operating in the b2c market used in this article includes (doligalski, 2018): online vendors (internet stores and sellers using e-commerce platforms), e-service providers (companies which offer an automated service provided through the internet), content providers (companies which publish content on the internet), multisided platforms (internet intermediaries), and community providers (companies which allow for journal of business models (2018), vol. 6, no. 2, pp. 32-36 33 interactions between people who share common interests). for the purpose of this discussion, the following typology of goods will be used: public goods, common goods, club goods, and private goods. an analysis of these business models provides a comprehensive overview of the way companies function. the typological approach used in this article additionally reveals differences in the functioning of organizations — in this particular case, internet companies operating in the consumer market. the business models distinguished above are ideal (pure) types which do not fully reflect the complexity or diversity of real-world companies. nonetheless, as simplified analogues, they embody their most crucial properties. knowing the ideal types within the range of business models and the types of products these business offer enables us to understand the basic logic according to which real world companies operate, even if their business models and products are hybrids of ideal models. typology of business models of companies in the b2c market online vendors are companies that deal in the sales of tangible products through an online store or an e-commerce platform. online vendors can be middlemen who offer products that are manufactured by other companies, or, less commonly, they may sell products which they manufacture themselves. these vendors typically provide physical products, traditional services (e.g. travel packages) or digital products (e.g. software). online vendors that offer material goods or traditional services sell private goods that are characterised by rival consumption and a feasible exclusion. rival consumption is understood as the situation in which the consumption of a good by one person diminishes its utility to others. paid digital products are an instance of club goods, the consumption of which is non-rival, but still remain not available to anyone. by an e-service we understand a service which is provided remotely over the internet, based on the server of the provider, without any direct involvement of any employee of the provider. an e-service is thus an internet tool, often of an infrastructural nature, which requires self-management from the customer and offers individualized values. examples of e-services include e-mail, internet search engines, internet banking systems, and network storage. e-services are characterised by non-rival consumption (consumption of the good by one person does not limit its utility to others) and scalability, understood as the capability to serve a greater number of customers. however, such consumption may become rival when congestion problems occur, limiting the convenience of these internet services. content providers are entities that distribute content online. the scope of content provided by this type of business varies widely and includes text, graphics, audio, and video. this type of activity is characterised by the high cost of content creation and the ease of its publication in different forms and through various channels. this explains the relationships that often exists between internet content providers and enterprises in the media industry. similarly to e-services, content is usually consumed through non-rival consumption, as long as there are no limitations to scalability. multi-sided platforms are intermediaries between different groups of customers, and provide an environment in which transactions or other types of interactions take place. they can enable financial transactions (e.g. auction platforms, travel platforms) or at least aggregate two groups of users, facilitating interactions between them (e.g. classified ad platforms, dating services). the product offered by these platforms is interaction with users from the complementary group; it is typically rival in nature and usually leads to a customer obtaining a private good. if—less commonly — a platform brings together consumers and sellers of digital goods, then it usually makes it possible to obtain a club type of good. the character of this interaction is thus dependent to a large degree on the type of good being offered. community providers are companies that offer people of similar needs, interests or identities the opportunity to enter into different kinds of interactions, such as the exchange or sharing of resources, communication, and, in some cases, cooperation. communities are therefore based on interactions, ones that do not directly involve transactions, but instead utilise value co-creation that is oriented towards others in the community, that is the contribution of a certain user-made work or sharing a journal of business models (2018), vol. 6, no. 2, pp. 32-36 34 resource to benefit the community as a whole (doligalski, 2015). community providers thus offer non-rival interactions with other users, interactions that lead to the creation and provision of a certain good (e.g. discussions, open source software). often in case of multisided platforms and community providers it is difficult to unequivocally assign companies to either of the models, as they usually combine the characteristics of each, i.e. rivalry over scarce goods (e.g. private goods, position within a ranking) and cooperation between users (e.g. sharing opinions about sellers). the relationship between business models and types of products offered as mentioned above, online vendors offer private goods (tangible goods or traditional services) or club goods (digital products). e-service and content providers charge fees to their customers while offering club goods. if they are offered free of charge, should they be distinguished as public goods, or at least as commons? public goods are characterised by two values: the impossibility of excluding anyone from consuming the good, and non-rival consumption (adams & mccormick 2006; kaul, grunberg & stern 1999). on the other hand, if rival consumption occurs, we are dealing with a common good (commons). typical examples of public goods include lighthouses and the ozone layer, while in the case of commons, it is parks and public roads. so do free content or e-services bear the characteristics of one of these two types of goods? the question requires us to differentiate between two criteria: the purpose and technological properties of a given good. both free content and e-services are offered according to the principle of common accessibility. technically there are many ways in which a person could be denied access to a website. an internet site may not be displayed to users with a particular kind of terminal (desktop or mobile), a specific browser, or a particular ip address, which is associated with the location of the user (geoblocking) or their internet provider. so does the technical capability to block access to certain content or e-service settle the question of the character of these goods? one might argue that a similar form of denying consumption may occur in the case of a public good such as a television signal, which can theoretically be blocked for users inhabiting a particular area. public roads are often given as one example of a common good, but in this case, exclusion may take place by limiting access to particular types of vehicles. these ambiguous criteria make it more difficult to qualify free content and e-services. but if we assume that a search engine or the content of a particular blog is, generally speaking, available to anyone and any potential exclusions are notably rare exceptions, then these goods are of a more public than club character. this approach may seem to contradict the formal definitions of public and common goods, nonetheless these goods are often classified as elements of a continuum or as non-pure public goods (kaul, grunberg & stern 1999). on the other hand, if content and e-services are offered free of charge over the course of limited-time promotions, after which the customer is required to make a payment (e.g. netflix), these should be classified as club goods. this situation resembles a club that allows anyone to enter in the afternoon, but charges an admission fee in the evening. there remains the matter of qualifying goods offered by multi-sided platforms and community providers. multi-sided platforms usually offer rival interactions with users from the other group. in some cases, access to a platform is restricted by payment (e.g. the dating website eharmony), and thus its product should be counted as a private good. provided that access to the platform is free, then its product — rival interaction with users from the other group — bears the characteristics of a common good. this resembles a used car market – in the first case, there is an entry fee, while in the other, there is not. in both cases buyers compete for the best used cars offered by sellers. community providers, on the other hand, offer non-rival interactions which may lead to the creation of certain goods (discussions, open source software). some of them are open to everyone (e.g. twitter, open chat forums) and hence are of a public good character. there are communities with restricted access (e.g. chat groups for classmates), and these offer a club good. journal of business models (2018), vol. 6, no. 2, pp. 32-36 35 feasible exclusion non-feasible exclusion rival consumption private goods • online vendors selling tangible products or traditional services • multi-sided platforms with restricted access common goods • multi-sided platforms with free access non-rival consumption club goods • online vendors selling digital products • paid e-service providers • paid content providers • providers of communities with restricted access public goods • free e-service providers • free content providers • providers of communities with free access table 1: proximal relations between business models of internet companies and the types of goods offered while this discussion is concerned with ideal types, in practice these entities usually combine the properties of both types. table 1. presents an attempt to associate business models of internet companies in the b2c market with the basic types of goods they offer. discussion this article presents an attempt to relate business models to the types of products offered. it combines internet companies, i.e. entities that have operated for more or less the past 20 years, with an older economic concept, namely, the typology of goods. the analysis shows that internet companies provide all four types of goods distinguished in the theory of economics. the proposed classification is of a proximal character, as the goods offered by internet companies may not always be qualified unequivocally. examples of goods that are difficult to categorize include e-services offered using the freemium model. a basic free version of an e-service bears the characteristics of a public good, while the paid premium version is a club good. the classification of goods based on the criteria of rivalry and feasible exclusion does not account for revenues obtained through other channels. thus internet content that is offered for free but allows for a display of intrusive advertisements bears the characteristics of a public good. similarly, websites that offer free e-services, while at the same time selling — or enabling other entities to sell — their customers’ data, are classified as public goods. the definition proposed by kaul (2001) is a contemporary attempt to approach the problem of the public good by proposing that it is inclusive (public in consumption), based on participatory decision-making and design (public in provision), and that it is just (public in benefits). under this definition, many companies that provide their content or services free of charge would not be included in the category of public goods, though these would include both wikipedia and open source software. the above remarks, as well as the complexity and the hybrid character of products offered by internet companies, indicate the need to formulate a new categorization of goods, one that would better reflect the conditions of the modern economy. such a categorization could include external effects that accompany consumption, both positive (e.g. interactions between users) and negative (e.g. congestion problems). journal of business models (2018), vol. 6, no. 2, pp. 32-36 36 references adams, roy & mccormick, ken (2006) private goods, club goods, and public goods as a continuum, review of social economy, 45:2, 192-199, doi: 10.1080/00346768700000025 doligalski, tymoteusz (2018) modele biznesu firm internetowych działających na rynku odbiorców indywidualnych – ujęcie typologiczne (business models of internet companies operating in the b2c market: typological approach), marketing i rynek, 12/2018, approaching. doligalski, tymoteusz (2015) internet-based customer value management, springer, heilderberg. kaul, inge (2001) public goods: taking the concept to the 21st century. the market or the public domain, drache d. (comp.), london & new york: routledge, p. 255-273. kaul, inge, grunberg, isabelle & stern, marc a., (1999) “defining global public goods”, in kaul, inge et al., eds. (1999) global public goods: international cooperation in the 21st century, new york: oxford university press, p. 2-19. journal of business models (2018), vol. 6, no. 2, pp. 5-9 5 business model and non-financial key performance indicator disclosure laura bini lorenzo simoni francesco dainelli francesco giunta department of economics and management, university of florence abstract business model disclosure is proposed as a communication tool for companies to increase the effectiveness of non-financial key performance indicator (nfkpi) disclosure. first, business model enables the identification of indicators that are aligned with strategic objectives. moreover, it acts as an integrated framework, showing how different capitals are combined to create value. please cite this paper as: bini et al. (2018), business model and non-financial key performance indicator disclosure, vol. 6, no. 2, pp. 53-57 acknowledgements: this work is the final output of a project granted by the institute of chartered accountants of scotland (icas). the authors would like to thank icas research team for their support. keywords: performance, non-financial disclosure, business model introduction in the present economic context, companies base their competitive success on intangible factors (oecd, 1999; teece, 2000; bontis, 2001). financial measures are not able to fully reflect the value of intangible assets because they are backward looking accounting-based metrics that reflect the use of physical capital (smith and van der heijden, 2017). for this reason, nfkpis are necessary to assess a company’s performance (eccles, 1991; ittner and larcker, 2003; montemari and nielsen, 2013). the importance of nfkpis has also been recognized by standard setters and law-makers. recent non-financial disclosure regulations, like the companies act regulation 2013 in the uk and the european directive 95/2014, have introduced the requirement for large companies to disclose relevant nfkpis. despite the importance of nfkpis, a big problem emerges in the identification of indicators that are relevant to the business (badawy et al., 2016). this issue is especially critical for external users who may find it journal of business models (2018), vol. 6, no. 2, pp. 5-9 6 difficult to fully understand whether the nfkpis communicated by a company are really “key” indicators (holland, 2004). in keeping with previous bm literature and the most widespread regulating approach, this paper aims to propose the concept of business model (bm) as a valuable tool to assess a company’s nfkpi disclosure. approach it is well established in accounting literature that, in order to be effective, indicators should be consistent with the way a company uses different tangible and intangible resources to generate value (grasenick and low, 2004; montemari and nieslen, 2013). this approach is shared by the majority of the regulatory frameworks, which recommend that nfkpi disclosure give market participants a view of a company “through the eyes of management” (sec, 1989). in other words, external users should be able to see the company “in a manner which aligned with senior managers’ (presumably) holistic view of the business” (beattie and smith, 2013, p. 10). the way a company combines its resources and knowledge to gain a competitive advantage defines its bm (nielsen, 2010; casadeus-masanell and ricart, 2010). as stated by osterwalder et al. (2005), the bm offers “a conceptual model that explicitly states how the business functions” (p.3). thus, it is a valuable tool to create a shared understanding of the business, both inside and outside the organization (perckman and spicer, 2010). as a simplified, focused representation of the company, the bm represents a template that helps understand the configuration of various components within the organization (winter and szulanski, 2001). it can contribute to improve “tractability, understanding, as well as our ability to measure, predict and communicate” the main features of an organization (massa et al, 2017, p. 84). bukh (2003) maintains that examining a company’s bm is essential for investors to fully appreciate information about non-financial indicators. according to mouritsen and larsen (2005), the knowledge of a company’s bm allows users to appreciate individual pieces of information and measurements that, by themselves, do not link up directly to the value creation process. in light of this, the bm becomes particularly useful to frame nfkpi disclosure, offering insights into the logic that underlies the value creation process. key insights from the corporate communication perspective, the bm becomes a valuable communication device that can provide external users with “a convincing context to interpret the quantitative or relative indicators” (holland, 2004, p. 97). this context-giving narrative allows external users to shape “a coherent picture”, where the interrelated factors that promote value creation are clearly identified (nielsen and bukh, 2013). linking nfkpis and bm disclosure allows companies to offer investors a clearer picture of the value creation process (bini et al., 2016). the bm serves two main purposes. first, it enables the identification of relevant nfkpis – indicators that are aligned with strategic objectives. moreover, it acts as a framework for disclosure, showing how different capitals are related and how they contribute to value generation. bm disclosure should highlight how the different resources are combined together to reach the results that are measured by appropriate nfkpis. this way, companies are able to offer an integrated communication: the strategy defines the objectives; the bm illustrates how different resources, both tangible and intangible, are used to reach those objectives; nfkpis monitor progress against strategy (bhimani and langfield-smith, 2007) and show how financial results are related to strategic objectives (figure 1). figure 1: the link between strategy, bm and kpis journal of business models (2018), vol. 6, no. 2, pp. 5-9 7 discussion and conclusions this paper proposes bm as a communication device to frame nfkpi disclosure. by linking bm and non-financial indicator disclosure, companies may offer an integrated communication that is capable of showing the connections between a company’s strategy and the way resources are combined to generate value. according to holland (2004), the disclosure of bm “would create a level playing field for disclosure for those investors not privy to direct one-to-one contact with companies”, (p. 101) thereby reducing information asymmetries in the market. our proposal can be helpful for companies that face the need to communicate nfkpi and bm. this is especially the case of large companies that have to comply with the eu directive 95/2014 and of those that voluntarily publish an integrated report (iirc, 2013). in both cases, linking the description of a company’s bm with nfkpi disclosure allows enhancing the reliability of disclosure. bm description, on the one hand, provides the “information context” —a story that illustrates the connections and relationships between various bm components. nfkpis, on the other hand, provide evidence for the veracity —the credibility— of the company’s story over time (holland, 2006). our proposal provides insights also for many categories of subjects —standard setters, regulators, consultants, auditors— who are developing guidelines on non-financial disclosure. an integrated disclosure that emphasises the linkages between a company’s bm and the related nfkpis, in fact, raises the need to identify a specific meaning of relevant nfkpis, as well as a detailed description of what a bm description should focus on. journal of business models (2018), vol. 6, no. 2, pp. 5-9 8 references badawy, m., el-aziz, a. a., idress, a. m., hefny, h. & hossam, s. (2016), a survey on exploring key performance indicators, future computing and informatics journal, vol. 1, no. 1-2, pp. 47-52. beattie, v. & smith, s.j. (2013), value creation and business models: refocusing the intellectual capital debate, the british accounting review, vol. 45, no. 4, pp. 243-254. bhimani, a. & langfield-smith, k. (2007), structure, formality and the importance of financial and non-financial information in strategy development and implementation, management accounting research, vol. 18, no. 1, pp. 3-31. bini, l., dainelli, f. and giunta, f. (2016), business model disclosure in the strategic report: entangling intellectual capital in value creation process. journal of intellectual capital, 17(1), pp.83-102. bontis, n. (2001), assessing knowledge assets: a review of the models used to measure intellectual capital, international journal of management reviews, vol. 3, no. 1, pp. 41-60. bukh, p.n. (2003), the relevance of intellectual capital disclosure: a paradox?, accounting, auditing & accountability journal, vol. 16, no. 1, pp. 49-56. casadeus-masanell, r. & ricart, j.e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, no. 2-3, pp. 195-215. eccles, r. (1991), the performance measurement manifesto, harvard business review, vol. 69, no. 1, pp. 131-137. grasenick, k. & low, j. (2004), shaken, not stirred: defining and connecting indicators for the measurement and valuation of intangibles, journal of intellectual capital, vol. 5, no. 2, pp. 268-281. holland, j. (2004), corporate intangibles, value relevance, and disclosure content, the institute of chartered accountants of scotland, edinburgh. holland, j. (2006), a model of corporate financial communications, the institute of chartered accountants of scotland, edinburgh. iirc (2013), “the ir framework”, international integrated reporting council, available at http://www.theiirc.org/ (last access 28 october 2017). ittner, c.d. & larcker, d.f. (2003), coming up short on nonfinancial performance measurement, harvard business review, vol. 81, no. 11, pp. 88-95. massa, l., tucci, c.l. & afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. montemari, m., & nielsen, c. (2013), the role of causal maps in intellectual capital measurement and management, journal of intellectual capital, vol. 14, no. 4, pp. 522-546. mouritsen, j & larsen, h.t. (2005), the 2nd wave of knowledge management: re-centering knowledge management through intellectual capital information, management accounting research, vol. 16, no. 3, pp. 371-394. journal of business models (2018), vol. 6, no. 2, pp. 5-9 9 nielsen, c. (2010), “conceptualizing, analyzing and communicating the business model”, department of business studies, aalborg university, wp, 2, pp. 1-24. nielsen, c. & bukh, p.n. (2013), “communicating strategy: using the business model as a platform for investor relations work”, the business model community working paper series 10 (2013). organization for economic co-operation and development (oecd) (1999), “guidelines and instructions for oecd symposium”, international symposium measuring reporting intellectual capital: experiences, issues and prospects, june, amsterdam, oecd, paris. osterwalder, a., pigneur, y. & tucci, c.l. (2005), clarifying business models: origins, present, and future of the concept, communications of the association for information systems, vol. 15, pp. 1-40. perkmann, m. & spicer, a. (2010), what are business models? developing a theory of performative representations, in technology and organization: essays in honor of joan woodward, pp. 265-275. emerald group publishing limited, bingley, uk. securities and exchange commission (sec) (1989), managements’ discussion and analysis of financial condition and results of operations: certain investment company disclosures, financial reporting release no. 36, sec, washington dc. smith, s. & van der heijden, h. (2017), analysts’ evaluation of kpi usefulness, standardization and assurance, journal of applied accounting research, vol. 18, no. 1, pp. 63-86. teece, d. j. (2000), managing intellectual capital: organizational, strategic, and policy dimensions, oxford university press, oxford uk. winter, s.g. & szulanski, g. (2001), replication as strategy, organization science, vol. 12, no. 6, pp. 730-743. journal of business models (2015), vol. 3, no. 1, pp. 22-28 22 please cite this paper as: brøndum et al. 2015 ‘kickass companies: leveraging business models with great leadership’, journal of business models, vol. 3, no. 1, pp. 22-28. introduction and theoretical setting the world loves winners. whether it is successful athletes, politicians, or business people who outperform the pack, there is a continuous longing to study successful people and to learn from them so that we too may improve ourselves. this mechanism is embedded in human nature but also goes for businesses and organisations in general. in the past, researchers and practitioners alike have strived to identify the outstanding practices, also known as “best practices”, and optimised processes of successful companies to learn from them and use them to improve their status quo. this is a good thing, as learning from best-practice cases is an effective means of understanding the principles and specifics of good ways of doing business. however, in the literature, there is a tendency to study only large international corporations like apple, google, amazon, and proctor & gamble, even though small and medium-sized enterprises (smes) constitute the dominant form of business organisations in all countries worldwide. smes represent between 95% and 99% of the enterprise population depending on the industry and state (deakins & freel, 2009). however, for an sme, it can be hard to learn from these multinational billion-dollar businesses, as the smes typically are constrained by scarce resources in ways that larger corporations are not (knight, 2000; chesbrough, 2007). there are countless examples of smes that clearly outperform their competitors and deliver exceptional financial results via outstanding practices, in many cases to much higher degrees than their esteemed global counterparts. when the spotlight falls on smes, we rarely see successful companies characterised as having unique patents, intellectual property, specifically nuanced strategies, or above-normal capitalisation rates. hence, we speculated that there must be a set of alternative explanations and recipes for the apparent success of such smes and – literally – how they kick ass. the objective of this paper is to highlight what can be learned from the best smes and how we might apply their mechanisms of excellence as best-practice examples. our point is that a model of the critical elements and relationships that create a kickass company – based on sme data will – in the long run, comprise the most valid model for other smes looking at improving their performance. in our search for excellent-performing smes, it became evident that traditional strategy tools and mindsets like five forces (porter, 1980), swot, or pestel analysis were incapable of explaining the dimension of exceptionality. in the search for a stronger theoretical standpoint, we were inspired by a series of management theories relating to corporate culture (logan et al., 2008; collins, 2001). we were also influenced by the notion of kickass companies: leveraging business models with great leadership kristian brøndum, christian nielsen, kim tange, frans laursen & jesper oehlenschläger journal of business models (2015), vol. 3, no. 1, pp. 22-28 23 business models and the practical tools related to this movement (osterwalder & pigneur, 2010; osterwalder et. al, 2014). the power of business models lies in their ability to visualise and clarify how firms may configure their value creation processes. among the key aspects of business model thinking are a focus on what the customer values, how this value is best delivered to the customer, and how strategic partners are leveraged in this value creation, delivery, and realisation exercise. central to the mainstream understanding of business models is the value proposition towards the customer, and the hypothesis generated is that, if the firm delivers to the customer what he/she requires, then there is a good foundation for extensive customer loyality and a longterm profitable business. hence, the objective here is to study the intersection between business models, corporate culture, leadership, execution, and the ability to deliver continuously outstanding financial results. in other words, we want to determine how to leverage business models through great leadership – and ultimately create significant financial results from this. our review of the aforementioned literature led to the statement of the following hypotheses from which an empirical study could depart: 1. the organisation and configuration of a company depend upon how competitive their primary market is. 2. companies’ ability to create relationships with customers and partners and to utilise these relationships are important factors in optimising the business model, as these relationships help to create lock-in and higher knowledge flows to and from these partners. 3. clear communication from the management about the company’s objectives, a strong focus on employee well-being, and a “we-culture” create a healthy environment and thus better business results. 4. companies that are propelled by a determination to become world champions perform better than average. 5. an open and decentralised leadership approach is necessary for employee satisfaction and ultimately influences the company’s performance. 6. hiring personnel from matching value sets creates the best team in the long run and therefore also the best results. 7. how companies choose to compete and configure their business model will have an impact on the company’s performance. 8. a strong customer focus is essential for good longterm performance, and a focus on helping customers create value contributes to maintaining the company’s source of business. methods the aim was to produce valid and reliable results based on research on smes. for this purpose, the data collection was organised around the hypotheses and carried out in two phases. data collection phase 1 the first stage is based on data collected through an online questionnaire published by the business model design centre at aalborg university. the survey was sent to over 7,000 danish companies via direct e-mail and resulted in 755 useful responses from a broad selection of danish smes. the research group then analysed the data for non-response bias. to reduce the total number of variables (93), variables within the same “theme” were merged using the cronbach’s alpha test. the construction of the latent variables, equivalent to the hypotheses, was optimised for their effect on corporate performance using a factor analysis. the responses are distributed across industries as indicated in table 1. the survey included the following themes: • background about the company • characterisation of the market’s competitiveness and dynamics • the importance of the company’s collaborations with external partners in the value chain • management style and the company’s mindset • characterization of the company’s revenue patterns • characterization of the company’s customer focus and interactions with customers • the company’s performance on financial and non-financial indicators journal of business models (2015), vol. 3, no. 1, pp. 22-28 24 table 1: responses from industries industries frequency percentage transportation 47 6.2 retail 123 16.3 utility 9 1.2 hospitality 38 5.0 agriculture 127 16.8 construction 63 8.3 housing 30 4.0 service 318 42.1 total 755 100.00 regarding performance, we did a further study using available data from the nn market data company database1. this study was done to support the companies’ performance score with the average growth in turnover over the last five years and average growth in profit be fore tax over the last five years. influenced by the criteria used in the good to great model (collins, 2001), we selected parameters that were relevant and measurable for our sme context. the research group validated each of the 755 data points on performance. the statistical analyses were performed by dividing the data set into two groups: a low-performance group (companies with an aggregated overall performance score below 6.00, using a seven-point likert scale) and a high-performance group (companies with an overall performance score of 6.00 or above). the high-performance population consisted of 117 businesses, and the average overall performance score of this group was 6.23. the average number of employees in the population was 35, ranging from three to 216 employees. for the analyses, we used linear regression models and chisquared tests to validate the initial hypotheses. before this, the conditions for linear regression and analysis of variance as the root mean square was tested and verified based on the guidelines introduced in stubager and sønderskov (2011). in the last part of the analysis, the research group ranked the companies’ performance based on financial data collected through secondary data sources. in this step, a population of 24 companies stood out from the rest of the dataset. these companies both had good performance values from the questionnaire and particularly strong financial characteristics based on our second analysis. we identify these 24 companies as kickass companies. data collection – phase 2 in the second stage of the data collection, we used semi-structured qualitative interviews to analyse the population of kickass companies identified in phase 1. the purpose of this was to uncover the essential aspects of being a kickass company. this qualitative part of the investigation was based on interviews with representatives of 12 of these kickass companies. the data processing and analysis included methods to ensure validity and reliability, including a semi-structured interview guide, audio/video recording of the interviews, transcriptions, and analytical pattern recognition in the empirical work. findings: what constitutes a kickass company? based on the eight hypotheses developed from the literature on business models, leadership, and how best to implement unique business models, the empirical evidence unveils a model containing six critical elements that create a kickass company. from the extensive data analysis process – both the quantitative as well as the qualitative – we found several areas or practices and processes where the kickass companies were significantly different from the rest of the population. these are presented in the following six findings. finding no. 1: you need willpower in kickass companies, we found certain traits of a distinct management style and mindset. more specifically, the mindset of the management team and the relationship between the management team and the employees was an area where the high-performance journal of business models (2015), vol. 3, no. 1, pp. 22-28 25 companies were significantly different from the rest of the population. to be a kickass company, you need a strong leader or management team with the ability to maintain focus on the company’s core business activities and , if necessary, the willpower to trim the business accordingly by outsourcing tasks and activities that are outside the company core. these traits were present in the high-performance companies in our analysis. in kickass companies, managers are leaders who lead the way, not administrators hiding behind desks. the aforementioned finding is in line with another crucial aspect of kickass companies, namely a passion for becoming the best in one’s field of operation. in the best-performing companies, this is often sensed all the way down to the employees’ passion for the job. it also means that there is an understanding of the company’s core mission and a focus on it throughout the organisation and that the management can transform its vision into a language that the employees understand. in other words, to become a kickass company, you need to have a clear vision and a transparent strategy that the employees can relate to. however, within the kickass companies segment, we found that employee involvement at the strategic level is not essential for performance. however, employee involvement plays a significant role at the tactical and operational levels with respect to improving and developing the company and how it works. kickass companies are found to apply both a traditional top-down management style at the strategic level and a more bottom-up approach at the tactical and operational levels. finding no. 2: you need to be there for your customers kickass companies are found to possess specialised knowledge of their customers and their respective needs. as such, they have high customer intimacy, resulting in a deep understanding of the customer’s situation and desired outcomes. kickass companies are found to be superior at optimising the customer’s value creation by focusing on helping to deliver superior customer value to the customer’s customer. the idea that companies succeed by selling value is not new. however, kickass companies had a significantly greater focus on improving their customers’ business and helping the customer become more efficient about his/her respective customers. our study illustrates that the highest-performing companies are able to improve the liquidity of their customers, which is a strong anchor point for cooperation. kickass companies have the unique ability to focus on creating economic profit within the “us and our customers” ecosystem. finally, the highest-performing companies in our sample are significantly different when it comes to focusing on sales. their knowledge of the customers is found to be a crucial resource in this work, and listening to the customer is an important point in creating value-adding processes from idea to final product/service. in short, kickass companies are customer-centric organisations. finding no. 3: you strive to be the best in line with finding no. 1, kickass companies compete through product/service leadership. they tend to offer a superior product or service and can achieve premium prices because of the experience they create for their customers. they are excellent at leveraging their expertise across organisational boundaries by mastering such disciplines as collaboration and knowledge management. because our sample of companies consists of smes, this finding correlates significantly with the characteristic that kickass companies, in some manner or another, specialise in a certain niche, so they ensure that they do not end up competing exclusively on price. finding no. 4: success is a “we thing” kickass companies have a “we culture”. even though our sample of kickass companies has a top-down management approach at the strategic level – as learned in finding no. 1 – they furthermore succeed in developing a strong culture with a high degree of “we–consciousness”. in such a corporate culture, the employees are typically deeply involved at the tactical and operational levels to improve and develop the company and how it works. 1 nn market data is one of denmark’s leading knowledge banks. journal of business models (2015), vol. 3, no. 1, pp. 22-28 26 in the data, we also found strong relations between the management, who are sometimes also the owners, and the employees, which provides a breeding ground for good internal relations that leads to better knowledge sharing. kickass companies emphasise the importance of collective knowledge sharing, giving the employees responsibility and ensuring that everyone can contribute. finally, kickass companies emphasise the importance of competence development and the fact that employees need to feel challenged to a certain degree to perform best. finding no. 5: you need to be able to accelerate kickass companies’ performance is found to be driven by a focus on growth. one of the ways for these companies to expand their business is through internationalisation. in contrast to the rest of the pack, kickass companies are significantly different in their attitude towards exporting, as they continuously scan for opportunities to sell abroad. these high-performance companies are found to have implemented business models that are flexible in that they can accommodate changing market requirements. our research illustrates that, besides frequent existing messages in the business literature relating to the importance of creating agile businesses in both growing and declining economies as well as hard-to-copy value propositions or value propositions that take a long time to replicate, business model scalability in kickass companies can typically be placed in one of the following four dimensions: 1. the firm is removed from otherwise typical capacity constraints of the particular type of business. 2. partners that enrich the value proposition without hurting profits are included. 3. stakeholders take multiple roles in the business model and create value for one another. 4. the business model becomes a platform that attracts new partners, including competitors. finding no. 6: use motivating kpis last, the use of target figures and key performance indicators (kpis) are found to have a particular role in kickass companies. here, kpis are used to improve the performance of the company through a positive outlook. kpis are thus not used as a control mechanism but instead to measure, develop, and improve the organisation and to stay focused. our study finds that kpis are all too often not identified through a strict analysis of value creation, for example, based on the business model of the company. our analysis of kickass companies’ performance concerning some financial and non-financial parameters leads us to formulate four pieces of good advice: 1. identify kpis that will motivate owners, managers, and employees. 2. kpis should be used to focus on what needs to be improved/developed in the company. 3. kpis should reflect the core focus of the company. 4. kpis should inspire and create energy around the vision of the company, not serve as control mechanisms. concluding remarks this paper is based on a study of 755 danish smes and further in-depth case studies of 12 of these. its objective was to identify a model of components and relationships among the very best, most efficient, high-performing smes. we call these kickass companies. the result is a model made up of six interrelated dimensions, which together illustrate what makes up a kickass company: 1. you need willpower 2. you need to be there for your customers 3. you strive to be the best 4. success is a “we thing” 5. you need to be able to accelerate 6. use motivating kpis following these six dimensions might not be a guarantee of success, and not all components will be implementable in all types of companies. however, the empirical evidence here suggests that, if companies think along these lines of doing business, their probability of success will be higher than otherwise. finally, there is the question of “how to do this”. we suggest that you take a closer look at the online tools available on www.kickasscompanies.com, where you will also be able to sign up for our forthcoming book. journal of business models (2015), vol. 3, no. 1, pp. 22-28 27 references chesbrough, h. w., 2007. why companies should have open business models. mit sloan management review, 48(2), pp. 22-28. collins, j., 2001. good to great: why some companies make the leap... and others don’t. william collins. deakins, d. & freel, m., 2009. entrepreneurship and small firms. 5th ed. maidenhead: mcgraw-hill education. knight, g., 2000. entrepreneurship and marketing strategy: the sme under globalization. journal of international marketing, 8(2), pp. 12-32. logan, d., king, j., & fischer-wright, h., 2008. tribal leadership: leveraging natural groups to build a thriving organisation. harper collins osterwalder, a. & pigneur, y., 2010. business model generation. john wiley & sons. osterwalder, a., pigneur, y., bernarda, g. & smith, a., 2014. value proposition design. john wiley & sons inc. porter, m.e., 1980. competitive strategy. free press, new york, 1980. stubager, r. & sønderskov, k., 2011. forudsætninger for lineær regression og variansanalyse efter mindste kvadrants metode. 5th ed. white paper, aarhus universitet. journal of business models (2015), vol. 3, no. 1, pp. 22-28 28 frans g. laursen holds an msc in business economics & foreign trade and is a partner in the consulting company 2begreat aps. frans has many years of practical experience in sales and management with positions as director of sales as well as manager of danish and international companies. since 2004, frans has worked as a consultant with a particular focus on the development and embedment of business models, business strategies and strong, customer-oriented corporate cultures. http://dk.linkedin.com/in/frans-g-laursen-8523403b kim tange is a partner in 2begreat aps and marketing manager at tradium. he is a professional board member of several private small and medium enterprises and an educational manager and teacher at the executive board programme. kim is a co-author of several books on management and sales. furthermore, he has extensive experience in business development and market orientation, as a consultant, adviser, director and teacher, both in the private and public sector. http://dk.linkedin.com/in/kimtange jesper oehlenschlager is a partner at 2begreat aps. he is a diploma manager and affiliated with the centre for postgraduate business courses at continuing easj. jesper is an experienced facilitator helping companies and organizations to new results through the development of language, stories and culture. additionally, he has many years of background in the development of sales organizations and productive relationships in the knowledge-intensive industries. http://dk.linkedin.com/in/jesperoehlenschlager about the authors kristian brøndum holds an msc in innovation and entrepreneurship and works as a part-time researcher and part-time project manager at business model design center (www.bmdc.aau.dk), one of the world’s leading interdisciplinary centres of excellence in business model research. kristian has worked with business models, creativity and entrepreneurship since 2011. http://dk.linkedin.com/in/kristianbroendum christian nielsen is professor at aalborg university, denmark. he heads the business model design centre (www.bmdc.aau.dk) and has worked with the field of analysing and valuing business models since 2001 both as a researcher and as a buy-side analyst, portfolio manager, consultant and board member and is also joint-editor of the journal of business models. https://dk.linkedin.com/in/christianhnielsen journal of business models (2018), vol. 6, no. 2, pp. 19-24 19 understanding business model innovation from a practitioner perspective carlos m. dasilva heg school of management fribourg / hes-so // university of applied sciences western switzerland, carlos.dasilva@hefr.ch abstract while business model innovations are critical to a company’s long-term survival, they are still poorly understood compared to other kinds of innovations. this paper investigates prior research and reframes business model innovation through a practitioner lens. reporting on a content analysis of interviews with ceos of small and medium enterprises in the technology industry, this research investigates their definition of business model innovation. this research intends to contribute to a better understanding of the meaning of business model innovation from a practitioners’ perspective. these findings open new directions for theory development and empirical studies in the business model and innovation management literature. please cite this paper as: dasilva c. (2018), understanding business model innovation from a practitioner perspective, journal of business models, vol. 6, no. 2, pp. 19-24 acknowledgements: the author acknowledges the preliminary research and contributions made by mr. zoran bjelic during his master thesis work at the heg school of management fribourg. keywords: business model innovation, ceos, innovation introduction although the literature agrees business model innovations are key to a firms’ long term survival, they are still poorly understood compared to other kinds of innovations such as process or product innovations. in this manuscript, we investigate prior research and reframe business model innovation through a practitioner lens. we report on a content analysis of 63 interviews with the top management of small and medium size enterprises in the technology industry, with the aim of recording their definition of business model innovation. this research intends to contribute to a better understanding of the meaning of business model innovation from a practitioners’ perspective. these findings open new directions for theory development and empirical studies in the business model and innovation management literature. journal of business models (2018), vol. 6, no. 2, pp. 19-24 20 business model innovation (bmi) is increasingly relevant to practitioners as companies look for alternative ways to compete beyond product or process innovations (henry chesbrough, 2007; ibm, 2016). whereas products and processes can often be easily copied by competitors, the dynamic and complex nature of bmi makes it harder to do so (amit and zott, 2012; schneider and spieth, 2014). despite clear advantages, bmi tools and processes are deficient (zott et al., 2011). one reason may be due to the lack of empirical and theoretical research to support bmi within organizations (venkatraman and henderson, 1998). in order to promote the establishment of adequate management frameworks and mechanisms that lead to bmi, more empirical foundations are necessary . theory development should evolve toward a construct that best approaches “the hypothesized course of [observed] events” (weber, 1949, p. 44) aimed at rigorous theory building (george and bock, 2011). by elaborating a review and presenting findings from an inductive study of practitioner perspectives, our aim is to better understand bmi in order to advance scholarly knowledge and research. in a nutshell, to provide a preliminary bridge from the phenomenon in managerial practice to the literature. the findings of the analysis are discussed and implications are drawn in the conclusion. finally, the limitations are stated and recommendations for future research presented. approach given the lack of a consistent framework and the limited empirical studies on bmi, we took an alternative approach by asking practitioners about their understanding and application of bmi. following the content analysis methodology and steps taken by (george and bock, 2011), we proceeded to interview the ceos of small and medium size companies from the high-tech industry. key insights based on an inductive study of practitioner perceptions, our research reveals that practitioners perceive bmi more as a way of orchestrating a new approach in order to reach new customers and markets with innovative products, than about engineering new revenue possibilities or maintaining existing ones. it is more about reaching new (market and products) than reconfiguring existing resources and capabilities to generate supra returns. it is not about optimization of the existing, but creation of the new. it is not a vehicle for facing existing challenges or constraints, nor for keeping the existing business sustainable, but a way to explore new possibilities in an outward manner. discussion and conclusions research on bmi based on rigorous inductive or deductive logic is limited. this content analysis research presents an integrative framework for understanding bmi in the practitioner context. our analysis of the language of bmi used in practice provides specific clues for understanding bmi in the broader management context. our results reveal a lack of convergence on the meaning and definition of bmi. this research shows practitioners’ general perception of bmi is fragmented. the following section will contrast the findings of our research with extended literature on bmi. novel orchestration. a large number of respondents agree that bmi represents a novel approach to doing business. the category comprises five subcategories (new way of doing business, change, adaptation, evolution and new solutions). practitioners seem to clearly see bmi as an alteration of the existing status quo into a novel one. it is thus not a current state, but a process of transformation from one stage to another. in order to reach the new state, a firm has to master several processes and activities – both existing and new. these processes and activities, alongside resources (hedman and kalling, 2003) and capabilities (morris et al., 2005), plus their orchestration may lead to the design of an innovative business model (gassmann et al., 2015). bmi may therefore change the internal organizational structure and control, and possibly the company culture (foss and saebi, 2015). business model changes towards a new way are almost by definition strategic issues for which the top management team is accountable. customer centric. the second most cited category is stakeholders. of the five subcategories, one clearly stands out: customers. a total of 41% of the respondents mentioned the term customers in their definition of bmi. the ceos in our study seem particularly journal of business models (2018), vol. 6, no. 2, pp. 19-24 21 concerned about their customers when defining bmi. congruently, the literature reveals that every business model should serve certain customer groups (chesbrough and rosenbloom, 2002) and must answer the fundamental question “who is the customer?” (magretta, 2002). further, morris and colleagues (2005) argue that failure to adequately identify the right customer market is a key factor associated with venture failure. an approach commonly referred to as the customer value proposition (johnson et al., 2008) is where organizations focus their activities on best serving their customers (barnes et al., 2009). it addresses a customer’s problem, the solution to it, and value from the customer’s perspective (chesbrough and rosenbloom, 2002). a discussion that matches our data and is congruent with the research is undertaken by (gassmann et al., 2015), who identifies customers as a central dimension when designing a new business model. product innovation. the category product/service was the third most cited by practitioners. in fact, it is the second most cited in terms of total frequencies. its subcategory, market, is the predominant term referred to in the interviews with an absolute frequency of 17 times, accounting for 27% of the practitioners’ mentions. they are clearly aware that bmi allows companies to deploy products in a specific market. from the respondents’ perspective, bmi seems intrinsically connected with new markets rather than existing markets in which they already operate. the word product is often joined with the word new or innovation, again revealing the practitioners’ perception that bmi mainly deals with the development of new products and new markets, rather than existing ones. bmi is clearly different from product and process innovation. whereas products can often be easily copied, the dynamic nature of bmi means it cannot (schneider and spieth, 2014). new business models are hard to follow and copy given their complexity (bucherer et al., 2012). yet, new products and associated technologies can also be facilitators to shape new business models or readapt existing ones. for example, apple’s ipod was not revolutionary per se since several companies had already offered devices using mp3 technology. however, combining the ipod with the innovative itunes business model led the company to become the market leader and disrupt the music industry (abel, 2008). revenue. the category value was the fourth most cited in our study. its subcategory, revenue and profit, was important to the respondents when considering bmi, but not fundamental. the financial viability of a business model rests on its revenue model (amit and zott, 2001). it is an essential dimension of the business model as it represents the means by which a firm captures value (zott and amit, 2008). the interviews revealed respondents perceived revenue and profit as a consequence of bmi, not as its driver. new revenues versus maintaining existing ones were predominant in the responses. in fact, no respondent perceived bmi as a mechanism to prevent the loss of profitability. chesbrough and rosenbloom (2002) highlight the importance of bmi for sustaining profits in the long run: a notion that is clearly missing from our sample of responses. a possible reason for the lack of concern for maintaining the existing revenues might be that the interviewed ceos were not from large corporations, but from more agile smes where chance and adaptation are more common. to sum up, our respondents consider bmi as a means to secure new revenues and profits, and less as a vehicle for sustaining existing ones. exogenous. in contrast, few respondents considered opportunity (subcategories: competitive advantage, rupture, differentiation, uniqueness, sustainability, attractability) as relevant to bmi. the results of our research contrast sharply with those of (george and bock, 2011) study based on e-mba students’ description of business model terminology. the authors build their research argument from the notion that “business models are opportunity-centric” and that the “business model is the organization’s configurational enactment of a specific opportunity”. further, they justify firm formation as a decision “based on the enactment of an opportunity through an explicit or implicit business model”. the authors then define business model as “the design of organizational structures to enact a commercial opportunity. fewer words that were used related to optimization (maximization, combination of resources, best practices, improvements), in contrast with scholars in the field who advocate the leverage and re-combination of existing resources within the firm in order to create new business models (mcgrath, 2010). the least popular terms used relate to challenge (subcategories: challenge, threat, constrains, anticipation). this is not to say that bmi cannot be a journal of business models (2018), vol. 6, no. 2, pp. 19-24 22 solution to a company’s challenges, nor that threats play no role in bmi, but that practitioners do not perceive bmi as a tool to confront challenges or threats. this result is particularly interesting given that large corporations usually resolve to innovate their business models as a result of serious challenges (chesbrough, 2007). few companies resolve to innovate their business models before they are forced to do so by external events (chesbrough, 2010). the reason might lie in the limited research on bmi and its application. indeed, to date concrete solutions that support bmi, like they do with product innovation, are limited. hence, the list of companies that failed innovate their business model is extensive. kodak, for example, ignored digital photography and filed for bankruptcy in 2012 (waters, 2012). blockbuster ignored the innovative revenue models of its competitor and was forced out of the market by netflix (peers and ramachandran, 2013). siebel saw its crm market share shrink as salesforce brought in an innovative revenue model (dasilva et al., 2013). further examples abound, and the literature is clear in asserting it is critical for managers to recognize when to change their business model (johnson et al., 2008). journal of business models (2018), vol. 6, no. 2, pp. 19-24 23 references abel, i., 2008. from technology imitation to market dominance: the case of ipod. compet. rev. int. bus. j. inc. j. glob. compet. 18, 257–274. amit, r., zott, c., 2012. creating value through business model innovation. mit sloan manag. rev. 53, 41–+. amit, r., zott, c., 2001. value creation in e-business. strateg. manag. j. 22, 493–520. https://doi.org/10.1002/ smj.187 barnes, c., blake, h., pinder, d., 2009. creating and delivering your value proposition: managing customer experience for profit, 1st ed. kogan page, uk. bucherer, e., eisert, u., gassmann, o., 2012. towards systematic business model innovation: lessons from product innovation management. creat. innov. manag. 21, 183–198. chesbrough, h., 2010. business model innovation: opportunities and barriers. long range plann. 43, 354–363. chesbrough, h., 2007. business model innovation: it’s not just about technology anymore. strategy leadersh. 35, 12–17. chesbrough, h., rosenbloom, r., 2002. the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. ind. corp. change 11, 529. dasilva, c.m., trkman, p., desouza, k., lindič, j., 2013. disruptive technologies: a business model perspective on cloud computing. technol. anal. strateg. manag. 25, 1161–1173. https://doi.org/10.1080/09537325.2013.843661 foss, n.j., saebi, t., 2015. business model innovation: the organizational dimension. oxford university press. gassmann, o., frankenberger, k., csik, m., 2015. the business model navigator: 55 models that will revolutionise your business, 1 edition. ed. ft press, harlow, england ; new york. george, g., bock, a.j., 2011. the business model in practice and its implications for entrepreneurship research. entrep. theory pract. 35, 83–111. https://doi.org/10.1111/j.1540-6520.2010.00424.x hedman, j., kalling, t., 2003. the business model concept: theoretical underpinnings and empirical illustrations. eur. j. inf. syst. 12, 49–59. henry chesbrough, 2007. business model innovation: it’s not just about technology anymorenull. strategy leadersh. 35, 12–17. https://doi.org/10.1108/10878570710833714 ibm, 2016. redefining competition: the ceo point of view. johnson, m.w., christensen, c.m., kagermann, h., 2008. reinventing your business model. harv. bus. rev. 86, 50–57. magretta, j., 2002. why business models matter. harv. bus. rev. 80, 86–+. mcgrath, r.g., 2010. business models: a discovery driven approach. long range plann. 43, 247–261. https://doi .org/10.1016/j.lrp.2009.07.005 journal of business models (2018), vol. 6, no. 2, pp. 19-24 24 morris, m., schindehutte, m., allen, j., 2005. the entrepreneur’s business model: toward a unified perspective. j. bus. res. 58, 726–735. https://doi.org/10.1016/j.jbusres.2003.11.001 peers, m., ramachandran, s., 2013. dish network to close its remaining u.s. blockbuster stores. wall str. j. schneider, s., spieth, p., 2014. business model innovation and strategic flexibility: insights from an experimental research design. int. j. innov. manag. 18, 1440009. https://doi.org/10.1142/s136391961440009x venkatraman, m., henderson, j.c., 1998. real strategies for virtual organizing. sloan manage. rev. 40, 33–48. waters, r., 2012. kodak files for bankruptcy protection. financ. times. weber, m., 1949. objectivity in social science and social policy. methodol. soc. sci. 78, 50–112. zott, c., amit, r., 2008. the fit between product market strategy and business model: implications for firm performance. strateg. manag. j. 29, 1–26. zott, c., amit, r., massa, l., 2011. the business model: recent developments and future research. j. manag. 37, 1019–1042. journal of business models (2019), vol. 7, no. 1, pp. 1-8 1 building sustainable value propositions for multiple stakeholders: a practical tool doroteya vladimirova centre for industrial sustainability, institute for manufacturing, university of cambridge, dkv21@cam.ac.uk abstract this paper presents a practical approach for helping innovation leaders to build value propositions that result in more sustainable businesses. the sustainable value proposition builder is a new tool developed to support the development and communication of value propositions to multiple stakeholders participating in the process of sustainable business model innovation. please cite this paper as: vladimirova, d. (2019), building sustainable value propositions for multiple stakeholders: a practical tool, vol. 7, no. 1, pp. 1-8 acknowledgements: this work was supported by the uk engineering and physical sciences research council (epsrc) project business models for sustainable industrial systems, [grant number ep/l019914/1]. keywords: sustainable value proposition, sustainable business models, business model innovation introduction value propositions are a fundamental premise in the business model literature (massa et al., 2017). value is a core concept that underpins business model frameworks and multiple authors place the value proposition at the heart of the business model (richardson 2008; osterwalder and pigneur, 2010). most research on value propositions to date has focused on the narrow customer-firm perspective (frow et al., 2014; dasilva, 2018). value propositions have been described as “the reasons a customer will value a firm’s (proposed) offering” (richardson, 2008, p.139). recent developments in the sustainable business model innovation space have led to the extension of the value proposition concept to integrate sustainability in its logic (lambert, 2018; raith and siebold, 2018). for example, baldassarre et al. (2017) refer to sustainable value propositions as the result of generating shared value for a network of stakeholders, while addressing a sustainability problem, and developing a product or service that tackles the problem. journal of business models (2019), vol. 7, no. 1, pp. 1-8 2 while there is an extensive academic debate and conceptualisation of value propositions, and lately sustainable value propositions, there is still a paucity of tools that can be used by industrialists to design and implement sustainable business models in practice (evans et al., 2017), and even fewer specifically focused on the design of sustainable value propositions. business model tools are sparse and typically do not consider how sustainability concerns may be integrated into the value proposition. the business model canvas (osterwalder and pigneur, 2010) and the value proposition design canvas (osterwalder et al., 2014) have become ubiquitous (kyhnau and nielsen, 2015). however, they focus on the single customer-firm relationship and do not consider sustainability in the creation of the value proposition. in a recent review of tools for developing responsible business models, hope (2018) identified a growing number of tools emerging in the field of sustainable business models that can help to design sustainable business models. among these tools, the cambridge value mapping tool (bocken et al., 2013; vladimirova, 2016) and the sustainable value analysis tool (yang et al., 2017) have extended the suite of tools that dig deeper into the concept of ‘sustainable value’ and yet the utility of these tools remains in ideation and analysis rather than construction of sustainable value propositions. den ouden’s (2012) value framework explicitly considers larger impacts and it approaches business model design by developing value propositions for the user, organisation, ecosystem and society, and considers value from the perspectives of economy, psychology, sociology and ecology. however, the value framework remains largely conceptual and is difficult to apply in industry. this study aims to address this gap with practical novelty and utility. the paper presents a new practical approach for helping innovation leaders to design better value propositions that result in more sustainable businesses. a new tool supporting the development and communication of value propositions to multiple stakeholders of sustainable business model innovation is presented. the tool can be used hands-on by industry practitioners who can follow the process and steps outlined in this paper. approach this study adopted engaged scholarship as a research strategy. engaged scholarship is a participatory form of research, which is designed to work across the theorypractice boundary (van de ven, 2007). the idea is to draw on the perspectives and understandings of key stakeholders in real-world problem situations to frame the research and, in turn, to leverage multiple theories and empirical findings to help address the problem situation (mathiassen, 2017). this research was conducted in the form of a collaborative inquiry with industry practitioners that integrated their experience to generate useful knowledge (barge and shockley-zalabak, 2008). a structured method and a practical tool to facilitate the development of value propositions for multiple stakeholders of sustainable business model innovation in practice was built. the research process is shown in figure 1. the first step was to formulate the problem with input from industry collaborators, which informed an initial concept for the tool. second, multiple theoretical perspectives from various fields, as elaborated in the next section, were identified and synthesised to figure 1: research process journal of business models (2019), vol. 7, no. 1, pp. 1-8 3 provide a robust theoretical foundation for the study, which led to the creation of the first version of the tool. third, the tool and the facilitation process were tested, iterated and refined with a total of sixty-seven industry participants. based on the feedback from participants and observations from using the tool in practice, the second and current version of the tool was developed. the participants in the study were employees and managers working for the same organisation, a market leader in global digital services. the company was looking to encourage internal disruption and sustainable innovation, and to facilitate collaboration across globally distributed teams. the participants were organised in twelve international cross-functional project teams of up to six people who took part in workshops facilitated by the author. each workshop lasted for 2 hours and 45 minutes and each team followed the step-by-step process outlined in table 1. participants provided verbal and written feedback on the utility of the tool and the process at the end of the workshop. in addition, each tool populated by the participants in the workshop was photographed and analysed after the event. the outcome of this engagement for the participants was a set of targeted value propositions to their customers and other project-specific internal and external key stakeholders who were identified as critical to the success of the proposed innovation. the value propositions subsequently made part of the business cases presented to the top management of the company after the workshops seeking support and sponsorship for the innovation. in summary, the purpose of this engagement was to provide a method and a tool for structured and collaborative innovation to teams comprising co-workers from different functions based in international locations of the business and to facilitate the development of a business case for an innovation which takes sustainability into consideration. theoretical foundation this study identifies and intertwines multiple theoretical perspectives in order to build a robust theoretical foundation. namely, the sustainable value proposition builder draws on the concepts of sustainable value (hart and milstein, 2003; yang et al., 2017), value proposition (ballantyne et al., 2011; frow et al., 2014), sustainable business models (stubbs and cocklin, 2008; evans et al., 2017) and stakeholder mutuality in a wider stakeholder network, which treats society and nature as primary stakeholders of the firm (haigh and griffiths, 2009; argandoña, 2011). value is referred to as the benefits derived by stakeholders from tangible and intangible exchanges in a stakeholder network (allee, 2008; yang et al., 2014). the scope of value, whereby, includes not only economic transactions but also relationships, exchanges and interactions conceptualised as value flows that take place among stakeholders in a network (den ouden, 2012). this study adopts the notion of sustainable value that “incorporates economic, social and environmental benefits conceptualised as value forms” (evans et al., 2017, p.601), whereby: i. economic value forms could include cost savings, profit, return on investment and long-term viability; ii. social value forms refer to the benefits created for various members/groups in society and could include job creation, secure livelihoods, health, wellbeing and community development; iii. environmental value forms refer to reducing negative impacts, e.g. resource efficiency and pollution prevention of air, water and soil, as well as creating positive impacts for the environment, e.g. investing in renewable resources. value proposition is a core construct found across several bodies of literature on customer value, business models and sustainability. for example, in the servicedominant logic (a stream in marketing theory), value propositions are defined as “promises”, which integrate resources and align value creation mechanisms in a reciprocal manner, i.e. actors are operating and seeking an equitable exchange of value amongst themselves (kowalkowski et al., 2016). sustainable value propositions have been recently defined as “a promise on the economic, environmental and social benefits that a firm’s offering delivers to customers and society at large, considering both short-term profits and longterm sustainability” (patala et al., 2016, p.144). ballantyne and varey (2006) argue that value propositions should be considered as proposals of value, where journal of business models (2019), vol. 7, no. 1, pp. 1-8 4 there is an expectation of reciprocity, which implies active roles for all actors. argandoña (2011) argues that if the value created is of multiple forms, better ways of creating economic and non-economic value in a sustained way should be found, so that all stakeholders who help to create the benefits also become beneficiaries of value. this study adopts the notion of stakeholder mutuality in the creation of sustainable value propositions whereby stakeholders, who receive benefits from, also have responsibility for and provide contributions to the value creation system (frow et al., 2014). moreover, treating society (argandoña, 2011) and nature (or the natural environment) as non-traditional but primary stakeholders of the firm (haigh and griffiths, 2009) spreads a wider net for sustainable value creation. sustainable business models seek to go beyond delivering economic value and include a consideration of other forms of value for a broader range of stakeholders (bocken et al., 2013). furthermore, a sustainable business model aligns interests of all stakeholder groups, and explicitly considers the environment and society as key stakeholders (bocken et al., 2014). schaltegger et al. (2016) summarize that sustainable business models help to describe, analyze, manage, and communicate a firm’s sustainable value proposition to its customers, and its other stakeholders: how it creates, delivers and captures economic value while actively maintaining or regenerating natural, social, and economic capital beyond the firm’s boundaries. sustainable business model innovation is defined as “innovations that create significant positive and/or significantly reduced negative impacts for the environment and/or society, through changes in the way the organisation and its value network create, deliver value and capture value… or change their value propositions” (bocken et al., 2014, p.44). sustainable business model innovation can lead to the development of entirely new business models, the diversification into additional business models, the acquisition of new business models, or the transformation from one business model to another (geissdoerfer et al., 2018). identifying key stakeholder groups, the interests they represent, the amount of power they possess and determining if they represent inhibiting or supporting factors toward the business model innovation is critical for its success (brouwer et al., 2012). engaging with the stakeholders of the sustainable business model innovation process can help innovation leaders identify the key players, understand the value exchanges among them and keep interests aligned by developing sustainable value propositions for the key stakeholders. sustainable value proposition builder this section presents the new sustainable value proposition builder which comprises a 5-step process and a graphical tool (figure 2) for creating sustainable value propositions for multiple primary stakeholders of the business model by internal and external stakeholders of the business. the sustainable value proposition builder was conceived to help companies to create value propositions to multiple stakeholders who play critical roles in the process of sustainable business model innovation. it adopts a qualitative approach to identifying different forms of value interpreted as benefits to and contributions from stakeholders. the primary aim of the sustainable value proposition builder is to support value proposition design and facilitate stakeholder engagement. it specifically helps to understand the positive and negative aspects of the value propositions for the stakeholder network, identify potential risks for key stakeholders so that timely action can be taken to address these, and identify opportunities for stakeholder engagement in the early stages of business model innovation. the proposed use of the tool follows five steps. the process begins by defining the unit of analysis, typically a new value opportunity (step 1). this could be a product, service, a new business idea, technology or sustainability innovation. key stakeholders of the unit of analysis are then identified and placed in each segment of the tool (step 2). generic stakeholder groups are shown on the tool as prompts to facilitate the generation of ideas. these include customers, investors and shareholders, suppliers and partners, society and environment, but when used, the tool is populated by users with specific stakeholders related to the new value opportunity. a facilitated brainstorming is then carried out to populate each stakeholder segment with the various forms of value generated for that stakeholder. this starts with identifying positive benefits that stakeholders might receive (step 3), followed by journal of business models (2019), vol. 7, no. 1, pp. 1-8 5 identifying contributions that stakeholder need to provide in order to realise the new value opportunity (step 4). finally, a balanced value proposition is developed for each stakeholder identified in the process (step 5). the tool is graphically designed and the process is logically devised for ease of use and limited need for expert facilitation. summary of the steps is presented next and the detailed workshop facilitation process is elaborated in table 1. • step 1: define the unit of analysis a new value opportunity, e.g. product, service, project, idea, technology, which could lead to a change in the existing business model or to the creation of a new business model. • step 2: identify key stakeholders of the new value opportunity, i.e. stakeholders who can enable or prevent successful change, which might include specific customers, decision-makers, partners, suppliers, representatives of society, proxies for the natural environment. • step 3: describe the economic, social and environmental benefits of the new value opportunity for each of the stakeholders. • step 4: describe the contributions from each stakeholder for the realisation of the new value opportunity. • step 5: develop a sustainable value proposition for each stakeholder. conclusion the paper introduces the sustainable value proposition builder, which assists industry users by providing a step-by-step structured approach for creating value propositions for multiple stakeholders of their business to support the process of business model innovation that integrates sustainability at the heart of the business. the contribution is twofold. first, the study strengthens the theoretical foundation of the emerging and reformist field of sustainable business model innovation by integrating concepts from multiple theories to inform a novel solution. second, a new tool, which bridges academic research and industry practice, is developed. implications for industry practice. the tool facilitates organisations in better understanding the exchanges with their stakeholders and could help build and communicate targeted value propositions. it also enables industrialists to enhance competitive advantage through the economic, social and environmental attributes of sustainable value. this tool can be used by entrepreneurs and business managers to gain a more complete understanding of the current value proposition of the company, and to explore opportunities for transforming the value proposition towards more sustainable solutions. overall, the sustainable value proposition builder provides a structured approach to a sustainability-focused approach to business model innovation. figure 2: sustainable value proposition builder (source: own figure) journal of business models (2019), vol. 7, no. 1, pp. 1-8 6 implications for research. it should be noted that the sustainable value proposition builder is intended to support value proposition design as part of a wider business model innovation process. it can be used as a standalone tool or together with other ideation, analysis and design tools to create a more comprehensive process. in future research, the sustainable value proposition builder can be applied in case studies in different industrial contexts. future research can reveal new ways of configuring new and existing tools to formulate a modular customized innovation process. the tool can also be developed into a digital tool. the workshop process can be gamified and tested in virtual reality environment to explore new ways of conducting innovation workshops. step activity prompts introduction to the tool and the workshop process. facilitator describes the underlying concepts and rationale of the tool and explains its purpose and use. participants describe existing value exchanges in the company. who are your internal and external customers? who are your suppliers / partners? what products / services do you offer to your customers? what benefits do you provide to your customers / suppliers / partners? what do you receive in return from your customers / suppliers / partners? step 1: define the unit of analysis. facilitator explains how the unit of analysis scopes the enquiry. participants debate and decide the unit of analysis, typically a new value opportunity. what is the new value opportunity, e.g. new product / service / project / business idea / technology / start-up company? step 2: identify key stakeholders for the new value opportunity. facilitator explains the concept and purpose of multi-stakeholder engagement. participants debate and determine the key stakeholders that can facilitate or block the change associated with the new value opportunity. who are the key change stakeholders for this value opportunity? who has the power to help realise the new value opportunity? who is in a position to block implementation? identify key stakeholders of the new value opportunity, e.g. customers / decision-makers / change sponsors / partners / suppliers / local community / environmental regulator. step 3: describe the economic, social and environmental benefits of the value opportunity for each stakeholder. facilitator provides prompts. participants explain the potential of the new value opportunity and identify economic, social and environmental benefits for the key stakeholders. what are the positive benefits for the stakeholders? describe economic, social and environmental benefits for each stakeholder. what problems does the new value opportunity solve for each stakeholder? what problems can the new value opportunity solve for each stakeholder? identify 3 problems that might be solved. step 4: describe the contributions from each stakeholder to the new value opportunity. facilitator provides prompts. participants identify economic, social and environmental contributions required from each stakeholder to the new value opportunity. what investment does each stakeholder need to make into the new value opportunity? what resources are needed in order to implement the new value opportunity? what responsibilities does each stakeholder have in order to realise the new value opportunity? what are the potential negative impacts for the stakeholders? what are the potential risks for each stakeholder? step 5: develop a sustainable value proposition for each stakeholder. facilitator provides real world examples of sustainable value propositions. participants develop constructs and build a set of new value propositions. define clear value propositions which communicate the benefits and desirable outcomes and outline reciprocity for the stakeholders. write the value propositions up in short messages. closing the workshop. participants discuss further how to engage with the stakeholders and communicate the new value propositions effectively. simplify the value propositions. highlight especially desirable outcomes. plan how to mitigate potential negative impacts. table 1: workshop facilitation process for the sustainable value proposition builder journal of business models (2019), vol. 7, no. 1, pp. 1-8 7 references allee, v. (2008), value network analysis and value conversion of tangible and intangible assets, journal of intellectual capital, vol. 9, no. 1, pp. 5-24. argandoña, a. (2011), stakeholder theory and value creation, working paper, iese business school working paper no. 992, university of navarra, pamplona, may 21, 2011. baldassarre, b., calabretta, g., bocken, n.m.p. and jaskiewicz, t. (2017), bridging sustainable business model innovation and user-driven innovation: a process for sustainable value proposition design, journal of cleaner production, vol. 147, pp. 175-186. ballantyne, d. and varey, r. j. (2006), creating value-in-use through marketing interaction: the exchange logic of relating, communicating and knowing, marketing theory, vol. 6, no. 3, pp. 335-348. ballantyne, d., frow, p., varey, r. j. and payne, a. (2011), value propositions as communication practice: taking a wider view, industrial marketing management, vol. 40, no. 2, pp. 202-210. barge, k. j. and shockley-zalabak, p. (2008), engaged scholarship and the creation of useful organizational knowledge, journal of applied communication research, vol. 36, no. 3, pp. 251-265. bocken, n. m. p., short, s. w., rana, p. and evans, s. (2013), a value mapping tool for sustainable business modelling, corporate governance, vol. 13, no. 5, pp. 482-497. bocken, n.m.p., short, s.w., rana, p. and evans, s. (2014), a literature and practice review to develop sustainable business model archetypes, journal of cleaner production, vol. 65, pp. 42-56. brouwer, h., groot kormelinck, a. and van vugt, s. (2012), tools for analysing power in multi-stakeholder processes – a menu. wageningen university. wageningen, available at: http://www.mspguide.org/resource/tools-analysingpower-multi-stakeholder-processes-menu (accessed 3 february 2019). dasilva, c. m. (2018), understanding business model innovation from a practitioner perspective, journal of business models, vol. 6, no. 2, pp. 19-24. den ouden e. (2012), innovation design: creating value for people, organizations and society, springer-verlag, london. evans, s., vladimirova, d., holgado, m., van fossen, k., yang, m., silva, e. and barlow, c.y. (2017), business model innovation for sustainability: towards a unified perspective for creation of sustainable business models, business strategy and the environment, vol. 26, no. 5, pp. 597-608. frow, p., mccoll-kennedy, j.r., hilton, t., davidson, a., payne, a. and brozovic, d. (2014), value propositions: a service ecosystems perspective. marketing theory, vol. 14, no. 3, pp. 327-351. geissdoerfer, m., vladimirova, d. and evans, s. (2018), sustainable business model innovation: a review, journal of cleaner production, vol. 198, pp. 401-416. haigh, n. and griffiths, a. (2009), the natural environment as a primary stakeholder: the case of climate change, business strategy and the environment, vol. 18, no. 6, pp. 347-359. http://www.mspguide.org/resource/tools-analysing-power-multi-stakeholder-processes-menu http://www.mspguide.org/resource/tools-analysing-power-multi-stakeholder-processes-menu journal of business models (2019), vol. 7, no. 1, pp. 1-8 8 hart, s.l. and milstein, m.b. (2003), creating sustainable value, academy of management executive, vol. 17, no. 2, pp. 56-67. hope, a. (2018), sustainable business model design: a review of tools for developing responsible business models, in sustainable business models: principle, promise and practice, moratis, lars (et al.) (eds.), springer, pp 377-394. kowalkowski, c., kindström, d. and carlborg, p. (2016), triadic value propositions: when it takes more than two to tango, service science, vol. 8, no. 3, pp. 282-299. kyhnau, j. and nielsen, c. (2015), value proposition design: how to create products and services customers want, journal of business models, vol. 3, no. 1, pp. 81-92. lambert, s. (2018), applying a sustainability lens to the business model, journal of business models, vol. 6, no. 2, pp. 49-53. massa, l. tucci, c. and afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. mathiassen, l. (2017), designing engaged scholarship: from real-world problems to research publications, engaged management review, vol. 1, no. 1, pp. 17-28. osterwalder, a. and pigneur, y. (2010), business model generation, john wiley & sons, hoboken, new jersey. osterwalder, a., pigneur, y., bernarda, g. and smith, a. (2014), value proposition design: how to create products and services customers want, john wiley & sons inc., hoboken, new jersey. patala, s., jalkala, a., keränen, j., väisänen, s., tuominen, v. and soukka, r. (2016), sustainable value propositions: framework and implications for technology suppliers. industrial marketing management, vol. 59, pp. 144–156. raith, m.g. and siebold, n. (2018), building business models around sustainable development goals, journal of business models, vol. 6, no. 2, pp. 71-77. schaltegger, s., hansen, e. and lüdeke-freund, f. (2016), business models for sustainability: origins, present research, and future avenues, organization & environment, vol. 29, no. 1, pp. 3-10. stubbs, w. and cocklin, c. (2008), conceptualizing a ‘sustainability business model’. organization environment, vol. 21, no. 2, pp. 103-127. van de ven, a. h. (2007), engaged scholarship: a guide for organisational and social research, oxford university press, new york. vladimirova, d. (2016), the cambridge value mapping tool, ifm review, issue 5, p. 24. https://www.ifm.eng.cam. ac.uk/news/the-cambridge-value-mapping-tool/ (accessed 3 february 2019). yang, m., vladimirova, d., rana, p. and evans, s. (2014), sustainable value analysis tool for value creation. asian journal of management science and applications, vol. 1, no. 4, pp. 312-332. yang, m., vladimirova, d. and evans, s. (2017), creating and capturing value through sustainability: the sustainable value analysis tool, research-technology management, vol. 60, no. 3, pp. 30-39. https://www.ifm.eng.cam.ac.uk/news/the-cambridge-value-mapping-tool/ https://www.ifm.eng.cam.ac.uk/news/the-cambridge-value-mapping-tool/ journal of business models (2018), vol. 6, no. 2, pp. 25-31 25 business model in accounting: an overview costanza di fabio francesco avallone university of genoa, department of economics and business studies abstract despite the interest in business model (bm), the academic debate in the accounting field seems still in the early stage. we investigate the use of bm in accounting through a literature review and discuss the findings considering management and banking research. specific streams and areas of improvement are identified. please cite this paper as:di fabio c., avallone f. (2018), business model in accounting: an overview, journal of business models, vol. 6, no. 2, pp. 25-31 acknowledgements: we thank the participants at the 2nd business model conference. we would like to thank especially robin roslender, christian nielsen, francesco giunta, laura bini, and lorenzo massa for their suggestions. keywords: business model; literature review; accounting research introduction within the accounting field, there has been lately an increasing interest from standard setters, regulators and professional bodies in the business model (bm). many bodies support the introduction of a section on the bm in the annual report (cima, 2010; bis, 2011; efrag, 2013); for instance, the uk corporate governance mandates disclosure on bm in the annual report. additionally, the european financial reporting advisory group undertook a joint project with national standard setters leading to a bulletin ‘the role of the bm in financial reporting’ and the research paper ‘the role of the bm in financial statements’ and revealing strong support for the bm playing a role in financial reporting. furthermore, the eu directive on disclosure of non-financial and diversity information (2014/95/ eu) requires that large public interest entities provide disclosure concerning the bm in the management report from 2017. the bm has started to play a significant role also as a rationale for accounting valuation and measurement purposes. indeed, the iasb introduced the bm approach to classification and measurement of financial assets in the scope of the international financial reporting journal of business models (2018), vol. 6, no. 2, pp. 25-31 26 standard 9 (ifrs 9), applied in the european union since january 1, 2018. such intervention is inspired by the need for reducing the complexity in accounting for financial instruments and to the development of an even more principle-based accounting standard. the underlying assumption to this approach is that the bm is the primary determinant of the actual management of financial assets and of their use for cash flows’ generation purposes. against this background, eminent scholars have problematized the role of the notion of bm and its implication for research, but the literature on the topic is still in its infancy (beattie and smith, 2013; bini et al., 2016) and there is a lack of a comprehensive framework. this paper aims at contributing to filling in this gap by investigating how the notion of bm has been used in the scope of accounting research. to this purpose, we present a literature review of accounting papers dealing with the bm and discuss them in the light of contributions brought by research in the management and banking field. our findings show that in accounting research the bm notion has been used mainly as a determinant of accounting choices concerning valuation and measurement of assets, and as an object of reporting. while the first perspective is adopted mainly by research in the field of financial reporting, the second is the focus of research within the non-financial reporting field. additionally, the findings suggest that empirical studies dealing with the link between bm and accounting choices would benefit from stronger methodological underpinnings. overall, our findings could trigger future studies investigating the usefulness of adopting a bm approach in the scope of financial reporting and further research on the link between the bm as a reporting framework and financial reporting. the present paper proceeds as follows. the next section synthetizes the methodological approach used to carry out the literature review. the third section presents the results. in the fourth section, we discuss the findings in the light of some contributions from management literature and from research in the banking field and conclude. approach the methodological approach adopted in this study is similar to other recent reviews in the intellectual capital and accounting literature (massaro et al., 2016; cuozzo et al., 2017). we resorted to the section of business, management and accounting of the scopus database (sciverse scopus) restricting the search to the keywords “bm – accounting” and “bm – financial reporting” in the scope of the article title, the abstract, and keywords. additionally, the search has no time orientation, given our interest in highlighting the development of research over time. the first list is of 156 articles. we went through all the abstracts of articles selected and performed a meaning-oriented content analysis to understand whether the focus of the papers is consistent with our research objectives. after the exclusion of papers whose topic is not consistent with our research objectives, the final dataset consists of 51 papers. the journal of management and governance, the journal of intellectual capital, and accounting forum are in the first place in the academic debate, followed by accounting and business research key insights our results show that the bm notion has been used mainly in the scope of two research streams and papers can be grouped into: (i) papers focusing on bm as a determinant of classification and measurement of items in the balance sheet in the scope of financial reporting; and (ii) papers focusing on the disclosure on the bm. overall, 39% of the papers concerned financial reporting-related issues, whereas 61% of the papers discuss issues within the field of non-financial reporting. with reference to research developed in the scope of financial reporting, it especially considers the bm as a determinant of classification and measurement of items in the balance sheet. specifically, this stream develops as a response to the introduction of the bm by the iasb and implicitly assumes that the bm is the primary determinant of the management of financial assets and of their use journal of business models (2018), vol. 6, no. 2, pp. 25-31 27 to generate cash flows. opposing the bm approach leisenring et al. (2012) maintain that the introduction of the bm concept by the standard setter is not significant and unnecessary due to its (supposed) identity with the notion of ‘management’s intent’. in their view, it is unfeasible for a firm to have a bm inconsistent with the managerial intention and the difference between these two concepts would only be due to the fact that bm could refer to the entity level, while management’s intent could refer to the single item. additionally, they both refer to the rationale underpinning management behaviour, which would be profit-seeking, and accordingly the managerial intent and the action undertaken will be aimed at achieving profits. directly replying to them, brougham (2012) asserts a significant difference between the two notions. the difference is explained by the level at which the bm is assessed and by the broader scope of the bm, whose underpinning rationale could be not only profit-seeking. in this perspective, the bm approach would enhance the relevance of financial information to users based on the idea that reporting should communicate to users if the bm has actually worked and since firms usually engage in different transactions, for different purposes and in distinct ways (singleton-green, 2014). two empirical papers explore whether the bm actually explains firms’ accounting choices and provide contrasting evidence on the bm argument. lassini et al. (2016) cluster a sample of 103 european listed companies based on different dimensions of the bm, using variables of (i) ownership, (ii) size, (iii) supply chain relation, (iv) internationalization, (v) r&d commitment, (vi) economic performance, (vii) operative growth performance, (viii) structural growth, (ix) financial profile, (x) liquidity profile. examining accounting choices by companies in different clusters, their results show no significant associations between bms and accounting choices. in contrast, pinto et al. (2015) find that the bm is a predominant factor in ex plaining accounting choice for measuring investment properties in publicly traded real estate management companies in brazil. with reference to research focusing on the disclosure on bm, these studies have mainly developed within the field of non-financial reporting although exceptions exist as the paper by bagnoli and redigolo (2016) and the one by mechelli et al. (2017) with either a focus on integrated reporting or restricting the scope to intellectual capital and sustainability. beattie and smith (2013) study the bm concept from the perspective of intellectual capital, based on the idea that the bm is the higher-level concept that should ‘drive the ic disclosure’ (beattie and smith, 2013, p. 252). indeed, both the notions of intellectual capital and of bm relate to the transformation of resources (capital) into value, but the bm notion seems key to explain how the intellectual resource is used in combination with others to engage in value creation activities. in their view, while the bm constitutes the holistic macro-level view, inspired by the managerial theory of the firm through a top-down approach, financial accounting is a bottom-up and transaction-based micro-level process. interestingly, the interviews to sophisticated users as financial analysts (nielsen and bukh, 2011) remark difficulties in capturing the essence of the whole bm and understand better the specifics of each strategy. among empirical papers dealing with disclosure on bm (see also melloni et al., 2016), bini et al. (2016, 2018) provide a considerable methodological contribution to analyse bm disclosure building on the guide provided by osterwalder et al. (2005). accordingly, they use the four pillars constituting a bm (namely (i) product, (ii) customer interface, (iii) infrastructure management, and (iv) financial aspects) as relevant dimensions for coding text units. specifically, bini et al. (2016) evaluate bm disclosure presented in the strategic report in the perspective of the contribution of intellectual capital to company competitive advantage, and bini et al. (2018) analyse the bm to capture the firm commitment to sustainability, which should be reflected in the bm (atkins et al., 2017). their content analysis of bm disclosure allows shedding light on the business model disclosures companies to detect their approach to sustainability and highlight areas whose approach to sustainability should be enhanced. the paper by nielsen and roslender (2015) is the first attempting to connect these two streams of research. indeed, they identify a critical tension between the perspective adopted by the bm as a framework and the perspective of financial accounting. in their view, the bm is concerned with value creation, delivery and journal of business models (2018), vol. 6, no. 2, pp. 25-31 28 capture, whereas the focus of financial reporting is the capture of shareholder value. from this angle, the bm should be the starting point for an ‘enhanced approach to financial reporting’ (p. 263) as it has the potential to provide a framework for understanding the value proposition of a firm (osterwalder and pigneur, 2010) explaining the flows through which the process of value creation develops (nielsen et al., 2009). specifically, nielsen and roslender (2015) acknowledge the need for understanding how financial reporting can be combined with the business model notion, without seeking to incorporate the latter in the first. discussion and conclusions this paper investigates how the notion of bm has been used in the scope of accounting research. overall, the findings of the literature review show that in accounting research the bm notion has been used primarily (i) as a determinant of accounting choices concerning valuation and measurement of assets, and (ii) as an object of reporting. while the first perspective is mainly adopted by research in the field of financial reporting, the second is the focus of research within non-financial reporting. these two views are only partially overlapping and relevant differences exist. first, studies within the area of financial reporting discuss the bm as a criterion for accounting valuation; from this angle, the bm influences the accounting numbers reported by firms. studies that deal with the bm as an object of reporting, and specifically those developed within the field of integrated reporting, look at the bm as a superior framework that determines the presentation, the narratives and the numbers included in the report. second, when dealing with issues concerning valuation and measurement of assets, research considers the bm as referring to an aggregate level (brougham, 2012) but this level is not necessarily the level of the firm and potentially it could even coincide with the level of the single item. in contrast, a shared assumption of studies dealing with the bm as an object of reporting is that the level at which the bm is defined and observed is always superior to the one of the single item and it corresponds to the organization. in particular, the bm of the entire organization is central within the framework for integrated reporting (girella et al., 2018). third, financial reporting refers to the bm as identified based on historical data to provide information that is verifiable and reliable. in contrast, research dealing with the bm as an object of reporting emphasizes a forward-looking perspective (nielsen and roslender, 2015) and the extent to which the bm will be sustainable in the future. the analysis shows that scholars mobilizing the notion of bm from the perspective of integrated reporting draw on the contributions brought by management literature to enhance their theoretical underpinnings and move forward the debate (beattie and smith, 2013). additionally, they exploit the management literature to build their methodological bases (see bini et al., 2016, 2018). differently, studies in the financial reporting field use various methodologies to identify bms. on the one hand, this implies that comparing their findings can be arduous; on the other hand, it could be difficult agreeing on what they consider as the bm. in this respect, accounting literature could benefit from the contribution of research in other fields, as the banking one, which has extensively investigated the impact of bm on banks’ performances, developing methodologies to identify the bm. a first approach adopted in the scope of banking literature implicitly assumes that the bm of an organization can vary over time and exploits indicators of the bm’s characteristics combined through cluster analysis (ayadi et al., 2015; roengpitya et al., 2014). an alternative approach assumes that the organization’s bm does not vary over time and that it is an underlying, latent strategy, whose outcomes are the observed variables. in line with these assumptions, this approach draws on factor analysis to identify bms (mergaerts and vander vennet, 2016). in our view, such contributions may support accounting research interested in classifying bm based on financial statements’ data to develop qualitative analyses as well as research aiming to encompass the bm as an explicit variable in regression models, without leaving it included in fixed effects. based on our analysis, future research could answer the call launched by singleton-green (2014) and investigate journal of business models (2018), vol. 6, no. 2, pp. 25-31 29 the relevance of financial information that reflects the bm by exploiting either qualitative and quantitative and considering a wide range of users. furthermore, the european public interest entities can represent a challenging setting, as they apply the bm approach as mandated by ifrs 9 and they have to comply with the eu directive on disclosure of non-financial and diversity information (2014/95/eu). this paper has some limitations, mostly deriving from the use of a single database and from the exclusion of the papers published after march 2018. nevertheless, its findings can support the development of further research in an area that, from an accounting perspective, has been thus far under researched. journal of business models (2018), vol. 6, no. 2, pp. 25-31 30 references ayadi, r., de groen, w. p., sassi, i., mathlouthi, w., rey, h., & aubry, o. (2016). banking business models monitor 2015 europe. bagnoli, c., & redigolo, g. (2016). business model in ipo prospectuses: insights from italian innovation companies. journal of management & governance, 20(2), 261-294. beattie, v., & smith, s. j. (2013). value creation and business models: refocusing the intellectual capital debate. the british accounting review, 45(4), 243-254. bini, l., bellucci, m., & giunta, f. (2018). integrating sustainability in business model disclosure: evidence from the uk mining industry. journal of cleaner production, 171, 1161-1170. bini, l., dainelli, f., & giunta, f. (2016). business model disclosure in the strategic report: entangling intellectual capital in value creation process. journal of intellectual capital, 17(1), 83-102. bis (2011). the future of narrative reporting. consulting on a new reporting framework. september 2011. available at: https://www.gov.uk. brougham, a. (2012). discussion of ‘business-model (intent)-based accounting’ by jim leisenring, thomas linsmeier, katherine schipper and edward trott (2012). accounting and business research, 42(3), 345-347. cima (2010). corporate reporting to business reporting – the way forward. lalith fonseka, world congress of accountants, concurrent session 22, 9 november 2010. cuozzo, b., dumay, j., palmaccio, m., & lombardi, r. (2017). intellectual capital disclosure: a structured literature review. journal of intellectual capital, 18(1), 9-28. efrag (2013). the role of the business model in financial statements. research paper. available at: https://www. efrag.org. girella, l., tizzano, r., & ferrari, e. r. (2018). concepts travelling across disciplinary fields: the case of the business model. journal of management and governance, 1-30. iirc (2013). business model: background paper for integrated reporting. international integrated reporting society. www.iirc.org. lassini, u., lionzo, a., & rossignoli, f. (2016). does business model affect accounting choices? an empirical analysis of european listed companies. journal of management & governance, 20(2), 229-260. leisenring, j., linsmeier, t., schipper, k., & trott, e. (2012). business-model (intent)-based accounting. accounting and business research, 42(3), 329-344. massaro, m., dumay, j., & guthrie, j. (2016). on the shoulders of giants: undertaking a structured literature review in accounting. accounting, auditing & accountability journal, 29(5), 767-801. mechelli, a., cimini, r., & mazzocchetti, f. (2017). the usefulness of the business model disclosure for investors’ judgements in financial entities. a european study. revista de contabilidad, 20(1), 1-12. journal of business models (2018), vol. 6, no. 2, pp. 25-31 31 melloni, g., stacchezzini, r., & lai, a. (2016). the tone of business model disclosure: an impression management analysis of the integrated reports. journal of management & governance, 20(2), 295-320. mergaerts, f., & vander vennet, r. (2016). business models and bank performance: a long-term perspective. journal of financial stability, 22, 57-75. nielsen, c., & bukh, p. n. (2011). what constitutes a business model: the perception of financial analysts. international journal of learning and intellectual capital, 8(3), 256-271. journal of business models (2019), vol. 7, no. 2, pp. 1-13 1 business model innovation with platform canvas krista sorri1, marko seppänen2*, kaisa still3, katri valkokari4 abstract purpose: this paper offers a literature review and explores a business model innovation for platform business. it also suggests a practical tool, platform canvas, to support implementation activities. design/methodology/approach: a literature review was conducted in fall 2016 that resulted in the tentative canvas approach, which was evaluated in seven real company cases. findings: the study identified the eight most important characteristics of a platform business model innovation. to support the innovation and development of successful business models in a platform ecosystem, the platform canvas tool was created. with guiding questions, platform canvas allows for an ecosystemic approach to business model innovation: it helps to understand the value creation and capture for multiple actors. originality/value: the unique result is a practical tool, platform canvas, which facilitates business model creation in platform ecosystems. please cite this paper as: sorri, seppänen, still and valkokari (2019), business model innovation with platform canvas, vol. 7, no. 2, pp. 1-13 keywords: platform, ecosystem, business model, platform canvas, literature review 1-2 tampere university 3-4 vtt technical research centre of finland *corresponding author acknowledgements: this research has been conducted as part of the design for value research programme focusing on the autonomous shipping ecosystem and the integrating platform competences toward network effects research programme. both programmes have been funded by business finland — the finnish funding agency for technology and innovation. journal of business models (2019), vol. 7, no. 2, pp. 1-13 2 introduction google, facebook, amazon, and apple—these and many other platforms are disrupting traditional businesses as they transform the existing value creation processes and customer behavior (e.g., miguel & casado, 2016; simon, 2013). by doing so, they are transforming the structure of major industries and forcing traditional incumbent companies to re-evaluate their current business models, simultaneously allowing opportunities for new entrants. participating in platform ecosystems is becoming an important way for companies to gain more revenues and profits, as platforms with their inherent network effects enable exponential growth. platforms, especially digital platforms, are used as a business model; examples are alibaba and general electric’s predix. the success of platforms is explained by sustainable and repeatable interactions (choudary, 2015) that breed the growth or emergence of an ecosystem. our emphasis on the platform ecosystem uses a novel theoretical framework by jacobides et al. (2018), which argues that ecosystem emergence is enabled by modularity and complementarities. as they emphasize, “allow a set of distinct yet interdependent organizations to coordinate without full hierarchical fiat”, hence seeing the ecosystem as “a set of actors with varying degrees of multilateral, non-generic complementarities that are not fully hierarchically controlled” (jacobides et al., 2018, p.2264). according to them, the core of ecosystems lies in combinations of modular complementarities and similarity of shared rules of operation. digital technology expands reach, convenience, speed, and efficiency tremendously compared with the traditional way (parker et al., 2016). although we are concentrating on digital platforms, the platform ecosystem is considered from the business perspective rather than as a technical issue (iivari et al., 2016). hence, for the purposes of the use of technology, we agree with chesbrough (2010, p. 354): “technology by itself has no single objective value. the economic value of a technology remains latent until it is commercialized in some way via a business model.” in this study, we explore business model innovation with the overall objective of value creation and/or capture (wirtz and daiser, 2017; clauss, 2016) in the context of platform ecosystems. accordingly, we employ the old but still valid definition by weill & vitale (2001) , which says that a business model is “a description of the roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of product, information, and money, and the major benefits to participants.” with this ecosystemic approach, we proceeded to develop a tool – platform canvas—and a supporting set of questions to help management and scholars to innovate their business models in platform ecosystems. the paper is structured as follows: first, we present the main characteristics of a platform ecosystem. second, we introduce the research design and data. third, we represent the results and the developed tool, platform canvas. finally, we discuss the challenges of the platform creation process and how the platform canvas tool can help facilitate this process, and conclude by summarizing avenues for further research. platform ecosystems for novel value business model innovation considers the business model rather than products or processes as the subject of innovation (baden-fuller & haefliger, 2013). in more detail, business model innovation can cover various aspects: (1) a value creation innovation, like new capabilities, new technology/equipment, new partnerships, new processes – or (2) a new proposition innovation, consisting of a new offering, new customers and markets, new channels, and new customer relationships – or (3) a value capture innovation, that could include new revenue models and value cost structures (clauss, 2016). platforms with modularity and complementarity platforms give companies new opportunities by changing the traditional business rules and how companies interact with each other (vazquez, 2016). their purpose is to facilitate the multi-party exchange of products, which can be goods, services, or even social currency, creating novel value and at the same time allowing value capture. platforms can also be considered matchmakers that bring members of different groups together. they sell access to the target group(s) journal of business models (2019), vol. 7, no. 2, pp. 1-13 3 (evans and schmalensee, 2016). in one way or another, platforms provide more value for customers by helping companies to create new integrated services (ju, kim and ahn, 2016). digital platforms are “software-based external platforms consisting of the extensible codebase of a software-based system that provides core functionality shared by the modules that interoperate with it and the interfaces through which they interoperate’’ (ghazawneh and henfridsson, 2015, p.199). the digital platform can, therefore, be described as the technical infrastructure to which the ecosystem participants integrate (iivari et al., 2016). a platform ecosystem can be seen as a collection of firms interacting with a contribution to the complements (de reuver et al., 2016). an interactive platform ecosystem is created using technology to connect ecosystem members, such as people, organizations, and their resources. hence, the platform ecosystem is oftentimes seen as a twoor multisided marketplace where value is created for all members of the network (parker et al., 2016) to succeed in digital platforms and the larger entity of the platform economy, participants need to recognize their roles in the platform ecosystem. platforms leverage the ability to create and scale value outside the organization in an ecosystem (choudary, 2015). platform ecosystems are clearly business ecosystems. according to rong et al. (2015), an ecosystem can be considered to be an established value network where the roles are fixedly interconnected and where the interconnected stakeholders have a shared faith and in which they co-evolve. therefore, companies need to understand that they cannot provide the value alone and that their actions have an impact on the overall ecosystem in which they operate. thus, for the ecosystem members to co-evolve, their capabilities need to be linked with the actions of the other participants (moore, 1996). platform as a business model innovation the platform has been presented as a business model innovation that enables external producers and consumers to create value together by interacting with each other (choudary, 2015). its ecosystem comprises the platform’s sponsor plus providers of complements that make the platform more valuable for the customers, considering how the actors—including users—are organized around a platform (jacobides et al., 2018). what is the new business model innovation when technical modularity allows all these independent components of a system to be produced by different producers (jacobides et al., 2018)? the opportunity for a platform often arises when there is too much friction in the market, which hinders the different user groups from dealing with each other (evans and schmalensee, 2016). the aim of the platform is then to reduce barriers to participation—that is, to reduce friction in order to get new participants to join both sides of the market. by doing so, the platform enables sustainable and repeatable interactions by balancing their quality and quantity (choudary, 2015). platforms provide opportunities to tackle the innovation management challenge of allowing value co-creation with users (or consumers). they allow for innovation to take place beyond the province of in-house experts and research and development laboratories; when customers start to engage and be more interactive, new forms of value appear (parker et al., 2016). in other words, a platform as a business model innovation requires ecosystem level considerations in order to explore value co-creation and capture innovations (clauss, 2016). research design there is a demand for research into the transformative and disruptive impact of digital platforms on organizations and their business models (parker et al., 2016), for more research exploring digital platform innovation (de reuver et al., 2017) as well as for research on ecosystem value creation/capture (jacobides et al., 2018). the purpose of our study is to solve this need for supporting business model innovation in the context of platform ecosystems. an extensive literature review allowed us to break down and identify the critical characteristics of platform ecosystems. we then proceeded to formulate the most important criteria in an easy-to-use format with a construct of platform canvas. literature review we first identified the relevant characteristics, frameworks, and models in the extant platform literature to obtain a pre-understanding of the field, following journal of business models (2019), vol. 7, no. 2, pp. 1-13 4 a similar procedure to that of wirtz and daiser (2017). this was done with a comprehensive literature review, conducted in fall 2016, combining the keywords “digital,” “platform,” “characteristic,” “ecosystem,” “element,” “disruption,” and “value.” the review process included an iterative search of references and citations available in research papers in the web of science database. this snowballing methodology complemented the search results by identifying original books and articles (wohlin, 2014). during the comprehensive literature review, 16 sources—journal articles and books—were identified as original sources. the original sources were published between 2002 and 2016. from these original sources, we identified and grouped the characteristics that were presented as essential to the meaning described in the source. this grouping resulted in 18 critical characteristics for establishing a platform ecosystem (see table 1). the descriptive names of these were derived and synthesized from the terms used in the original sources with broad synonyms. crafting the platform canvas tool as the business model canvas (osterwalder and pigneur, 2010), complemented by the book value proposition design (evaluated in the recent study by kyhnau and nielsen, 2015), has become the de facto diagnostic tool for understanding the value creation potential of businesses, our goal was to develop a similar construct that is easy to use and emphasizes the special characteristics of platform ecosystems. we are aware of multiple other constructs that attempt to do this (for example, digital platform canvas1; the platform design canvas2; and platform canvas3. however, they are not research-based. the previously described literature search offered 18 critical characteristics. for a more manageable number of characteristics to be included in the canvas, these were then arranged according to their prevalence in the sources. in the first list of characteristics, the prevalence varied between 3 and 15; the mean was 6.8 and 1 http://icsb.nl/artikelen/new-business-model-canvas-for-digitalplatforms/ 2 https://platformdesigntoolkit.com/toolkit/ 3 https://www.slideshare.net/yearofthegoat/the-platform canvas-learn-how-to-build-platform-business-models-in-45min); the median was 5. the second list was compiled based on the three most cited sources and the characteristics emphasized by these sources. the first six characteristics were the same in both lists. the seventh was different, and by accepting both of these, we ended up with the eight most essential characteristics. accordingly, we created a first version of the template, which was microsoft excel-based and had a cell for each of the eight characteristics. each of the cells also included a couple of questions to clarify the meaning of the terms used. the first version was tested by using it as a supporting tool for interviewing companies about their platform ecosystem activities and business model innovation. the canvas template was first separately filled by representatives of seven finnish manufacturing companies with their in-house knowledge and by a researcher using publicly available data. then, the researcher interviewed the company representatives for 1-2 hours. at the end of each interview, the company representatives were asked to give feedback on the canvas itself. during this initial use, it became clear that the platform participants have to have a deep and detailed knowledge of the market in which they are participating before they can benefit from platform canvas. it should be noted that all of the companies had created the platform based on their own needs. only one company mentioned that they had been obliged to re-visit their platform strategy since they had noticed the platform did not respond to the needs of the presumed participants. these eight characteristics seemed to bring structure to the interviews, for both the interviewer as well as the interviewees. with this validation of the canvas content, the eight characteristics were developed into the platform canvas tool. however, as some of the terms needed clarification in order for the company representatives to be able to answer, those changes were incorporated into the platform canvas. the visual elements and their positions were also added based on insights from the research. for example, an image of a group was placed to highlight the fact that platforms are about groups of people; both a heart and a dollar sign were added to emphasize different types of value. journal of business models (2019), vol. 7, no. 2, pp. 1-13 5 platform canvas platform canvas operationalizes the eight key characteristics of business model innovation for a platform ecosystem identified by the literature review. these characteristics are presented here to understand the main issues that companies need to consider when planning their activities in the platform ecosystem. hence, the presentation order does not reflect the popularity of the characteristic in the literature. in addition, the questions developed to guide the use of platform canvas are explained. eight key characteristics the core interaction of the platform, which refers to the exchange of value, is the single most important type of activity in the platform ecosystem (parker et al., 2016) platform key characteristics c o re in teractio n s im p licity m ain tain ab ility to o ls fo r co n su m p tio n m etrics f ilterin g f acilitate c reatio n to o ls tractio n c o st o f m u ltih o m in g m atch in g m o n etizin g c h an ge to leran ce v alu e p ro d u cers c o n su m ers g o vern an ce n etw o rk eff ects 3 3 3 2 3 4 4 4 5 5 6 7 9 11 12 12 13 15 source reference x x x x x x x x x x x x x bonchek m., choudary, s. p. (2013) three elements of a successful platform strategy x x x x x x x x x x moazed, a. (2016) what is a platform? x x x x x x x x x x simon, p. (2011) the age of the platform x x x x x x x x x abeysinghe a. (2016) building a digital enterprise learning from experience x x x x x x x x x boudreau, k. j., jeppesen, l. b. (2014) unpaid crowd complementors: the platform network effect mirage x x x x x x x x x choudary, s.p. (2015) platform scale x x x x x x x x x cusumano, m. a., gawer, a. (2002) the elements of platform leadership x x x x x x x x westhead, m. (2014) platforms two/multi-sided markets x x x x x x x edelman, b. (2015) how to launch your digital platform x x x x x x x abeysinghe a. (2015) platform for digital transformation x x x x x x hyatt, m. (2016) why you need a platform to succeed x x x x x x tiwana, a. (2013) platform ecosystems x x x x x evans, d., s., schmalensee r. (2016) matchmakers x x x x x evans, d., s., hagiu, a., schmalensee r. (2006) invisible engineshow software platforms drive innovation and transform industries x x x x parker,g et al (2016) platform revolution x x x x kouris, i., kleer, r. (2012) business models in twosided markets: an assessment of strategies for app platforms table 1: summary of key platform elements identified in the literature review journal of business models (2019), vol. 7, no. 2, pp. 1-13 6 and is accordingly central in the canvas. first, it brings forth the characteristics of (1) value, describing the value creation potential of the platform, and (2) monetizing, as capturing the value. the literature refers to this for example by creating feasible pricing models that maintain or even increase the traction toward the platform (parker et al., 2016, pp. 106–110). the core interaction also introduces the two sides of the platform: (3) producers and (4) users. this emphasis on at least two sides has also been addressed by the term “bilateral market power of the platform” (kouris and kleer, 2012); although with added participants the term “multi-sided markets” is also used (evans and schmalensee, 2016). different scholars refer to the producer of the value using different terms such as “complementors” and “market side 1”; some even combine all sides and refer to them only as participants. researchers often refer to the value user side as consumers, customers, and end users. all of these terms are also used in traditional pipeline businesses, although the roles do not mix in such businesses as they do in platform ecosystems. (5) filtering (including matching) allows for making the value exchange efficient, simultaneously allowing the platform to attract participants (parket et al., 2016, pp. 296-297), and is considered crucial for all participants in the platform ecosystem. it describes the algorithm’s ability to filter a massive amount of data in a way that enables the quick and precise matching of the value producer and the value user. hence, these software-based tools enable the exchange of value between the right producers and appropriate consumers. accordingly, the platform owner aims to build and maintain an ecosystem where the platform will continue to attract participants; this is partly ensured by providing the desired match easily. “the platform rules” for all participants are addressed with (6) governance. the literature describes governance with several terms such as control, rules, access control, and trust. with an elaborate governance system of laws, enforcement, and penalties (evans and schmalensee, 2016), the platform can facilitate value co-creation and match the most compatible users with each other. resilience (7) (including change tolerance and maintainability) describes the platform’s ability to adapt to a changing environment. it has also been referred to as modular, evolvable, durable, and plug-n-play. all of these emphasize the importance of being adaptive to change. however, a company which is highly adaptive to change can even cause market turbulence for its own benefit (simon, 2013). maintainability of the system can also be considered to be part of resilience. it includes three perspectives: a) maintaining compatibility with future complementary products (i.e., platform integrity) when new technologies arise, b) developing the platform while maintaining compatibility with past complements, and c) maintaining platform leadership despite changes (cusumano and gawer, 2002). with this goal, aspects of boundary resources (both technical and co-operative) need to be addressed. the final and most crucial characteristic of a platform is the (8) network effect. this refers to the ability to increase the scale of business significantly with minimal investment (choudary, 2015, pp. 74–75). utilizing the network effects is essential for the platform ecosystem to exploit its full potential. process with guiding questions as with the business model canvas, a list of questions to explore the main characteristics (called “blocks” in osterwalder and pigneur, 2010) was developed. the questions are intended to help companies to innovate and evaluate their platform business models from different perspectives, thus addressing the ecosystemic nature of platforms. each characteristic can be defined by answering the facilitative questions (see table 2). we propose that these questions may also help platform ecosystem participants consider their positions and prospects in the platform: they may find these beneficial due to the differences in platform thinking versus traditional business thinking. we further propose that platform canvas and the guiding questions can lead the participants through the whole innovation process, or can be used to explore certain aspects of the platform. to address the core interaction, both the value for producer and value for users need to be described in detail and understood thoroughly. it is also important to understand that the role of the user may vary in different interactions. hence, with regard to value, it is not enough to think which friction the platform reduces; journal of business models (2019), vol. 7, no. 2, pp. 1-13 7 it is equally important to identify all the different values created by the interaction and how the platform attracts users on all sides. it should be remembered that the value may be monetary, but in many cases, it is something completely different (like information). second, the opportunities related to the network effects must be understood. whether the effects are direct, indirect, or both, and what kinds of scalability requirements the platform faces because of this, must be addressed. the platform owner must have an idea of how the tools characteristics questions value producers who are the value producers and what motivates them to create the value? through which channels do they produce the value? value users who are the value users, and what motivates them to consume the value? through which channels do they consume the value? value what are the different values that are created? how does the platform attract participants? how is the chicken-and-egg problem solved? which friction does the platform reduce? filters what data are acquired to match producer and user? which filters does the platform need to serve the relevant content to consumers and connect them to the relevant value producer? network effects which types of network effects are achieved? value capture what currency does the user provide to the producer in exchange for value? how does the platform capture some portion of this currency? governance what are the tools for lowering the barriers to entering the platform? which creation/curation/ customization/ consumption tools does the platform provide? resilience to what extent are the boundary resources defined? table 2: guiding questions figure 1: platform canvas journal of business models (2019), vol. 7, no. 2, pp. 1-13 8 and services in the platform solve the chicken-and-egg problem (attracting participants on all sides of the market to the platform) and how the platform keeps the interest of the users. this affects the requirements for the filtering abilities of the platform. after these aspects have been reviewed and planned, the system side of the canvas can be completed. the management first needs to define the governance and curation aspects. the final phase of the design is to ensure the resilience of the platform. this is done by opening up both the technical and co-operative boundary resources. the platform owner should have a clear picture of how the tools and services provided help facilitate the interactions, value creation, and value exchange, which can then guide the finding of appropriate technology partners for the platform. discussion and conclusions platform canvas is intended to guide the platform ecosystem participants—platform sponsors or owners, platform complementors, and other service providers— in their business model innovation. one could describe platform canvas as a “poka-yoke type” (shingo, 1986) error-proofing tool for organizations planning their activities in a platform ecosystem. as poka-yoke aims to eliminate the possibilities of causing a defect to a product or process by offering a method for involving members of the production or process, for example, the canvas aims to offer a method to explore business model innovation in a platform ecosystem by offering a template for involving ecosystem participants. overall, we propose that with its eight key characteristics it can be used to support innovation in a similar manner to the business model canvas when establishing a platform ecosystem or evaluating possible needs in re-thinking the ecosystem (osterwalder and pigneur, 2010). the contribution of the canvas the canvas helps challenge the platform participants to open up their thinking. it provides the possibility to see the big picture and simultaneously drill down to a more detailed level. hence, the canvas provides an understanding of the complexity related to platform ecosystems. platform participants need to understand the dual role of individuals (one can represent both value producer and value user—i.e., one can be a value prosumer). especially in cases where participants are seeking to understand the impacts and possibilities of business model innovation in an ecosystem, platform canvas can help them find new perspectives for understanding the possibilities of the platform ecosystem (for api economy, see e.g., huhtamäki et al., 2016). the initial use of the eight characteristics in the manufacturing industry validated this (sorri, 2016). as the emphasis was on re-evaluating business models, the importance of prior market knowledge was noted. the canvas has also been used to study the expectations that startups have in relation to their platformbased business models and their abilities to support the core interaction and capture value from it (korhonen et al., 2017). this study showed that many startups see themselves as connectors of users and producers, and hence confirmed the importance of ecosystem thinking in a platform-based business (parker et al., 2016). from the business model perspective, according to chesbrough (2010), the most important functions that a platform ecosystem should fulfill are to articulate the value proposition, detail the revenue mechanism, and describe the value network. these have been included in platform canvas, which also addresses the ecosystemic nature of platforms—the fact that in ecosystems there are multiple business models in play that need to be considered. furthermore, we claim that the canvas contributes to the business model literature with the inclusion of network effects, which are presented as necessary and specific to platform ecosystems. for example, a comprehensive literature review on business models by zott et al. (2011) listed the components of e-business models found in the existing research at that time, and none of the scholars considered the network effects to be important. limitations of the canvas the eight critical characteristics of a platform ecosystem were identified through an inclusive literature review and based on how they often they appeared in the literature. as digital platforms are becoming increasingly complex research objects (evans and basole, 2016), their research is also becoming complex and takes place within information systems, innovation management, and economics (de reuver et al., 2017). accordingly, there is also a great deal of variation within the sources regarding journal of business models (2019), vol. 7, no. 2, pp. 1-13 9 which characteristics are considered important when developing successful digital platforms. this stems for example from the bias towards successful cases, which are studied ex-post (de reuver et al., 2017). the canvas has been mostly used internally, which alleviates the challenges with disclosure issues between various organizations. however, for an even better grasp of the complexities related to the platform and also for a better in-depth analysis of the possibilities of novel value creation, additional research on canvas utilization at the ecosystem level could increase, for example, understanding of the emergence and resilience of an ecosystem. the cases of this research are all from the manufacturing industry as well as from startups. our assumption was that the utilization of the canvas is not limited by the domain. however, more research needs to be conducted to examine this in more detail. while the aim of platform canvas is to help business managers, managers must still familiarize themselves with the basic theories and fundamental differences of the platform business model compared with the traditional ones. journal of business models (2019), vol. 7, no. 2, pp. 1-13 10 references chesbrough, h. (2010) ‘business model innovation: opportunities and barriers’, long range planning. elsevier ltd, 43(2–3), pp. 354–363. doi: 10.1016/j.lrp.2009.07.010. choudary, s. p. (2015) platform scale: how an emerging business model helps startups build large empires with minimum investment. 1st edn. edited by evelyn shilpa. platform thinking labs pte. ltd. de reuver, m., sørensen, c., & basole, r. c. (2018). the digital platform: a research agenda. journal of information technology, 33(2), 124-135. evans, p. c., & basole, r. c. (2016). revealing the api ecosystem and enterprise strategy via visual analytics. communications of the acm, 59(2), 26-28. evans d. and schmalensee, r. (2016) matchmakers: the new economics of multisided platforms. 1st edn. boston, ma: harvard business review press. ghazawneh, a., & henfridsson, o. (2015). a paradigmatic analysis of digital application marketplaces. journal of information technology, 30(3), 198-208. huhtamäki, j. et al. (2016) visualizing the geography of platform boundary resources : the case of the global api ecosystem abstract. iivari, m. et al. (2016) ‘toward an ecosystemic business model in the context of industrial internet’, journal of business models, 4(2), pp. 42–59. ju, j., kim, m. s. and ahn, j. h. (2016) ‘prototyping business models for iot service’, in procedia computer science, pp. 882–890. doi: 10.1016/j.procs.2016.07.106. korhonen, h. m., still, k., seppänen, m., kumpulainen, m., suominen, a., & valkokari, k. (2017). the core interaction of platforms: how startups connect users and producers. technology innovation management review, 7(9), 17-29. kouris, i., & kleer, r. (2012). business models in two-sided markets: an assessment of strategies for app platforms. in icmb (p. 22). kyhnau, j. and nielsen, c. (2015) ‘how to create products and services customers want’, journal of business models, 3(1), pp. 81–92. moore, j. f. (1996) the death of competition: leadership and strategy in the age of business ecosystems, leadership. john wiley & sons, ltd. doi: 10.1017/cbo9781107415324.004. osterwalder, a. and pigneur, y. (2010) business model generation : a handbook for visionaries, game changers, and challengers. john wiley & sons, ltd. parker, g., van alstyne, m. and choudary, s. p. (2016) platform revolution : how networked markets are transforming the economy and how to make them work for you. 1st edn. w. w. norton & company, inc. rong, k. et al. (2015) ‘understanding business ecosystem using a 6c framework in internet-of-things-based sectors’, international journal of production economics, 159, pp. 41–55. doi: 10.1016/j.ijpe.2014.09.003. journal of business models (2019), vol. 7, no. 2, pp. 1-13 11 shingo, s. (1986) zero quality control: source inspection and the poka-yoke system. edited by a. p. dillon. productivity press. sorri, k. (2017). establishing a platform ecosystem: case study on early adopters. thesis. tampere university of technology. simon, p. (2013) the age of the platform how amazon, apple, facebook, and google have redefined business. 2nd edn. motion publishing llc. vazquez, p. (2016) ‘why platform disruption is so much bigger than product disruption’, harvard business review, (april). wirtz, b. and daiser, p. (2017) ‘business model innovation: an integrative conceptual framework’, journal of business models, 5(1). available at: https://journals.aau.dk/index.php/jobm/article/view/1923. wohlin, c. (2014) ‘guidelines for snowballing in systematic literature studies and a replication in software engineering’, in proceedings of the 18th international conference on evaluation and assessment in software engineering ease ’14, pp. 1–10. doi: 10.1145/2601248.2601268. zott, c., amit, r. and massa, l. (2011) ‘the business model: recent developments and future research’, journal of management, 37(4), pp. 1019–1042. doi: 10.1177/0149206311406265. journal of business models (2019), vol. 7, no. 2, pp. 1-13 12 krista sorri, msc (tech), is a doctoral student in the field of industrial management at the tampere university, finland. her research interests are business model creation and development in relation to digital platform ecosystems. she recently joined academia after a long career in industrial management. dr. marko seppänen, phd, is a full professor in the field of industrial management at the tampere university, finland. prof. seppänen is an expert in managing value creation in business ecosystems, business concept development, and innovation management. in his latest research, for example, he has examined platform-based competition in business ecosystems and innovation management in business networks. his research has appeared in high-quality peer-reviewed journals such as the journal of product innovation management, technological forecasting and social change, the journal of systems and software, and the international journal of physical distribution & logistics management.. about the authors journal of business models (2019), vol. 7, no. 2, pp. 1-13 13 dr. kaisa still is a senior scientist at vtt, providing research and service for ecosystems in their quest for supporting technology innovations. she is an active member of international research networks and publishes frequently about innovation ecosystems and platforms in publications such as the technology innovation management review. she has a m. sc. in industrial engineering (1993) and a ph.d. in information systems sciences (2010). she was a visiting scholar at mediax, stanford (20132016). dr. still has an extensive background in industry in finland, us and china. dr. katri valkokari has over 15 years’ experience on both research and practical development work regarding business networks, ecosystems and networked business operations. currently, she works as a research manager at vtt within the research area of business, innovation and foresight. in 2009, katri completed her doctoral thesis on business network development. she published several articles, managerial guidebooks and other publications related to collaboration models, innovation, and knowledge management as well as sustainability. she has executed over 20 customer (mainly company) projects and 23 research projects concerning different business and network development aspects during the years 2001 2018. about the authors journal of business models (2018), vol. 6, no. 2, pp. 59-64 59 depicting a performative research agenda: the 4th stage of business model research christian nielsen *, morten lund, stefan schaper, marco montemari, peter thomsen, jesper sort, robin roslender, kristian brøndum, christian byrge, christine delmar, lorenzo simoni, francesco paolone, maurizio massaro, and john dumay * corresponding author: aalborg university, mail: chn@business.aau.dk abstract this article provides a research program for the field of business models. it focusses specifically on 4th stage research, which is concerned with the performative notions of business models to which six conceptual avenues for further research are depicted. please cite this paper as: nielsen, c., m. lund, s. schaper, m. montemari, p. thomsen, j. sort, r. roslender, k. brøndum, c. byrge, c. delmar, l. simoni, f. paolone, m. massaro and j. dumay (2018), depicting a performative research agenda: the 4th stage of business model research, journal of business models, vol. 6, no. 2, pp. 59-64 keywords: business models, research agenda, performative research introduction the goal of this article is to articulate a research program for the field of business models (bm) specifically in relation to the 4th stage of business model research, which is argued to be the performative research phase in the field. in 2010, lecocq et al. depicted a research program for the field of business models (bm), under the inspiration from lakatos (1969, quoted in lecocq et al., 2010), suggesting that science is organized in research programs. it was concluded that business models presented a progressive research program (and not a degenerative one). a research program typically encompasses a set of core assumptions, for example in the form of protective hypotheses. one example of this would be the contemporary “customer centric” understanding of business models that focusses on the value propositions delivered to customer groups instead of e.g. the competitive advantage discourse of strategy. another would be the current work on establishing ontologies of business model patterns (gassmann et al., 2014; taran et al., 2016). journal of business models (2018), vol. 6, no. 2, pp. 59-64 60 approach as our point of departure, we use the general results of a structured literature review recently conducted by nielsen et al. (2018). this study depicts four current and co-existing stages of research in business models (see also figure 1). it is important to note that these research stages do not supersede each other, but rather co-exist simultaneously. also, none are more important that the others, and their co-existence confirms the research field as a developing one. the result of the structured literature review led to the identification of dominant themes of research. key insights the business model concept has been steadily growing in popularity amongst both academics and practitioners over the last decades. this success is mainly rooted in the strong emphasis on customer value creation (nielsen and roslender, 2015), being that it is the customers’ perception of value that determines the level of success. in other words, the value of the products seen from the customer’s perspective, and not the products’ technical features by themselves, determine success. the concept of business models embraces this line of thinking by focusing on the value proposition constructed in the interface between the customer, the infrastructure management, and the financial aspects of the organisation (osterwalder et al., 2005). arguably a major source of the business model field’s intrinsic potential is that it operates as a platform where these multiple aspects of a companies’ operations conceptually converge. four current stages of research let us take a brief look at the four stages before zooming in on stage four: the 1st stage of bm research is concerned with definitions and concepts as e.g. discussed by jensen (2014) and fielt (2014) respectively. current arguments pose researchers to be critical towards the bm concept and its defining elements, as depicted by jensen (2014) in his narrative about whether one business model definition is enough? future research might also engage in discussing what is not a business model or the implications of having an accepted definition in the field. further critical angles could focus on the different functions that business models may have from a managerial perspective. they may be concerned with controlling functions as depicted by montemari and nielsen (2013) or about sense-making as outlined by michea (2016). in the 2nd stage of bm research, innovation of business models and their underlying value propositions are in focus. current research has focused on the processes of business model innovation (wirtz et al., 2017) and how figure 1: the four stages of business models research journal of business models (2018), vol. 6, no. 2, pp. 59-64 61 business model innovation introduces new partnerships into existing business model (lund and nielsen, 2014) to achieve scalability (nielsen and lund, 2018). future critical research could focus on understanding the barriers to business model innovation and business model implementation (montemari et al., 2018) as well as identifying decision-support systems for these processes as exemplified by nielsen et al. (2017). the 3rd stage of business model research focusses on identifying frameworks and theories for describing and analysing bms. wirtz et al. (2016) argue that business model researchers should focus on consolidating and confirming existing bm descriptions and bm innovation frameworks empirically and in different contexts such as the public sector versus the private sector. this is parallel to the developments in other emerging fields like intellectual capital research (dumay, 2013). this would constitute an important step in building empirical bm taxonomies and from these taxonomies building bm archetypes. in the end, this would enable bm theory to be constructed. finally, the 4th stage of bm research concerns the performative notions of bms. research here should work on establishing relationships between bm elements and financial values. further, an important contribution would lie in establishing links between bm performance and a broader understanding of performance measure identification (montemari et al., 2017) and other contextual factors such as cultural variables, further enhancing the connection between bms, bm innovation and managerial issues. current trends forming the meaning of performance in the past decade, several new forms of organisation and ways of creating value have appeared. in conjunction with this, new technologies have emerged. together, these mechanisms of organisation, value creation and technology leverage combinatorial innovations (varian, 2010) by creating new spaces for value creation, new ways of serving customers, and sometimes entire new products. this is currently discussed in terms of disruptive innovation. consider uber’s disruption of the taxi industry, how airbnb currently challenges the hotel industry, and the way in which skype set the standards for internet-based phone services over a decade ago. such disruptions (christensen and raynor, 2013) might radically alter the value creation in any given industry. it may be expected that these changes will alter the performance measurement information that is relevant for guiding managers’ decisionmaking; not to mention the potential bm innovation trajectories available to them. at present, performance of organisations can be accounted for in financial reporting and managementbased kpi identification rests on a series of management models and frameworks such as the balanced scorecard or other performance scorecards (nielsen and roslender, 2015) that are at least two decades old. financial reports do not factor in the type of business model a given company applies, therefore rendering comparisons of value creation difficult. the same goes for comparing kpis across companies. taran et al. (2016) suggest to make use of bm configurations to identify relevant kpis because bms constitute a natural analytical structure from which to analyze a company. hence, in the 4th stage of bm research, the “performance” of companies and other organisations, including public and non-profit organisations can be expanded upon and understood from the perspective of business models. discussion and conclusions the 4th stage of bm research is concerned with the performative notions of bms. in opposition to an ostensive understanding of bms that focuses on creating meaning by pointing out examples, the performative understanding of bms is concerned with creating a basis for action. thus, research should focus on establishing relationships between bm elements and financial outcomes as well as other measures of performance of both financial and non-financial character. we envisage that the field of bms still will be driven forth by its practical relevance, as is evident of the last two decades. however, moving forward a critique of the dominant authors is necessary, as is a stronger focus on theory-building. to achieve this, we argue that it is necessary to depict a research program that outlines a set of key hypotheses. these are set out for the 4th stage of bm research below: 1) create empirically validated ontologies the 4th stage of bm research should support and enhance the connection between bms, bm innovation journal of business models (2018), vol. 6, no. 2, pp. 59-64 62 and managerial issues. a starting point for this is to depict the relationships between industries and business models as is proposed by gassmann et al. (2014). researchers should seek quantifiable validation through large-scale empirical studies. this focus will also support future theory-building in the field. 2) create decision-support structures moving on from such an empirically validated ontology, researchers should aim to create decision-support methodologies and systems for bm analyses and for bm innovation trajectories that may assist in avoiding industry-based imitation (see nielsen et al., 2018; montemari et al., 2018). such empirically validated analytical structures might follow the lines of taran et al.’s (2016) mapping ontology or gassmann et al.’s (2014) pattern methodology. 3) connect kpis to bm configurations third, research should to a larger extent address the manageable of bms. this can be achieved by creating clear structures for kpi identification for each different bm configuration. for example, the ontology provided by taran et al. (2016) forms a platform for alignment between value creation and performance measurement through the mechanism of the business model according to 71 business model configurations. however, at the present, no empirical work has established the connections between business model configurations and performance measures, and this is an important step for future theorising about performance. 4) benchmark value creation currently there are multiple types of business models even the same industries. therefore, benchmarking with a peer group needs to encompass an identification of the applied business model configuration in order to create a meaningful comparative exercise. at present the creation of benchmarking around corporate performance is difficult as no validated or reliable theory of corporate benchmarking exists. despite a lack of theory, benchmarking, also sometimes denoted as evaluations, assessments or comparative data, is readily viewed as an important source of information for evaluation against the best competitors or peers (kouzmin et al., 1999) thus providing motivational and managerial effects (behn, 2012). when research has been able to establish an empirically validated ontology and identified direct relationships between bm configurations and kpis, the next step would be to apply this knowledge to devise a performative benchmarking methodology. 5) report on the basis of the business model tweedie et al. (2017) argue, that despite a seemingly strong link between integrated reporting (iirc, 2013) and business models, this relationship is an uneasy one. organisations such as the iirc and standardsetting bodies around the world are currently debating the merits of corporate reporting and disclosures in the light of accelerating industry disruption. similarly, academia is debating the pros and cons of mandatory versus voluntary reporting. however, the connections between new (and old) forms of value creation and their respective performance measures have yet to be made. guidelines for reporting on bms might therefore be improved by including a set of minimal requirements to be addressed in the disclosures, a comparable or at least a unified layout, and a set of stable performance measures in order to track the developments of a company’s bm over time. however, these are merely speculations that should be validated by future research. final remarks this article proposes a research programme that is specifically aimed at the performative notions of business models. together, the five hypotheses will be able to move the field into a new era in which what is otherwise known as an emerging field, for certain will be perceived as a mature one. it is often argued that the popularity of business models is largely attributable to its practical relevance. however, the business model field has begun its emancipation from practice into a more developed and theorized one and at the same time also its emancipation from the more traditional disciplines such as strategy, innovation and marketing with which it has typically been intertwined. building theory is expected to lead to the contours of a coherent set of constructs relating to business models, their subsystems, outcome measures and contextual influences. in the future, such constructs may be used as a basis for analytical, archival and field research. journal of business models (2018), vol. 6, no. 2, pp. 59-64 63 references behn, r.d. (2012). motivating and steering with comparative data. international public management review, 13(1), 21-37. christensen, c., & raynor, m. (2013). the innovator’s solution: creating and sustaining successful growth. harvard business review press. dumay, j. (2013), “the third stage of ic: towards a new ic future and beyond”, journal of intellectual capital, vol. 14 no. 1, pp. 5-9. fielt, e. 2014, conceptualising business models: definitions, frameworks and classifications, journal of business models, vol. 1, no. 1, pp. 85-105 gassmann, h., frankenberger, k. and csik, m. (2014), “the business model navigator”, pearson education limited, harlow. iirc (2013), “the international <ir> framework”, the international integrated reporting council, london, available at: www.theiirc.org. jensen, a.b. 2014, do we need one business model definition?, journal of business models, vol. 1, no. 1, pp. 61-84. kouzmin, a., löffler, e, and klages, h. (1999), “benchmarking and performance measurement in public sectors’, the international journal of public sector management, vol. 12, no 2, pp. 121–144. lakatos, i. (1969). criticism and the methodology of scientific research programmes, proceedings of the aristotelian society, new series, 69 (1968 1969), 149-186. lecocq, x., demil, b., & ventura, j. (2010). business models as a research program in strategic management: an appraisal based on lakatos. m@ n@ gement, 13(4), 214-225. lund, m., & nielsen, c. (2014). the evolution of network-based business models illustrated through the case study of an entrepreneurship project, journal of business models, vol. 2, no. 1., pp. 105-121. michea, a. (2016), enacting business models. phd dissertation, copenhagen business school montemari, m. and nielsen, c. (2013), “the role of causal maps in intellectual capital measurement and management”, journal of intellectual capital, vol. 14 no. 4, pp. 522-546. montemari, m., s. schaper, y. taran, c. nielsen, j. sort and p. thomsen (2018). business model innovation or business model imitation – that is the question. working paper: business design center. montemari, m., m.s. chiucci and c. nielsen. (2017). ¬¬designing performance measurement systems using business models. working paper: business design center. nielsen, c., & lund, m. (2018). building scalable business models. mit sloan management review, 59(2), 65-69. nielsen, c. and r. roslender. (2015). “enhancing financial reporting: the contribution of business models”, british accounting review, 47(3): 262-274. journal of business models (2018), vol. 6, no. 2, pp. 59-64 64 nielsen, c., m. lund & p. thomsen (2017), killing the balanced scorecard to improve internal disclosure, journal of intellectual capital, vol. 18, no. 1, pp. 45-62. nielsen, c., m. lund, m. montemari, f. paolone, m. massaro and j. dumay (2018). state-of-the-art in business model research. london: routledge. osterwalder, a., pigneur, y., and tucci, l.c. (2004). clarifying business models: origins, present, and future of the concept, communications of ais, vol. 6, pp. 1-25. taran, y., nielsen, c., thomsen, p., montemari, m., and paolone, f. (2016), “business model configurations: a five-v framework to map out potential innovation routes”, european journal of innovation management, vol. 19. no. 4, pp. 492-527. tweedie, d., nielsen, c., & martinov-bennie, n. (2017). the business model in integrated reporting: evaluating concept and application. australian accounting review. varian, h. r. (2010). computer mediated transactions. the american economic review, 100(2), 1-10. wirtz, b.w., v. göttel and p. daiser (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1-28 wirtz, b.w. and p. daiser (2017), business model innovation: an integrative conceptual framework, journal of business models, vol. 5, no. 1, pp. 14-34. journal of business models (2018), vol. 6, no. 2, pp. 54-58 54 business model design themes, value propositions and firm performance ekaterina migol1 olga tretyak2 anna b. holm3 1, 2 faculty of management, nru higher school of economics, moscow, russia 3 department of management, aarhus school of business and social sciences, aarhus university, denmark abstract this paper presents the results of a study of business model design themes of 30 retailers from russia. we find a positive relationship between novelty-centred business models and company performance. furthermore, companies achieved the best performance by combining elements of the efficiency and complementarity business model design themes. please cite this paper as: migol e., tretyak o., holm a.b. (2018), business model design themes, value propositions and firm performance, journal of business models, vol. 6, no. 2, pp. 54-58 keywords: business model type, business model design theme, firm performance introduction while there has been much research on business model configurations (gassmann, frankenberger, & csik, 2015), business model types (baden-fuller & haefliger, 2013) and businessmodel innovation (foss & saebi, 2017) during the past 15 years, little has been done on the link between business models and firm performance (george & bock, 2011). in turn, the lack of research (morris, shirokova, & shatalov, 2013; zott & amit, 2007, 2008) hinders the analysis and assessment of the link between business model configurations and firm performance (amit & zott, 2001; tretyak & klimanov, 2016). the aim of this paper is to help fill this gap. this line of research is considered important for the insights it can provide to researchers and practitioners on how to increase firms’ value creation and capture (zott & amit, 2007). this paper is based on the notion that a company’s business model signifies its value propositions, value creation, value delivery and value-capture activities. moreover, the business model can be viewed as a representation of its realised business strategy (casadesusmasanell & ricart, 2010). here, business strategy is journal of business models (2018), vol. 6, no. 2, pp. 54-58 55 understood as the way in which a firm chooses to position itself against competitors in its potential markets (zott & amit, 2007). drawing on research by amit and zott (2001) and zott and amit (2008), we investigate how a company’s value proposition, driven by its business strategy, influences its performance. we define a company’s value proposition as the bundle of products and their characteristics (e.g. product or service, level of standardisation, differentiation, brand, etc.) required to solve a customer need (holm, günzel, & ulhøi, 2013), or to “get a job done” (johnson, christensen, & kagermann, 2008) for a consumer. a company’s value capture is represented by its cost structure and revenue model, which result in monetary consequences, i.e. its economic performance. approach as we have indicated above, we follow amit and zott (2001) in recognizing four sources of value creation: efficiency, complementarities, lock-in and novelty. later papers by zott and amit (2007, 2008) concluded that these four sources of value creation can be analysed as design themes that determine the construct of a business model. by efficiency is meant transactional efficiency, according to which efficiency is increased when the price of a transaction is reduced. complementarity is understood as achieving some synergistic effect from selling a set of products and / or services. in other words, the value of a and b is higher when these goods are purchased together than if they were purchased separately and at different times. how effectively a company manages not only to attract new customers, but also to retain them, is also directly related to the creation of additional value. a lock-in design theme mainly focuses on preventing customers switching from a company to its competitors. the development of new products and services, new methods of production, distribution, marketing technologies, and new markets are all ways of creating new values. the source of value creation novelty, or innovation is aimed at creating completely new markets or developing new approaches to improving transactions in existing markets. thus, companies employing one of the design themes will adjust their business models’ components, including their value propositions, to the chosen design theme. following amit and zott (2001) and zott and amit (2007), we proposed the following five hypotheses: h1: the more a company’s value proposition is efficiency-oriented, the better the company’s performance. h2: the more a company’s value proposition is complementarity-oriented, the better the company’s performance. h3: the more a company’s value proposition is lock-inoriented, the better the company’s performance. h4: the more a company’s value proposition is noveltyoriented, the better the company’s performance. h5: value-propositions from different business model design themes will have a positive effect on a company’s financial performance. to test the hypotheses, we collected data on the value propositions and business model design themes of the top 30 russian retailers in the home appliances and consumer electronics markets in russia. the selected firms are either national players or international subsidiaries, with a combined market share of approx. 70%. the economic crisis in russia in 2014 resulted in a sharp drop of around 25% in the sale of consumer goods, so most of the retail companies in the study were already looking for new ways of generating profits and experimenting with various business model configurations. this made them very suitable for studying business model elements and their influence on performance. the data were collected by means of a survey instrument and structured face-to-face interviews in march and april, 2015. five experts from the russian branch of the german marketing research company gfk were asked to complete a special questionnaire designed to identify business model design themes in each of the studied companies. these experts regularly conducted market and company analyses of the home appliances and consumer electronics retailers and markets in russia, and interacted with topand middle-level employees in the studied companies on a daily basis. thus, they were aware of most of the internal processes in the companies, including business objectives and journal of business models (2018), vol. 6, no. 2, pp. 54-58 56 market strategies, so their knowledge of the companies’ business models is both profound and relevant. moreover, given that they do not work in any of the studied companies, we can probably assume that their evaluations are less subjective and skewed towards the positive than if we had interviewed actual employees from each company. we asked each expert to evaluate the business model design of all 30 companies, resulting in 150 different questionnaires. once these questionnaires were aggregated, we then carried out a follow-up discussion with the experts to formulate and confirm a common approach to evaluating all attributes of the business model design themes of each company. for each company in the study, a design theme of the business model and corresponding elements of its value proposition were identified and measured on efficiency, complementarities, lock-in and novelty characteristics. the items for measuring each design theme and value propositions were borrowed from the approach developed by zott and amit (2007). the strength of each of these items was measured using 5-item likert scales and coded into a standardized score. each business model design theme was measured as a variable at a particular point in time. these variables were then regressed on a range of performance measures, provided by gfk rus. in line with other empirical studies (mcarthur & nystrom, 1991; tushman & anderson, 1986), we employed financial representation of the growth in sales turnover as the measurement of a firm’s performance and our dependant variable. the data were analysed using linear regression analysis with the least square root method. hypotheses h1, h2, h3 were rejected, suggesting that value propositions based on efficiency, complementarity and lock-in did not determine the financial performance of the studied firms. hypothesis h4, however, was accepted, pointing to the importance of novelty-focused value propositions for business model performance. to test hypothesis h5 we built a model using the method of stepwise regression, where individual items from each design-theme value proposition were considered or rejected as part of the set of items explaining the dependant variable, i.e. firm performance in terms of the growth of sales turnover. the coefficients of determination for this model were 0.62 (r2) and 0.54 (adjusted r2), suggesting a goodness of fit and good explanatory power of the model, as well as confirming hypothesis h5. three value-proposition items were found to be highly significant, with positive coefficients: 1. one company’s product / service enabled customers to solve their problems with the least effort (an efficiency design-theme attribute); 2. customers of another company combined the use of several products / services to achieve synergistic effects (a complementarity design-theme attribute); 3. key business partners do not collaborate with competitors of the company (a novelty design-theme attribute). however, the efficiency and complementarity items were significant with a positive coefficient only in combination with the novelty items, suggesting that they only influenced firm performance if the firm’s value proposition had a novelty focus. key insights the study has confirmed some findings from existing research and also produced a number of new insights. like zott and amit (2007, 2008), we find that a complementarity and lock-in focus in business model design is insignificant for firm performance, although this research treated them as independent variables, and not as control variables. furthermore, our analysis confirms a positive relationship between novelty-centred business models and firm performance. with this in mind, we can assume that a positive development in firm performance affects the renewal of the business model, related to the change in the value chain itself. in other words, companies whose business models are more innovative-oriented, e.g. offer and develop new products, create new needs for clients or develop new approaches to doing business, are more likely to demonstrate better economic performance. an important new finding is that the highest correlation between value propositions and firm performance was found in a business model design composed of items from different initial design themes developed journal of business models (2018), vol. 6, no. 2, pp. 54-58 57 by zott and amit (2007, 2008). more specifically, two items from the complementarityand efficiencyfocused value propositions were found to be significant for firm performance. the first is related to a company’s ability to combine its products and services in such a way as to create synergy for its customers, while the second is related to the level of efficiency with which a company’s products and services satisfies consumer needs. this proves zott and amit’s (2008) statement that the identified four design themes of the business model are not mutually exclusive: elements of all the design themes can be present in a single business model, though there should always be a preference for a particular design theme (ibid.). discussion and conclusions like zott & amit (2007), we also find that noveltycentred business models enhance firm performance, measured here as growth in sales turnover. however, our research further shows that the performance of a novelty-based business model can be improved by adding elements from other business model design themes, when adjusting value propositions to market conditions. this leads to two important questions for discussion: 1. first, whether business model design themes can be defined as being novelty-, efficiency-, lock-inor complementarity-centred, as suggested by amit & zott (2001) and zott & amit (2008). a business model configuration can also be influenced by the business environment as well as the industry, or even society, it is embedded in. for example, a study of chinese firms by wei, song and wang (2017) finds that manufacturing flexibility promotes both efficiencyand novelty-centred business model designs, and, subsequently, firm performance. furthermore, the relationship between manufacturing flexibility and an efficiency-centred business model design is strengthened by competitive intensity, but weakened by demand heterogeneity. in contrast, the relationship between manufacturing flexibility and novelty-centred business model design is weakened by competitive intensity, but strengthened by demand heterogeneity. their findings thus indicate a need to adjust business model design to the competitive landscape. 2. second, whether a company’s business model is secondary to its business strategy, and, as suggested by casadesus-masanell and ricart (2010), represents the company’s realised strategy. zott and amit (2007) also find that novelty-centred business models can enhance firm performance when coupled with product market strategies that either emphasize differentiation (i.e. innovation) or cost leadership, suggesting that business models and business strategies are complements, not substitutes for each other. following this line of discussion, the fundamental question for managers and entrepreneurs is what to choose first, i.e. a competitive business strategy or a business model design. for example, holm and günzeljensen’s (2017) research on freemium business models of online digital firms shows that choosing a freemium business model implies choosing a specific way to compete. the study finds that successful freemium companies employed similar business model designs, a ‘prospector’ strategy (miles & snow, 1978), and similar sets of tactics to outperform their rivals. however, the research does not show what the companies chose first, i.e. a strategy or their business model designs, or whether the two were evolving hand-in-hand. as in the above-mentioned and other research contributions, our study illustrates and confirms a link between business model design and firm performance, albeit one which depends on the choice of business strategy and its implementation through the business model design elements. however, this complex relationship requires further studies before we can help practitioners design their business models to achieve the desired company performance. journal of business models (2018), vol. 6, no. 2, pp. 54-58 58 references amit, r., & zott, c. 2001. value creation in e-business. strategic management journal, 22(6-7): 493-520. baden-fuller, c., & haefliger, s. 2013. business models and technological innovation. long range planning, 46(6): 419-426. casadesus-masanell, r., & ricart, e. j. 2010. from strategy to business models and onto tactics. long range planning, 43(2-3): 195-195. foss, n. j., & saebi, t. 2017. fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43(1): 200-227. gassmann, o., frankenberger, k., & csik, m. 2015. the business model navigator: 55 models that will revolutionise your business: pearson education. george, g., & bock, a. j. 2011. the business model in practice and its implications for entrepreneurship research. entrepreneurship theory and practice, 35(1): 83-111. holm, a. b., günzel, f., & ulhøi, j. p. 2013. openness in innovation and business models: lessons from the newspaper industry. international journal of technology management, 61(3-4): 324-348. holm, a. b., & günzel-jensen, f. 2017. succeeding with freemium: strategies for implementation. journal of business strategy, 38(2): 16-24. johnson, m. w., christensen, c. m., & kagermann, h. 2008. reinventing your business model. harvard business review, 86(12): 50-59. mcarthur, a. w., & nystrom, p. c. 1991. environmental dynamism, complexity and munificence as moderators of strategy performance relationships. journal of business research, 23(4): 349-361. miles, r. e., & snow, c. c. 1978. organizational strategy, structure, and process. new york: mcgraw-hill. morris, m. h., shirokova, g., & shatalov, a. 2013. the business model and firm performance: the case of russian food service ventures. journal of small business management, 51(1): 46-65. tretyak, o., & klimanov, d. 2016. new approach to business model analysis. russian management journal, 14(115-130). tushman, m., & anderson, p. 1986. technological discontinuities and organizational environments. administrative science quarterly, 31(3): 439-465. wei, z., song, x., & wang, d. 2017. manufacturing flexibility, business model design, and firm performance. zott, c., & amit, r. 2007. business model design and the performance of entrepreneurial firms. organization science, 18(2): 181-199. zott, c., & amit, r. 2008. the fit between product market strategy and business model: implications for firm performance. strategic management journal, 29(1): 1-26. journal of business models (2016), vol. 4, no. 3, pp. 5-18 5 purpose: the approach presented in this paper addresses entrepreneurs and managers of smes in the construction sector that are willing to refine their current business model. design: the main scope for defining the assessment was the transformation of generic industry performance indicators into a framework that encompasses the needs of smes in the construction industry. the assessment comprises for example typical key success factors that are relevant in the construction sector. these are for instance aspects like project management capabilities, implementation of risk-management mechanisms or mastering the value network in the construction sector. findings: the set of indicators we identified is thematically aligned to the osterwalder business model canvas which means that nine aspects of a business model are distinguished and elaborated in the assessment. for each of the indicators questions and respective multiple-choice answers were formulated to identify the degree of performance achieved by companies conducting the assessment. originality / value: the framework distinguishes from existing approaches concerning the complexity. the developed tool is the initial ignition for managers to start change projects in their companies. the idea is to help entrepreneurs in their strategic decision-making process and to enable them to control their complex and continuously progressing company environment. in the future, it is envisaged that the assessment, implemented as a selfassessment tool, will be part of a holistic approach. acknowledgement: all partners of the european funded project newbee (novel business model generator for energy efficiency in construction and retrofitting) are gratefully thanked for making this material available. development of an assessment tool to evaluate and improve sme business models abstract please cite this paper as: schüle et al. (2016), development of an assessment tool to evaluate and improve sme business models, journal of business models, vol. 4, no. 3, pp. 5-18 keywords: business model; sme self-assessment; construction industry 1-3 fraunhofer iao, nobelstr. 12, d-70569 stuttgart, germany; stephan.schuele@iao.fraunhofer.de 4 ifa-bau consult gmbh, industriestr. 2, d-70565 stuttgart, germany stephan schüle1, michael schubert2, christian hoyer3 and klaus-michael dressel4 journal of business models (2016), vol. 4, no. 3, pp. 5-18 6 introduction this paper aims at developing a business model assessment for locally acting medium-sized companies of the construction industry who offer solutions of high to medium complexity to their customers. in particular, this assessment should give first orientation especially to managers who want to adjust their business model to changed environment conditions. it is designed as a self-assessment, reviews the main aspects of a business model and has been created as lean as possible. the assessment is based on a performance factor analysis, derived by comparing different literature sources. this initial assessment was reviewed and enhanced with experts from the construction industry. the framework described in this paper is a helpful tool for managers of sme to roughly gauge the performance of their company and business model. it can be seen as a starting point for a deeper analysis of a company’s business model and as initial activity that helps to direct a change process in a company. the working structure of this paper is broken down into six chapters, as described in the figure below. chapter 1 introduction chapter 2 trends in business models of the construction industry chapter 3 research approach chapter 4 assessment framework chapter 5 conclusion and next steps trends and the state of the art in business models for the construction industry is explained in chapter 2. the research approach used to develop the assessment is described in chapter 3. chapter 4 gives an insight into the different performance factors of the assessment framework. the conclusion, implications and next steps are reported in chapter 5. trends in business models of the construction industry since the economic recession has bottomed out in 2005, the european construction industry is still struggling. as opposed to other regions, europe was not able to establish continuous growth in the construction industry during the last years (statista 2015). facilitated by continuous instability during the last years, many building contractors need to reorient. especially the european climate targets offer a high growth potential for companies focussing on the refurbishment of buildings (saheb et. al. 2015). adjusting to this situation, many companies have to change their competitive strategies or changed and adjusted their whole business model. the refurbishment of existing buildings is an attractive market for companies of all sizes. additionally, large construction companies are expanding in emerging markets. moreover, a change of strategy in the field of services has taken place (schober 2011). this means that companies are not limited only to mere construction activities or services related to construction. in the future, the construction industry is expected not to increase as much as many years before but the growth trend promises improvement. the long-time image of being a risk sector does not exist anymore which is also visible through banks having increased the loan volume for the construction sector. however, not all weaknesses have been overcome so far. a time driven business rivalry has been existing for many years instead of a preferable competence-oriented competition. traditional business models like general contractors or total contractors are no longer the benchmark in the construction industry. during the last years and also today, new models like gmp-models, open books, ipi contracting (e.g. performance or energy contracting), oss, target costing and the consideration of the building cycle have gained more importance and are still developing (gralla 2001, mahapatra et al. 2011, heilfort 2004, bertoldi et al. 2014, cabinet office 2014). figure 1: working structure of this paper journal of business models (2016), vol. 4, no. 3, pp. 5-18 7 the main goal of all models is to enable transparency, partnership and trust between all participants but most of all between customer and contractor. as a rule, for this purpose targets are set like cost targets, time lines but also corporate objectives like energy consumption targets or life-cycle costs of the renovated building. so-called energy performance contracting is also highly attractive. the contractor commits to provide energy, including operation, maintenance and exchange of the corresponding infrastructure. the main contract is based on specific energy (cost) saving whereby measures for energy saving and for improving energy efficiency are taken. as guaranteed savings, these improvements include the systematic and overall optimization of facilities and building. the contractor receives these saved energy costs or bonus payments proportionately as a compensation for his investments and services for a defined period of time. such energy saving contracting has the advantage that needs are adjustable in a highly flexible way to customer instructions (decc 2015). all new business models aim to improve the customer interface. however, the customer interface cannot be regarded separately but effects with all building blocks of the business models have to be considered. in this case the changes concern all companies in the construction industry, regardless of the size. summarizing all aspects, it can be stated that in the future smes will collaborate to offer business models covering nearly the whole value chain and providing a holistic service portfolio to customers. research the research covered the analysis of cross-industry performance factors and in particular those that are related to the construction sector. industry performance factors were derived from various business model approaches and extracted from strategic management literature. a set of factors was derived from the work related to industry models by kern in 2014 (kern 2014). some others can be found in literature related to business models (osterwalder 2010; hamel 2002; pateli, giaglis 2003; johnson et al. 2008; linder, cantrell 2000; bouwman et al. 2005; teece 2010. voelpel et al. 2005, porter 2008) and finally there is also literature with a focus on the construction industry (ak partnerschaftsmodelle 2005; girmscheid 2010a; giesa 2010; girmscheid 2010b) that proposes performance factors. the industry performance factors of the different literature sources were compared against each other and doublings eliminated. finally, they have been discussed and prioritized with industry experts. based on those industry performance factors, design fields were derived and defined. the design fields are not overlapping and have been validated with academics and industry experts. the next step comprises the identification and definition of different characteristic per design field, whereas the characteristics should be without any overlap against each other. the characteristics were defined in a way that they are representing different maturity levels of the corresponding design field. in the following, the list of the 19 design fields that have been defined for the self-assessment is presented: • competitive strategy (porter 2008, schober 2011) • efficiency and sustainability of business models (schober 2011, drucker 1963) • acquisition of projects (expert interview with a construction manager) • degree of the technological interweavement (kern 2014, expert interview with a construction manager) • project management (heilfort 2004, girmscheid 2010b) • risk management (girmscheid 2010a) • assets, resources and competences (heilfort 2004, ewald 2012) • appropriate offers (heilfort 2004, racky 2004) • environmental conditions of the market (schober 2011) • power over suppliers (porter 2008, schober 2011) • customer orientation (osterwalder 2010, schober 2011) • corporate culture and human resource management (lies 2014) • investment in knowledge base (davenport 2000, expert interview with a construction manager) • power over buyers (porter 2008, expert interview with a construction manager)) • degree of network competence (thorgren 2009, schober 2011). journal of business models (2016), vol. 4, no. 3, pp. 5-18 8 • contracting models (gralla 2001) • quality management (girmscheid 2010a) • revenue streams of the company (osterwalder 2010, expert interview with a construction manager). • project cost structure (osterwalder 2010, expert interview with a construction manager) it has to be emphasized that the number of maturity levels were restricted to three. the idea was to avoid complexity by developing a high number of maturity levels for each design field. practitioners should be able to do the self-assessment in a short time. several successful examples from different application areas and industry sectors show that frameworks with a low number of maturity levels can serve the needs of the industry (e.g. cmmi framework (4 capability levels), fraunhofer rnd-assessment (4 maturity levels)). with the support of six construction companies, the assessment was revised and adjusted. as a result, the mentioned 19 design fields were approved by the companies and the content revised to some extent. since the assessment has been designed especially for medium-sized construction companies, this target group has also taken part in the validation process. two medium-sized construction companies and one medium-sized consulting company from germany have validated the assessment. additionally, a company from finland and one from spain supported the beta-tests. all companies did the self-assessment and identified gaps in the design field as well as unclear points in the description of the design fields and in the maturity levels. strengths and weaknesses identified in this process were discussed with the project managers and ceos in order to ensure that the assessment screens most important aspects in a coherent way. summarizing, it can be stated that the assessment could be validated in different use cases. assessment framework the assessment consists of the above mentioned 19 different design fields which now will be illustrated in detail. these design fields have been structured additionally by means of the osterwalder business model canvas (see figure 2). this is intended to guarantee that all necessary aspects of a business model have been considered. the osterwalder approach has been chosen due to the following arguments: • the osterwalder approach was used to describe business models in different sectors (e-business, discrete manufacturing, consumer goods, service companies) (osterwalder et al 2010). this means that the approach is flexible and generic enough to be used also in the construction industry. • the network perspective is a building block of the osterwalder canvas. since this is truly becoming a key activities • project management • risk management • power over suppliers • quality management value proposition • efficiency and sustainability of business models • competitive strategy customer relationships • appropriate offers • bargaining power over buyers • contracting models customers • competitive strategy • customer orientation revenue streams • revenue streams of the company channels • acquisition of projects with high gross margin • appropriate offers • customer orientation • quality management key partners • degree of the technological interweavement • assets, resources and competences • appropriate offers • power over suppliers • environment conditions of the market • degree of network competence cost structure • contracting models • project cost structure key resources • assets, resources and competences • corporate culture and human resource management • investment in the knowledge base figure 2: assessment structure journal of business models (2016), vol. 4, no. 3, pp. 5-18 9 focal point for smes in the construction sector, it is an important criterion for the selection of an adequate modelling framework. • the osterwalder approach was applied regularly in the industry during the last years which means that it is proven to be appropriate for practitioners. • all well-known approaches can be mapped with the building blocks of the osterwalder model (schuele, sturm 2012). the mapping of the 19 design fields also reveals key levers of a construction sector’s business model. both the partner network and the customer interface are influenced by many different aspects which have to be controlled. the structure and the management of the project network mainly influence the project success. due to thematic overlaps, some buildings blocks are multiply. however, design fields which have been mentioned two or three times are not more important than others but are of more generality as others. this applies to the design fields “competitive strategy”, “assets, resources and competences”, “power over suppliers”, “needs-based offers” and “quality management“. in a first step, each design field being part of this assessment is explained clearly for the practitioner. the respective overall meaning is explained and, if possible, particularities or examples from the construction sector are added. self-assessment of the company takes place based on maturity levels. for each view on the business model, two or three different maturity levels are defined. competitive strategy competitive strategies are strategies on company level in order to get or create competitive advantages on company level (porter 2008). if the envisaged competitive advantage is only aimed for a submarket, we speak of a concentration on focus areas (niche strategy such as housing, local civil engineering or renovations). however, rapidly expanding companies still try to cover the entire design and construction process. typical examples of the construction industry are companies with a broad product portfolio that have either a high vertical integration or act as a one stop shop in the market (schober 2011). based on a diversification of the product portfolio, demand fluctuations can be compensated and risks can be avoided. a good balance between customer value and price for the service offered should always be achieved. with the help of a good business model, a company can dominate its market segment. thereby its competitive strategy is consciously developed, implemented and scrutinized regularly. poorly elaborated business models in the construction industry are characterized by the fact that market shares are declining, competing products are preferred by customers and that the insolvency risk is increasing. derived maturity level: • good: the business model enables companies to be one of the leading actors in his market segment. the competitive strategy being the basis of the business model is developed consciously, realized and questioned on a regular base. • intermediate: the business model still ensures economic growth. although the company responds to market changes, it will not dominate the market. the approach to strategic orientation and business model development has not been formalized. • bad: market shares decline, competitor products are preferred by customers, the risk of insolvency exists. there is neither a deliberate competitive strategy nor a deduced business model. efficiency and sustainability of business models the efficiency and sustainability of business models must always be considered in combination. a high flexibility of the company is needed to overcome projects and their challenges such as bureaucratic hurdles easily. in the foreground is the response time of the company to serve customer needs quickly with minimum effort (schober 2011, drucker 1963). sustainability in the construction industry means that customers are satisfied permanently and that ecologically and economically integrated solutions are implemented for them. a high efficiency and sustainability is defined by the right balance of total costs for the value proposition and the company’s profits, whereby customer loyalty is high. efficiency and sustainability are low when the majority of completed projects are characterized by a negative balance and there is no customer loyalty. derived maturity level: • high efficiency and sustainability: this is defined by the right balance of a company’s total costs of journal of business models (2016), vol. 4, no. 3, pp. 5-18 10 values and profits. customer loyalty is high. • intermediate efficiency and sustainability: the company is still profitable, however, the margin compared to competitors is low due to high development and project costs. customers move to competitors. • no efficiency and sustainability: the majority of projects being handled has negative results. company viability is endangered. there is no customer loyalty. acquisition of projects one of the most important acquisition methods in the construction industry is still the word of mouth but, of course, an excellent reputation must exist. if this is not sufficient, additional marketing measures have to be initiated. for example, companies can selectively improve their profile and act as holistic, green or cheap construction companies on the market and thus address specific customer groups. meanwhile, new tender forms (e.g. internet auctions) are used. although this results in transparent pricing mechanism, it usually affects also corporate profits in a negative way. in contrast to classical negotiations, proximity to customers is neglected (as one main focus of smes) through internet auctions. independent of the company size, an above-average equity capital ratio helps if the company’s goal is to participate in larger projects. derived maturity level: • high success rate: it is easy for the company to acquire projects with large contribution margins. • intermediate success rate: the company has average success in the acquisition of projects with large contribution margins. • low success rate: projects with large contribution margins are rarely acquired. degree of the technological interweavement the degree of technological interweavement describes the interdependencies between network partners in a value chain due to components or trades or to the complexity growth by interweaved different technologies which require a common and early planning (kern 2014). especially in key trades, such as facades or the technical building orientation, it is important that partners are involved at an early stage to help managing and optimizing the system parameters and to ensure process quality and process stability. in case of bad technological interdependence, the company provides primarily isolated solutions to the customers. derived maturity level: • high: large-scale projects being handled by a company usually have high technological interweavement. complex structures and technical systems are realized with partners. in accordance with their task formulation, technological interdependence of smaller projects is mostly low. • low: primarily, isolated applications having low technological interweavement are offered to the customer. this is independent from project size and thus applies to small and medium undertakings. project management project management is a key component in order to carry out a construction project within the contractual limits of time, cost and quality. especially work covering overlapping trades is challenging for responsible project managers. a good project management works solution-oriented to counteract any problems as early as possible. the range of tasks of project management includes, for example, professional purchasingand partner management, tendering, construction site organization, project controlling or interface management (heilfort 2004, girmscheid 2010b). companies acting in networks need to synchronize their project portfolios when they want to succeed (multi-project management). poorly managed projects exceed again and again the given time and budget or do not lead to a final result which corresponds to the expected quality. derived maturity level: • structured: project managers or site managers in a company are able to coordinate value networks and to reach project goals agreed with the client. the experience of project managers or site managers within a company is high. • unstructured: projects are managed without dejournal of business models (2016), vol. 4, no. 3, pp. 5-18 11 tailed planning in accordance with arising requirements within the project. projects exceed the given time and budget frame. risk management especially in pre-contact phases, corresponding risk management is often not done or not carefully enough performed. problems occur during the project if risk analysis has not (sufficiently) been carried out. the overall objective is to increase customer benefits and to decrease the own risk. in addition to efficient project and cost controlling, an adequate equity base reduces the entrepreneurial risk in case of payment default/ debt default in the construction sector. each project manager should be able to establish a project-related risk management in his projects. structured risk management makes risks and effects visible at an early stage and enables appropriate countermeasures. in this way, project cancellation can mainly be avoided (girmscheid 2010a). derived maturity level: • structured: project risks are managed in a structured way. as a result, risks are detected at an early stage, effects are made visible and measures are determined which are monitored continuously. • partially structured: project risks are managed in a partially structured way. most risks are detected at an early stage. unrecognized risks do not cause project cancellation but are removed with great effort in the course of the project. • unstructured: risk management is not part of project management. in the past, unrecognized, serious risks have caused project cancellation. assets, resources and competences smes often do not have all necessary assets and competences for offering a service portfolio to customers. to manage and carry out larger renovation projects, complementary knowledge, competences and equipment are necessary which are covered by a partner network. among other things, during the construction phase it is possible to call for tenders in the partner network and therefore jointly offer a solution in early project phases (heilfort 2004). it is also most important to have access to experts and subcontractors which can master certain building trades, renovation or manufacture components. approaches that include the cooperation of all contract partners and project members (incl. the client) ensure that projects can be conducted cheaper, faster, qualitatively better and thus more satisfying for all partners. iteration loops in the planning process are avoided and conflict potential is eliminated. this requires social competence as well as formal (guidelines and rules) and informal (not officially required) communication structures of the involved partners. especially cross-company teams make it possible that appropriate professional skills are immediately available in each project phase (ewald 2012). for big projects so-called temporary working teams are often used. an optimal status is developed if all required assets, resources and competences for the execution of the task are available in the own company or are provided by trusted partners. derived maturity level: • available: usually all required assets, resources and competences for the realization of the task are available in the company itself or are directly provided by project partners. networking between project partners is given. • rarely available: not all required assets, resources and competences for the realization of various tasks are available. in some cases, projects could not be acquired or conducted due to unavailable resources. the networking of project partners is fragmented. appropriate offers the basis for appropriate offers are always market analysis on a regular basis with internal and external references that consider actual trends and changes and thus extend the use for the client. usually the architect or planner is the contact for the building contractor. the actual aim should be the direct contact with the client (resp. the contribution of the own competence). nowadays, clients act more independently and often approach the company directly. to save time and costs, the client and – in case of investment projects –also his network should be included in the planning. the close cooperation with the client in the performance description leads to the consideration of all client expectations and strengthens the trust in the contractor (heilfort 2004). more and more owners expect a continuous involvement in the building process or want to conduct many activities autonomously. thus the value propojournal of business models (2016), vol. 4, no. 3, pp. 5-18 12 sition has to be appropriately scalable (racky 2004). nevertheless, from the perspective of the contractor the client can only be partly included in the proposal preparation as pricing pressure in the construction industry is very high. finding a cheaper supplier is always possible for the client. derived maturity level: • well balanced: the value of an offer is well balanced in relation to pricing. the market is regularly analysed to understand customer requirements and to keep an eye on current trends and changes. the customer is actively involved in proposal preparation. • unbalanced: price and customer benefits of the solution are unbalanced. there is no or insufficient customer orientation which is not or only partially focused on the market. market analysis is only conducted once in a while, customer requirements are not considered for proposal preparation. environmental conditions of the market good companies that are established in the market are protected by entrance barriers. these are aspects like technological complexity, established and strong value added networks, client lock-in or capital intensity in the building material industry. companies that try to overcome these barriers are currently from low-wage countries, e.g. from eastern europe. the long-term market trend to move from new construction to renovation of buildings requires an adapted service offer by the contractor. tendencies to modular construction or the use of prefabricated components also change the parameters of the market (e.g. reduction of the vertical integration at the construction site). especially for kmu, new markets often can only be opened with a strong partner network (schober 2011). derived maturity level: • high: the company is part of a powerful network or is itself a powerful player on the market. competitors and new challengers are not able to gain market shares. new markets can be developed with the help of partners. • intermediate: the own market segment(s) could not be defended constantly against competitors in recent years. nevertheless, the market position could be nearly maintained. • low: competitors continually enter the own market segment. market shares decline steadily. power over suppliers in general, the factor “power over suppliers” describes the bargaining power towards the supplier (porter 2008). this power over suppliers only exists partly in the construction industry. due to high workload in specific craft businesses, a general contractor only has little power over companies with competences in mechanical services, electronic installations or the envelope construction. indeed partner enterprises are often evaluated by criteria like expertise, capability or reliability, but there is no actual competition due to the current lack of capacity. for other crafts (e.g. stucco work, screed linings or door installation) the workload is much lower and thus the balance of power between contractors and suppliers is different. another example is the cooperation between building materials industry and construction companies. due to the limited transportation options, on regional level for many building materials often no serious competitor exists (schober 2011). derived maturity level: • high: the companies control more than 70% of their suppliers and observe and measure regularly criteria to monitor the performance of their suppliers. these criteria are revised and updated regularly. strategies are available preventing to be dependent on only one supplier (multi-sourcing). • intermediate: approx. 50% of the suppliers are controlled whereas the other 50% cannot be controlled. strategies for performance evaluation of suppliers are only used sporadically. again and again single-sourcing relationships occur. • low: more than 70% of suppliers dictate the market, for example because of their products’ competitive advantage. furthermore, the company has no strategy to evaluate the performance of its supplier. in the past, single-sourcing relationships with some suppliers could not be prevented. customer orientation companies need to differentiate from its competitors in terms of the value proposition or customer channel resp. the customer interface (osterwalder 2010). the journal of business models (2016), vol. 4, no. 3, pp. 5-18 13 construction industry differentiates between specialists with custom-made solutions and generalists who offer customers everything from one source. this includes construction-services such as inspection, certification, testing and verification or communication with the respective authorities (schober 2011). the definition of a target system between client and contractor should always be conducted. however, it must be kept in mind that not every customer is the same and each company has different customers. for example, the demands and requirements of a project developer are different from those of a company keeping the existing building stock or an investment company. derived maturity level: • high customer orientation: the company has a unique selling proposition towards customers or differs from other competitors by means of the customer channel’s layout. • low customer orientation: for the customer, no difference regarding benefit promises or customer channel is visible. corporate culture and human resource management the staff must be regarded as the most important asset by the company’s management. excellent motivation, culture, skills and knowledge are a result of this appreciation and should be reciprocated by reward and promotion. a strong workforce has a high level of motivation. the skills of employees are increased by regular training and further education. due to satisfaction there is small fluctuation (lies 2014). as summary it can be stated that the corporate culture has a positive effect on each project results. good performing companies do not set-up uncontrolled capacities due to past, good order situations. their image and mind-set makes it easy for them to find new qualified employees. derived maturity level: • strong staff: the motivation of employees is high and skills of employees are enhanced through constant trainings (strategic must). the corporate culture has a positive impact on project results. there is a low turnover due to high satisfaction. • weak staff: the motivation of employees is subject to change. skills and knowledge are not applicable and have a negative impact on project results. trainings are rarely offered and new work content is not communicated appropriately. furthermore, there is high fluctuation. investment in knowledge base investment in the knowledge base ensures that the knowledge in the enterprise is updated regularly (davenport 2000). in the context of the construction industry this includes the latest developments and trends in the construction industry. especially knowledge of lean on-site manufacturing methods, functional materials and technologies is of high importance. dealing with intellectual property is also covered by this factor. derived maturity level: • high: a process for the allocation, structuring and delivery of knowledge has been established, for example good monitoring of the business environment (destep = demographic, social, technological, ecological and policy analysis; pestl = sociological, technological, economic and political change; technology roadmap, trend radar; trainings for employees). possibilities, e.g. networks for the informal exchange of knowledge, are offered. employees are ready to share and transmit their knowledge. mechanisms for explicit safeguarding of knowledge exist. • intermediate: allocation, structuring and provision of knowledge is informal. from time to time, there is a monitoring of the business environment (destep, pestl, technology radar, trend radar ...); training programmes for staff members exist. employees are ready to share and transmit their knowledge. mechanisms for explicit safeguarding of knowledge exist. • low: allocation, structuring and provision of knowledge are seldom realized. power over buyers this factor describes the bargaining power of a company towards its customers (porter 2008). especially towards small private investors (e.g. construction of a detached house), contractors often have a high bargaining power since clients usually do not have the necessary knowledge. in contrast, the situation is often just the opposite of commercial clients who have journal of business models (2016), vol. 4, no. 3, pp. 5-18 14 specialized e.g. in property management. in this case the client has a high power due to his own professionalization degree. derived maturity level: • high: companies dominate customers or there is a balanced (partnership) relationship between companies and customers, yielding benefits for both. • low: customers have great influence on the company and the value offer. degree of network competence the degree of network competence describes, on the one hand, the social competence and ability to interact in networks in order to achieve common goals and, on the other hand, the ability to bring expertise and experiences into collaborations. regional operating companies usually have a wide network from which all parties benefit, enabling also a strong diversification (thorgren 2009, schober 2011). therefore, cooperation mechanisms (e.g. partnering, construction team approach, construction management contract) were developed in the past. however, in one’s own network not only craftsmen and planners should be integrated but also other roles such as banks or facility managers. derived maturity level: • high: high degree of social and technological competence. networking partners are often actively involved as external specialists. • low: low degree of social and technological competence. there is only irregular or no cooperation with partners. contracting models contracting models describe the contractual relationship between the prime contractor and the client. the cooperation of the construction company with partners and subcontractors must also be regulated by contracts. the open books approach, the enterprise-wide disclosure of balance sheets along the value chain, creates transparency in the cost structure. with the help of this approach, changes to services after contract conclusion can also be handled transparently and conflicts caused by supplements can be reduced. typically, construction overheads or costs of the shell are fully disclosed within this approach. costs of finishing trades are negotiated and contracted commonly but, in contrast to overhead costs, not fully disclosed. an important lever for reducing total project costs are socalled gmp contracts which means that a guaranteed maximum price is offered. when exceeding or falling below this gmp, the difference will be allocated according to the contracting parties depending on the contract (gralla 2001). derived maturity level: • strong: if possible, new contracting models like gmp or open books principle are applied. • weak: contracting models are not or only rarely applied. quality management key aspects of a quality management system are the control of the customer-customer process (translate customer requirements, generate customer satisfaction), the management of the resources involved, the designation of responsibility or the responsibility of management and continuous improvement of all processes (girmscheid 2010a):. due to the high amount of needed resources for a certified quality management system, this is not always the best solution, especially for small enterprises. however, the continuous improvement and documentation of processes and structures are also of great importance for typical smes. in micro-enterprises, the degree of documentation must be questioned with respect to the efforts needed for it. it is important that in the construction process the quality of construction output is always agreed with the customer. derived maturity level: • strong: a suitable qm system or an appropriate cip (continuous improvement process) has been implemented and is effective. • intermediate: a suitable qm system or an appropriate cip (continuous improvement process) has been implemented but is only effective to some extent. • weak: a suitable qm system or an appropriate cip (continuous improvement process) has not been implemented. revenue streams of the company revenue streams can be divided according to different journal of business models (2016), vol. 4, no. 3, pp. 5-18 15 types, such as purchase price, instalments or shares of turnover (osterwalder 2010). the latter is gaining more and more importance in the construction industry. the general rule in determining the price is that customers benefit and corporate interests should always be in balance. it is typical for the construction industry that construction companies have in many cases problems with payment delays or denials. the problem often arises in the early stage of the contract design, if instead of an agreement about supplements only partial payments are defined. another problem is that often the liquidity of the client is not evaluated beforehand. a good measure to obtain revenue streams are thirdparty guarantees. derived maturity level: • strong: sources of income are known for each project. due to the good financial planning, profits are constantly obtained. • intermediate: sources of income are known for each project but no constant profits are obtained. • weak: at contract signing, sources of income are only considered limitedly and therefore assets are only rarely obtained. project cost structure the project cost structure determines the profit, as all fixed and variable costs incurred in the company, will be accounted accordingly (osterwalder 2010). “unavoidable costs” (“fixed costs”) include rents or personnel costs. “variable costs” (e.g. transport costs) are based on the quantity sold. overhead costs should be distributed to the different projects in a construction company as in any company. especially for smaller companies this is mainly done in a poor manner as a project cost structure persecution is not implemented. derived maturity level: • strong: the cost structure of projects is always mastered. • intermediate: the cost structure of projects is mostly mastered. • weak: in the past, pricing often has not been correct. supplements or losses within the balance of projects become the standard. conclusion and next steps given the comprehensive literature review and the feedback from the industry, many aspects have been elaborated in detail. since the assessment was aimed to be lean, only the main design fields in the construction industry were taken into account it also represents the consensus on european level as this work has been created within a recently finished european research project. by establishing this, managers of mediumsized companies can take advantage of the tool in the future as it allows a “health check” of the business model in their company. the assessment framework aims to reduce the complexity of a business model and addresses managers (especially those with a technical background instead of an economic or management background) in construction companies and makes the user of our tool aware of significant levers in a typical business model. the tool should help practitioners to reduce the hurdle of business model assessment for them. however, it has to be pointed out that this framework can be only a starting point but is not able to replace a detailed assessment of the business model or professional consulting. the detailed assessment is needed in any case before changes and adoptions are made. now as the validation of design fields and assessment criteria is completed, a web-based application is being developed. the results of the assessment will be made available to the participants via a report function. an urgent need for action in relation to the individual building blocks of the osterwalder canvas will be highlighted by a colour code (red, yellow, green) in the report. in this way the web-based self-assessment is an easy and valuable tool to get first main levers in order to improve business models in the construction industry. in the future, a broader validation will be necessary. the broader validation will also allow receiving empirical data on the applicability of the presented approach. a first version of the tool is already available on: http://plm.iao.fraunhofer.de/newbee/homepage1. aspx. in the next stage of this process the web-tool will allow to test the solution with additional stakeholders, and thereby will help to refine the solution again. journal of business models (2016), vol. 4, no. 3, pp. 5-18 16 reference list administrative arbeitskreis “partnerschaftsmodelle in der bauwirtschaft” im hauptverband der deutschen bauindustrie e.v: (2005): partnering bei bauprojekten. berlin. bertoldi, p.; labanca, n.; kiss, b.; panev, s. (2014). eur scientific and technical research reports: publications office of the european union. bouwman, h.; faber, e.; van der spek, j. (2005): connecting future scenarios to business models of insurance intermediaries. in: 18th econference and eintegration in action. bled, slovenia, 06. 08.06.2005. cabinet office (2014). new models of construction procurement. retrieved from http://www.gov.uk. davenport, t.h. and prusak, l. (2000) working knowledge: how organizations manage what they know, harvard business school press, boston, ma. department of energy and climate change (2015). guide to energy performance contracting best practices. retrieved from http://www.gov.uk. drucker, p. (1963). managing for business effectiveness. harvard business review, pp. 53-60. ewald, n. & partisch. (2012). bausektor: bau, baustoffindustrie und baumaterialhandel. frankfurt a.m. giesa, i. (2010): prozessmodell für die frühen bauprojektphasen. darmstadt: techn. univ. darmstadt, inst. für baubetrieb (schriftenreihe des instituts für baubetrieb, 54). girmscheid, g. (2010a): strategisches bauunternehmensmanagement. berlin, heidelberg: springer berlin heidelberg. girmscheid, g. (2010b): projektabwicklung in der bauwirtschaft. wege zur win-win-situation für auftraggeber und auftragnehmer. 3rd ed. heidelberg: springer (vdi). gralla, m. (2001): garantierter maximalpreis. gmp-partnering-modelle ; ein neuer und innovativer ansatz für die baupraxis. stuttgart: teubner (leitfaden der bauwirtschaft und des baubetriebs). hamel, g. (2002): leading the revolution. how to thrive in turbulent times by making innovation a way of life. new york: plume book. heilfort, t.; strich, a. (2004): praxis alternativer geschäftsmodelle. mehr erfolg für bauherren und bauunternehmer. dresden: inst. für baubetriebswesen. johnson, m. w.; christensen, c. m.; kagermann, h. (2008): reinventing your business model. in: harvard business review, pp. 51–59. kern, m. (2014): technology driven industry models: towards organised chaos in engineering. connecting high value solutions with future markets: management of applied r&d; the r&d management conference 2014; 3 6 june 2014, stuttgart; fraunhofer-institut für arbeitswirtschaft und organisation <stuttgart> institut für arbeitswissenschaft und technologiemanagement <stuttgart>. stuttgart: fraunhofer verlag. journal of business models (2016), vol. 4, no. 3, pp. 5-18 17 lies, j. (2014). gabler wirtschaftslexikon. last downloaded 2015-01-17 from wirtschaftslexikon.gabler.de: http:// wirtschaftslexikon.gabler.de/archiv/596505812/employer-brandingv3.html linder, j.; cantrell, s. (2000): changing business models : surveying the landscape. working paper from the accenture institute for strategic change. mahapatra, k et. al. (2011). report on business models for one-stop-shop service for sustainable renovation of single family house. deliverable d3.2 of the project successful sustainable renovation business for single-family houses – success families. osterwalder, a.; pigneur, y.; clark, t. (2010): business model generation. a handbook for visionaries, game changers, and challengers. hoboken, nj: wiley. pateli, a. g.; giaglis, g. m. (2003): a framework for understanding and analysing ebusiness models. in: 16th ecommerce conference etransformation. bled, slovenia, 09. 11.06.2003. porter, m. e. on competition. updated and expanded ed. boston: harvard business school publishing, 2008. racky, p. (2004). partnerschaftliche vertragsmodelle für bauprojekte. kassel: institut für bauwirtschaft universität kassel. saheb yamina et. al. (2015): energy renovation: the trump card for the new start for europe. eur scientific and technical research reports: publications office of the european union. schober, k.-s. dr.; sievers, g. dr.; schmitt, p.; walter, g. dr. (2011): strategien der deutschen bauwirtschaft. chancen nutzen, risiken meistern. schüle, s.; sturm, f.: approach to implement new collaboration patterns in the tooling industry in: école de management : creating and capturing value through r&d management and innovation : the r&d management conference 2012 ; may 23-25, 2012, grenoble france. 2012, statista (2015). estimated construction industry growth rates in selected regions in 2013. retrieved from http:// www.statista.com. teece, d. j. (2010): business models, business strategy and innovation. in long range planning 43 (2-3), pp. 172–194. sara, t.; wincent, j.; örtqvist, d. (2009) designing interorganizational networks for innovation: an empirical examination of network configuration, formation and governance, journal of engineering and technology management, volume 26, issue 3, september 2009, pages 148-166, (http://www.sciencedirect.com/science/article/pii/ s0923474809000228). voelpel, s.; leibold, m.; tekie, e.; krogh, g. (2005): escaping the red queen effect in competitive strategy: sensetesting business models. in european management journal 23 (1), pp. 37–49. journal of business models (2016), vol. 4, no. 3, pp. 5-18 18 stephan schüle is an expert for scientific issues in the context of technology management and r&d-management. he is responsible for the development of innovation frameworks and business model assessments at fraunhofer iao. he has long-term experience with the management of european research projects but also with international consulting projects. michael schubert is a senior researcher at fraunhofer iao. he studied technology management at the university of stuttgart and is also expert in the area of innovation and r&d management. he is project manager in national and international research and consultancy projects and was involved in the development of various business models for the construction industry and other branches.. christian hoyer graduated in 2015 at the university of stuttgart and works since 2014 as a research assistant at the fraunhofer iao in stuttgart. this paper is based on the findings of his bachelor thesis in technology management. about the authors klaus-michel dressel is the managing director of ifa-bau consult gmbh, a consulting company for sme construction companies in europe. he is an expert for the development of company strategies, business models and implementation of lean management in the construction industry. klaus-michael has longterm experience with research and consulting projects. journal of business models (2015), vol. 3, no. 1, pp. 81-92 8181 value proposition design is a very different book about business. an accessible, practical handbook that delivers exactly what the cover promises: “how to create products and services customers want”. journal of business models (2015), vol. 3, no. 1, pp. 81-92 8282 the prelude leading on from the bestselling 2010 book business model generation (bmg), alexander osterwalder and yves pigneur, this time flanked by greg bernarda, alan smith and trish papadakos, set out to further the intricate link between business models and value propositions in the 2014 publication value proposition design (vpd). we have been looking forward to this contribution, not just because of the impact the 2010 book made on businesses, business models and business development, but also because the notions of understanding what really lies in the concept of the value proposition in fact is rather hard for many companies, students and academics to comprehend. value proposition design addresses the relationship between customer segments and value propositions in the so-called value proposition canvas (vpc), which could be described as the pivotal element of the business model canvas (bmc). the book focuses on two of the building blocks from the bmc, namely “customer segments” and “value propositions” and gives a simple and accessible way of researching whether the value propositions of a company’s business model correlates with the actual needs of the customers it wishes to serve. not only are the methods easy to work with, they are in addition a fun and inspiring way of working with strategy and business development. value proposition design how to create products and services customers want by alex osterwalder, yves pigneur, greg bernarda, alan smith & trish papadakos (published by john wiley & sons, new jersey. isbn: 978-1118968055) reviewed by jan kyhnau (the practitioner) and christian nielsen (the professor) for the journal of business models. value proposition design uses the simplicity and effective means of inspiring and instructive drawings to clarify what it’s talking about – and more importantly, what it means. journal of business models (2015), vol. 3, no. 1, pp. 81-92 8383 through our work with organizations of varying size and industrial affiliation and collaborating with students, we have encountered countless instances where value propositions are mistaken for product features. in our use of the value proposition canvas during the last two years where it has flourished on the internet, we have come to appreciate its ability to convey this understanding to even stubborn ceo’s, owners and financial managers.  let us be frank: if you are looking for an academic dissertation about business models and the meaning of value propositions, value proposition design is not the book for you. however, if you are looking for a no-nonsense “howto-do” book that helps you identify and understand customer segments as well as offering you the tools to design razor-sharp value propositions, which ensure the success of your chosen business model, look no further. value proposition design is a brilliant cookbook, which, as the flip side of the cover states, helps you avoid wasting your time building stuff nobody wants. value proposition design is written as an accessible, practical handbook that delivers exactly what it promises at its outset: “how to create products and services customers want”. whereas the business model canvas focused on how to create value for businesses, the value proposition canvas focuses on how to create value to customers. using the value proposition canvas is not going to be a brand new experience for those who have worked with the business model canvas before. that said, there is a quick introduction to the business model canvas, meaning that brand new readers who have not read the bmg book can follow and understand the premise of the vpc and its context. the scope and focus between the two tools are, however, quite different. in this new book, the focus is much more in-depth into the way organizations function and create value, and the book provides the reader with a whole array of practical tools and examples on how to create for example customer profiles, value maps and how to work with prototyping and testing. the field of business models has developed dramatically over the last five years both in academia and in business and therefore we intend to review this book from both perspectives, namely from the practitioner perspective and the professor perspective.  on the book as a whole, the practitioner says: as a practitioner, i have nothing but praise in regards to the new ways the book works with development, innovation and testing of business models, as well as the online tools provided with the book. these are hands-on methods and tools, which enable the user to understand customers, design the value propositions, and create correlation between customer segments and the corresponding value propositions. it should be mentioned that i have known about the content of vpd and the online companion for some time, as i was part of the pre-reader team of the book, which consists of roughly 60 practitioners from all over the world. i have also been part of the test team who tested the “online companion” tool. in the last few months, i have had the opportunity to use the book and the tools on a series of strategy and business development cases as well as for facilitating business model and value proposition design processes. from my experiences i have to say that the authors have done a great job in terms of enabling business development teams to effectively develop and test prototypes of value propositions and in extension, business models. ... journal of business models (2015), vol. 3, no. 1, pp. 81-92 8484 value proposition design is organized in four sections. the first 25 pages of the book provide an extensive introduction with a comprehensive table of content, and arguments for why readers should invest time in this book. here the authors use the book’s own model to describe the “pains” which they have identified amongst their customers (the readers) and subsequently which “pain relievers” and “gain creators” the book and the online companion offer. naturally, this is concluded with the books own value proposition, which is to “design, test and deliver what customers want”. concluding, there is an online test, by which you can on the book as a whole, the professor says: as a professor from the fields of management and performance measurement it is a relief to endure a contribution that realizes that the creation of value essentially stems from an organization providing a product or service to a customer (either another organization or a consumer) which is of value to him/her. the following negotiation between these two entities then leads to a pricing and payment agreement, and ultimately the realization of value coupled with the related costs leads to a profit contribution. in the literature, i currently see many interpretations of value creation that are related to financialization and accounting practices. while we must not neglect the positive attributes of sound financial business models with for example high liquidity ratios and a high level of free cash flow, none of them will be sustainable in the long term if what the company brings to the market is of poor value to the customer now or somewhere in the future. sometimes investors and financial analysts tend to forget this perspective in their reports.  hopefully, the perspective of the business model canvas and value proposition canvas will in time find their ways more broadly into the curriculum of business and finance and resolve this forgetfulness. according to osterwalder and pigneur1 (2015), 250 universities in the usa have adopted the business model generation book for one or more courses. for now, however, we are seeing the growing popularity and importance of thinking in terms of business models and value propositions more or less only in the fields of entrepreneurship, business development and intrapreneurship. however, this is not a bad place to start. in time, we might ponder the positive aspects of introducing these lines of thought to certain areas of public administration, university administration and banking. just a thought. 1 osterwalder, a., and pigneur, y. (2015) the business model canvas: why and how organizations around the world adopt it. a field report from strategyzer. accessed from http://blog.strategyzer.com (26.02.2015). together with many elaborate, instructive and exemplified tools for prototyping possibilities and gaining customer insights, the book has a good flow. it is my experience that users easily understand the models presented as well as being able to follow the detailed descriptions that come with the tools. the “online companion” is an online portal, which comes with the book. it offers tools, templates and posters, and even tests and exercises all of which correlates to the books curriculum. it is a refreshing way of handling external material and it expands both the experience and the learning exercise. yet seen from a practitioner point of view it falls a little short in trying to be both a supporting tool as well as a training tool. but overall i think that the book and the online companion work well together and are to business model designing what batman and robin are to crime fighting – a dynamic duo. http://blog.strategyzer.com journal of business models (2015), vol. 3, no. 1, pp. 81-92 8585 assess your value proposition design skills as well as receive a few good pointers on how you convey the idea of vpd to your colleagues. section 1 – canvas the first section of the book explains the thought process behind value proposition design as well as providing instructions for using the vpc. it describes the two sides of the vpc: 1) a customer profile side where you clarify your customer understanding, and 2) a value map side where you map out how you intend to create value for that customer. the value proposition canvas is a simple model that points out “the pains” the users struggle with, and “the gains” which they strive for, held against the “pain relievers” and “gain creators” the organisation offers. it also describes what it means to achieve fit between the two sides of the model. gain creators pain relievers pains gains products & services customer job(s) value proposition customer segment copyright: strategyzer ag the makers of business model generation and strategyzer the value proposition canvas strategyzer.com the book gives a simple and accessible way of researching whether the value propositions of a company’s business model correlates with the actual needs of the customers it wishes to serve. the so called fit. in principle this is not new, but it has never been formulated in a more understandable fashion. not only is the canvas a highly efficient and understandable tool, it is in addition a fun and inspiring way of working with strategy and business development. journal of business models (2015), vol. 3, no. 1, pp. 81-92 8686 the practitioner says: “observe customers – create value”. it is that simple. and when the authors explain it graphically, it really is easy to understand that value proposition design is all about achieving fit between customer profiles on the one hand side and the value map on the other. the subdivision into three fields on each side of the canvas is easy to command and easily accessible. as a user i find that each field will be filled up with notes rather quickly. the book and the online companion provide good advice on checking for the given fit. where the book makes a notable difference is in the section regarding rankings of the notes and the guidelines as to how the process should be guided. the ranking goes from “nice to have” to “essential” and the “best practices and common mistakes” which is shown on pages 24-25 under customer profiling and on page 39 under value mapping helps to improve the value gained from working with the vpc. what’s more, the table on page 42-43 helps you pick the right direction for your value proposition. by looking at the rankings it often becomes clear whether you should address the essential gains or the most extreme pains. finally, the selection of the different types of fit and the walkthrough of the different contexts, which applies to the same customer, is helping to refine and vary the usage of the vp canvas. the professor says: the model presented here should be taught on the first semester of any under-grad business education. it forces managers and entrepreneurs to consider if there is a market for their product. this is not new in any sense, but to be honest, i have not seen it formulated in a more understandable fashion previously. this model has been used successfully with business students in their project work the last two years with us. for me there are two central passages in this section: 1. the section on achieving fit as a whole (starting page 40) 2. particularly the section on customer segmentation and why this should be done according to perceived use value of different customer groups provided on pages 54 to 59 is a must read for any manager or business owner section 2 – design the second section of the book revolves around how you design the best possible value proposition, or rather, how to design different prototypes of value propositions. here the value proposition canvas  is linked with the business model canvas and the environment surrounding a company’s business model and the reader is introduced to prototyping techniques and how to start a value proposition design process.  that is why we think you will enjoy the 10 prototyping principles on pages 78-79. the three first principles assure a better process along with more and better ideas: 1) make it visible and tangible 2) embrace a beginners mind – don’t let existing knowledge get in the way 3) don’t fall in love with first ideas – create alternatives. the design thinking influence of this book teaches us the importance of never falling in love with the first idea or to work into too great detail too early; because this makes you attached to the idea. as such, journal of business models (2015), vol. 3, no. 1, pp. 81-92 8787 you want to work within rough universes and work up-tempo and in drafts and sketches. the more the better. the book describes many relevant techniques, which enable you to attain insight into customer profiles and to create ideas and innovation from these. not all of the tools are easy to use, which the book also attempts to accommodate in being explicit about the level of difficulty for each of the tools. be aware that some of the techniques may be difficult to apply without any prior knowledge. especially the co-creation technique might demand more background than what is on offer in the book alone. the checklists ”10 questions to assess your value proposition” on page 122-123 and ”7 questions to asses business models” on page 156-157 work really well. whether it be on paper or through the online companion, these lists are essential when the different prototypes are to be evaluated against each other. we are both particularly fond of the section “from value proposition to business model and back again” on pages 152 and 153. this exercise illustrates how to change perspective in relation to the business model by zooming out and then back in again. this enables you to see the weaknesses and opportunities in the proposed value propositions and decipher what happens when you refine or change the value proposition or customer segment. the practitioner says: as creative director and business model designer, i have worked with many of the starting points for idea development, which the book mentions in section 2.2 from page 88 and forward. the book gives you very practical instructions, and i agree fully with the point of departure, namely that great value proposition does not have to be centred around the customer, but may also originate from other successful value propositions and business models from other trades. why would you not? in love, war and business development, all is fair. so “steal” with pride. in the last part of the second section, which is the part of the book i find the best and most useful, you find instructions to composing a workshop in an already established organization. there is quite detailed information, which shows what part of the book you should use at what time. my experiences lead me to caution the readers on the ease of conducting these processes. there are many places where this process can fail if you endeavour into a workshop with many hopeful participants. i recommend that you pilot these processes with a small group of employees whom you know well and who are aware of the premise of such a pilot workshop. the professor says: having worked with the value proposition canvas for a couple of years now, my favourite passage of this book is found in section 2, and specifically sections 2.4, 2.5 and the first part of section 2.6 (starting on page 120 to page 165). from my personal perspective, section 2 also seems to be the most developed part of the book. the only negative aspect would be to comment on the widespread mix of introduction to the models and workshop tools. while its practical nature is the core strength of the book in general perhaps some form of distinction in the colour scheme could have enlightened the organization of the mix between tools and models? journal of business models (2015), vol. 3, no. 1, pp. 81-92 8888 section 3 – test the third section of the book revolves around how to reduce risks of failure when developing value propositions by testing them. the section offers principles for testing and validating value propositions and shows how progress can be measured and followed minutely by help of simple yet effective tools such as test card, learning cards and a newly developed progress board (pages 244 to 245). the book includes a very enlightening case story of the owlet baby monitor illustrating how many of the tools provided with the book for designing and testing value propositions and business models was used by the winners of an international business model competition. they did so in part by using the concept of minimum viable product, which the book describes. section 3.3 offers a bibliotheca of different tests in the experiment library. an array of different experiments and test methods, all of which take their point of departure in a call to action, are described. the idea is to attain evidence of what works and what does not from the customers’ perspectives. among the techniques are guides on how to test the interest and relevance of a value proposition, the customers’ priorities and the progress board business hypotheses ! ! ! ! ! test: backlog test: build invalidated unclear results validated test: measure test: learn progress copyright: strategyzer ag the makers of business model generation and strategyzer strategyzer.com 21 43 list the key assumptions that need to be true for your idea to work. prioritize the most critical ones that could kill your business. the tests and experiments that you intend to perform the tests and experiments that are being planned, designed, or built. the tests and experiments that are currently running and collecting data. the tests and experiments that were executed, collected data, and are ready to be analyzed. your validation criteria step-by-step. back to the drawing board iterate or pivot your design design another test, and learn more before making a decision advance to the next step, move on in your quest to make ideas reality ? to manage the test process you can use the progress board poster, an example of the extensive amount of extras in the online companion which comes with the book. it offers very accessible and useful tools and templates and even tests and exercises, all of which correlates to the book’s curriculum. journal of business models (2015), vol. 3, no. 1, pp. 81-92 8989 preferences and – not least – their willingness to pay for the value provided. with point of departure in steve blank’s investment readiness thermometer (page 242), the section is rounded off with instructions to how one can measure the testing process. the practitioner says: i find the test section very inspiring. when i introduce these methods during workshops to get better traction and strengthen the developed value propositions, i only receive positive feedback. this is something everyone seems to find valuable. the power of the test section lies, in my opinion, in the description of the hypothesis-based test process, where the people behind strategyzer have developed some very simple, yet extremely effective tools. i am talking about test cards, which makes it easy to design a test, and learning cards, which makes it possible to retain and maintain the results and insights. overview of the testing process is developed in the usual easily accessible graphic form and can be found on page 198-199. as recent as early march 2015, i introduced vpd, prototyping and test methods to a large european pharmaceutical company, which found the tools to be very useful in order to indicate what their r&d department should focus on in the future. the professor says: this section of the book is a very practical “how to” guide for entrepreneurs or business developers. i agree fully with the mantra ‘go out and find evidence for what you are proposing’. too many entrepreneurs and even students sit in front of their laptops and think they can find evidence of customer needs in that way. i think the section on five data traps to avoid is very important to consider and i personally enjoyed the product box technique. i am putting that into practice the very next chance i get. section 4 – evolve the fourth and final section, ”evolve”, is more than anything a plea from the books authors to continue developing, measuring and monitoring both business model and value proposition performance and to continually track the satisfaction of your customers. the book uses the chinese e-commerce company, taobao, part of the alibaba group, as an example of how the tools, which normally are used for designing and testing business models and value propositions, may also be used for continuous reinvention of the business. in the first part of the section 4 (page 169-162), the authors introduce alignment opportunities, which an increasing number of communication, marketing and advertising people know and use on a daily basis. especially the value proposition canvas is a good tool to create alignment in relation to advertising, sales, internal and external branding, employer advocacy and so forth. there are many possibilities in using the tools in this book for creating value added “narratives” for both internal and external stakeholders. lastly, the authors have provided a very useful glossary, which especially becomes useful for people who have limited experience with bmg and vpd. journal of business models (2015), vol. 3, no. 1, pp. 81-92 9090 concluding remarks and future directions this book is a must read for undergraduate students in any field where creating a new product or new knowledge might be a possibility. this includes not only students in business and social sciences but also students of humanities, engineering and medicine. at aalborg university, denmark, we have both been involved in bringing these models into the business model curriculum and teaching it to 150+ students. last year we had to cheat and use the information available from strategyzer’s blog, so we are looking forward to feeling the coherence brought about by this cookbook in class.  likewise, for anyone involved in product or business development, or new venture creation this book is a must read, of course alongside business model generation because the latter provides a common language for the process spelt out in this book.  for the practitioner, vpd is an exquisite cookbook with recipes. the practitioner says: as i see it, the authors use the last section not just to conclude and to put into perspective but just as much to urge users and supporters of value proposition design to strive for more and better solutions, to keep on developing, optimizing and measuring their effort to adjust their value propositions to what customers want. seen from a strategic planner and creative director perspective, i see a lot of possibilities in using the tools in this book – not just in creating products and services customers want, but also in creating value added branding and “story doing” based on the perfect brief that the value proposition canvas actually represents. i am grateful to have been among the team of pre-readers and it is worth noting that the process of reading the book with even more critical eyes have not changed my impression of “value proposition design”. i believe it is a very useful and in many ways ground-breaking handbook, which makes strategy work and the creation of products and services customers want much more qualified and even more fun. the professor says: i sense the authors wanted a concluding section to the book, however, the final section about evolving the value proposition comes short of the thoughtfulness of the remainder of the book and it lacks the coherence of the rest of the book. on the other hand this opens up, not only for a little critique, but also for some more work to be done. as professor of business models and performance measurement, i can only say that the measure and monitor section inspires me to keep working towards the next generation of tools. journal of business models (2015), vol. 3, no. 1, pp. 81-92 9191 the practitioner says: to me, strategy and business development is about creating actual value, and not about a bunch of buzzwords. as such, i think that vpd is a highly valuable contribution to all who need to invent, optimize or renew their business models. that goes for entrepreneurs as well as small, medium or large enterprises and organizations. the authors are definitely inspired by dan roam’s thoughts about minimizing the “blah blah blah” in meetings and reports on strategy and business development. hence they strive to replace words with pictures where possible. that has resulted in a very different book about business. a book, which uses the simplicity and effective means of instructive drawings to clarify what it’s talking about – and more importantly, what it means. the professor says: for me the highlight of the book was section 2 on designing value propositions; particularly pages 120 to 165. i have just read them again and they are equally informative third time around. i did feel that the evolve section needed a bit more work. however, like business model generation left a door open for the value proposition design book, these weak spots related to the alignment and measurement of the evolving business model innovation process leave yet another couple of doors open. when i look back at both business model generation and value proposition design i feel that an interesting angle is to work more on the patterns introduced in the former and applied sporadically in the latter. some more work needs to be done in this respect. at the business model design center we have also dissected all known business model configurations, presently there are 62, and are in the process of combining them with the notions of performance measurements. strategy and business development is something that should be taken very seriously. in our opinion this is exactly what is done in value proposition design. the authors take strategy and business development very seriously by acknowledging that companies and organizations that need to invent or reinvent themselves cannot afford that the development of business models is an exclusive exercise for a few selected people in top management. vpd adds new and necessary resources for strategy and business development to existing businesses and advocates for bringing business development into the culture of a given company. journal of business models (2015), vol. 3, no. 1, pp. 81-92 9292 about the book review authors jan kyhnau is consultant and trained practitioner within business model design and innovation. with a background as a strategic planner, creative director and entrepreneur/ founder within digital marketing, he has extensive experience in concept development and value proposition design. jan cooperates with bmdc at aalborg university and is also external lecturer and examiner at university colleges denmark. furthermore, jan is danish representative of business model you®, licensed strategic board member, member of alex osterwalder’s pre-reader team and member of the journal of business models’ editorial team. christian nielsen is professor at aalborg university, denmark and visiting professor at macquarie university, australia. christian heads the business model design centre (www.bmdc.aau.dk), one of the worlds leading interdisciplinary centres of excellence in business model research. christian has worked with the field of analysing and valuing business models since 2001 both as a researcher and as a buy-side analyst, portfolio manager, consultant and board member and is also joint-editor of the journal of business models. journal of business models (2015), vol. 3, no. 1, pp. 49-61 4949 the importance of classification to business model research dr. susan c. lambert1 1 torrens university, australia keywords: classification, business model, taxonomy, typology, theory building article classification: conceptual please cite this paper as: lambert, susan c. 2015. ‘the importance of classification to business model research’, journal of business models, vol. 3, no. 1, pp. 49-61 abstract purpose: to bring to the fore the scientific significance of classification and its role in business model theory building. to propose a method by which existing classifications of business models can be analyzed and new ones developed. design/methodology/approach: a review of the scholarly literature relevant to classifications of business models is presented along with a brief overview of classification theory applicable to business model research. existing business model classifications are evaluated in terms of their propensity to contribute to theory building and a method for designing classifications schemes is proposed. findings: little attention has been paid to the rationale underlying the design of business model classifications and often there is no explicit consideration of the suitability of the classification for its intended purpose. each classification contributes to the understanding of business models in practice but there is a dearth of taxonomical research that can facilitate progression of business model research towards theorizing. originality/value: this paper addresses the research element of classification that is largely overlooked yet is crucial for business model theory building. the nature of business model classifications is examined in the light of classification philosophies and a structured method of classification design is proposed. a case is made for the development of a general classification of business models that can facilitate the progression of business model research towards theory building. journal of business models (2015), vol. 3, no. 1, pp. 49-61 5050 1. introduction the business model concept has defied its early critics who saw it as a novel concept that was no more than another way of articulating business strategy (baden-fuller & mangematin, 2013) and although there is still no universally accepted definition or framework of a business model, like its predecessor concepts including strategy, the meaning is evolving through research and practical applications. numerous studies seek to determine what is taking place in actual organizations and how business models relate to e-business, strategy, innovation and technology (zott, amit, & massa, 2011). as with other, nascent fields of research such as small enterprise and organizational science, in ‘the absence of careful empirical analysis, a plethora of conceptually based models have emerged’ (hanks, watson, jansen, & chandler, 1993, p.11). a range of empirical studies use the business model to classify enterprises and to identify relationships between enterprise performance and the business model. in addition, the motivation for and frequency of business models innovations and the relationships between business model innovation and firm success are the subjects of empirical research that helps us to understand the business model concept (lambert & davidson, 2013). in some studies, the business model is used as an independent variable and in others as a dependent variable (zott et al., 2011). much of the research is predicated on a classification of business models and in many instances the classification is proposed with little or no justification or explanation. each of the many classifications is conceived to meet the specific needs of the researcher, and they vary considerably in terms of purpose and the scientific rigor used in their development. some classifications are constructed using a large number of business model characteristics and potentially serve a relatively wide range of purposes and others are based on a small number of business model characteristics, serve specific purposes and, consequently, facilitate only a limited range of generalizations. each of the well-structured business model classifications makes a contribution to the business model knowledge base; however, distinguishing one classification from another, evaluating their utility for future research, and understanding the underlying decisions on which the classifications are based, are not always possible because very little consideration is paid to the taxonomical issues (baden-fuller & mangematin, 2013; mäkinen & seppänen, 2007; morris, schindehutte, richardson, & allen, 2006). this paper proceeds with a discussion of the significance of classification followed by a brief overview of classification philosophies that are relevant to business models. next, business model classifications that are present in the scholarly literature are analyzed in the light of the philosophies presented, and a case is made for a more transparent and structured approach to the design of classification schemes for research. a classification design method is then proposed. the paper concludes with a summary of the findings and a discussion of the importance of classification to business model research. 2. the universal significance of classification classification is critical to the understanding of objective reality. it involves the ordering of objects into groups or classes on the basis of their similarity and ordering of objects into classes provides meaning to reality (bailey, 1994, 2005; simpson, 1961). the action of putting things which are not identical into a group or class is so familiar that we forget how sweeping it is. the action depends on recognizing a set of things to be alike when they are not identical. we order them by what it is that we think they have in common, which means by something that we feel to be a likeness between them (bronowski, 1951, p.21). it is widely recognized that classification is a necessary step in understanding a research area, however throughout history there has been continuous debate about the best way to classify objects, what criteria to use, and what purpose the classification can serve. since ancient times, the natural historians worked to ‘bring order to the apparent chaos of the natural journal of business models (2015), vol. 3, no. 1, pp. 49-61 5151 world’ (huxley, 2007, p.12) and for centuries, biologists have understood the importance of classifying objects according to a general, widely accepted classification scheme which facilitates the naming of objects and provides a common language within the entire domain. the study of diversity brought life to taxonomic research the philosophical basis of which shaped the resultant biological research (huxley, 2007). the importance of classification is not, however, peculiar to biological science research. researchers in the organizational sciences (carper & snizek, 1980; chrisman, hofer, & boulton, 1988; mckelvey, 1982; scott, 1987; sells, 1964), behavioral sciences (mezzich & solomon, 1980), social sciences (bailey, 1994), and information and computer sciences (fettke & loos, 2003; vessey, ramesh, & glass, 2005), recognize the value of both conceptually derived and empirically derived, general classification schemes for their fields of research. embedded throughout management research are classifications of research objects as diverse as teams (hollenbeck, 2012), activities within the strategy process (eppler & platts, 2009) and reasons for financial report restatement (gertsen, van riel, & berens, 2006). firms are classified according to size (brews & purohit, 2007), entrepreneurial orientation (jambulingam, kathuria, & doucette, 2005), industry (yip, devinney, & johnson, 2009), and business models (lambert & davidson, 2013). without some level of consensus on the classification of objects within a field of research, knowledge accumulation and meta-analysis are impeded (hollenbeck, 2012) and theorizing is forced to be on a grand scale. classifications make it possible to study and make generalizations about discrete, homogeneous groups of objects and, ultimately, propose mid-range theories that apply only to those discrete groups of objects (rich, 1992). such mid-range theories might explain why some business models perform better than others or are more sustainable than others, or they might explain why some business models are vulnerable to technological, political or social change and others are not. mid-range theories could explain how the dimensions of particular classes of business models can be manipulated to enable organizations to adapt to change or to pursue new strategies. in this paper i examine the basis of business model classifications, revealing that although many specific classifications exist, there are no general classifications. the analysis is based on identifying the philosophy behind the classification which has implications for the functions and characteristics of the resultant classification. the following section provides a brief overview of the essentialist and empiricist philosophies of classification and their respective outputs. 3. philosophies of classification two distinct theories of classification have been widely adopted in the research of inanimate objects including business models; essentialism and empiricism. the suitability of each theory depends on the purpose of the classification. essentialism stems from the aristotelian view that there exist a few essential characteristics, which define the essence of an organism and that, by identifying these characteristics, classes of organisms can be created. classes based on a small number of characteristics considered essential to defining the essence of the group are called monothetic groups. for objects to qualify for membership of the group, they must possess the characteristics used to define the group; and possession of the characteristic is both sufficient and necessary for membership in the group (bailey, 1994; mckelvey, 1982). classifications that are the product of essentialist philosophy are called typologies. typologies can take the form of traditional (commonsense) or theoretical classifications (rich, 1992; warriner, 1984). traditional classifications ‘depend on implicit recognition of the categories referred to, for there are no explicit classificatory criteria’ (warriner, 1984, p.134) and they are based on broad similarities and differences that are apparent to the users and that reflect the interests of the users. traditional classifications are useful for identifying and naming things that exist in the real world such as organizations. organizations can be classified as educational institutions, manufacturers, retailers and service providers. this traditional classification might be useful to identify types of organizations but its usefulness is limited because the similarities of organizations within a class and the differences journal of business models (2015), vol. 3, no. 1, pp. 49-61 5252 between classes are not expressed and classifications can overlap. theoretical typologies, on the other hand, are derived on the basis of a prior theory such as economics, management, strategy, or entrepreneurship theory. the researcher conceptualizes and names the ‘types’ that are relevant to the research and decides, a priori, the few characteristics that represent the essence of the object which in turn, relates to the purpose of the classification. for example, theoretical typologies of organizations include those based on their function in society, who benefits from their output, inputs and the technology employed (mckelvey, 1982). the result is a deductively-derived classification designed for a specific purpose; ‘but no matter how useful they may be in predicting certain features of special interest to particular theories, they have limited general utility’ (warriner, 1984, p.135). baden-fuller and haefliger (2013) argue that conceptual typologies are forward looking classifications. theoretical classifications may have no empirical equivalents, and may be ideal types or completely hypothetical (bailey, 1994). for example, economists classify economies as traditional, market, command and mixed economies although there are no instances of pure market or command economies. the ideal types are benchmarks against which existing economies can be compared and therefore be better understood. theoretical classifications can be supported by empirical cases, for example, a typology of financial instruments can be populated with instances of financial instruments. all members of a category must possess the characteristic(s) which define that category. typologies are mostly generated through qualitative classification rather than quantitative analysis, although they can be formed by concep tualizing types and then analyzing the results using statistical techniques (bailey, 1994). the nosella et al. (2005) and bigliardi et al. (2005) business model classifications of the biotechnology industry illustrate how theoretical basis and empirical processes can be combined. as typologies categorize objects according to a limited number of defining characteristics (often as few as two), they are able to simplify complex concepts. researchers base the defining characteristics on their personal perspective and bias (hambrick, 1984). however, the simplicity of typologies limits their power to explain or predict phenomena (hambrick, 1984); and any increase in the number of defining characteristics will lead to a disproportionate increase in the level of complexity of the task and in the ultimate result of the research itself. for example, even if all [defining characteristics] are dichotomous, the formula for determining the number of [types] is 25, where 5 is the number of [defining characteristics]. thus for five dichotomous [defining characteristics] the typology will contain only 25 or 32 [types], but for 12 dichotomous [defining characteristics] the number of [types] is 212 or 4,096. (bailey, 1994, p.4) keeping the number of defining characteristics small is consistent with the essentialist philosophy that there are only a few characteristics that capture the essence of the object. where researchers need to use a large number of defining characteristics, they must ask whether the essentialist philosophy is appropriate for the purpose. in contrast to essentialism, empiricism is based on adansonian principles whereby polythetic groups of objects are formed. polythetic groups of objects ‘...have the greatest number of shared character states, and no single state is either essential to group membership or sufficient to make an [object] a member of the group’ (sneath & sokal, 1973, p.21). classifications that are the product of empiricist philosophy are called taxonomies. note the dual meaning of ‘taxonomy’. a taxonomy is an empirically derived classification of objects based on the totality of their observable characteristics. the term taxonomy is also used to refer to the ‘…theoretical study of classification, including its bases, principles, procedures, and rules’ (simpson, 1961, p.11). researchers who develop classification schemes carry out taxonomic activity, yet their output, the actual classification schemes, can be typologies (specific classifications) or taxonomies (general classifications). this dual meaning can lead to confusion and even misuse of the term in the business model literature where many classifications are referred to journal of business models (2015), vol. 3, no. 1, pp. 49-61 5353 as taxonomies when they are in fact typologies. an analysis of existing business model classifications is presented later in this paper. empirically derived classification has come to be known as numerical taxonomy (sneath & sokal, 1973). numerical taxonomies evaluate affinity between objects numerically (using multivariate techniques) creating taxa (categories) based on a large number of characteristics commonly referred to as variables. objects are ordered according to their degree of affinity (mckelvey, 1982; sokal & sneath, 1963). a priori, all characteristics have equal weighting, and similarity between objects is a function of the similarity between each of their many individual characteristics. a taxonomy can serve as a general classification of objects from which generalizations can be made, hypotheses proposed, and eventually mid-range theory generated since ‘it is the intimate connection with empirical reality that permits the development of a testable, relevant, and valid theory’ (eisenhardt, 1989, p.532). by using a large number of variables the researcher bias that is present in typologies is potentially reduced. however, there are still many subjective decisions to be made. in fields of study where little is known about the object of classification and research is exploratory, the researcher must trawl the data using as many variables as practical. the danger with this approach is that key variables may be overlooked and irrelevant variables may dominate. the resultant classification may be statistically valid but may not be intuitively sensible or useful. where there is little domain knowledge, an alternative to the pure inductive method is to seek expert opinion on variable selection, what ketchen (2005) refers to as the cognitive approach. in research areas that are more mature, with existing theories in relation to the object of classification, the researcher can utilize that prior knowledge to minimize the chance of irrelevant data obstructing the classification and to ensure all key variables are included. in addition, where causal relationships are known, they can be taken into account in order to avoid overrepresentation of constructs (ketchen, 2005). a large number of variables is still required; however, utilizing existing theory to refine the variable set is beneficial for classifications that are aimed at confirming existing theory. variables are identified and measurement rules determined to allow data to be collected and coded for cluster analysis. the data can be further analyzed using a range of multivariate techniques. the aim is to minimize within-group variance and maximize inter-group variance, thereby creating homogeneous groups. once created, these homogeneous groups can be used for a multitude of research applications, enabling the study of both within-group behavior as well as inter-group behavior. essentialist and empiricist theories of classification imply important differences in the taxonomical approaches used to create a catalogue of objects and in the resulting catalogue itself. the utility of those catalogues also differs. a typology is developed with a specific purpose in mind, is based on only a few characteristics and therefore has limited utility (mckelvey, 1982). by contrast, taxonomies are the result of grouping objects based on the totality of their observable characteristics. although many researchers use the terms interchangeably, they are not equivalent: typologies and taxonomies have their own limitations and strengths. the characteristics and functions of typologies and taxonomies are summarised in table 1. table 1: summary of characteristics and functions of typologies and taxonomies typologies taxonomies the product of essentialist philosophy the product of empiricist philosophy categories (types) are conceptually derived categories (taxa) are empirically derived journal of business models (2015), vol. 3, no. 1, pp. 49-61 5454 4. business model classifications scholars have long recognized that the business model literature lacks a systematic approach to the development of classifications and that many of the so-called taxonomies are simply lists of existing business activities, or at best, typologies of generic kinds of business models (baden-fuller & morgan, 2010). the varied use of the terms typology and taxonomy in the business model literature creates misunderstanding and confusion for those attempting to analyze and compare the various classification schemes. early business model classifications are simple identification schemes (traditional typologies) that use no explicit criteria for classification and produce generic types or shorthand descriptions of existing business models (baden-fuller & morgan, 2010). for example, applegate (2001) proposes four business model types; focused distributor models, portal models, producer models and infrastructure provider models. laudon & traver (2003) identify seven types of business models; portal, e-tailor, content provider, transaction broker, market creator, service provider and community provider. bambury (1998) and eisenmann (2002) propose fourteen and eight business model types respectively. the criteria used to define each type is not explicit, instead the types are broadly described in free form narrative. theoretical typologies are based on prior theory such as economics, strategy, and entrepreneurship. numerous theoretically based typologies of business models are present in the literature providing alternate means of comparing business models according to a small number of clearly specified criteria. market related criteria including customer profile (bienstock, gillenson, & sanders, 2002; leem, suh, & kim, 2004), market configuration factors (timmers, 1998; tapscott, ticoll & lowy, 2000), transaction factors (wang & chan, 2003) and marketing strategy (weill & vitale, 2001) dominate the classification criteria. product related factors (timmers, 1998; bienstock at al., 2002) and resources (weill & vitale, 2001; betz, 2002) also feature in the classification criteria. baden-fuller and mangematin (2013) argue that the essential characteristics of the business model, which they define as “a meta concept to exemplify firm strategy” (baden-fuller & mangematin, 2013, p. 419) are customer, customer engagement, monetizaton and value chain and linking mechanisms. their purpose is to “capture the essence of the cause-effect table 1: summary of characteristics and functions of typologies and taxonomies typologies taxonomies few characteristics considered many characteristics considered reasoning by deduction reasoning by inference mostly qualitative classifications quantitative classifications monothetic groupings polythetic groupings specific classification general classification provides a basis for only limited generalizations provides a basis for wider generalization journal of business models (2015), vol. 3, no. 1, pp. 49-61 5555 relationships between customers, the organization and money (baden-fuller & mangematin, 2013, p. 419) which corresponds to an essentialist view of business models best served by a typology. some theoretical typologies form the basis of empirical research that collects evidence of empirical cases (kauffman & wang, 2008; malone et al., 2006; rajala & westerlund, 2007; sabatier, mangematin, & rousselle, 2010). the differentiating criteria of theoretical typologies are chosen to serve the specific tasks, for example measuring and comparing financial performance (malone et al., 2006), analyzing the software industry’s resource requirements and mode of management (rajala & westerlund, 2007), and identifying the characteristics of business models associated with the survival of internet firms (kauffman & wang, 2008). these empirically supported typologies serve the purposes for which they are intended; however, their utility for other research is limited due to the small number of differentiating criteria used. there are few empirically derived taxonomies of business models present in the literature. the italian biotechnology industry is the subject of one series of studies (bigliardi, nosella, & verbano, 2005; 2005) and two non-industry-specific studies involve united states based firms (malone, morris, schindehutte, richardson, & allen, 2006; 2006). what is missing from the literature is an empirically derived general classification (a taxonomy) of business models that uses many criteria to classify business models and is relevant to multiple industries. such a general classification of business models will allow general patterns of configurations of business model variables to be inferred from the results. simple relationships between variables can be hypothesized and tested and mid-range theories of business models, those intended to hold true for particular categories of business models rather than for all instances of business model, can be proffered. a good classification scheme forms the foundation of theory development. to advance research towards mid-range theories, it is necessary to order the objects within the research domain since ‘theory cannot explain much if it is based on an inadequate system of classification’ (bailey, 1994, p.15). classifications ‘…are partway between a simple concept and a theory. they help to organise abstract, complex concepts’ (neuman, 2003, p.46). business models are abstract, complex concepts, and we can enhance our understanding of them by developing a general classification scheme. so far i have made a case for the explicit and thoughtful consideration of the basis of classifications used in business model research. in the next section, i propose a classification design method that can aid in the design of a classification scheme that is consistent with its purpose. 5. classification design for business model research to encourage the application of theoretical rigor to the design of classification schemes in business model research and communicating their underlying structure to potential users, i now propose a method for the design of classification schemes based on the extant classification literature presented earlier in this paper. figure 1 outlines six decision steps that lead to a classification outcome appropriate for the intended purpose. step 1 step 2 step 3 step 4 step 5 step 6 state the objectives of the classification identify the necessary functions and characteristics of the classification select the classification philosophy that delivers the required functions and characteristics identify the classification principles that flow from the theoretical basis choose a procedure that is consistent with the principles decide the rules to operationalise the procedure figure 1: classification design steps journal of business models (2015), vol. 3, no. 1, pp. 49-61 5656 step 1: specify the purpose of the classification. the purpose might be specific or it might be broad to facilitate broad generalizations. step 2: identify the necessary functions and characteristics of the classification that will best serve the intended purpose. step 3: select the classification philosophy that deli vers the functions and characteristics required of the classification. for example, to understand the relationship between business models and social and environmental sustainability, we need a specific classification that uses characteristics of the business model that the researcher believes to be relevant to the study. the classification criteria would be based on existing sustainability research, just as baden-fuller and haefliger (2013) and baden-fuller and mangematin (2013) determined their classification criteria to better understand the relationship between business models and technological innovation. classifications such as these are consistent with an essentialist philosophy of classification that would produce a typology. step 4: identify the classification principles relevant to the classification philosophy. for example, the essentialist philosophy requires the categories to be conceptualized using as few characteristics as possible and forming monothetic groups and the empiricist classification philosophy requires categories to be determined through observation. step 5: choose procedures that are consistent with the philosophy and principles. the conceptualization of categories requires a procedure that identifies a small number of classification criteria. to establish categories through observation there needs to be a procedure to discover variables. step 6: decide the rules by which the procedures will be carried out. the procedure to define the object for classification is quite straightforward when the object is tangible but it is more challenging and requires carefully conceived rules when the object is abstract. business models are abstract objects that have no universally accepted definition and whose components vary according to user perception. for example, a rule related to the procedure of defining the sampling unit is to treat multiple business models within the enterprise as a single hybrid business model rather than as multiple, discrete business models. a rule associated with conceptualizing categories is to specify the number of categories required. table 2 shows examples of principles, procedures and rules associated with both essentialist and empiricist philosophies of classification. a general classification of business models based on empiricism would create polymorphic categories of business models (i.e., groups of business models based on overall similarity) using computerized statistics programs to perform cluster analysis that identifies the taxa based on the observed variables. decision rules relating to the selection and measurement of variables and choice of particular statistical techniques must be made explicit. clustering is often performed using both hierarchical and non-hierarchical methods to minimize the impact of the limitations of each method (henry, tolan, & gorman-smith, 2005; huberty, jordan, & brandt, 2005; ketchen, 1996). finally, the clusters would be interpreted and labelled and differences between clusters identified. both numerical descriptions such as z-scores, inter-cluster distance, and linear discriminant functions can form part of the analysis. journal of business models (2015), vol. 3, no. 1, pp. 49-61 5757 6. conclusion classification is an integral part of business model and other management research (christensen & carlile, 2009) and to facilitate the evaluation of classifications the relevant principles, procedures and rules require explication. in this paper i have provided an overview of the theory of classification to bring to light the significant differences between classification schemes and their relevance to research. i have highlighted the differences between typologies and taxonomies to show how each serves different research needs. a study of existing business model classifications present in the extant literature reveals that there exist many specific classifications but no general classification of business models that can form the basis of generalizations. without the ability to generalize about homogeneous groups of business models, mid-range theory building is stifled. to guide the construction of taxonomically sound business model classification schemes, i have offered a structured method that links the purpose of the classification to the corresponding philosophy of classification and to the necessary functions and characteristics. the individual classification design steps make transparent the decisions embodied in the classification scheme so that future researchers can build on and refine existing classification schemes rather than starting anew each time a classification is required. a classification scheme, like a good theory, is seldom finished. it is only given interim acceptance with the understanding that further studies will tend to elaborate and refine it, or disconfirm it (mckelvey, 1982, p.30). table 2: examples of principles, procedures and rules for the design of an essentialist and an empiricist classification scheme classification philosophy essentialism empiricism associated principles • categories derived conceptually • form monothetic groups • categories derived through observation • collect data based on many variables • form polythetic groups related procedures • define the criteria to form categories • define the sampling unit and determine the population • identify objects that fit the categories • analyse the results quantitatively and/or qualitatively • define the samling unit and determine the population • discover and measure the variables • code the variables • form clusters using computerized statistical software • analyse results quantitatively related rules • derive 16 categories • treat multiple business models within the enterprise as a single hybrid business model • apply both hierarchical and non-hierarchical clustering methods • use numerical descriptions such as z-scores, inter-cluster distance, and linear discriminant functions in the analysis journal of business models (2015), vol. 3, no. 1, pp. 49-61 5858 thoughtful consideration of the purpose of business model classification schemes that extends beyond the immediate requirement has the potential to create a bridge between current and future research. an awareness of the principles that underlie existing classification schemes improves the potential to leverage from prior research. the use of classification throughout all fields of research to create order in the field and to facilitate mid-range theorizing renders it an important construct worthy of careful and explicit consideration by business model researchers. references applegate, l. (2001), e-business models: making sense of the internet business landscape, in g. dickson & g. desanctis (eds.), information technology and the future enterprise, new models for managers. prentice hall, upper saddle river nj. baden-fuller, c. & haefliger, s., (2013), business models and technological innovation. long range planning, vol. 46, no. 6, pp. 419-426. baden-fuller, c. & mangematin, v., (2013), business models: a challenging agenda. strategic organization, vol. 11, no. 4, pp. 418-427. baden-fuller, c. & morgan, m. s., (2010), business models as models. long range planning, vol. 43, no. 2-3, pp. 156-171. bailey, k. d. (1994), typologies and taxonomies: an introduction to classification techniques. sage publications inc los angeles. bailey, k. d., (2005), typology construction, methods and issues. encyclopedia of social measurement, vol. 3, pp. 889-898. bambury, p.october 1998, (1998). a taxonomy of internet commerce. first monday, 3(10). http://firstmonday.org/ htbin/cgiwrap/bin/ojs/index.php/fm/article/view/624/545october 1998. bienstock, c., gillenson, m. & sanders, t., (2002), a typology of e-commerce business models. quarterly journal of electronic commerce, vol. 3, no. 2, pp. 173-182. bigliardi, b., nosella, a. & verbano, c., (2005), business models in italian biotechnology industry: a quantitative analysis. technovation, vol. 25, no. 11, pp. 1299-1306. brews, p. & purohit, d., (2007), strategic planning in unstable environments. long range planning, vol. 40, no. 1, pp. 64-83. bronowski, j. (1951), the common sense of science. heineman educational books ltd london. carper, w. b. & snizek, w. e., (1980), the nature and types of organizational taxonomies: an overview. academy of management review, vol. 5, no. 1, pp. 65-75. chrisman, j. j., hofer, c. w. & boulton, w. r., (1988), toward a system for classifying business strategies. academy of management review, vol. 13, no. 3, pp. 413-428. christensen, c. m. & carlile, p. r., (2009), course research: using the case method to build and teach management theory. academy of management learning & education, vol. 8, no. 2, pp. 240-251. eisenhardt, k. m., (1989), building theories from case study research. academy of management review, vol. 14, no. 4, pp. 532-550. journal of business models (2015), vol. 3, no. 1, pp. 49-61 5959 eisenmann, t. (2002), internet business models, text and cases. mcgraw-hill irwin new york. eppler, m. j. & platts, k. w., (2009), visual strategizing: the systematic use of visualization in the strategic-planning process. long range planning, vol. 42, no. 1, pp. 42-74. fettke, p. & loos, p., (2003), classification of reference models: a methodology and its application. information systems and ebusiness management, vol. 1, no. 1, pp. 35-53. gertsen, f. h. m., van riel, c. b. m. & berens, g., (2006), avoiding reputation damage in financial restatements. long range planning, vol. 39, no. 4, pp. 429-456. hambrick, d. c., (1984), taxonomic approaches to studying strategy: some conceptual and methodological issues. journal of management, vol. 10, no. 1, pp. 27-41. hanks, h. s., watson, c. j., jansen, e. & chandler, g. n., (1993), tightening the life-cycle construct: a taxonomic study of growth stage configurations in high-technology organizations. entrepreneurship, theory & practice, pp. 5-30. henry, d. b., tolan, p. h. & gorman-smith, d., (2005), cluster analysis in psychology research. journal of family psychology, vol. 19, no. 1, pp. 121-132. hollenbeck, j. r., beersma, b., & schouten, m. e. , (2012), beyond team types and taxonomies: a dimensional scaling conceptualization for team description academy of management review, vol. 37, no. 1, pp. 82-106. huberty, c. j., jordan, e. m. & brandt, w. c. (2005), cluster analysis in higher education research, in j. c. smart (ed.), higher education: handbook of theory and research (vol. xx, pp. 437-457). springer. huxley, r. (2007), the great naturalists. thames & hudson london. jambulingam, t., kathuria, r. & doucette, w. r., (2005), entrepreneurial orientation as a basis for classification within a service industry: the case of retail pharmacy industry. journal of operations management, vol. 23, no. 1, pp. 23-42. kauffman, r. j. & wang, b., (2008), tuning into the digital channel: evaluating business model characteristics for internet firm survival. information technology and management, vol. 9, no. 3, pp. 215-232. ketchen, d. j., (1996), the application of cluster analysis in strategic management research: an analysis and critique. strategic management journal, vol. 17, no. 6, pp. 441-458. lambert, s. c. & davidson, r. a., (2013), applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. european management journal, vol. 31, pp. 668-681. laudon, k. & traver, c. (2003), e-commerce; business, technology, society. pearson prentice hall upper saddle river, new jersey. leem, c. s., suh, h. s. & kim, d. s., (2004), a classification of mobile business models and its applications. industrial management & data systems, vol. 104, no. 1, pp. 78-87. linder, j. c. & cantrell, s., (2001), five business-model myths that hold companies back. strategy & leadership, vol. 29, no. 6, pp. 13-18. mäkinen, s. & seppänen, m., (2007), assessing business model concepts with taxonomical research criteria. management research news, vol. 30, no. 10, pp. 735-748. malone, t. w., weill, p., lai, r., d’urso, v. t., herman, g., apel, t. & woerner, s., (2006), do some business models perform better than others? mit sloan research paper no. 4615-06. journal of business models (2015), vol. 3, no. 1, pp. 49-61 6060 mckelvey, b. (1982), organizational systematics: taxonomy, evolution, classification. university of california press berkeley. mezzich, j. e. & solomon, h. (1980), taxonomy and behavioral science: comparative performance of grouping methods. academic press inc (london) ltd. london. morris, m., schindehutte, m., richardson, j. & allen, j., (2006), is the business model a useful strategic concept? conceptual, theoretical, and empirical insights. journal of small business strategy, vol. 17, no. 1, pp. 27-49. neuman, w. l. (2003), social research methods: qualitative and quantitative approaches (5th ed.). pearson education inc boston. nosella, a., petroni, g. & verbano, c., (2005), characteristics of the italian biotechnology industry and new business models: the initial results of an empirical study. technovation, vol. 25, no. 8, pp. 841-855. rajala, r. & westerlund, m., (2007), business models a new perspective on firms’ assets and capabilities: observations from the finnish software industry. international journal of entrepreneurship and innovation, vol. 8, no. 2, pp. 115-125. rich, p., (1992), the organizational taxonomy: definition and design. academy of managment review, vol. 17, no. 4, pp. 758-781. sabatier, v., mangematin, v. & rousselle, t., (2010), from recipe to dinner: business model portfolios in the european biopharmaceutical industry. long range planning, vol. 43, no. 2-3, pp. 431-447. scott, w. r. (1987), organizations rational, natural, and open systems (second ed.). prentice-hall new jersey. sells, s. b. (1964), toward a taxonomy of organizations, in w. w. cooper, h. j. leavitt & m. w. shelly (eds.), new perspectives in organization research (pp. 515-531). john wiley & sons. inc., new york. simpson, g. g. (1961), principles of animal taxonomy. columbia university press new york. sneath, p. h. & sokal, r. r. (1973), numerical taxonomy: the principles and practice of numerical taxonomy. w.h. freeman and company san francisco. sokal, r. & sneath, p. (1963), principles of numerical taxonomy. w h freeman and company. tapscott, d., ticoll, d. & lowy, a. (2000) digital capital: harnessing the power of business webs, harvard business school press. timmers, p., (1998), business models for electronic markets. electronic markets, vol. 8, no. 2, pp. 3-8. vessey, i., ramesh, v. & glass, r. l., (2005), a unified classification system for research in the computing disciplines. information and software technology, vol. 47, no. 4, pp. 245-255. wang, c.-p. & chan, k.01/02/2008, (2003). analyzing the taxonomy of internet business models using graphs. first monday. http://journals.uic.edu/ojs/index.php/fm/article/view/1058/97801/02/2008. warriner, c. k. (1984), organizations and their environments: essays in the sociology of organizations (vol. 3). jai press london. weill, p. & vitale, m. (2001), place to space. harvard business school press boston. yip, g. s., devinney, t. m. & johnson, g., (2009), measuring long term superior performance: the uk’s long-term superior performers 1984-2003. long range planning, vol. 42, no. 3, pp. 390-413. zott, c., amit, r. & massa, l., (2011), the business model: recent developments and future research. journal of management vol. 37, no. 4, pp. 1019-1042. journal of business models (2015), vol. 3, no. 1, pp. 49-61 6161 about the author susan c. lambert, dr., is associate professor (accounting) at torrens university australia and has a strong interest in applying the business model concept to strategic decision making in business and in academic settings. she has held senior academic and administrative positions in business schools and has taught a range of accounting, auditing, business information systems and electronic business courses. she is especially interested in how technology can be used in higher education to improve student learning and to reach students who would otherwise miss out on a higher education. prior to joining academia she was a sales consultant for ibm international and prior to that she worked as a professional accountant. she is a fellow of chartered accountants australia and new zealand and she remains active in this body. her primary research interests revolve around business models and their application to environmental and social sustainability research and to universities. email: susan.lambert@tua.edu.au mailto:susan.lambert%40tua.edu.au?subject= journal of business models (2018), vol. 6, no. 2, pp.65-70 65 toward smart city business models sari perätalo petri ahokangas martti ahtisaari institute, oulu business school abstract this paper discusses a business model concept in a public smart city context. to date, there is no unified understanding of how smart cities create value for their stakeholders. this study aims to contribute to the research by investigating the content and dynamics of a business model approach for smart cities. please cite this paper as: perätalo s., ahokangas p. (2018), toward smart city business models, journal of business models, vol. 6, no. 2, pp. 65-70 keywords: smart city, business model, business context change introduction since the 1980s there has been enormous growth in networking between companies as businesses  – and now also cities – have realized that they have to concentrate on their own core competencies and use external resources to compliment the competencies they have (pikka, 2007; nooteboom, 1999). this kind of network thinking assumes synergies, either positive or negative, indicating that the network is the sum of its components (i.e. public governance and businesses) that interact together (pikka, 2007), paving the way to ecosystem thinking. according to the seminal work by moore (1996), business ecosystems comprise organizations and individuals interacting in economic communities, creating value for their customers and users. these ecosystems are characterized by high complexity, cooperation, independence, competition and coevolution (moore, 1996). recently, business model research has also started to expand its viewpoint from a networked view towards an ecosystemic view (iivari, 2016, p. 3). in practice, this means that value creation and capture the key features of business models are embedded within the whole ecosystem of players, and innovations are formed together with businesses and public organizations (pikka, 2007), basically implying that value is co-created and co-captured (ahokangas et al., 2015). thinking about these realities, it is important for businesses and also cities to understand their situations with regard to other players and to chart plans for the journal of business models (2018), vol. 6, no. 2, pp.65-70 66 future. hence, business networks, and recently ecosystems, have become more and more important in regional and city development – successful business is usually a target of regional development because traditionally it is seen that regional development enables local business, and firms accumulate in those regions where the factors of production are best available (pikka, 2007). we can say that there is no doubt that the business model has entered the field of city development. both the business network and ecosystem can act as a basis when researching a smart city business model that benefits both cities and companies within the cities. this paper discusses the business model concept in a public smart city with a view that it is understood as a business ecosystem that includes a diversity of different stakeholders. the purpose of this paper is to explore what kind of business model approach could work for smart city organizations. so far, academic research has not addressed how smart cities could utilize the business model approach in their development (díaz-díaz et al., 2017). agility and speed are common requirements for businesses in smart cities, and to answer these two challenges, both smart cities and businesses have to concentrate on their core competencies and outsource other activities (pikka, 2007). approach this conceptual paper builds on a literature review for which we collected a systematic sample of papers about smart cities and business models with combinations of the keywords “smart city” and “business model”. this review was performed between january and february 2018, and it contains outcomes from articles that were published before then. regional development theories were excluded from this study. smart city bollier (1998) proposed the term “smart growth”, which evoked new political practices for better urban planning. later, a new definition for the smart city was presented by komninos (2006), who argued that smart cities are constructed as multi-dimensional clusters, combining three dimensions: people, collective intelligence, and artificial intelligence. parallel to this, a city’s focus of development has changed from competition to coopetition towards a sharing economy. even though there is no widely accepted definition of a smart city, some key terms and characters pop up in the definitions found in the literature: 1) networked infrastructure is a key factor in the concept. 2) technology is one political and social enabler for a smart city. 3) there is an emphasis on business-led urban development. 4) the aim of a smart city is to change how services are delivered and how residents are included in them. 5) finally, the vision of a better future is embedded within it (albino et al., 2015; pardo et al., 2011). also, one of the denominators of (smart) cities is that they attempt to prioritize their innovation ecosystems aiming at social and environmental sustainability via urban planning (zygiaris, 2012). almost all well-managed smart cities follow a certain architecture regardless of their size or form (anthopolous et al., 2016). in the perspective of the city and urban planning, there are four dimensions to consider: actors, priorities, resources, and policies (schaffers et al., 2011). these factors create the basis of an integrated framework that can be used to research how governments predict initiatives aimed at creating a smart city (afonso et al., 2015). for the purposes of this paper, we address the smart city as a business ecosystem where city governance is the key player because in the city’s strategy they define how cities create value for different stakeholders. business ecosystems in smart cities are constantly changing because different services are changing citizens’ daily life and behaviour, as well as that of businesses in an urban context (díaz-díaz et al., 2017, p. 6). this is why it is necessary to design innovative business models for the city (walravens, 2015). new technologies open up new possibilities for multiple business models applied to public services in smart cities (díaz-díaz et al., 2017). according to lappalainen et al. (2015), cities have now started to see the benefits of ecosystemic thinking. business model the term business model has dominated in the managerial literature since the 90’s, especially when it comes to the emergence of the internet (demil and lecocq, 2010). since the 1960s, the business model and value chain have evolved closely together as a concept (mulligan et al., 2013). teece and pisano (1994) identified a shift from journal of business models (2018), vol. 6, no. 2, pp.65-70 67 technological development that happened inside the firm towards a view of the effects of technology and its development as being one of the interactions between firms. accordingly, the competitive landscape could be seen as changing, and markets as having become complex networks of relationships between different actors. since then, the focus of business modelling has shifted from single-firm, closed business models that make little use of external ideas and technologies, to a mixed, networked model where some services are private and others are public, and again towards an open, ecosystemic business model view that benefits from the large community (casadesus-masanell et al., 2011). thus, the business model has been seen to change over time (worldview change) and due to market pressure (business context change) (iivari, 2016). a business model is a key factor when studying smart city development, as the term is commonly used also in (open) innovation ecosystems (mulligan et al., 2013). open innovation requires that the organization defines the ways to create, deliver and capture value in cooperation with partners that are part of the open innovation economy (saebi and foss, 2015). thus, we rely on the definition where the business model is defined as the content, structure and governance transactions made inside an organization and between it and its external partners who support the organization’s value creation, delivery and capture (e.g. zott and amit, 2010). currently, however, there is no widely accepted definition or conceptualization of the business model for the city context, but we can say that in cities, a particular business model describes the architecture or design of value creation, delivery, and capture mechanisms it employs (teece, 2010). key insights smart city business model approach based on smart city and business model concepts, we can see that both of them have gained a lot of interest since the 1990s, and the view has shifted towards a networked, and later ecoystemic, focus. digitalization and technological developments drive both the evolution of smart cities and business models in regional city contexts. we identify three steps in the understanding development of business context change, based on changes in the competitive landscape and worldview resulting in three different types of business models: closed, mixed and open. closed business models are rooted to value chain thinking, mixed business models to the network approach, and open business models to the sharing economy. parallel to this, it can be said that competition characterizes closed business models, coopetition mixed business models, and the sharing economy open business models. this evolution is depicted in figure 1 above. according to schaffers et al. (2012), for the smart city concept, ecosystemic thinking is particularly relevant because cities themselves can and should act as innovation drivers. the city may strive for new market creation in the ecosystemic business model approach if the city enables evolution of the innovation ecosystem and adopt the rapid shift of organizational and industrial boundaries that can create new kinds of business opportunities (hirvonen-kantola et al., 2016; iivari, 2016). from an innovation perspective, new markets are created because of the co-creation activities of the ecosystem actors, and the context of the business ecosystem is changing (hirvonen-kantola et al., 2016). urban areas are able to build a sustainable competitive advantage through the business model approach (hirvonen-kantola et al., 2016) and a maturity model is a useful tool in the guidance of regional network development (pikka, 2007). when we want to study a city’s business model, the main factor we should focus on is the maturity of the smart city’s ecosystem, which includes e.g. governance, strategy, people, and skills, but also how the different players in the ecosystem see the smart city’s opportunities, values, and advantages. figure 1: business model evaluation in the city context. journal of business models (2018), vol. 6, no. 2, pp.65-70 68 practical implications the practical implications of this paper relate to alternative business models in the context of the smart city. the aim is to develop an approach to understanding smart cities from the point of view of the business model, but also to bring the smart city concept into the business model discussion. discussion and conclusions the worldview change has changed the business context, and thus affected business model evolution. networked and ecosystemic thinking is a way to understand modern business in the smart city context where different types of drivers of globalization, and also digitalization, are changing the boundaries of industries, because a diversity of different players (for example, public organizations, small and large companies, and citizens working together) are characterizing the modern ecosystemic context (iivari, 2016). to work well, the open ecosystemic approach need to develop its capability to manage the knowledge processes, such as the exploitation, exploration and retention processes that take place between businesses and their environment (e.g. saebi and foss, 2015). business opportunities, which are born via a shift of industrial and organizational boundaries, are the core of the business model in an ecosystemic view. smart cities – and also businesses located in the cities – should concentrate on their core competencies and outsource other activities to answer the challenges of the rapidly changing world. the open ecosystemic approach in smart cities creates value for all city entities, including for businesses, when different pieces of knowledge and skills are brought together via lowering the boundaries to different industries working in a city. however, it should be noted that the reality in this research is complex, and it is based on a social network system that is evolving all the time; thus, it is not possible to speak about simple cause–effect relationships. when cities want to use business models, a new way of thinking and approach to city development is needed. this is not just adding a new tool to the repertoire. it is also noticeable that cities’ maturity is an important denominator when it comes to business model, because cities different from each other and they can have rather differing stages of development and roles when researching them in the global scale (iammarino et al., 2018). hence, for future research, it is important to take a closer look at the maturity of a smart city’s ecosystem. in conclusion, both the smart city and business model concepts are multi-faceted, and this causes some limitations to this research. both concepts are descriptive in nature, and thus do not provide empirical validity. one limitation – to which this paper aims to contribute – is that there is no ready-made theory for city business models. thus, several implications for future research are provided. this short paper gives some preliminary thoughts on what a smart city business model could be and what kinds of possibilities there are in the smart city business model approach. journal of business models (2018), vol. 6, no. 2, pp.65-70 69 references afonso, r.a., dos santos brito, k. and alvaro, a. (2015). brazilian smart cities: using a maturity model to measure and compare inequality in cities. proceedings of the 16th annual international conference on digital government research, pp. 230-238. ahokangas, p., ailila, h., hellaakoski, h., kyllönen, v., lehtimäki, t., peltomaa, i., seppänen, v. and tanner, h. (2015). collaborative business networks of the future. vtt value network 2.0. vtt technical research centre of finland. albino, v., berardi, u. and dangelico, m. (2015). smart cities: definitions, dimensions, performance and initiatives, journal of urban technology, vol. 22, no. 1, pp.3-21. anthopolous, l.g.; fitsilis, p. and ziozias, c. (2016). what is the source of smart city value? a business model analysis, international journal of electronic government research (ijegr) vol. 12. no. 2. bollier, d. (1998). how smart growth can stop sprawl, essential books, washington, dc. casadesus-masanell, r. and llanes, g. (2011). mixed source. management science, vol. 57, no. 7, pp. 1212-1230. demil, b. and lecocq, x. (2010). business model evolution: in search of dynamic consistency, long range planning 43, pp. 227-246. díaz-díaz, r., muñoz, l. and pérez-gonzález, d. (2017). the business model evaluation tool for smart cities: application to use cases, energies 2017, vol. 10, no. 3, doi:10.3390/en10030262. hirvonen-kantola, s., iivari, m. and ahokangas, p. (2016). new market creation in urban area development: an ecosystemic business model approach, in saari, a and huovinen p (ed.) wbc proceedings volume iii building up business operations and their logic shaping materials and technologies, construction management and economics report 18, tampere university of technology, pp. 21-31. iammarino, s., mccann, ortega-argiles, r. (2018). international business, cities and competitiveness: recent trends and future challenges. competitiveness review: an international business journal, vol. 28, no. 3, pp. 263-251. iivari, m. (2016). exploring business models in ecosystemic contexts. doctoral dissertation, acta universitatis ouluensis. komninos, n. (2006) the architecture of intelligent cities, conference proceedings intelligent environments 06, institution of engineering and technology, pp. 53-61. lappalainen, p., markkula, m. and kune, h. (ed.) (2015). orchestrating regional innovation ecosystems: espoo innovation garden, aalto university, laurea university of applied sciences and built environment innovations ryj ltd. moore, j. (1996) the death of competition. fortune, vol. 133, no. 7, pp. 142-144. mulligan, c.e.a.; and olsson, m. (2013). architectural implications of smart city business models: an evolutionary perspective. ieee commun. mag. vol. 51, pp. 80–85. nooteboom, b. (1999). innovation and inter-firm linkages: new implications for policy. research policy 28, pp. 793–805. journal of business models (2018), vol. 6, no. 2, pp.65-70 70 pardo, t. and taewoo, n. (2011). conceptualizing smart city with dimensions of technology, people, and institutions. proceedings of the 12th annual international conference on digital government research conference: digital government innovation in challenging times, pp. 282-291. 18. pikka, v. (2007). a business enabling network: a case study of high-tech network; its concepts, elements and actors. doctoral dissertation, acta universitatis ouluensis. saebi, t. and foss, n.j. (2015). business models for open innovation: matching heterogeneous open innovation strategies with business model dimensions, european management journal 33, pp. 201-213. schaffers, h., komninos, n., pallot, m., trousse, b., nilsson, m. and oliveira, a. (2011). smart cities and the future internet: towards cooperation frameworks for open innovation. j. domingue et al. (ed.): future internet assembly, lncs 6656, pp. 431–446, 2011. teece, d. and pisano, g. (1994). the dynamic capabilities of firms: an introduction. industrial and corporate change, vol. 3, no. 3, pp. 537–556. teece, d. (2010). business models, business strategy and innovation, long range planning vol. 43, no. 2-3, pp. 172-194. walravens, n. (2015). qualitative indicators for smart city business models: the case of mobile services and applications, telecommunications policy 39, pp. 218–240. zott, c. and amit, r. (2010). business model design: an activity system perspective. long range planning, vol. 43, no. 2–3, pp. 216–226. zygiaris, s. (2012). smart city reference model: assisting planners to conceptualize the building smart city innovation ecosystems, journal of knowledge economy, vol. 4, no 2, pp. 217-231. journal of business models (2018), vol. 6, no. 2, pp. 71-77 71 building business models around sustainable development goals matthias g. raith nicole siebold department of economics and management, otto-von-guericke university, magdeburg, germany, raith@ovgu.de, nicole.siebold@ovgu.de abstract by specifying the un’s sustainable development goals as quantifiable target groups, one can address these targets directly. we develop four generic business model designs based on two fundamental decisions: should value be created for or with the target group, and should income be generated through market revenues or positive externalities? please cite this paper as: raith m.g., siebold n. (2018), building business models around sustainable development goals, journal of business models, vol. 6, no. 2, pp. 71-77 keywords: sustainable development goals, business model design, generic strategies introduction the increasing proliferation and, consequently, societal awareness of global environmental, social, and economic problems has led the united nations (un) to officially enact as of january 1, 2016 a collection of 17 sustainable development goals (sdgs) as a common global agenda until the year 2030 (a/res/ 70/1, 2015). although not legally binding, the sdgs, agreed upon by 193 un members, mark a milestone in international policy coordination. the common objectives comprising the biosphere, society, and the economy are fundamental enough to be acceptable by all nations involved, and, with 169 specific targets (a/res/71/313, 2017), they are instrumental enough to take action. moreover, with 232 indicators, fulfillment of individual goals can be measured and compared, thus providing an orientation for dealing with multiple and possibly conflicting objectives in the decisions made by stakeholders, e.g., policy makers, public organizations, firms, and investors. yet, in order to avoid paying merely lip service to sustainability, the 17 sdgs have to be operational in order to be approachable by organizations and firms. this raises the question of implementation, which requires new forms of social interaction, economic journal of business models (2018), vol. 6, no. 2, pp. 71-77 72 development, and, specifically for firms, business models. with regard to the latter, the traditional approach has been to innovate existing, operating business models by including objectives of social support and environmental protection, thus creating the benchmark of a triple bottom line that firms must exceed to ensure sustainability (bocken, short, rana, and evans, 2014). while the economic bottom line is intuitively given by the generated income required to maintain the operative business, social and environmental bottom lines are more difficult to conceive. instead of quantifying specific thresholds, the approach calls for a balance of objectives (boons and lüdecke-freund, 2013). however, if objectives cannot be specified, sustainability efforts threaten to become “business-as-usual augmented by incremental environmental or social initiatives” (schaefer, corner, kearins, 2015: 395), where the focus is mostly on reducing unsustainability (cohen and winn, 2007; dean and mcmullen, 2007) rather than creating sustainability (ehrenfeld, 2012). in this paper, instead of integrating sdgs into the business model, we proceed in the opposite direction. we take the perspective of a “conscious entrepreneur” (pavlovich and corner, 2014), who is committed to sustainability by pursuing a specific environmental or social mission and then strategically formulating an economically sustainable business model around this mission, thereby creating shared value (porter and kramer, 2011). as a consequence, only economic sustainability becomes the bottom line to exceed, but corresponding to articulated social or environmental objectives. by specifying sustainability targets upfront in the value proposition, the entrepreneur can also identify the indicators to measure their fulfillment. as we show, the un’s collection of sdgs as a system of globally shared beliefs and values (schaefer et al., 2015) together with their specific targets and associated indicators hereby provide an orientation for the organizational implementation of sustainability through the business model (santos, pache, and birkholz, 2015). an economically sustainable business model built around a mission centered on sdgs can then be defined in the traditional sense as a logical process of value creation, value delivery, and value capture that can be maintained in the long run (osterwalder and pigneur, 2010; zott and amit, 2010; arend, 2013; dohrmann, raith, and siebold, 2015; massa, tucci, and afuah, 2016). approach in a first step, we need to conceive the sustainability targets in a way that they can be explicitly addressed by a social or environmental mission (martin and osberg, 2015). for the purpose of this study on business models, we concentrate on those sdgs that can be addressed directly at the firm level. for the sdgs related to social targets, e.g., no poverty (sdg 1), zero hunger (sdg 2), good health and well-being (sdg 3), quality education (sdg 4), gender equality (sdg 5), or reduced inequalities (sdg 10), the social mission of a venture will typically specify a social target group to which created value is delivered (santos, 2012; dees, 2012). a well-identified target group supports value delivery, because one can measure the size of the target group, the number of affected individuals, and the status change of each or the average affected individual accomplished through the mission. the same reasoning can be applied to fauna related environmental targets, e.g., life on land (sdg 15) or life below water (sdg 14). for example, organizations such as the “world wildlife fund” or “greenpeace” focus on specific endangered target groups of animals. a crucial difference between animal and human target groups is that in a non-vegan sustainable society numerous species of animals are used as resources, against their free will and often at the cost of their life to produce consumption goods such as food, clothing, and furniture, or to develop goods such as cosmetics and pharmaceuticals. other species are held in captivity, e.g., as pets, as resources for services of human pleasure. however, as long as the treatment of these animals is still a matter of social concern, they can be regarded as target groups as well, for which objectives, targets, and indicators can be specified for responsible consumption and production (sdg 12). in terms of formulating sustainability targets, the differences between flora and fauna are not fundamental. plants are also living entities that can be granted the right simply to exist (sdg 14, 15) and can therefore be focused as target groups. and plants are also regarded as resources for production and consumption (sdg 12). a technical difference between fauna and flora is the method of measurement, where indicators of flora related targets are typically quantified by areas, weights, or other aggregate measures. the final category of sustainability targets that we consider for business model design relates to abiotic targets, e.g., air, water, minerals. journal of business models (2018), vol. 6, no. 2, pp. 71-77 73 as many important natural resources are distributed throughout the world, their measurement seems most appropriate in geographical categories, such as the air in cities, the water in oceans or lakes (sdg 6, 14), or rare earths, which thereby become specific targets that can be addressed through a mission. in order to address the sustainability targets at the firm level, we focus explicitly on value delivery to one or more quantifiable target groups. we then consider two fundamental strategic decisions to be made by entrepreneurs in designing their business models around this mission. the first decision relates to the way in which the sustainability target is addressed in the process of value creation. here we distinguish between a supportive mode of value creation for a target and an integrative mode of value creation with a target (dohrmann et al., 2015). the second decision relates to the way in which value is to be captured, i.e., the form of generated income. we distinguish between the commercial mode of value capture through the market, i.e., with market revenues, and the social mode of value capture through the mission, e.g., with monetary or in-kind donations, where both modes of generated income are means to an end (porter and kramer, 2011; schaefer et al., 2015). with these two strategic decisions, we obtain a typology of four generic business model strategies for addressing sustainability targets, which are determined by the combinations of value creation and value capture, as is shown in fig. 1. in the following, we characterize each business model strategy and discuss how it addresses the broad variety of sdgs. 1. provision: the mission of a venture in this category is to create social value by directly supporting the fulfillment of a specific sustainability target through the free provision of goods and services. if the target (group) is of sufficient social concern, then its support will create positive externalities that the entrepreneur can try to capture in the form of monetary or in-kind donations, depending on the nature of the target. the firm’s revenues are therefore not obtained from but generated through the target (dohrmann et al., 2015). for social missions, this is the business model strategy adopted by charities, soup kitchens, or homeless shelters. the same design is employed by the “world wildlife fund” to prevent the extinction of endangered animal species or by “greenpeace” with an even broader scope of environmental targets. the value capture of these organizations is characterized by the monetization of positive externalities (santos, 2012; dees, 2012). 2. self-help: this strategy focuses on the productive integration of a target (group) into the process of value creation. economic sustainability is supported by capturing resources as productive input from the target for which value is created. the selfhelp strategy thus substitutes a (missing) market for resources that the target can provide (donate) itself. in societal contexts, self-help value-creation processes help to empower social or physically disadvantaged target groups. in environmental contexts, self-help is typically achieved through natural regeneration processes, which, however, are often endangered by society and therefore need to be supported to succeed, e.g., through the establishment of wild-life reserves. as the “ocean clean-up” project demonstrates, even oceans can be “empowered” to clean themselves by using their natural currents to collect the accumulated garbage at focal geographical locations. in many cases, economic sustainability cannot be achieved by self-help alone, in particular when the self-help process requires additional support or a technological infrastructure. however, if the implementation of self-help is appreciated enough to create positive externalities, these can be additionally monetized by the venture through donations (i.e., with the provision model) to ensure economic sustainability (dohrmann et al., 2015). figure 1: generic business model strategies for sustainability targets journal of business models (2018), vol. 6, no. 2, pp. 71-77 74 3. deployment: sustainability targets may also be productively integrated (deployed) by the venture to create marketable goods or services for commercial target groups. by combining social with commercial value in a hybrid business model, economic sustainability is achieved through market revenues (haigh, kennedy, and walker, 2015; hockerts, 2015). for example, the social mission of “work integration social enterprises” (wise) is to employ disadvantaged target groups, in order to integrate them into the work force. conceptually, the same design is used by the “kruger national park” in africa, where endangered species of wildlife are protected within their natural environment, thereby generating market venues from wealthy tourists on photo safaris. again, even the “ocean clean-up” project could fall into this business-model category, if the plastic that is gathered by the oceans is sold on the recycling market. in all of these examples, a target (group) benefits by being deployed as a resource for commercial value creation. 4. promotion: the final business model strategy, similar to the provision strategy, pursues a supportive mission, but which the venture now uses to promote the sale of a commercial product or service to a customer group from which it can obtain market revenues. this capture of market value is used as a means to finance the social value creation alongside the commercial value creation (porter and kramer, 2011). this business model characterizes, for example, “buy-1-give-1” or “buy-1-donate-1” policies, where for every commercial sale of a product a similar product is given to a person in need, or, more generally, a sum of money is given to support a sustainability target in a social or environmental context (marquis and park, 2014). key insights as our discussion of heterogeneous social and environmental goals revealed, by addressing sdgs through their identified targets, the latter can be specified and addressed as target groups, to which value is delivered. the design of a business model around this social mission to create what pavlovich and corner (2014) refer to as a “conscious enterprise” involves two fundamental strategic decisions. the first is related to value creation and whether it is to occur for or with the target (group); the second focuses on value capture through the market or through the mission. as we showed, these two decisions determine the business model strategy for the entrepreneur’s mission. the strategic task for the entrepreneur is thus to proactively select the appropriate business model for creating shared value and transformational change, rather than integrating the mission into an existing business model for mainly incremental change (schaefer et al., 2015). interestingly, this may be easier for startups in search of a new business model than for established firms with an existing one. discussion and conclusions the four generic strategies outlined above cover a broad conceptual variety of business models that can be built around sustainability targets, thus creating new opportunities for business model research (arend, 2013; eckhardt, 2013). as we have shown, each chosen strategy combination characterizes one of four distinct business model designs that can be utilized individually or in combination for targets of qualitatively different sustainability development goals. indeed, the same business model design can be applied to targets of different nature, implying that the implementation of sustainability development goals at the firm level can be strongly supported by the use of analogies from completely different contexts (martins, rindova, and greenbaum, 2015). the four generic strategies also provide a strategic orientation for non-sustainable firms in the process of sustainable business model innovation. the realization of the un’s global agenda 2030 requires not only the commitment of policy makers, the implementation of the sdgs requires action being taken at the firm level. rather than enhancing an economically successful business by additional social and environmental objectives as a form of responsive corporate social responsibility, we propose instead to configure economically sustainable business models around the sdgs for shared value (porter and kramer, 2006). with the central focus on quantifiable target groups, our business model approach may also facilitate impact measurement and, with our typology of generic strategies, provide a structured foundation for impact comparison between organizations that create shared value. journal of business models (2018), vol. 6, no. 2, pp. 71-77 75 in providing a general framework that is suitable for a broad range of sdgs covering social and environment goals, our strategic approach to business model design around sustainability targets unites the two traditionally distinct research fields of sustainability entrepreneurship and social entrepreneurship. we believe that only a unified view will enable us to consider and measure the impact of private or public initiatives that address several sdg’s in combination. we hope that our approach contributes to future research along this path. journal of business models (2018), vol. 6, no. 2, pp. 71-77 76 references a/res/70/1. 2015. transforming our world: the 2030 agenda for sustainable development. resolution adopted by the general assembly on 25 september 2015. a/res/71/313. 2017. work of the statistical commission pertaining to the 2030 agenda for sustainable development. resolution adopted by the general assembly on 6 july 2017. arend rj. 2013. the business model: present and future—beyond a skeumorph.  strategic organization,  11(4): 390-402. bocken nmp, short sw, rana p, evans s. 2014. a literature review to develop sustainable business model archetypes. journal of cleaner production, 65: 42-56. boons f, lüdeke-freund f. 2013. business models for sustainable innovation: state of the art and steps towards a research agenda. journal of cleaner production, 45: 9-19. cohen b, winn mi. 2007. market imperfections, opportunity and sustainable entrepreneurship. journal of business venturing, 22(1): 29-49. dean tj, mcmullen js. 2007. toward a theory of sustainable entrepreneurship: reducing environmental degradation through entrepreneurial action. journal of business venturing, 22(1): 50-76. dees jg. 2012. a tale of two cultures: charity, problem solving, and the future of social entrepreneurship. journal of business ethics, 111(3): 321-334. dohrmann s, raith mg, siebold n. 2015. monetizing social value creation – a business model approach. entrepreneurship research journal, 5(2): 127-154. eckhardt jt. 2013. opportunities in business model research. strategic organization, 11(4): 412-417. ehrenfeld, jr. 2012. beyond the brave new world: business for sustainability. in p bansal and aj hoffman (eds.): the oxford handbook of business and the natural environment, oxford university press, 611-619. haigh n, kennedy ed, walker j. 2015. hybrid organizations as shape-shifters. california management review, 57(3): 59-82. hockerts k. 2015. how hybrid organizations turn antagonistic assets into complementarities. california management review, 57(3): 83-106. marquis c, park a. 2014. inside the buy-one give-one model. stanford social innovation review, winter: 28-33. martin rl, osberg sr. 2015. two keys to sustainable social enterprise. harvard business review, may: 86-94. martins ll, rindova vp, greenbaum be. 2015. unlocking the hidden value of concepts: a cognitive approach to business model innovation. strategic entrepreneurship journal, 9(1): 99-117. massa l, tucci c, afuah a. 2016. a critical assessment of business model research. academy of management annals, annals-2014. journal of business models (2018), vol. 6, no. 2, pp. 71-77 77 osterwalder a, pigneur y. 2010. business model generation. a handbook for visionaries, game changers and challengers. new jersey: john wiley & sons, inc. pavlovich k, corner pd. 2014. conscious enterprise emergence: shared value creation through expanded conscious awareness. journal of business ethics, 121(3): 341-251. porter me, kramer mr. 2006. strategy and societa: the link between competitive advantage and corporate social responsibility. harvard business review, 84(12): 78-92. porter me, kramer mr. 2011. the big idea: creating shared value. harvard business review, 89: 62-77. santos fm. 2012. a positive theory of social entrepreneurship. journal of business ethics, 111(3): 335-351. santos f, pache ac, birkholz c. 2015. making hybrids work: aligning business models and organizational design for social enterprises. california management review, 57(3): 36-58. schaefer k, corner pd, kearins k. 2015. social, environmental and sustainable entrepreneurship research: what is needed for sustainability-as-flourishing? organization & environment, 28(4): 394-413. zott c, amit r. 2010. business model design: an activity system perspective. long range planning, 43(2): 216-226. journal of business models (2016), vol. 4, no. 3, pp. 37-47 37 purpose: the paper develops a systematic overview of business model portfolios and links it to the diversification literature. it conceptualizes the firm as consisting of multiple, different business models, with the purpose of advancing the structural, organizational and strategic understanding of business models and corporations. design: the research design is an in-depth case study focusing on a large european incumbent firm in the automotive industry, secondary data is supported with primary sources. findings: despite its inherently limited nature as single case study, the paper shows important findings in the study of corporations: a new way thinking of the business model architecture within the firm. practical implications: for practitioners, the paper offers a new toolkit in conceptualizing their firm and shows strategic options in creating, managing and discarding different business models. originality / value: the concept of interlocked business model components as drivers of value creation within business model portfolios offers a new explanation for strategic portfolio creation. leveraging business model components as drivers of business model portfolios abstract please cite this paper as: sachsenhofer (2016), leveraging business model components as drivers of business model portfolios , journal of business models, vol. 4, no. 3, pp. 37-47 keywords: business model innovation; portfolio strategy; business model management; diversification; disruptive technology 1 institute of strategic management, vienna university of economics & business, austria, wolfgang.sachsenhofer@wu.ac.at wolfgang sachsenhofer 1 journal of business models (2016), vol. 4, no. 3, pp. 37-47 38 introduction so far, no generally accepted definition of the term business model (bm) has emerged, a notion that is shared by a majority of researchers within the academic field studying business models (e.g. chesbrough, 2010; zott, amit & massa ,2011). consent though exists in the description of a bm; that it is a cognitive device that creates value and allows the capturing of the created value. the concept of a business model outlines (1) how to create sustainable value in an increasingly interconnected and fast moving world and (2) how to protect this value from being captured by competition (chesbrough, 2010; teece, 2010). this paper understands the business model as consisting of discreet components (activities & resources) connected by profit formula creating customer value (johnson et al., 2008). this component view (discreet and systemic) can be observed in many other theoretical musings about the business model (sabatier, 2010; zott, amit & massa, 2011). the firm today is a collection of different business models interrelated and interacting with each other (sabatier, 2010; casadesus-masanell & ricart, 2010; kim & min, 2015; sohl & vroom, 2016). this conceptualization of business models opens a wide range of managerial possibilities. managers of corporate business models are not limited any longer by an option space that comprises only restraint, incremental improvement or abandonment of the existing business model. in fact, business model management becomes a critical strategic task – to be carefully managed. sohl & vroom (2014) show that relatedness of business models is a greater determinant of performance than industry relatedness when expanding. furthermore, casadesus-masanell and ricart (2010, 2011) studied interrelations between several business models within one firm. in observing the airline industry, they show the example of a chilean airline which incorporates two business models at the same time: one carrying passengers and another one carrying freight. similarly, kim and min (2015) observe the retail industry and the propensity of incumbent retailers in adding new online business models. both works argue that firms add new business models when they see it fit to do so as potent strategic move. previous work on business model portfolios, for example by sabatier et al. (2010), introduced this portfolio thinking into the business model community. however, existing scholarly work does not provide a proper and satisfactory definition of a bmp and does not differentiate between simply operating multiple business models within and across the boundaries of a firm and the intended management of a bundle of business models. further, existing literature is silent when it comes to the elements and dimensions of bmps and bmp management. though, whereas casadesus-masanell and ricart (2011) view mostly efficiency gains as impetus for the operation of two business models, kim and min (2015) investigate the antecedents of business model portfolios. they view the incumbent asset basis as an independent variable in their research by distinguishing between complementary assets (teece, 1986) and conflicting assets, what they define as the opposite of complementary. these papers constitute important additions to business model innovation research: innovating business models not by changing the internal dynamics of the existing business model, but by adding a new one. at the same time, there is a noted absence of a systematic overview of this new field. attempting to understand the new research (sub-)field in the business model innovation stream contributes in answering fundamental questions of business strategy and business model research: kim and min (2015) have identified corporations that add new business models to their old one(s). whereas casadesus-masanell and ricart (2010) describe existing firms operating at least two business models at the same time. therefore, implicitly there are different options as to how several business models are operated in the same firm. for instance, potentially a new business model might just be added to the existing portfolio of bms in the firm, or it might be swallowed by one of the existing models. meaning, we ask the questions of: how can business model portfolios be managed in fundamentally disruptive environments? to answer these questions, this paper attempts a two-folded approach. the paper reviews the existing literature on multiple business models as well as the literature on corporate diversification as a basis to find theoretical constructs aiding in understanding the phenomenon of multiple business models within one firm. then, exemplarily, this paper conducts a case study of journal of business models (2016), vol. 4, no. 3, pp. 37-47 39 bmw ag, a german original equipment manufacturer (oem) to highlight the different business model interactions of a business model portfolio within a single firm. also, the different origins of multiple business models and the challenges of multiple business model management are discussed. the data collected in the case study is the result of several in-depth interview conducted with employees of different bmw business models, as well as data obtained from desk research. bmw as a whole corporation is divided into different business models, following the logic of johnson et al. (2008), who identify a business model as possessing a distinct customer value proposition, a profit formula and operating resources and activities. the resulting business models and components are then analysed for their interaction. this paper explains the logic of business model portfolio architectures as a static concept, then uses four identified disruptive trends to illustrate the dynamics of managing a business model portfolio in the face of fundamental change within different business models using the aforementioned case of bmw. the case and literature overview serve as the basis for theory on the use of business model portfolios; how both practitioners and academics can perceive the business model as a construct of components that interact with each other. it also shows that four different options exist for managing business model portfolios; business model reconfiguration, business model innovation, business model elimination and business model coordination for successfully operating a business models portfolio depending on internal and the wider strategic environment. theory: diversification of business models fundamentally, diversification presents itself as a rational move, when corporations possess specialized knowledge or strategic assets, as is argued by markides (1996). teece observes that managers naturally possess systematic knowledge advantages over investors and therefore should be better at diversifying into new product lines than investors (teece, 2010). the initial impetus for diversification stems from economics – creating economies of scope and reducing fixed costs. markides and williamson (1996) argue that a more important factor is to derive long-term benefits by looking for types of “dynamic relatedness” to pursue asset sharing (markides & williamson, 1996). tanriverdi and venkatraman (2005) show, that the concept of relatedness does not only matter when discussing resources or assets just as well with different knowledge dimensions. r&d relatedness, customer relatedness even managerial processes show relatedness that when combined yield positive results (tanriverdi & venkatraman, 2010). what follows is that synergies from diversification exist in several different dimensions within a business. when combining the positive effects (synergies or economies of scope), on the component level the entire corporation profits. this logic works just as well for business models. considering the often more complex nature of business models vs. products – this component view ought to be true for firms diversifying their business models as well. diversification in the context of bmi means, that a corporation is able to leverage its components strategic or otherwise1 of one business model and combine it with the component(s) of another business model. thereby the new business model not only profits from the same specific advantages inherent in the component(s), the sometimes considerable portion of fixed costs that a standalone business model would have to operate under, is reduced as well. depending on the depth of leverage, the fixed costs portion and the general competitive environment, this sometimes results in a significant inherent advantage. the cost advantage and the advantage of possessing a potential bottleneck result in the accrual of a greater share of profit over the standalone corporation b (without possession of these strategic assets). markides and williamson (1994) also show, it is not the product or service as outcome of a set of assets or capabilities, but the inner workings of the process of how these are created that are the source of at least temporary competitive advantage2. 1 strategic assets (markides & williamson, 1994): a firm’s asset under control that cannot be accessed / replicated / substituted quickly and cheaply by other competitors. strategic assets form the basis of the profit formula as they are the driving force behind differentiation and quasi-monopoly rents 2 assuming that in a market economy no asset offers permanent / sustainable competitive advantage journal of business models (2016), vol. 4, no. 3, pp. 37-47 40 this translates into the business model logic as following: it is neither a single business model component that leads to temporary competitive advantage. instead it is the system that is behind creating a strong customer value proposition (being a product or service), the profit formula of a business model and of course the resources (asset based) and activities (knowledge based) that drive value capture through diversification of business models. ecosystems and platforms as foundation for business model portfolios today’s developments in the individual mobility space are – from a strategic and competitive point of view – fundamentally different from traditional notions of competition and strategy. over the past 50 years oems derived their profits from either being technology or cost leaders. differentiation happened within the industry through product innovation (e.g. automatic steering, engine efficiency) (bakker, van lente & meeus, 2011); tillemann, 2014) and process innovation (e.g. ford’s conveyor belt) (tillemann, 2014). the car as such did not undergo major breakthrough developments – with the described technology disruptions, this is likely going to change. besides technology and business model innovation within the traditional automotive industry, similar developments appear outside the automotive industry. major technology corporations that have previously only stayed at the margins of the automotive industry are entering. these developments are the more relevant as adner and kapoor (2010) point out – they therefore argue that the concept “ecosystem”, ought to take the place that was previously reserved for the industry concept to take account of these developments. value creation and delivery in most industries is critically dependent on a network of corporations in the ecosystem. an ecosystem today is a complex web of interdependent layers of corporations that contribute towards a solution solving a customer need. in more and more differentiated economies3 these allow greater specialization between firms. value generation and capture mechanisms therefore occur within that space. all the same, this leads to greater interdependencies between firms. these interdependencies are made apparent when using the business model lens: shared business model components within firms and beyond act as glue in the creation of related business models that ultimately make up entire ecosystems. exemplary for such a complex web of interdependencies is the ecosystem that is forming around the individual mobility services and beyond. there, these effects are visible in the value chain and solution differentiation. the ecosystem consists of a complex web of secondary and tertiary suppliers, who themselves often possess supplier subsystems. large cooperation networks enable firms to further reduce costs and participate in r&d that would on standalone basis to costly and / or risky. furthermore, networks organizing after sales service, repair, maintenance and upkeep (fuel industries) are following after the oem’s value add. in addition to the core system, the automotive industry is part of a wider ecosystem, consisting of for example in-drive information provision, entertainment, mapping and parking services, but also the railways, rental car firms or city authorities planning to reduce traffic in inner cities. this is has important implications for corporations and their perspective on the business model as a concept as well as a strategic tool. choosing to focus on the ecosystem, rather than purely on the immediate environment of innovation, changes the prioritization of opportunities and threats, thinking about market timing and positioning, defining and measuring success (iansiti & levien, 2004) and strategic decision making. disruptive technologies as drivers of business model dynamics potentially, traditional oems face four distinct exogenous drivers of change, each with the possibility of disrupting the current business model: • autonomous driving (the economist, 2012) – the developments have been noted remaking the use of the car – instead of being one an objectified symbol of freedom, it might lose its branding edge. technical features of the car might become less important, instead of the possibilities associated with having from individual time and a second living / working space outside the house. 3 coase’s (1937) theory of falling transaction costs powerfully explains value chain differentiation journal of business models (2016), vol. 4, no. 3, pp. 37-47 41 • digitalization of the car – data in the car poses great opportunities for data management firms such as amazon, google and facebook to tailor the driving experience and capture great parts of the value associated with mobility spent. conversely this poses a threat for traditional automotive firms, as differentiation potential diminishes. • ownership of the car – owning a car is becoming much less attractive with the increasing diversity of different car sharing options as well as increasing national regulation by cities around the globe (most prominent example is london, the economist, 2002). business models like the ones from car2go or uber offer constant availability of cars to urbanites – making individual ownership of cars less attractive. oems business models might come under threat through stagnant revenue and lower profits. • power train (bakker, van lente & meeus, 2011) – the modern car is a technology system centred around the internal combustion engine that established itself as dominant design. with both electric vehicles (ev) and fuel cell vehicle (fcv) technologies on the rise, this hegemony is threatened; with possibly grave effects on business models in the individual mobility ecosystems. the fourth described disruptions (fcv and ev power train systems) are most likely the most fundamental challenge for several of the current business models of traditional oems. the entire mobility ecosystems might change from being based on hydro-carbonates to a more diverse and potentially exclusively electric power-based source. fundamental technology transitions such as these usually impact much wider fields than just the immediate competing technology, such as the transition from horse-drawn carriage to the internal combustion engine driven vehicle at beginning of the 20th century (tillemann, 2014). management of business models portfolios to be able understand business model additions, this paper looks at several automotive corporations and their operations. we evaluated the scope of their production – effectively what parts and which operations in the wider ecosystem around the car are done within the firm and which operations are usually done outside it. in the end, for practical purposes and to best demonstrate the different types of business model portfolio logics, the bmw ag case offers both a widened scope of interrelation types as well as a concise logic in how they interact. bmw group case bmw group comprises bmw ag and all subsidiaries controlled directly or indirectly by bmw ag. bmw was founded in 1916 as a manufacturer for airplane engines. 1923 the first motorbike was built by bmw and in 1928 the production of cars started. today bmw group is a manufacturer of cars and motorbikes and provider of related services. bmw group is represented in more than 140 countries, employs more than 116.000 people, and has an annual revenue of 80.401 €million in 2014. the company is among the largest industrial companies in germany. following the argument that the value proposition is the unit of analysis to identify a bm, four bms of the bmw group were selected for further investigation: bmw (cars), bmw group financial services, bmw i and drivenow. a corporation such as bmw ag might colloquially be termed as a “car company” operating a “premium car business model” (a comparison would be ryanair in the airline industry “low cost carrier business model”). despite its general truth, this paper argues it to be an oversimplification of what the business model concept both in terms of its descriptive power of the firm in its entirety and beyond as well as a tool to contribute to increased performance. the business model as an expression of a corporation’s architecture the exemplary statement above equates the concept of the business model with the initial definition of the concept by margretta (2002); being a narrative or story. with that perspective, business models of incumbent automotive firms are much less clear cut as will be demonstrated using the case of bmw ag: (a) bmw ag’s electric vehicle operation “bmwi” (b) bmw ag’s financial services operation journal of business models (2016), vol. 4, no. 3, pp. 37-47 42 as a result of technology developments coming from the wider ecosystem (power train: in particular the standard lithium-ion battery enhanced through the development of the cobalt-cathode), bmw ag has created a new initiative, bmwi. this initiative has grown to satisfy customers’ needs for individual mobility by harnessing the new technology of electric mobility. this, by opening a joint-venture based battery production facility, by establishing an entirely new sub-brand; by planning, developing and producing a carbon-based chassis (lower weight). furthermore, bmw ag develops partnerships with other firms to source new transmission technologies, in-car electronics, and using utilities’ grids to supply electricity and building electric refueling stations. bmw ag does not just diversify its portfolio of automobiles, but creates a new business model besides the old, incumbent business model, effectively operating two bms. although bmw ag serves a different customer group in general, it sometimes consciously cannibalizes (at least some of) its existing revenues. more fundamentally, for that move to happen successfully, it established entirely new factories, hired new staff and adapted its corporate culture. in fact, bmw ag operates a different business model beside the traditional one, building and selling premium cars. the rationale behind the business model portfolio is fundamentally linked to the principles of related diversification (markides & williamson, 1994; tanriverdi & venkatraman, 2005). bmw ag’s existing – in fact all firms’ business model are composed of components, namely resources (e.g. factories); activities (lean management); a customer value proposition (exciting, unlimited driving in a branded german automobile) and a profit formula describing the overall costs and benefits for the firm (johnson et al., 2008). the new business model is critically linked through one or more components to the existing model(s), leveraging economies of scale and scope. the move of establishing a new business model by serving different customers / markets in this paper is classified as vertical business model link bmw ag’s customers rarely pay cash when acquiring a new car, but usually finance it using a financing solution. that solution requires a financial institution as backing (in many cases a bank license) and has traditionally been performed by banks or other asset managing firms (and still is to some degree). bmw ag though has moved into that space as well, now providing several leasing and credit solutions for which it needs specialized financial services personnel; furthermore it has established relations to the financial services community to partner with a reinsurance firm insure credit risk, also it instructs its dealers how to sell the developed financing solutions directly (besides offering them online as well); and they brand it under their bmw brand. in the existing literature on firm boundaries (e.g. lafontaine & slade, 2007), bmw ag would be seen as integrating downwards along the value chain. this, without differentiating between fairly simple integrations: e.g. instead of exclusive partnerships with car dealers. in this case though, bmw ag operates a different system of activities downstream. it has to acquire a banking license, needs financial services specialists, create and manage relationships with car dealerships to sell its financial products. at the same time, it ensures financing by capital markets and re-insurance of its portfolio risks. the different business models are – just as in the case of the vertical business model link, linked by its components. bmw ag manages to use its brand and its dealerships as a platform to establish different business models at the same time. bmw financial services profits from the critical resources of the existing business model: the brand and the access to potential customers through dealerships as fundamental components of the financial services business model. the paper understands this therefore to be a different business model developed on the value chain, naming it horizontal business model link. this would apply in the same way to upstream integration; if bmw ag were to start operating an aluminum smelter it would constitute a new and different horizontal business model link. the business model as a tool this paper defines four different types of managerial actions to manage business model portfolios. these actions have already been discussed in literature related to the management of single business models (e.g. massa & tucci, 2013) and adapted to the arena of multiple business models: (1) business model reconfiguration (2) business model innovation journal of business models (2016), vol. 4, no. 3, pp. 37-47 43 (3) business model elimination (4) business model coordination (1) business model reconfiguration is an action for managers to increase the overall value in bmps. it means to reconfigure existing business models, i.e. to adapt one or more components of a business model. adaptation might be necessary due to evolution of the components and / or the ecosystem of a certain business model. assets of a portfolio can decrease in value and thus need to be substituted. the environment might change, e.g. related to technology or consumer preferences, so that a reconfiguration of the profit formula is necessary. resources, such as financial resources, might also be redistributed from less value generating to higher value generating business models e.g. in order to expand the business model by adding new assets. for bmw ag, for instance, business models are under constant scrutiny due to the increased competitive pressure due to digitalization, power train re-design (battery / fuel cell), and automation. from a portfolio perspective this implies that the overall number of business models in the portfolio stays the same. if business models in a portfolio are highly interrelated, however, the reconfiguration of selected business models might create positive or negative repercussions for related business models. the determining factor for a reconfiguration decision is the net increase in the overall portfolio value, meaning, by how much does the potential value created, outperform the potential costs in related business models. (2) business model innovation means the reconfiguration of business models within a portfolio, depending on the radicalness of reconfiguration and the level of novelty of the existing business model after reconfiguration (massa & tucci, 2013). however, business model innovation might also occur when a new business model is added (for example through m&a) or created from scratch. the differentiating element to business model innovation from business model reconfiguration from a portfolio perspective is that the number of business models in the portfolio increases. triggers for business model innovation are the same as for business model configuration, however, with the difference that the environmental changes cannot be fully absorbed by a simple reconfiguration of existing business models. for example, bmw ag is faced with a phase of dynamism mainly through the efforts related to mitigate climate change. exemplary is the increasing popularity of electric and hybrid vehicles, which will decrease the demand for standard combustion engine powered vehicles, eventually rendering this business model obsolete. for adequate adoption of alterative products (i.e. evs) new business models need to be created. business model innovation might create additional super-additive effects e.g. through new complementary business models or sub-additive effects through decreasing costs due to scale effects across business models. (3) business model elimination is the task of terminating a business model within a portfolio that generates value below the performance threshold of the firm. in order to compensate for eliminated business models, new business models might be created or acquired. business models also follow life cycles similar to products, technologies or industries (abernathy & utterback, 1978; klepper, 1997). during the life cycle of the business models, business model reconfiguration is more appropriate in order to revive it and to increase an existing business model’s value. however, if one of bmw ag’s business models reaches the end of its life cycle, it is likely to be terminated due to profitability loss and falling below the threshold of their expected value contribution set by management. business model elimination leads to a decrease in the number of portfolio elements in the business model portfolio. (4) business model coordination relates to the day-today coordination and optimization activities of bmp managers to increase the overall bmp value without changing the overall number of business models in the portfolio and without changing components of the standalone business models in the portfolio. business model coordination activities are for instance the optimization of business processes, the transfer to managerial best practices, cross fertilization of ideas. implications to acknowledging that most oems operate several business models also means to acknowledge its implications: business models of an oem are depending on managerial choice and therefore are able to be managed and strategically deployed. in particular, this becomes relevant in rapidly changing business environjournal of business models (2016), vol. 4, no. 3, pp. 37-47 44 ments – for example triggered by technology changes. managers can, by applying the described business model logic to their corporation and by developing an understanding of its critical components, steer the corporate business model portfolio. this, in combination with a well-thought out strategy, can indeed lead to superior performance and strategic competitive advantage, in particular in turbulent business environments. besides professionals, this paper also clarifies and develops a distinct question within the community of business model researchers. corporations are more than one anecdotal business model, indeed, they operate different ones at the same time. a closer look therefore at the diversification literature, dynamic capabilities and potentially alliance literature in connection with the concept and theories of business models and business model innovation is therefore recommended. at the same time, this paper has distinct limitations. the case study is representative of rather traditional corporations operating business model portfolios. more advanced, mostly software & data driven firms might yield different results, as do different industries in different cycles of innovation. also, this concept is based on firms operating in a position enabling direct or at least close contact with customers. b2b business models might look differently again. journal of business models (2016), vol. 4, no. 3, pp. 37-47 45 reference list abernathy, w. j., & utterback, j. m. (1978), patterns of industrial innovation, technology review, vol. 64, pp. 254-228. adner, r., & kapoor, r. (2010), value creation in innovation ecosystems: how the structure of technological interdependence affects firm performance in new technology generations, strategic management journal, vol. 31, no. 3, pp. 306-333. bakker, s., van lente, h., & meeus, m. (2011), arenas of expectations for hydrogen technologies, technological forecasting and social change, vol. 78, no. 1, pp. 152-162. casadesus-masanell, r., & ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, no. 2, pp. 195-215. casadesus-masanell, r., & ricart, j. e. (2011), how to design a winning business model, harvard business review, vol. 89, no. 1/2, pp. 100-107. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, no. 2, pp. 354-363. christensen, c. m. (1997), the innovator's dilemma, harvard business school press, boston. coase, r. h. (1937), the nature of the firm, economica, vol. 4, no. 16, pp. 386-405. johnson, m. w.; christensen, c. c., kagermann, h., (2008), reinventing your business model, harvard business review, vol. 86, no. 12, pp. 57–68. kim, s. k., & min, s. (2015), business model innovation performance: when does adding a new business model benefit an incumbent?, strategic entrepreneurship journal, vol. 9, no. 1, pp. 34-57. klepper, s. (1997), industry life cycles, industrial and corporate change, vol. 6, no. 1, pp. 145-182. lafontaine, f., & slade, m. (2007), vertical integration and firm boundaries: the evidence, journal of economic literature, vol. 45, no. 3, pp. 629-685. margretta, j. (2002), why business models matter, harvard business review, r205g. markides, c. c., & williamson, p. j. (1994), related diversification, core competences and corporate performance, strategic management journal, vol. 15, no. 2, pp. 149-165. markides, c. c., & williamson, p. j. (1996), corporate diversification and organizational structure: a resource-based view, academy of management journal, vol. 39, no. 2, pp. 340-367. massa, l., & tucci, c. l. (2013), business model innovation, dodgson, m., gann, d.m. & phillips, n., the oxford handbook of innovation management, oxford university press, oxford, p. 420. mitchell, d. w., & coles, c. b. (2004), business model innovation breakthrough moves. journal of business strategy, vol. 25, no. 1, pp. 16-26. journal of business models (2016), vol. 4, no. 3, pp. 37-47 46 sabatier, v., mangematin, v., & rousselle, t. (2010), from recipe to dinner: business model portfolios in the european biopharmaceutical industry, long range planning, vol. 43, no. 2, pp. 431-447. sohl, t., & vroom, g. (2014), business model diversification, resource relatedness, and firm performance, in academy of management proceedings, vol. 2014, no. 1, p. 10894. teece, d. j. (1986), profiting from technological innovation: implications for integration, collaboration, licensing and public policy, research policy, vol. 15, no. 6, pp. 285-305. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2, pp. 172194. the economist, (2012), “the driverless road ahead”, available at: http://www.economist.com/news/ business/21564821-carmakers-are-starting-take-autonomous-vehicles-seriously-other-businesses-should-too (accessed on 12 january 2016). the economist, (2002), “the war against the car”, available at: http://www.economist.com/node/1155093 (accessed on 12 january 2016). tanriverdi, h., & venkatraman, n. (2005), knowledge relatedness and the performance of multibusiness firms, strategic management journal, vol. 26, no. 2, pp. 97-119. tillemann, l. (2014), the great race: the global quest for the car of the future, simon & schuster, new york. zott, c., amit, r., & massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2016), vol. 4, no. 3, pp. 37-47 47 wolfgang sachsenhofer is a phd student at the vienna university of economics and business. his research complements his practical experience as a strategy consultant for technology corporations, since he focuses on business model innovation in incumbent technology firms. as a member of the omv-wu energy & strategy think tank, he specifically focuses his research on mobility and (clean) energy industries. wolfgang sachsenhofer holds an ma from the university of st. gallen, switzerland in strategy and innovation management about the author journal of business models (2018), vol. 6, no. 2, pp. 84-89 84 a review of sustainable business models and strategic sustainable development kaie small-warner, amal abuzeinab and ahmad taki de montfort university, leicester, united kingdom abstract this paper summarizes sustainable business models by addressing definitions, archetypes and assessments. it then summarizes the framework for strategic sustainable development to highlight its systematic, scientific and social strengths. the discussion combines both concepts to conclude with a research approach that may scientifically and socially enhance sustainable business models. please cite this paper as: small-warner, k. (2018), a review of sustainable business models and strategic sustainable development, journal of business models, vol. 6, no. 2, pp. 84-89 acknowledgements: thank you to the leicester school of architecture and the overall faculty of art, design and humanities, de montfort university for my supervisory team and research funding. keywords: sustainable business models; strategic sustainable developmentl introduction sustainability issues will not be resolved by the government alone but require proactive action and innovation from the private sector. kiron et al. (2017) reported indepth global research from 2009 to 2016 on how businesses adopt and integrate sustainability into strategies and practices. the report concluded that sustainable business practices are not yet widespread and progress needs to be accelerated. many business leaders execute strategies aligned with global sustainable development goals but not necessarily in sync with their core businesses. there is still a lack of fully understanding that opportunities can be created by embracing a sustainable strategy (kiron et al., 2017). this need for businesses to embrace sustainability spurred research on the use of business models (bms) to help drive organizational sustainable development but it is still a new focus. in the summary of a special journal issue on business models for sustainability (bmfs), schaltegger, hansen and lüdeke-freund (2016) proposed that “a business model for sustainability helps describing, analyzing, managing and communicating: i) a company’s sustainable value proposition to its customers, and all other stakeholders, ii) how it creates and delivers this value, iii) and how it captures economic value while maintaining or regenerating journal of business models (2018), vol. 6, no. 2, pp. 84-89 85 natural, social and economic capital beyond its organizational boundaries” (p.6). they concluded that further integrative research is needed on using bms to drive industry transformations. similarly, the framework for strategic sustainable development (fssd) has proven that science can help business leaders with sustainability transitions. the fssd is a systematic, comprehensive and scientific approach that enables multilevel and cross-sectoral understanding and collaboration (broman and robert, 2017). approach this paper summarizes the sustainable business model (sbm) literature by addressing definitions, frameworks, archetypes, tools and assessments. the paper then summarizes the fssd and discusses the limited literature that has combined both concepts. the body of literature was explored using scopus to first gather data on ‘sustainable business models’ or ‘business models for sustainability’. due to limited time, the review was not exhaustive and therefore all concepts may not be included. the second search was for ‘business model’ and ‘fssd’ and returned four (one was redundant) journal articles published in 2017. overall, the aim is to summarize the two concepts and propose the increased use of their combination to scientifically and socially enhance the development of sbms. key insights sustainable business models lüdeke-freund (2010) theoretically examined the interrelations between ecological sustainability, business activities and bm components from a strategic management perspective to define an sbm as “a business model that creates competitive advantage through superior customer value and contributes to the sustainable development of the company and society” (lüdekefreund, 2010, p.23). morioka et al. (2017) explored the use of sbms to integrate sustainability into core business decisions and defined an sbm as “a representation of business elements, their interrelations and the systemic context that enable sustainable value exchange with stakeholders towards corporate sustainability performance, translating and providing feedback between corporate strategy and operations” (p. 724). beyond definitions, some authors proposed frameworks and tools to develop sbms and describe required components, functions and interrelationships. stubbs and cocklin (2008) generated characteristics and components of an ideal sbm to conclude that “an organization adopting an sbm develops internal structural and cultural capabilities to achieve firm-level sustainability and collaborates with key stakeholders to achieve sustainability for the system that the organization is part of ” (p. 123). joyce and paquin (2016) expanded the original business model canvas (bmc) developed by osterwalder & pigneur (2010) to integrate environmental and societal considerations. this ‘triple layered business model canvas’ includes an environmental layer that adds a life-cycle perspective and a social layer that focuses on stakeholder engagement and management. the life-cycle perspective was also used to create the sustainable value analysis (sva) tool. the tool analyzes the product lifecycle to systematically identify uncaptured value and convert it to opportunity (yang, vladimirova and evans, 2017). value uncaptured is an alternative way to think about the value creation and capture component of sbms where four forms – value surplus, value absence, value missed, and value destroyedare analyzed to generate ideas for sbm innovation (yang et al., 2017). on the topic of value, the value proposition of the product-service systems (pss) concept has linked it to sbm literature. pss focuses on the customer’s usage and satisfaction for product development and requires thinking beyond the boundaries of existing practices (tukker and tischner, 2006). moving from theoretical concepts to practical transformation, bocken et al. (2014) developed eight (subsequently nine in ritala et al., 2018) sbm archetypes to stimulate innovative thinking for the creation of sbms. their research considered the entire value network and created new systems as opposed to only focusing on the existing firm and technologies. following the logic that practice provides evidence of transitions in society and business, ritala et al (2018) used the archetypes to create keywords for sustainable activities and quantitatively analyzed them to indicate sustainable efforts. they concluded that the majority of sustainable activities were linked to financial value and there was more focus on environmental than social and organizational efforts. similarly focusing on ways to assess sbms, brehmer, podoynitsyna and langerak (2018) used zott & journal of business models (2018), vol. 6, no. 2, pp. 84-89 86 amit’s (2010) boundary-spanning systems approach to bm design elements -content, structure and governanceas the framework for the creation of sustainability codes and a performance assessment. tauscher and abdelkafi (2018) took a strategic management approach to create a simulation model that determines scalability and robustness of sbms. they utilized feedback loops based on systems dynamics modeling principles in order to capture the complexity of each scenario. in the theoretical development of sbms, it can be seen that researchers have tried to embed sustainability into all processes and expand beyond organizational boundaries, embracing systems thinking and wider stakeholder collaboration (stubbs and cocklin, 2008; lüdeke-freund, 2010; bocken et al., 2014; brehmer, podoynitsyna and langerak, 2018; tauscher and abdelkafi, 2018). however, the research has not yet matured and there is a lack of agreed theoretical concepts and empirical testing (dentchev et al., 2016; evans et al., 2017). there is also a need for sustainability research to be more systematic and unified (broman and robert, 2017). the framework for strategic sustainable development for over 25 years, the fssd has undergone continuous development through a rigorous, systematic, and iterative process of peer and practitioner reviewing and testing (broman and robert, 2017). best summarized by missimer (2015), “…the fssd has been designed to give guidance on strategically moving any region, organization, project or planning endeavor towards social and ecological sustainability in an economically viable way” (p.2). there are several motivations for the development and use of this sustainability framework. the benefits and opportunities of proactive action need to be understood by and illustrated to organizations. identifying ‘root causes’ that are often overlooked or underestimated can create possibilities for ‘root solutions’ and eliminate fundamental unsustainable practices. unsustainable practices become economically riskier as markets shift to be sustainability-driven and thus their elimination is automatically beneficial. the fssd aims to identify these ‘root causes’ (broman and robert, 2017). the fssd also aims to provide an overarching multidisciplinary structure that is complimentary to other supportive tools and frameworks. a key outcome of the framework’s development is a science-based definition for sustainability, ‘sustainability principles’, that is adaptable to various disciplines. it is compliant with available relevant scientific knowledge and allows for well-defined and measurable processes, comparisons and outcomes. this enables the quick elimination of scientifically unachievable visions. many challenges are also faced when trying to solve current problems across various preferences and values, without potentially creating new problems in the future. therefore, a unifying definition presents a needed agreement on what is essential for the sustenance of social and ecological systems to prevent unsustainable development (broman and robert, 2017). another key component is backcasting planning, which is a strategic planning method at the core of this framework. first the vision is defined that follows the ‘sustainability principles’ and then various scenarios are created in a step-by-step process to reach this vision. the vision must be principle based instead of specific to a scenario because as conditions change, what was previously perceived to be ideal may no longer be relevant and what previously seemed unachievable may become feasible. this is flexible and transferable. finally the fssd also includes operational guidelines, ‘abcd-procedure’, to guide organizations through strategic sustainable transitions (figure 1). figure 1. the abcd-procedure can be described using this funnel metaphor starting with the sustainable vision, highlighting the challenges of the current situation, creating ideas to reach the vision and then structuring these into a strategic plan (broman and robert, 2017, pp. 21). journal of business models (2018), vol. 6, no. 2, pp. 84-89 87 a critique of the fssd was the weakness of the social attributes in comparison to the ecological and economic attributes. a similar trend was identified in the sbm literature and this seems to be the general case with sustainability transitions (adams et al., 2016; broman and robert, 2017; missimer, robèrt and broman, 2017; ritala et al., 2018). to counter this, over the past 10 years, the fssd has and continues to be socially enhanced by researchers focused on ‘social sustainability principles’ (missimer et al., 2017). there are several examples globally of fssd applications that have led to comprehensively aiding organizations with the reduction of social and ecological non-compliance along with developing new opportunities. it was designed to unify various supporting mechanisms for sustainable development. despite this, the uptake of the fssd has been slow. this could be due to complexity and sophistication as skilled facilitation and significant effort is required to utilize the framework. for a comprehensive description of the fssd and the most recent version, see broman and robert (2017). discussion and conclusions three journal articles were found that combine the fssd and bm concepts. in an effort to enhance strategic sustainable development from a business perspective, franca et al. (2017) combined the fssd with the bmc through action research that is still ongoing. the bmc blocks were strengthened by the integration of sustainability-driven thinking towards longerterm market requirements. the fssd was enhanced by thoroughly integrating a business perspective. the most notable business impacts from the combination were bm scalability to global level, risk identification and avoidance, investment strategy, and enhanced partnerships and social integration. rauter, jonker and baumgartner (2017) used the fssd to investigate how and why companies integrate sustainability into their bms. they found that the fssd provided greater clarity where there was a lack of specific sustainability goals. kurucz et al. (2017) developed a conceptual model of relational leadership for strategic sustainability and incorporated findings from leadership research on two bm development and assessment tools theoretically aligned with the fssd. the use of the fssd appears to be a recent and underdeveloped approach to embedding sustainability into the bm concept. franca (2013) began research on bm design for strategic sustainable development when there were no other similar tools. subsequently, as already seen in this paper which is not exhaustive, others have and continue to pursue different ways to embed sustainability in bms (joyce and paquin, 2016; yang et al., 2017) indicating that this topic warrants wider research and validation. given that actions in one location can have an impact on the other side of the world, a systematic view is needed for the complex topic of sustainable development (stubbs and cocklin, 2008). the fssd provides a scientific and methodological multidisciplinary process for defining, implementing and analyzing sustainability. this leads to the question: how can the fssd as a theoretical framework support the development of sbms? this paper concludes by proposing that exploring the interrelationship between sbms and the fssd could lead to a systematic, scientific and strategically robust sbm concept that embeds sustainability in the core of organizations. this is because the fssd focuses on the elimination of fundamental unsustainable practices which if left unchecked, could actually reverse progress. the research could improve the understanding of sustainability challenges and how they may be turned into opportunities. the research may also highlight whether or not current actions are indeed sustainable based on the fssd definitions. further, the socially strengthened fssd could enhance the integration of social sustainability in sbms. overall, the research could be useful for organizations and policy makers in regards to guiding sustainability transitions using sbms. journal of business models (2018), vol. 6, no. 2, pp. 84-89 88 references adams, r. et al. (2016) sustainability-oriented innovation: a systematic review. international journal of management reviews, 18 (2), pp. 180-205. bocken, n. et al. (2014) a literature and practice review to develop sustainable business model archetypes. journal of cleaner production, 65, pp. 42-56. brehmer, m., podoynitsyna, k. and langerak, f. (2018) sustainable business models as boundary-spanning systems of value transfers. journal of cleaner production, 172, pp. 4514-4531. broman, g.i. and robert, k.h. (2017) a framework for strategic sustainable development. journal of cleaner production, 140 (part 1), pp. 17-31. dentchev, n. et al. (2016) embracing the variety of sustainable business models: social entrepreneurship, corporate intrapreneurship, creativity, innovation, and other approaches to sustainability challenges. journal of cleaner production, 113, pp. 1-4. evans, s. et al. (2017) business model innovation for sustainability: towards a unified perspective for creation of sustainable business models. business strategy and the environment, 26 (5), pp. 597-608. franca, c.l. et al. (2017) an approach to business model innovation and design for strategic sustainable development. journal of cleaner production, 140, pp. 155-166. frança, c.l. (2013) introductory approach to business model design for strategic sustainable development, blekinge institute of technology. joyce, a. and paquin, r.l. (2016) the triple layered business model canvas: a tool to design more sustainable business models. journal of cleaner production, 135, pp. 1474-1486. kiron, d. et al. (2017) corporate sustainability at a crossroads: progress toward our common future in uncertain times. mit sloan management review. may 2017. kurucz, e.c. et al. (2017) relational leadership for strategic sustainability: practices and capabilities to advance the design and assessment of sustainable business models. journal of cleaner production, 140 (part 1), pp. 189-204. lüdeke-freund, f. (2010) towards a conceptual framework of ’business models for sustainability. in: knowledge collaboration &amp; learning for sustainable innovation, 2010. delft: r. wever, j. quist, a. tukker, j. woudstra, f. boons, n. beute, eds. missimer, m. (2015) social sustainability within the framework for strategic sustainable development, blekinge institute of technology. missimer, m., robèrt, k. and broman, g. (2017) a strategic approach to social sustainability – part 1: exploring the social system. journal of cleaner production, 140, pp. 32-41. morioka, s. n. et al. (2017) transforming sustainability challenges into competitive advantage: multiple case studies kaleidoscope converging into sustainable business models. journal of cleaner production, 167, pp. 723-738. journal of business models (2018), vol. 6, no. 2, pp. 84-89 89 osterwalder, a. and pigneur, y. (2010) business model generation: a handbook for visionaries, game changers, and challengers. hoboken, n.j: john wiley & sons. rauter, r., jonker, j. and baumgartner, r.j. (2017) going one’s own way: drivers in developing business models for sustainability. journal of cleaner production, 140 (part 1), pp. 144-154. ritala p. et al. (2018) sustainable business model adoption among s&p 500 firms: a longitudinal content analysis study. journal of cleaner production, 170, pp. 216-226. schaltegger, s., hansen, e.g., and lüdeke-freund, f. (2016) business models for sustainability: origins, current research, and future avenues. organization & environment, 29 (1), pp. 3-10. stubbs, w. and cocklin, c. (2008) conceptualizing a ”sustainability business model”. organization & environment, 21 (2), pp. 103-127. tauscher, k. and abdelkafi, n. (2018) scalability and robustness of business models for sustainability: a simulation experiment. journal of cleaner production, 170, pp. 654-664. tukker, a. and tischner, u. (2006) product-services as a research field: past, present and future. reflections from a decade of research. journal of cleaner production, 14 (17), pp. 1552-1556. yang, m. et al. (2017) value uncaptured perspective for sustainable business model innovation. journal of cleaner production, 140 (part 3), pp. 1794-1804. yang, m., vladimirova, d., and evans, s. (2017) creating and capturing value through sustainability: the sustainable value analysis tool. research technology management, 60 (3), pp. 30-37. zott, c. and amit, r. (2010) business model design: an activity system perspective. long range planning, 43 (2), pp. 216-226. journal of business models (2019), vol. 7, no. 3 pp. 67-76 67 cognitive exploration strategies and collective decision-making in entrepreneurial business modelling tassilo henike1,* and katharina hölzle2 abstract our business model (bm) teaching approach helps students to understand three essential dimensions of cognitive exploration strategies and to experience negotiation strategies in groups for designing a first bm. didactically, it follows kolb’s experiential learning cycle, including individual paper and case study preparations as well as collective discussions and decision-making. please cite this paper as: henike, t. and hölzle, k. (2019), cognitive exploration strategies and collective decision-making in entrepreneurial business modelling, vol. 7, no. 3, pp. 67-76 keywords: cognition, exploration strategies, entrepreneurial business modelling 1–2 chair for innovation management and entrepreneurship, university of potsdam *corresponding author acknowledgements: we thank benjamin heinz-meyer for introducing us to an exceptional case. we also thank our students that helped us to improve our bm teaching concept over the last years. journal of business models (2019), vol. 7, no. 3 pp. 67-76 68 introduction uncertainty is a constituting characteristic of entrepreneurial processes. especially in the early stages of a new venture, entrepreneurs have endless possibilities with unpredictable consequences (malmström & johansson, 2017). one crucial phase in this process concerns decision-making about what mechanisms should be used for exploiting an opportunity (shepherd, williams, & patzelt, 2015). these exploitation mechanisms base on founders’ mental business models (bm), i.e., belief structures of reasons why as well as procedures how various actors engage in focal business interactions (cf. doz & kosonen, 2010).1 possible configurations of these structures are manifold, yet (in particular novice) entrepreneurs are additionally challenged as they commonly have limited resources prohibiting prolonged experimentation (sosna, trevinyo-rodríguez, & velamuri, 2010). further, they cannot rely on prior entrepreneurial experiences and experienced partner networks that could aid in decision-making for a promising first bm. thus, entrepreneurs need to strongly rely on their cognition (sosna et al., 2010). given these challenges, we aim to teach students what cognitive exploration strategies exist, how these strategies are related to bm innovation or imitation, and how collective decisions emerge in teams (cf. rydehell & isaksson, 2016). cognitive exploration strategies are individual strategies of how information is gathered and interpreted for finding solutions and decision-making. in our bm class, students learn and experience the impact of three dimensions of cognitive exploration strategies on bms: strategic orientation, analogical or combinatory problem solving, and intuitive or factual reasoning (cf. henike, 2019). to teach the impact of these dimensions on the bm development process, we use a combination of individual learning, inquiry-guided class discussions, individual expeditionary learning for one specific case, and group discussions of this case following kolb’s and kolb’s “experiential learning cycle” (2005). this learning cycle helps students to learn the essential bm concepts. it also helps to reflect on how their behaviour, in terms of cognitive exploration strategies as well as 1 we differentiate between mental business models and implemented business logics or exploitation mechanisms as this differentiation helps to better discuss related cognitive or implementation challenges. group negotiations, impact bm decisions (cf. hogan & warrenfeltz, 2003). our bm teaching approach is part of a three-month advanced master class on “innovation management” taught in english at the university of potsdam, germany.2 the class regularly consists of 50 students from business administration and management of information systems majoring in innovation management and entrepreneurship. each week, we concentrate on one specific theme of innovation management taught in a two-hour lecture and two-hour exercise. for every lecture, we provide mandatory readings and related questions. case studies for individual and group preparations supplement exercises. exercise groups regularly consist of four to five students. given this setting, we teach the impacts of cognitive exploration strategies and group negotiations on bm innovation in one week in the middle of a semester. in the next sections, we describe in more detail our teaching approach and learning methods, the objectives and procedure of our bm teaching approach, and required materials. in the end, we reflect on our experiences in regards to student evaluations and success in achieving our teaching objectives. we finish with a short discussion emphasising how teachers can modify our approach to other learning objectives or teaching conditions. teaching approach and methods our bm teaching approach is inspired by kolb’s and kolb’s “experiential learning cycle” (2005). the learning cycle requires high self-motivation and practical experiences for achieving long-term learning outcomes. the learning process includes constant conflictual movements between reflection and action, existing and new knowledge, as well as implicit understanding and the ability to comprehensibly explicate this understanding (kolb &  kolb, 2005). teachers support individual learning processes by providing feedback to students’ beliefs, ideas, and ways of thinking. they create a setting where the use of different methods respect the individual differences in learning (kolb &  kolb, 2005). 2 for inspiration, we provide our full teaching materials in the online appendix to this article. journal of business models (2019), vol. 7, no. 3 pp. 67-76 69 consequently, our teaching approach uses a combination of four methods. first, our teaching approach starts with individual learning. in this stage, we provide students with academic articles so that they make sense of most common definitions and concepts on their own. own preparation allows students to tap into new themes at their own pace and based on their existing knowledge. second, we use the classroom for inquiry-based learning. inquirybased learning is an approach that motivates students to think and openly articulate their opinions based on questions posed (bell, urhahne, schanze, & ploetzner, 2010). by collecting varying opinions and moderating discussions, teachers motivate students to recognise conceptual differences almost autonomously. discussions require students to explain what they have already learned in their preparation. at the same time, teachers’ and fellow students’ questions show how much they have already understood abstract concepts aiming to close the knowing-doing gap (cf. pfeffer & sutton, 2000). third, we ask our students to apply this knowledge to specific contexts. in this phase of expeditionary learning, students better understand the usefulness and limitations of theoretical concepts. at the same time, they are motivated to go on an individual expedition and to find their own solutions to problems (outward bound, 1998). in the fourth stage, students discuss in groups the solutions from their learning expedition. this exchange of individual experiences fosters collective learning and reflection (loewenstein, thompson, & gentner, 2003). in sum, our learning cycle helps students to understand concepts, their applicability, and how different behaviours can result in different outcomes (cf. hogan &  warrenfeltz, 2003). figure 1 summarises our teaching approach, aspired learning cycle, and four methods used. bm teaching in our class, we focus on one specific kind of bm innovation. this kind of bm innovation is the design of a first bm in an entrepreneurial context (ahokangas & myllykoski, 2014; massa & tucci, 2014). we use the four different phases of the learning cycle to teach the following objectives: • how entrepreneurial bm design challenges are different from existing bm reconfiguration challenges, • what cognitive exploration strategies exist, • how they impact decisions to design a first bm, and • how negotiation strategies unfold in the process of collective decision-making stage 1: individual bm learning for proper preparation, we start our bm week by prompting students to read “a critical assessment of business model research” (massa, tucci, & afuah, 2017). this review article introduces students to the varying perspectives existing in bm research, cognitive and implementation challenges, and reflects why there is increasing practical and theoretical interest for bms since the beginning of the information age. figure 1: teaching approach journal of business models (2019), vol. 7, no. 3 pp. 67-76 70 accordingly, we ask our students to concentrate on the following questions: • what are definitional/conceptual differences (related to bms) discussed in the article? • why are bms important from a practical and theoretical perspective? • why and when are bms sources for innovation? • what external and internal factors do challenge firms’ bms in the 21st century? stage 2: inquiry-based bm learning in the lecture, we start with a brief history of quotes from famous researchers to emphasise that schumpeter, drucker, or porter have discussed the fundamental idea behind bms decades ago (cf. casadesus-masanell & zhu, 2013). we contrast these quotes with recent examples like alibaba or uber to start discussing what has changed in the 21st century. at that point, we move to a discussion with students of what bms are and whether they are attributes of individuals or entities like firms, universities, et cetera. for greater clarity, we introduce a differentiation between a mental bm, i.e., abstraction from reality or beliefs (cf. doz & kosonen, 2010), and an implemented business logic. this differentiation helps in the discussion to reflect upon cognitive (e.g., number of bm alternatives, inability to calculate consequences, massa &  tucci, 2014) and implementation challenges (e.g., higher customer power, increased fluidity in firm interactions, partner selection). in sum, proper preparation and class discussion teach students that the challenges of designing a first bm for a new venture are different from the challenges of reconfiguring existing bms in incumbent firms or adding a new bm to an existing portfolio of bms (cf. massa & tucci, 2014). students learn that central challenges are the definition of an appropriate value proposition, creation and capture mechanism (teece, 2010). further, they learn that both, copying existing bms or designing new bms, have proven to be reliable sources for designing a first bm (casadesus-masanell & zhu, 2013)—at the same time, increasing the difficulty for decision-making. stage 3: expeditionary bm learning after the lecture, we ask the students to apply their knowledge to a real case. they must design a first bm for an existing service that has no specific value proposition and value capture mechanism yet. the service is called errorfarealerts and provides information about online error fares of flights. an algorithm crawls the internet for these error fares and informs registered people by e-mail free of charge (cf. an extended description in the supplementary materials). a possible error fare could be that a flight only costs $59 instead of $590. as we want students to collect additional information about the service, industry, other bms, we invite them into a computer lab. further, we provide a word processing program for taking notes. the time limit for the in-class completion of this individual assignment is 60 minutes. afterwards, students have an additional week to rethink the task before they must submit reflection reports. the central task for students is to comprehensively document all steps taken during their processes of developing a bm for errorfarealerts. to support documentation, we ask students to answer the following questions/requirements within their reflection reports: • be as precise as possible with your description and give reasons for decisions that you have made during the process. reflection report should be around three pages long. • what were your first thoughts and steps when starting with the task? • did you consider different business models during the process? if so, which ones did you consider for the task, and why did you consider them? • which, in your opinion, is the most appropriate business model for errorfarealerts and why? students can earn with their reports at a maximum six points that add to their final grades (for the whole class 100 points are the maximum). this requirement additionally motivates students to make accurate descriptions. we make these questions and requirements available before our computer lab session via an onlinelearning platform (moodle). at the beginning of our computer lab session, we introduce students to the case of errorfarealerts. we present the service to the whole class via a short video (errorfarealerts, 2016). afterwards, students can individually look for further explanations on their homepage journal of business models (2019), vol. 7, no. 3 pp. 67-76 71 (errorfarealerts, 2018). they can also use the internet to look for additional information that helps them to design an appropriate value proposition and value capture mechanism. during their expeditions, students will encounter several tensions at the interface of technological, competitive, legislative, and ethical issues (cf. thursby, fuller, & thursby, 2009). for instance, students need to decide on their own, whether it is ethical to make a profit based on others’ mistakes. stage 4: bm learning in groups the individual expeditions and reflections serve as an introduction for our main teaching objective, i.e., understanding what cognitive exploration strategies exist and how they impact bm decisions. in the group exercise—that takes two hours, we ask students to exchange the reflection reports with their group members. we ask group members to read the reflection reports and mark text passages according to the three dimensions of cognitive strategies that we introduce before. in the end, students will understand how different approaches in each dimension have impacted their group members’ bm decisions. the three dimensions consist of the following aspects: 1. strategic orientation (gatignon & xuereb, 1997): beliefs about whether competitive, customer or technological orientation is the driving force for bm designs: • focus on competitive similarity or differentiation • focus on customer convenience or inconvenience • focus on internal technological potential or fit the external environment 2. problem-solving (gazzaniga, heatherton, & halpern, 2015): the process of generating a solution based on: • similar content or context analogies • adding or changing elements of existing patterns (conceptual combination) 3. reasoning (gazzaniga et al., 2015): point of judging to derive a conclusion based on: • intuitive proof (own feelings or imagination) • factual proof (own knowledge, external statistics or comments) by reading the reflection reports, group members will recognise a great variety in possible value propositions and value capture mechanisms for errorfarealerts’ bm. some students may recommend imitating bms from travel agencies or to expand the bm to other kinds of online fares like shopping. other students may recommend cooperating with flight providers to reduce their failure rates. the group discussions will reveal that these differences are mainly related to different strategic orientations. focussing strongly on the customer will lead to bms that are free of charge for customers and subsidised by advertisements or partner provisions. however, focussing on what customers do not like may encourage students to reject advertisements. focussing strongly on the competition leads to imitations or strengthens considerations of how to be different from competitors. another possibility is to focus on the technology itself. accordingly, students will consider the legislative situation or imitability of the technology. students may argue that imitation of the algorithm is easy or that error fares only appear randomly. that is why these students will recommend targeting airline companies and help them to correct these error fares. as the suitability of the different bm solutions is unknown, students will also learn that the strategies to generate solutions and reasons to recommend a bm differ from student to student. some students will only feel safe in decision-making when they have outweighed different alternatives and collected different facts. others will only feel confident after imagining possible consequences in the future or considering currently famous examples like spotify. this variance will spur intense discussions in the groups about the bm that the group will finally recommend. these intense discussions animate students to think about negotiation strategies so that each group can recommend one bm. these negotiation strategies could be the joint development of a bm integrating aspects from all group members, solution enforcement due to existent group roles (e.g., the group leader makes the final decision), or no final decision resulting in severe group conflicts. these negotiation activities will show students how important the sharing of fundamental values and definition of group roles is for entrepreneurial teams. in the last 20 minutes of the exercise, one group presents their solution and discusses with the other groups what bm alternatives are possible, what cognitive exploration strategies they have used, and how differences in these strategies affected the other groups’ final decisions. journal of business models (2019), vol. 7, no. 3 pp. 67-76 72 in sum, this bm teaching approach puts students in a real-life situation and increases their understanding of how to search for different bm designs bridging doing and knowing (pfeffer &  sutton, 2000). at the same time, it shows how difficult it is to make decisions in uncertain situations. table 1 summarises our bm teaching approach and the material needed. student evaluations and success of bm teaching approach student evaluations and personal feedbacks on our bm teaching approach are extraordinarily positive. in general, students widely appreciate the situation of being confronted with a real-life challenge and the possibility to discuss their solutions with others. furthermore, as we combine conceptual issues with practical applications, students better understand the contributions and limitations of concepts (e.g., what possibilities do we have to create a value proposition?). for the specific bm case, most students enjoy working on this case as they quickly understand the service’s purpose and immediately see personal learning outcomes. at the same time, the case requires students to reflect on their position as a potential customer or business owner leading to different decisions. from time to time, students are also amazed when they read others’ solutions recognising the immense possibilities. overall, the students get a good overview of the different cognitive exploration strategies and understand them quickly. at the same time, however, we also see that the more possibilities are presented, the uncertainty among students increases whether they have made the right bm decision. that is why students like to discuss their solutions with others because they often need to find additional support for their bms when they do not feel very confident. we have made excellent experiences with our bm teaching approach and would recommend this approach for settings with a short time span (1 week) and classes with up to 50 students. beyond the teaching of thematic bm issues, the concept helps students to improve their cognitive flexibility and their teamwork competencies. they need to switch between conceptual ideas, case-specific practical concerns and the benefits as well as costs of different bm alternatives. it helps them to acknowledge the benefits of reflecting on their beliefs and building lines of reasonable argumentation. this also has positive implications for the group process. students learn to effectively communicate within groups, understand other students’ lines of argumentation, and how to reach consensus. limitations and adaptability limitations of this teaching approach may be the workload involved as students need to spend much time on individual preparation, writing reflection reports, and collecting information. furthermore, there is no overall right solution for what bm will be the best solution for the case of errorfarealerts. this fact may frustrate some students; however, the clear objective of this concept is teaching subject teaching objective concepts application individual 1. individual preparation • when/where? before the lecture • what? 4 questions raised • material? massa et al. (2017) 3. individual expedition • when/where? computer lab or homework (1 week in total) • what? individual bm design + reflection report • material? case description + access to additional information sources group 2. class discussion • when/where? in class, tuesday (week 1, two h) • what? bm innovation challenges, central bm elements • material? lecture slides + moderated class discussion 4. group negotiation • when/where? in class, wednesday (week 2, 1h) • what? collective solution + discussion • material? individual group discussions + final class discussion table 1: summary of bm teaching approach journal of business models (2019), vol. 7, no. 3 pp. 67-76 73 to train students to deal with uncertainty and to understand how decisions emerge. moreover, our concept focusses specifically on cognitive challenges and neglects implementation challenges. that means that, although students have cognitively developed an appropriate bm, we do not dive further into challenges of executing this bm like negotiating with partners and investors, raising financial resources, or interacting with customers. we also do not specifically address social bms. we have also applied the case study in other settings with less time for teaching and with different groups of students. therefore, we will shortly describe how our teaching approach could be modified. first, when time is limited to a single two-hour session, the case could be introduced to a whole class asking students to think about single bm dimensions spontaneously. this question will help to uncover varying possibilities and to discuss further the problems of creating linkages between dimensions and their complex interdependencies (cf. massa, viscusi, & tucci, 2018). second, mostly in executive teaching, the case could be used as an inspiration to reflect upon the bms of their own companies. challenges could be discussed in how this case provides a pattern for innovating the own bm or what challenges would arise if an existing company implements this bm. third, this entrepreneurial case could be contrasted with a case of an incumbent company to discuss different challenges of both situations (e.g., how decisions in the past constraints future bm decisions). fourth, visual bm tools like the bm canvas (osterwalder & pigneur, 2010) or bm pattern cards (gassmann, frankenberger, & csik, 2014) could be used to support students in thinking and communicating bm solutions. in group discussions, the focus could shift to discuss the strengths and weaknesses of visual bm tools. conclusion overall, we are very satisfied with the learning outcomes of our students and, equally important, students also acknowledge the positive effects of this concept. we recommend this bm teaching approach to teachers and students interested in the fields of entrepreneurship, strategy, and innovation management as well as in the subjects of cognitive challenges, cognitive exploration strategies, and dynamics of group discussions. journal of business models (2019), vol. 7, no. 3 pp. 67-76 74 references ahokangas, p., & myllykoski, j. (2014). the practice of creating and transforming a business model. journal of business models, 2(1), 6–18. bell, t., urhahne, d., schanze, s., & ploetzner, r. (2010). collaborative inquiry learning: models, tools, and challenges. international journal of science education, 32(3), 349–377. casadesus-masanell, r., & zhu, f. (2013). business model innovation and competitive imitation: the case of sponsor-based business models. strategic management journal, 34(4), 464–482. doz, y. l., & kosonen, m. (2010). embedding strategic agility. long range planning, 43(2-3), 370–382. errorfarealerts (2016). error fare alerts how it works. retrieved december 06, 2018, from https://www.youtube. com/watch?v=dym_vv4jflm. errorfarealerts (2018). homepage, from https://www.errorfarealerts.com/?lang=en. gassmann, o., frankenberger, k., & csik, m. (2014). the business model navigator: 55 models that will revolutionise your business. harlow, england, london, new york, boston, san francisco: pearson. gatignon, h., & xuereb, j.-m. (1997). strategic orientation of the firm and new product performance. journal of marketing research, 34(1), 77–90. gazzaniga, m., heatherton, t., & halpern, d. (2015). psychological science (5th ed.). new york: norton. henike, t. (2019). imitate or deviate? how cognitive safety impacts entrepreneurial business modelling. accepted paper for presentation at the 79th annual meeting of the academy of management. boston, usa. hogan, r., & warrenfeltz, r. (2003). educating the modern manager. academy of management learning & education, 2(1), 74–84. kolb, a. y., & kolb, d. a. (2005). learning styles and learning spaces: enhancing experiential learning in higher education. academy of management learning & education, 4(2), 193–212. loewenstein, j., thompson, l., & gentner, d. (2003). analogical learning in negotiation teams: comparing cases promotes learning and transfer. academy of management learning & education, 2(2), 119–127. malmström, m., & johansson, j. (2017). practicing business model management in new ventures. journal of business models, 5(1), 1–13. massa, l., & tucci, c. l. (2014). business model innovation. in m. dodgson, d. m. gann, & n. phillips (eds.), the oxford handbook of innovation management (pp. 420–441). oxford: oxford university press. massa, l., tucci, c. l., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73–104. massa, l., viscusi, g., & tucci, c. l. (2018). business models and complexity. journal of business models, 6(1), 59–71. journal of business models (2019), vol. 7, no. 3 pp. 67-76 75 osterwalder, a., & pigneur, y. (2010). business model generation: a handbook for visionaries, game changers, and challengers. hoboken, new jersey: john wiley & sons, inc. outward bound (1998). guide for planning a learning expedition. dubuque: kendall hunt publishing. pfeffer, j., & sutton, r. i. (2000). the knowing-doing gap: how smart companies turn knowledge into action. boston, usa: harvard business school press. rydehell, h., & isaksson, a. (2016). initial configurations and business models in new technology-based firms. journal of business models, 4(1), 63–83. shepherd, d. a., williams, t. a., & patzelt, h. (2015). thinking about entrepreneurial decision making. journal of management, 41(1), 11–46. sosna, m., trevinyo-rodríguez, r. n., & velamuri, s. r. (2010). business model innovation through trial-and-error learning. long range planning, 43(2-3), 383–407. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2-3), 172–194. thursby, m. c., fuller, a. w., & thursby, j. (2009). an integrated approach to educating professionals for careers in innovation. academy of management learning & education, 8(3), 389–405. journal of business models (2019), vol. 7, no. 3 pp. 67-76 76 tassilo henike is a doctoral candidate at the university of potsdam, germany and was a visiting researcher at the school of business and social sciences, aarhus university, denmark. he holds a master’s degree in business administration and engineering from the technical university of berlin, germany. he is a teaching assistant in bachelor and master courses including innovation management, entrepreneurship, and technology management. katharina hölzle is full-tenured professor for innovation management and entrepreneurship at the university of potsdam. she has been a visiting professor to the university of international business and economics (uibe) in beijing, china, and the uts business school and macquarie graduate school of management (mgsm) in sydney, australia. since 2014, she is a member of the hpi-stanford design thinking research program. since 2015, she is editor-in-chief of the creativity and innovation management (cim) journal. since 2018, she is a member of the commission of experts for research and innovation that advises the german federal government. she teaches entrepreneurship, innovation and technology management on a bachelor, master and executive level at national and international universities. about the authors journal of business models (2018), vol. 6, no. 3, pp. 63-78 63 home-based businesses: an exploration of business model heterogeneity isla kapasi 1 and laura galloway 2 abstract purpose: home-based business (hbb) literature identifies variation in the sector, such as differences in technology use, knowledge capital. it also asserts hbb may have specific value for specific groups of business starters. despite this diversity, hbb is treated as one conceptualisation, as a single business model. consequently, our knowledge is based on disparate studies with different research agendas and results are inconsistent and sometimes contradictory. this paper outlines a means by which the heterogeneity of hbb can be revealed via a framework within which diversity might be viewed. method: largely conceptual, this paper draws from a study of 30 hbb owners to test the framework using the business model dimension of in or from home and the distinguishing feature example of knowledge. the empirical work was qualitative, based on interviews. findings: we find variation in hbb types and distinct business models, exposing heterogeneity. the framework provides a means by which the reality of hbb may be better revealed. value: value lies in the provision of a means by which we might view the diversity of hbb. using the framework, different research agendas may be serviced and afford sight of issues that affect hbb as they vary by business model. this is of value for research clarity, and also for informing policy and support of small businesses as the needs of different types of hbb will vary. please cite this paper as: kapasi, i. and galloway, l. (2018), home-based businesses: an exploration of business model heterogeneity, vol. 6, no. 3, pp. 63-78 keywords: home-based business, micro firms, smes, enterprise, strategy 1 university of leeds, charles thackrah building, 90 clarendon road, leeds, ls2 9lb, uk, +44(0)1133432611, i.kapasi@leeds.ac.uk 2 professor of business & enterprise, edinburgh business school, heriot-watt university, edinburgh, eh14 4as, uk, +44(0)1314514789, lg1@ebs.hw.ac.uk. mailto:i.kapasi@leeds.ac.uk mailto:lg1@ebs.hw.ac.uk journal of business models (2018), vol. 6, no. 3, pp. 63-78 64 introduction most modern economies have a large micro-firms sector and the majority of these firms are home-based businesses (hbbs) (e.g. bis, 2015; walker, 2003). in the uk, for instance, 96 per cent of firms employ fewer than 10 people (ward and rhodes, 2014), and the business model of more than 70 per cent of these is to use the home as the business base (bmg research, 2013). the size and potential value of the hbb sector is, therefore, substantial and this has not gone unnoticed by governments. as a cumulative economic contributor and employer, there is much rhetoric about how to grow this sector (e.g. business link, (2012), in the uk; small business administration, (2013), in the usa; porirua, (2013), in new zealand). currently, however, within the research and policy literature, little is known about hbb, particularly in terms of its diversity (or not) with regards to business model(s), context and strategies. in fact, throughout the literature, hbbs are treated as homogenous (dannhauser, 1999; e.g. ruiz and walling, 2005; mason et al., 2011); an inference applied to their business models also, such that the hbb business model is treated as an archetype (massa and tucci, 2013). as a consequence of this, meaningful information for policy and practice and the opportunity to develop robust theory and research within this proportionately large part of the business sector continues to elude us. to support the sector appropriately and thereby make best use of it as an economic asset, a more sophisticated understanding of hbb business models is required. this study addresses this gap. the contribution of this paper, therefore, is its examination of the components of hbbs that contribute to the creation and capture mechanisms of hbb business models. despite the general use of ‘hbb’ as a homogenous business model form, we find that by recognising hbb as a heterogeneous phenomenon, we enhance our theoretical understanding of the relationship between hbb strategy and business model iterations. thus, we establish that hbb business models are in fact metamodels (massa and tucci, 2013) as a result of the individual owner choices and subsequent consequences for their business. moreover, we contribute to calls from the research community regarding the value of inspecting and classifying business models (lambert, 2015). the paper beings with a review of business model and hbb literature, outlining inconsistencies in ontology and research that are obscuring understanding that might inform knowledge, policy support and practice about and for hbb. in response, a conceptual framework, supported by empirical data, is proposed which aims to improve clarity and understanding regarding the intersection of dimensions with different value creation/capture within the hbb. finally, the value of this more granular representation of hbb is discussed, including implications for those who support hbb, along with opportunities for further research, including theoretical and empirical engagement with broader study of work in society. business models according to porter (1996), firms must seek continual value creation/capture opportunities in order to remain sustainable. the e-commerce era saw the development of interest in business models (magretta, 2002), in particular in terms of scrutinising the effects on value creation and capture in firms (value most often understood as financial profit osterwalder and pigneur, 2002a; hedman and kalling, 2003; teece, 2010). a firm’s business model articulates its primary purpose (e.g. amit and zott, 2001; sirmon et al., 2007; pitelis, 2009; demil and lecocq, 2010) and acts as an expression of firm strategy (hedman and kalling, 2003). most simply, margretta (2002) describes a business model as the story of an organisation; its “core logic” (seddon et al., 2004, p.426; also shafer et al., 2005), as it expresses the interrelations and configuration of organisational components (baden-fuller and morgan, 2010). key features of a business model include a firm’s its inward (seddon et al., 2004) or outward-looking orientation (mcgrath, 2010); the approach to sustained or temporary competitive advantage (kujala et al., 2010; mcgrath, 2010, respectively); the intersection or separation of the creation and capture of value (amit and zott, 2001; osterwalder and pigneur, 2002a); and links “a firm’s resources and functions and its environment” (mansfield and fourie, 2004, p.39). thus, the business model of a firm allows it to operate optimally within regards to its specific contextual conditions. while all business models include the same components (osterwalder and pigneur, 2002b), baden-fuller and morgan journal of business models (2018), vol. 6, no. 3, pp. 63-78 65 (2010) consider them to be organisational specific, thus heterogeneous by their very nature (also teece, 2010; leavy, 2010; chesbrough, 2010). furthermore, innovation, which is vital to firm creation and survival and for value creation/capture to occur (chesbrough, 2010), may drive new business model configurations (pitelis 2009). as such, business models are flexible (mcgrath, 2010) especially in dynamic business environments (pitelis, 2009) and are refined over time (teece, 2010; morris et al., 2005). refinement in particular occurs in circumstances of macroenvironment change, in industries/sectors with stiff competition, when entering new markets (london and hart 2004), and when maximum value configuration is required (demil & lecocq, 2010). moreover, although strategy and business models are not synonymous (casadesus-masanell and ricart, 2010), they are highly integrated as a firm’s strategy often informs business model creation and development (osterwalder et al., 2005; gambardella and mcgahan, 2010). however, business models remain poorly understood (e.g. morris et al., 2005; johnson et al., 2008; kujala et al., 2010), and particularly so amongst microbusinesses. in the context of hbbs – the focus of this paper – to date there is no specific exploration of business models. this paper provides some initial contribution towards addressing this gap, and it is to the extant literature on hbbs and, in particular factors related to business models, that we now turn. heterogeneous or homogenous? the issue of business models in home-based business the world of work and where it occurs is changing. examples of this include an increase in teleworking and greater availability of flexible working (cifre et al., 2002; garrett and danziger, 2007; vilhelmson and thulin, 2016). self-employment and independent business activities are also increasing, and this includes a rise in hbb; recent figures from scotland, for example, show an increase in hbbs of more than 20 per cent between 2012 and 2015 (the scottish government, 2015). as a consequence, hbb has begun to emerge as a field of increasing interest, both to researchers (beach, 1993; deschamps et al., 1998; van gelderen et al., 2008; kapasi and galloway, 2016), and to policy makers (e.g. jones, 2012; enterprise nation, 2014), reflecting an interest in developing and supporting the sector, and encouraging this particular mode of self-employment and business. empirical studies exploring hbb have been conducted in several, generally western, economies, for example,(e.g. usa loscocco and smith-hunter, 2004; canada bryant, 2000; australia nansen et al., 2010) in australia. most prolific are studies based in the uk. these studies cover a range of research themes., including the effects of technology diffusion (daniel et al., 2014; ruiz and walling, 2005); urban or rural context (dwelly et al., 2005; newbery and bosworth, 2010; reuschke and mason, 2015); housing stock (reuschke, 2016) and gender (ekinsmyth, 2013; thompson et al., 2009). whatever the focus however, hbbs are largely treated as homogenous entities in empirical studies. the location of where hbb activity occurs provides an exemplary illustration. empirical examination of the location of hbb business activity is subject to disparate sources of data and definitions of hbb. to illustrate, three empirical studies are described, though this is not exhaustive. first, thompson et al. (2009) use global entrepreneurship monitor data, basing their measurement of hbb on nascent and start-up activities in the home. elsewhere, felstead et al. (2000) base their study on the 1998 labour force survey that explores those who work mainly, sometimes or partially at home (both employed and self-employed), thus not separating employment and self-employment status. finally, dwelly et al.’s (2005) longstanding definition of an hbb still underpins much research (e.g. ekinsmyth, 2011; mason and reuschke, 2015). here hbb is defined as “any business or selfemployed person that uses a residential property as a base from which they run their operation – consciously doing so instead of running a separate workspace/ shop/office” (dwelly, et al. 2005, p.4). here the home is described as a base rather than the location of the work. as a consequence of definitional discrepancies, research findings tend to vary considerably by study, and these inconsistencies can refer to the businesses, the owners, or both. each of these issues is explored in turn below. journal of business models (2018), vol. 6, no. 3, pp. 63-78 66 business components there are some commonalities between studies of hbb. loscocco and smith-hunter (2004) and walker (2003) report concentration of hbbs in business services for example. additionally, hbbs are found in several studies to have low levels of initial capitalisation, have lower growth ambitions than other firms, and are likely to have few or no employees (e.g. newbery and bosworth, 2010; thompson et al., 2009; walker, 2003). these commonalities are also found for micro-firms generally (e.g. young, 2013), and so it is no great surprise that these apply in the hbb context. other findings throughout the hbb literature diverge though. first, there is variation in the value capture of hbbs. studies such as mason et al. (2011) and ekinsmyth (2011) find that income generated in a hbb is unlikely to be the only or main source of household income, instead being supplementary to households. alternatively, walker (2003) finds that the hbb was the major income source for 72 per cent of the male operators and 50 per cent of the female operators in her australian sample. second, value creation based on the type of work conducted in hbbs, further reveals disparities. for example, several studies report a predominance of either knowledge work (ammons and markham, 2004; crosbie and moore, 2004; jurik, 1998) or low-skilled activities (office of the chief economic advisor, 2015; newbery and bosworth, 2010; walker, 2003). findings about the importance and use of technology for hbbs as a value creation component are also mixed. for example, wynarczyk and graham (2013) conclude that technology has “reframed the concept of ‘home economics’” (p.451), whereas, kapasi and galloway (2016) and mason et al. (2011) report that in many cases technology use is resisted and the importance of e-commerce is overstated. in addition, location of the firm (i.e. at or from home) emerges as a diverging business model component. in many cases, business in and from home are not discrete, with some work conducted in the home, such as accounts and marketing, and other work, such as transaction or service, provided outside the home, as is the case for tradespeople, for example. elsewhere, at the other extreme, for some the home is the business; several authors focus on the experiences of b&b owners for example (e.g. di domenico, 2008; felstead and jewson, 2000; newbery and bosworth, 2010). fundamentally, therefore, we can see that both in and from home emerge as potential distinguishing features of disparate hbb models. owner components hbbs are often operated in a self-employment capacity to ‘employ’ one person: the owner. consequently, in the case of hbbs, the owner is ‘embedded’ in the business model of their hbb. for example, there is some assertion that hbbs are a desirable employment option for some group. women with dual responsibilities for domestic and economic life are one such group, where the flexibility of hbb can afford the ability to service both roles (walker and webster, 2004); white, 2008; kirkwood and tootell, 2008). the competing demands of home work and market work will have an impact on the business model adopted. human capital, when applied to hbb activity, is another largely unexplored feature of hbb ownership, despite research finding that hbb owners have higher levels of educational attainment than non-hbbs (e.g. jurik, 1998; felstead et al., 2000; mason et al., 2011). referring to both formal and informal acquisition of knowledge and skills, the level of human capital required of a business will have an effect on the business model applied. some studies find hbbs to be knowledgeintensive (walker, 2003), thereby requiring high levels of human capital. other studies find that hbbs are characterised as businesses that require low levels of human capital (newbery and bosworth, 2010), implying lower knowledge and skills requirements. in the employment context, the human capital level of individuals tends to correlate with the human capital requirements of their job (burton-jones, 2001). in concert with this, throughout the hbb literature the human capital requirements of firms are assumed to be in line with the human capital of owners. kapasi and galloway (2016) however, find this assumption unsafe since there was evidence of a lack of correspondence between human capital attainment and human capital requirements amongst some of the hbbs included in their uk sample, with some, particularly lower human capital-based firms, run by people with high levels of educational and skills attainment. journal of business models (2018), vol. 6, no. 3, pp. 63-78 67 in addition to the possible business and owner components of hbb business model(s), we propose that various and disparate antecedents to, and outcomes sought of, hbb will also contribute to the business model employed. these antecedents may be internal (i.e. related to the individual or business decisions) or external (i.e. related to environment or context), and some examples are given below. internal antecedents people who start a business or become self-employed in response to a perceived market opportunity may choose to base their business – at least initially – at home. there is some evidence that in initial stages, many firms base their firms at home for cost-saving reasons (herrington and kew, 2017); a value component significant to business model development (malmstrom and johansson, 2017). upon establishment and a period of sustainability some of these business may move on to an external location, but others may continue to locate at home. in addition, the establishment and operation of a business from home can provide for some a flexible work option. in addition, as noted already, people with caring responsibilities, and mothers in particular, have been identified as a group whose caring and work roles can be facilitated by this model of business as it allows them to combine their dual roles (ekinsmyth, 2011). other groups with competing home/life priorities, such as people with long-term health issues, might be similarly motived to hbb. external antecedents employment norms in some industries are based on the hbb model; consider the employment context of farming, some forms of hospitality, or most of the building trades for example (ons, 2014). these norms can shift over time and indeed, some sectors have increased their proportion of self-employment, and particularly that based at home, as a consequence of structural changes in the employment market (baldry et al., 2007); perrons (2003) finds an increase in contractual home based employment in her study of new media for example. additionally, as employment has become increasingly precarious throughout the last few decades – as ‘jobs for life’ have been replaced by ‘portfolio careers’ in many industries (templer and cawsey, 1999) – the ‘gig economy’ has emerged. friedman (2014) describes the gig economy as that characterised by a series of gigs – short-term contracts, periods of employment and self-employment. similar to the idea that work is now more akin to a series of projects, the gig economy is likely to involve greater use of resourcefulness for work, including the use of the home for reasons of cost and convenience alongside lack of alternatives (wynarczyk and graham, 2013). these disparate rationales for hbb may have specific effects on operations and performance, but have not received systematic investigation in the literature. instead, our knowledge of the sector is inferred from a range of studies of hbb that have been prompted by different research agendas, and hbb is still referred to as if it is a single business type, operating as a distinct business model. consequently, the potential for understanding value creation and capture within this large sector of many economies remains hindered. we argue, therefore, that a central problem in terms of understanding hbb is the treatment of it as an archetype business model, even where there is acknowledgement of heterogeneity in the rationale underpinning empirical work (e.g. mason et al., 2011). consequently research outcomes, whilst considered implicitly generalizable, are in fact limited at best. this in turn compromises ability to inform policy and practice, and indeed, scholarly enquiry. in particular, the distinction between in the home and from the home is a critical one. other distinguishing features of the value capture and creation approach are also likely to have an impact on encouragement, support and resource needs and on the capacity of a hbb to prosper and grow. these may include the extent to which technology might enable the business, the personal lifestyle needs of the owner, the knowledge capital of owners, and the knowledge requirements of the businesses. a means of exploring the heterogeneity of business models amongst hbbs is thus required, and in the next section we propose a framework to that end. this is not the first attempt to draw distinctions between types of hbb. for example, newbery and bosworth (2010), reuschke (2016), walker and brown (2004), and shaw et al. (2000) have all identified that differences between hbbs exist. these previous categorisation approaches have all focused on demographic or industry sector categories though, such as variation by journal of business models (2018), vol. 6, no. 3, pp. 63-78 68 gender or within agriculture. they have not explored hbb within the wider economic landscape. our framework is described in the next section. a home-based business strategy framework the framework presented in figure 1 is framed within the entrepreneurship paradigm, distinguishing independent business operation from employee status. relating the framework to entrepreneurship seems reasonable based on the interpretation of ‘entrepreneurship’ as business ownership or self-employment, as per studies such as the global entrepreneurship monitor (for example xavier et al., 2013). in concert with felstead and jewson (2000), newbery and bosworth (2010) and wapshott and mallett (2012), the framework makes a distinction between in and from the home. this dimension is a crucial factor in the value capture of a hbb business model. figure 1 presents on its x-axis the distinction between work in the home and work from the home. hbbs may be categorised here as a point on a range, rather than as a binary choice between in and from, to acknowledge the diversity of experience between these points. a b&b for example is entirely based in the home, while an accountant may do some work in the home and some work in external locations (e.g., clients’ offices). a selfemployed translator might do all their trade in external locations (e.g., hospitals) but use the home as the business address and manage accounts and marketing, for example, in the home. the y-axis refers to some feature for inspection within hbb contexts. the framework thus affords sight of distinct models of hbb from which to engage in further inspection. figure 2 provides an example framework based on the distinguishing business model component of knowledge required for the business. given that previous hbb literature reports hbbs as operating within the knowledge/services sector (walker, 2003; dwelly et al., 2005; newbery and bosworth, 2010), knowledge (attainment and requirements) appears to be a central constituent of the hbb construct. the framework illustrated in figure 2 provides four related but distinct quadrants for inspection of hbbs in terms of their business-offering knowledge requirements. lines between quadrants are not rigid; rather they are permeable to illustrate the non-arbitrary nature of the distinctions between each, that the framework incorporates ranges rather than categories. using this framework it is possible to observe variables within. to exemplify we draw from a study of 30 hbbs. in this case, we use the framework illustrated in figure 2 that distinguishes knowledge requirements for the business by the in or from the home business model. the methodology we employed to test this framework is described in the next section. methodology the data used here to test the framework was collected as part of a larger study of uk hbbs. the sample was purposively sourced in order to assess the differing components of hbb business models with particular reference to the at or from home aspect of business operation. personal networks, social media and national business centres and some subsequent snowballing were employed to reach the sample. as per stake (2010), qualitative data was collected in the home high low from the home f ea tu re f o r in sp ec ti o n figure 1: basic hbb model framework in the home high low from the home k n o w le d ge r eq u ir ed f o r th e b u si n es s figure 2: in/from the home by knowledge requirements journal of business models (2018), vol. 6, no. 3, pp. 63-78 69 through in-depth, semi-structured interviews, which lasted between 30-75minutes, and included information about both the owner and the business. interviews were conducted at mutually agreed locations and times, and interviewees were assured confidentiality and anonymity. the sample included 30 participants of whom 13 were male and 17 female. this was a well-educated sample, with 24 participants having first degree or higher levels of qualification. summary data about the participants is given in table 1. participant gender (m/f) age (y= >45; o= <45) business 1 f y translation 2 f y jewellery manufacture 3 f o translation 4 f o artist 5 f o pilates instructor 6 f y toy manufacture 7 f y mobile hairdresser 8 f y retail 9 f y artist 10 f o retail 11 f o food manufacture 12 f o spiritual advisor 13 f y accountant 14 f y accessories manufacture 15 f y b&b 16 f o retail 17 f y training consultancy 18 m y translation 19 m y media freelancer 20 m y retail 21 m y management consultant 22 m y it 23 m o management consultant 24 m y software developer 25 m o training consultancy 26 m y property rentals 27 m o telecommunications 28 m u social media advisor 29 m o draughtsman 30 m y musician table 1: summary sample information the 30 hbbs from which participants were drawn are plotted in figure 3 and a broad idea of demographics, while not intended to imply representativeness, is provided for information by the use of nomenclature described in table 2. analysis while the data required for plotting within a framework comprises specific, discrete features (such as age, gender, education attainment level), interview content was also of use. eisenhardt (1989) stresses the use and utility of qualitative data to afford insight and theoretical development. in line with this, while discrete items were important in terms of the plotting of different hbbs and hbb owners into the framework, the interviews provided rich and nuanced context to each case. figure 3 affords us some sight of the nuances of different hbb models in terms of the knowledge requirements of the firms. in the home high low from the home k n o w le d ge r eq u ir ed f o r th e b u si n es s figure 3: mapped sample in/from the home by knowledge requirements male female myh24 fyh13 myh19 fyh1 myh18 myn22 male female myn20 mon29 fyh2 foh10 myh28 fyh14 foh11 fyh6 fon16 fyh9 foh4 fyh15 male female myh21 moh23 fyh17 foh3 mon25 male female myh21 moh23 fyh17 foh3 mon25 gender m=male f=female age group y= under 45 o= over 45 knowledge capital (owner) h=higher education n=no higher education examples male under 45 with higher education = myh1 male over 45 without higher education = mon2 table 2: key to figure 2 journal of business models (2018), vol. 6, no. 3, pp. 63-78 70 while this study was entirely qualitative and so none of the data plotted in figure 3 can be said to be representative of the hbb sector, it does illustrate several things about the sample. first, hbbs span a wide range of industries and heterogeneity is observable (as demonstrated by information in table 1). this sample is also illustrative of older and younger, male and female hbb ownership. in terms of knowledge requirements for the firms, there is a clear range, from technology and professional knowledge required through to low knowledge requirements (as illustrated by the spread of business types mapped in figure 3). in this sample it is clear that there is no direct link between knowledge capital of the owner and knowledge requirements for the business; in particular, amongst those firms with least knowledge requirements we have owners with high levels of knowledge capital, and indeed, some representation of the opposite, with an unqualified it consultant operating in this high tech knowledge sector for example (as defined by standard international trade classification (united nations, 2006). this may suggest a research agenda concerning the use of self-employment to mitigate lack of formal qualifications in knowledge sectors (where it may be difficult to obtain employment without requisite education). there is certainly a research agenda implied in terms of exploring why some highly educated people develop hbbs in low knowledge sectors. to illustrate further heterogeneity and to engage with the theory that hbb is particularly suited to those who require flexibility of home and work life, a ‘common group’ was selected for particular inspection. this group was ‘mothers’, and the choice of these was based on assertions throughout the research and policy literature that hbbs are a convenient and useful way of combining the dual roles of motherhood and work (walker and webster, 2004). to explore this, we applied an ‘ideal types’ analysis. weber (1904) proposes that ideal types inform typologies and represent abstract concepts that derive from the characteristics and elements of the object of study. to this end, by selecting one instance of the ‘type’ from each quadrant, diversity can be revealed, and theoretical development enabled (eisenhardt, 1989; eisenhardt and graebner, 2007). in this case, the ideal type selected from each quadrant had the common characteristics of being female, having higher education and being the primary carer for young children. a vignette for each is presented below. case 1 – high knowledge/skills requirement + in the home fyh13 is a qualified and chartered accountant with several years of experience working for one of the largest accountancy firms in the uk. she decided to become self-employed when she found commuting too inconvenient and time-consuming as she tried to manage full-time work and looking after her children. she chose to create a hbb because it is possible to do this in her industry and it would reduce her commuting time. case 2 – high knowledge/skills requirement + from the home fyh17 is an environmental consultant and auditor with two young children. she is educated to master’s degree level. consultancy is a norm within her industry sector. her self-employment registered address is her home address, however, she conducts all of her customer facing work in the buildings of the contracting organisation. she chose to start a hbb because this was the most cost effective business model available and would allow her to spend more time at home with her family. case 3 – low knowledge/skills requirement + in the home fyh6 is educated to degree level and has had several jobs in industry in the field of marketing. she makes memento toys for parents from the outgrown clothes of their babies and children, a business selected on the basis that she could operate it at home while caring for her two young children. the hbb model also allows her to keep costs low. case 4 – low knowledge/skills requirement + from the home fyh8 is a mother of two with a masters qualification in human resource management. after graduation she found it hard to find work and was turned down for several positions. shortly after she had her first child, she became self-employed in order to balance childcare with the continued requirement to work. consequently, she began selling household cleaning products door-todoor, and she manages her accounts and other administrative functions from the home. the hbb model enables her to keep costs low, she can choose her hours flexibly, thereby suiting her life requirements. journal of business models (2018), vol. 6, no. 3, pp. 63-78 71 discussion the proposed framework offers both theoretical and practical contributions. first, from a theoretical development perspective, this study advances a hbb business model framework which elucidates the importance of two key dimensions that are integral to the value creation and capture components of hbb: in and from the home, and the example variable of knowledge requirements of the business. this advancement of hbb theory may be especially valuable in light of changes to work in society norms. the framework also allows that causal relationships between dimensions may be tested. this offers potential to inspect how changes to work in society norms affect ‘working’ behaviours and expose (possible) unintended aspects of these, with particular reference to the importance of environmental factors for business model development and innovation (mansfield and fourie, 2004; pitelis, 2009). the dimensions, which refer to value creation/ capture components, made visible by the framework provide conceptual clarity in order to see a diversity of issues, experiences and needs within the heterogeneity. for example, based on findings in the employment literature, an increase in the numbers of hbbs in the high knowledge/skills requirement outside the home quadrant might be anticipated in response to structural change such as increased contractualisation of knowledge workers (e.g. baldry et al., 2007). equally, an increase in hbb owners may also be expected in the low skills outside the home quadrant as a result of changing industry norms such as the ‘gig economy’, that is, temporary short-term engagements with organisations. these two broad contexts of hbb have different support requirements, and implications for policy and scholarly research. inspection of low knowledge requirements within the home businesses provides a clear example of the value of the framework developed in this paper. previous research has found that those opting for the kinds of businesses included in this group may do so due to low barriers to entry (loscocco and smith-hunter, 2004; mason et al., 2011; thompson et al., 2009). in addition, these businesses operate in highly competitive markets and may have “little power to determine payment and deadlines, and are often reliant on a small number of clients” (thompson et al., 2009, p.228). consequently the importance of understanding this quadrant is considerable given that competitive advantage is central to firm survival (porter, 1996), and this is facilitated (or not) by the business model adopted (hedman and kalling, 2003; teece, 2010). the support implications for this type of hbb are not similar to those in other quadrants though. further, conventional wisdom would locate those with low skills levels in this quadrant, but as illustrated by the sample used for this paper, this is an unsafe assumption, with evidence of low skills businesses operated by people with high human capital. skills development support needs to engage with actual rather than assumed knowledge and skills levels of those operating hbbs in any of the quadrants identified if it is to be most effective. the framework also provides a basis on which to test integral dimensions, assess similarities and differences in what is often a homogenised understanding, or representation, of hbb (refer to massa and tucci, 2013, for a discussion on business model archetypes). in this paper we used higher education and mother as constants and found evidence of hbbs facilitating dual roles. the evidence was not consistent to one model of hbb though, and representation in each quadrant was found. this suggests that even where the value capture purpose of the hbb is consistent (from the perspective of the individual owner) – in these cases to facilitate dual roles and keep costs down – neither the experiences of the owners nor the types of hbb business models they adopted for this are homogenous and as such have different support and resource requirements. this clearer view of the differences between hbb models for working mothers might afford tailored and most effective support for their disparate hbbs. other examples of the affordance of greater inspection may be the much-asserted utility of technology for hbbs; this is especially pertinent given that the importance and use of technology may well vary between the quadrants. another might relate to business scale, providing a better idea of which types of hbb are represented by those who are self-employed and those who are employing others (and in either case, those that have the potential to grow). the framework also provides a way of classifying a hbb that, by recognising the issue of heterogeneity, makes the ability to compare like with like more feasible. this affords a more precise understanding of different types of hbb, with which to inform research activity, policy and those who seek to support hbb. journal of business models (2018), vol. 6, no. 3, pp. 63-78 72 to summarise, our framework illustrates that hbbs exhibit different business models based on their approach to the creation and capture of value. therefore, based on the differing categories that they occupy, hbbs are observable heterogeneous; they represent, in fact, meta-models (as per massa and tucci, 2013). recognising broad distinctions will enable future research to examine variation between the business models employed, and key issues that affect the different business models (for example technology and lifestyle factors). this may allow for the nuance required to understand additional issues in the hbb landscape such as work-life balance, for example. from these more refined categories, better-focused research to understand issues and explore experiences may be achieved. from there, better understanding can develop and be used to inform support and policy agents. furthermore, this research provides a conceptual framework from which we can theorise abstract factors which are likely to be embedded in the structure of hbb business models such as social class, social status, gender, intellectual, social and financial capitals and opportunity recognition/discovery. conclusion this paper has paid specific attention to the complex issue of activities classified as hbb. the study builds on existing hbb classifications such as those developed by newbery and bosworth (2010) and walker and brown (2004). this study develops insights into the value creation and capture approaches taken by hbbs. we demonstrate that for hbbs, the distinct category of location, that is in and from home may be viewed together with other business model components, to inform future research, including for the purposes of theory building as per eisenhardt (1989). in this case, while the theoretical assertion of the role of flexibility of hbb ownership can be useful for mothers is supported, the expression and type of hbb ownership is seen to vary considerably and as such, suggests heterogeneity of experience s within this group rather than homogeneity. the implications of this study for policy and practice are considerable. first, the number of hbb activities across the developed world appears to be continuing to increase. thus, awareness of this trend within support agencies is advised. second, the framework indicates that hbb is heterogeneous, including different business models. therefore clarity around the support offering for the different activities that are currently labelled as hbb would be beneficial. in particular, even amongst specific groups or for specific purposes, as illustrated in this paper by the example of working mothers, it is not safe to assume business model homogeneity. the potential of supported business development activities specifically for hbbs across different business models will be valuable. finally, with regards to practitioners, an awareness of the aspects of different hbb business models as per this framework would be beneficial as it may help those businesses and owners to alleviate some of the challenges identified. as with all studies, this study has limitations. first, the complexity of the existing research base is hard to reconcile given the heterogeneity of organisations studied. second, this paper provides only limited examples of the components of hbb that may be studied. this provides an opportunity for future research in the field to identify and map additional ones (e.g. technology, key partners, owner value propositions (i.e. lifestyle factors)). third, this study comprises a snapshot in time in terms of the hbbs studied and decisions regarding each firm and its business model may be realistically expected to change over time as per business model theory (morris et al., 2005; teece, 2010). this is an aspect worthy of future research. finally, this study has not addressed all of the business and owner characteristics of hbbs. given that hbbs are often solely owner-led, there is room for future research to examine how business models intersect with specific owner/business-related components and whether these constructs are discrete or overlap in the study of hbb. journal of business models (2018), vol. 6, no. 3, pp. 63-78 73 references amit, r. and zott, c. (2001). value creation in e-business. strategic management journal, 22 (6-7), 493-520 ammons, s. k. and markham, w. t. (2004). working at home: experiences of skilled white collar workers. sociological spectrum, 24 (2), 191-238 baden-fuller, c. and morgan, m. s. (2010). business models as models. long range planning, 43 (2-3), 156-171 baldry, c., bain, p., taylor, p., hyman, j., scholarios, d., marks, a., watson, a., gilbert, k., gall, g. and bunzel, d. (2007). the meaning of work in the new economy. london: palgrave beach, b. (1993). family support in home-based family businesses. family business review, 6 (4), 371-379 bis (2015) business population estimates for the uk and regions 2015 [online]. london: department for business innovation & skills. available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/ file/467443/bpe_2015_statistical_release.pdf [accessed dec 7, 2015]. bmg research (2013) small business survey 2012: businesses with no employees [online]. london: department for business, innovation & skills. available: https://www.gov.uk/government/uploads/system/uploads/attachment_ data/file/193548/bis-13-p180-small-business-survey-2012-businesses-with-no-employees.pdf [accessed jun 14, 2013]. bryant, s. (2000). at home on the electronic frontier: work, gender and the information highway. new technology, work and employment, 15 (1), 19-33 burton-jones, a. (2001). knowledge capitalism: business, work, and learning in the new economy. oxford: oxford university press business link (2012) starting a business from home [online]. available: http://www.businesslink.gov.uk/bdotg/ action/detail?itemid=1083765349&type=resources [accessed jun 11, 2012]. casadesus-masanell, r. and ricart, j. e. (2010). from strategy to business models and onto tactics. long range planning, 43 (2-3), 195-215 chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43 354-363 cifre, e., martinez-perez, d., beas, i. and llorens, s. (2002). teleworking in europe: some descriptive and research data. new information technologies and work psychology: european trends towards fitting individual, job and organisational characteristics to new technology, 16-27 crosbie, t. and moore, j. (2004). work-life balance and working from home. social policy and society, 3 (3), 223-233 daniel, e. m., domenico, m. d. and sharma, s. (2014). effectuation and home-based online business entrepreneurs. international small business journal, (ahead-of-print), dannhauser, c. l. (1999). who’s in the home office? (cover story). american demographics, 21 (6), 50 demil, b. and lecocq, x. (2010). business model evolution: in search of dynamic consistency. long range planning, 43 (2-3), 227-246 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/467443/bpe_2015_statistical_release.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/467443/bpe_2015_statistical_release.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193548/bis-13-p180-small-business-survey-2012-businesses-with-no-employees.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193548/bis-13-p180-small-business-survey-2012-businesses-with-no-employees.pdf http://www.businesslink.gov.uk/bdotg/action/detail?itemid=1083765349&type=resources http://www.businesslink.gov.uk/bdotg/action/detail?itemid=1083765349&type=resources journal of business models (2018), vol. 6, no. 3, pp. 63-78 74 deschamps, m., dart, j. and links, g. (1998). home-based entrepreneurship in the information age. journal of small business & entrepreneurship, 15 (1), 74-96 di domenico, m. (2008). ‘i’m not just a housewife’: gendered roles and identities in the home-based hospitality enterprise. gender, work & organization, 15 (4), 313-332 dwelly, t., maguire, k. and truscott, f. (2005) under the radar: tracking and supporting rural home based business [online]. london: commission for rural communities. available: http://www.liveworknet.com/uploads/radar.pdf [accessed apr 12, 2012]. ekinsmyth, c. (2011). challenging the boundaries of entrepreneurship: the spatialities and practices of uk ‘mumpreneurs’. geoforum, 42 104-114 ekinsmyth, c. (2013). managing the business of everyday life: the roles of space and place in ‘mumpreneurship’. international journal of entrepreneurial behaviour & research, 19 (5), 5-5 enterprise nation (2014) home business report [online] available: https://www.enterprisenation.com/blog/posts/ britain-s-army-of-2-9-million-homepreneurs-hold-key-to-local-economic-growth [accessed nov 12, 2014] felstead, a. and jewson, n. (2000). in work, at home: towards an understanding of homeworking. london: routledge felstead, a., jewson, n., phizacklea, a. and walters, s. (2000) a statistical portrait of working at home: evidence from the labour force survey [online]. london: centre for labour market studies, university of leicester. available: http://www.leeds.ac.uk/esrcfutureofwork/downloads/workingpaperdownloads/fow_paper_04.pdf [accessed jun 22, 2012]. friedman, g. (2014). workers without employers: shadow corporations and the rise of the gig economy. review of keynesian economics, (2), 171-188 gambardella, a. and mcgahan, a. m. (2010). business-model innovation: general purpose technologies and their implications for industry structure. long range planning, 43 (2-3), 262-271 garrett, r. k. and danziger, j. n. (2007). which telework? defining and testing a taxonomy of technology-mediated work at a distance. social science computer review, 25 (1), 27-47 hedman, j. and kalling, t. (2003). the business model concept: theoretical underpinnings and empirical illustrations. european journal of information systems, 12 (1), 49-59 johnson, m., christensen, c. and kagermann, h. (2008). reinventing your business model. harvard business review, 86 (12), 51-59 jones, e. (2012) the home business guide: a guide to starting and growing a business from home [online] available: https://www.gov.uk/government/publications/the-home-business-guide [accessed jun 14, 2013] jurik, n. c. (1998). getting away and getting by. work and occupations, 25 (1), 7-35 kapasi, i. and galloway, l. (2016). motivations and mitigating business limitations in scottish rural home-based businesses. local economy, 31 (3), 377-392 http://www.liveworknet.com/uploads/radar.pdf https://www.enterprisenation.com/blog/posts/britain-s-army-of-2-9-million-homepreneurs-hold-key-to-local-economic-growth https://www.enterprisenation.com/blog/posts/britain-s-army-of-2-9-million-homepreneurs-hold-key-to-local-economic-growth http://www.leeds.ac.uk/esrcfutureofwork/downloads/workingpaperdownloads/fow_paper_04.pdf https://www.gov.uk/government/publications/the-home-business-guide journal of business models (2018), vol. 6, no. 3, pp. 63-78 75 kujala, s., artto, k., aaltonen, p. and turkulainen, v. (2010). business models in project-based firms-towards a typology of solution-specific business models. international journal of project management, 28 (2), 96-106 lambert, s. c. (2015). the importance of classification to business model research. journal of business models, 3 (1), 49-61 leavy, b. (2010). a system for innovating business models for breakaway growth. strategy & leadership, 38 (6), 11-11 loscocco, k. and smith-hunter, a. (2004). women home-based business owners: insights from comparative analyses. women in management review, 19 (3), 164-173 magretta, j. (2002). why business models matter. harvard business review, 80 (5), 86-93 malmstrom, m. and johansson, j. (2017). practicing business model management in new ventures journal of business models, 5 (1), 1-13 mansfield, g. m. and fourie, l. c. h. (2004). strategy and business models-strange bedfellows? a case for convergence and its evolution into strategic architecture. south african journal of business management, 35 (1), 35-44 mason, c. m., carter, s. and tagg, s. (2011). invisible businesses: the characteristics of home-based businesses in the united kingdom. regional studies, 45 (5), 625-639 mason, c. m. and reuschke, d. (2015) home truths: the true value of home-based businesses [online]. glasgow: federation of small businesses. available: http://www.fsb.org.uk/policy/rpu/scotland/assets/home%20truths%20 -%20final.pdf [accessed feb 26, 2015]. massa, l. and tucci, c. l. (2013). business model innovation. the oxford handbook of innovation management, 20 (18), 420-441 mcgrath, r. g. (2010). business models: a discovery driven approach. long range planning, 43 (2-3), 247-261 morris, m., schindehutte, m. and allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research, 58 (6), 726-735 nansen, b., arnold, m., gibbs, m. and davis, h. (2010). time, space and technology in the working-home: an unsettled nexus. new technology, work and employment, 25 (2), 136-153 newbery, r. and bosworth, g. (2010). home-based business sectors in the rural economy. society and business review, 5 (2), 183-197 office of the chief economic advisor (2015) small business survey scotland topic report: home-based businesses [online]. available: http://www.gov.scot/resource/0048/00483744.pdf [accessed jun 6, 2016]. ons (2014) record proportion of people in employment are home workers [online]. office for national statistics. available: http://webarchive.nationalarchives.gov.uk/20160105210705/http://www.ons.gov.uk/ons/rel/lmac/ characteristics-of-home-workers/2014/sty-home-workers.html [accessed sept 26, 2017 2017]. osterwalder, a. and pigneur, y. (year) business models and their elements. in, 2002a lausanne, switzerland. 1-5 [accessed] http://www.fsb.org.uk/policy/rpu/scotland/assets/home%20truths%20-%20final.pdf http://www.fsb.org.uk/policy/rpu/scotland/assets/home%20truths%20-%20final.pdf http://www.gov.scot/resource/0048/00483744.pdf http://webarchive.nationalarchives.gov.uk/20160105210705/http://www.ons.gov.uk/ons/rel/lmac/characteristics-of-home-workers/2014/sty-home-workers.html http://webarchive.nationalarchives.gov.uk/20160105210705/http://www.ons.gov.uk/ons/rel/lmac/characteristics-of-home-workers/2014/sty-home-workers.html journal of business models (2018), vol. 6, no. 3, pp. 63-78 76 osterwalder, a. and pigneur, y. (year) an e-business model ontology for modelling e-business. in, 2002b bled, slovenia. 17-19 [accessed] osterwalder, a., pigneur, y. and tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of the association for information systems, 15 1-40 perrons, d. (2003). the new economy and the work–life balance: conceptual explorations and a case study of new media. gender, work & organization, 10 (1), 65-93 pitelis, c. n. (2009). the co-evolution of organizational value capture, value creation and sustainable advantage. organization studies, 30 (10), 1-47 porirua (2013) home-based business opportunities [online]. available: http://www.pcc.govt.nz/business/whychoose-porirua/home-based-businesses [accessed oct 10, 2013]. porter, m. e. (1996). what is strategy? harvard business review, november-december 61-78 reuschke, d. (2016). the importance of housing for self-employment. economic geography, 1-23 reuschke, d. and mason, c. (2015). urban home-based businesses: how distinct are the businesses and their owners? in: mason, c., reuschke, d., syrett, s.andvan ham, m. (eds.), entrepreneurship in cities: neighbourhoods, households and homes. (pp. 223-248). cheltenham: edward elgar publishing limited. ruiz, y. and walling, a. (2005) home-based working using communication technologies [online]. london: office for national statistics,. available: http://www.ons.gov.uk/ons/search/index.html?newquery=home-based+working+ using+communication+technologies [accessed]. seddon, p. b., lewis, g. p., freeman, p. and shanks, g. (2004). the case for viewing business models as abstractions of strategy. the communications of the association for information systems, 13 (1), 64-64 shafer, s. m., smith, h. j. and linder, j. c. (2005). the power of business models. business horizons, 48 (3), 199-207 shaw, h. g., shaw, a. s. and trache, h. (2000). the homeworking revolution: considering the property dimension. regional studies, 34 (3), 303-307 sirmon, d. g., hitt, m. a. and ireland, r. d. (2007). managing firm resources in dynamic environments to create value: looking inside the black box. academy of management review, 32 (1), 273-292 small business administration (2013) home-based businesses [online]. available: http://www.sba.gov/content/ home-based-business [accessed oct 10, 2013]. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43 (2-3), 172-194 templer, a. and cawsey, t. (1999). rethinking career development in an era of portfolio careers. career development international, 4 (2), 70-76 the scottish government (2015) sme reports highlight growth potential [online]. available: http://news.scotland. gov.uk/news/sme-reports-highlight-growth-potential-1c22.aspx [accessed jun 6, 2016]. http://www.pcc.govt.nz/business/why-choose-porirua/home-based-businesses http://www.pcc.govt.nz/business/why-choose-porirua/home-based-businesses http://www.ons.gov.uk/ons/search/index.html?newquery=home-based+working+using+communication+technologies http://www.ons.gov.uk/ons/search/index.html?newquery=home-based+working+using+communication+technologies http://www.sba.gov/content/home-based-business http://www.sba.gov/content/home-based-business http://news.scotland.gov.uk/news/sme-reports-highlight-growth-potential-1c22.aspx http://news.scotland.gov.uk/news/sme-reports-highlight-growth-potential-1c22.aspx journal of business models (2018), vol. 6, no. 3, pp. 63-78 77 thompson, p., jones-evans, d. and kwong, c. (2009). women and home-based entrepreneurship: evidence from the united kingdom. international small business journal, 27 (2), 227-239 united nations (2006) standard international trade classification [online] available: https://unstats.un.org/unsd/ publication/seriesm/seriesm_34rev4e.pdf [accessed dec 7, 2018] van gelderen, m., sayers, j. and keen, c. (2008). home-based internet businesses as drivers of variety. journal of small business and enterprise development, 15 (1), 162-177 vilhelmson, b. and thulin, e. (2016). who and where are the flexible workers? exploring the current diffusion of telework in sweden. new technology, work and employment, 31 (1), 77-96 walker, e. (2003). home-based businesses: setting straight the urban myths. small enterprise research, 11 (2), 35-48 walker, e. and brown, a. (2004). what success factors are important to small business owners? international small business journal, 22 (6), 577-594 walker, e. and webster, b. (2004). gender issues in home-based businesses. women in management review, 19 (8), 404-412 wapshott, r. and mallett, o. (2012). the spatial implications of homeworking: a lefebvrian approach to the rewards and challenges of home-based work. organization, 19 (1), 63-79 ward, m. and rhodes, c. (2014) small businesses and the uk economy [online]. london: library house of commons. available: www.parliament.uk/briefing-papers/sn06078.pdf [accessed 31 mar, 2015]. weber, m. (1904). objectivity in social science and social policy. in: shils, e. a.andfinch, h. a. (eds.), the methodology of the social sciences. (pp. new york, ny: free press. wynarczyk, p. and graham, j. (2013). the impact of connectivity technology on home-based business venturing: the case of women in the north east of england. local economy, 28 (5), 451-470 xavier, s. r., kelley, d., kew, j., herrington, m. and vorderwülbecke, a. (2013) gem 2012 global report [online]. london: global entrepreneurship research association. available: http://www.gemconsortium.org/docs/2645/gem2012-global-report [accessed aug 6, 2013]. young, l. (2013) growing your business: a report on growing micro businesses [online] available: https://www.gov. uk/government/uploads/system/uploads/attachment_data/file/197726/bis-13-729-growing-your-business-areport-on-growing-micro-businesses.pdf [accessed jun 14, 2013] https://unstats.un.org/unsd/publication/seriesm/seriesm_34rev4e.pdf https://unstats.un.org/unsd/publication/seriesm/seriesm_34rev4e.pdf http://www.parliament.uk/briefing-papers/sn06078.pdf http://www.gemconsortium.org/docs/2645/gem-2012-global-report http://www.gemconsortium.org/docs/2645/gem-2012-global-report https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/197726/bis-13-729-growing-your-business-a-report-on-growing-micro-businesses.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/197726/bis-13-729-growing-your-business-a-report-on-growing-micro-businesses.pdf https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/197726/bis-13-729-growing-your-business-a-report-on-growing-micro-businesses.pdf journal of business models (2018), vol. 6, no. 3, pp. 63-78 78 dr isla kapasi is a lecturer in entrepreneurship at the centre for enterprise and entrepreneurship studies in the business school at the university of leeds. her research interests include entrepreneurial diversity, micro firms and the motivations and experiences of entrepreneurs. she has published widely on these topics. professor laura galloway, phd, is a professor of business and enterprise at the edinburgh business school at heriot-watt university. she specialises in research in diverse contexts and entrepreneurial diversity. she has published widely on smes, entrepreneurship, leadership and education. about the authors journal of business models (2018), vol. 6, no. 2, pp. 78-83 78 accounting through the business model robin roslender1 christian nielsen2 1 dundee university and aalborg university 2 aalborg university and norway inland university of applied sciences abstract while the business model has become a popular concept in many academic disciplines, it has not been invited into the accounting sphere. a new development, integrated reporting, promises to challenge this, but unfortunately its conceptualisation of the concept is flawed. can the accountancy profession grasp value propositions to customers? please cite this paper as: roslender, r. and nielsen, c. (2018), accounting through the business model, journal of business models, vol. 6, no. 2, pp. 78-83 keywords: business models, value propositions, accounting, customers. introduction the business model concept has entered a growing number of academic disciplines during the past decade. its impact has been impressive, as might be expected of such a fundamental and far-reaching concept. there are exceptions to this general trend, however. the present paper focuses on the comparatively modest reception the business model concept has received in the accounting discipline and argues there is reason to believe this could change given the pivotal role the business model concept is recognised to play within integrated reporting (ir) development. unfortunately, this does not promise to be a mere formality as current thinking on the business model in relation to ir is partial (tweedie et al., 2018), and perhaps intentionally so (roslender and nielsen, 2018). in our view, this is well understood by those who commend a particular interpretation of ir, one that threatens to emasculate the concept’s capacity to radically reconfigure financial reporting in ways that might worry many of those who see themselves as the guardians of this project. journal of business models (2018), vol. 6, no. 2, pp. 78-83 79 approach this paper discusses the two fields of integrated reporting and a new visibility for customers in accounting and reporting. integrated reporting for some years ir has been touted as the new generic model for financial reporting. it is envisaged as replacing the now ageing corporate reporting model that emerged in the mid-1970s. concerns have been expressed about the latter model since the early 1990s but for several reasons these concerns have not prompted significant change. this is not least due to the inherently conservative nature of the global accountancy profession, and particularly its financial reporting constituency. twenty years ago, corporate reporting seemed likely to be replaced by some form of business reporting model (icas, 1999) but the resilience of corporate accounting practices, and its guardians, effected its survival to the present day. ir advocates must recognise the strength and influence of these guardians. ir originally emerged in south africa approaching fifteen years ago. at its simplest ir recognises the necessity to account for a wider range of capitals than does corporate reporting and to a similarly wider range of stakeholders. arguments for a stakeholder emphasis rather than the traditional shareholder emphasis have proliferated in recent years. ir originally emphasised the necessity to account to the environmental lobby (now the sustainability lobby). consequently, in its early years ir attracted enthusiastic support from these stakeholders, including the environmental accounting community. the admission that it was crucial to take the environment into account was portrayed as a much merited and potentially valuable advance. the environment was not to be the only additional capital to account for. both intellectual capital and human capital, together with social and relational capital, are identified as additional capitals to the more traditional emphasis on physical and financial capital. the identification of six capitals was crucial in the framework the international integrated reporting council (iirc) identified in its 2013 conceptual framework for ir. the iirc had emerged in 2010 to promote the ir concept, largely as envisaged by its south african creators, as a potentially feasible basis for a new financial reporting approach. the subsequent commercialisation of the ir concept was not to everyone’s liking, however, at the extreme being portrayed as a betrayal of the originally highly desirable admission of the need for a much more integrated approach to financial accounting and reporting. flower (2015) provides one of the most excoriating critiques of the iirc’s reconfiguration of the initial concept. such was the opprobrium conveyed in its pages, two stalwarts for a sustainability emphasis, adams and thompson, penned a pair of ‘let’s take a moment to think about this’ responses published alongside it. leaving aside the debate about the compromised purity of the ir concept in the hands of the iirc, which debate promises to run for some time yet, of more interest here is the way in which the iirc has enrolled the business model concept in its ir framework. the business model sits at its very core, something clearly evident in figure 2 (iirc, 2013:13). the six capitals are identified as inputs to the business model which sees them transformed into (six) outcome capitals. it is this transformation process that ir seeks to account for. this departs significantly from what corporate reporting presently seeks to account for, which might be conceptualised as the growth of the financial value of a business entity during an accounting period, as represented in the balance sheet. this financial value, and any increases (or indeed decreases) in it, is understood to be the rightful reward for those prepared to risk their capital in the venture itself. the iirc labels figure 2 the “value creation process”, intimating that accounting for the business model is in fact accounting for value creation by the enterprise. this is because the business model is best understood to provide a visualisation of value creation, i.e., how value is created by the business enterprise. from a conventional financial reporting perspective, value is created for shareholders, who see an increase (or decrease) in the balance sheet and in turn the market value of their shares, be they individuals or institutional shareholders. value creation in relation to a business model is not understood in this way, at least not in the first instance. value is now to be understood to be created for, and delivered to, customers via appealing value propositions, a core concept in the business model literature and alongside it the strategic management literature. since the 1980s the latter has reflected the journal of business models (2018), vol. 6, no. 2, pp. 78-83 80 dominant role customers have in shaping sustained competitive advantage. customers: a new visibility in accounting and reporting traditionally financial reporting has been shaped by the need to report on the enterprise to its owners. in recent decades it has been recognised that additional stakeholders have a range of different, and sometimes competing, interests in such financial information, as a result of which financial reporting has evolved in this direction. ir marks a further stage in this evolution, in some part as an effort to take into account the concerns of the broader society in respect of sustainability issues. more significantly, however, despite the suggestion that ir is based in a more inclusive reporting paradigm, continued emphasis on value capture, as the principal objective of shareholders, constitutes a major denial of fundamental change. while a business model as the visualisation of value creation and delivery is positioned at the core of the new reporting model, securing and demonstrating continued value capture remains the prime motivation for those charged with reporting enterprise performance. the intellectual capital literature identifies customers and customer relationships as major constituents of relational capital, together with brands and reputation. long acknowledged as key assets of enterprises, their importance has escalated in recent decades. the generality of intellectual capital’s constituents, and prior to this many aspects of goodwill, have not been incorporated within the balance sheet despite their importance, for reasons widely understood by the accountancy profession, managers and shareholders alike. these reasons make sense within prevailing regulatory framework guiding financial reporting. although it is possible to identify examples of accounting for customers, these have been pursued within the managerial accounting literature. in some cases, such accounting has been indirect, such as in accounting for quality or target costing. work at the interface between managerial accounting and marketing management has produced a literature that focuses on documenting (=counting) a variety of customer attributes such as customer retention, customer referral and customer engagement (with a parallel brand-oriented literature). many accounting practitioners and academics would question whether such developments might be considered as accounting despite their utility for enterprise managements. key insights accounting through the business model given the escalating importance of customers their relative invisibility within financial accounting and reporting is problematic. as long as the pursuit of robust balance sheet valuations prevails there seems little likelihood the impasse can be avoided. for this reason, the emergence of ir is to be welcomed. the reconceptualization of accounting and reporting it signposts is, however, potentially so fundamental it is likely to evince powerful resistance among the accountancy professionals. nielsen and roslender (2015) offered the following characterisation of a business model: [a] description of an organisation’s concept for earning ‘money’ [which] identifies the platform that connects value creation and value delivery between the organisation, its stakeholders, and its customers in order to capture value. (p.265). this characterisation consciously downplays the significance of accounting for value capture on the grounds that despite its various failings, the prevailing approach to financial reporting fulfils this role satisfactorily. the manner in which the guardians of financial reporting have sought to enrol the business model concept within ir marks a further attempt to refurbish a value capture emphasis, which is understandable and legitimate. in our view, however, this is not the most beneficial use of the business model concept within accounting. the business model concept promises to facilitate accounting for value creation for and delivery to customers, which constitute generic activities that should now be recognised as posing the principal challenge to the accountancy profession, in tandem with the other management functions. a major dimension of this challenge is that financial values, which have for many generations provided the main preoccupation for those responsible for balance sheet preparation, will not be relevant to this exercise. equally, the traditional journal of business models (2018), vol. 6, no. 2, pp. 78-83 81 concern with costs that underpins a major part of income statement construction, and the greater part of cost and management accounting practice, is similarly of little relevance. in this context the ‘value for money’ aphorism that gained such currency a generation ago and continues to inform common-sense financial thinking, partially captures the transformation that is being signalled here. its usual meaning is associated with an efficient use of financial resources, inter alia the limited spending power of individuals. however, on a daily basis many individuals engage in expenditures that contradict the pursuit of demonstrable financial value, preferring instead to secure a vast range of intangible or emotional value. why else would so many people willingly exchange five euros for a cup of coffee? the concept of the value proposition sits at the heart of business model thinking, something clearly evident in the case of osterwalder and pigneur’s iconic business model canvas (osterwalder and pigneur, 2010). although it is easy to identify a variety of concrete business models explicitly intended to deliver financial as opposed to emotional value for money, ryanair providing a powerful exemplar, the majority of contemporary business models are consciously (or sometimes not) informed by a recognition that the customer is normally seeking some level of emotional value from what is made available for them by the enterprise. successful enterprises are those that fashion value propositions that satisfy the demands of their customers, albeit not at any cost. excessive pricing will normally provide a degree of disincentive to purchase on the one hand and the motivation for competitors, new and old, to enter the market. this said, the margins that are at issue are not as sensitive as those asserted to characterise the competition existing between enterprises offering low cost value propositions, where cost leadership organises the marketplace. after porter (1985), attractive product differentiation is likely to outweigh potential cost savings, viewed in absolute if not relative terms. this set of business model related concepts is barely visible within the ir framework. equally they are not part of the vocabulary of financial accounting and reporting, and as previously suggested are likely to engender discomfort among many within that particular community. from our perspective it is these ideas that should be recognised as constituting what should now be accounted for in addition to what is presently the focus of financial accounting and reporting. this is quite distinct from what ir is represented as seeking to achieve. ir is touted as a possible successor to the prevailing mode of corporate reporting, a replacement that, as we have identified earlier, continues to privilege the value capture needs of shareholders, albeit not to the exclusion of some other stakeholders, some of whom are already being provided for to a degree. there is a strong argument that ir as presently envisaged by the iirc and its supporters entails little beyond the provision of a marginally more inclusive balance sheet, based in the six generic capitals that are either enhanced, diminished or transformed in the course of the value creation process, as visualised in the enterprise’s business model. there will need to be an increased level of narrative reporting of these latter processes since it seems unlikely that conventional hard numbers will be able to capture what has been accomplished, with significant emphasis on “what has been accomplished”. stripped right down, ir is principally focused on the production of historical information and is thus simply at odds with the future emphases of the business model concept as understood by most of those who commend it. discussion and conclusions the phrase accounting through the business model is used here to focus attention on the challenge of accounting for value creation for and delivery to customers rather than accounting for value capture for shareholders. in so doing, we are conscious of the objection that we are doing little more than exchanging one privileged stakeholder for another, albeit in the case of customers a very large stakeholder. it is important to affirm that what is envisaged entails something different to accounting for customers, which as was previously noted is already being pursued as a core component of strategic management accounting. what is now to be accounted for is the intangible or emotional value, the pleasure, the positive sensations that customers experience as they embrace and enjoy appealing value propositions, arguably the antithesis of what the accountancy profession has, for generations, based its jurisdiction on. this is not a task that the accountancy profession can accomplish on its own, in much the same way that target cost management was quickly recognised to require inputs from a range journal of business models (2018), vol. 6, no. 2, pp. 78-83 82 of management functions, none of which was prime despite the importance that value engineering plays in all such exercises. the objection that, in effect, accounting through the business model demands that accountants quantify the unquantifiable, is likely to spring to the minds of many. to some degree this objection has already been partly rejected by sections of the profession by virtue of their uptake of narrative approaches to reporting and disclosure, something likely to expand further in an era of ir. accounting through the business model in this way provides an opportunity for further innovation, including the fabrication of customer self-narratives focused on the demand for and supply of appealing value propositions as an exercise in the co-creation of value as recently identified within the marketing management literature. journal of business models (2018), vol. 6, no. 2, pp. 78-83 83 references adams, c. a. (2015). “the international integrated reporting council: a call to action”, critical perspectives on accounting, 47:23-28 flower, j. (2015). “the international integrated reporting council: a story of failure”, critical perspectives on accounting, 47:1-17 icas. (1999). business reporting: the inevitable change, edited by v beattie, edinburgh: institute of chartered accountants of scotland. iirc. (2013). the international <ir> framework, london: international integrated reporting council. nielsen, c. and roslender, r. (2015). “enhancing financial reporting: the contribution of business models”, british accounting review, 47(3): 262-274. osterwalder, a. and pigneur, y. (2010). business model generation: a handbook for visionaries, game changers and challengers, hoboken nj: john wiley & sons. porter, m. (1985). competitive advantage: creating and sustaining superior performance, new york: the free press. roslender, r. and nielsen, c. (2018). unlocking customer value: a critical appraisal of integrated reporting, critical perspectives on accounting (forthcoming). thomson, i. (2015). “but does sustainability need capitalism or an integrated report? a commentary on ‘the international integrated reporting council: a story of failure’”, critical perspectives on accounting, 27:18-22. tweedie, d., c. nielsen and n. martinov-bennie. (2017). “evolution or abandonment? contextualising the business model in integrated reporting”, australian accounting review (eprint)., journal of business models (2018), vol. 6, no. 2, pp. 90-95 90 re-combining value chains: cross-industry cooperation for business model innovation ph.d. jon williamsson ph.d. gabriela schaad gothenburg university, school of business, economics and law abstract the interplay between the value chain and business model innovation is a comparatively overlooked topic in business model literature. this paper explores how incumbents create a business model for biodiesel production through the re-combination of established value chains. the case study highlights the importance of ownership and cross-industry cooperation for business model innovation. please cite this paper as: williamsson, j. and schaad, g. (2018), re-combining value chains: cross-industry cooperation for business model innovation, journal of business models, vol. 6, no. 2, pp. 90-95 keywords: business model innovation, value chain, governance introduction the introduction of the business model into mainstream strategy research meant that the concept had to be contrasted with the existing analytical toolbox (cf. teece, 2010). one of the key pre-existing concepts that has direct implications for the function of the business model is the external value chain. the importance of the value chain for the development of business models was pointed out in early research (e.g. timmers, 1998) and the role of the value chain has been highlighted in work on the interaction between network ties and business model innovation (allee, 2009; oskam et al., 2018). vice versa, it has been noted that business model innovation may influence what role a firm plays in a value chain (giesen et al., 2007) and that there is potential to use business models to modify or improve value chains (linder and cantrell, 2000; tikkanen et al., 2005). however, the topic is still comparatively poorly understood. there are thus calls for research that explores the role that the value chain plays in relation to business model innovation in general (zott et al., 2011), and for business model innovation for sustainable innovations, in particular (boons and lüdeke-freund, 2013). journal of business models (2018), vol. 6, no. 2, pp. 90-95 91 a topic of importance in relation to value chains and business model innovation is the maturity of the firm (cf. giesen et al., 2007). incumbents possess resources and knowledge that allow them to scale up operations quickly, even in the more challenging case of sustainable innovations (hockerts and wüstenhagen, 2010). they also already have existing value chains in place. however, due to phenomena such as dominant logic and path dependence, incumbents face particular challenges associated with the development and implementation of new business models (chesbrough, 2010; massa and tucci, 2013). incumbents therefore often choose to experiment with business models externally through for example subsidiaries or joint ventures – options that offer both flexibility and control while limiting the risk exposure of other operations (cf. markides, 2013; visnjic kastalli and van looy, 2013). ventures building on cross-industry cooperation are of particular interest to incumbent firms since such ventures provide access to a wider resources base (financial, physical and intellectual) compared to when the firm is only active in its original business sector (cf. giesen et al., 2007). cooperation between enterprises can serve as a mechanism that promotes organizational learning, especially regarding the transfer of tacit knowledge (tamer cavusgil et al., 2003). cooperation thus facilitates the use of complementary assets and expertise between firms. through cooperation, firms can improve their ability to manage complex relationships and share risks associated with, for example, policy or product development (schibany et al., 2000). however, cooperation may also entail the establishment of complex production systems, which frequently necessitates substantial investments in new business infrastructure. moreover, for cooperation to function well, involved parties need to find common goals and incentives while building up trust (hoejmose et al., 2012). this means that the formation of the business model and the accompanying value chain constitutes a considerable part of the managerial work that goes into the building of a joint venture. despite enjoying the benefits associated with a more mature resource base, the development and implementation of a business model is still a considerable challenge for established actors (markides, 2013). hence, the purpose of this paper is to explore the role that the value chain plays in business model innovation when incumbent firms cooperate to establish joint ventures. firms that operate within the field of sustainable innovation are under particular pressure to establish a suitable business model (boons et al., 2013). sustainable innovations are often costly to the point where they are not competitive, successful ventures in this sector thus offer the opportunity to study critical success factors. an example of successful cross-industry cooperation is sunpine, a manufacturer of pine-based biodiesel, bio-oil and resin. the main product, pinebased biodiesel, is a sustainable alternative to fossil diesel fuel as it is carbon neutral in the sense that it does not add co 2 to the atmosphere. sunpine operates from piteå in northern sweden. since starting production in 2010, the company reached a turnover of sek 950 million in 2016, producing 2 % of all diesel sold in sweden during that year. sunpine claims that its biodiesel reduced co 2 emissions from diesel vehicles with more than 1 125 000 tons1 between 2010 and 2016. the company was founded through a cooperation between sveaskog (sweden’s largest forestry company, owned by the swedish state and holder of a 25 % stake in sunpine), södra (sweden’s largest forestry cooperative, producing mainly timber goods and pulp products, also holding a 25 % stake), preem (a petroleum corporation, owning oil refineries and a network of petrol stations in sweden, likewise with a 25 % share) and kiram (a swedish biotechnology developer owning a 15 % share). four years after starting production, a new player got involved. lawter, a global chemical company specialized in pine-based chemicals, became a partner by acquiring 10 % of sunpine. together these companies possessed the intellectual and process-related resources necessary to develop the products that are currently offered. furthermore, they represent the entire value chain from forest-based raw material to the consumer product. södra provides sunpine with crude pine oil, a residue originating from the production of pulp from forest resources, which in turn are provided by sveaskog. kiram represents the interests of the founder and inventor, who developed the initial prototype, whereas lawter provides technological and process-related know-how as well as strategic insights. preem processes the pine-based diesel in its refineries, mixing it with ordinary diesel into a blend consisting of at least 50 % renewable pine diesel. through preem’s network of petrol stations, the final product is then 1 sunpine public presentation from 2017. journal of business models (2018), vol. 6, no. 2, pp. 90-95 92 sold to end-consumers all over sweden. consequently, the board of sunpine joins representatives from the main suppliers of the raw materials used in the production, the technology inventor, and the distributor of the final product. it is worth noting that even though sunpine is highly successful, much of its success can be attributed to the environmental policies implemented in sweden with regards fuel taxes (cf. palgan and mccormick, 2016). without high taxes on fossil fuels bio-diesel would not be a competitive alternative. approach the interaction between the supply chain and the business model is a topic linked to managerial sensemaking about strategic issues (cf. chesbrough, 2010; tikkanen et al., 2005). case studies are considered an appropriate approach when exploring, analyzing and describing how individuals, such as managers, make sense of complexity (woodside and wilson, 2003), making it a suitable research approach for this study. by allowing the researcher to address “why” and “how” questions in a broad and explorative manner, case studies enable the researcher to map contextual factors and help creating a picture of the logic behind a specific course of events (yin, 2003). for this paper, we relied on interviews with business representatives involved in the founding and management of sunpine, including its ceo and the inventor that developed the technology around which the firm is built. the interviews were recorded and transcribed with a low level of inference. in addition, secondary material such as annual reports, news and press material was gathered and used both for the formulation of the interview questions and for establishing a better understanding of the case firm’s context and development. the analysis builds on sunpine being a paradigmatic case (flyvbjerg, 2006) of a successful cooperation between incumbent firms that collectively develop a business model through the pooling of resources. key insights as is often the case with innovation processes, the development of sunpine’s business model was neither quick nor simple. both value creation (i.e. the production processes) and the value offer (i.e. what type of products and what properties those products should possess) have changed over time. the idea behind the technology that sunpine builds on was originally conceptualized during the late 1990s by the inventor who is still represented in the firm through ownership of kiram. in 2005, the idea was tested in a small experimental plant with promising results. with the support of a financial service provider, the inventor engaged with several potential investors and established a ‘dream team’ of representatives from the value chain that would become the base of sunpine’s business model. these investors had skills and resources that were used to iron out any remaining problems related to the complex production process, gradually increasing the efficiency of the production line. in 2010, a full-scale commercial production plant was opened and after some fine-tuning, plans were developed to complement operations with new types of production inputs as well as new outputs. the modifications meant that in 2016 sunpine could utilize two variants of the main raw materials and produce not only the two original products, pine-based diesel and bio-oils, but also resins (the result of the cooperation with lawter) and turpentine. this development was the result of the capacity that the owners brought into sunpine and is tightly linked to the value chains that these firms already had in place. making sunpine into a node for the value chains of its owners was a strategy pursued by the founder, who had the explicit goal to make sunpine part of a value chain that the owners would want to see grow at a rapid pace. hence, the business model of sunpine can be said to be the result of an interweaving of the different value chains that the owners already were engaged in. analyzing sunpine we found three key lessons related to the success of the firm and the interplay between value chains and business model innovation for new joint ventures. first, the owners showed a common understanding not only of sunpine’s technology, but also of the potential of the resources that sunpine and its owners jointly possessed. this meant that it was possible to develop the business model further while increasing the yield of already existing value chains and introducing new partners without hurting the existing constellation. the common understanding also meant that it was important to the investors to keep key patents within sunpine. this arrangement provided clarity in relation to the management of patent-related issues. second, the case reveals the importance of journal of business models (2018), vol. 6, no. 2, pp. 90-95 93 active and smart – both in the sense of being technologically savvy and strategically astute – ownership. for example, preem possesses expertise in relation to both present and future requirements for diesel fuels, as well as the demands of end-consumers. this is knowledge that could take considerable time and effort to acquire, and especially so for an inventor with no previous experience of the fuel market. hence, by having all the key players from sunpine’s value chain on the board, the strategic management team has an advantage when analyzing upand downstream trends. furthermore, it increases the quality of communications between these key stakeholders. here the inventor’s ability to recruit a ‘dream team’ of dedicated actors that were willing to have ‘skin in the game’ appears to be a considerable success factor, both in relation to business model development and for the technological development of the product. third, each of the firms that eventually became owners of sunpine has a longterm dedication to sustainability and sees sunpine as a promising way for them and for society to move to a bio-based economy. sunpine thus represents a good fit both with existing value chains and with the greater strategic scope of each of the owners. the dedication to sustainability is also mirrored in the long-term contracts that the backers have entered. since the partners needed to be patient during the start-up and development phase, the long-term dedication to both sustainability and to sunpine was portrayed as crucial for the success of the firm. additionally, the dependence of sunpine on environmental policies meant that there were, and still are, concerns about the political risks associated with the firm’s future. without the dedication to the vision of a future bio-based economy, the constellation behind the firm, as well as its business model, would most likely have been quite different. discussion and conclusions studying the role that the external value chain played in relation to business model innovation for sunpine, we see an interaction that can be characterized as a process of adaptation and mutual strengthening. the initial business model that the inventor brought to the negotiation table was dependent on sunpine purchasing raw materials from existing supply chains dominated by large incumbent actors and selling its products to established industry leaders. this is a situation that, due to sunpine’s anticipated low bargaining power, squeezes profit margins. furthermore, sunpine would be under constant threat of elimination through encroachment on both the supplier and the customer side. by making suppliers and customers into key stakeholders whose interests are constantly present in the board room, the inventor assured that the growth of sunpine is something that is beneficial for actors located both upand downstream in the value chain. consequently, the investors will support the development of sunpine’s business model in ways that both capitalize on, as well as strengthen, their own external value chains. the case study thus shows the importance of ‘smart capital’, i.e. investors that have an interest in contributing with their knowledge and resources in order to make the firm grow (cf. bjørgum and sørheim, 2015), as well as the necessity to shape the business model of joint ventures in a way that makes the growth of the firm into something that not only generates revenue in the form of dividends but also strengthens the value chains of the investors. in relation to business model research, this case study thus highlights the importance of ownership and the role that ownership plays in relation to the formation of both business models and new value chains. the case study therefore illustrates the importance of good governance (cf. chesbrough, 2010; zott and amit, 2010) and the weight that this should be given when incumbent actors are involved in business model innovation for joint ventures. as pointed out in existing literature, the business model perspective on entrepreneurship and management has come to influence research on sustainable innovation to a degree where the commercialization process for sustainable innovations has turned into a matter of finding and establishing a suitable business model (boons and lüdeke-freund, 2013). hence, concerning sustainable innovation, our case study shows how a shift to a more sustainable technology is facilitated by cooperative business model development.  the case not only shows the possibilities and potential pitfalls of cross-industry partnerships conducted by incumbents with quite different scale and scope, but it also indicates that such collaborations may contribute considerably to a more sustainable future. finally, the study shows that this development can be achieved through a combination of cross-industry cooperation and relatively simple but powerful policy incentives, such as taxes on fossil fuels and tax exemptions for sustainable alternatives. journal of business models (2018), vol. 6, no. 2, pp. 90-95 94 references allee, v., 2009. value-creating networks: organizational issues and challenges. learn. organ. 16, 427–442. https:// doi.org/10.1108/09696470910993918 bjørgum, ø., sørheim, r., 2015. the funding of new technology firms in a pre-commercial industry – the role of smart capital. technol. anal. strateg. manag. 27, 249–266. https://doi.org/10.1080/09537325.2014.971002 boons, f., lüdeke-freund, f., 2013. business models for sustainable innovation: state-of-the-art and steps towards a research agenda. j. clean. prod. 45, 9–19. https://doi.org/10.1016/j.jclepro.2012.07.007 boons, f., montalvo, c., quist, j., wagner, m., 2013. sustainable innovation, business models and economic performance: an overview. j. clean. prod. 45, 1–8. https://doi.org/10.1016/j.jclepro.2012.08.013 chesbrough, h., 2010. business model innovation: opportunities and barriers. long range plann. 43, 354–363. https://doi.org/10.1016/j.lrp.2009.07.010 flyvbjerg, b., 2006. five misunderstandings about case-study research. qual. inq. 12, 219–245. https://doi.org/ 10.1177/1077800405284363 giesen, e., berman, s.j., bell, r., blitz, a., 2007. three ways to successfully innovate your business model. strateg. leadersh. 35, 27–33. https://doi.org/10.1108/10878570710833732 hockerts, k., wüstenhagen, r., 2010. greening goliaths versus emerging davids theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. j. bus. ventur. 25, 481–492. https://doi.org/10.1016/ j.jbusvent.2009.07.005 hoejmose, s., brammer, s., millington, a., 2012. “green” supply chain management: the role of trust and top management in b2b and b2c markets. ind. mark. manag. 41, 609–620. https://doi.org/10.1016/j.indmarman.2012.04.008 linder, j., cantrell, s., 2000. changing business models: surveying the landscape. accent. inst. strateg. chang. 1–15. https://doi.org/10.4018/978-1-59904-939-7.ch249 markides, g.g., 2013. business model innovation: what can the ambidexterity literature teach us? acad. manag. perspect. 27, 313–323. massa, l., tucci, c.l., 2013. business model innovation, in: dodgson, m., gann, d.m., phillips, n. (eds.), the oxford handbook of innovation management. oxford university press, oxford, pp. 420–441. oskam, i., bossink, b., de man, a.p., 2018. the interaction between network ties and business modeling: case studies of sustainability-oriented innovations. j. clean. prod. 177, 555–566. https://doi.org/10.1016/j.jclepro.2017.12.202 palgan, y.v., mccormick, k., 2016. biorefineries in sweden: perspectives on the opportunities, challenges and future. biofuels, bioprod. biorefining 10, 523–533. https://doi.org/10.1002/bbb.1672 schibany, a., hämäläinen, t.j., schienstock, g., 2000. interfirm co-operation and networking: concepts, evidence and policy. tamer cavusgil, s., calantone, r.j., zhao, y., 2003. tacit knowledge transfer and firm innovation capability. j. bus. ind. mark. 18, 6–21. https://doi.org/10.1108/08858620310458615 journal of business models (2018), vol. 6, no. 2, pp. 90-95 95 teece, d.j., 2010. business models, business strategy and innovation. long range plann. 43, 172–194. https://doi .org/10.1016/j.lrp.2009.07.003 tikkanen, h., lamberg, j.-a., parvinen, p., kallunki, j.-p., 2005. managerial cognition, action and the business model of the firm. manag. decis. 43, 789–809. https://doi.org/10.1108/00251740510603565 timmers, p., 1998. business models for electronic markets. j. electron. mark. 8, 3–8. https://doi .org/10.1080/10196789800000016 visnjic kastalli, i., van looy, b., 2013. servitization: disentangling the impact of service business model innovation on manufacturing firm performance. j. oper. manag. 31, 169–180. https://doi.org/10.1016/j.jom.2013.02.001 woodside, a.g., wilson, e.j., 2003. case study research methods for theory building. j. bus. ind. mark. 18, 493–508. https://doi.org/10.1108/08858620310492374 yin, r., 2003. case study research: design and methods, third. ed. sage, thousand oaks. zott, c., amit, r., 2010. business model design: an activity system perspective. long range plann. 43, 216–226. https://doi.org/10.1016/j.lrp.2009.07.004 zott, c., amit, r., massa, l., 2011. the business model: recent developments and future research. j. manage. 37, 1019–1042. https://doi.org/10.1177/0149206311406265 journal of business models (2020), vol. 8, no. 2, pp. 101-114 101 developing new sustainable strategy: the struggle of small and medium swedish contractors companies to experiment with business models. martine buser1 and veronica carlsson2 abstract purpose: this paper analyses the efforts and challenges met by small and medium contractors to develop new business models when struggling to implement retrofit solutions for single house owners’ renovation. design/methodology/approach: the paper builds on a four years action research project with 21 swedish contractors from the gothenburg region testing the business model canvas to develop energy efficient solutions. the project method includes 67 interviews with craftsmen and their customers, 18 workshops gathering the companies in two groups to develop new sustainable business models and 16 shadowing of visits to their customers. findings : our study underlines how smes contractors concentrated on their technical core business tend to underestimate their customer relationship. both customer segments and relationships escape from formalisation as these companies do not dare to exclude any client and are inclined to reduce customer relationship to personal interaction. besides, these project base companies are challenged by the blocks presented by the canvas and struggle to match the model with their own organisation. original value: differently to most research on business models and sustainability this paper addresses the concrete difficulties construction smes face when implementing business models. please cite this paper as: buser m. and carlsson, v. (2020), developing new sustainable strategy: the struggle of small and medium swedish contractors companies to experiment with business models., vol. 8, no. 2, pp. 101-114 keywords: business models, constructions smes, sustainability acknowledgment : the paper draws on a 4 years phd project funded by the swedish government research council for sustainable development formas. 1 construction management, architecture and civil engineering, chalmers university of technology, gothenburg sweden, buser@chalmers.se 2 örebro university mailto:buser@chalmers.se journal of business models (2020), vol. 8, no. 2, pp. 101-114 102 introduction the social and legislative focus on sustainability has pressed the construction sector to optimise and innovate in term of both material and business processes. as buildings represent 30% of the total energy consumption, sweden, following eu regulation has formulated national targets regarding energy and sustainability, but is facing challenges regarding their implementation (boverket 2020). while new built is adapting to new regulations, renovation of existing building stock is lagging behind. in particular properties built between 1950 and 1975, representing 43% of the swedish dwelling are in need of renovation (boverket 2015, scb 2014). houses of this period are outdated compared to today material efficiency, and technical components such as ventilation systems, bathrooms, laundry, drainage, windows or roofing are reaching the end of their lifetime expectancies. whereas large real estate and contractor companies are taking care of large housing development, the responsibility of renovation scope for single-family houses is let to their owners who usually mandate small and medium sized enterprises (smes) to perform the work. however, the majority of these renovations aims at increasing comfort and aesthetic design to the detriment of energy efficiency solutions (bravo et al. 2019). the situation seems to be similar to other european countries where energy renovation has still not emerged as common practice (bartiaux et al. 2014) and smes contractors are failing to substantially increase sustainability awareness among their customers (naef et al. 2019). to account for this situation, the lack of competences regarding new technology and innovation has often been put forward. however, retrofit can be successfully achieved by using existing technology, suggesting that the lack of retrofit is not only a technical challenge related to innovation but also a problem related to the market. to explore retrofit from a market perspective, we chose to look at how craftsmen engaged in single family house renovation could increase retrofit testing the use of business models. this approach enables to map the actual practices of a company and enable changes that requires crosscutting activities, inter and extra-organisational integration and focus on the customers’ needs. based on an action research method, financed by formas; the project aimed at supporting small contractors’ companies from the gothenburg region experimenting with osterwalder and pigneur’s (2010) business model canvas, to develop their activities towards new energy efficient solutions for their customers. drawing on the results of this four years project (20132017) gathering 21 small companies active in different trades, the purpose of the present paper is to investigate how concretely these companies could benefit from using the canvas, identify the challenges they met in doing so and assess the potential of bmc to improve these companies’ offers in term of energy efficiency solutions. the paper is organised as follows: the next section explains what characterises a bm, bmc and sustainable bm and its constituting elements as well as the specific issues related to their applications for smes and energy efficient solutions. next come the method and the empirical findings. a discussion and a derived conclusion end the paper theoretical frame single house energy efficient renovation and the construction sector so far, the absence of success encountered by retrofits for this single houses has often been explained by the focus on technical aspects. the contractor smes who should promote and carry these new forms of renovations are said to be inadequately prepared to develop and adapt the latest technical solutions to their current practices (killip 2013). not only do they lack the full set of skills and resources to deal with the technologies, but they also have problems to identify and select among the possibilities offered by these new developments and adapt them to their own businesses (mokhlesian and holmen 2012). moreover, their suppliers seem to be not sufficiently supportive to promote these solutions (kilip et al. 2020). under pressure to deliver within tight time frames, the contractors tend to offer and repeat a set of standardized solutions to their customers (archtnicht and madelner 2014). so, even if a company is willing to take risks and engage in an innovative solution for a specific client, it does not imply that this solution will lead to a long-term change of practices. as the contractor moves from one project to the next, the routine is to revert to established and journal of business models (2020), vol. 8, no. 2, pp. 101-114 103 conservative practices (killip 2013). this practice is reinforced by the apparent singularity of each of the projects (buser and carlsson 2017). in order to reshape the existing built environment towards eus sustainability targets (eu action plan 2020) there is a need for innovative solutions (geissdoerfer et al. 2018). to provide sustainable solutions construction companies need to change their practices especially towards integrating new technologies and products to their actual offers (mokhlesian and holmen 2012). however, the construction smes have not the reputation of being especially dynamic in term of innovation. rather they demonstrate a business as usual attitude likely to miss the escalating environmental performance requirements (hardie and newell, 2011). these smes seem to be insufficiently equipped to develop and adapt to new markets and may miss the benefit from the upcoming increase of opportunities (hardie and newell, 2011). researchers have highlighted the importance of clients and building standards to incite and support smes in their innovation process (hardie and newell, 2011¸håkansson and ingemansson 2012). ). håkansson and ingemansson (2012) identified that the collaboration with clients represents the most important driving forces for renewal in the construction industry, however the authors seems to take for granted that interested customers are available. recent studies show that successful renovations are clearly associated so far with the rather rare proactive house owners (risholt and berker 2013, galvin and sunikka-blank, 2014) and the result of engaged and active milieu friendly actors with a high level of knowledge (fawcett and killip 2014). while mainstream house owners are associated with lack of information and technical knowledge to carry out retrofit (mortensen et al. 2014). in addition, they rather address their investments to other forms of renovation triggered by comfort, lifestyle and esthetical aspirations (risholt and berker 2013, bravo et al. 2019). the role of policies to promote co 2 emission reduction, should not be forgotten. hardie et al. (2013) suggest that the regulatory environment is far more important to environmental innovators than to others and that the influence of clients and end users becomes therefore less significant. so, the diffusion of eu´s energy efficient targets putting pressure on private house owners to renovate in order to comply with these energy targets should help the expansion of energy efficient renovations (directive 2010/31/eu). however, in sweden, these directives are regulatory and do not include financial incentives even though the latter may be more useful to influence owners of existing houses to adopt building envelope measures (mokhlesian and holmen 2012). authors (uguru 2000, janda 2014) have suggested that technological innovations related to retrofit have been overemphasized since many of the needed technology to achieve satisfying results are already available. they underlined instead that the retrofit issues should be considered as a market breakthrough problem instead of a technological one (janda et al. 2014) business model one strategy to develop new business is to implement business models methods. these tools serve to map the actual core aspects of an organisation and to define possibilities for future developments. business models can be of many types, mobilising different components and configurations (see saebi and foss 2015, for a review), most of the authors seem nevertheless to agree on a basic understanding: business models are focusing on how a company defines a value proposition to address specific customer segments and organise itself and its networks to reach the benefits associated to this newly defined proposition. as pointed out by teece (2010) a business model is a strategic tool “defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit” (p:172). a business model can be viewed as the conceptual glue of a business. it should be sufficiently differentiated to meet particular customer needs, no too difficult to replicate, and should lead to competitive advantage (teece 2010). it contributes though more to change the “way you do things” rather than “what you do” and therefore should bring organisational changes for the company (amit and zott, 2012). however, these changes are not limited to the company but can involve larger group of actors including company customers, shareholders and key stakeholders like suppliers and are context dependant. (zott et al. 2011). the dynamic process of bm and in particular its relation to practice is also underlined by ahokangas and myllykoski (2014). schneider and spieth (2013) demonstrate that a contribution to studies of business model innovation journal of business models (2020), vol. 8, no. 2, pp. 101-114 104 encompasses many different understandings of the prerequisites, the processes and the effects of business model innovation. they point to, for example that business models might develop as a continuous response to changes in the environment, and/or as a discovery driven trial and error process (schneider and spieth 2013). in this perspective, bm may serve to foster future development and include new technology. though it is characteristic that these approaches, with their comprehensive business area coverage, do not include an appreciation of how new types of technologies would need to be integrated (see also baden-fueller and haeflinger 2013). furthermore, the role of management of the company might need to change to support new ways of doing business and therefore also should be one of the “objects “of the business model innovation. lindgren (2012) is thus discussing leadership when developing business models for small and medium sized enterprises (sme) and add competences to the conceptual landscape. his study shows that smes primarily focus on meeting needs and demands from a “predefined” customer and act rather reactively than actively. in the construction sector, the use of business models has so far attracted little attention to the exception of the study of pekuri et al. (2015). their results show that for finnish contractors the selection of project is not guided by any specific business model. the selection of tasks to be carried seems to be influenced by short term prospect such as need of work and profitability, as these are decided project by project . among the many business models, osterwalder and pigneur (2010) have developed a rather simple conceptual tool, the canvas, which should help companies to successfully generate new business models. this canvas is composed of nine blocks showing the logic of how a company intends to make money and represents the blueprint for a strategy to be implemented trough organizational structures, processes and systems (p15). as noticed by lund and nielsen (2014) the model does not prescribe any particular starting point for the analysis, or any particular order of discussion. though the 2010 canvas is designed with the company strengths and abilities on the left and moves to the customer on the right of the canvas. but osterwalder and pigneur’s handbook starts by focusing on the customer and how to solve his/her problems and how to deliver a new solution (section 1-4). once the revenue streams are assessed (section 5), the key resources, activities and partners are discussed (section 6-8) and end ups with the cost structure (section 9). the handbook offers consequently two contradictory lectures on how to proceed with the model. for our workshops, we exploited a third path starting with the value proposition then the customer segments followed by the building blocks “backwards” to the left in the canvas. business models and sustainability the concern for sustainability has fostered interest in developing business models seeking to bridge the short-term financial interest of companies to maintain or increase economic prosperity with the longer-term focus of social, environmental and economic sustainability (schaltegger et al. 2015). their common purpose is to give a strategic tool to companies aspiring to integrate sustainability concerns and goals in their business (pieroni et al.2019). among other geissdoerfer et al. (2018) have shown based on a literature review how bm and sustainable innovations are interrelated and have proposed normative requirements for businesses to operate towards sustainability. furthermore, bocken et al. (2014) have identified eight sustainable business models archetypes which together should provide guidance to integrate sustainability concerns in business purpose and support innovative practices. they aim a categorizing and explaining bm for sustainability, providing mechanisms to assist the development of sustainable bm and examples for business to de-risk the sbm innovation process, and finally to contribute 8.key partners 7.key activities 2.value proposition 4. customers relationship 1.customers segments 6.key resources 3.channels 9.cost structure 5.revenue streams table 1: the business model canvas (osterwalder & pigneur, 2010) journal of business models (2020), vol. 8, no. 2, pp. 101-114 105 to define a clearer research agenda for bm for sustainability (2014). regarding the development of practical tool, joyce et al. (2015) have proposed to add two more canvas to the osterwalder and pigneur’s initial bmc renaming the latter economic bmc: an environmental life cycle business models canvas focusing on the environmental impacts of both new products and services and a social stakeholder business model canvas assessing the social impacts and benefits of new products and services. these three models acknowledging the complexity of sustainability seems however to be rather heavy to operate in a business context. however, the scope of the present paper is only indirectly referring to the sbm stream as the reflection towards implementing sustainable solutions to the customers has been carried in the workshops using the 2010 bmc (osterwalder and pigneur 2010). our project started in 2013 where sbm were only slowly emerging. though, by revealing the barriers that the aec smes are facing when implementing bmc, we also contribute to discuss the challenges of this sbm stream. method the present paper reports the findings of an action research project with small swedish contractor companies from the gothenburg region experimenting with business model to develop energy efficient solutions. the method is multidisciplinary and employs an interpretive approach to discuss the empirical material (burrell and morgan 1979, bryman and bell 2011). the frame of understanding is based on a selective literature review drawing on business models and sustainable business models theory, studies of sustainable renovation as well as of the particularities of the construction sector smes. the empirical material has mostly be collected for a phd (2013-2017) conducted by one of the authors whose focus is to document and analyse the integration of new energy saving solutions for the renovation of single family houses with a particular focus on the relation between the house owners and the craftsmen engaged to carry the work. initially, 90 contractor smes of the gothenburg region were contacted first by e-mail and then by phone. the enterprises were partly sought out from a map search engine using specific trade words and concepts, partly through snowballing when interacting with the enterprises. out of the 90, we visited 24 for a first interview; 21 finally accepted to be part of the project. the trades are distributed as following 16 carpenters, 2 electricians, 5 energy solution providers, and 1 brick layer. we do not claim a representativeness in our sampling and see our study as exploratory. this longitudinal study includes 18 workshops distributed during 24 months with a total of 21 craftsmen’s companies to discuss and develop the potential of new energy saving solutions for their customers, and including twice the presence of technical experts; 13 interviews with craftsmen and enterprise representatives; nine interviews with customers and six observations of initial encounters between craftsmen and customers to design and decide the scope of the renovation. the purpose of the action project is not to develop solutions for the companies but to train the companies into using bm has tool to keep improve their business solutions and adapt to the continuous environment changesthe workshops represent the main sources for the present discussion. for the workshops the companies have been divided in three groups depending on their location. they did not have any previous business relation before meeting in the project. during the initial workshops, the different elements of the canvas (osterwalder & pigneur 2010) were discussed separately (customers, business proposition, key activities, value proposition etc). the complete canvas was presented in two workshops. the latest workshops have focused on potential new solutions and how to find and “get” new customers. out of the three groups, one, the south group, was more successful than the two others and therefore being richer in term of information will serve as a main example for the presentation of the results. the following table gives a short description of the 9 companies participating in the south group and underlines the diversity of the companies involved in the project but also the diversity of the services each provide to the customers. all these companies have a rather local market and tend to define their area of intervention within an hour drive from their central office. journal of business models (2020), vol. 8, no. 2, pp. 101-114 106 notes were taken during the workshops and the interviews were taped and transcribed. to carry our analysis, we have followed the 5 steps model of qualitative analysis suggested by taylor-powell & renner (2003): knowing the data by getting over it several times; identify key questions or topics to organise the analysis; categorize information by themes and features; identify patterns and connections wihthin and between categories and finally interpretation by attaching meaning and significance to the analysis. since the process is not rigid moving back and forth between the steps can occur. the results and interpretations of the different methods of gathering data have been triangulated by been discussed during the workshops with the participants and also between the researchers participating to the project. results challenges for the smes building on the osterwalder pigneur’s handbook (2010), this section underlines the challenges met by the companies when dealing with most of the topics addressed by the 9 blocks of the canvas. company trade organisation since business 1 energy one main owner nine employees 2001 services: hvac, heating and plumbing 2 insulation two owners 21 employees sale department 1978 services: providing insulation in walls, floors, roofs and attics. 3 electrician five owners 13 employees 2002 services: lighting, smart housing 4 electrician one main owner 25 employees 1992 services: electrical safety, lighting, renovation. specialist expertise within e.g. control system, knx, heating and automatic heating controls 5 carpenter two owners nine employees 1984 services: construction, property services, snow plowing, renovations and decorations, custom installations 6 carpenter two owners 14 employees 1995 services: all types of construction work for private persons and businesses: new built, refurbishment, extensions, renovations, bricklaying and plastering etc 7 carpenter two owners seven employees 2011 roof, new built, refurbishment, renovation 8 carpenter one owner nine employees 1998 services: new built, refurbishment of single-family houses, vacation homes etc. renovations, kitchen renovations, carpentry. through business partners: excavation, plumbing, electricians, tile work, expert work in wet areas, tinsmith 9 carpenter one owner one employee 1987 all types of construction services, new built, renovation, refurbishment, extensions. the owner owns two more businesses in transportation and warehousing. table 2: the 9 smes of the south group journal of business models (2020), vol. 8, no. 2, pp. 101-114 107 customers segments identifying customers segment represents the first challenge for these companies. they fail to define and prioritise segments from fear of excluding any potential project. they claim their focus is on single family’s house, but they also perform work for church, schools or factories. it appears that these companies are willing to take almost any jobs providing the project are assessed as low risk and can generate profit. from what should be a straightforward customers segment, these companies seem to face a rather diversified market with a very broad potential of customers. besides, they also emphasised a need for flexibility to adjust to the building characteristics related to the periods and types of constructions they renovate. paradoxically, when discussing in group during the workshops, these companies tend to have rather stereotypic understanding of what their customers want and need. in particular, they argue that the costs of retrofit are too high to seduce their mainstream customers and prevent any kind of investment. this understanding of the customer appears to be more nuanced during interviews. here the craftsmen tend to display a more open attitude towards their customers and acknowledge a large variety of situations, contexts and demands. in particular, they notice that their customers tend to be more knowledgeable about the renovation possibilities and may even challenge their expertise regarding the proposed solutions. if most of the craftsmen accept to consider these new possibilities and assess their relevance for the concrete customer’s, they do not add them in their projects’ portfolio. they may nevertheless reuse this new knowledge or competence if a similar case shows up. it appears clearly that the customers segments are decomposed into singular project and customer and that our companies are not willing to disregard any of them. however, the south group did identify two new customer segments that the companies could target together. one was the new owners of houses built between 1950 and 1980 as these buildings are subject to a generation shift and in need of substantial renovation. the other segment was “the longstanding” houses owners, that might want to renovate to increase the house value before selling it. besides, company four decided to create an offer for customers interested in solar panels and company seven identified the customers lacking financial resources as a segment they could target in association with a bank. in our sample, new customers segments are added to existing ones; the companies are reluctant to select, prioritise or downsize the number of segments present in their portfolio as they may miss a project. value propositions to create an explicit value proposition seems to be another challenge for our companies, not because they do not know what problems their customers are facing or which products or services to offer but because these are implicit knowledge the craftsmen mobilise project by project. they define their value propositions as depending on the specific context. there is no transparency regarding the cost or the length of the contract, as these features are modified following the type of customers or projects. as in this example, witnessed by one of the authors of a craftsman (company five) coming to a customer house for the first time and commenting on the poor aspects of the location. the lack of maintenance of the surroundings were interpreted by the craftsman as a sign of low income and therefore the prospect of a meagre income. so, in order to avoid working for this customer he overpriced heavily his tender. to his surprise the price was accepted without discussion and he made a substantial benefit. the value for customers seems to be renegotiated for each transaction. however unwilling to come up with defined and stable value proposition, the south group decided to create a joint service: a package gathering the different trades to simplify the task of the house owner when planning renovation. the package consists of a complete assessment of the houses’ needs in term of renovation as well as several offers to carry the work in different steps. in doing so, the companies have identified the limit of their own competences and trade and decided to build on the complementarity of the services they already offer separately. company four developed services regarding the choice, installation and maintenance of solar panels, to learn but also to demonstrate their expertise to their journal of business models (2020), vol. 8, no. 2, pp. 101-114 108 customers, they have installed solar panels on their own houses and facilities. company seven proposal with a bank shorten and simplify the house owners’ process when planning the financing of their renovation. channels when searching for companies to participate in the project, we were struck by the lack of information provided by the companies’ websites and the difficulty to find proper description of the core business and competences these craftsmen were proposing. their market seems to be very local and it would be a mistake to believe that all of them are willing to increase significantly their turnover. in fact, three of our companies stated explicitly that they did not want to grow unless undertaking a very substantial project. the craftsmen described their relations to their customers as based on local and personal networks relying on personal recommendation to get new jobs. therefore, investing in marketing is not seen as a priority. however, many of them have tried diverse marketing solutions in the past: leaflet in mailboxes, advertising in local or specialised magazines, participating in national tv broadcasts on craftsmen work or craftsmen competition, or investing in shiny websites. but none of these, they claim, have brought back much return on investment. for our companies, word to mouth is the main channel of information to attract new customers. besides, these direct contacts allow the craftsmen to shape without delay their offers according to the specific needs of the customers. the two new value propositions defined by the two single companies have appeared on the respective companies ‘websites. the south group joint proposal has been printed as a leaflet and distributed door to door in the local area corresponding to the target groups. using real estate’s agents as medium to deliver this new value proposition has been discussed and finally discarded. the participants did not trust the agents to be fair and faithful to the proposals. customer relationships as seen above, the relation to customers is personal and depends on local networks. these companies valorise face to face communication. they describe the first encounter with customers as determinant for the relation to come. this moment enables them to identify the type of client they are dealing with and define the scope of the project. they also have the possibility to refuse the collaboration. the first encounter is often carried by the owner of the company, where the tasks are later often performed by the employees. this shift of interlocutors can create misalignments and triangulation between the parts may occurs. the owner has then the responsibility to straighten the relation if needed. the retention of customers is not as issue as such as renovation activities are seen to be a one-off event, so the companies do not aim at creating long term relationship with their customers. at the same time this relation is important for them as it should not damage the possibility of new potential customers and the quality of the services should contribute to the recommendation to new projects. revenues streams even if the companies insist on the uniqueness of the projects they perform, one way of assuring the revenue stream is to propose standardised and cheap solutions to the customers using a reduced number of materials. this repetition ensures financial profits and quality of execution. however, sustainable renovation asks for upgrade of competences, techniques and material. these companies are not opposed to such improvement providing the customers can afford it. the common understanding regarding the customers’ will to invest in sustainable solution is that even if they wanted to, they would not be able to. the single houses market in the region of gothenburg is under heavy press with more buyers than available properties and a system of open auction enabling people to bed on top of each other increasing the selling price by up to 10 to 15% (figures for 2013-2018). “new house owners are actually “broke” when they enter their new property and go for cosmetic improvement instead for structure and sustainable renovation”(manager company eight). another shared opinion is that “if the customers do have money left, they would rather put them towards a new kitchen or bathroom than to put money towards energy efficiency solutions” ( manager company three). journal of business models (2020), vol. 8, no. 2, pp. 101-114 109 with the exception of the energy company providing price for heating equipment and installation, there are no cost transparency of the offered services or material. here as well the cost of the work to be performed is estimated by the craftsmen project by project, though this is not a topic they are keen on openly discussing. besides, none of the three new business propositions is announcing costs or prices for the work to be done. key resources they key resources for our companies are mainly human labour as they depend on the competences and skills of their employees. they do not hesitate to mobilize members of their professional network if a task requires more workforce or competences outsides of their own trade. they are also willing to broader their scope by adding new technical competences as for the solar panels or business competences as in the financial resource proposal. the university participation to the project was also seen as a key resource for these companies– to be able to use the university logo has been a motivation to participate in the project for many of the companies. they saw this as a legitimization possibility for their company in term of knowledge and competence. key activities the companies summarised their key activities as problem solving. they describe their work as defining and executing distinct solutions fitting with the customer’s ambition, budget and houses’ specificities. at the same time many of their current interventions do have elements of standardisation and repetitions which could justify a listing of their key activities. the appropriation of sustainable solutions requires time and funding. our companies are not ready to prioritise these investments as long as the customers demand is not more outspoken. for the smallest companies this is especially acute as the owner is often the one delivering all the key activities of the company. they professional identity of our respondents is clearly connected to their trade: “i am an electrician, this is what i know, this is what i am good at !” (manager company three). our participants saw activities such as customers, suppliers and partners relationships, marketing, or accounting as necessary burdens but not adding essential value to their companies. only one of the three business propositions, the solar panel is asking for a radical change in key activities requiring the mastering of new products, process and competences. key partners banks are mentioned as key partners by all the participants. the proposal of the company seven for a financial solution associated to renovation project is a result of this close collaboration. asides of the bank, the companies possess a network of informal partners active both in their own domain and in other trades which they can mobilize when needed. they can rely on each other for specific tasks and recommend each other to their customers. the joint proposal is building on this type of informal network where the competences are brought together to offer a common product. the modalities for the distribution of tasks and revenues are formalised. the solar panels initiative of company four requires a closer relation with the providers not only in term of equipment but also in term of learning and appropriation of the new technology. apart from company four, none of the companies participating to our research has identified new key partner it could associate with to develop new value proposition. cost structure the expenses linked to the learning and time investment of new sustainable solutions is seen as one of the main barriers to their implementation. so, it is no surprise that two of three propositions are virtually cost free. by investing in solar panel for it owns house, company 4 minimises the risk and can actually carry a life size trial without investing too much from his own company. the companies have all been very discrete about the cost structure of their running business. investing in new solutions is certainly appealing but taking the risk of investing without being certain of the pay back is seen as too risky by these companies. paradoxically, it is not so much the cost they worry about but the long term consequences of their intervention on the buildings. journal of business models (2020), vol. 8, no. 2, pp. 101-114 110 to conclude, the experimenting of business model by a group of nine construction companies has results in the creation of three new value proposition for the companies involved. two for single company and one engaging a network of several of these companies. unfortunately, 6 months later they had not created new business and no customers had benefitted of any of these proposals. this situation did reinforce the participants’ conviction that there were not much benefit investing in new business propositions and be proactive, ant that the market was definitely not open to . discussion and conclusion the lack of success so far of the three proposals tends to confirm the role of regulatory environment as the most influential factor to environmental innovators (hardie et al. 2013). so far sweden has not proposed any incentives to regulate the adoption of sustainable renovation. similar to previous studies (pekuri et all. 2015, mlecnik et al.2019) the preliminary assessment of the use of the canvas with the construction smes shows some difficulties for these companies to work with the blocks division as they tend to see their business as a succession of projects. the logic behind the business models’ canvas does not fit with the understanding of their own organisation. the small size of these companies forces their members, often the owners, to take responsibilities for several if not all of the building blocks. the hierarchisation and prioritisation becomes difficult as they are totally immerged in all the activities. distance to the issues and self-criticism are difficult to achieve. besides in order to secure their business they tend to broaden their customers segments instead of narrowing it down. but our results show that the problem for these smes is not unambiguously the lack of skills and knowledge to develop sustainable renovation solutions as suggested by mokhlesian and holmen (2012). these companies are able to deliver punctually innovative solutions when requested by the customers. what seems to miss though it the motivation to take the necessary time to translate these solutions embedded in the craftsmen head into regular business models to be accessible for other customers as long as the latter are not clearly stating their interest. so, it is not so much the conceptualisation of the solutions, but rather their formalisation and visibility which is an issue. as identified by fawcett et al. (2014) when the contractor moves from one project to the next, the routine is to revert to established and conservative practices. the business model followed by the companies participating to the project are going against two of the strong the propositions of the canvas as to define clear segments and specific value propositions. the proposed solutions are adding new customers segments and business proposals to the already much diversified portfolio of activities. however so far, no clear decision has been taken to substantially transform their business and invest in sustainable solutions, they strategic decisions have yet to be taken. journal of business models (2020), vol. 8, no. 2, pp. 101-114 111 references achtenhagen l., melin l., naldi l. (2013) “dynamics of business models – strategizing, critical capabilities and activities for sustained value creation” long range planning, vol. 46, pp. 427-442. andreasen m. m. and hein l. (1987) “integrated product development”. ifs (publications), bedford. baden-fuller c. and haefliger s. (2013) “business models and technological innovation”. long range planning, vol. 46, pp. 417–418. bartiaux, f., gram-hanssen, k., fonseca, p., ozoliņa, l., & christensen, t. h. (2014). a practice–theory approach to homeowners’ energy retrofits in four european areas. building research & information, vol 42, 4, pp. 525-538. bocken, n.m.p., short, s.w., rana, p. and evans, s. (2013), “a literature and practice review to develop sustainable business model archetypes”, journal of cleaner production, vol 65, pp. 42-46. boons, f. and lüdeke-freund, f. (2013), “business models for sustainable innovation: state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. boverket (2015) förslag till utvecklad nationell strategi för energieffektiviserande renovering. boverket. stockholm boverket (2020) utveckling av regler om klimatdeklaration av byggnader. boverket. stockholm. bravo, g., pardalis, g., mahapatra, k., & mainali, b. (2019). physical vs. aesthetic renovations: learning from swedish house owners. buildings, vol 9,1 pp 12. buser, m., & carlsson, v. (2017). what you see is not what you get: single-family house renovation and energy retrofit seen through the lens of sociomateriality. construction management and economics, vol 35, 5, pp. 276-287. dainty, a. r. j., green, s., & bagilhole, b. (2007). people and culture in construction: contexts and challenges. in a. r. j. dainty, s. green & b. bagilhole (eds.), people and culture in construction: a reader (pp. 3–25). abingdon / new york: taylor francis. eu (2005) the new sme definition. user guide and model declaration. european commission. enterprise and industry publications bruxelles. fawcett, t. and killip, g. (2014)anatomy of low carbon retrofits : evidence for owner-occupied superhomes. building research and information, vol. 42, 4, pp. 434-445. geissdoerfer, m., vladimirova, d., & evans, s. (2018). sustainable business model innovation: a review.  journal of cleaner production, vol 18, pp. 401-416. graner m., missler-behr m (2014) “method application in new product development and the impact on crossfunctional collaboration”. international journal of innovation management vol. 18, 01, 25 p. hardie, m., & newell, g. (2011). factors influencing technical innovation in construction smes: an australian perspective. engineering, construction and architectural management, vol. 18, 6, pp. 618-636. hardie m, allen j, newell g (2013) environmentally driven technical innovation by australian construction smes. smart and sustainable built environment 2013 vol. 2, 2 , pp. 179-191 journal of business models (2020), vol. 8, no. 2, pp. 101-114 112 joyce, a., paquin, r., & pigneur, y. 2015. the triple layered business model canvas: a tool to design more sustainable business models. artem organizational creativity international conference. nancy, france. killip, g. (2013) products, practices and processes: exploring the innovation potential for low-carbon housing refurbishment among small and medium-sized enterprises (smes) in the uk construction industry. energy policy, vol 62, pp. 522-530. killip, g., owen, a., & topouzi, m. (2020). exploring the practices and roles of uk construction manufacturers and merchants in relation to housing energy retrofit. journal of cleaner production, vol 25, 1, pp 119-205. kirkels y., duysters g. (2010) brokerage in sme networks. research policy, vol. 39, 3, pp. 375–385. lindgren p. (2012): business model innovation leadership: how do sme’s strategically lead business model innovation? international journal of business and management, vol. 7, 14, pp.53-66. lindgren p. & abdullah m.a. (2014): conceptualizing strategic business model innovation leadership for business survival and business model innovation excellence. journal of multi business model innovation and technology, vol. 1, pp.115–134. lund, m. & nielsen, c. 2014, ‘the evolution of network-based business models illustrated through the case study of an entrepreneurship project’, the journal of business models, vol. 2, 1, pp. 105-121. mlecnik, e., straub, a., & haavik, t. (2019). collaborative business model development for home energy renovations. energy efficiency, 12(1), 123-138. mortensen, a., heiselberg, p., & knudstrup, m. (2014). economy controls energy retrofits of danish single-family houses. comfort, indoor environment and architecture increase the budget. energy and buildings, vol. 72, pp. 465-475. naef, p., sahakian, m., & goggins, g. (2019). conclusion: comparing household energy use across europe—uncovering opportunities for sustainable transformation. energy demand challenges in europe, 137. pekuri a, pekuri l., haapasalo h (2105) business models and project selection in construction companies. construction innovation 2015 vol.15, 2, pp.180-197. pekuri a, pekuri l., haapasalo h (2013) ‘the role of business models in finnish construction companies’, australasian journal of construction economics and building, vol. 13, 3 pp.13-23. pieroni, m. p., mcaloone, t. c., & pigosso, d. c. (2019). business model innovation for circular economy and sustainability: a review of approaches. journal of cleaner production, 215, 198-216. osterwalder a. & pigneur y. (2010) business model generation (2010).  business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons. osterwalder a , pigneur y., bernarda g., smith a. (2014) value proposition design: how to create products and services customers want. wiley. hoboken. risholt, b., time, b., & hestnes, a. g. (2013). sustainability assessment of nearly zero energy renovation of dwellings based on energy, economy and home quality indicators. energy and buildings, vol. 60, pp. 217-224. journal of business models (2020), vol. 8, no. 2, pp. 101-114 113 risholt, b., & berker, t. (2013). success for energy efficient renovation of dwellings—learning from private homeowners. energy policy, vol. 61, pp. 1022-1030. saebi t. and foss n. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, vol 43, 1, pp 200-227. scb (2014) yearbook of housing and building statistics 2014. official statistics of sweden. statistics sweden. stockholm. schaltegger, s., hansen, e. g., & lüdeke-freund, f. (2015). business models for sustainability origins, present research, and future avenues. organization & environment, pp. 1-8. schneider s. and spieth p.: “business model innovation: towards an integrated future research agenda”. int. j. innovation management. vol 17 1, (34 pages). 2013. sverige byggindustrier (2016) byggtermometern, http://www.byggtermometern.se taylor-powell e., and renner, m. (2003). analyzing qualitative data. in p. h. rossi (ed.), handbook of survey research. new york: academic press. teece d.j. (2010) business models, business strategy and innovation. long range planning. vol. 43, pp. 172-194 ulrich, k., eppinger, s. (2012) product design and development. 5 ed. boston. mcgraw-hill. yunus, m., moingeon, b. and lehmann-ortega, l. (2010), “building social business models: lessons from the grameen experience”, long range planning, business models, vol. 43, 2–3, pp. 308–325. zott c., amit r, massa l (2011) the business model: recent developments and future research, journal of management, vol. 37. 4, pp. 1019 – 1042 https://mgmt.wharton.upenn.edu/profile/1301/ journal of business models (2020), vol. 8, no. 2, pp. 101-114 114 martine buser is associate professor in construction management at chalmers university of technology in sweden. her work focuses on sociological aspects of environmental and social sustainability and explores social practice and organisational features related to project in the construction sector. her interest includes innovation, change management and business development processes in context such as milieu certification, renovation, waste management and operation of buildings. veronica carlsson holds a phd in construction management from chalmers. after her studies she chose to apply the principles she had researched and worked as  project leader developping a strategy to create a fossil free transportation fleet for örebro region. she is now back at university as administrative unit manager for education at örebro university. about the authors journal of business models (2019), vol. 7, no. 3, pp. 38-46 38 using digital gamification in the context of business models jesper c. sort1 and peter martin holst2 abstract the use of blended learning and gamification to enhance motivation and learning by the students is a recent and increasingly important topic in teaching. this paper will give an example of how gamification was implemented in an entrepreneurial course using business models as the primary structure. please cite this paper as: sort, j. c. and holst, p. m. (2019), using digital gamification in the context of business models, vol. 7, no. 3, pp. 38-46 keywords: business models, gamification, education 1 business design center, aalborg university 2 artventure, copenhagen acknowledgements: the authors would like to thank arun khan at artventure and the lecturers and supervisors from the new venture creation course for inputs to this paper journal of business models (2019), vol. 7, no. 3, pp. 38-46 39 introduction universities and higher educations have a strong focus on teaching entrepreneurship (sexton & upton, 1987; fiet, 2001; hindle, 2007) and as this special issue is emphasizing business models (bm) is likewise becoming an increasingly taught topic. furthermore, the two topics are often parts of the same courses. discussions have occurred in the educational context whether or not teaching should focus more on e-learning and the use of digital media mixed with traditional learning also called blended learning (garrison & kanuka, 2004; conole 2008). the reasons for introducing blended learning is, for instance, to elevate student motivation based on the interactive capabilities of internet communication technology (swan, 2001) and to promote critical thinking and higher-order learning (garrison & kanuka, 2004). this paper will give insights on how digital gamification was introduced and effects the feedback between students by a peer-feedback approach where students place ‘money’ on each other’s business model ideas. the approach has been applied to the 3rd semester elective 30 ects course on master’s level called new venture creation (nvc), where the students work with applied entrepreneurship and develop a scalable business model throughout the course. the course, in general, follows the lean start-up approach inspired by ries (2011); blank and dorf (2012) and blank et al. (2014) and has a strong focus on business models as the structure of the business development. one of the issues experienced in the course was how to make the students more interactive and involved in each other’s projects. the issue regarding interaction, in this case, can be seen as a twofold problem with an underlying correlation. the first part is related to the students mainly working on their own new venture project, and even though the groups are split into clusters giving presentations within the clusters, they lack the motivation to keep track of what the other groups are working on. the second part, related to the first part, is the students lack of engagement in each other projects inhibiting knowledge transfer between the students. the strength of knowledge transfer has been shown in other studies (fiet, 2001; siegel and wright, 2015) where knowledge transfer is key in promoting idea development and broadening the student’s competencies. the lack of knowledge transfer, in this case, would be related to sharing insights, cross-venture-development and constructive feedback between groups and furthering ideas and critical thinking within the groups. the issue of lacking interaction and knowledge transfer was sought mitigated by the introduction of an online gamification tool. gamification has proven to foster more interaction in classrooms and among students (iosup and epema, 2014). hence the introduction of gamification through should give students incentives to interact, provide peer feedback and knowledge share more with each other. peer assessment or feedback is a process where students evaluate achievements of their peers (topping et al., 2000). the feedback becomes a strategic learning process, where the students learn formative assessment as well as a tool for reflection (cheng and warren, 1999; venables and summit, 2003) especially, the function of feedback and peer feedback have shown the ability to improve students’ projects (li et al., 2010). this paper will explain how the introduction of gamification and blended learning was introduced to nvc via an online gamification tool which would enable the ambition of more interaction between groups. the gamification was introduced through the learning-platform peaqs1, which is a newly developed online platform that combines well-known elements from crowdfunding platforms like kickstarter.com and a stock market mechanism that assigns real-time shares/currency to the new venture projects as they are developed and displayed on the platform. approach this section will explain the context and design of the course before going more into depth with how the gamification was introduced and the effects on the feedback and knowledge sharing between the students. course design the implementation of blended learning and gamification needs to be thought into the course curriculum, and considerations need to be made as to how it fits the general learning style and flow of the course. for 1 it should be noted that the author from aau has no ownership or stake in the company behind peaqs. journal of business models (2019), vol. 7, no. 3, pp. 38-46 40 the nvc course that focuses on applied entrepreneurship and bm, it was essential to find a tool that could accommodate the learning points in the applied entrepreneurship such as communication, validation and scalability. furthermore, the class flow and “language” in the class is inspired by the lean startup approach (blank et al., 2014); hence the tool should also accommodate this terminology. the learning tool introduced on the nvc course is called peaqs (https://peaqs.com/) and the webpage state it resembles “kickstarter meets shark tank”. the selection of this learning tool in form of a gamification platform was primarily based on the assumption that it was fitting with the course flow and learning objectives regarding applied entrepreneurship and focus on bm. furthermore, the platform had elements that promote interaction between the students and across groups, which was part of the initial problem related to the course. the platform is divided into 4 distinct phases, where the students need to upload various information pertaining their new venture creation. as default the 4 phases follow a chronological flow from “idea/concept” to “get to market”. a phase is characterized by a starting and ending date, where students are required to enter specific information, defined by the teacher, into the system. furthermore, when a phase starts the students can buy/sell stocks in all venture creation projects on the platform except their own. before the platform can be used, the administrator (being the course administrator, lecturer or course coordinator) needs to review the different phases and align these with the class flow and learnings objectives of the course. this is done by assigning own headlines to the various phases and templates and by adjusting the time brackets for when the phases shall become accessible to the participating students. following the structure of the nvc course, the platform was split into four separate phases: phase 1) called ‘concept’, phase 2) ‘business case’, phase 3) ‘product description’, and phase 4) ‘get to market’ (see appendix 1 for elaboration). these phases correlate with the learning objectives and stages of the course. all phase-headlines and topics within each phase can be edited to make an optimal fit to course learning objectives. the following sub-section will introduce how the learning tool was introduced and how the gamification effected the process. appendix 1: elaboration of each phase and the platfrom in the nvc course the first stage of the course, the students would first identify a problem and an idea for a solution; they want to work with throughout the course. this corresponds to the ‘concept phase’ being the first phase in peaqs, where the students have to describe the idea/concept and write their team profile. following this phase, the second phase ‘business case’ goes more into depth with the product-market fit, minimal viable product (mvp) and different customer segments. the nvc students at this point are working with mvp in the lectures and validating the various features and ideas surrounding the product/ service and identifying the right value proposition on a general level. this shows the ambition of alignment between the information needed in the phase on the platform and the content the students are lectured during this stage of the course. the third phase is ‘product description’ which relates to working with the value proposition and how to address and target the customer segments, thus generating revenue. the headlines here are focused on specifying the value proposition, towards specific customer segments and how to reach them. this relates to the themes the students are working on during this stage of the course, such as customer journey, how to get/keep/grow customers and how to generate revenue from their value proposition. the fourth and final phase ‘get to market’ revolves around the partnerships and infrastructure the idea will need to succeed. this correlates with the students at this stage who are working on key activities, key resources, key partners and cost structure in bmc terms. journal of business models (2019), vol. 7, no. 3, pp. 38-46 41 gamification and process before the students were invited to work on the peaqs platform, an introduction was given to the students regarding the relevance of the learning tool and the ambition of introducing the tool. following this explanation, the students all had to create a profile on the platform that allows for group business development on one side and individual investment with a game currency on the other. after the students have created their personal profile, they can form groups according to the groups they are working in. every student in the group can now add text, pictures, films and graphs to describe and update their project when required according to the phases. from here on the concept is fairly ‘plug-and-play’. in each phase, the students are guided towards what information they need to produce, insert and upload. the figure below illustrates what the page looks like when information has been uploaded in the concept phase. in this instance, the group is working with a project called “ramp”, and they have uploaded a picture with their logo and some ideas of features together with a description of the project. furthermore, in the top right corner, it is possible to follow the stock price development for this specific project. if this screenshot was taken right at the introduction all stocks would be valued at 100; this screenshot is taken shortly after, where it is noticeable that the stock price has fluctuated somewhat due to other students buying/selling ramp stocks. once the groups have updated and published their project/business case on the concept page, this is reflected on the asset/product page as well as the figure 1: screenshot from an individual project page with concept description and stock price. journal of business models (2019), vol. 7, no. 3, pp. 38-46 42 common market page, which is the overview page (see figure 2). on the market page, all students can see all projects on the platform pertaining to their course. at this point each student can use his/her online currency to buy stocks in the projects they find most promising. as the investments are occurring the prices on each project/stock will start to rise/fall depending on the overall interest in the stock. figure 2 below illustrates the market page or “stock exchange”. in the top part of the market page, the students can see the development in stock prices for each project and furthermore a top 10 ranking of the best performing projects as well as the top 10 investors below this, the students can browse each project/business case to identify which project/case they find most promising and want to invest their currency into. gamification and peer feedback as previously mentioned, one of the challenges in this course was to create more feedback and especially peer feedback. from the initial development of the course figure 2: screenshot from the “stock exchange” overview journal of business models (2019), vol. 7, no. 3, pp. 38-46 43 weekly presentations were implemented as 10 minutes “what have you learned” presentations, where the supervisors can give feedback to the students. this session was also intended to act as way for the students to give peer feedback to each other; however, this rarely happened. this led to introducing the blended learning and gamification aspects into the engagement into the weekly “what have you learned” presentations and feedback. this implementation of gamification through the “stock exchange” enabled the students to reflect on what the other groups had uploaded and further to help them reflect upon their own information upload. during the weekly “what have you learned” pitches, the peer feedback improved, as more fellow-students had read up on the other projects and hence were able to give more constructive feedback. furthermore, the students would more often engage in discussion concerning their own investments and the other investments before and after the formal pitches, showing a higher degree of interest in each other projects than previously observed in the course. in this manner, the students showed a higher degree of critical thinking, and a greater level of knowledge transfer than during regular presentations without the gamification mechanisms. furthermore, the supervisors would in plenum with all students discuss why some projects were performing better than others. this was done to increase both the knowledge sharing but also the quality of the peer feedback. e.g. the students quickly learned that it was important to be short and precise in their formulations and more importantly; be understandable as the better the “peer students” understood the project, the better the quality of feedback. in the final week of lectures in the course the best project/case on the platform receives an award indicated for achieving the highest stock price, which also implicitly translates into the best peer review. this is done to motivate and provide incentives to the students to continuously update their projects and furthermore buy/vote on the projects they feel should be the “winner” for having the best business idea. this part is optional, and the whole leaderboard can be removed from the learning tool, if not suitable for the learning objectives of the course. this “award” is not part of the final grading of the students, but is done to motivate the students. key insights introducing a blended learning platform, in this case peaqs, was quite straightforward, and the students had virtually no issues with understanding and engaging in a digital learning and gamification platform. furthermore, the students understood the relevance and found interest in the use of an online platform underpinning the strength of blended learning and gamification. this is in line with what research into blended learning suggests when describing the implementation of gamification as “promising” (iosup and epema, 2014). it is also worth mentioning the quality of discussions among the students propelled by the question of what information they should prioritize and upload into the system. they engaged in discussions regarding how to condense their ideas into, e.g. 150 characters. in other words, the ability to convey a problem, present their solution and the associated value proposition in a short and precise manner. furthermore, as students dived into the development of their projects/business cases of their peers, a loop of reflection and inspiration took place, inclining them to improve and refine their projects. this showed signs of a higher degree of knowledge transfer (siegel and wright, 2015), increase in the quality of the projects (li et al. 2010) and is furthermore in line with research showing positive learning outcomes of blended learning (garrison & kanuka, 2004). a potential negative side, which the coordinator/lecturer needs to be aware of, is the motivation provided by the gamification. if not appropriately introduced and followed-up during the process, students might go for the prize of winning the ‘competition’ rather than using the stock market mechanism to leverage a better and deeper understanding of the projects on the platform. a few of the students addressed this to the coordinator, as they were not sure how they should spend their currency on the platform. this triggered a journal of business models (2019), vol. 7, no. 3, pp. 38-46 44 need for further explanation regarding how the students, in the context of the course, should evaluate and invest. the criteria for the new venture creation course being validation, potential and scalability. these criteria are some of the key elements of lean start-up and the course learning objectives in general. in short, it is crucial that the students understand the learning objectives within a blended learning and gamification framework, or else the gamification incentive can end up disrupting the learning outcomes. the notion of implementing gamification with a virtual currency also showed an interesting effect among the students, as they were very keen on learning how they could grow their portfolios and optimize their investing approach. the teacher could potentially choose any “currency” or other types of stimuli to engage the students. the choice of “money” as a currency here, was in line with the entrepreneurial theme of the course and a setting familiar to most students. in addition, the platform and choice of currency demonstrated the motivating impact of gamification in classrooms (iosup and epema, 2014). however as written above, should be aligned with the learning goals and objectives of a specific course. the ‘stickiness’-factor of the stock market mechanics keeps students engaged in the platform’s gamification but also emphasized the need for countermeasures to avoid a day trading scenario. the students could become too engaged with the pure performance part optimizing their portfolio and hence not consider the feedback needed for the weekly sessions. such behavior of not truly using critical thinking to give quality peer feedback can lower or disrupt the benefits of peer feedback (li et al. 2010). addressing the concern of students adopting a day trading2 approach, a cap to trading was introduced into the trading algorithm. this cap dictates that a student can only make one transaction (either buy or sell) per stock for every game phase. this initiative sharply reduced any speculative mindset but still left plenty of incentive to scrutinize other projects/ cases on the platform (and hence enable peer feedback) and also invest wisely. 2 day trading is determined by frequent buying and selling of a single or a limited number of stocks only to optimize an investment portfolio. the direct effect the blended learning and gamification had on the projects and presentations are difficult to measure, and the supervisors stated, that it might have had an impact, but it was hard to pinpoint if it was the platform or other factors that made the students more engaged. however, and more importantly so, no students uttered any discouragement or feelings of demotivation in using the platform. as stated previously the introduction of the gamification which enable more and better peer feedback, which was observed during the course. albeit not being able to provide any direct cause and effect in this paper; the higher degree and quality of peer feedback should have a positive impact on the students and projects in accordance with previous research (see e.g. venables and summit, 2003; li et al. 2010). it should be noted that the peer feedback in this paper was not directly a part of the final grading. this could potentially be incorporated that the students had to do peer feedback orally or written and would be part of the grading. in the current context, the university only allow us to expect involvement and interaction during the course and a student can be expelled from the program for having an attendance lower than 75%. but this measure is not affecting the grading. however, the feedback from the supervisors and censors at the exam indicate that the students, which have been involved in the peer feedback during the course are more knowledgeable and in line with the learning goals often leading to better grades. discussion and conclusion the problem discussed in this paper is the lack of interaction and knowledge sharing often seen in the context of entrepreneurship and business model teaching. this paper illustrates how some of these hurdles can be mitigated by introducing a blended learning digital platform that has a stock exchange mechanism to serve as a means of gamifying peer feedback and project evaluation. the ambition was to achieve more interactions and enhance knowledge sharing among students, improving their project quality and ultimately elevating their understanding of the subject matter – all in line with the learning objectives of the course. this is important to note as the introduction of a new tool/approach otherwise can become a somewhat fragmented experience (fiet, 2014). journal of business models (2019), vol. 7, no. 3, pp. 38-46 45 the problem regarding the interaction and peer feedback between groups was improved using the platform, and the students found the concept of the platform and within this, the investing aspect to be a motivating factor – which is a positive element to any all teaching approach. furthermore, the interaction and peer feedback increased knowledge sharing among the students, which lead to further input and idea development and enhance critical thinking towards project improvement in line with previous research (venables and summit, 2003; li et al. 2010). all supervisors saw a gamification platform such as the one described above as a good opportunity to stimulate peer feedback and knowledge sharing among groups and to help motivate the students. the experience also showed the importance of explaining the students why a new learning tool should be implemented in the course and how to go about using it. it might be intuitive for students and supervisors alike to use, but they will need to be informed on how to use it in relation to the learning objectives of the course at hand. this paper showcases an example where the students need instructions regarding how they should invest and what parameters they should apply to their investment decisions. otherwise a “free market” approach might lead to suboptimal solutions and speculative day-trading behavior. as stated earlier, this was avoided by introducing a set of evaluation criteria based on the learning objectives, a technical update to the platform introducing a day trading cap and finally the feedback from supervisors. in conclusion, introducing gamification, peer feedback through a blended learning approach has proven itself to be a positive contribution when teaching bm and entrepreneurship. the online gamification platform improved the interaction, peer feedback and knowledge sharing among students and also furthered the motivation to improve their projects/cases and to apply critical thinking to their learning process. the approach also strengthened the student’s skills and capabilities in regards to the learning objectives of the course that stress communication and critical thinking. journal of business models (2019), vol. 7, no. 3, pp. 38-46 46 references blank, s., & dorf, b. (2012).  the startup owner’s manual: the step-by-step guide for building a great company. bookbaby. blank, s., engel, j., & hornthal, j. (2014). lean launchpad: evidence-based entrepreneurship educators guide. cheng, w., & warren, m. (1999). peer and teacher assessment of the oral and written tasks of a group project. assessment & evaluation in higher education, 24(3), 301-314. conole, g. (2008). capturing practice: the role of mediating artefacts in learning design. in lockyer, l., bennett, s., agostinho,s. & harper, b.  (eds),  handbook of research on learning design and learning objects:  issues applications and technologies,187-207.hersey pa: igi global. fiet, j. o. (2001). the theoretical side of teaching entrepreneurship. journal of business venturing, 16(1), 1-24. garrison, d. r. & kanuka, h. (2004). blended learning: uncovering its transformative potential in higher education. internet and higher education, 7, 95-105 hindle, k. (2007). teaching entrepreneurship at university: from the wrong building to the right philosophy. handbook of research in entrepreneurship education, 1, 104-126. iosup, a., & epema, d. (2014, march). an experience report on using gamification in technical higher education. in proceedings of the 45th acm technical symposium on computer science education, 27-32 li, l., liu, x., & steckelberg, a. l. (2010). assessor or assessee: how student learning improves by giving and receiving peer feedback. british journal of educational technology, 41(3), 525-536. osterwalder, a., & pigneur, y. (2010).  business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons. ries, e. (2011). the lean startup: how today’s entrepreneurs use continuous innovation to create radically successful businesses. crown books. siegel, d. s., & wright, m. (2015). academic entrepreneurship: time for a rethink?. british journal of management, 26(4), 582-595. swan, k. (2001). virtual interaction: design factors affecting student satisfaction and perceived learning in asynchronous online courses. distance education, 22(2), 306 – 331. sexton, d. l., & upton, n. b. (1987). evaluation of an innovative approach to teaching entrepreneurship. journal of small business management, 25(1), 35-43. topping, k. j., smith, e. f., swanson, i., & elliot, a. (2000). formative peer assessment of academic writing between postgraduate students. assessment & evaluation in higher education, 25(2), 149-169. venables, a., & summit, r. (2003). enhancing scientific essay writing using peer assessment. innovations in education and teaching international, 40(3), 281-290. journal of business models (2021), vol. 9, no. 3, pp. 50-59 50 experiences from a decade: a universal approach to business model teaching jesper c. sort and kristian brøndum business design lab, aalborg university business school abstract there are many different approaches to teaching business models. this paper presents a universal five-step approach developed from an ongoing longitudinal action research project to uncover best-practice in educating and developing business model competencies. the approach is based on the teaching principles of case-based teaching, learning-by-doing and problem-based learning. please cite this paper as: jesper c. sort, j. c. and brøndum, k. (2021), experiences from a decade: a universal approach to business model teaching, vol. 9, no. 3, pp. 50-59 acknowledgements: we want to thank all our colleagues in the business model community and the business design lab, for endless discussions on teaching business models as well as inputs to this paper and helping to refine the approach. doi: https://doi.org/10.5278/jbm.v9i3.2558 issn: 2246-2465 keywords: teaching, business models, business model canvas introduction one of the most famous references used when teaching business models (bms) is “business model generation” (bmg) by osterwalder and pigneur (2010) and especially the framework business model canvas (bmc). even though the book is rather intuitive and more application-focused than most traditional textbooks, it offers little information about how to teach the subject to students or practitioners. we have, not surprisingly, experienced that if the subject of bms is taught in a traditional lecture format, it can become somewhat “dry” or boring. nevertheless, a traditional lecture format is a convenient and time-efficient ‘goto-solution’ for first-time teachers, as they lack guidance and instructional resources for lesson planning (e.g. goodwin, 2012). this paper – therefore – offers an approach and useful guide for inexperienced teachers to design a bm course for the first time. furthermore, this paper offers insights on how to create an engaging and enrichening teaching session for participants, which could be an inspiration for veteran teachers to redesign or test new things in their bm course(s). journal of business models (2021), vol. 9, no. 3, pp. 50-59 51 there are many ways of teaching bms to both practitioners and students (hereafter labelled “participants”), for instance, blended learning (margolina and bohnsack, 2019), gamification (sort and holst, 2019), and flipped classroom (bitetti, 2019). this paper will build upon three different – but complementary – didactics: casebased teaching, learning-by-doing, and problem-based learning (pbl). in the following, these didactics will briefly be introduced. later, we will explain the differences and complementarities of the didactics enabled in our universal approach in the “approach” section. pedagogical approaches using cases or case-based teaching have been advocated by scholars to enhance the individual’s learning process (schank, 1990; leake, 1996). schank (1990) emphasises this by stating “good teaching is good story telling” (p. 232) or in other words: case-based teaching should create an excellent narrative which enables the participant to engage in the setting and the topic. researchers, as well as psychologists, agree that rehearsal and learning-by-doing stimulate successful learning (hogan and warrenfeltz, 2003; ann haefner and zembal-saul, 2004). some of the main features of learning-by-doing are propositional knowledge produced within academia and knowledge validated through practical work (gibbons et al., 1994). likewise, more and more universities are adopting characteristics of pbl (de graaf and kolmos, 2003; savin-baden, 2014). pbl is an instructional participantcentred approach that empowers participants to “conduct research, integrate theory and practice, and apply knowledge and skills to develop a viable solution to a defined problem” (savery, 2015, p. 9). pbl can be performed in many constellations and modes of knowledge (see further savin-baden, 2014). de graff and kolmos (2003) argue that these features in pbl lead to higher motivation and harder work from the participants as well as improving learning capabilities at a higher complexity level. based on the abovementioned research on teaching, we initiated an ongoing longitudinal action research project to uncover best practice in terms of educating and developing bm competencies. this initiative includes a business development project on networkbased bms with more than 100 companies involved, a research project on bms as a communicating tool (see sort and nielsen, 2018), along with experiences from teaching bms in different settings and contexts over the last decade. furthermore, we have had scholarly discussions with colleagues from the bm community as well as alexander osterwalder and yves pigneur, the renowned authors of the book ’business model generation’ (2010). this action research project has led to the development of what we refer to as “a universal approach to teaching business models”. we have developed and refined our approach during the years and will continue to develop it further. the approach has been used both in teaching contexts as well as professional settings. results show that participants afterwards have a profound knowledge and application skill on how to use bms and the bmc as a language for discussion, analysis and innovation. our approach has been applied with university students ranging from first-year bachelor students to master students in their final year and from a vast range of different study directions such as art, business administration, management accounting, international business, engineering, medicine, and innovation management. furthermore, the approach has been applied successfully in different geographical settings, such as denmark, china, italy, and germany. the approach has also worked well with practitioners from smalland medium-sized enterprises as well as large corporations in various industries. this validation from a large variety of both students and practitioners is why we dare calling our approach universal and a “best practice”. approach the universal approach described in this paper will focus on how the widely accepted framework business model canvas (bmc) can be taught. the approach and didactics apply to most topics and frameworks related to bms such as the value proposition canvas, the lean start-up canvas, and the bm environment map. however, due to the confinements of the short paper format, we focus on the one topic that we believe most teachers can relate to, namely bmc. journal of business models (2021), vol. 9, no. 3, pp. 50-59 52 our approach builds upon the notions of case-based teaching, learning-by-doing, and pbl, which would also reflect the expectations towards the participants in the learning objective after a teaching session. casebased teaching relies on examples or cases to enhance the participants understanding of the topic. the cases typically include pre-made materials and clear-cut outcomes. as such, the participants get a more practical approach and more profound learning by understanding the different context where the topics can be applied (see schank, 1990). taking this a step further, introducing learning-by-doing fosters hands-on experience for the participants to further enable and stimulate successful learning (ann haefner and zembal-saul, 2004). finally, adopting pbl in a more open-ended approach where a limited amount of information is provided and the outcomes to the scenarios or problems are nonconclusive. as a result, the participants learn how to think critically, be able to define a problem, and work towards a solution on their own (savin-baden, 2014). the rationale of these three pedagogical learning approaches is found in our belief that participants should leave a teaching session with the ability to understand, reflect and apply a given theory, framework or tool. towards this aim, the three pedagogical approaches enable each other; case-based teaching offers both understanding and context learning, followed by learning-by-doing that offers the participants a setting and ability to apply the tool. lastly, pbl enables the participants to think critically and find new and interesting problems on their own and work towards a solution which in this case could be the development of a new innovative bm, suggestions for bm design changes or similar. the following steps comprise the universal bm teaching approach: 1. identify the audience’s pre-understanding 2. traditional lecture on the topic: bmc in lecturing context 3. case-based examples: one or multiple cases explained in plenary 4. learning-by-doing: knowledge application 5. facilitate self-directed learning with pbl depending on the course specifics and the time available, each step (except for the first) can be conducted as a teaching session on its own (usually 60 minutes) but can also be merged into one extended session. step one identify the audience’s preunderstanding the first step is related to knowing the audience and their existing knowledge about the topic. a good starting point is to get the participants to think about their understanding of the topic bmc and discuss it in pairs or larger groups. following this brief session, the teacher should ask the participants to share their understanding with the rest of the class. some teachers might know the knowledge level of the audience in advance (for example if the session is part of a teaching series). if this is the case, this step can be done by the teacher in advance without setting time aside for discussion. however, if the teacher does not know the audience (for example, if it is a single independent teaching session or part of a universityindustry program with a company), this initial step is essential to identify the optimal emphasis and time allocation for the following steps. besides, having a pre-understanding about the audience plays a vital role in achieving the “zone of proximal development”, i.e. situations where the teacher combines the right level of competence of the participants to the right level of challenge in the teaching (see further wass and golding, 2014). example: it is essential not only to ask if the participants have read the syllabus in our example the book by osterwalder and pigneur (2010) – but also if they have a genuine understanding of the topic. participants usually think they know much about bms and the bmc from a quick read through the book. however, quite often, their knowledge or understanding is very superficial. hence, questions concerning the notions of value and how bms are different from strategy could be valuable follow-up questions to get a feeling of their actual level. moreover, if the groups share their understanding, the teacher can listen in and get a good grasp of the competence level. step two traditional lecture on the topic: bmc in lecturing context the second step is what most would refer to as the traditional or conventional lecture. the teacher will explain the principles of the topic regarding theories journal of business models (2021), vol. 9, no. 3, pp. 50-59 53 and methods. in this context, the lecture will typically involve an explanation of how the bmc works, including strength and weakness. also, the teacher could explain the development of the bmc and framing it in the broader field of bm research. an explanation of each building block should be presented, including what the specific block entails and the concepts or questions affiliated with each bmc building block. during this traditional lecture, the teacher could also start to make use of the case-based pedagogics, but this should be confined to relatively simple cases on a narrative or archetype level. example: dependent on the level of the prior knowledge of the participants, the first part of this lecture could be explaining how bm research is related to other subjects (such as marketing and strategy) but also how it is different. a natural part of this general introduction would also be to focus on value creation, delivery and capture towards customers. in this context, we often use narratives on well-known companies and their successful bm transitions. for example, the story of how xerox became successful after changing revenue model (see chesbrough and rosenbloom, 2002) or how nespresso fruitfully adjusted their customer segment and revenue model (see matzler et al., 2013). some of the strengths and limitations of the bmc could also be explained. examples of strengths are the intuitive design and its use as a common framework for analysing businesses, while the latter could be the in-side-out perspective and the missing focus on competitors, for instance. it is also critical to assure that the participants understand how value differentiates from technology, products and services as well as why value is such an essential part of understanding customers and their decisions. step three case-based examples: one or multiple cases explained in plenary in the third step, the session shifts into casebased teaching by using cases related to the participants’ prior knowledge or educational direction. when teaching the bmc, it makes sense to use one or several examples from the curriculum. however, local cases (geographically or industry-wise) could equally be used to enhance the engagement by the participants. the use of a bm case allows the participants to achieve an in-depth understanding than solely theoretical learning attained in step 2. the profound understanding is achieved through introducing a case where the teacher demonstrates practical application of the theory in context; for instance, mapping the bmc for a company. the teacher should explain why this bm case is exciting and unique before, during and after the walk-through. these are essential aspects to convey an excellent narrative which, from our experience, will enhance the learning of the participants. the teacher can, after a thorough explanation of one case, choose to do shorter narratives about other noteworthy bm cases that fit the course curriculum or learning points. example: when cases (and especially the first one) are applied, the teacher should use sufficient examples when explaining each building block. for instance, we often use gillette as the first case since most people know and relate to this case (see e.g. osterwalder & pigneur, 2010, p. 105). firstly, we go through the theoretical considerations of the building block “customer segments” to clarify the underlying aspects of that building block. secondly, we demonstrate how the case can be applied to that particular building block in this example by explaining who the actual customers of gillette are. this process of theoretically explaining and practically demonstrating using the case is performed for the remaining building blocks. to achieve another level of abstraction in the teaching, the teacher could illustrate how the case might have a certain bm pattern embedded. for example, by highlighting the specific building block connections that drive this bm pattern1. in the gillette case, this would involve an explanation on how their close partnership with the retailers enables them to get the best spots in the shop in return for marketing efforts. this, in turn, enables gillette to keep their brand value towards the customers as well as their revenue model, which is based on selling relatively cheap handles and making high profits on the razor-heads continuously2, hence the “razor & blades” pattern (e.g. osterwalder & pigneur, 2010). 1 for an extensive overview of different bm patterns, please see gassmann et al. (2014). 2 the gillette case works in almost all contexts, as most people have somehow engaged with gillette; i.e. people have either used a gillette razor (or similar), seen their commercials or been at a retailer where they are sold. however, we have experienced that cultural differences can affect this case, especially in countries where hair removal is not a common thing. journal of business models (2021), vol. 9, no. 3, pp. 50-59 54 step four – learning-by-doing: knowledge application while the second and third step should give the participants an understanding of the topic and the bmc framework, the fourth step starts the learning-by-doing process and is also somewhat oriented towards pbl. the idea behind step four is to apply both case-based teaching as well as learning-by-doing and still facilitating the process in a structured and teacher-led manner. structured, in this context, refers to the fact that the teacher is still controlling the process and guides the participants. this is done by briefly introducing the participants to a new bm (typically at the archetype level). like described in step three, this can be a well-known international case, or it could be a more local one. the important part is that the participants have engaged with the case company (experience with buying or using the company’s offering) or considerable prior knowledge about the case. the participants now have to map out the bm using a set of predefined answers that should be placed into the appropriate bmc building blocks, see figure 1 and 2. we usually use an a4 or a3 print-out of the bmc. when the allocated time runs out, the teacher can either go through the right answers directly (if in lack of time) or invite the participants to reveal their answers one building block at a time to increase the discussions and thereby the learning. if the latter approach is chosen, the teacher can reflect upon the answers revealed before presenting the “correct” solution in the end. as such, this step requires the teacher to be wellinformed about the specific case. this step leaves most participants with both a great understanding of the bmc framework as well as the ability to use it properly. furthermore, this step can advantageously be done in smaller groups; first, the mapping in groups of two and afterwards, in groups of four, each group present their final bmc and elaborate on the rationale behind their “answers”. if there are variations in their answers (which there usually are), these are an excellent starting point for further discussions, eventually increasing the learning aspect. example: we conduct a “jeopardy-style” exercise with a “cheat sheet”, which gives the participants all the right answers, but they will still have to determine where the answers fit in the bmc. the answers can be stickers, puzzle pieces or other forms of tiles (see figure 1 and 2). at this point, the teacher should function as a facilitator, to whom the participants can ask questions if they do not understand some of the answers figure 1: nespresso “cheat sheet” inspired by pigneur (2017) journal of business models (2021), vol. 9, no. 3, pp. 50-59 55 on the cheat sheet. as seen in figure 1 and 2, we have used nespresso as an example as most participants have an appropriate level of knowledge about the nespresso brand and operations. we have also successfully applied tesla, apple and airbnb as well as similar large and well-known (local) companies as cases for this learning-by-doing exercise. step five facilitate self-directed learning with pbl the fifth and final step is stimulating the participants to apply their knowledge on their own through the pbl pedagogics. the participants are therefore required to work independently on a problem or scenario with limited information and no clear-cut outcomes. for example, participants could be given the task to identify the bm for an undisclosed case company using the bmc. this step should start with the introduction of the, until now, undisclosed case company. the case can be presented in any manner found suitable by the teacher, as long as the presentation do not give away too much information. the important part is to let the participants use their obtained theoretical knowledge, apply it on their own (individually or in groups) and enhance the learning-by-doing aspect in the approach by utilizing self-directed learning. the teacher should, therefore, be involved merely as a facilitator at this point (advise and encourage participants) and not provide the path to resolve the problem. the final step can be concluded in multiple ways depending on the teacher and the course. nevertheless, the participants usually do a plenary presentation of the mapped bmc (or in front of an opponent group) to get feedback as there is no absolute solution in this step. step 5 could also be the actual exam, as it – according to our experience – assesses the participant’s abilities to apply their understanding, think critically and develop a solution. example: we have used videos, e.g. zimmerman (2015), written case company descriptions, free search on the internet (by the participants themselves) as well as inviting actual companies inside the classroom to do a live presentation in this step. the most crucial part is that the participants – individually – can collect enough information to start mapping the bmc but also have room to apply their critical thinking; for instance, to figure out what are the key resources and not just routine resources in this particular bm. hence, we will typically figure 2: nespresso bmc using “cheat sheet” journal of business models (2021), vol. 9, no. 3, pp. 50-59 56 have participants working in groups to foster this critical thinking. at the end of the session, we often conclude with having the participants present in front of an opponent group to increase knowledge sharing. furthermore, the participants will see how other groups have solved the task, again a crucial point in pbl. key insights and discussion the first attempts of implementing this approach can take a fair amount of time for the teacher, as cases and narratives have to be prepared to make sure the casebased teaching will show its effect. however, we do believe it is time well spent, as the participants show enhanced learning and application abilities compared to doing a traditional lecture about bms and/or the bmc. at least the evaluation of the teaching sessions we have done throughout the years have indicated this. also, direct feedback from the participants and examiners of oral and written exams have supported this. the participants demonstrate a higher level of learning and ability when compared to participants where we have used just traditional lectures or similar approaches. for teachers, the preparation time can be reduced significantly, though, by using the examples and cases from this paper. our universal approach has applicability across different themes and study directions. within bm teaching settings, we have used the same approach to invent or improve new bms (“to-be” bms, cf. the terminology in osterwalder & pigneur, 2010), value proposition designs (osterwalder & pigneur, 2014) as well as the bm environment map (osterwalder & pigneur, 2010). as previously described, the five-step approach is applicable to most teachers in most contexts. however, we do have some further recommendations and insights regarding the use of cases, using scenarios, and the audience. choosing and using cases the teacher will need to develop or read up on some (from a teaching point of view) compelling cases as the quality of the narratives in step two and bm cases in step three are dependent on the teacher exclusively. so, the teacher needs to make sure the bm cases fit the course and the setting. some years ago, we experienced how the use of cases can go wrong. during a bm course at a chinese university, we used the cases we usually would apply at european educational institutions. however, these cases were not applicable in a chinese context as we experienced that some of the classic textbook examples (e.g. google, facebook and uber) are somewhat unknown to chinese students. furthermore, we once tried to apply “for-profit” company cases in a session primarily consisting of “non-profit” organisation participants at a university-industry program. the participants left with some understanding of the bmc framework; nonetheless, it could have been much stronger if the cases were more related to the participants existing knowledge and everyday work environment. in general, when the universal approach is used with practitioners, it is a good idea to use cases that are familiar to their organisational environment. for example, if it is a b2b company, participants would exhibit a better understanding of b2b cases rather than b2c cases – and vice versa. similarly, if it is a smaller organisation, participants would better understand and relate to domestic-based cases than large international corporations. from our experience, if the participants do not understand the general logic of the bm cases, step three, four and five are likely to fail. it should also be noted that the cases introduced in step five should not give direct answers to the participants. the introduction to a case in step five should be on a general level and not include information like “our customer segments are …” or “our value proposition is …”. for example, using a youtube video about airbnb’s business model, where all the bmc building blocks are slavishly covered, will counteract step five’s aim of getting the participants to apply their knowledge if the answers are given like in step four. the use of live cases as previously mentioned, the approach is also very applicable to include live-case cases, i.e. inviting an organisation (of any type, size and age) to do a presentation. the guest speaker should, however, be noticed about which topics he/she should include in the presentation. if not all parts of the bm are indirectly touched upon during the presentation, the teacher could choose to do a small round of q&a’s, either by him-/herself or let the participants pitch in as well to uncover missing pieces. the general approach will remain the same, and journal of business models (2021), vol. 9, no. 3, pp. 50-59 57 the company case will typically be introduced in step five. the teacher can, during the other steps, prepare narratives or bm cases that are somewhat related to the live case. according to our experience, this inspires the participants in the subsequent steps; still, the first narratives and bm cases do not have to be related to the live case to reach a good result. using scenarios the fifth step can also entail a variety of setups, where the teacher presents different scenarios or design constructs. the lecturer can, for instance, say that the case is restricted to a b2b setting only or decide that only a specific channel type can be used to reach the customers. we have found that scenarios challenge the participants in new ways and may generate new insights on how the bmc functions in a specific setting. furthermore, in the fifth step, the teacher could introduce a specific customer segment or value proposition and have the participants brainstorm on how to design a bmc with these requirements. knowledge level of participants the approach can and should be modified as needed (or dictated) by time constraints and the pre-existing knowledge of the participants. if the participants show a general high understanding of the topic, the teacher can choose to spend less time on step two and three before going into step four and five. moreover, if the application of theories is not essential to the program (this holds for some practical university-industry activities) or is part of an advanced course, the teacher can choose only to apply step four and five. it should be noted that jumping directly to step four or five might prove counterproductive, as trying to let participants develop skills on their own have shown some difficulties. studies (e.g. kirschner et al., 2006) have revealed that minimal guidance during the initial learning stages does not show a positive outcome of the learning. conclusion the universal approach to teaching bms presented in this paper has proven successful in a variety of settings across disciplines and countries. it has been refined during the last decade and can be used as a guide to teaching bms in an engaging and enrichening way, which can be quite beneficial to new teachers within the bm field. likewise, our approach can serve as an inspiration to experienced teachers who are seeking new insights. even though some of the steps can be somewhat time-consuming for the teacher, the preparation time will be reduced significantly, if the examples and cases presented in this paper are used. the five-step approach combines pbl, learning-bydoing and case-based teaching, which provides the participants with a deep understanding and ability to apply the tools/theories/frameworks theoretically as well as practically. the participants (and the teacher) are highly engaged and usually find that times flies. furthermore, the teaching sessions are given high ratings when evaluated. in conclusion, we hope this approach can inspire inexperienced as well as veteran teachers to enrich and evolve their teaching sessions both to heighten the motivation and competencies of the participants. journal of business models (2021), vol. 9, no. 3, pp. 50-59 58 references ann haefner, l., & zembal-saul, c. (2004), learning by doing? prospective elementary teachers’ developing understandings of scientific inquiry and science teaching and learning, international journal of science education, vol. 26, no. 13, pp. 1653-1674. bitetti, l. (2019), activate business model learning through flipped classroom and backward design, journal of business models, vol. 7, no. 3, pp. 100-110. chesbrough, h., & rosenbloom, r. s. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies,  industrial and corporate change,  vol. 11, no. 3, pp. 529-555. gassmann, o., frankenberger, k., & csik, m. (2014), the business model navigator: 55 models that will revolutionise your business, pearson, uk. de graaf, e., & kolmos, a. (2003), characteristics of problem-based learning,  international journal of engineering education, vol. 19, no. 5, pp. 657-662. gibbons, m., limoges, c., nowotny, h., schwarzman, s., scott, p., & trow, m. (1994), the new production of knowledge: the dynamics of science and research in contemporary societies, sage, london, uk. goodwin, b. (2012), research says new teachers face three common challenges, educational leadership, vol. 69, no. 8, pp. 84-85. hogan r., warrenfeltz r., (2003), educating the modern manager, academy of management learning & education, vol. 2, no. 1, pp. 74-84. kirschner, p. a., sweller, j., & clark, r. e. (2006), why minimal guidance during instruction does not work: an analysis of the failure of constructivist, discovery, problem-based, experiential, and inquiry-based teaching, educational psychologist, vol. 41, no. 2, pp. 75-86. leake, d. b. (1996), case-based reasoning: experiences, lessons and future directions, aaai press/mit press, cambridge, ma. margolina, a. & bohnsack, r. (2019), teaching business models via blended-learning, journal of business models, vol. 7, no. 3, pp. 24-37. matzler, k., bailom, f., friedrich von den eichen, s., & kohler, t. (2013), business model innovation: coffee triumphs for nespresso, journal of business strategy, vol. 34, no. 2, pp. 30-37. savery, j. r. (2006), overview of problem-based learning: definition and distinctions, the interdisciplinary, journal of problem-based learning. vol 1, no. 1, pp. 9-20. savin-baden, m. (2014), using problem-based learning: new constellations for the 21st century,  the journal on excellence in college teaching, vol. 25, no. 3&4, pp. 197-219. schank, r. c. (1990), case-based teaching: four experiences in educational software design, interactive learning environments, vol. 1, no. 4, pp. 231-253. journal of business models (2021), vol. 9, no. 3, pp. 50-59 59 sort, j. c. & holst, p. m. (2019), using digital gamification in the context of business models, journal of business models, vol. 7, no. 3, pp. 38-46. sort, j. & nielsen, c. (2018), using the business model canvas to improve investment processes, journal of research in marketing and entrepreneurship, vol. 20, no. 1, pp. 10-33. osterwalder, a., & pigneur, y. (2010),  business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons, hoboken, nj. osterwalder, a., pigneur, y., bernarda, g., & smith, a. (2014), value proposition design: how to create products and services customers want, john wiley & sons, hoboken, nj. pigneur, y. (2017), “business model innovation: a challenge in existing companies”, keynote presented at the 1st business model conference, 18-19 may, venice, italy. wass, r., & golding, c. (2014), sharpening a tool for teaching: the zone of proximal development, teaching in higher education, vol. 19, no. 6, pp. 671-684. zimmerman, m. [mars startup toolkit]. (2015, november 17).  examining nespresso’s business model [video file] from 00:00 till minute 07:56. retrieved from: https://www.youtube.com/watch?v=nckgw5c9ajq (accessed december 13, 2018). journal of business models (2017), vol. 5, no. 1, pp. 35-50 35 business model innovation portfolio strategy for growth under product-market configurations bert verhoeven 1 and lester w. johnson 2 abstract purpose: the research links three concepts: product market growth strategy, the magnitude of innovation and business model innovation, merging them together into a dynamic business model innovation strategy framework. design/methodology/approach: the paper is conceptual and exploratory in nature and builds on existing literature and the author’s experience with developing business models. findings: the bmi strategy framework can help managers establish a bmi portfolio strategy following six pathways within four categories. conclusions lead to avenues for future research in business model innovation portfolio strategy, dynamic business model innovation processes, and market innovation. originality/value: the article deepens the theoretical understanding of business model innovation strategy and provides an enriched dynamic classification of business model development and business model innovation, new to the firm, new to the market and new to the world and the expected outcome being more or less novel (incremental, evolutionary, transformative). our analysis brings new insights into the recent development in the literature from a static to a more dynamic view on business model innovation, supporting a dynamic analysis of strategy development and business model innovation processes. please cite this paper as: verhoeven, b. and johnson, l. w. (2017), business model innovation portfolio strategy for growth under productmarket configurations, journal of business models, vol. 5, no. 1, pp. 35-50 keywords: business model innovation; innovation portfolio; entrepreneurial strategy; product market innovation; growth strategy 1 new venture institute, flinders university, bedford park south australia 5042 australia; bert.verhoeven@flinders.edu.au 2 swinburne business school, swinburne university of technology hawthorn vic 3122 australia. journal of business models (2017), vol. 5, no. 1, pp. 35-50 36 introduction most of the time companies are in exploitation mode, leveraging existing knowledge and resource bases (mudambi & swift 2011), executing a plan in which innovation is a change process involving incrementally extending a range of (slightly modified) products to the same known users (bucherer, eisert & gassmann 2012) without drastically altering the value proposition, or questioning the existing business model. a business model represents the rationale of how an organisation creates, delivers and captures value (teece 2010a) and the development, adoption and exploitation of value-added activities in economic and social areas is a key factor for competitiveness and growth (crossan & apaydin 2010). but in highly uncertain, complex and fast-moving global industry environments competitors challenge the status quo by creating new business models with superior competitive advantage. firms commercialise new ideas and technologies through their business models (chesbrough 2010) where the same idea or technology taken to market through two different business models will yield two different economic outcomes, stressing the constant need to search for the most optimal business model fit with product-market configurations. studies on the performance of business model innovation (bmi) are scarce but first indications are that effective bmi outperforms product-process innovation (amit & zott 2012; bock et al. 2012) leading to generic growth (baden-fuller & morgan 2010; calia, guerrini & moura 2007; velu 2015). according to the literature on strategic diversification (e.g., ansoff, 1958), firms can achieve growth by engaging in exploration of new markets or market niches, reducing the risk of becoming obsolete to users: growth by market pull (di stefano, gambardella & verona 2012). exploration can also involve a dynamic search for new knowledge, skills and resources (new product development) in domains that are new to the firm (baum, calabrese & silverman 2000; benner & tushman 2003; he & wong 2012): growth by product push (brem & voigt 2009). it is unclear, however, how bmi relates to this growth strategy model. this gap leads to a lack of direction for a bmi strategy under product-market boundary conditions. in the literature, we find an abundance of work on differentiation strategy, innovation strategy and more recently also on bmi, but to the best of our knowledge there has been no attempt to connect the three concepts to create a bmi strategy framework assisting managers to make better decisions on growth via bmi. we set out to develop this framework which also helps to address a second gap in the literature leaving managers mostly in the dark on decisions involving the magnitude of bmi from incremental exploitation of existing business model to exploration of new value propositions enabling a strategic portfolio of bmi. our study addresses these gaps as we specifically ask: what consequences for bmi strategy can be extracted from the link between product-market growth diversification strategy and the magnitude of innovation under product-market configurations? helping business model innovators make better strategic decisions in turbulent environments, a central contribution of our study, is the development of a dynamic bmi strategy framework for growth under product market configurations and combines a muchneeded update to the ansoff matrix with bmi magnitude under product-market configuration. the framework supports analysis of the origin, magnitude and drivers of bmi as well as bmi strategic growth goals and scope. practically this enables managers to put together a bmi portfolio strategy guiding and balancing their bmi efforts in new to the firm, new to the market and new to the world bmi. to address bmi strategy and magnitude and to support, the conceptual development of a bmi strategy framework, we first deepen our understanding of the shortcomings and problem statement in section 2. then in section 3 we outline and discuss the conceptual development of two concepts: growth through differentiation strategy and innovation magnitude. then we will pull the concepts together in a conceptual model and discuss consequences in section 4, followed by conclusions in section 5. literature review, shortcomings and problem statement the business model concept has been defined in different ways (fielt 2014; teece 2010a; zott & amit 2010), but two themes appear in the literature repeatedly: the business model as a representation of the logic and strategy of value creation, delivery and capture (johnson, christensen & kagermann 2008; shafer, smith & linder 2005), and the business model as a framework journal of business models (2017), vol. 5, no. 1, pp. 35-50 37 explaining the elements, structure and architecture, of the business (amit & zott 2012; chesbrough 2007; george & bock 2011; osterwalder, pigneur & tucci 2005). ahokangas and myllykoski (2014) noted that these two aspects enable the business model concept to connect abstract-level strategy (i.e., theoretical thinking) to its implementation on a practical level (i.e., action) (mcgrath 2010; osterwalder, pigneur & tucci 2005; sosna, trevinyo-rodríguez & velamuri 2010). when bmi is considered as the innovation of the business model (velu 2015) it involves the discovery and adoption of fundamentally different modes of value proposition, value capture and/or value creation to an existing business (teece 2010a), but it is under discussion what the value elements of the business model consist of (fielt 2014; groth & nielsen 2015; osterwalder 2004; osterwalder & pigneur 2010; osterwalder et al. 2014), let alone how bmi influences which elements or structure of the business model. groth and nielsen (2015) present an overview of a number of different frameworks and conclude that many frameworks focus on similar areas, and the differences should therefore sometimes be seen in the details and in the ways the areas are put together. chesbrough and rosenbloom (2002) mention the value network as one of the elements, where barjak, niedermann and perret (2014) perceive bmi as changes of all three components of business models, 1) value creation, 2) business systems, and 3) revenue generation. osterwalder (2004) assumed the business model framework to cover value creation, an enabling part for value delivery and a value capture part (osterwalder 2004; osterwalder, pigneur & tucci 2005) consisting of 9 elements in three categories. value creation elements: (1) value proposition, (2) customer segments, (3) customer relationships and (4) channels. enabling elements: (5) key activities; (6) key partners and (7) key resources. cost-revenue logic: (8) cost and (9) revenue (osterwalder & pigneur 2010; osterwalder, pigneur & tucci 2005). the nine elements can be iterated and changed, providing a dynamic tool for bmi analysis, but strategic guidance on how to use this tool under different product-market configurations is lacking. business models lie at the core of the fundamental question asked by business strategists: how does a firm build a sustainable competitive advantage, turn a profit and grow? zott and amit (2008) argued that the business model may interact with the firm’s product market strategy. teece (2010a) added that coupling strategy analysis with business model analysis is necessary to protect whatever competitive advantage results from the design and implementation of new business models. strategy analysis is thus an essential step in designing a competitively sustainable business model within the product-market strategy. but academic literature on bmi strategy has mainly focused on what it is and giving managers and researchers a language (definition) for bmi that can foster analysis, reflection and dialogue on the subject (amit & zott 2011; george & bock 2011; zott 2007). other research has used a range of conceptual lenses like: classification or features of innovative business models (bereznoi 2015; chesbrough 2007; fielt 2014; groth & nielsen 2015; lambert 2015; lambert & davidson 2013; taran, boer & lindgren 2015); bmi activities and elements (amit & zott 2011; johnson, christensen & kagermann 2008; osterwalder, pigneur & tucci 2005); bmi strategic approaches (amit & zott 2012; bock et al. 2012; cavalcante, kesting & ulhøi 2011; günzel-jensen & holm 2013; kesting & günzel-jensen 2015; lindgren 2012; teece 2010a); analysis or case studies of bmi (abdelkafi, makhotin & posselt 2013; hoveskog, halila & danilovic 2015; sosna, trevinyo-rodríguez & velamuri 2010); or in fewer cases, bmi in the context of innovation (souto 2015). to add to this diversity of studies, schneider and spieth (2013) pointed out that the business model concept, following its acknowledgement as an enabler of innovations, has itself emerged as a promising unit of analysis and starting point for innovation strategies. trends such as the development of service orientation of manufacturers (kindström 2010), increasing customer centricity (teece 2010b), and a market driven form of r&d such as open innovation (chesbrough 2012; spithoven, vanhaverbeke & roijakkers 2012; van de vrande et al. 2009; van der meer 2007; vanhaverbeke 2013) , have led to the emergence of new forms of product-market configurations (johnson, christensen & kagermann 2008) and drive analysis of bmi. acknowledging extant theoretical streams and their explanatory support for research on bmi, schneider and spieth (2013) looked at strategic concepts like the resource-based view, dynamic capabilities view, and strategic entrepreneurship to better understand bmi. consequently, they distinguished two terms: 1. business model innovation is opportunity driven and represents a firm‘s response to changing sources of value creation where entrepreneurial actions are required. journal of business models (2017), vol. 5, no. 1, pp. 35-50 38 2. business model development (bmd) requires a firm to identify potentials in terms of improvements and continuous innovations where minor, continuous changes to the extant business model of a firm primarily require a firm to focus on the usage of its resources and competences as well as their development as suggested by resource based and dynamic capabilities perspectives. this view aligns with theory from the literature on product innovation management and based on that literature bucherer, eisert and gassmann (2012) add a boundary factor suggesting a distinction between a situation in which a company is forced to innovate its business model (called ‘threat’ in the following) and a situation where it innovates to capture an opportunity (‘opportunity’). following schneider and spieth (2013) and bucherer, eisert and gassmann (2012), bmd is more likely to be prompted by a defensive reaction to threats to the market position while bmi is more likely to be prompted by an offensive pursuit of opportunities (bucherer, eisert & gassmann 2012). the much used distinction between threat and opportunity in the strategic literature (porter 1979) is less clear-cut in innovation, where the origin of innovation is more likely to represent nuances along a sliding scale, for example initially addressing a market threat which may lead to opportunity driven bmi and vice versa. but the strategic distinction is useful as it deepens the understanding of the origin of innovation within the concepts of bmi and bmd. while new firms always act on opportunities, for established firms both origins of innovation are relevant and rather than a clear distinction between bmi and bmd, innovation of the business model is more likely to be a spectrum of offensive (opportunity) and defensive (threat) positions along a sliding scale with some overlap between elements of bmd and bmi in the middle (figure 1). cavalcante, kesting and ulhøi (2011) made a useful contribution, arguing that changes to a business model consist either of 1) creation, 2) extension, 3) revision, or 4) termination. but they stopped short of explaining which strategy should be applied in what situation and why? and while the discussed distinction between bmd and bmi is useful, it leaves unexplained the influence of product-market boundary conditions on the process of bmi/bmd and the magnitude of bmi compared to bmd. the discussion of bmi and bmd above is summarised in table 1: conceptual development growth strategy through differentiation since its introduction more than half-a-century ago, the ansoff matrix (ansoff 1958) also known as the ansoff product-market expansion grid has been one of the most widely described and utilised strategic management and marketing tools in academic texts. ansoff’s matrix (figure 2) suggests four alternative growth strategies which hinge on whether products or markets are new or existing. the four quadrants in the matrix have guided corporate growth strategies for decades and can be summarised as: 1. market penetration suits a causal plan approach since it leverages many of the firm‘s existing resources and capabilities with minimal assumptions, largely keep doing what the firm already does well with incremental improvements. threat opportunity business model innovation business model development figure 1: spectrum sliding scale of bmd and bmi bmi strategy concept bmi bmd origin `opportunity` `threat` drivers market/customer driven resources/ capabilities/ product driven key milestones new business model fit resource/ capabilities/npd performance milestones table 1: bmi strategy factors journal of business models (2017), vol. 5, no. 1, pp. 35-50 39 2. product development is done in order to leverage existing technology strengths by developing a new product targeted to existing customers, which requires modified or new value propositions and a process with more assumptions than simply attempting to increase market share. 3. market development include the pursuit of additional market segments or geographical regions (clone markets), which typically comes with more assumptions than a market penetration strategy and involves experimentation to validate the assumptions. 4. diversification is the most experimental of the four growth strategies since it requires both product and market development (assumptions on both levels) and may be outside the core competencies of the firm. however, diversification may strengthen the potential to gain a foothold in an attractive industry (high rate of return) and the reduction of overall business portfolio risk. while ansoff’s matrix has been used in marketing and management studies, it has not received the same attention in the innovation literature. but a clear cut distinction between product development (technology push) and market demand (market pull) led innovation has been dismissed by the field of technology studies since the 1970s with the conclusion that both are important for innovation and that advances in scientific and technological knowledge as well as demand conditions are the main instigators of new technological paradigms (van den ende & dolfsma 2005). further course of development of a technological paradigm can be determined by an interaction of both technological developments and by demand. it motivated nagji and tuff (2012) to put the two categories in ansoff’s matrix (product development and market development) together in one category of adjacent innovation (nagji & tuff 2012). the two scholars refined the matrix replacing ansoff’s binary choices of product and market (old versus new) to three: safe bets in the core, less sure things in adjacent spaces, and high-risk transformational initiatives. an adjacent innovation involves leveraging something the company does well into a new space. while acknowledging the interaction of push and pull, putting them together in one adjacent quadrant may, however, lead to a loss of nuances helping better explain differences in bmd or bmi strategy. however, it acknowledges a matter of degree in innovation (magnitude) from incremental to adjacent (evolutionary) and transformative, something we will discuss more in depth in the following section. magnitude of innovation under product market conditions scholars have tried to explain the magnitude of innovation in many different ways. crossan and apaydin (2010) pointed out that the magnitude dimension of innovation indicates the degree of newness of the innovation outcome with respect to an appropriate referent. in terms of magnitude, scholars tend to distinguish between incremental and radical innovation. to confuse matters the latter is sometimes termed as transformational, revolutionary, disruptive, discontinuous, or breakthrough (crossan & apaydin 2010). radical innovation induces fundamental changes and a clear departure from existing practices in the organisation, while incremental innovation represents a variation in product development diversification market penetration market developmentexisting product existing users/market new product new users/market figure 2: ansoff growth matrix (1958) journal of business models (2017), vol. 5, no. 1, pp. 35-50 40 existing routines and practices. the oslo manual (oecd 2005) distinguishing between radical or transformative innovation, evolutionary innovation and incremental innovation. by definition, all innovations must contain a degree of novelty and the oslo manual has developed three concepts for the novelty of innovations: new to the firm, new to the market, and new to the world. the minimum entry level for an innovation is that it must be new to the firm. innovations are new to the market when the firm is the first to introduce the innovation in its market. the market is simply defined as the firm and its competitors and it can include a geographic region or product line. new to the world: an innovation is new to the world when the firm is the first to introduce the innovation for all markets and industries, domestic and international. new to the world therefore implies a qualitatively greater degree of novelty than new to the market. souto (2015) connects the terms “incremental innovation” and “radical innovation” with linking bmi with disruption. teece (2010a) linked the magnitude of innovation with bmi suggesting that the more radical a technological innovation, the greater the need for bmi to capture (part of) the value created by the new technology. these scholars argued the important notion that bmi is related to the novelty of the innovation, innovation as an outcome. zott and amit (2008) concluded that a novelty-centred business model combined with early entry into a market has a positive effect on performance. like them, many studies see bmi as radical or disruptive innovation that affects the entire business and not just incremental changes (cavalcante, kesting & ulhøi 2011; george & bock 2011; markides 2006; yunus, moingeon & lehmann-ortega 2010). radical or transformative means more than disruptive at company level, doing business in a new way. radical bmi relates to market level. it attracts new customers or causes customers to consume more and it enlarges the market. barjak, niedermann and perret (2014) perceive bmi as changes of all three components of business models, 1) value creation, 2) business systems, and 3) revenue generation. however, bmi might originate in one part of the business model and at the outset seem to be just another incremental innovation (bmd), but their fundamental impact on the business model then develops in the process. it illustrates the need to look beyond the outcome of bmi and study the magnitude of bmi under product-market configurations, which we will discuss in the next section. discussion first the magnitude of bmi is discussed and illustrated in figure 3, followed by the related elements of the bmi strategy framework matrix (figure 4), followed by a discussion of bmi portfolio strategy based on analysis of the four quadrants. to illustrate each stage, we use product-market introduction examples from apple, as these are well known examples helping to better understand the distinctions between the elements. the oslo manual, written in 2005, does not provide guidelines for magnitude of bmi, indicating the novelty of the concept of bmi. figure 3 brings the product-market configuration, the magnitude dimensions of innovation and distinction between bmi and bmd together. figure 3 shows a magnitude of bmi under productmarket configurations in four quadrants. the strategy following bmi magnitude is illustrated in the strategy framework for bmi under product-market configurations in figure 4. 1. update the business. the main motivation for innovation in this quadrant is to assure optimised market penetration, defending market position and aiming to reduce or eliminate threats (bucherer, eisert & gassmann 2012). the strategic focus is on exploitation and efficiency to improve processes and reduce cost throughout the value chain. this is made possible via internal incremental improvements managing resources that become too costly or unnecessary over time and enforce a change in the business model. the improvements can be implemented internally or using outside-in open innovation where outsiders’ contributions enable an enterprise to create offerings whose scale belies its internal capabilities (chesbrough & garman 2009). a firm could, for example, outsource certain activities/investments in new capabilities instead of developing them internally. this quadrant is driven by bmd, exploitation and business model updates are incrementally new to the firm, but not to the market. example is apple’s innovation of the creative process. acknowledging the importance of creativity, in 2011 a team of senior executives at apple researched a variety of models and workshops, considered the latest research in various sciences and studied other models implemented at companies like pixar and google. after several years of research and internal testing, a journal of business models (2017), vol. 5, no. 1, pp. 35-50 41 existing users/market • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • new users/market new product offering • • • • • • • • • • • • • • • • • • • • • existing product offering 1 3 2 4 evolutionary new to the market evolutionary incremental bmd new to the firm figure 3: magnitude of bmi under product-market boundary conditions 2. evolutionary bmd leverages new product development or vice versa to reduce or eliminate external npd threat in existing market. if internal npd is opportunity driven and disrupts the current market then bmi strategy moves into quadrant 3 or 4. 1. bmd new to the firm to reduce/ eliminate threat to exploitation of business model fit with current product-market configuration. 4. transformative bmi new to the world creates new to the world product-market configurations and competitive position, leveraging opportunity for new business model fit 3. evolutionary bmi new to the market leverages development of new market segments or vice versa. bmd anticipates market threats and/or extends business model into clone/adjacent market creating better business model fit. bmi strategy moves into quadrant 4 if re-segmentation disrupts the market. existing product existing users/market new product new users/market figure 4: strategy framework for bmi under product-marketconfigurations journal of business models (2017), vol. 5, no. 1, pp. 35-50 42 program matured called creativeiq, which identified four steps: search, prepare, create, innovate. the four steps are in isolation not new to the market, but the order and holistic approach to the creative process was new to the firm and changed a core process in the business model of apple (schmincke & miller). 2. bmd to leverage npd: source of innovation in the second quadrant is to anticipate threats to the market position via leveraging npd or inside-out open innovation, whereby a business places some of its assets or projects outside its own walls (chesbrough & garman 2009) as technology (and r&d) or other resources are necessary and adequate but underutilised and could be leveraged for additional purposes. as in ansoff’s matrix, this quadrant is driven by a combination of exploitation and exploration and the outcome is bmd that is new to the firm or new to the market. the objective is for a new product to better fit existing market segments, while optimising cost-revenue logic of the value capture process. an example is the yearly incremental updates of the iphone concept from, for example, iphone 5 to iphone 5s, developing the business model with a twostep introduction of new models. a second example is the introduction of iphones with `large` and `small` screens. if npd is opportunity driven and disrupts the current market bmd prompts bmi strategy moving into quadrant 3 or 4. an example is nespresso from nescafe for which the technology was developed in the 1980s but was not commercially successful until bmi disrupted the market moving into quadrant 4. 3. bmd or bmi to leverage new markets: exploring boundary markets extends bmd into adjacent markets creating new business model fit. bmd is in that case based on developing core business model strengths into adjacent markets. an example is bic, a french company known for a wide variety of plastic products like pens and disposable razors. bic has a core competency in plastic and to develop this competitive advantage the company would want to create new plastic products in markets that are that are close in proximity to what the company already does, like for example lighters, leveraging and developing existing business model strengths (core competencies and distribution channels). another source of evolutionary bmd is anticipation of threats` like price erosion, market shifts (changing population, needs/wants), technology changes as well as commoditisation of products, and legal or regulatory changes. this may lead to evolutionary bmd new to the firm, or even transformative bmi. an example of the latter is the development of the digital music industry from kazaa to napster to apple ipod to apple itunes, initially driven by a new market for digital music downloads. the existing business model of napster was driven by creating a platform that allows for peer-to-peer downloading of digital music. this popular business model was however threatened by lack of compliance with regulations and copyright infringement and napster ceased operations in 2001. when the music industry turned to streaming, it became an adjacent market for apple, that has business model strengths in digital technology and platforms. moving into the adjacent market steve jobs did not just developed the apples business model, but also innovated the existing music streaming industry business model by changing important elements: music labels as key partners and pay per individual song, where customers do not need to buy a whole album. this led to a transformative itunes business model in the music industry resulting in a dominant position for apple itunes and a sharp decline in album sales. market driven bmi can involve new products that are technological superior or take root initially in simple applications at the bottom of a market and then relentlessly move up market, eventually displacing established competitors in quadrant 4 (disruptive innovation) (christensen 1997). startups are less likely to adopt quadrant 1 or 2 strategies as they do not yet defend product or market positions that can be leveraged. they are most likely to play in category 3 and 4, where markets can be disrupted and the startup becomes the source of the `threat`. the analysis of quadrant 3 indicates that entrepreneurial disruption does not always lead to radical new business models but is often based on targeting new niche segments in existing markets, using modified value propositions, not creating new to the world business models but modifying existing business models (sometimes reverse engineered from other industries) and introducing them as new to niche segments. an example of successful entrepreneurial introductions in this quadrant are `digitisation of the business model` relying on the ability to turn existing products or services into digital variants, and thus offer advantages over tangible products, e.g. wikipedia, dropbox or netflix, (gassmann, frankenberger & csik 2013). if initial re-segmentation leads to new markets journal of business models (2017), vol. 5, no. 1, pp. 35-50 43 disrupting and replacing old markets (e.g., streaming service netflix causing the demise of blockbuster video stores business model), then the bmi has successfully become a transformative innovation (quadrant 4). 4. create business model for new product-market configuration: here the source of bmi is pursuing an opportunity which leads to a business model that is not only new to the firm or the market but also to the world. revolutionary search for new users and new product development creates new value propositions for new markets. an example for apple is: iphone in combination with apple app-store. bmi in category 4 is value driven and involves most (if not all) the elements of the business model in both products and markets maximising assumptions and uncertainty, but potentially maximising return as first mover advantage (zott & amit 2008) may lead to early product-market learning, leaving competitors struggling to catch up. strategic focus is on diversification creating a new costrevenue logic of the value capture process. quadrant 4 is different from quadrants 2 and 3 as the unknown is in both products and markets maximising the uncertainty, requiring new value propositions and new resources, skills and capabilities. for existing firms this may lead to a disruption of the current business model and increasingly, researchers have used the notion of ambidexterity to refer to a firm’s ability to engage in exploratory activities leading to transformative innovation on the one hand and exploitative activities leading to incremental innovation on the other (lin et al. 2013). the discussion of the four quadrants is summarised in table 2: boundary conditions: `if` strategic consequences: `then` product-market configuration and origin of innovation bmi strategic growth goal bmi or bmd and scope of innovation risk 1. existing market/ existing product. optimised market penetration, defending market position and aiming to reduce or eliminate threats. reduce/eliminate threat to exploitation of business model fit with current product-market configuration. incremental bmd new to the firm failing to act on weaknesses or opportunities in current product-market configurations may lead to oblivion when competitors introduce superior business models. 2. existing market/ new product where the origin is to anticipate external threats to the market position via leveraging npd leveraging or new product development opportunities 2. leverage new product development or vice versa to reduce or eliminate external npd threat in existing market. if internal npd is opportunity driven and disrupts the current market then bmi strategy moves into quadrant 3 or 4. evolutionary bmd new to the firm or market. bmi fails when product development fails to attract market traction. npd becomes technology in search of customers. 3. existing product/ new market, where the source of innovation is anticipation of market threats or pursuing opportunity in market diversification into new segments or clone markets. leverage development of new market segments or vice versa. anticipating market threats and/or extends business model into clone/adjacent market creating better business model fit. bmi strategy moves into quadrant 4 if re-segmentation disrupts the market. evolutionary bmd/ bmi new to the market misunderstanding of market threats and wrong assumptions about adjacent markets leads to failure of bmd. bmi does not lead to value for new segments. 4. new product/ new market where the source is the creation of an opportunity. new product-market configurations and new competitive position transformative bmi new to the world failing go to market strategy as unable to educate the market about the new business model. failing to manage ambidexterity where bmi of the enabling elements does not keep up with the value side of the business model table 2: bmi under product-market conditions journal of business models (2017), vol. 5, no. 1, pp. 35-50 44 in terms of innovation magnitude and origin of the innovation this paper suggests that a transformational bmi is opportunity driven and induces fundamental changes and a clear departure from existing practices leading to a new to the world business model. evolutionary bmi/bmd is either opportunity or threat driven, where evolutionary bmi requires entrepreneurial strategies for new segments and evolutionary bmd is driven by a resource/capabilities view on npd. incremental (new to the firm) bmd represents an update in existing routines and practices and incremental change in value. conclusions theoretical contribution ahokangas and myllykoski (2014) noted that two themes in the literature enable the business model concept to connect abstract-level strategy (i.e., theoretical thinking) to its implementation on a practical level (i.e., action) (mcgrath 2010; osterwalder, pigneur & tucci 2005; sosna, trevinyo-rodríguez & velamuri 2010): 1) the business model as a representation of the logic and strategy of value creation, delivery and capture (johnson, christensen & kagermann 2008; shafer, smith & linder 2005), and 2) the business model as a framework explaining the elements, structure and architecture, of the business (amit & zott 2012; chesbrough 2007; george & bock 2011; osterwalder, pigneur & tucci 2005). strategy analysis is an essential step in designing a competitively sustainable business model within the product-market strategy (teece 2010a; zott & amit 2008). but our literature review identified a lack of strategic guidance on how these two themes connect strategy with implementation, resulting in a need to better understand strategic bmi choices under different product-market configurations and innovation magnitude. we started this article with the following research question: what consequences for bmi strategy can be extracted from the link between product-market growth diversification strategy and the magnitude of innovation under product-market configurations? our analysis led to the development of a strategy framework for bmi under product-market configurations and combines a much-needed update to the ansoff matrix with bmi magnitude under product-market configuration. as far as we are aware this is the first scholarly attempt to integrate the two concepts. the distinction in the literature between opportunity driven bmi and threat driven bmd (schneider & spieth 2013) enabled analysis of the magnitude and product-market configurations at two sub-levels: bmi and bmd. it deepens the theoretical understanding of bmi strategy and led to an enriched dynamic classification of bmd and bmi new to the firm, new to the market and new to the world and the expected outcome being more or less novel (incremental, evolutionary, transformative), answering the call in the literature for a more dynamic view on bmi (cavalcante, kesting & ulhøi 2011). the bmi strategy framework supports a dynamic analysis as bmi may take place along a developing scale from bmd to bmi and from incremental to evolutionary to transformative, involving more than one, or moving through all 4 quadrants of the bmi strategy framework. bmi might also originate in one part of the business model and at the outset seem to be just another incremental innovation, but their fundamental impact on the business model then develops in the process ending up in a new to the world business model disrupting the market. practical implications most of the time companies are in exploitation mode not questioning the current business model. growth based on sustainable competitive advantage requires managers to successfully exploit or explore bmi as effective bmi outperforms product-process innovation. to better facilitate the practical search for the most optimal business model fit with product-market configurations, we presented and discussed the bmi strategy framework, providing useful traits (rules) and clarity of understanding to practitioners on the various options available to them for pursuing bmi growth opportunities that deliver sustainable competitive advantage and provide the foundation for a bmi portfolio strategy. our analysis shows that resource and capability driven bmd helps managers formulate a defensive strategy under conditions of existing products-existing markets prompting incremental innovation. bmd as proactive strategy to reduce npd/market threats prompts new to the firm or new to the market evolutionary innovation (or vice versa) under the following two configurations: new products-existing market; existing product-new market. opportunity driven bmi as a strategy to achieve evolutionary market or journal of business models (2017), vol. 5, no. 1, pp. 35-50 45 transformative innovation is prompted under the following two configurations: existing/modified productnew market; new product-new market. this enables managers to establish a bmi portfolio strategy following 6 pathways in four groups: 1. quadrant 4, existing product-existing market: a number of updates of the business model new to the firm (bmd) to reduce/eliminate threat and exploit business model fit aiming for continuous improvement. 2. quadrant 2, new product-existing market: several bmd projects modifying the business model new to the market to anticipate technology threats to current business model fit. 3. quadrant 3, existing product-new market: this category has three elements: a number of projects scanning the environment and extending bmd new to the market into adjacent markets. several bmd projects anticipating market threats. and several opportunities driven projects where bmi leverages the development of new market segments or vice versa aiming for better business model fit with new market segment. 4. quadrant 4, new product-new market: a number of longer term bmi projects aiming to disrupt other’s or own business model by creating business models that are new to the world, discovering external opportunity for new product-market fit. future research future research may dig deeper into the dynamic aspects of bmi by studying how firms move their innovation efforts from one quadrant to another, for example when they turn threats into opportunities moving from quadrant 3 to 4. process is strongly related to a more dynamic view of bmi so future research could also attempt to explore the process of bmi/bmd under product-market configurations. for example: is strategic choice for bmi in one of the quadrants more strongly related to experiential or causal bmi processes? this question for process oriented research is especially interesting to provide more clarity on the process of evolutionary bmi/bmd: how and when do firms approach evolutionary bmi/bmd using a predominantly entrepreneurial iterative process versus planned resource/capabilities process? a further opportunity is research of the relationship between the four strategic configurations with its environment, for example how is bmi strategy distinct from or may interact with the firm’s existing product market strategy processes and competitive position? a fourth opportunity for future research may attempt to learn more about bmi portfolios, the integration and synthesis of its elements and the consequences for innovation strategy and process. it would be recommended to test the portfolio strategy and related innovation processes by a number of case studies to be able to learn more about the assumptions, relationships and outcomes. when looking at innovation portfolios nagji and tuff (2012) found that firms outperforming their peers tend to allocate their investments in a certain ratio: 70% to safe bets in the core, 20% to less sure things in adjacent spaces, and 10% to high-risk transformational initiatives. as it happens, an inverse ratio applies to returns on innovation (nagji & tuff 2012). research on performance of bmi and bmd could help identify optimal percentages for bmi portfolios. lastly, bmi research may develop a focus on its relationship with market innovation. recent literature (kjellberg, azimont & reid 2015) has referred to the process of market innovation and how the market itself is contributing to bmi via, for example, open source development or double sided platforms (uber, airbnb), opening interesting prospects to find out more about the interaction between bmi and market innovation. journal of business models (2017), vol. 5, no. 1, pp. 35-50 46 references abdelkafi, n, makhotin, s & posselt, t 2013, ‘business model innovations for electric mobility’, international journal of innovation management, vol. 17, no. 1, pp. 1-41. ahokangas, p & myllykoski, j 2014, ‘the practice of creating and transforming a business model’, journal of business models, vol. 2, no. 1, pp. 6-18. amit, r & zott, c 2011, business model innovation: creating value in times of change, working paper, iese business school – university of navarra july 2010. amit, r & zott, c 2012, ‘creating value through business model innovation’, mit sloan management review, vol. 53, no. 3, pp. 41-49. ansoff, hi 1958, ‘a model for diversification’, management science, vol. 4, no. 4, pp. 392-414. baden-fuller, c & morgan, ms 2010, ‘business models as models’, long range planning, vol. 43, no. 2–3, pp. 156-171. barjak, f, niedermann, a & perret, p 2014, the need for innovations in business models, policy brief european commission dg research and innovation, university of applied sciences and arts north-western switzerland (fachhochschule nordwestschweiz, fhnw), 14 may 2014. baum, jac, calabrese, t & silverman, bs 2000, ‘don’t go it alone: alliance network composition and startups’ performance in canadian biotechnology’, strategic management journal, vol. 21, no. 3, pp. 267–294. benner, mj & tushman, ml 2003, ‘exploitation, exploration, and process management: the productivity dilemma revisited’, academy of management review, vol. 28, no. 2, pp. 238-256. bereznoi, a 2015, ‘business model innovation in corporate competitive strategy’, problems of economic transition, vol. 57, no. 8, pp. 14-33. bock, aj, opsahl, t, george, g & gann, dm 2012, ‘the effects of culture and structure on strategic flexibility during business model innovation’, journal of management studies, vol. 49, no. 2, pp. 279-305. brem, a & voigt, k-i 2009, ‘integration of market pull and technology push in the corporate front end and innovation management—insights from the german software industry’, technovation, vol. 29, no. 5, pp. 351-367. bucherer, e, eisert, u & gassmann, o 2012, ‘towards systematic business model innovation: lessons from product innovation management’, creativity and innovation management, vol. 21, no. 2, pp. 183-198. calia, rc, guerrini, fm & moura, gl 2007, ‘innovation networks: from technological development to business model reconfiguration’, technovation, vol. 27, no. 8, 8, pp. 426-432. cavalcante, s, kesting, p & ulhøi, j 2011, ‘business model dynamics and innovation: (re)establishing the missing linkages’, management decision, vol. 49, no. 8, pp. 1327-1342. chesbrough, h 2007, ‘business model innovation: it’s not just about technology anymore’, strategy & leadership, vol. 35, no. 6, pp. 12-17. journal of business models (2017), vol. 5, no. 1, pp. 35-50 47 chesbrough, h 2010, ‘business model innovation: opportunities and barriers’, long range planning, vol. 43, no. 3, pp. 354-363. chesbrough, h 2012, ‘open innovation’, research technology management, vol. 55, no. 4, pp. 20-27. chesbrough, h & rosenbloom, rs 2002, ‘the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies’, industrial and corporate change, vol. 11, no. 3, pp. 529-555. chesbrough, hw & garman, ar 2009, ‘how open innovation can help you cope in lean times’, harvard business review, vol. 87, no. 12, pp. 68-76. christensen, cm 1997, the innovator’s dilemma: when new technologies cause great firms to fail, harperbusiness. crossan, mm & apaydin, m 2010, ‘a multi-dimensional framework of organizational innovation: a systematic review of the literature’, journal of management studies, vol. 47, no. 6, pp. 1154-1191. di stefano, g, gambardella, a & verona, g 2012, ‘technology push and demand pull perspectives in innovation studies: current findings and future research directions’, research policy, vol. 41, no. 8, pp. 1283-1295. fielt, e 2014, ‘conceptualising business models: definitions, frameworks and classifications’, journal of business models, vol. 1, no. 1, pp. 85-105. gassmann, o, frankenberger, k & csik, m 2013, ‘the st. gallen business model navigator’, www.bmi-lab.ch, george, g & bock, aj 2011, ‘the business model in practice and its implications for entrepreneurship research’, entrepreneurship theory and practice, vol. 35, no. 1, pp. 83-111. groth, p & nielsen, c 2015, ‘constructing a business model taxonomy: using statistical tools to generate a valid and reliable business model taxonomy’, journal of business models, vol. 3, no. 1, pp. 4-21. günzel-jensen, f & holm, ab 2013, ‘one size does not fit all -understanding the front-end and back-end of business model innovation’, international journal of innovation management, vol. 17, no. 1, pp. 1-34. he, z-l & wong, p-k 2012, ‘reaching out and reaching within: a study of the relationship between innovation collaboration and innovation performance’, industry and innovation, vol. 19, no. 7, pp. 539-561. hoveskog, m, halila, f & danilovic, m 2015, ‘early phases of business model innovation: an ideation experience workshop in the classroom’, decision sciences journal of innovative education, vol. 13, no. 2, pp. 177-195. johnson, mw, christensen, cm & kagermann, h 2008, ‘reinventing your business model’, harvard business review, vol. 86, no. 12, pp. 50-59. kesting, p & günzel-jensen, f 2015, ‘smes and new ventures need business model sophistication’, business horizons, vol. 58, no. 3, pp. 285-293. kindström, d 2010, ‘towards a service-based business model – key aspects for future competitive advantage’, european management journal, vol. 28, no. 6, pp. 479-490. journal of business models (2017), vol. 5, no. 1, pp. 35-50 48 kjellberg, h, azimont, f & reid, e 2015, ‘market innovation processes: balancing stability and change’, industrial marketing management, vol. 44, 1, pp. 4-12. lambert, sc 2015, ‘the importance of classification to business model research’, journal of business models, vol. 3, no. 1, pp. 49-61. lambert, sc & davidson, ra 2013, ‘applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010’, european management journal, vol. 31, no. 6, pp. 668-681. lin, h-e, mcdonough, ef, lin, s-j & lin, cy-y 2013, ‘managing the exploitation/exploration paradox: the role of a learning capability and innovation ambidexterity’, journal of product innovation management, vol. 30, no. 2, pp. 262-278. lindgren, p 2012, ‘business model innovation leadership: how do sme’s strategically lead business model innovation?’, international journal of business and management, vol. 7, no. 14, pp. 53-66. markides, c 2006, ‘disruptive innovation: in need of better theory’, journal of product innovation management, vol. 23, no. 1, pp. 19-25. mcgrath, rg 2010, ‘business models: a discovery driven approach’, long range planning, vol. 43, no. 2–3, pp. 247-261. mudambi, r & swift, t 2011, ‘proactive r&d management and firm growth: a punctuated equilibrium model’, research policy, vol. 40, no. 3, pp. 429-440. nagji, b & tuff, g 2012, ‘managing your innovation portfolio’, harvard business review, vol. 90, no. 5, pp. 66-74. oecd 2005, ‘proposed guidelines for collecting and interpreting technological innovation data’, oslo manual, vol. (3 ed.), osterwalder, a 2004, the business model ontology: a proposition in a design science approach, thesis, lausanne. osterwalder, a & pigneur, y 2010, business model generation, john wiley & sons inc, hoboken, new jersey. osterwalder, a, pigneur, y, bernarda, g & smith, a 2014, value proposition design, john wiley & sons, inc. hoboken, new jersey. osterwalder, a, pigneur, y & tucci, c 2005, ‘clarifying business models: origins, present, and future of the concept’, communications of the association for information systems, vol. 16, pp. 1-25. porter, me 1979, ‘how competitive forces shape strategy’, harvard business review, vol. 57, no. 2, pp. 137-145. schmincke, d & miller, e what apple learned about creativity, viewed 22-01-2017, (http://www.smartceo.com/ schmincke-miller-apple-learned-creativity/). schneider, s & spieth, p 2013, ‘business model innovation: towards an integrated future research agenda’, international journal of innovation management, vol. 17, no. 1, pp. 1-34. journal of business models (2017), vol. 5, no. 1, pp. 35-50 49 shafer, sm, smith, hj & linder, jc 2005, ‘the power of business models’, business horizons, vol. 48, no. 3, pp. 199-207. sosna, m, trevinyo-rodríguez, rn & velamuri, sr 2010, ‘business model innovation through trial-and-error learning: the naturhouse case’, long range planning, vol. 43, no. 2–3, pp. 383-407. souto, je 2015, ‘business model innovation and business concept innovation as the context of incremental innovation and radical innovation’, tourism management, vol. 51, pp. 142-155. spithoven, a, vanhaverbeke, w & roijakkers, n 2012, ‘open innovation practices in smes and large enterprises’, small business economics, vol. 41, no. 3, pp. 537-562. taran, y, boer, h & lindgren, p 2015, ‘a business model innovation typology’, decision sciences, vol. 46, no. 2, pp. 301-331. teece, dj 2010a, ‘business models, business strategy and innovation’, long range planning, vol. 43, no. 2–3, pp. 172-194. teece, dj 2010b, ‘forward integration and innovation: transaction costs and beyond’, journal of retailing, vol. 86, no. 3, pp. 277-283. van de vrande, v, de jong, jpj, vanhaverbeke, w & de rochemont, m 2009, ‘open innovation in smes: trends, motives and management challenges’, technovation, vol. 29, no. 6–7, pp. 423-437. van den ende, j & dolfsma, w 2005, ‘technology-push, demand-pull and the shaping of technological paradigms patterns in the development of computing technology’, journal of evolutionary economics, vol. 15, no. 1, pp. 83-99. van der meer, h 2007, ‘open innovation – the dutch treat: challenges in thinking in business models’, creativity & innovation management, vol. 16, no. 2, pp. 192-202. vanhaverbeke, w 2013, ‘rethinking open innovation beyond the innovation funnel’, technology innovation management review, vol. 3, no. 4, pp. 6-10. velu, c 2015, ‘business model innovation and third-party alliance on the survival of new firms’, technovation, vol. 35, no. 1, pp. 1-11. yunus, m, moingeon, b & lehmann-ortega, l 2010, ‘building social business models: lessons from the grameen experience’, long range planning, vol. 43, no. 2–3, pp. 308-325. zott, c & amit, r 2008, ‘the fit between product market strategy and business model: implications for firm performance’, strategic management journal, vol. 29, no. 1, pp. 1-26. zott, c & amit, r 2010, ‘business model design: an activity system perspective’, long range planning, vol. 43, no. 2–3, pp. 216-226. zott, cr 2007, ‘business model design and the performance of entrepreneurial firms’, organization science, vol. 18, no. 2, pp. 181-199. journal of business models (2017), vol. 5, no. 1, pp. 35-50 50 bert verhoeven is a successful entrepreneur who started his working life in holland and currently holds a position as senior lecturer at new venture institute, flinders university in south australia. since moving to australia in 2006 till late 2016 he studied and lectured at the swinburne business school. his expertise is in entrepreneurial and innovation strategy, business model innovation and social entrepreneurship. from 2014-2017 bert was part of the teaching team at swinburne’s design factory. he has published in entrepreneurship and innovation, and now does further research for his phd on business model innovation. lester johnson is professor of marketing at swinburne business school. prior to coming to swinburne in early 2014 he was at melbourne business school, mt eliza business school, the university of sydney, bond university and macquarie university in a career in australia going back to 1975. he is a fellow of both the australia new zealand marketing academy (anzmac) and the australian market and social research society. he is past editor of the australasian marketing journal and is on the editorial boards of a number of international journals. about the authors journal of business models (2019), vol. 7, no. 3 pp. 111-118 111 teaching value propositions as part of the business model mika yrjölä1 abstract this paper outlines and discusses one approach for teaching business students about the role of value propositions as an important part of any organization’s business model. the course-wide approach is organized around understanding, creating and capturing value. the approach involves traditional teaching, interactive discussions, group work, pitching, and peer evaluation. please cite this paper as: yrjölä, m. (2019), teaching value propositions as part of the business model, vol. 7, no. 3, pp. 111-118 keywords: customer value proposition, business model, teaching 1 tampere university, tampere, finland, mika.yrjola@uta.fi journal of business models (2019), vol. 7, no. 3 pp. 111-118 112 introduction often marketers (and marketing students) are accused of focusing too much on customers and market research and not having the concepts and skills to communicate with other functions, outline the strategic or operational implications of marketing decisions, and demonstrate the value of marketing (klaus et al., 2014). for instance, marketers are stereotypically adept at spotting new consumer trends, but might have a hard time describing how those trends might affect the organization’s strategy and business model. this might reduce marketing’s influence in the organization (e.g. day and moorman, 2010; whitler et al., 2018), which might lead to the organization becoming irrelevant in the eyes of its customers, missing important external threats and opportunities, and ultimately losing its ability to operate in the marketplace (day and moorman, 2013; klaus et al., 2014). conversely, organizations that are more in line with actual customer needs tend to have superior financial performance (e.g. hortinha et al., 2011; shah et al., 2006; whitler et al., 2018). building on the above discussion, our goal in teaching marketing has been to improve future marketers’ strategic and operational capabilities outside the typical narrow perspective of marketing as a function. this paper describes an approach in which students learn how to develop, evaluate and manage an organization’s customer value propositions (cvps), and how the cvp relates to the organization’s business model. they also learn what implications cvps have for the design, management and organization of the business. as payne and frow (2014) report in their study of over 200 companies, many practitioners use the term ‘value proposition’ in their everyday discussions, but less than ten per cent of these companies formally develop, communicate and leverage cvps in their business models. the approach outlined in this paper gives students the concepts and the language needed to interact with other members of an organization at the strategic level. this approach has successfully been applied three times in its entirety as a course (table 1) and one part of it has been used two times as an introduction to value creation on another course. student feedback has been very good, averaging between 4.0…4.5 /5. table 1: course information the rest of the paper is organized as follows. first, the approach, including its phases and contents, is outlined. second, key insights are presented. finally, a summary and conclusions conclude the paper. the approach this approach is designed keeping in mind with the principle of streamlined teaching: the learning outcomes are communicated to the students at the start of the course, and the contents, teaching methods, evaluation criteria and learning climate of the course are in line with these outcomes (biggs, 2003; biggs and tang, 2011). by reading scientific articles, discussing cvps and business models in class and in groups, and by applying this learning through developing a concrete cvp, the students will engage in deeper level thinking and learning, such as reflecting, applying, relating and arguing (biggs and tang, 2011). the approach for teaching business students about cvps and business models consists of seven phases (table 2). the largest part of the approach is a group assignment. each group of 4-5 students takes two roles: first, they are the marketing team tasked with developing a new cvp for a local firm of their choosing (a presenting role), and second, they act as potential funders of the cvp (an opponent role). local firms are chosen, because the students might find potential employers this way, and the firms’ representatives course name marketing management and organization level bachelor credits 5 ects no. of students 35-45 learning outcomes after the course, students should be able to develop, evaluate and manage an organization’s customer value propositions (cvps). they should understand the role of the cvp in a business model and what implications cvps have for the design, management and organization of the business. journal of business models (2019), vol. 7, no. 3 pp. 111-118 113 might be available to comment on the final solutions. further, this gives the students a concrete case to work on (in my experience, students have found it easier to improve on a concrete case rather than start from a general/abstract case). the first two phases introduce the key concepts, tie in cvps with business models through value creation, and orient the students toward the group work. especially the 60-minute group work around the understanding, creating and capturing value framework has proved to be useful in sparking the imagination and helping the students get started on their group assignment (table 3). when introducing the concept of cvps to students, i have found it most useful to start from customer value and different dimensions of customer value (e.g. economic, emotional, symbolic). after students have read the first articles at home, the classroom discussion starts by discussing how a company might create economic value (e.g. low prices, discounts, value for money), how other companies might create functional value (e.g. convenient phase description themes and concepts materials 1 introduction to customer value and customer value propositions traditional lecture and discussion based on the articles. dimensions of customer value value propositions points of difference, points of parity articles: anderson et al., 2006; rintamäki et al., 2007 2 the understanding, creating and capturing value framework brief lecture + 60-minute group work + discussions of work business model outside-in and inside-out thinking articles: johnson et al., 2008; yrjölä et al., 2018 book: day and moorman, 2010 3 canvasing students work outside the classroom customer profiles cvp elements book: osterwalder et al. 2014 4 pitching each group presents a 5-minute pitch. each group selects another group as their potential funding target. crystallizing the idea 5 feedback 2-3 weeks before the presentation, the students submit their work in its current form and receive short feedback from both the teacher and their opponent group. characteristics of a good cvp 6 presentation each group has 20 minutes to present their solution using any visuals/media they wish. after each presentation, the opponent group can use 5 minutes to ask further questions or comment on the presentation. communicating the cvp and business model changes to potential funders/ gatekeepers 7 evaluation the students receive a short evaluation from their opponents (potential funders) and a detailed evaluation and grade from the teacher. fit of cvp and business model article: day, 2007 book: day and moorman, 2010 table 2: phases of the teaching approach journal of business models (2019), vol. 7, no. 3 pp. 111-118 114 opening hours, easy product comparisons, fast shipping) and so on (e.g. rintamäki et al., 2007). then the lectures naturally move on to cvps and business models. the second phase ends with a 60-minute group work where each group is given a value dimension (economic, functional, emotional or symbolic) and an industry (e.g. fashion, consumer electronics, retail), and the task is to answer the questions in table 3 related to understanding, creating and capturing value. (one could also try this exercise with different value dimensions and more nuanced levels, such as metrics, but then i would advise giving the students more time. in the book by day and moorman, 2010, there is an excellent table that could be made into such an extended exercise: “table 4-1 customer value leadership strategy, organization, and metrics”, p.80). the third phase, canvasing, is about developing an initial solution for the assignment case using the book value proposition design (osterwalder et al. 2014; also available as an e-book). the students follow the four steps and techniques outlined in the book, but also benefit from what has been learned during phases one and two. from experience, i do not recommend using the book alone without prior theoretical knowledge as the book’s simplistic and ‘comic book’ -like feel might leave the students confused and unmotivated. in the fourth phase, pitching, the groups present their initial solutions in a bite-size way and then each group selects another group as their ‘potential funding target’. the pitches last 5 minutes each and consist of three points: 1) what is the chosen company?, 2) why does its cvp need to be redesigned?, and 3) what does the initial solution look like? the five-minute time limit is absolute: once the time is up, the audience applauds, and the group must make room for the next presenters. this forces the students to crystallize their work and reflects practices in business conferences. (pedagogically, there are two benefits to the pitching exercise. it gives a chance to check how far the students are in their canvasing work and correct any major misunderstandings, and the pitching is also a control measure since it means each group should have started working on their solution.) the fifth phase, feedback, involves the groups submitting a work-in-process version of their solution to the teacher and to their potential funders (opponents). in a week’s time, they receive short written feedback from both, consisting of suggestions and ideas for improving and presenting their solution. the opponents are especially requested to think about what makes a good value proposition. for instance: is the target customer segment clearly defined and does the cvp answer its specific needs? how are the key benefits marketed and demonstrated to customers? is the proposed cvp likely to be profitable (e.g. in terms of pricing, growth, costs)? can the current business model deliver on the cvp and what changes need to be made? during the sixth phase, each group has 20 minutes to present their solution using any visuals/media they understanding value: what are the concrete benefits and sacrifices? what is the cvp? creating value: which business model elements (e.g. resources, partnerships, and processes) support the cvp? capturing value: which bm elements (e.g. cost structure, revenue model) are needed to capture value? economic value … … … functional value … … … emotional value … … … symbolic value … … … table 3: the understanding, creating and capturing value exercise journal of business models (2019), vol. 7, no. 3 pp. 111-118 115 wish. while many groups end up having a typical powerpoint or prezi presentation, some groups have creatively used music, costumes and videos to engage the audience. after each presentation, the opponent group can use five minutes to ask further questions or comment on the presentation. on some occasions, i have invited the chosen firms’ representatives (e.g. managers, ceos) to comment on the final solutions. in their presentations, the students are asked to address the following questions: • why should the case organization develop a new cvp? • how the new cvp has been developed? • what are the objectives and contents of the cvp? • how should the organization’s business model be changed to be aligned with the cvp? • which metrics should be used to evaluate the new cvp? finally, the seventh phase is the evaluation of the group work. based on the presentations, the opponent groups give short oral and written evaluations. the opponents evaluate their potential funding target using the realwin-worth-it screen (r-w-w), originally developed by dominick schrello (day, 2007). the r-w-w consists of three main parts with each part having sub-questions (table 4). i have found it a good template for peer evaluation, since it is simple enough, yet guiding the students’ attention to key themes of the course. finally, the teacher evaluates the assignments on a scale from one to five. the criteria are: 1. demonstrating understanding of the relevant aspects and use of course materials (e.g. articles) 2. being able to make arguments for the chosen contents of the cvp 3. presentation of the solution (including visuals, structure, language) 4. being able to document and reflect on the development and learning process (e.g. showing how the ideas have been modified along the way, using photographs to show which ideation methods have been used) 5. demonstrating unique, critical or constructive perspectives. in line with the principle of streamlined teaching, these criteria are communicated to the students at the start of the course (biggs, 2003; biggs and tang, 2011). key insights and reflections the described teaching approach is motivated by a goal to improve future marketers’ strategic and operational capabilities outside the typical narrow perspective of marketing as a function, especially teaching business students about the role of value propositions as an important part of any organization’s business model. after applying the approach three times in its entirety as a course and two times as an introduction to value creation on another course, i have made the following observations: • working on concrete cases is good way to teach about cvps and business models that might otherwise remain quite abstract, • comparisons to other industries/other cases help free students’ the imagination, • sometimes it is good to restrict the amount of time to present (or the space for writing) to force the students to crystallize their arguments, and • applying multiple teaching methods can, at best, lead to deeper levels of thinking and learning (biggs and tang, 2011). area of evaluation sub-questions real: is the market and the solution real? does the cvp answer a real customer need? is the target customer segment large enough? can the organization deliver on the cvp? win: is the cvp competitive and can the organization deliver on it? is the cvp likely to be unique and superior to competition? can the organization sustain the cvp over time? worth it: is the cvp profitable and strategically logical? are there opportunities for growth? are the revenues likely to be greater than costs? are the risks acceptable? how does the cvp fit with the organization’s business model and strategy? table 4: real-win-worth-it screen for peer evaluation of the cvp solution (modified from day, 2007) journal of business models (2019), vol. 7, no. 3 pp. 111-118 116 thus, the approach can provide students with business skills, intraand interpersonal skills, and leadership skills (hogan and warrenfeltz, 2003). summary and conclusion the purpose of the method discussed in this paper was to teach business students about the role of the cvp in a business model and what implications cvps have for the design, management and organization of the business. this approach was designed with the principle of streamlined teaching (biggs, 2003; biggs and tang, 2011), and it consists of seven phases: 1. introduction to customer value and customer value propositions 2. the understanding, creating and capturing value framework 3. canvasing 4. pitching 5. feedback 6. presentation 7. evaluation this approach has multiple advantages. firstly, by using concrete cases and having an active opponent, the students learn that a change in a company’s cvp will require changes in its business model (e.g., johnson et al., 2008). secondly, the students learn valuable, transferable skills such as group work, argumentation and presentation (e.g. through canvasing, pitching and giving feedback). thirdly, the group work is especially relevant here since only rarely are cvps and business models designed and developed alone. fourthly, the students receive feedback often: (1) verbal feedback on their pitch, (2) short written feedback at the halfway point of the course (both from the teacher and their opponent group), (3) peer evaluation after presenting their final solution, and (4) a written evaluation from the teacher. in terms of limitations and requirements of the approach, the class size is one important consideration – this approach is difficult to scale. in my view, the 45-student limit is a maximum, since after that the teacher’s workload increases and the amount of attention each student and student group receives diminishes. secondly, and partially related to the previous point, the teaching and interaction culture needs to be open and motivated. while creating or changing a classroom culture is difficult, i would advise the teacher to try to adopt an exploratory/ inquiry orientation to teaching (vehviläinen, 2014). this means asking the students open questions, such as “why do you think company a’s cvp works?”. thirdly, group work as a teaching method inherently has risks in terms of freeloading, group dynamics, and making sure everyone learns something. fourthly, this approach will only work if the students have enough knowledge of the basics and concepts of marketing and management, since the traditional lecture part is quite limited. it would be interesting to see this approach applied on an mba course, where the managers themselves arguably have the required subject knowledge and experience and could, ideally, work on developing cvps for their own organizations (hogan and warrenfeltz, 2003). in the future, the various article and book materials can be changed, or new ones added. for instance, there exist various competing conceptualizations of customer value dimensions and the components of cvps. the concluding presentations (phase 6) could also be made as videos. the videos, ideally, would be under ten minutes in length. the students should be instructed to upload their videos on youtube under the privacy setting of ‘unlisted’, meaning that only those with the direct link will see the video and it will not appear in any search results. then the links could be shared on an online learning platform, such as moodle, for other students to view. this is also another solution for the scalability problem, since these videos could be viewed from home. journal of business models (2019), vol. 7, no. 3 pp. 111-118 117 references anderson, j. c., narus, j.a, and van rossum, w. (2006), customer value propositions in business markets, harvard business review, vol. 84 no. 3, pp. 90–9. biggs, j. (2003), teaching for quality of learning at university (2. edition). suffolk, uk: open university press and the society for research into higher education. biggs, j. and tang, c. (2011), teaching according to how students learn. in j. biggs and c. tang, teaching for quality learning at university. open university press, pp.16-30. day, g.s. and moorman, c. (2010), strategy from the outside in: profiting from customer value. mcgraw-hill. day, g.s. and moorman, c. (2013). regaining customer relevance: the outside-in turnaround. strategy & leadership, 41(4), 17–23. day, g.s. (2007), is it real? can we win? is it worth doing, harvard business review, vol. 85 no.12, pp. 110-120. hogan r., and warrenfeltz r., (2003), educating the modern manager. academy of management learning & education, vol. 2 no. 1, pp. 74-84. hortinha, p., lages, c., and lages, l. f. (2011), the trade-off between customer and technology orientations: impact on innovation capabilities and export performance, journal of international marketing, vol. 19 no. 3, pp. 36–58. johnson, m. w., christensen, c. c., and kagermann, h. (2008), reinventing your business model, harvard business review, vol. 86, pp. 50-59. klaus, p., edvardsson, b., keiningham, t. l., and gruber, t. (2014), getting in with the “in” crowd: how to put marketing back on the ceo’s agenda, journal of service management, vol. 25 no.2, pp. 195–212. osterwalder, a., pigneur, y., bernarda g. and smith, a. (2014), value proposition design: how to create products and services customers want. john wiley & sons, inc. usa. payne, a., and frow, p. (2014), developing superior value propositions: a strategic marketing imperative. journal of service management, vol. 25 no. 2, pp. 213-227. rintamäki, t., kuusela, h., and mitronen, l. (2007), identifying competitive customer value propositions in retailing, managing service quality, vol. 17 no. 6, pp. 621–634. shah, d., rust, r. t., parasuraman, a., staelin, r., and day, g. s. (2006), the path to customer centricity, journal of service research, vol. 9 no. 2, pp. 113–124. vehviläinen, s. (2014), ohjaustyön opas. yhteistyössä kohti toimijuutta. helsinki: gaudeamus. whitler, k.a., krause, r., and lehmann, d. r. (2018), when and how board members with marketing experience facilitate firm growth, journal of marketing. vol. 82 (september), pp. 86–105. yrjölä, m., kuusela, h., neilimo, k., and saarijärvi, h. (2018), inside-out and outside-in mental models: a top executive perspective, european business review, vol. 30 no. 5, pp. 529-553. journal of business models (2019), vol. 7, no. 3 pp. 111-118 118 dr. mika yrjölä is university lecturer of marketing at tampere university, tampere, finland. his research background is on executive decision-making, business models, digital services and multiand omni-channel retailing. he has published his work in the journal of retailing and consumer services, journal of business models, european business review, and journal of business and industrial marketing. about the authors journal of business models (2016), vol. 4, no. 2, pp. 42 -59 42 purpose: this study explores business models within a particular domain of industrial internet. design/methodology/approach: building from theory, this study is conceptual in nature. findings: this paper presents a business model framework for understanding the dynamics of value co-creation and co-capture from lifecycle and ecosystem configuration point of view. research limitations/implications: this study stresses the need to understand how the integrated, co-dependent processes of value co-creation and co-capture influence on business models of individual firms in co-evolving business ecosystems. practical implications: to fully benefit from the mutually connected opportunities enabled by iot, it is important for firms to position themselves within the ecosystem in terms of the stage of product or service life cycle as well as the scale and scope of ecosystem configuration. originality/value: the originality of this research thus relates to expanding the business model literature from ecosystemic perspective. toward ecosystemic business models in the context of industrial internet marika miriam iivari 1, petri ahokangas2, marjaana komi3, maarit tihinen4, kristiina valtanen5 abstract please cite this paper as: iivari et al. (2016) toward ecosystemic business models in the context of industrial internet, journal of business models, vol. 4, no. 2 keywords: ecosystem, industrial internet, internet of things, value co-creation, value co-capture 1 oulu business school, martti ahtisaari institute of global business and economics, marika.iivari@oulu.fi 2 oulu business school, martti ahtisaari institute of global business and economics 3 research team leader, technical research centre of finland 4 senior researcher, vtt technical research centre of finland ltd. 5 vtt technical research centre of finland ltd. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 43 introduction the rapid development and increasing pervasiveness of digital technologies (turber et al., 2015) has exposed modern companies to highly dynamic, interconnected business environment. a rising trend in today’s economy is digital technology being increasingly intertwined with non-digital products (turber and smiela, 2014). this trend is often referred to as the “internet of things”, coined by kevin ashton in 1999 (atzori et al., 2010; gubbi et al., 2013) or “industrial internet” (kantola et al., 2015; fitzgerald, 2015; muhonen et al., 2015). the concept of industrial internet can be understood as an application or business domain under the internet of things (dahlberg et al., 2015; muhonen et al., 2015). therefore we refer to these terms interchangeably. the internet of things (iot) is considered as the common paradigm of modern information and communications technology (ict) field (atzori et al., 2010), following the chain of personal computers, world wide web and mobile phones. to human-computer interaction, iot adds the third dimension of physical objects. the iot can therefore be defined as the network of physical objects, consumer devices and enterprise assets containing technology to communicate and sense or interact with external environment (lehong and velosa, 2014). yet, successful iot implementations are not just the result of technology innovation, but involve the intelligently coordinated innovation of products, services, and business models (berthelsen, 2015). business models at a large sense can be considered to determine how an organization creates and captures value (zott and amit, 2010; shafer et al., 2005; chesbrough, 2010). although the business model concept has gained notable momentum in academic research over the last decade, they have remained understudied in the context of iot (priem et al., 2013; turber et al., 2015). in the interconnected domain of iot, alongside the traditional business networks, new actors arise and the role of existing ones is changing. iot is seen to offer immense potential to virtually all sectors of the economy by enabling innovative applications and services to consumers, companies and public sector alike (pang et al., 2012; muhonen et al., 2015). it is particularly important to highlight that “industry” in this respect refers to all fields of business, not only that of manufacturing. yet, the literature has not provided actionable, field-tested model theories for capturing, visualizing and analyzing firms’ business models in digitally intensive business environments (turber and smiela, 2014). this is the first research gap this paper aims to contribute to. in a similar vein to zott and amit (2015, 1), we consider a business model to describe the system of interdependent activities that are performed by a focal firm and its partners and the mechanisms, which link these activities to each other. hence, we view the business model as a boundary-spanning unit of analysis (zott & amit 2007). furthermore, organizations are also challenged with managing the complexity of business models around digitized products (turber et al., 2015). to date, the environment for smart applications and their business models has been very complicated, with a lot of experimentation, and many failures (schaffers et al., 2011). technology may be there for many, but business application has remained an issue (glova et al., 2014). hence, firms fail to create (and capture) value beyond the physical product (turber et al., 2015). especially traditional product companies feel increasingly compelled to revise their existing business models in response to new competitive dynamics and to tap into iot inspired opportunities (turber et al., 2015; chesbrough and appleyard; 2007; dahlander and gann, 2010). yet, the scarce studies on iot and related business models have focused on technological platforms and single firm’s business models (mazhelis et al., 2013, lindgren and aagaard, 2014; westerlund et al., 2014). these previous firm-centric business models conceptualizations and frameworks are not suitable for analyzing the interdependent nature of growth and success of companies evolving in such an interconnected context (weiller and neely, 2013; westerlund et al., 2014). as a result, the exact relationship between external forces and the business model has remained limitedly explored area (de reuver et al. 2009, ahokangas & myllykoski, 2014). iot is considered to change the dynamics of value creation and value capture (hui, 2014). accordingly, there is a need to shift research focus from enabling technologies to business ecosystems thinking (westerlund et al., 2014; dahlberg et al., 2015), and particularly onto value co-creation and co-capture. in this study, these activities refer to joint efforts for synergistic value creation and capture between all stakeholders. this is the second research gap this paper seeks to address. thus, the purpose of this study is to provide a theoretijournal of business models (2016), vol. 4, no. 2, pp. 42 -59 44 cally grounded framework for the analysis of iot business models. the research question of paper calls how the business model can be used to understand the dynamics of value co-creation and co-capture in iot ecosystems? the literature starts with discussing the background of business model concept, moving onto the impact of digitalization and internet on business models, and further expanding to ecosystemic perspective on business models. finally, we introduce our research approach and the conceptual business model framework and address its implications for research and practice. we also discuss the limitations of this research and propose future research directions. business models and the internet the origins of the business model concept the business model concept became hype with the rise of electronic commerce in the 1990s (timmers, 1998; onetti et al., 2012; teece, 2010; amit and zott, 2001; zott et al., 2011) to explain e-business firms’ value creation logic and competitive advantage issues (ahokangas et al., 2014; wirtz et al., 2015). internet-based start-ups in particular used the term to differentiate themselves from the incumbents. since then, many forums and communities have been established around the topic, and numerous papers published within industrial and academic research during the past decades. teece (2010, 174) claims that importance of business models is driven by factors such as “the emerging knowledge economy, the growth of the internet and e-commerce, the outsourcing and offshoring of many business activities, and restructuring of the financial services industry around the world”. also, veit et al., (2014, 45) emphasize that “the growth of the internet has undoubtedly created greater opportunities for digitized business transactions but this has been accompanied by an intensified competition and an accelerated pace of technological change” making formalized and conceptualized business modelling even more important. indeed, technological innovation creates the need for business models for bringing discoveries to market and for the opportunity to satisfy unrequited customer needs (teece, 2010; glova et al., 2014; chesbrough, 2010). a business model description is therefore an important starting point for business innovation and transformation (wirtz et al., 2015), as it can serve as a tool to align technology development and economic value creation (glova et al., 2014; chesbrough and rosenbloom, 2002). despite the importance of business models, no unified definitions exist. researchers have proposed many definitions and concepts in order to describe the essence and purpose of business models (wirtz et al., 2015). business models have been depicted, for instance, as an architecture (timmers, 1998; osterwalder and pigneur, 2002), a description (applegate, 2000; weill and vitale, 2001), a narrative (magretta, 2002), representation (shafer et al., 2005; morris et al., 2005), a structural template (amit and zott, 2001), a method (afuah and tucci, 2001), a recipe (baden-fuller and morgan, 2010) a framework (afuah, 2004), a pattern (brousseau and penard, 2006), a set (seelos and mair, 2007) and a model or conceptual tool (chesbrough, 2003; osterwalder, 2004; osterwalder et al., 2005). for instance osterwalder et al. (2005, 7) define a business model as “a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. it is a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenues streams”. indeed, common with all different perspectives to business models is that they tend to portray the notion on how firms create and capture value (zott and amit, 2010; shafer et al., 2005; chesbrough, 2010). furthermore, osterwalder and pigneur (2002) considered a business model as a link between strategy, business processes, and information systems, where ict lays the foundations for how business models are built. these main elements of the business model have been illustrated by pateli (2003), shown in figure 1. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 45 information systems business processes business model strategy figure 1. business model definition framework (adapted from pateli, 2003) business models can create a shared and common understanding of the ict domain and facilitate communication between people and heterogeneous and widely spread application systems (osterwalder and pigneur, 2002). even if there is a common acknowledgement that effective and efficient business models are a huge valuable asset to business, most businesses find it hard and use tremendous resources to explain and understand their business better (lindgren and aagaard, 2014). one explanation for this is that many of modern business model conceptualizations and frameworks are still firm-centric, and thus less suited for analyzing the interdependent nature of the growth and success of companies that are evolving in the same innovation ecosystem (weiller and neely, 2013; westerlund et al., 2014). originally, the business model concept was considered to nest between network and firm to describe a firm’s position within its value network (amit and zott, 2001; hedman and kalling, 2003; turber et al., 2015). however, during the course, the focus moved to study business models from the focus of the firm (magretta, 2002; casadesus-masanell and ricart, 2010; mcgrath, 2010). hence, this study argues that business model research needs to draw its attention back to a dynamic approach in order to consider various influences on business model viability, business model evolution and the place of business models in the product or service lifecycle (see also demil and lecocq, 2010; ahokangas et al., 2014). indeed, a shift is starting to take place from single-firm revenue generation towards multi-firm control and interface issues (ballon, 2007), which we discuss further in the following parts of this study. business models, digitalization and the industrial internet early approaches to business modeling focused on the selection of the most appropriate virtual channels and revenue models within the e-business context (ballon, 2007; amit and zott, 2001; magretta, 2002). as the internet boom of the start of the millennia subsided, the attention of business model literature shifted towards the integration of virtual activities into the realworld marketplace. along with the rise of the mobile telecommunications industry, business models were increasingly connected with shifting firm boundaries, through vertical and horizontal integration within the industry as well as through the complex provision of new services (ballon, 2007). this vertical and horizontal nature of the iot is illustrated in the following figure 2, where within iot ecosystems, physical objects are seamlessly integrated into the information network through enabling ict, where physical objects can become active participants in business processes (haller et al., 2009, 15). the vertical and horizontal integration within the digitally intensive industries means that business models were also designed to match the nature of integration (ballon, 2007). technical products are usually commercialized through vertical business models. here, firms, e.g. infrastructure and technology providers, believe that competitive advantage rises from focusing on value creation within narrow segments (ahokangas, 2015). these firms focus on offering a complete solution and thus, all technology and services are provided and controlled by the same company (quinnell, 2013). therefore, vertical models are slow to respond to market dynamics. (quinnell, 2013). horizontal models enable fast growth and innovation in the industry, as they allow multiple providers to focus on their respective fields through a common framework (quinnell, 2013). horizontal business models aim to capture as much value as possible across different segments. hence, cost awareness and short-term profjournal of business models (2016), vol. 4, no. 2, pp. 42 -59 46 it potential often guide these firms (ahokangas, 2015). however, even though horizontal models allow rapid scale-up of applications and businesses, considerable inputs from different parties are required before the system is able to run smoothly (quinnell, 2013). therefore, horizontal model is more heavily dependent on supporting infrastructure. yet, as digitalization and industrial internet progresses, traditional firm-centric business models are facing challenges, as product manufacturers are increasingly in the need of transforming their mode of operation to service providers. previously independent actors are increasingly connected with each other through both technical and business ties. the introduction of new technologies such as radiofrequency identification (rfid), bluetooth and smart computing has enabled many new application and business propositions in traditional industrial sectors, such as the energy sector, logistics and transport, manufacturing and production, industrial automation, environment, utilities, maintenance, health-care and services (glova et al., 2014; gubbi et al., 2013; mazhelis et al., 2013). connections and communications between physical items, such as sensors, mobile phones and other consumer devices, or even enterprise assets, to the internet and to each other, make business modelling more challenging but also more valuable. companies are recognizing the potential for faster decision making, real-time control, service time reduction, process optimization, new business models, enhanced operational efficiency, resource conservation, and the capability to do all of this location-independently, and moreover, globally (vtt visions 3, 2013; hui, 2014; turber and smiela, 2014; mazhelis et al., 2013). the entire iot domain is demanding for new service concepts and business models, as companies need to “fundamentally rethink their orthodoxies about value creation and value capture” (hui, 2014). this kind of transformation requires a conversion from product to service mindset (hui, 2014; dahlberg et al., 2015), as illustrated in the following table 1. figure 2. the iot as a business ecosystem (adapted from ailisto, 2015) journal of business models (2016), vol. 4, no. 2, pp. 42 -59 47 table 1. shifting from product to service mindset (adapted from hui, 2014) value creation needs of customers existing needs and lifestyle are solved on reactive basis addressing real-time and emerging need in a predictive manner offering a stand alone product expiring over time over the air updates for products to enhance or correct features the role of data single point data will be used for future product requirements the data is combined for creating user experience of existing products, at the same time enabling other services value capture path to profit the next product or device will be sold allows recurring returns (for example monthly based billing) control points intellectual property rights (e.g. patents) and brand personalization and context: network effects between products development of capabilities leveraging the core competences as well as existing processes and resources to understand how partners within ecosystem are making money the literature shows that researchers and practitioners have yet not researched widely on how digitization and the iot effect on business models (turber et al., 2015). furthermore, iot research from the business ecosystem perspective has been practically nonexistent, because limited research has focused on technological platform perspective and single firms’ business models (mazhelis et al., 2013; westerlund et al., 2014). however, alongside the traditional business network of buyers, suppliers and makers of product or services, new actors arise and the role of existing ones is changing, which requires new research approaches. successful firms do not just add value but reinvent it (normann and ramirez, 1993, 65). therefore, the focus needs to shift from enabling technologies to the value-creating system itself (normann and ramirez, 1993) through business ecosystems thinking (westerlund et al., 2014; dahlberg et al., 2015), and from linear value creation and capture to boundary-spanning value co-creation and co-capture. the ecosystemic perspective on business models a biological ecosystem can be defined as a community of interacting organisms and their physical environment (oxford english dictionary). drawing from ecosystem analogy, a business ecosystem, as defined by moore (1993), is an economic community that is supported by a foundation of interacting organizations and individuals – the organisms of the business world (moore 1996: 15). moore expanded previous supply chain network theories to include other organizations such as universities, industry associations and other (non-commercial) stakeholders, as well as the interactions between them (rong et al., 2015). as biological ecosystems, also business ecosystems are characterized by high complexity, interdependence, cojournal of business models (2016), vol. 4, no. 2, pp. 42 -59 48 operation, competition and coevolution (moore, 1996; jansson et al., 2015; lehto et al., 2013). the concept of business ecosystem emphasizes companies’ joint utilization of complementary capabilities in pursuit of new innovations (lehto et al., 2013; chesbrough et al., 2014; hirvonen-kantola et al., 2015). successful iot implementations are not just about technological solutions, but involve also the intelligently coordinated innovation of products, services, and business models (berthelsen, 2015). in this kind of context, the business model can be viewed as a boundary-spanning unit of analysis (zott and amit, 2007, ahokangas et al. 2014), as the business model shifts the focus of research on how the firm connects with its external environment. the boundary-spanning nature of business models has been acknowledged by some scholars in business model research, as discussed by zott and amit (2010). zott et al., (2011), in their extensive review of the business model literature, state that even though business models are centered on a focal firm, their boundaries are wider, and business models emphasize a system-level activity approach, with also the focal firm’s partners playing a role. this refers to the need to consider the activities that are performed for the focal firm but outside its boundaries by partners, suppliers or customers (zott and amit, 2010). hence, the focal firm is able to rely on the resources and capabilities of third parties, and utilize the external ideas and sources of innovation through the open business model concept (see also chesbrough, vanhaverbeke and west, 2014). messerschmitt and szyperski (2003) discussed ecosystems in ict and presented a layered model of the ecosystem stakeholder roles. in the traditional approach, an ecosystem is based on technical infrastructure, a platform, to which other players of the ecosystem integrate (messerschmitt and szyperski, 2003). products, systems and services, as well as user applications are built on this technological foundation. wirtz et al. (2010) discussed four business models for the web 2.0 in order to classify internet-based business models. each of these business models, illustrated in the following figure 3, can be offered standalone or bundled. yrjölä et al. (2015a) organized these models into a layered, ecosystemic model. in this perspective, it can be interpreted that the lower level business models serve as enablers and value levers for the higher layers (yrjölä et al. 2015a). in an ecosystem, the members evolve symbiotically through simultaneous collaboration and competition (moore, 1993; lehto et al., 2013; jansson et al., 2014; rong et al., 2015, ritala et al., 2014). hence, this model can be used to highlight the dependencies between the ecosystem layers (yrjölä et al., 2015a). onetti et al., (2012) also state that the business model needs to accommodate the spatial dimensions and organizational boundaries, as well as the role of partners. the firm’s choices “can make the difference in terms of company’s ability to access resources, develop competences, create a network, benefit from knowledge spill-overs and therefore excel, innovate and implement its strategy” (onetti et al., 2012, 359). therefore, we argue that as networks and partnerships can have a great influence on how value is (co)created and (co) figure 3. the 4c business model typology (adapted from yrjölä et al., 2015a) journal of business models (2016), vol. 4, no. 2, pp. 42 -59 49 captured, they need to be considered as a part of the business model itself (wirtz et al., 2015; chesbrough et al., 2014). ahokangas et al. (2014) propose a dynamic, processual framework for business models, consisting of the elements what the firm does, how the activities are organized, why do they think it can be done profitably and where the activities take place, internal or external to the firm. according to ahokangas et al. (2014, 22) all elements of the business model can be externalized. amit and zott (2015, 1) also state that a “business model describes the system of interdependent activities performed by a focal firm and its partners and the mechanisms that link these activities to each other”. the authors stress that the content, structure and governance of business models are important but the antecedents of business model design need to be acknowledged as well. these antecedents are the goals for creating and capturing value, the templates used by other organizations, collaboration and the activities of stakeholders, and internal and external constrains (amit and zott, 2015). their business model describes how a focal firm may tap into its ecosystem to perform the activities that are necessary to fulfill perceived customer needs, as it focuses on the activities performed by the subset of actors within the focal firm’s ecosystem. thus, their conceptual framework alerts to the “possibilities for leveraging resources that exist within the business ecosystem (amit and zott, 2015, 16). therefore, in the development of iot related offerings, it is essential early on to consider the underlying business opportunities that are attractive and feasible for all the key stakeholders, which emphasizes value cocreation and co-capture (jansson et al., 2014). in the ecosystemic perspective, the logic is enabling value creation for all stakeholders, not only how it is captured by the focal firm (zott et al., 2011, upward and jones, 2015). the identification of interconnections and dependencies within the ecosystem and business model synergy are particularly relevant, as in complex, interconnected ecosystems, value co-creation for the focal firm may in fact result in value co-destruction for another (upward and jones, 2015). this emphasizes the role of synergic business models, as it is business model synergy that enables simultaneous value co-creation and co-capture within that ecosystem (ahokangas, 2015) among “any and all actors in the organization’s value constellation (upward and jones, 2015, 10). these previous discussions build the theoretical foundations of our iot business model framework, which we elaborate in the following chapter. ecosystemic business model framework for iot building from the literature, we propose a conceptual business model framework for understanding the dynamics of value co-creation and co-capture in the context of industrial internet. in deriving our framework, we extend the work by messerschmitt and szyperski (2003). from business perspective, this technical approach is too limited. it does not consider the integration of multiple businesses operating in a collaborative environment (glova et al., 2014). hence, we apply an osi model (open systems interconnection), which is a conceptual framework for understanding relationships (rouse, 2014). our framework is presented in the following figure 4. in order to answer the research question in relation to understanding the dynamics of value co-creation and value co-capture in iot ecosystems, both the ecosystem configuration in terms of scope and scale, as well as the life cycle perspective in terms of stage need to be taken into account. the iot ecosystem can be considered to function as an open innovation platform where joint development of innovations is highlighted (saebi and foss 2015; chesbrough et al., 2014). industrial internet as a business ecosystem (figure 2) sets the dimensions of scale and scope of value co-creation and co-capture. the infrastructure and hardware are needed for running iot services. the important role of platforms and data is highlighted by the example of google; without the platform it is not possible to collect and utilize data in value creation or capture. the actual devices and equipment, e.g. sensors that gather data, create the next layer. this is typically the layer where iot companies start their business, only to realize that they need a platform and connectivity for efficient data acquisition and analysis. the furthest layer includes applications and user interface, aimed for end users. this would include, for instance, a web-based personal health monitoring service. in this perspective, scale and scope follow the previously presented 4c business model typology. the role of the business model in co-evolving iot business ecosystems (rong et journal of business models (2016), vol. 4, no. 2, pp. 42 -59 50 al., 2015) is hence to connect the firm with its external environment, customers, competitors and larger society (teece, 2010; ahokangas et al., 2015). indeed, cooperation demonstrates the linkage between the constructive elements and the ecosystem configuration, but this process of cooperation varies along the lifecycle of the business ecosystem (rong et al., 2015). hence, we extend the work by messerschmitt and szyperski (2003) to include research to life cycle stages. the stages of value co-creation and co-capture therefore include research, technology, products, systems and service. this life cycle perspective highlights that value co-creation and co-capture processes start already before any actual business models exist. ecosystem players need to be sensitive to the goals and motives of other ecosystem stakeholders and how these impact the synergy of the ecosystem already before any actual business. this means that already research activities, either carried out by firms or specific research institutions, add value to the ecosystem through the exploration of different business opportunities. in the technology development stage, actual business models start to emerge, as at this stage, the commercialization aspects need to be considered as well. at the earlier stages, vertical, product-focused business models appear more common, and at the later stages, as services start to emerge, horizontal models prevail. we claim, that simultaneous value co-creation and cocapture within iot ecosystems rises through “oblique” business models. in the context of iot, the relationship among partners is no longer based on customer-supplier–relationship but organizations are now dependent on each other, interact in order to achieve common strategic objectives and eventually share a common fate (iansiti and levien, 2004; moore, 1996; rong et al., 2015). therefore, organizations cannot build their business models in silos, but a synergic view requires them to consider the stage of life cycle of clients and partners as well, as the stage determines how firms should build their own business models. whereas previous ict-based business models have considered only one layer of the ecosystem configuration, either through horizontal or vertical business models, the oblique iot business model views the ecosystem as a whole (ahokangas et al. 2015; lehto et al., 2013). an oblique business model with an evolving and loosely coupled structure (saebi and foss, 2015; amit and zott, 2015), figure 4. the iot business model framework journal of business models (2016), vol. 4, no. 2, pp. 42 -59 51 table 2. oblique business model case illustration apple uber airbnb stage service on-demand music experience on-demand transportation on-demand travel accommodation system platform-based: apple gets a share per tune played platform-based: uber gets a share per ride platform-based: airbnb gets a share per rental product music player smartphone app website technology disrupting traditional music industry through mp3 technology disrupting traditional taxi industry through mobile application disrupting traditional travel industry through online service research based on two-sided value co-creation and co-capture for artists and listeners based on two-sided value co-creation and co-capture for passengers and drivers based on two-sided value co-creation and co-capture for guests and hosts scale and scope ipod as hardware, itunes as platform, iphone as device, uniform interface, service based on bundled content. a user application that utilizes equipment of others with own technological infrastructure and platform to provide a taxi service. an online platform that utilizes the property of others to offer accommodation for travellers. follows the rationales of open innovation (chesbrough et al., 2006; chesbrough et al., 2014). through oblique business models, fast-growing and service-oriented companies are able to utilize external resources outside firm boundaries (ahokangas, 2015; bogers and west, 2012; chesbrough et al., 2014). we extend our elaboration through the following case illustration. apple’s ipod was among the first ones to create an oblique business model by basically combining memory stick (product) to content (service) distributed to masses: cheap hardware with very versatile content, bypassing completely the more old-fashioned music distribution logic employed by the music industry. uber technologies’ mobile application for fulfilling a physical need resulted in the collapse of a traditional value chain in on-demand transportation. the fast rise of companies providing local services through similar business models has even resulted in a term “uberification” (schlafman, 2014). airbnb developed a website for list, find and rent accommodation, without owning any real estate. through their platform-based business model, their ability to scale up occurs basically with zero marginal cost (moazed, 2014). these cases further ground oblique business models on sharing economy –based thinking, where business opportunities can be seen as journal of business models (2016), vol. 4, no. 2, pp. 42 -59 52 two-sided, i.e., simultaneous provisioning and utilization of resources (yrjölä et al., 2015b). thus, in addition to value co-creation and co-capture through open innovation, oblique business models also consider the possibilities for value sharing. stephany (2015), has recently defined sharing economy as “the value in taking the underutilized assets and making them accessible online to a community, leading to a reduced need for ownership of those assets.” hence, sharing economy thinking has become popular especially in peer-to-peer communities that are the source of uber’s and airbnb’s business opportunity. conclusion eventually the layers in the iot ecosystem are becoming blurred or fuzzy at the firm level, as companies seek bundled or hybrid business models that combine or aggregate services from different layers. during the ecosystem’s evolution, also the specific roles of actors can change. in this kind of dynamic context, the oblique business model is the binding factor between the stage, scale and scope of value co-creation and cocapture, as it brings the focus onto the ecosystemic business opportunity itself. in this way, the business model provides synergy for mutually connected opportunities within the ecosystem. business opportunities in the field of iot may rise at any stage of the product or service development. the benefit of the oblique business model thus is that it does not separate the sources of value creation, capture, and sharing as they are embedded within the whole ecosystem. the famous cases of apple, uber and airbnb show that the number of oblique business models is growing rapidly, winning market share and jeopardizing the established or incumbent firm’s horizontal and vertical business models (ahokangas, 2015). oblique business models have the power to disrupt whole industries. the academic contribution of this paper lies within the business model literature, firstly by discussing the role of external environment within business models and secondly, by discussing the emerging ict-based business models in the field of internet of things. this study stresses the need to understand the nature of integrated, co-dependent processes of value co-creation, co-capture and sharing and their impact on the business models of individual firms in co-evolving business ecosystems. we extend the research from value creation and capture at the firm level onto how value can be co-created and co-captured at the ecosystem level. the originality of this research thus relates to expanding the business model literature from ecosystemic perspective. the practical implications of this paper relate to the alternative business opportunities in the context of iot. this study highlights the configuration of the iot business ecosystems and the need to for firms to position themselves within the ecosystem in terms of the stage, scope and scale of value co-creation and co-capture. in this way, the opportunities offered by industrial internet and digitization can truly be exploited to build for competitive advantage especially for firms previously focused on serving the physical, product-based value chain. the limitations of this research relate to the need to empirically test the issues we have pointed in relation to the stage, scope and scale of ecosystemic value creation and capture. both qualitative and quantitative research is needed to build further propositions and hypotheses to validate our framework. thus, these limitations also relate to potential future research directions and questions that arise from our research. digitization and the internet of things are spreading to various new business fields and industries, ranging from private smes into large public organizations. does firm size matter in this context? are ecosystemic business models similarly applicable to large and small firms? are the dynamics of ecosystemic business models different in different industries characterized by high levels of digitization? how do the roles of ecosystem members change and evolve within the ecosystem over time? for instance these issues we hope future research to address. acknowledgement this work is supported by tekes – the finnish funding agency for technology and innovation in it houses to boost industrial internet. the authors would like to acknowledge the tintti teollinen internetti – industrial internet project consortium. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 53 references adner, r. & kapoor, r (2010) value creation in innovation ecosystems: how the structure of technological interdependence affects firm performance in new technology generations. strategic management journal, vol. 31, pp. 306-333. afuah , a. (2004) business models – a strategic management approach, mcgraw hill irwin, new york. afuah, a., & tucci, c. l. (2001) internet business models and strategies: text and cases. mcgraw-hill, new york. ahokangas, p. (2015, january 29) vertical, horizontal and oblique business models (blog) available at: http://techbusstratintfutures.blogspot.fi/ ahokangas,p., alila, h., helaakoski, h., kyllönen, v., lehtimäki, t., peltomaa, i., seppänen, v. & tanner, h. (2015) collaborative business networks of the future. vtt value network 2.0. vtt technical research centre of finland. grano, kuopio. ahokangas, p., juntunen, m. & myllykoski, j. (2014) cloud computing and transformation of international e-business models. research in competence-based management, vol. 7, pp. 3-28. ailisto, h. (2015) industrial internet – opportunity for finland. keynote presentation at automaatio xxi conference, 17-18 march, helsinki amit, r., & zott, c. (2001). value creation in e-business. strategic management journal, vol. 22, no. 6-7, pp. 493-520. amit, r & zott, c. (2015) crafting business architecture: the antecedents of business model design. strategic entrepreneurship journal. pp. 1-20. available at: http://wileyonlinelibrary.com doi: 10.1002/sej.1200 applegate, l. m. 2000. e-business models: making sense of the internet business landscape. in g. dickson & g. desanctis (eds.), information technology and the future enterprise: new models for managers, pp. 49-101. englewood cliffs, nj: prentice-hall. atzori, l., iera, a. & morabito, g. (2010) the internet of things: a survey. computer networks, vol. 54, pp. 2787–2805. baden-fuller, c., & morgan, m. s. (2010). business models as models. long range planning, vol. 43, no. 2-3, pp. 156-171. ballon, p. (2007) business modelling revisited: the configuration of control and value, info, vol. 9, no. 5, pp. 6 – 19. berthelsen, e. (2015) a new agenda item for enterprise executives: enterprise iot. machina research. (white paper). bogers, m. & west, j. (2012) managing distributed innovation: strategic utilization of open and user innovation. creativity and innovation management, vol. 21. no. 1, pp. 61-75. brousseau, e., & penard, t. 2006. the economics of digital business models: a framework for analyzing the economics of platforms. review of network economics, vol. 6, no. 2, pp. 81-110. casadesus-masanell, r., & ricart, j. e. (2010). competitiveness: a business model reconfiguration for innovation and internationalization. management research, vol. 8, no. 2, pp. 123-149. chesbrough, h. (2003). open innovation: the new imperative for creating and profiting from technology. boston: harvard business school press. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 54 chesbrough, h. (2010) business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2-3, pp. 354-363. chesbrough, h. & appleyard, m. (2007) open innovation and strategy. california management review, vol. 50, no. 1, pp. 57-74. chesbrough h, & rosenbloom r. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change, vol. 11, pp. 529–555. chesbrough, h., vanhaverbeke, w. & west, j. (2014) new frontiers in open innovation. oxford university press, oxford. chesbrough, h., vanhaverbeke, w. and west, j. (2006) open innovation: researching a new paradigm, oxford university press, oxford. dahlander, l. & gann, d. (2010). how open is innovation? research policy, vol. 39, no. 6, pp. 699– 709. dahlberg, h., öberg, j., glaumann, m., gjelstrup, a. & berntsson, g.l.(2015) connected things. arthur delittle teliasonera demil, b. &lecocq, x. (2010) business model evolution: in search of dynamic consistency. long range planning, vol. 43, pp. 227-246. de reuver, m., bouwman, h. & macinnes, i. (2009) business model dynamics: a case survey. journal of theoretical and applied electronic commerce research, vol. 4, no. 1, pp. 1-11. fitzgerald, m. (2015, january 27) gone fishing – for data. mit sloan management review. available at: http:// sloanreview.mit.edu/article/gone-fishing-for-data/ frankenberger, k., weiblen, t. & gassmann, o. (2014) the antecedents of open business models: an exploratory study of incumbent firms. r&d management, vol. 44, no. 2, pp. 173-188. glova, j., sabol, t. & vajda, v. (2014) business models for the internet of things environment. procedia economics and finance, vol. 15, pp. 1122-1129. gubbi, j., buyya, r., marusic, s. & palaniswami, m. (2013) internet of things (iot): a vision, architectural elements, and future directions. future generation computer systems, vol. 29, pp. 1645-1660. haller, s., karnouskos, s., schroth, c. (2009), the internet of things in an enterprise context, in j. domingue, d. fensel und p. traverso (eds.), first future internet symposium fis 2008, lncs 5468, springer verlag 2009, pp. 14-28. hedman, j. and t. kalling (2003). “the business model concept: theoretical underpinnings and empicical illustrations.” european journal of information systems, vol. 12, no. 1, pp. 49-59. hirvonen-kantola, s., ahokangas, p., iivari, m., heikkilä, m. & hentilä, h. (2015) urban development practices as anticipatory action learning: case arctic smart city living laboratory. procedia economics and finance, vol. 21, pp. 337-345. hui, g. (2014, july 29) how the internet of things changes business models. harvard business review. available at: https://hbr.org/2014/07/how-the-internet-of-things-changes-business-models journal of business models (2016), vol. 4, no. 2, pp. 42 -59 55 iansiti, m., and levien, r. (2004), the keystone advantage: what the new dynamics of business ecosystems mean for strategy, innovation, and sustainability, harvard business press. jansson, n., ahokangas, p., iivari, m., perälä-heape, m. & salo, s. (2014) the competitive advantage of an ecosystemic business model: the case of ouluhealth. interdisciplinary studies journal, 3 (4), 282-294. kantola, r., llorente santos, j. & beijar, n. (2015) policy-based communications for 5g mobile with customer edge switching. security and communication networks, available at http://wileyonlinelibrary.com lehong, h. & velosa, a. (2014, july 21) hype cycle for the internet of things. gartner inc. available at: https://www. gartner.com/doc/2804217/hype-cycle-internet-things lehto, i., hermes, j., ahokangas, p. & myllykoski, j. (2013) collaboration in cloud businesses – value networks and ecosystems. communications of the cloud software. (discussion paper) available at: http://urn.fi/urn:nbn:fife201303062240 lindgren, p. and aagaard, a. (2014). the sensing business model. wireless personal communications, vol. 76, no. 2, pp. 291-309. magretta, j. (2002). why business models matter. harvard business review, vol. 80, no. 5, pp. 86-92. mazhelis, o., warma, h., leminen, s., ahokangas, p., pussinen, p., rajahonka, m., siuruainen, r., okkonen, h., shveykovskiy, a. & myllykoski, j. (2013) internet-of-things market, value networks, and business models: state of the art report. jyväskylä university printing house, jyväskylä. mcgrath, r. g. (2010). business models: a discovery driven approach. long range planning, vol. 43, no. 2-3, pp. 247-261. messerschmitt, d.g. & szyperski, c. (2003) software ecosystem: understanding an indispensable technology and industry. the mit press. moazed, a. (2014, january 23) what is a platform? available at: http://www.applicoinc.com/blog/what-is-a-platform-business-model/ moore, j. (1993) predators and prey: a new ecology of competition. harvard business review, vol. 71, pp. 75–86. moore, j. (1996) the death of competition. fortune, vol. 133, no. 7, pp. 142-144. morris, m., schindehutte, m., & allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research, vol. 58, no. 6, pp. 726-735. muhonen, t., ailisto, h. & kess, p. (2015) standardization in industrial internet (iot) and condition-based maintenance. proceedings at the automaatio xxi conference, 17-18 march, helsinki normann, r. & ramirez, r. (1993) from value chain to value constellation: designing interactive strategy. harvard business review, vol. 71 pp. 65-77. onetti, a., zucchella, a., jones, m., & mcdougall-covin, p. (2012). internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management and governance, vol. 16, no. 3, pp. 337-368. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 56 osterwalder, a. (2004). the business model ontology – a proposition in a design science approach. ph.d. thesis, university of lausanne. osterwalder, a. & pigneur, y. (2002). an e-business model ontology for modeling e-business. proceedings at the 15th bled electronic commerce conference, 17-19 june, bled. osterwalder, a., pigneur, y., and tucci, c.l. (2005) clarifying business models: origins, present, and future of the concept. communications of the association for information systems, vol. 16, no. 1, pp. 1–25. pang, z., chen, q., han, w. & zheng, l. (2012) value-centric design of the internet-of-things solution for food supply chain: value creation, sensor portfolio and information fusion. information systems frontiers, vol. 17, no. 2, pp. 289-319. pateli, a. (2003). a framework for understanding and analysing ebusiness models. proceedings at the 16th bled ecommerce conference, 9-11 june, bled. priem rl, butler je, li s. 2013. toward reimagining strategy research: retrospection and prospection on the 2011 amr decade award article. academy of management review vol. 38, pp. 471–489. quinnell, r. (2013, october 2) vertical vs. horizontal: which iot model will thrive? available at: http://www.embedded.com/electronics-blogs/other/4422131/vertical-vs--horizontal--which-iot-model-will-thriveritala, p., golnam, a. & wegmann, a. (2014) coopetition-based business models: the case of amazon.com. industrial marketing management, vol. 43, pp. 236-249. rong, k., hu, g., lin, y., shi, y. & guo, l. (2015) understanding business ecosystem using a 6c framework in internetof-things based sectors. international journal of production economics, vol. 159, pp. 41-55. rouse, m (2014, august) osi reference model (open systems interconnection) available at: http://searchnetworking.techtarget.com/definition/osi saebi, t. and foss, n.j. (2015) business models for open innovation: matching heterogenous open innovation strategies with business model dimensions. european management journal, vol. 33, no. 3, pp. 201-213. schaffers, h., komninos, n., pallot, m., trousse, b., nilsson, m. & oliveira, a. (2011) smart cities and the future internet: towards cooperation frameworks for open innovation. in: j dominique et al. (eds): future internet assembly, lncs 6656, pp. 431-446. seelos c, mair j. (2007). profitable business models and market creation in the context of deep poverty: a strategic view. academy of management perspectives vol. 21, pp. 49–63. shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, vol. 48, no. 3, pp. 199-205. schlafman, s. (2014, april 4) uberification of the us service economy. available at: http://schlaf.me/ post/81679927670 stephany, a. (2015) the business of sharing: making it in the new sharing economy. pagrave macmillan. available at: http://www.palgraveconnect.com/pc/doifinder/10.1057/9781137376183.0001. teece, d. j. (2010). business models, business strategy and innovation. long range planning, vol. 43, no. 2-3, pp. 172-194. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 57 timmers, p. (1998). business models for electronic markets. electronic markets, vol. 8, no. 2, pp. 3-8. turber, s. & smiela, c. (2014) a business model type for the internet of things. twenty second european conference on information systems, 9-11 june, tel aviv. turber, s., vom brocke, j. & gassmann, o. (2015) designing business models in the age of pervasive digitization. proceedings at the academy of management annual meeting, 7-11 august, vancouver. upward a., & jones, p.h. (2015) an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science. organization & environment, pp. 1-27. doi:10.1177/1086026615592933 veit, d., clemons, e., benlian, a., buxmann, p., hess, t., kundisch, d., leimeister, j., loos, p., spann, m., (2014) business models: an information systems research agenda. business & information systems engineering, vol. 6, no. 1, pp. available at: http://aisel.aisnet.org/bise/vol6/iss1/8/ vtt visions 3, (2013). productivity leap with iot. visions of the internet of things with a special focus on global asset management and smart lighting, vtt, espoo. available at: http://www2.vtt.fi/inf/pdf/visions/2013/v3.pdf weill, p. , & vitale, m. r. (2001) place to space: migrating to e-business models. harvard business school press, cambridge. weiller, c., & neely, a. (2013). business model design in an ecosystem context. university of cambridge working papers. cambridge service alliance, cambridge. westerlund, m., leminen, s., & rajahonka, m. (2014) designing business models for the internet of things. technology innovation management review. available at: http://timreview.ca/article/807 wirtz, b.w., pistoia, a., ullrich, s. & göttel, v. (2015) business models: origin, development and future research perspectives. long range planning, pp. 1-19 (article in press) wirtz, b.w., schilke, o. & ullrich, s. (2010) strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, vol. 43, no. 2-3, pp. 216-226. zott, c., & amit, r. (2010). business model design: an activity system perspective. long range planning, vol. 43, no. 2-3, pp. 216-226. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp. 1019-1042. yrjölä, s., ahokangas, p. & matinmikko, m (2015a) evaluation of recent spectrum sharing concepts from business model scalability point of view. proceedings at the ieee dyspan 2015 – dynamic spectrum access networks, 29 september – 2 october, stockholm. yrjölä, s., matinmikko, m., ahokangas, p., & mustonen, m. (2015b). licensed shared access to spectrum. in: hu, f. (ed): spectrum sharing in wireless networks: fairness, efficiency, and security. taylor & francis llc, crc press. (forthcoming) journal of business models (2016), vol. 4, no. 2, pp. 42 -59 58 about the authors m.sc. marika iivari is a doctoral candidate at the aacsb accredited oulu business school, finland. she holds m.sc in international business degree from the ulster university, northern ireland. she is completing her doctoral dissertation on business models and open innovation in the context of innovation ecosystems. she is currently working on a research project on industrial internet. previously she has worked on living labs and open innovation ecosystem in the context of integrative urban planning and smart cities. dr. petri ahokangas received his m.sc. (1992) and d.sc. (1998) degrees from the university vaasa, finland. he is a senior research fellow and adjunct professor at the university of oulu business school, martti ahtisisaari institute, finland. he is also an entrepreneur. prior to his university career he worked in the telecoms/software industry. his research interests lie in how innovation and technological change affect international business creation, transformation, and strategies in highly technologyand software-intensive business domains. dr. marjaana komi works as a research team leader of cyber physical solutions in knowledge intensive products and services in vtt technical research centre of finland. she earned her m.sc. degree in information processing science in 1992 and doctoral degree in 2004 from the university of oulu. she also completed executive mba in 2005 and international marketing programme in insead in 2010. she has worked as a vice president of vtt business solutions and been responsible for creating business from technology for national and international ict accounts. prior to this she worked as a research group manager in embedded software engineering. her research interest includes industrial internet and internet of things technology -based business solutions particularly in the area of building sector and smart wearables. journal of business models (2016), vol. 4, no. 2, pp. 42 -59 59 dr. maarit tihinen is a senior scientist in the digital services in con text team in vtt technical research centre of finland ltd. she graduated in the department of mathematics and received her phd in 2014 in the department of information processing science from the university of oulu, finland. tihinen has worked in various national and international research and customer projects and has written several scientific publications for international software engineering conferences and journals. her research interest includes e.g. global software develop ment, process improvement, measurements and metrics, internet of things, industrial internet, digital transformation, and digital services development. m.sc. kristiina valtanen is a research scientist in the industrial internet of things team area in vtt technical research centre of finland. she graduated from the department of electrical engineering from the university of oulu in 1999. she has worked in diverse research projects in the area of industrial internet. within this topic, her main research interest includes business-aware software solutions. journal of business models (2019), vol. 7, no. 3 pp. 47-56 47 developing a viable business model for start-ups at the gruendungsgarage christiana müller,1 elisabeth maria poandl2, and martin glinik3 abstract developing a viable business model is crucial when founding a start-up. we present a teaching approach based on business model development in the context of the gruendungsgarage. following a blended learning approach, the business model was developed with the aid of a mooc, a business model workshop and follow-up activities. please cite this paper as: müller et al. (2019), developing a viable business model for start-ups at the gruendungsgarage, vol. 7, no. 3, pp. 47-56 keywords: business model development, entrepreneurship, blended learning 1-3 institute of general management and organisation, graz university of technology, christiana.mueller@tugraz.at; elisabeth.poandl@ tugraz.at; martin.glinik@tugraz.at journal of business models (2019), vol. 7, no. 3 pp. 47-56 48 introduction the scientific interest in the development of business models has been high for quite some time. a discussion regarding the importance of integrating business model development and business model frameworks has recently intensified, and especially their roles as central elements of entrepreneurship education (snihur et al., 2018). business models are “an architecture for how a firm creates and delivers value to customers and the mechanisms employed to capture a share of that value” (teece, 2018, p.1). their graphical representation, for example, with the aid of the business model canvas (bmc) (osterwalder and pigneur, 2010) supports entrepreneurs, allowing them to communicate and discuss topics with potential partners and investors more efficiently (trimi and berbegal-mirabent, 2012). in entrepreneurship education, the business model is presented as an important concept, as the focus shifts from writing business plans to developing business models by trial and error (snihur et al., 2018). in the gruendungsgarage (gg) initiative, the development of the business model by trial and error also represents a central element. the objective is to achieve a viable business model, i.e., a business model in which all elements have been welldeveloped and aligned (sharma and gutiérrez, 2010) both with one another and the external environment (d’souza et al., 2015; malmström and johansson, 2017). the gg initiative is an interdisciplinary teaching format that can be used to support start-up projects at an early stage before they have been founded. participating teams usually enter the gg with a (often vague) business idea that they develop into a viable business model during their time in the gg so they can start their own venture company. the development of the business model is an essential step when founding a company, which takes place shortly after the start-up projects are entered in the gg. using a blended learning approach, participants are asked to develop an initial version of a viable business model that can be used as a means of communication and discussion (trimi and berbegal-mirabent, 2012) and which facilitates a successful founding process. this business model is refined as the participating teams gain experience (zalewska-kurek et al., 2016) during the gg. based on several years of practical experience, our goal in this paper is to describe the development of a viable business model based on a blended learning approach in the context of the gg. for this reason, the gg is explained to provide an understanding of the context, but a strong focus is placed on the business model development approach. furthermore, key insights into the development process are provided through a discussion of the experiences made, challenges encountered and further applications of the teaching approach. approach in this section below, the concept of the gg is explained, the didactic concepts of the gg and the business model teaching approach are described and the business model teaching approach is explained in detail. the concept of the gruendungsgarage the gg is an interdisciplinary and inter-university teaching format that has been developed to support students (at the bachelor’s, master’s and doctoral level) and academic staff, helping them transform their business ideas into viable business models during the program and preparing them to found the start-up. for one semester, participants are supported by university staff who have expertise in entrepreneurship, mentors who have practical experience in these areas and gg alumni who have successfully founded a start-up. the program is officially begun with a kick-off event, during which the team members get to know their assigned mentors and sign target agreements. the core competencies of the assigned mentors need to complement the nature of the specific entrepreneurial venture in order to fulfill the needs of each individual team. therefore, it is recommended to form a large, heterogeneous pool of mentors who have a wide range of entrepreneurial relevant skills. the mentors in the gg to date have had expertise in business model development, online and growth marketing, intellectual property rights and legal and tax matters. after the kick-off event, three main phases begin (see figure 1). the first two weeks of the initiative are generally characterized by a start-up phase during which the teams begin developing the first draft of their business model. the second phase is characterized by a variety of workshops. after six weeks, the teams present a progress report and their initial results in an intermediate presentation. the third phase is the mentoring and journal of business models (2019), vol. 7, no. 3 pp. 47-56 49 coaching phase that extends over the whole semester. during this phase, the aim is to refine the teams’ first business models. at the final presentation which takes place at the end of the semester, the teams present their business models to representatives from business, science and politics, investors, business angels and people from the regional start-up scene. the didactic concepts the teaching and learning concept of the gg is based on an experience-based learning approach (williamsmiddleton et al., 2014). according to fayolle and gailly (2008), “entrepreneurship education is driven by experience more than by systematic teaching approaches” (williams-middleton et al., p. 2). although the classical learning concept is still used in individual theoretical units in gg workshops, learning-by-doing is applied predominantly (pittaway and thorpe, 2012), because it is considered that participants will only gain experience “by doing, talking, and sensemaking” (williamsmiddleton et al., p. 2) as well as by making mistakes and failures (pittaway and thorpe, 2012). participants of the gg, therefore, play active roles while gaining experiences and reflecting on processes and outcomes. each workshop and discussion provides the participants with new insights, allowing them to develop their own business ideas and business models. during this time, the teams are encouraged to reflect on their business models. as part of this process, teachers serve as facilitators to foster creativity, which is important in entrepreneurship education (snihur et al., 2018). facilitators also take on roles as counselors, guides, or role models and are asked to support entrepreneurs while they develop their ideas and constantly revise them (azim and al-kahtani, 2014). scientific staff and mentors in the gg serve as facilitators, and these requirements apply fully to them. although they have different backgrounds, most of them have experience running a business and/or teaching. the facilitators involved in the business model development have theoretical knowledge and expertise in the practical development of business models, the ability to apply the bmc, critically analyze it and provide appropriate feedback and suggestions for improvements. the business model teaching approach included in the gg has been modified several times over the last few years as insights and feedback from the participants have been considered and implemented. thus, the final didactic concept is based on the blended learning concept (garrison and kanuka, 2004; lalima and dangwahl, 2017). blended learning consists of a combination of face-to-face learning in classrooms combined with online learning experiences (garrison and kanuka, 2004; lalima and dangwahl, 2017). among others, the concept incorporates traditional classroom teaching, group discussions, online learning with the aid of videos or audio files and even virtual classrooms (lalima and dangwahl, 2017). this concept seems to be a suitable didactic concept that can be used to support the business model teaching approach in the gg because participants can 1) independently familiarize themselves figure 1: structure of the gg (based on vorbach, 2017) journal of business models (2019), vol. 7, no. 3 pp. 47-56 50 with the main principles of business model development, 2) prepare an initial draft of their business model at home and 3) mainly use face-to-face learning in the classroom to take part in in-depth discussions, clarifying questions related to business model development and further improvements. the main learning objective of taking the business model approach is that participating teams should understand the importance of developing a viable business model before they found a business. furthermore, participants must learn how to describe a business model with its interacting elements, identify well-known business model patterns, learn how to apply these and understand how business models can be designed and tested. in addition, participants create business models based on their own business ideas and refine them on the basis of discussions that take place during the plenary sessions and feedback received from the instructors. the business model development teaching approach the business model development is scheduled at the beginning of the gg to teach participants, on the one hand, the basics of business models and their creation and, on the other hand, to provide participants with the opportunity to refine their business models with support from experienced mentors and facilitators during the gg. this support is important because activities related to boundary-spanning and setting up the organizational structure are important events that occur during the early stages after a business has been founded (trimi and berbegal-mirabent, 2012). the business model can serve as a useful mechanism to provide this support (zott and amit, 2007). the participants enter the gg with a (often vague) business idea; they often have not yet clearly defined their models. by taking our business model development approach, the participants become familiar with the business model concept and learn how to develop a business model. in this way, participants can develop a business model using this approach and improve its viability with the input received in other workshops and from mentors. the detailed teaching approach used during the business model development is presented in figure 2 and consists of three steps: 1) incorporation, 2) development and 3) refinement. in the following section, these three steps are explained in detail. step 1 incorporation in the first step, participants should become aware of the basic processes associated with developing a business model. based on the blended learning approach, we decided to develop a massive open online course (mooc) to familiarize participants with the business model concept, teach them how to generate a business model and encourage them to think about the business model based on their initial business idea. in a mooc, lectures figure 2: business model development teaching approach journal of business models (2019), vol. 7, no. 3 pp. 47-56 51 are open to a broader audience rather than only the students enrolled at a particular university. the digitalization and associated technical possibilities enabled in moocs allow students to learn both independently and collectively online and manage their own time (toven-lindsey et al., 2015). the mooc startup-journey: business model generation lecture needs to be attended by all participants of the gg. the mooc was developed at the graz university of technology and is available free of charge via the imoox.at platform. no prior knowledge is needed to attend the mooc, which includes a total of ten videos divided into four units: 1) business model patterns and framework (definitions and basic information about business models), 2) customer value (unique selling propositions, customer value as well as methods (e.g., design thinking, empathy map, moodboard, kano model, journey mapping, mockups, wireframing, prototyping)), 3) business model generation (instructions on and examples of how to fill in a bmc and analyses of prior participants’ canvases) and 4) experience reports (interviews with start-up founders, dos and don’ts when working on a bmc and how to sell the business model briefly in a pitch). each of the videos in the units has a length of 15 to 30 minutes and ends with a short quiz to evaluate the individual learning progress. related links in the mooc provide the students with access to further information. two additional assignments encourage the participants to reflect on and apply the knowledge gained by designing a bmc for a case company, for which a possible solution is also provided. the overall objective of creating the mooc was to provide the participants with fundamental information on how to develop a business model, theoretical knowledge and practical examples. by the end of the incorporation step, the participants had gained an understanding of the business model concept and how to develop a business model. in the case of the gg, the teams independently developed a version of a business model based on their own business ideas. this process is described in the next step. step 2 development a four-hour workshop is subsequently held to place a focus on the further development and fine-tuning of the participants’ business models in a face-to-face setting. at this business model workshop, the participants’ goal is to complete the development of their business models, usually with the aid of the bmc (osterwalder and pigneur, 2010). according to trimi and berbegal-mirabent (2012), the bmc provides a useful tool for entrepreneurs, as its use 1) allows the visualization of the business model elements and reflection on the content, 2) enhances communication with different stakeholders and facilitates discussion, 3) forces the entrepreneur to consider every business model element individually but also the model as a whole and 4) fosters creativity and innovation. at the beginning of the workshop, a short theoretical lecture to business model development is presented to repeat and complement basic information provided in the mooc; a discussion follows, and questions can be asked. the theoretical lecture on business models includes information on the process of business model development, business model patterns, the bmc as well as bestpractice examples. a brief introduction to the concept of value proposition design (osterwalder et al., 2014) supplements the theoretical foundations and encourages further study. most of the theoretical aspects that have already been presented in the mooc are only explained in detail if questions remain. after the lecture, the working and discussion phase starts. during this phase, the participants continue to work on their business models and consult the facilitators to have more in-depth discussions. the main topics discussed are the interactions among the business model elements and the effects of alterations in individual elements. the target groups for the products or services offered are often not sufficiently defined (too broad) or the key activities and key resources are not clearly differentiated during the process. depending on the participant’s background and business idea, different challenges arise. for example, participants that lack economic knowledge need help identifying costs or recognizing economic correlations between the bmc elements. at the end of the workshop, all teams briefly present their bmc and give each other feedback. this serves to stimulate further improvements of the business model during the final step of the gg process. step 3 refinement the refinement step of our business model development approach comprises all activities that follow the workshop. these activities include discussions between the participants and their mentors about the journal of business models (2019), vol. 7, no. 3 pp. 47-56 52 developed business model and the continuing refinements of the bmc, made during additional workshops held as part of the gg. these workshops and coaching sessions can give participants new perspectives on their developed business models, as they learn about design thinking, personas, marketing, tax issues and other topics of interest. with the help of these new insights, the participants can then further develop and improve their business models. furthermore, participants begin to conduct customer surveys or test their business models in other ways to develop a viable business model by the end of the gg. key insights two facts present the facilitators with a challenge regarding the business model teaching approach: 1) the business ideas of participants who enter the gg are at different stages of maturity. this means that some participants present vague, but interesting ideas that can only be developed into business models if a great deal of effort is invested. other participants have already developed the initial drafts of their business models and understand the business model concept. 2) participants have different backgrounds. this means that team participants can have engineering backgrounds and enter the gg with a technological business idea (for example, a small hydroelectric power station). teams of students with medical, educational, or economic backgrounds are also working in the gg on ideas, such as starting up an online pastry shop and confectionery. technicians that lack economic backgrounds are especially unaccustomed to dealing with business model aspects. despite these two challenges, the facilitators need to convey the same knowledge to all team members. the feedback that has been received from the gg participants directly after the workshop has always been positive. in addition, we asked participants of the gg volume xi to describe their experiences working with the bmc. we also asked them to describe the impact that the workshop and the mentoring had on their business ideas and business models. the results revealed that the participants considered the level of difficulty of the gg to be rather low due to the comprehensive framework of the bmc, which provided them with a good overview. participants described that the individual building blocks of the bcm and examples helped them to create their own business models. most participants considered the description of the value proposition to be straightforward, as the value proposition basically reflected their business ideas. many of the participants had more difficulties describing the financial aspects (cost structure and revenue streams). they were not often able to support their revenues and costs with numbers and could not describe these building blocks in detail. for this reason, many assumptions had to be made by the participating teams. the majority of the participants mentioned that especially the consultations with mentors had a strong impact in the development of their business model. although participants prepared for the face-to-face workshop using the mooc to develop their business model, they had some difficulties completing the bmc in the workshop. we noticed that some participants seemed to be overwhelmed by detailed information. the task became more challenging for them when they had to consider more highly detailed information and ask the facilitators more questions. these findings revealed that the challenge is not to lose sight of the “big picture” of the bmc and to proceed in a clearly structured manner. overall, the evaluation results of the business model teaching approach were positive. the participants appreciated having the opportunity to become familiar with the theoretical concept of business models using the mooc at their own pace and under their own conditions. they also valued the examples they were given, which helped them think about their own business ideas and prepare for the business model workshop. this allowed participants to use the time in the workshop more effectively to refine their bm and discuss any ambiguities with the facilitator or other participants. discussion and conclusions the business model has emerged as an important teaching content in entrepreneurial education, which can be used to turn entrepreneurial opportunities into realities (trimi and berbegal-mirabent, 2012; snihur et al., 2018). to take full advantage of these opportunities, we developed a business model development teaching approach based on the blended learning concept that supports gg participants while they develop a viable business model. the main tool used to develop journal of business models (2019), vol. 7, no. 3 pp. 47-56 53 and visualize the business model was the bmc, which has proved to be a useful graphical tool for clearly mapping the main elements of a business model (osterwalder and pigneur, 2010). although we teach participants how to further develop and refine their bmc in a clearly structured way, the participants sometimes face difficulties while initially working with it. this is because they become overwhelmed by detailed information and, therefore, are unable to view their model as a whole or do not know how to identify certain business model elements because their business idea is at an early stage of development. we noticed that participants benefited from the discussions that took place in the mentoring sessions as part of the refinement step of the business model development. due to the different maturity stages and natures of the business ideas, changes and improvements to the business models varied due to the influence of the mentors and the workshop. thus, we were not surprised to note that the business models that had been developed by the end of the gg sometimes deviated significantly from the business ideas that had been submitted initially. some teams entered the gg with well-developed ideas and business models, while other teams altered their original business ideas during the gg process. this process is congruent with learningby-doing (pittaway and thorpe, 2012) and emphasizes the importance of seizing opportunities while developing an individual business model (teece, 2010). while it is essential to alter the business model at an early stage (rydehell and isaksson, 2016), as shirky (2008) highlighted for technological start-ups, both participants and mentors found it challenging to completely change the initial business idea. in the gg, we observed this type of complete change most frequently for webbased and service-based business ideas, but less frequently for hardware-based product ideas. the blended learning concept used in the business model development approach can easily be applied in other classroom settings. the approach has already been implemented in two other courses at the graz university of technology: entrepreneurship and process management. the entrepreneurship course is organized in the form of a seminar and lasts for one week. the business model development teaching approach is embedded in the course during that week, whereby students are presented with additional topics and given additional tasks, such as writing a business plan. the course has been developed to teach students the basics of entrepreneurship rather than how to found a company. we predict that students will apply to join the gg at a later stage and present their own ideas. in the process management course, students work on a provided business idea. the course lasts an entire semester, during which students link their business models to the process maps of companies. what makes the gg unique is the fact that workshops and mentoring sessions are combined. this offers participants the opportunity to develop business models based on their business ideas over a longer period of time and receive professional support that can help them eventually found their own venture. we use the format of the blended learning concept within a mooc to teach business model development, but this concept can also be implemented in other settings or without developing a mooc. for example, teachers could provide learning materials on business model development via a digital platform or e-mail with instructions and assignments that help prepare the students for the face-to-face workshop. providing examples of the bmc, case studies, or related links to videos that are freely available online would also support the participants’ preparation and learning outcomes. journal of business models (2019), vol. 7, no. 3 pp. 47-56 54 references azim, m. t. & al-kahtani, a. h. (2014), entrepreneurship education and training: a survey of literature, life science journal, vol. 11, no. 1s, pp. 127-135. d’souza, a., wormann, h., huitema, g. & velthuijsen, h. (2015), a business model design framework for viability; a business ecosystem approach, journal of business models, vol. 3, no. 2, pp. 1-29. fayolle, a. & gailly, b. (2008), from craft to science: teaching models and learning processes in entrepreneurship education, journal of european industrial training, vol. 32, no. 7, pp. 569-593. garrison, d.r. & kanuka, h. (2004), blended learning: uncovering its transformative potential in higher education, internet and higher education, vol. 7, no. 2, pp. 95-105. lalima & dangwal, k. l. (2017), blended learning: an innovative approach, universal journal of educational research, vol. 5, no. 1, pp. 129-136. malmström, m. & johansson, j. (2017), practicing business model management in new ventures, journal of business models, vol. 5, no. 1, pp. 1-13. nieuwenhuizen, c., groenewald, d., davids j., rensburg l.j. & schachtebeck, c. (2016), best practice in entrepreneurship education, journal of problems and perspectives in management, vol. 14, no. 3, pp. 528-536. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, hoboken, new jersey. osterwalder, a., pigneur, y., bernarda, g. & smith, a. (2014), value proposition design: how to create products and services customers want, john wiley & sons, hoboken, new jersey. pittaway, l. & thorpe, r. (2012), a framework for entrepreneurial learning: a tribute to jason cope, entrepreneurship & regional development, vol. 24, no. 9-10, pp. 837-859. rydehell, h. & isaksson, a. (2016), initial configurations and business models in new technology-based firms, journal of business models, vol. 4, no. 1, pp. 63-83. sharma, s. & gutiérrez, j.a., (2010), an evaluation framework for viable business models for m-commerce in the information technology sector, electronic markets, vol. 20, no. 1, pp. 33-52. shirky, c. (2008), here comes everybody: the power of organizing without organizations, penguin, new york. snihur, y., lamine, w. & wright, m. (2018), educating engineers to develop new business models: exploiting entrepreneurial opportunities in technology-based firms, technological forecasting & social change, doi: 10.1016/j. techfore.2018.11.011. teece, d.j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2/3, pp. 172–194. teece, d.j. (2018), business models and dynamic capabilities, long range planning, vol. 51, no. 1, pp. 40–49. journal of business models (2019), vol. 7, no. 3 pp. 47-56 55 toven-lindsey, b., rhodas, r.a. & lozano, j. b. (2015), virtually unlimited classrooms: pedagogical practices in massive open online courses, internet and higher education, vol. 24 (2015), pp. 1-12. trimi, s., & berbegal-mirabent, j. (2012), business model innovation in entrepreneurship, international entrepreneurship and management journal, vol. 8, no. 4, pp. 449-465. vorbach, s. (2017), “lecturing entrepreneurship at graz university of technology. the case of ‘gruendungsgarage’”, paper presented at the 20th international conference on interactive collaborative learning (icl), 27-29 september 2017, budapest, hungary. williams-middleton, k. w., mueller, s., blenker, p., neergaard, h. & tunstall, r. (2014), “experienced-based learning in entrepreneurship education a comparative study of four programmes in europe”, paper presented at the research in entrepreneurship and small business (rent) xxviii, 19 november-20 november, luxembourg, available at: http://publications.lib.chalmers.se/records/fulltext/203607/local_203607.pdf (accessed 28 november 2018). zalewska-kurek, k., kandemir, s., englis, b.g. & englis, p.d. (2016), development of market-driven business models in the it-industry. how firms experiment with their business models?, journal of business models, vo. 4, no. 3, pp. 48-67. zott, c. & amit, r. (2007), business model design and the performance of entrepreneurial firms, organization science, vol. 18, no. 2, pp. 181-199. journal of business models (2019), vol. 7, no. 3 pp. 47-56 56 christiana müller is assistant professor and head of the business model management working group at the institute of general management and organisation at the graz university of technology. she is currently working on her habilitation with the topic of technology-oriented business model management. her focus is on business model development and business model innovation, mainly in the context of digitalization. christiana and her colleagues run a business model lab in which they advise and train companies on business model development and business model innovation. elisabeth maria poandl is research and teaching assistant at the institute of general management and organisation at the graz university of technology. her research interests as well as her courses focus on the fields of entrepreneurship and business models. in her phd thesis she investigates collaborations of start-ups and established companies. as a member of the board at the academic startup accelerator gruendungsgarage, elisabeth supports the local start-up scene and advises academic entrepreneurs in developing their own business models. martin glinik is a research assistant at the institute of general management and organisation at the graz university of technology. he is a phd candidate with a master’s degree in business administration. his research interests focus on the fields of entrepreneurship, business models and sustainability. in his dissertation he investigates sustainability-oriented business models of start-ups. about the authors journal of business models (2017), vol. 5, no. 1, pp. 14-34 14 business model innovation: an integrative conceptual framework bernd w. wirtz 1 and peter daiser 2 abstract purpose: the point of departure of this exploratory study is the gap between the increasing importance of business model innovation (bmi) in science and management and the limited conceptual assistance available. therefore, the study identifies and explores scattered bmi insights and deduces them into an integrative framework to enhance our understanding about this phenomenon and to present a helpful guidance for researchers and practitioners. design/methodology/approach: the study identifies bmi insights through a literature-based investigation and consolidates them into an integrative bmi framework that presents the key elements and dimensions of bmi as well as their presumed relationships. findings: the study enhances our understanding about the key elements and dimensions of bmi, presents further conceptual insights into the bmi phenomenon, supplies implications for science and management, and may serve as a helpful guidance for future research. practical implications: the presented framework provides managers with a tool to identify critical bmi issues and can serve as a conceptual bmi guideline. research  limitations: given the vast amount of academic journals, it is unlikely that every applicable scientific publication is included in the analysis. the illustrative examples are descriptive in nature, and thus do not provide empirical validity. several implications for future research are provided. originality/value: the study’s main contribution lies in the unifying approach of the dispersed bmi knowledge. since our understanding of bmi is still limited, this study should provide the necessary insights and conceptual assistance to further develop the concept and guide its practical application. please cite this paper as: wirtz, b.w. and p. daiser (2017), business model innovation: an integrative conceptual framework, journal of business models, vol. 5, no. 1, pp. 14-34 keywords: business model innovation; framework; elements; factors; conceptual study 1 german university of administrative sciences speyer, chair for information and communication management, freiherr-vom-stein-str. 2, 67346 speyer, germany, ls-wirtz@uni-speyer.de 2 german university of administrative sciences speyer, freiherr-vom-stein-str. 2, 67346 speyer, germany, daiser@uni-speyer.de journal of business models (2017), vol. 5, no. 1, pp. 14-34 15 introduction during the past decade, research has produced appealing evidence that links successful business model innovation (bmi) with value creation (giesen et al., 2007; johnson et al., 2008; sinfield et al., 2012). building upon these insights, bmi has—next to acquisition and market expansion, service development, and product development—emerged as a forth path to growth and value creation(shelton, 2009; sinfield et al., 2012; wang et al., 2015). in addition, bmi is seen as a powerful management tool that supports companies in facing today’s intensified global competition and dynamic market conditions (johnson et al., 2008). consequently, bmi has “become increasingly important both in academic literature and in practice given the increasing number of opportunities for business model configurations enabled by technological progress, new customer preferences, and deregulation” (casadesus-masanell and zhu, 2013, p. 464). against this background, scientific research should provide the necessary insights and conceptual assistance to further develop the concept and guide its practical application(wirtz et al., 2016b). however, our understanding of bmi is still limited (bucherer et al., 2012; bocken et al., 2014; lambert, 2015) and available concepts do not adequately support management in innovating their company’s business models (frankenberger et al., 2013; taran et al., 2016). from a research perspective, bmi is seen as a fuzzy, slippery construct (fielt, 2013; spieth et al., 2014; taran et al., 2016) that “cannot build on an established definition and well-structured literature base” (schneider and spieth, 2013, p. 1). although there have been massive efforts in the recent past to develop new insights and increase the field’s understanding, scientific knowledge is largely present in a heterogeneous, siloed structure (zott et al., 2011). moreover, “a sound theoretical foundation is still missing” (carayannis et al., 2015, p. 86). following the arguments of boons and lüdeke-freund (2013), bocken et al. (2014), massa and tucci (2014), and wirtz et al. (2016a) scientific research should therefore support a normative process of creating a common understanding and a common language of important bmi concepts since this would help to “accelerate the development of sustainable business models in research and practice”(bocken et al., 2015, p. 42). given the fact that there is comprehensive knowledge available (cf. zott et al., 2011; massa and tucci, 2014), which is, however, dispersed across various scientific fields (zott et al., 2011; schneider and spieth, 2013; carayannis et al., 2015), this study tries to contribute to academic and practical knowledge creation by conducting a literature-based investigation. in doing so, it brings together scattered insights of the bmi framework and consolidates them into an integrative concept that incorporates the key elements and dimensions of bmi. furthermore, we use google as an illustrative example of a company that looks back at nearly two decades of successful bmi (goggin, 2012; steiber and alänge, 2013; wirtz, 2016) to illustrate the different aspects of the integrative concept with practical examples. summarizing, the goal of this investigation is to develop a bmi framework that presents unifying insights of available bmi frameworks and explains key factors, elements, dimensions, and the presumed relationships among them (cf. miles and huberman, 1994). this way, the integrative bmi framework supports science and management since researchers and practitioners can draw conceptual information and insights about bmi from a synthesis of existing knowledge that is based on a structured analysis of the literature. by illustrating the key components of bmi in a clear and comprehensive manner, the integrative bmi framework should be especially useful to managers in designing and implementing bmi (cf. taran et al., 2016). for this purpose, the study continues as follows: in the upcoming section, we explain the approach of analyzing the literature and review different bmi frameworks to present an integrative account. in the next section, we integrate the insights drawn from the identified bmi frameworks. the study concludes with the subsequent discussion and conclusion section, outlining its implications for research and practice. identifying existing bmi frameworks in the literature to identify a relevant set of bmi frameworks, we conducted a title and abstract search in ebscohost using three leading academic databases (academic search complete, business source complete, and econlit with full text). this database approach seems especially journal of business models (2017), vol. 5, no. 1, pp. 14-34 16 reasonable since the bmi “literature is developing largely in silos” (zott et al., 2011, p. 1019). in a first step, we searched for publications that deal with bmi to establish a meaningful basis of bmi literature (key words: “business model innovation“, “business model evolution”, ”business model development”, “business model dynamics”, and “business model reinvention”). this led to a total of 219 search results. after sorting out the studies that did not match the bmi context, 179 articles remained in the set that formed the starting point for this investigation. compared to the number of studies in recent bmi literature reviews (cf. boons and lüdeke-freund, 2013; schneider and spieth, 2013; spieth et al., 2014; wirtz et al., 2016a), we believe this represents an adequate initial set of articles.in the next step, we scrutinized these 179 articles for bmi frameworks and checked their lists of references for further relevant studies that may not have come up in the database query. finally, we could identify six bmi frameworks, which are outlined in the following. existing bmi frameworks the first identified bmi framework was elaborated by malhotra (2000), who presents “a framework for developing organizational knowledge management systems for business model innovation” (malhotra, 2000, p. 6). in this study, the author proposes an information-processing model and sense-making model of knowledge management to facilitate bmi in order to achieve sustainable competitive advantage in the increasingly dynamic and discontinuous business environment. two years later, deloitte consulting and deloitte & touche publish the results of their competitive strategy study on business model innovation, in which they present a process-oriented bmi framework (cf. deloitte, 2002) that puts the spotlight on three innovation dimensions (who, what, and how). it describes a systematic approach for implementing and assessing innovation in businesses and focuses on the context of bmi in terms of the external and internal factors and capabilities to be exploited. moreover, it introduces the concept of sustainabilityto the bmi setting, emphasizing the innovated business model’s inimitability over time. on the whole, their bmi framework has a strong practical character, seeking to support companies in innovating their business models (deloitte, 2002). building on this approach, mahadevan (2004) works out the aforementioned framework in more detail by clearly visualizing key bmi factors. the author defines particular core elements, namely who to serve (target customers), what to offer (value propositions), and how to operate (value delivery system), as well as external factors (technology, changing customer needs, firm level issues, regulatory & economy, and competition), which are inextricably linked with the formerly mentioned core elements. moreover, all these elements are linked to sustainability, which is expected to be an important factor for appropriating value from bmi. in the same year, voelpel et al.(2004) present a framework that is based on the four pillars customers, technology, business system infrastructure, and economics/profitability. they propose to address bmi in an interactive, circular process that takes into account specific environmental changes in each of the four pillars. furthermore, the authors conclude that “organizations should continuously attempt to reinvent themselves” (voelpel et al., 2004, 270, 271), and thus constantly sense potentials for new value propositions. the ibm institute for business value and ibm global business services present a further bmi framework (cf. ibm, 2009). they distinguish between three main types of bmi: (1)  industry model innovation—innovating the industry value chain, (2)  revenue model innovation—product, service, and/or value development, as well as novel pricing models,and (3)  enterprise model innovation—innovating by changing enterprises, partners, and/or networks (ibm, 2009). the most recent of the bmi frameworks identified is the one of yang et al. (2014). they propose a bmi framework that takes into account a company’s particular market type, components, and innovation tools. thus, the who, the what, and the how of bmi can again be found in their concept. apart from that, they not only explicitly include specific components into this process, namely company (competency), value (product), customer (market), and profit (cost), but also integrate particular innovation tools and their related procedure, combination, and internal evaluation. the six previously described bmi frameworks do not share many similarities or characteristics. with the exception of the bmi framework of mahadevan (2004), journal of business models (2017), vol. 5, no. 1, pp. 14-34 17 which is partly based on the findings of the study by deloitte (2002), the frameworks were developed independently, thus not following a process of accumulating knowledge. moreover, they are rather different in nature and driven from various perspectives, comprising a knowledge management (malhotra, 2000), an organizational (voelpel et al., 2004), a strategy and management (deloitte, 2002; ibm, 2009), and a conceptual perspective (mahadevan, 2004; yang et al., 2012). these findings as well as our general lessons learned from the literature analysis underline the previously mentioned heterogeneous diffusion of bmi knowledge (cf. zott et al., 2011; schneider and spieth, 2013; carayannis et al., 2015). considering the number of bmi studies identified, we found a considerable body of bmi knowledge, which, however, seems to be mostly scattered in different areas of application and/or different fields of research, supporting the statement of zott et al. (2011, p. 1019) according to which the “literature is developing largely in silos”. as already mentioned by boons and lüdekefreund (2013), bocken et al. (2014, p. 42), massa and tucci (2014), as well as wirtz et al. (2016a) this situation may benefit from a normative approach that integrates existing knowledge into unified concepts, and thus supports a common understanding of bmi (lambert, 2015; taran et al., 2016). in this context, an integrative conceptual framework can be of particular importance since it provides a synthesis of existing knowledge and explains key factors, elements, dimensions, and the presumed relationships among them (cf. miles and huberman, 1994), supporting science and management in further developing and implementing bmi. against this background, this study contributes to academic and practical knowledge creation by conducting a literature-based investigation that brings together scattered insights of bmi into an integrative bmi framework. integrative perspective in this section, we first present an overview of the identified elements of the analyzed bmi frameworks. building upon these insights, derived from the findings of the literature-based analysis, we gradually elaborate an integrative bmi framework. each step of this deductive approach is finally described with a practical example of google to illustrate the respective aspects of the conceptual bmi framework in a real-world context. in this sense, google — a company which looks back at nearly two decades of successful bmi (goggin, 2012; steiber and alänge, 2013; wirtz, 2016) — serves as a kind of exemplary case study. to systematically identify the elements of the bmi frameworks, we had to determine reasonable dimensions in a first step. for this purpose, the frameworks were scrutinized and their individual dimensions were compared. this approach led to six dimensions, which formed the basis for a systematic analysis of the components of the respective bmi frameworks: (1)  bmi macro-environmental elements, (2) bmi micro-organizational elements, (3) bmi core elements, (4) bmi tools and technique elements, (5)  bmi knowledge management elements, and (6)  bmi outcome/impact elements. table 1 summarizes the results of this analysis. the analysis of the bmi components of the distinctive bmi frameworks shows a rather unbalanced, heterogeneous picture. especially the spectrum of bmi elements, the intensity of use, and the degree of abstraction reveal substantial differences. the spectrum and intensity of use of bmi elements are qualitative evaluations that are based on the identified elements of the respective bmi frameworks. the low intensity of the dimensions bmi tools and technique elements as well as bmi knowledge management, for instance, reflect that these dimensions only show few elements in comparison to the other dimensions. the degree of abstraction varies since some authors aggregate the elements on a higher level, while other authors go more into detail. the bmi framework of ibm (2009), for instance, only provides three core elements that summarize all relevant aspects and provide the underlying bmi strategies. these findings underline the importance of the pursued approach, developing an integrative bmi framework in the course of a normative process to help create a common understanding of the bmi concept (cf. boons and lüdeke-freund, 2013; bocken et al., 2014; massa and tucci, 2014; wirtz et al., 2016a). journal of business models (2017), vol. 5, no. 1, pp. 14-34 18 developing an integrative bmi framework building upon the insights of the identified bmi frameworks and elements, we derived six important components of a bmi framework: environmental bmi dimensions, central bmi dimensions, bmi techniques and tools, knowledge/information management, bmi intensity, and bmi outcome/impact. each of these components is outlined in the following by presenting the respective findings of the analysis of the literature and the corresponding conclusions for this study. furthermore, each theoretically deduced component is illustrated with a practical example of google to exemplify the respective aspects of the integrative bmi framework in a real-world context. authors/elements bmi macro environmental elements bmi micro organizational elements bmi core elements bmi tools and technique elements bmi knowledge management elements bmi outcome/ impact elements spectrum of bmi elements malhotra (2000) radical discontinuous change organizational need for new knowledge and knowledge renewal information processing model sense-making model knowledge creation knowledge renewal deloitte (2002) external factors internal capabilities who what how superior shareholder value innovator advantages incumbent disadvantages mahadevan (2004) technology regulatory and economy changing customer needs competition firm level issues target customers (who) value propositions (what) value delivery system (how) sustainability voelpel et al. (2004) sensing strength, direction, and impact of technology change in customer needs/behavior new customer value proposition sensing potential for value system reconfiguration sensing feasibility and profitability customers technology business system infrastructure economics/ profitability competitive advantage ibm (2009) industry model innovation revenue model innovation enterprise model innovation successful financial results yang et al. (2014) company (competency) customer (market) value (product) profit (cost) who what how procedure combination internal evaluation sustainability competitive advantage intensity of use of bmi elements very low low moderate high very high table 1: overview of identified bmi elements journal of business models (2017), vol. 5, no. 1, pp. 14-34 19 environmental bmi dimensions an often discussed aspect concerning bmi are external factors (e.g., deregulation, market transparency, globalization) that have led to an increasingly dynamic business environment (porter, 2001; brews and tucci, 2004), which causes constantly changing stakeholder preferences (teece, 2010). thus, the entire business model field is “explicitly concerned with how firms interact with their environment” (berglund and sandström, 2013, p. 275). to account for these factors, mahadevan (2004) presented a helpful frame for bmi by conceptually separating bmi according to its context, which not only provides systemic factors that drive the bmi cycle, but also its core that deals with “the operational details of the nature of innovation” (mahadevan, 2004, p. 4). the framework generally follows this suggestion by separating important bmi elements into environmental and central bmi dimensions. in addition to the logical separation between environmental and central bmi dimensions, a further division of the environmental bmi dimensions seems reasonable since these may be macroor micro-related (deloitte, 2002). particularly since much of the extant bmi research focuses on internal or organizational perspectives (berglund and sandström, 2013). a similar approach can also be found in the studies of bucherer et al. (2012) and carayannis et al.(2015), who divide the origins of bmi into external and internal triggers. from a macro-level perspective, we could identify the elements globalization, technology, environment, and regulatory/economic issues (brews and tucci, 2004; mahadevan, 2004; voelpel et al., 2004; habtay, 2012). concerning scientific literature, especially elements like globalization, deregulation, and the internet caused a massive change, bringing along an increasingly dynamic business environment (brews and tucci, 2004), which forces companies to continually modify their business models (wirtz and lihotzky, 2003; voelpel et al., 2004; agarwal and helfat, 2009). in addition, technologydriven bmi has gained considerable attention. although technology by itself does not have a single objective value, it can be commercialized through a business model (chesbrough, 2010). moreover, technology may pose a severe threat to entire industries since technology-induced bmi usually spreads out across entire markets (jacobides et al., 2006), “its upstream and downstream industries and thus, eventually, its overall architecture” (gambardella and mcgahan, 2010, p. 269). apart from macro-environmental challenges, such as economic shifts, regulatory effects, and technological changes, which force companies to innovate their business model (linder and cantrell, 2000; bucherer et al., 2012; boons and lüdeke-freund, 2013), altering customer preferences and competition (jaworski et al., 2000; mezger, 2014) as well as firm dynamics are seen as vital bmi triggers (geels et al., 2008; boons and lüdeke-freund, 2013). against this background, we adapt the environmental bmi elements changing customer needs, product/service innovation, competition, and firm dynamics, using the frameworks of mahadevan (2004) and voelpel et al. (2004) as well as the studies of giesen et al. (2010) and enkel and mezger (2013). summarizing, these previously described macroand micro-environmental elements are expected to significantly influence the bmi behaviorof companies (mahadevan, 2004). the environmental bmi dimensions are presented in figure 1. the impact of the macro-level and micro-level environmental elements and associated bmi behavior can be illustrated well with the development of google that is “one of the behemoths of the digital age” (goggin, 2012, p. 742) and has many times successfully demonstrated its bmi capabilities by continuously creating new products and services and entering new business areas (steiber and alänge, 2013). when google started its business operations in 1998 there have already been figure 1: macro-level and micro-level environmental dimensions of bmi journal of business models (2017), vol. 5, no. 1, pp. 14-34 20 popular search engines, such as yahoo!, altavista, and lycos (marketline, 2012a). but google had a better solution to deal with the new information paradigm, which came along with the rise of the internet—from finding information to getting the right information. building upon these changing customer needs, google presented a straightforward service innovation, marketing the first search algorithm that takes into account the relevancy of the search results, which made the company quickly outperform its competitors, who still provided simple content searches (marketline, 2012a). furthermore, google entirely focused on the provision of their search engine front-end instead of integrating news, offers, and advertisements into their landing page. given the situation that many users did not have fast internet access at that time, using the google search was convenient due to its low bandwidth requirements. in a nutshell, google’s search solution was abreast of the trend, or in other words, an excellent response to the environmental macro and micro bmi elements. later, google continued to successfully introduce various bmis. as an example, we use google’s android platform in the following, which they developed to enter the mobile phone market (goggin, 2012). following rubin (2007), android is an open platform, including “an operating system, user-interface and applications— all of the software to run a mobile phone, but without the proprietary obstacles that have hindered mobile innovation”. google early identified the changing customer needs with regard to mobile internet use, which came along with the technology development in the smartphone and network business. this global development caused a rapid industry shift in the mobile phone market, creating new balances of power. therefore, traditional mobile phone companies, such as rim or nokia, lost their leading position within less than five years (marketline, 2012b). while google’s main competitors in this new field (apple and rim) kept on selling mobile devices with proprietary software, they chose a different approach—using and extending their software developing competencies—and created an open platform in coordination with strong partners like samsung, lg, htc, t-mobile, and verizon. by providing a platform-independent software for free, google was able to quickly increase its android distribution (goggin, 2012), clearly outperforming its rivals (e.g., iphone 13.9%, windows 2.6%, blackberry 0.3%, others 0.4%)by reaching a market share of 82.8% in the second quarter of 2015 (idc, 2016). central bmi dimensions concerning the central bmi dimensions, deloitte (2002) and yang et al. (2014) use a threefold division into ‘who’, ‘what’, and ‘how’, which is also applied by mahadevan (2004), who furthermore refers to target customers, value propositions, and value delivery system in this sense. these bmi factors basically form the character of the bmi: innovation through market and target group changes (yang et al., 2014), through value proposition changes, altering the value creation, and/ or through value constellation changes that transform the value chain (cf. magretta, 2002; teece, 2010; chesbrough, 2013). similarly, amit and zott (2012) apply the factors ‘who’, ‘what’, and ‘how’, also referring to a company’s customers, activities, and value creation, or johnson et al. (2008), who summarize this in one factor, which they call customer value proposition and which reflects the three dimensions target customer, job to be done, and offering. for this reason, the bmi factors that contain the elements ‘who’ (target group/customers), ‘what’ (value proposition), and ‘how’ (value constellation), represent a vital element of the central bmi dimension. the android platform represents a suitable example to illustrate this. the value proposition [what] is to provide a comprehensive platform that supports deviceindependent mobile access to information (goggin, 2012) and that serves as “foundation for many new phones and will create an entirely new mobile experience for users, with new applications and new capabilities we can’t imagine today” (rubin, 2007). this bmi targets at three different groups [who]: users (e.g., individuals, companies), network carriers (e.g., verizon, sprint, t-mobile), and handset manufacturers (e.g., htc, samsung, lg). since the platform is for free, google does not generate direct cash inflows from the provision of android. however, it serves as a platform [how] that is supposed to make users use google consumer apps, which finally allow to capitalize the bmi (goggin, 2012). journal of business models (2017), vol. 5, no. 1, pp. 14-34 21 given the previous frameworks’ focus concerning the bmi factors, we are missing a further important aspect of bmi, which so far has not been of particular relevance in the studies identified. here, it needs to be kept in mind that business models are not static (bucherer et al., 2012; achtenhagen et al., 2013) and that bmi “can occur in a number of ways: by adding new activities, by linking activities in novel ways—or by changing one or more parties that perform any of the activities” (amit and zott, 2012, p. 45). as a result, innovating an existing business model, developing a new one (schneider and spieth, 2013; mezger, 2014), modifying organizational activities and structures, and adapting and building up new resources and competencies (amit and zott, 2001; voelpel et al., 2004; mezger, 2014) in regard to bmi has an impact on the components of a business model (demil and lecocq, 2010; bucherer et al., 2012; boons and lüdeke-freund, 2013). hence, an organization has to take into account the causal link and interaction between the targeted bmi factors and the respective business model components (casadesus-masanell and ricart, 2010; enkel and mezger, 2013). moreover, bmi can also have an impact on the bmi process itself, changing the way how bmi has been conducted so far. concerning the process of bmi, manifold approaches can be found in the scientific literature (e.g. linder and cantrell, 2000; pateli and giaglis, 2005; johnson et al., 2008; sosna et al., 2010; teece, 2010). the distinctive approaches differ in scope and procedure as well as their organizational integration, showing that there are various ways to handle bmi. this shows that the bmi process is not a static construct and is applied in different forms. against this background, the bmi process itself can also be modified in terms of adjustments and optimization to increase bmi efficiency and effectiveness or to adapt the bmi process to new organizational, strategic, or environmental settings. thus, the bmi components and the bmi process should be considered separately when dealing with bmi. for this reason, bmi areas forms a second element in the central bmi dimensions. google’s business model, for instance, is made up of several sub-models or components (e.g., procurement model, revenue model, competencies/resources model, etc.). given the initial business model that covered the search engine activities, the further bmi developments of the company constantly required changes of particular components to adjust the business model to the particular requirements (wirtz, 2016). again referring to the android platform, this means that various components had to be adjusted. taking the finance model, for example, the concept of low upfront investments, immediate returns, and short-term interim financing from the search engine business did not cover the needs anymore. android required higher initial investments as well as prolonged return and financing periods. from a revenue model perspective, google extended its former revenue per click and adword activation revenues with royalties and revenue from transaction payment.furthermore, new competencies and resources were needed to set up, maintain, and develop the android platform, leading not only to an adjustment of the competencies/ resources model, but also to new cooperations with network carriers and handset manufacturers, which entailsamending the network model. dynamics between environmental and central bmi dimensions a substantial finding of mahadevan (2004) was that the elements of the environmental and central bmi dimensions are inseparably intertwined and interact dynamically since it is impossible to avoid diffusion of innovation, which makes the environment influence the center and vice versa. considering that bmi is seen as vital competency to successfully act and react within today’s dynamic, competitive business environment (desyllas and sako, 2013; kastalli and van looy, 2013), “it makes good business sense for companies to develop the capability to innovate their business models” (chesbrough, 2010, p. 354). however, this also requires to possess the relevant knowledge about the external and internal elements (zott et al., 2011; denicolai et al., 2014) and to have the skills to sense and identify bmi opportunities (mezger, 2014) as well as to change drivers (frankenberger et al., 2013). therefore, an effective interface management, “which may feature the combination and interaction of different knowledge resources and flows” (denicolai et al., 2014, p. 249), is of paramount importance. journal of business models (2017), vol. 5, no. 1, pp. 14-34 22 in this context, yang et al. (2014) propose innovation tools that support systematic bmi assessment through procedure, combination, and internal evaluation. this is supported by eppler et al. (2011), who recommend to use tools and methods that provide structure and guidance for systematic knowledge creation to pool “information from inside and outside” (eppler et al., 2011, p. 1324), and denicolai et al. (2014), who also suggest to exploit internal and external information. against this background, we add the element bmi techniques & tools, serving as systematic interface between the central and environmental bmi dimensions, to the integrative bmi framework. according to malhotra (2000, p. 5) “new business environments are characterized not only by rapid pace of change but also discontinuous nature of such change”. he translates these requirements into an organizational need for knowledge creation and renewal. to deal with this need, he proclaims two important factors, information processing and sensemaking, which form a dynamic process to constantly fuel and inform bmi to create and renew knowledge. kastalli et al. (2013) underline these findings by emphasizing the importance of understanding the customer and interpreting the signals of the market. likewise, denicolai et al. (2014) propose to use a process of recursive learning in order to exploit the organization’s external knowledge. therefore, the element knowledge/information processing & sense-making, also serving as interface between the central bmi and environmental bmi dimensions, is a crucial element of the integrative bmi framework. these elements are also important factors for the successful bmi of google. although google has an aggressive acquisition strategy to grow and create innovation, external knowledge interaction is one of their key innovation enablers. therefore, they cooperate closely with researchers and universities and “establish specific units with responsibility for external screening and sourcing” (steiber and alänge, 2013, p. 259). the former ceo of google eric schmidt calls the process of sensing, gathering, and connecting the relevant information that is needed for innovation “combinatorial innovation” (schmidt, 2014, p. 74). thus, it is about having the systems and tools to gather the information (bmi techniques & tools) and transform it to applicable knowledge through evaluation, validation, and combination (knowledge/information processing & sense-making). the components environmental bmi dimensions, central bmi dimensions, bmi techniques figure 2: dynamic structure of environmental and central bmi dimensions journal of business models (2017), vol. 5, no. 1, pp. 14-34 23 and tools, and knowledge/information management as well as the presumed relationships within the integrative bmi framework are summarized in figure 2. bmi intensity given the information from the bmi factors and bmi areas and comparing them with the status quo allows to derive the required business model changes. so far, “few authors discuss the degree of innovativeness of business model innovations” (bucherer et al., 2012, p. 192). in the same vein, the identified bmi frameworks did not take into account bmi intensity. although the literature on bmi has not found a consensus yet and fails to provide a concise categorization, it can be said that there are different bmi intensities (bucherer et al., 2012). while most bmis are expected to be moderate or incremental, only requiring slight business model modifications (mitchell and bruckner coles, 2004; hargadon, 2015), there are other opinions that mainly see radical or disruptive bmis (markides, 2006), which reflect a massive business model change, leading to substantial discontinuities of the existing business model (bucherer et al., 2012). considering insights from the literature, this differentiation is also important since different intensities of change are connected with different risks and efforts of change (wirtz, 2011). thus, bmi intensity — ranging from moderate to radical innovation — is an important element of the integrative bmi framework. as mentioned before, google constantly expanded its business model by entering various new domains that are well beyond its initial expertise, in particular, software, email, social networking, publishing, navigation, video, and so on (goggin, 2012). these ongoing developments continuously influence google’s business model. however, not all of them have the same impact since some only require minimal business model changes. let us, for example, take the web service google books that provides access to book and magazine content in the fashion of an online library, thus allowing users to browse books and magazines online and to buy or borrow books from the google library (google, 2016). from a bmi perspective, this reflects a moderate innovation. although there are significant technological differences (e.g., scanning books instead of crawling the web, distinctive content presentation, modified revenue generation), it basically just represents an extension of the primary search engine business model. in comparison, the situation with regard to the previous android example is different. this radical innovation required a tremendous modification of the business model and its components since the value proposition, value constellation, and the entire value creation process became subject to substantial change. from a business model component perspective, developing and marketing android had a massive impact on the sub-models. the network model, for example, had to be modified since new business partners needed to become part of the development and marketing process (e.g., open developers, network carriers, and handset manufacturers). moreover, developing platform software requires new competencies and additional resources, which calls for an adaption of the competencies and resources model. similarly, the new product/ service offer demands an entirely distinctive manufacturing and revenue model. these examples underline the importance of being aware of the bmi intensity since a moderate innovation should carry less risk and take less effort compared to a more intense innovation. bmi outcome/impact from a bmi outcome/impact perspective, we identified several elements in the previous bmi frameworks, covering aspects such as knowledge creation, sustainability, shareholder value, competitive advantage, etc. (cf. malhotra, 2000; deloitte, 2002; mahadevan, 2004; voelpel et al., 2004; ibm, 2009; yang et al., 2014). by complementing these findings with the insights of the literature analysis, we derived the following three key elements that are of vital importance to bmi: bmi sustainability, bmi competitive advantage, and bmi value creation/capture. as mentioned before, mahadevan (2004) addresses the degree of sustainability of bmi, which is expected to be closely related to bmi success. therefore, bmi should take into account the factors that protect and expand its sustainability. moreover, the overarching goal of achieving competitive advantage has to be kept in mind during bmi activities since this is not an automatic, implicit supplement (teece, 2010). nevertheless, successful bmi “can itself be a pathway to competitive journal of business models (2017), vol. 5, no. 1, pp. 14-34 24 advantage if the model is sufficiently differentiated” (teece, 2010, p. 173) and difficult to replicate (magretta, 2002; günzel and holm, 2013). in this context, amit and zott (2012, p. 42) have a fitting example: “someone might come up with a better mp3 player than apple’s tomorrow, but few of the hundreds of millions of consumers with ipods and itunes accounts will be open to switching brands.” however, successful bmi may also produce copycats that can finally limit “the innovator’s ability to take advantage of its idea” (casadesus-masanell and zhu, 2013, p. 480). thus, bmi sustainability is considered an important element of bmi (cf. carayannis et al., 2014; carayannis et al., 2015). similarly, the previously mentioned concept of competitive advantage is generally seen to be a key source of bmi (mitchell and coles, 2003; schindehutte et al., 2008; eppler et al., 2011; eurich et al., 2014). moreover, successful bmi can produce business models that are a competitive advantage themselves (chesbrough, 2010; boons and lüdeke-freund, 2013). thus, bmi competitive advantage is a further element of the integrative bmi framework. the very successful market introduction of the android platform for smartphones provides a good example of the importance of sustainable competitive advantage. rim, the company that invented the blackberry device, for instance, had transformed the mobile phone industry and reigned the business phone market for years. by including a qwertz keyboard and applications, such as email, organizer, and corporate data access, rim quickly became a worldwide market leader in the corporate mobile phone market (marketline, 2012b), allowing them “to capture some of the value they create for their customers” (eichen et al. 2015, p. 29). starting with the launch of the iphone in 2007 and google’s android operating system in 2008, rim had suddenly been unable to compete and their market share eroded considerably, leading to a deterioration of the entire company. already two years after google introduced the android operating system, more android than blackberry devices were sold (marketline 2012). this shows the importance of creating a sustainable competitive advantage since other competitors may develop an enhanced or new solution and quickly take on the competitive advantage. last but not least, the study of deloitte (2002) refers to superior shareholder value and the study of ibm (2009) to rewarding financial results as final outcome of successful bmi. although these factors are common targets of companies, we believe that these do not reflect a holistic integrative approach since superior shareholder value may create the impression that bmi is only relevant to corporations. in addition, financial results seem to limit value creation to the financial aspects of the firm and rather show an orientation towards the past instead of strategic future value creation. against this background, we refer to a more general concept of value creation, which means that companies can derive returns if they “find ways to capture some of the value they create for their customers through their innovation” (eichen et al., 2015, p. 29)—irrespective of the character of these returns. summing up, the overall objective of bmi is value creation/capture (chesbrough and rosenbloom, 2002; amit and zott, 2012; mezger, 2014). thus, the final element of the integrative bmi framework is bmi value creation/capture. when speaking of value creation, it is hard to find a better example than google. founded in 1998, google went public in 2004. the share price at the initial public offering was usd 85 (investopedia, 2016). at the end of 2015 it nearly surpassed the usd 800 mark (cf. nasdaq, 2016). according to the forbes magazine, google has a market capitalization of usd 500.1 billion and an estimated brand value of usd 82.5 billion (forbes, 2016). this success story is to a large extent a result of google’s very successful bmi activities that provide the basis for sustainable competitive advantage, leading to various profitable revenue streams (e.g., keyword advertising, adword advertising, video advertising, transaction fees in the google play store, licensing fees from software and cloud services, hardware sales, and so on). summarizing, the integrative bmi framework is presented in figure 3. discussion and conclusion the point of departure of this exploratory study is the gap between the increasing importance of bmi in both academic literature and management (casadesus-masanell and zhu, 2013; fielt, 2013) and the limited conceptual assistance available to guide its scientific journal of business models (2017), vol. 5, no. 1, pp. 14-34 25 development and practical application (bucherer et al., 2012; frankenberger et al., 2013; bocken et al., 2014; wirtz et al., 2016a). against the background of the heterogeneous diffusion of knowledge across various disciplines and the need of companies for enduring bmi, mainly resulting from today’s highly dynamic business environment, this study identifies and explores scattered insights of the bmi concept in the scientific literature and consolidates them into an integrative framework. for this reason, this investigation intends to contribute to bmi research in four ways: (1) enhance our understanding about the key elements and dimensions of bmi, (2)  present further conceptual insights into the bmi phenomenon, (3)  supply implications for science and management, and (4)  be a helpful guidance for future research on bmi. looking back at the literature-based analysis, we can underline previous statements of the field that although there have been massive efforts in the recent past to develop new insights, the gained knowledge is rather dispersed (zott et al., 2011; schneider and spieth, 2013; carayannis et al., 2015; lambert, 2015). in total we could identify six bmi frameworks that examine bmi from different perspectives. based on the broad derived set of bmi elements, we could elaborate figure 3: an integrative conceptual bmi framework journal of business models (2017), vol. 5, no. 1, pp. 14-34 26 an integrative bmi framework, which—compared to the previous approaches — provides a more comprehensive, holistic picture of the elements and dimensions of bmi. while from a conceptual and structural perspective, the derived integrative bmi framework can be regarded as an updated and extended version of the framework of mahadevan (2004), particularly since it follows the same general logic of separating between environmental and central elements, it also includes pervasive modifications. when looking at the framework’s farreaching extension, the vast progress and knowledge generation that took place in the field during the past decade can immediately be recognized. moreover, the combination of insights from the different bmi framework perspectives led to important conceptual findings. the integration of bmi techniques & tools and knowledge/information processing & sense-making, which are two elements for connecting the central and environmental bmi dimensions in order to gather systematic information and create knowledge, is seen as a vital improvement since this matter has not been illustrated in previous bmi endeavors. furthermore, the proposed conceptual combination of bmi sustainability and bmi competitive advantage to finally achieve the overall target of bmi value creation/capture is a helpful, abstract presentation of their relationship. apart from that, new elements were identified, which so far had not been considered in previous bmi frameworks (e.g., bmi areas, bmi intensity). this situation was particularly surprising since the associated elements (business model components, bmi process, and innovation intensities) are much debated subjects in the scientific literature. concerning the bmi factors (who, what, and how), these elements seem to be solid components of bmi since these are well-established and applied in a similar fashion throughout manifold scientific studies (e.g., deloitte, 2002; magretta, 2002; teece, 2010; chesbrough, 2013; yang et al., 2014). for managers, the integrative bmi framework provides a tool that allows them to identify and reflect on critical issues, which are important for successful bmi. in this context, it can be applied as a reference system concerning organizational and strategic aspects (e.g., structural organization, methodical and organizational development, system infrastructure, and strategic focus), as well as with regard to bmi audit and controlling activities. for this purpose, the elements of the integrative bmi framework have to be enriched with company-specific criteria and indicators that allow bmi evaluation and measurement. furthermore, the integrative bmi framework can also be used in the form of a checklist since it presents important elements that have to be considered for successful bmi. despite the study’s contribution to science and management, it also shows several limitations. although the illustrative examples provide supplementary context for the deduced phenomena, they are only descriptive in nature (cf. eisenhardt, 1989). therefore, the examples do not support any statements concerning empirical validity. furthermore, the examples are related to a very successful company in a growing and technology-driven environment that looks back at many years of successful bmi. the question remains, if case studies of less successful companies in other industries come to similar conclusions. besides, given the vast amount of academic journals, it is possible that further important publications exist that may have escaped our scrutiny. for future research, we suggest a trinomial approach to address the particular points in question of this study as well as general issues concerning the bmi concept. first, additional case studies, especially from organizations in different situations and environments, will provide further insights and help to broaden our understanding of bmi. second, we recommend examining this study’s findings by means of qualitative in-depth expert interviews to learn more about the significance of the individual elements and their interrelations, as well as if there are further elements that are relevant to the success of bmi and may have not been identified in this study. third, quantitative approaches are needed to validate the integrative bmi framework through confirmatory empirical methods. especially its individual elements and their contribution to the success of bmi endeavors should be examined by using causal analytical analysis. thus, the relationships between environmental and central bmi dimension elements, which are applied as exogenous constructs, and bmi value creation or capture, which serves as endogenous construct, should be journal of business models (2017), vol. 5, no. 1, pp. 14-34 27 investigated by using enlarged samples and longitudinal data. in summary, future research demands further qualitative and quantitative investigations to challenge and validate this study’s findings and implications. journal of business models (2017), vol. 5, no. 1, pp. 14-34 28 references achtenhagen, l., melin, l. and naldi, l. (2013), “dynamics of business models – strategizing, critical capabilities and activities for sustained value creation”, long range planning, vol. 46, no. 6, pp. 427–442. agarwal, r. and helfat, c.e. (2009), “strategic renewal of organizations”, organization science, vol. 20, no. 2, pp. 281–293. amit, r. and zott, c. (2001), “value creation in e-business”, strategic management journal, vol. 22, no. 6-7, pp. 493–520. amit, r. and zott, c. (2012), “creating value through business model innovation”, mit sloan management review, vol. 53, no. 3, pp. 40–50. berglund, h. and sandström, c. (2013), “business model innovation from an open systems perspective: structural challenges and managerial solutions”, international journal of product development, vol. 18, no. 3-4, pp. 274–285. bocken, n.m., rana, p. and short, s.w. (2015), “value mapping for sustainable business thinking”, journal of industrial and production engineering, vol. 32, no. 1, pp. 67–81. bocken, n.m., short, s.w., rana, p. and evans, s. (2014), “a literature and practice review to develop sustainable business model archetypes”, journal of cleaner production, vol. 65, pp. 42–56. boons, f. and lüdeke-freund, f. (2013), “business models for sustainable innovation. state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. brews, p.j. and tucci, c.l. (2004), “exploring the structural effects of internetworking”, strategic management journal, vol. 25, no. 5, pp. 429–451. bucherer, e., eisert, u. and gassmann, o. (2012), “towards systematic business model innovation: lessons from product innovation management”, creativity and innovation management, vol. 21, no. 2, pp. 183–198. carayannis, e.g., grigoroudis, e., sindakis, s. and walter, c. (2014), “business model innovation as antecedent of sustainable enterprise excellence and resilience”, journal of the knowledge economy, vol. 5, no. 3, pp. 440–463. carayannis, e.g., sindakis, s. and walter, c. (2015), “business model innovation as lever of organizational sustainability”, the journal of technology transfer, vol. 40, no. 1, pp. 85–104. casadesus-masanell, r. and ricart, j.e. (2010), “from strategy to business models and onto tactics”, long range planning, vol. 43, no. 2-3, pp. 195–215. casadesus-masanell, r. and zhu, f. (2013), “business model innovation and competitive imitation. the case of sponsor-based business models”, strategic management journal, vol. 34, no. 4, pp. 464–482. chesbrough, h. (2010), “business model innovation. opportunities and barriers”, long range planning, vol. 43, no. 2-3, pp. 354–363. chesbrough, h. (2013), open business models: how to thrive in the new innovation landscape, harvard business review press, boston, ma. journal of business models (2017), vol. 5, no. 1, pp. 14-34 29 chesbrough, h. and rosenbloom, r.s. (2002), “the role of the business model in capturing value from innovation. evidence from xerox corporation’s technology spin-off companies”, industrial and corporate change, vol. 11, no. 3, pp. 529–555. deloitte (2002), “deconstructing the formula for business model innovation: uncovering value-creating opportunities in familiar places. a competitive strategy study by deloitte consulting and deloitte & touche”, pp. 1–24. demil, b. and lecocq, x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, vol. 43, no. 2, pp. 227–246. denicolai, s., ramirez, m. and tidd, j. (2014), “creating and capturing value from external knowledge: the moderating role of knowledge intensity”, r&d management, vol. 44, no. 3, pp. 248–264. desyllas, p. and sako, m. (2013), “profiting from business model innovation: evidence from pay-as-you-drive auto insurance”, research policy, vol. 42, no. 1, pp. 101–116. eichen, s.f.v.d., freiling, j. and matzler, k. (2015), “why business model innovations fail”, journal of business strategy, vol. 36, no. 6, pp. 29–38. eisenhardt, k.m. (1989), “building theories from case study research”, academy of management review, vol. 14, no. 4, pp. 532–550. enkel, e. and mezger, f. (2013), “imitation processes and their application for business model innovation. an explorative study”, international journal of innovation management, vol. 17, no. 1, 1340005-1–34. eppler, m.j., hoffmann, f. and bresciani, s. (2011), “new business models through collaborative idea generation”, international journal of innovation management, vol. 15, no. 6, pp. 1323–1341. eurich, m., weiblen, t. and breitenmoser, p. (2014), “a six-step approach to business model innovation”, international journal of entrepreneurship and innovation management, vol. 18, no. 4, pp. 330–348. fielt, e. (2013), “conceptualising business models: definitions, frameworks and classifications”, journal of business models, vol. 1, no. 1, pp. 85–105. forbes (2016), “the world’s most valuable brands. #2 google: brand value as of may 2016”, available at: http://www.forbes.com/companies/google/ (accessed 14 june 2016). frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013), “the 4i-framework of business model innovation: a structured view on process phases and challenges”, international journal of product development, vol. 18, no. 3-4, pp. 249–273. gambardella, a. and mcgahan, a.m. (2010), “business-model innovation. general purpose technologies and their implications for industry structure”, long range planning, vol. 43, no. 2-3, pp. 262–271. geels, f.w., hekkert, m.p. and jacobsson, s. (2008), “the dynamics of sustainable innovation journeys”, technology analysis & strategic management, vol. 20, no. 5, pp. 521–536. journal of business models (2017), vol. 5, no. 1, pp. 14-34 30 giesen, e., berman, s.j., bell, r. and blitz, a. (2007), “three ways to successfully innovate your business model”, strategy & leadership, vol. 35, no. 6, pp. 27–33. giesen, e., riddleberger, e., christner, r. and bell, r. (2010), “when and how to innovate your business model”, strategy & leadership, vol. 38, no. 4, pp. 17–26. goggin, g. (2012), “google phone rising: the android and the politics of open source”, continuum, vol. 26, no. 5, pp. 741–752. google (2016), “google books”, available at: https://books.google.com/intl/en/googlebooks/about/index.html (accessed 14 june 2016). günzel, f. and holm, a.b. (2013), “one size does not fit all. understanding the front-end and back-end of business model innovation”, international journal of innovation management, vol. 17, no. 1, 1340002-1–34. habtay, s.r. (2012), “a firm level analysis on the relative difference between technology driven and market driven disruptive business model innovations”, creativity and innovation management, vol. 21, no. 3, pp. 290–303. hargadon, a. (2015), “how to discover and assess opportunities for business model innovation”, strategy & leadership, vol. 43, no. 6, pp. 33–37. ibm (2009), “paths to success: three ways to innovate your business model”, available at: http://www-935.ibm .com/services/us/gbs/bus/pdf/qr_gbe03170-usen_pathsuccess.pdf (accessed 7 july 2015). idc (2016), “smartphone os market share, 2015 q2”, available at: http://www.idc.com/prodserv/smartphone-osmarket-share.jsp (accessed 16 june 2016). investopedia (2016), “if you had invested right after google’s ipo”, available at: http://www.investopedia.com/ articles/active-trading/081315/if-you-would-have-invested-right-after-googles-ipo.asp (accessed 14 june 2016). jacobides, m.g., knudsen, t. and augier, m. (2006), “benefiting from innovation: value creation, value appropriation and the role of industry architectures”, research policy, vol. 35, no. 8, pp. 1200–1221. jaworski, b., kohli, a.k. and sahay, a. (2000), “market-driven versus driving markets”, journal of the academy of marketing science, vol. 28, no. 1, pp. 45–54. johnson, m.w., christensen, c.m. and kagermann, h. (2008), “reinventing your business model”, harvard business review, december, pp. 51–59. kastalli, i.v. and van looy, b. (2013), “servitization. disentangling the impact of service business model innovation on manufacturing firm performance”, journal of operations management, vol. 31, no. 4, pp. 169–180. kastalli, v.i., van looy, b. and neely, a. (2013), “steering manufacturing firms towards service business model innovation: embracing indicators that reflect market performance”, california management review, vol. 56, no. 1, pp. 100–123. lambert, s. (2015), “the importance of classification to business model research”, journal of business models, vol. 3, no. 1, pp. 49–61. journal of business models (2017), vol. 5, no. 1, pp. 14-34 31 linder, j. and cantrell, s. (2000), “changing business models: surveying the landscape”, available at: http://course .shufe.edu.cn/jpkc/zhanlue/upfiles/edit/201002/20100224120954.pdf (accessed 3 june 2016). magretta, j. (2002), “why business models matter”, harvard business review, vol. 80, no. 5, pp. 86–92. mahadevan, b. (2004), “a framework for business model innovation”, imrc 2004 conference, december 16-18. malhotra, y. (2000), “knowledge management and new organization forms: a framework for business model innovation”, information resources management journal, vol. 13, no. 1, pp. 5–14. marketline (2012a), google inc.: the world’s leading internet search engine, case study, london. marketline (2012b), research in motion: blackberry: losing the battle against apple and google, case study, london. markides, c. (2006), “disruptive innovation: in need of better theory”, journal of product innovation management, vol. 23, no. 1, pp. 19–25. massa, l. and tucci, c.l. (2014), “business model innovation”, in dogdson, m., gann, d., & nelson, p. (ed.), the oxford handbook of innovation management, oxford university press, oxford, uk, pp. 420–441. mezger, f. (2014), “toward a capability based conceptualization of business model innovation: insights from an explorative study”, r&d management, vol. 44, no. 5, pp. 429–449. miles, m.b. and huberman, a.m. (1994), qualitative data analysis: an expanded sourcebook, 2nd ed., sage publications, thousand oaks. mitchell, d. and coles, c. (2003), “the ultimate competitive advantage of continuing business model innovation”, journal of business strategy, vol. 24, no. 5, pp. 15–21. mitchell, d.w. and bruckner coles, c. (2004), “establishing a continuing business model innovation process”, journal of business strategy, vol. 25, no. 3, pp. 39–49. nasdaq (2016), “goog”, available at: http://www.nasdaq.com/de/symbol/goog/interactive-chart?timeframe=6m& charttype=line (accessed 14 june 2016). pateli, a.g. and giaglis, g.m. (2005), “technology innovation induced business model change. a contingency approach”, journal of organizational change management, vol. 18, no. 2, pp. 167–183. porter, m. (2001), “strategy and the internet”, harvard business review, vol. 79, no. 3, pp. 62–78. rubin, a. (2007), “where’s my gphone”, available at: https://googleblog.blogspot.de/2007/11/wheres-my-gphone .html (accessed 13 june 2016). schindehutte, m., morris, m.h. and kocak, a. (2008), “understanding market driving behavior: the role of entrepreneurship”, journal of small business management, vol. 46, no. 1, pp. 4–26. schmidt, e. (2014), google: how google works, 1st ed., grand central publishing, new york. journal of business models (2017), vol. 5, no. 1, pp. 14-34 32 schneider, s. and spieth, p. (2013), “business model innovation. towards an integrated future research agenda”, international journal of innovation management, vol. 17, no. 1, 134000-1–34. shelton, r. (2009), “integrating product and service innovation”, research-technology management, vol. 52, no. 3, pp. 38–44. sinfield, j.v., calder, e., mcconnell, b. and colson, s. (2012), “how to identify new business models”, mit sloan management review, vol. 53, no. 2, pp. 85–90. sosna, m., trevinyo-rodríguez, r.n. and velamuri, s.r. (2010), “business model innovation through trial-and-error learning: the naturhouse case”, long range planning, vol. 43, no. 2/3, pp. 383–407. spieth, p., schneckenberg, d. and ricart, j.e. (2014), “business model innovation–state of the art and future challenges for the field”, r&d management, vol. 44, no. 3, pp. 237–247. steiber, a. and alänge, s. (2013), “a corporate system for continuous innovation: the case of google inc”, european journal of innovation management, vol. 16, no. 2, pp. 243–264. taran, y., nielsen, c., montemari, m., thomsen, p. and paolone, f. (2016), “business model configurations: a five-v framework to map out potential innovation routes”, european journal of innovation management, vol. 19, no. 4, pp. 492–527. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43, no. 2-3, pp. 172–194. voelpel, s.c., leibold, m. and tekie, e.b. (2004), “the wheel of business model reinvention. how to reshape your business model to leapfrog competitors”, journal of change management, vol. 4, no. 3, pp. 259–276. wang, q., voss, c., zhao, x. and wang, z. (2015), “modes of service innovation: a typology”, industrial management & data systems, vol. 115, no. 7, pp. 1358–1382. wirtz, b.w. (2011), business model management: design instruments success factors, gabler, wiesbaden. wirtz, b.w. (2016), business model management: design process instruments, textbook for the digital society, 2nd ed., amazon media kindle e-book, speyer. wirtz, b.w., göttel, v. and daiser, p. (2016a), “business model innovation. development, concept, and future research directions”, journal of business models, vol. 4, no. 1, pp. 1–28. wirtz, b.w. and lihotzky, n. (2003), “customer retention management in the b2c electronic business”, long range planning, vol. 36, no. 6, pp. 517–532. wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016b), “business models. origin, development and future research perspectives”, long range planning, vol. 49, no. 1, pp. 36–54. yang, d.-h., byun, j.-b. and you, y.-y. (2012), “a comparative study on innovation tools for the development of business models by the types of convergence”, journal of digital convergence, vol. 10, no. 6, pp. 141–152. journal of business models (2017), vol. 5, no. 1, pp. 14-34 33 yang, d.-h., you, y.-y. and kwon, h.-j. (2014), “a framework for business model innovation using market, component and innovation tool”, international journal of applied engineering research, vol. 9, no. 21, pp. 9235–9248. zott, c., amit, r. and massa, l. (2011), “the business model. recent developments and future research”, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2017), vol. 5, no. 1, pp. 14-34 34 professor bernd w. wirtz holds the chair for information and communication management at the german university of administrative sciences speyer. he has published widely on issues pertaining to business models, electronic business, strategic management, media management, and marketing. email: ls-wirtz@uni-speyer.de peter daiser is a doctoral student and research assistant at the german university of administrative sciences speyer. before that, he gained extensive professional experience in strategy and management consulting with struktur management partner, kpmg and pwc. email: daiser@uni-speyer.de about the authors journal of business models (2016), vol. 4, no. 3, pp. 19-36 19 purpose: as companies need to be able to identify whether their business model is under threat and also to make the right decisions concerning the development of a potential new business model, we have adopted porter`s five forces in order to analyze different threats to a business model. furthermore, we have evaluated different business model patterns and rated them according to their impact on each of porter’s forces. by being aware of patterns, managers and decision makers can generate a new business model or adapt an existing one in a more systematic way. design: data were gathered through surveys. data were analyzed by median analysis. findings: we were able to identify clear trends in the performance of patterns against porter’s forces. the results can furthermore help companies to make systematic combinations of these patterns to mitigate the threats. for the forces “bargaining power of buyers”, “bargaining power of suppliers”, and “competitive rivalry” we were able to identify specific value dimensions of the bm patterns. research limitations / implictions: we have defined five steps for using business model patterns as a tool to counteract the pressure of any of porter’s five forces. managers and decision makers can use these patterns to generate systematically a new business model or adapt an existing one. originality / value: scholars propose a pattern-based methodology in order to develop business models (rudtsch et al., 2014). therefore, the aim of this paper is to find out how companies are able to overcome business model threats by using business model patterns and linking these to the value dimensions of a business model business model patterns used as a tool for creating (new) innovative business models abstract please cite this paper as: lüttgens and diener (2016), business model patterns used as a tool for creating (new) innovative business models, journal of business models, vol. 4, no. 3, pp. 19-xx keywords: business model innovation; business model patterns; value dimensions of business models; porter`s five forces 1-2 rwth aachen university, germany dirk lüttgens 1 and kathleen diener 2 journal of business models (2016), vol. 4, no. 3, pp. 19-36 20 introduction over the last few decades, both professional practice and academic research have provided substantial insights into how to master new product and service development successfully. however, recent technological advances and economic challenges necessitate that established companies not only increasingly reshape their products (or continuously improve their processes), but also innovate their business model (bm) (chesbrough, 2010; burmeister et al., 2015). not only recent challenges, such as “industrial internet”, but also more “traditional” threats, such as new suppliers or competitors (start-up scene), demand new business models. therefore companies should not only be able to identify whether their business model is under threat, but also be able to make the right decisions concerning the development of a new business model. where companies are failing to adapt their business models to changing environmental conditions is illustrated by, among other things, the example of the photography pioneer kodak. the identification and control of business (model) threats is one of the central issues in strategic management and to date not yet solved. although in the past several approaches from the scientific field and professional practice to manage and control threats have been developed (ansoff, 1975; holopainen and toivonen, 2012), companies today are often not able to recognize threats to their business model in time. the strategic management literature deals since its early days with the analysis of structures, strategies, and performance of companies in and between related industries. the “competitiveness” literature has considered internal factors and assumes that organizations define themselves within their environment because, for example, of their strategies (porter, 1979), resources & capabilities (wernerfelt, 1984; teece et al., 1997; eisenhardt and martin, 2000), or core competencies (prahalad and hamel, 1990; leonard-barton, 1992; barney, 1991) and that this is crucial for their performance. the contributions to weak signals (ansoff, 1975, 1980; rossel, 2011, 2012) and environmental dynamism (bourgeois and eisenhardt, 1988; ginsberg, 1988; tushman and anderson, 1986; saritas and smith, 2011), in turn, put the focus on the far more complex external uncertainties and dynamics in the business environment which affect the company on a wide range. the concept of weak signals (a system developed by ansoff) is one of these concepts and can be assigned to the strategic foresight literature. in particular, companies need to increase their sensitivity to fuzzy information (weak signals) in order to identify possible threats at a very early stage. thus, so-called weak signals are extremely difficult for companies to identify, and without adequate tools it is almost impossible (e.g. lack of expertise in the assessment of the development of unrelated industries). overall, the literature on strategic management has a variety of approaches and concepts, but these are less suitable for industrial adoption or daily business. phenomena such as digitalization and increasing globalization have enabled the emergence of entirely new business models and changing market conditions, resulting in both significant opportunities for new business models and in threats to already existing business models (amit and zott, 2001). at the same time, it is being observed that firms respond differently to these threats: while some companies have increased their value significantly with new business models (e.g. apple, google, facebook, amazon, and cewe), others did not respond or responded too late and have suffered significantly in value (e.g. nokia, rim, microsoft, yahoo, kodak, neckermann, and karstadt / quelle) (chesbrough, 2010; dewald and bowen, 2010; doz and kosonen, 2008; stötzer and mahler 2013). when analyzing this phenomenon, the business model perspective is helpful: it combines existing approaches and enables a holistic view and an extensive and differentiated analysis that goes beyond the traditional boundaries of the enterprise (amit and zott, 2001; bock et al., 2012). but how can companies find out whether their business model is under threat and, if so, to which intensity? to the best of our knowledge, there is no existing approach in the literature which helps companies to identify business model threats. therefore we adopt porter’s five forces in order to analyze different threats to the business model. furthermore, also only little academic research has been published on dedicated methods and tools for business model innovation. one of the best known practitioner-oriented frameworks is the “business model canvas” of osterwalder/pigneur (2010), which fosters a creative workshop environment journal of business models (2016), vol. 4, no. 3, pp. 19-36 21 analyzing as-is and defining to-be business models along a framework of nine elements (burmeister et al., 2015). this and other canvas templates are also an important element of an iterative business model innovation process, as they can serve as easy prototypes to illustrate business models alternatives. another dedicated tool is that of collections of business model patterns i.e., commonly used and proven configurations of specific business model components. the idea is that innovative business models can be created by rearranging and composing existing patterns. gassmann et al. (2013), for example, propose a set of 55 business model patterns. patterns can be used to enrich an existing business model with new elements (rudtsch et al., 2014), as they help it to become more abstract and detached from existing (biasing) structures. by being aware of patterns, managers and decision makers may find it easier to generate a new business model or to adapt an existing one (abdelkafi et al., 2013). scholars propose a pattern-based methodology in order to develop business models (rudtsch et al., 2014). therefore, the aim of this paper is to find out how companies are able to overcome business model threats by using business model patterns and linking these to the value dimensions of a business model. we used porter’s five forces as our underlying framework to analyze threats to business models. if it is possible to identify any trend in the performance of the value dimensions against porter´s forces, it will be possible to systematically generate business model innovations by combining different patterns. the aim of this study is therefore to answer the following research questions: • how can threats to businesses be overcome and opportunities detected in business models? • how can business model patterns be combined in order to counteract porter’s five forces and to create successful business models? • which business model pattern is the most effective one in relation to porter’s five forces? background business model generation there are various scientific peer-reviewed articles that managers can generate business model innovations through three models: industry models, revenue models, and enterprise models. the first strategy – the industry model – innovates the industry value chain. this can be accomplished by moving horizontally from one industry to a new one or by reinventing an existing one. the revenue model strategy accomplishes business model innovation by introducing new pricing models or by reconfiguring the offers. finally, in the enterprise model, a company’s structure and the role it plays in the value chain are innovated (abdelkafi et al., 2013). business model innovation is often created through a trial and error process and is rarely successful in the first approach. due to fast-evolving markets and high uncertainty, it is difficult to predict the business environment during the development process. additionally, environmental changes are often ambiguous. an enterprise’s ability to adapt and predict is strongly affected by a manager´s judgment and interpretation skills, which are again influenced by existing organizational routines and behavioral norms and values. the ownermanager´s cognition and sense making are therefore the most important inputs for the initial business model design (sosna et al., 2010). the challenges are to recognize threats on time and to relocate resources in order to address the concerns (mcgrath, 2010). experimentation is useful for overcoming the uncertainty in business model innovation. the experimental conditions, however, need to be representative of the larger market, and the experiments require a high investment. direct costs are high, and there is always a risk that an experiment will not result in the expected outcomes and learnings (chesbrough, 2010). value dimension framework and business model pattern one task of a business model is to provide an overview of how a company generates value in a profitable manner (baden-fuller and morgan, 2010). five value dimensions can be identified: value proposition, value creation, value communication, distribution channels, and value capture. the value proposition refers to the combination of products and services which are of interest for customers. value creation is an irreversible process which gives a resource’s ‘order’ greater usefulness to others (humans/organizations) (beinhocker, 2007). value communication ensures the delivery of the value proposition through a message. the dimenjournal of business models (2016), vol. 4, no. 3, pp. 19-36 22 sion of distribution channels describes through which channels customers are reached and value delivered. finally, value capture describes how the value proposition is transformed into revenue and captured as a profit (abdelkafi et al., 2013). by improving these five value dimensions, a competitive business model can be developed. about 90% of business model innovation is the result of re-combinations of already existing business models. furthermore, these kinds of combination are repetitive, showing the existence of a pattern (gassmann et al. 2013). business model patterns can therefore be used to improve the five value dimensions of a business model. the patterns can be seen as business model building blocks which share similar characteristics or behaviors (osterwalder and pigneur, 2010). the combination of the patterns can lead to a systematic method for generating business model innovations (abdelkafi et al., 2013). business model patterns address particular characteristics and/or business relationships which can be evaluated and used as a pool of ideas (rudtsch et al., 2014). companies can make use of three ways to generate business model innovations with patterns: (1) identifying successful business model patterns in the own industry and trying to adapt them to the context. (2) adapting and transferring business model patterns from outside the industry. (3) implementing business model patterns in the company or combining different business model patterns (abdelkafi et al. 2013). gassmann created a business model pattern library consisting of 55 business model patterns. he furthermore defined four value dimensions which are equivalent to the above-mentioned five value dimensions. gassmann’s “what?” dimension refers to the product that is offered to the customer and is equivalent to the value proposition. his “how?” dimension is equivalent to the dimensions of value creation, value communication, and distribution channels. it describes how to build and distribute the value proposition. finally, the dimension “why?” explains the viability of being profitable. this is equivalent to the value capture dimension proposed by abdelkafi et al. (2013). the business model patterns can be assigned to these value dimensions. the combination of different patterns can lead to more radical innovations, since different value dimensions can be improved (abdelkafi et al. 2013). understanding the underlying structure of the different patterns furthermore helps to minimize the cognitive effort in the development of innovative business models (abdelkafi and täuscher, 2014). figure 1 gives an overview of the allocation of the business model patterns to the five value dimensions defined by gassmann. failure of business models the need to develop innovative business models is intensified by fierce competition among enterprises, the need to satisfy increasing customer requirements, and the rapidly changing environmental conditions (beqiri, 2014). yet despite their efforts, many companies will not survive in the long term. business failure was defined by honjo as “a situation in which firms cannot meet their liabilities and hence cannot conduct economy activities anymore” (honjo, 2000). it furthermore does not only affect the interests of the stakeholders but also the general development of the economy and society (wu, 2010). nowadays, strong global players, such as aeg, kodak, and quelle, are vanishing from the business landscape. the question arises of why companies steer – despite their innovative capabilities – in the direction of failure. the answer is simple: the companies have failed to adapt their business model to the changing environmental conditions. companies do not compete anymore between products and services but between business models (gassmann et al. 2013). therefore, if a company does not invest in developing or adapting its business model, the risk of failure increases. reasons why managers fail to innovate their business models are, for example, a lack of experience and the ease of staying in a comfort zone (gassmann et al., 2013). however, one of the main reasons is probably the fact that companies are not completely aware of what the aim of their business is. very few managers are able to explain the business model of their company, although it is the basis for successful business model innovation (gassmann et al., 2013). according to beqiri, the following points must be taken into account in order to avoid business failure (beqiri, 2014): • the business model must be revised periodically with a higher priority in comparison to product and services. product and services can be easily replicated whereas the business model is typical of the way in which a company operates. journal of business models (2016), vol. 4, no. 3, pp. 19-36 23 • companies must be ready to adapt their business model according to changes in the environment. a fast response to these changes is crucial. • customer needs are a priority in the operation of a company. therefore, it is vital that before designing a business model, the enterprise knows its customers perfectly and involves them in the whole business cycle, from product design to customer service. • competition usually comes from existing players in the market, rather than from new entrants. in this way, it is important to learn from existing players who already have the experience, know the market, and are capable of recognizing more easily any changes in the environment. threats to business models – porter’s five forces porter’s five forces describe the competitive forces within an industry and can help to analyze the strength of threats to a company. the identification of these threats – or at the same time of opportunities – can help organizations to develop appropriate strategies that maximize profit gains and ensure a long-term survival of a company (shariatmadari et al., 2013, p. 886). porter defined the following five factors: bargaining power of buyers, bargaining power of suppliers, competitive rivalry, threats of new entrants, and threats of substitutes. the stronger a factor is, the more the business models within this industry are at risk. hence, the five forces can be used by companies as an early warning system to analyze the threats to business models within industrial sectors. figure 1: allocation of the business model patterns (gassmann et al., 2013) journal of business models (2016), vol. 4, no. 3, pp. 19-36 24 the force “bargaining power of buyers” describes the influence that consumers can have over the company. they can, for example, compel companies to lower their prices or to improve the quality or quantity of their products (porter, 2008). this affects companies, since profit margins are reduced and competition among the market participants is increased. the consumers’ influence is especially high for price-sensitive products (porter, 2008, p. 30). how powerful the buyers are also depends on the amount of buyers who are interested in the product and how important a customer is for the company. bargaining power of buyers is also increased when buyers purchase from the same supplier in larger quantities (alrawashdeh, 2012). big companies, e.g. walmart, are able to negotiate prices and enforce lower prices from product suppliers. an essential part of the business model of those consumers is to buy large quantities at lower prices. this poses a threat to the suppliers. buyers are furthermore especially powerful in industries where the production fixed costs are high and marginal costs are low or when the customers face low switching costs (porter, 2008). the bargaining power of buyers can also be influenced by other factors, such as governments, patterns, and policies. these can act either in a positive or a negative way for the companies and also determine the success of a business. on the other hand, also suppliers have a bargaining power over participants in an industry. they are able to set higher prices or limit the quality and quantity of the products offered (porter, 1979). powerful suppliers can therefore squeeze profitability out of an industry which is unable to pass on the increasing costs in its own prices (porter, 1979). the bargaining power of suppliers is strongly influenced by their number. if there is only a small number of suppliers dominating the market, they are more powerful than if there were a lot of different suppliers (porter, 2008, p. 29). if the product that a supplier offers is unique, or if a supplier has built up high switching costs, the supplier is also in a stronger position and poses a higher threat to companies (porter, 1979). porter furthermore defined “competitive rivalry” as a factor which influences the competitive forces within an industry. it describes the rivalry among existing competitors and is present in many forms, e.g. new product introductions, advertising campaigns, service improvements, or price discounting (porter, 2008). if a market is profitable, rivalry in the market will increase as firms are encouraged to participate (lüttgens, 2015). the degree of rivalry within the market depends on many factors, such as the number of competitors, exit barriers, resources availability, capacities, and costs (porter, 2008). the fourth factor defined by porter is the “threat of substitutes”. a substitute is a product that can offer the same function or service in a similar way but by different means. one example would be microwave ovens as a substitute for conventional ovens. the threat of substitutes often shifts, as advances in technology create new substitutes or the price-performance comparison changes (porter, 2008). substitutes can limit the profits of economies and reduce the prosperity which an industry can have in good times. they can, however, also be positive if the company itself is able to develop or use an improved substitute. one example taken from the automobile industry was the development of new plastic materials which enabled the industry to reduce the utilization of metallic materials and consequently the reduction of the total weight of a vehicle (porter, 2008). the last factor of porter’s five forces is the “threat of new entrants”. the success of industries is influenced by potential and existing competitors. new entrants aim to gain a market share, put pressure on costs and prices, and raise the investments needed to be able to compete (porter, 2008). companies can erect entry barriers that hinder companies from entering the market and hence mitigate the risk of new entrants. the most common entry barriers, besides physical and legal obstacles, are the scale and investment required to enter the market as an efficient competitor (karagiannopoulos et al., 2005). in this study we examine how business model patterns can be used in an effective way to mitigate the threat of competitive forces within an industry (figure 2). to analyze the threats, porter’s five forces are used as a framework. we predict that the influence of business model patterns on porter’s five forces is the same regardless of the value dimension to which they belong. journal of business models (2016), vol. 4, no. 3, pp. 19-36 25 method research design we conducted a systematic query via ebscohost using we conducted an exploratory research study, the aim of which was to answer the question of how business model patterns can be combined and used to reduce business model threats. furthermore, which business model pattern is the most effective one to counteract which of porter’s five forces? we chose a quantitative survey, since it provides enough flexibility to reach the different experts in the field of business administration at lower costs. experts from rwth aachen university were mainly chosen because that university’s school of business and economics has an excellent reputation. the school has been accredited by the aacsb (association to advance collegiate schools of business). for reasons of simplification, we grouped the business model patterns according to the 5 value dimensions and measured their effect against the different business model threats. population and sample as a unit of analysis we chose experts from the field of business administration (research associates, post docs and external partners from r&d projects of the tim group at rwth aachen university). this field was selected because the experts are familiar with the way in which a business works; they know how to manage resources, and their field of expertise is that of how to achieve stability, growth, and profitability in businesses. furthermore, they are familiar with porter’s five forces. the target sample size was 80 in order to have 4 respondents per business model pattern and to be able to analyze 4 different business model patterns per value dimension. this sample size was also chosen to increase the internal validity and to minimize the single information bias. measurement to collect the data, a quantitative survey was set up. to establish internal validity, comparable groups were created randomly. participants were assigned to these groups and answered one of the different surveys. by doing so, any biased strategy was eliminated and equivalent groups were created (beins and mccarthy, 2012). mood’s median test was used to examine whether the medians from two or more populations were identical. the aim was to show whether a common behavior of the business model patterns within each value dimension exists. data collection the web-based survey was sent to the identified experts. each of them received a survey to complete. the target was to evaluate an amount of 76 surveys and to figure 2: mean values of the value dimensions against porter’s 5 forces journal of business models (2016), vol. 4, no. 3, pp. 19-36 26 collect a total of 1900 answers, 25 answers per survey. before implementing the surveys, a pretest was executed to ensure a good understanding of the questions and to adapt the questionnaire where necessary. the survey consisted of five sections corresponding to porter´s five forces: bargaining power of buyers, bargaining power of suppliers, competitive rivalry, threats of new entrants, and threats of substitutes. each one of these sections again contained five different variables as a unit of analysis over porter´s forces. the variables had been allocated to the five forces in a previous study and enabled us to observe the competitive intensity in more detail. an example of a variable is the growth of “governmental regulation, property rights, and patents” which measures porter’s forces of “bargaining power of buyers” and “threat of new entrants”. another example is the variable growth of the “number of suppliers for the specific product”, which acts again as an indicator for the “bargaining power of suppliers”. a complete list of the different variables and their allocation to porter’s forces can be extracted from appendix 1. the questionnaire used a likert scale to measure the effect of the business model pattern against the different porter´s forces and the variables. the likert scale has a range from 1 – 7 to evaluate the intensity of an effect, with 1 being as a low positive effect and 7 being the strongest positive effect over a force of porter´s. a high value indicates that a porter force has been reduced, and consequently there is a higher success rate for a business model if this business model pattern is applied. data analysis as stated before, we used gassmann’s list of identified patterns. in a first step, we created a library of patterns, grouping them according to their value dimension (gassmann et al. 2013). in a second step, we selected 19 patterns in order to implement the analysis and find any possible common behavior between the business model patterns and their specific performance over porter’s forces (compare table 1 for an overview of the selected patterns). finally, we conducted surveys and gathered data to show the intensity of the positive effect of the business model patterns against porter´s forces. the aim was to extract guidelines for how to create reliable combinations of business model patterns in order to counteract porter´s forces. results a mood’s median test was run to evaluate how the business model patterns performed against porter’s forces. by doing this, it was possible for us to detect which of the forces was mitigated the greatest. the results of the test showed that 4 out of the 5 value propositions had a significance level of 0.05. thus, it can be concluded for these four value propositions that the business model patterns share a common behavior according to the value dimension they are allocated to. this holds true for value creation, value capture, value communication, and distribution channels. only for the dimension of value proposition does not enough evidence exist. additionally, after calculating the mean values of the different business model patterns, it was possible for us to identify a common behavior according to the value dimension to which the business model patterns are allocated. as a reference point to decide whether a value dimension has a strong effect or not, we chose 5, because 5 was the overall median of four out of five value dimensions. all business model patterns with a value above 5 can be interpreted as having a sufficiently positive influence over the respective porter’s force. therefore, this pattern can be recommended for overcoming threats in this area. the patterns (belonging to the value proposition) showed the strongest positive effects against the “competitive rivalry” force. the dimensions of “value creation” and “value capture” showed a good performance against the “bargaining power of suppliers”; the patterns from the dimensions of “value communication” and “distribution channels” against the “bargaining power of buyers”. all these results were confirmed by the mood’s median test. for the forces “threat of new entrants” and “threat of substitutes” no value dimension showed an overall value above 5. in this case, it is possible to recognize some patterns that have a value above 5. for the force “threat of new entrants”, we have the patterns “ultimate luxury”, “mass customization” and “direct selling”. for the force “threat of substitutes” the unique business model pattern with a value above 5 is that of the “lock-in” pattern. table 1 gives an overview of all the results we obtained from the surveys. figure journal of business models (2016), vol. 4, no. 3, pp. 19-36 27 3 summarizes the overall performance of the value dimensions related to porter´s forces. besides collecting the data, the aim of this study was to examine how existing tools, such as business model patterns, can be used for business model innovation as a reaction to identified/potential upcoming business models threats. after completion of data collection it was possible to determine which value dimension performs best to counteract porter´s forces. table 1 shows the performance of each business model pattern, whereby the patterns are arranged according to the dimension they belong to, and it indicates which business model pattern is the most appropriate one for bargaining power of buyers bargaining power of suppliers competitiv e rivalry threat of new entrants threat of substitutes p ro p o si ti o n cross selling 4.5 4.65 5.05 3.55 3.85 ultimate luxury 4.9 4.5 5.75 5.1 4.65 lock in 5.3 0 5.05 4.6 5.10 barter 5.25 4.65 5.33 4.58 4.37 overall 4.99 4.60 5.23 4.43 4.46 c re at io n digitalization 4.95 5 4.8 4.55 3.8 integrator 5.5 5.5 4.75 4.75 4.65 orchestrator 4.75 5.35 4.19 4.2 3.875 mass customization 4.5 5.55 4.10 5.15 4.45 overall 4.925 5.35 4.50 4.66 4.24 c o m m u n ic at io n customer loyalty 5.5 5.4 3.62 3.66 4.8 experience selling 5.2 4.6 4.24 4.08 3.84 ingredient branding 5.75 4.95 4.9 5 3.83 overall 5.46 4.95 3.82 4.26 3.91 d is tr ib u ti o n c h an n el s affiliation 5.2 4.25 3.75 4.75 4.85 direct selling 5.7 4.41 4.2 5.375 4.81 shop in shop 5.25 4.5 4.25 4 3.4 e-commerce 5.44 5.68 4.8 4.8 4.44 overall 5.40 4.85 4.33 4.85 4.35 c ap tu re flat rate 5.25 5.35 3.75 4.13 5.00 franchising 5.10 6.25 3.85 3.94 3.85 no frills 4.65 5.40 4.20 3.90 4.95 razor and blade 4.65 4.85 4.25 4.00 3.63 overall 4.91 5.46 4.01 3.99 4.36 table 1: mean values of the value dimensions against porter’s 5 forces journal of business models (2016), vol. 4, no. 3, pp. 19-36 28 counteracting a specific force of porter´s. a higher number indicates a good performance against that force. patterns with a number higher than 5 (highlighted in green) are recommended for use in mitigating the corresponding force. some patterns proved to be effective against several forces, e.g. “franchising” and “lock in”. as explained earlier, patterns from the dimensions “value communication” and “distribution channels” work well against the power of buyers; patterns from the dimensions “value creation” and “value capture” can be applied against the threat of “bargaining power of suppliers”, and patterns from the dimension “value proposition” work well against the threat of “competitive rivalry”. furthermore, it is possible to create combinations of these factors. in two domains, no value dimension proved to be effective in counteracting the threats of any of porter´s five forces. this was the case for “new entrants” and “substitutes”. discussion the findings from our study show that business model patterns can constitute an approach to overcoming threats to businesses and to generating successful business models. gassmann identified 40 different patterns, 19 of which we analyzed and assessed according to their impact on threats within the industry. to assess threats we used the well-established five forces of porter. they can be seen as an early warning system for companies and can help to analyze the level of competition within the industry. the results of the study can help companies to use the business model patterns in a systematic way in order to react to identified or potential threats. bargaining power of buyers porter identified buyers as a potential threat to companies. buyers have bargaining power and can force companies to reduce their prices or to improve the quality of their product, which can result in lower profit margins for companies (porter, 2008, p.30). five variables were used to determine the effect of business model patterns against the bargaining power of buyers. one example is the variable “number and distribution of buyers”. the results from the study show that patterns which can be assigned to the value dimensions “communication” and “distribution channels” are especially effective for addressing the threat of the bargaining power of buyers. the two value dimensions interact well and 0,00 2,00 4,00 6,00 bargaining power of buers bargaining power of suppliers competitive rivalrythreat of new entrants threat of substitutes proposition creation communication delivery capture figure 3: overall performance of the value dimensions of a business model against porter’s 5 forces journal of business models (2016), vol. 4, no. 3, pp. 19-36 29 are both visible to the customer and affect customers directly. hence, patterns such as “customer loyalty” or “direct selling” can be applied. it is necessary to communicate to buyers that their needs are being addressed and also to communicate the value proposition of a product properly. customer loyalty, for example, can be increased by creating an emotional bonding or by rewarding loyalty with special offers (gassmann et al., 2013). if a customer is loyal to a company, the threat that she or he will use their bargaining power is reduced. bargaining power of suppliers the bargaining power of suppliers is also identified as a risk in the business environment. suppliers can influence prices and limit the quality and/or quantity of the supplied products. this squeezes profitability and can even force companies to exit the market (porter, 2008). factors for this force are “number of suppliers for the specific product” or “own possibility to use substitutes”. we identified business model patterns from the dimension of “value creation” and “value capture” as being effective against this threat. improved resource management and new, innovative developing processes can reduce dependency on suppliers. managers can use, for example, the business model pattern “mass customization” to address this threat. gassman defined this pattern as an approach of modular products and productions systems that enables an efficient individualization of products at competitive prices (gassmann et al., 2013). a further pattern which was identified to reduce the bargaining power of suppliers is that of “integrator”. here, control of all resources and capabilities in terms of value creation should lie with a company. hence, dependencies on suppliers can be reduced and costs decreased (gassmann et al., 2013). patterns which can be applied from the dimension of “value capture” are “franchising” or “flat rate”. by having efficient processes and increasing its profit margins, a company can respond better to rapid changes in the environment, such as an unexpected change of price, lack of resources from a supplier, or even the exit of one supplier. applying patterns from the dimensions “value capture” and “value creation” increase the ability of companies to react to unexpected changes in business environments and to reduce the power of their suppliers. competitive rivalry business model patterns from the dimension “value proposition” proved to be adequate to deal with competitive rivalry. this seems natural, since value proposition focuses on what makes a product or service superior to that of the competitors. furthermore, it addresses the question “why do customers buy our products?”. rivalry is present in many forms and depends on different factors, such as the number of competitors, resources, costs etc. (porter, 2008). the identified patterns were “cross selling”, “ultimate luxury”, “lock in”, and “barter”. all four were assessed to work well in addressing the degree of competitive rivalry within a company. applying, for example, the “lock in” pattern, consumers are prevented from switching to the competition by high switching costs. lock in can be generated, for example, by technological mechanisms or by substantial interdependencies of products or services (gassmann et al., 2013). threat of new entrants the profitability of the whole industry sector depends, amongst other things, on the number of potential and existing competitors. hence, monitoring the threat of entrants can help to develop strategies against new competitors. entry barriers, for example, make it difficult for an outsider to replicate a business model (karagiannopoulos, 2005). however, usually in a business model environment it is difficult for a firm to control the entrance of a competitor. although we were able to identify some business model patterns which are appropriate for addressing the threat of new entrants, these are diversified and are from different value dimensions. our results show no evidence of a specific value dimension which reduces the threat of new entrants. although it is in general difficult for companies to prevent new market entrants at all, the question is: how can companies protect their market against new entrants? we found that the business model patterns “mass customization” (value creation), “direct selling” (distribution channels), and “ultimate luxury” (value proposition) can be applied. in the direct selling pattern, for example, a company’s products are not sold through intermediary channels. thus by reducing the supply chain, profits can be increased. the savings can journal of business models (2016), vol. 4, no. 3, pp. 19-36 30 pose a price advantage and the close contact to the customer can improve customer relationships (gassmann et al. 2013). the effect in all three identified patterns is similar: the threats of new entrants can be tackled by cost advantages, by addressing customers’ needs better than the competition, and/or by improved customer relationships. threat of substitutes porter defined substitutes as products or services that offer the same service or function in a similar way but by different means. substitutes can be from the same family of products or from a different one (porter, 2008). they threaten business models because consumers can choose to purchase the substitute instead of the industry´s product. in our study, no value dimension was found that reduces the threat of substitutes in particular. it is hard to control the factor of competitors developing substitute products or consumers choosing to buy substitutes. the only pattern that appears to have a positive effect against the threat of substitutes is the “lock in” pattern. here, changing to another vendor is accompanied by high switching costs, and thus customers are discouraged from switching to a substitute product (gassmann et al., 2013). our study did not consider all the business model patterns that were identified by gassmann. further research should be conducted in order to examine whether another pattern can mitigate the threat of substitutes within an industry. managerial implications overall, we could confirm that if business model patterns have a similar impact on value dimensions, it is possible to systematically innovate business models by combining different patterns from different value dimensions. the utilization of business model patterns as a tool for creating innovative business models offer a wide range of opportunities. it enables companies to react systematically against external shocks or threats, by combining two different perspectives: (1) the “internal” business model perspective with its five elements like value creation, proposition, capture, communication, and distribution channels and (2) the external perspective using porter’s 5 forces with its five elements like bargaining power of buyers, bargaining power of suppliers, competitive rivalry, threat of new entrants and threat of substitutes. using business model patterns allows companies to reduce the effort of developing business models, and the patterns library increases the possibilities of innovation in a reliable way. furthermore, one of the main concerns of companies when developing new business models or changing existing ones is to develop a “not useful” or ineffective (dysfunctional) business model. with our approach we reduce the likelihood of developing a business model which does not work; nevertheless, our approach will not guarantee the development of the best business model. another advantage is that by using patterns in a systematic way, the development costs and time can be reduced, which allows companies to react more quickly to changing market conditions by developing faster business model prototypes (which means combining patterns in a new way). we have defined five steps for using business model patterns as a tool to counteract the pressure of any of porter’s five forces: 1. identify those forces of porter’s that pose the highest risk for the business model and, depending on priority, start looking for possible solutions to deal with the identified forces. 2. go through the list of business model innovations based on specific patterns and choose the recommended patterns that were identified as capable of counteracting the pressure of a specific force of porter´s. 3. select different business model patterns and run a brainstorming session in order to decide which might be a suitable combination of different business model patterns from the different business value dimensions. 4. if necessary, go through the business model patterns library and use it as a pool of ideas in order to find new possibilities for innovation. 5. implement a business tool for analysis, such as canvas, to analyze the different advantages and disadvantages of the new business model. for example, how can companies reduce the likelihood of porter’s force of new market entrants? looking at table 1, we see that there are three possible business model patterns related to value proposition, value journal of business models (2016), vol. 4, no. 3, pp. 19-36 31 creation, and the distribution channels: ultimate luxury, mass customization and direct selling. companies which implement at least one of these business model patterns can reduce the likelihood of new market entrants, and therefore counteract porter’s force of new market entrants. combining different business model patterns, which means using perhaps both ultimate luxury and mass customization will have at least a higher likelihood of counteracting porter’s force, but a company which sells luxury goods is less likely to mass produce its products, less likely to have fixed costs, and less likely to develop economies of scale. hence, if the factor “economies of scale” already exists, it does not seem useful to implement the pattern of “ultimate luxury” in order to counteract the threat of new entrants. nevertheless, it is possible to use the pattern “mass customization” in combination with direct selling, as it works perfectly well and also helps to reduce the threat of new entrants. it might be an interesting opportunity to think about the combination of two business model patterns which do not really fit together at first glance. if companies are able to develop and overcome these counter-effects, they might develop a rather new (radical) business model which is robust against external effects/threats. summarizing, combining different business model patterns both with complementary or supplementary effects is a great opportunity to identify “white spaces”, which are the starting point for any new business model opportunities. conclusion companies have gained substantial experience in the last years with regard to how to master new product and service development. however, recent technological advances and economic challenges necessitate that they increasingly not only reshape their products (or continuously improve their processes), but that they also innovate their business model. academic research has contributed to this issue by developing tools that aim to analyze the elements of a business model. one example is the business model canvas. it is a strategic management template for developing new or illustrating existing business models by outlining the way that a business model creates, captures, delivers, and communicates value out of a value proposition. another approach is that of business model patterns. managers and decision makers can use these patterns to generate systematically a new business model or adapt an existing one. the idea is that innovative bms can be created by rearranging and composing existing patterns. gassmann et al. (2013) identified 55 different bm patterns which can be used to enrich an existing bm with new elements. we analyzed the effect of such patterns against the threats to a bm by using porter’s five forces. these forces describe the competitive forces within an industry and can help to analyze the strength of threats to a company. we selected 19 bm patterns and evaluated their effect against each of the porter’s forces. in a quantitative study with experts from rwth aachen university, each bm pattern was assessed by the potential effect. we were able to identify clear trends in the performance of patterns against porter’s forces. the results can furthermore help companies to make systematic combinations of these patterns to mitigate the threats. for the forces “bargaining power of buyers”, “bargaining power of suppliers”, and “competitive rivalry” we were able to identify specific value dimensions of the bm patterns. for the forces “threat of new entrants” and “threat of substitutes” the results are less distinct. further research is needed in order to identify more bm patterns which might have a positive effect against those threats. further research is necessary in order to complete the library of business model patterns and to create a tool similar to the famous triz. triz (“theory of inventive problem solving”) is a problem solving method based on logic and data, which relies on the study of patterns of problems and solutions. it is based on the assumption that “somebody somewhere has already solved this problem (or one very similar to it.).” creativity is now finding that solution and adapting it to this particular problem (tritz journal, 2016). in our study we were able to extract recommendations for actions on how to react to business threats. the results can also help decision makers to innovate better business models and researchers to better understand the effects of business model elements on threat factors. journal of business models (2016), vol. 4, no. 3, pp. 19-36 32 reference list abdelkafi abdelkafi, n., & täuscher, k. (2014), “understanding the basic functioning of business models: a graphical approach for theoretical analysis and tool developmemnt”, in xxv ispim conference proceedings in dublin, ireland, 2014, 1-22, ispim, dublin, pp. 1-22. abdelkafi, n., makhotin, s., & posselt , t. (2013), business model innovations for electric mobility what can be learned from existing business model patterns?, international journal of innovation management, vol. 17, no. 1, pp. 1-41. alrawashdeh, r. (2012), the competitiveness of jordan phosphate mines company (jpmc) using 5 forces analysis, international journal of economics and finance, vol. 5, no. 1, pp. 191-200. amit, r., & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6-7, pp. 493-520. ansoff, h. i. (1975), managing strategic surprise by response to weak signals, california management review, vol. 18, no. 2, pp. 21-33. ansoff, h. i. (1980), strategic issue management. strategic management journal, vol. 1, no. 2, pp. 131-148. baden-fuller, c., & morgan , m. (2010), business models as models. long range planning, vol. 43, no. 2, pp. 156-171. barney, j. (1991), firm resources and sustained competitive advantage. journal of management, vol. 17, no. 1, pp. 99-120. beinhocker e. d. (2007), the origin of wealth: the radical remaking of economics and what it means for business and society. harvard business school press, cambridge. beins, c. b., & a. mccarthy, m. (2012), research methods and statistics. pearson eductaion, boston. beqiri, g. (2014), innovative business models and crisis management, procedia economics and finance, vol. 9, pp. 361-368. bock, a. j., opsahl, t., george, g., & gann, d. m. (2012), the effects of culture and structure on strategic flexibility during business model innovation, journal of management studies, vol. 49, no. 2, pp. 279-305. bourgeois, l. j., & eisenhardt, k. m. (1988), strategic decision processes in high velocity environments: four cases in the microcomputer industry, management science, vol. 34, no. 7, pp. 816-835. burmeister, c., lüttgens, d., & piller, f. t. (2015), “business model innovation for industrie 4.0: why the’industrial internet’mandates a new perspective on innovation”, working paper, aachen university technology and innovation management group, rwth aachen, aachen, 28 august. chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2, pp. 354-363. dewald, j., & bowen, f. (2010), storm clouds and silver linings: responding to disruptive innovations through cognitive resilience, entrepreneurship theory and practice, vol. 34, no. 1, pp. 197-218. journal of business models (2016), vol. 4, no. 3, pp. 19-36 33 doz, y., & kosonen, m. (2008), the dynamics of strategic agility: nokia’s rollercoaster experience, california management review, vol. 50, no. 3, pp. 95-118. eisenhardt, k., & martin. (2000), dynamic capabilities, what are they?, strategic management journal, vol. 21, no.10-11, pp. 1105-1121. gassmann, o., frankenberger, k., & csik, m. (2013). geschäftsmodelle entwickeln: 55 innovative konzepte mit dem st. galler business model navigator. carl hanser verlag gmbh co kg, st. gallen. ginsberg, a. (1988), measuring and modeling changes in strategy: theoretical foundations and empirical directions, strategic management journal, vol. 9, no. 6, pp. 559-575. holopainen, m., & toivonen, m. (2012), weak signals: ansoff today, futures, vol. 44, no. 3, pp. 198-205. honjo, y. (2000), business failure of new firms: an empirical analysis using a multiplicative hazards model, international journal of industrial organization, vol. 18, no. 4, pp. 557–574. karagiannopoulos, g., georgopoulos, n., & nikolopoulos, k. (2005), fathoming porter’s five forces model in the internet era, info, vol. 7, no. 6, pp. 66-76. leonard-barton, d. (1992), core capabilities and core rigidities: a paradox in managing new product development, strategic management journal, vol. 13, no. s1, pp. 111-125. lüttgens, d. (2015), “factors of the porter´s five forces. ”, working paper, aachen university technology and innovation management group, rwth aachen, aachen, 28 august 2015. mcgrath, r. g. (2010), business model: a discovery driven approach, long range planning,vol. 43, no. 2, pp. 247-261. osterwalder, a., & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, new jersey. porter, m. e. (1979), how competitive forces shape strategy, harvard business review, vol. 57, no. 2, pp. 21-38. porter, m. e. (2008), the five competitive forces that shape strategy, harvard business review, vol. 86, no. 1, pp. 2-17. prahalad, c. k., & hamel, g. (1990), the core competence of the corporation, harvard business review, vol. 68, no. 3, pp. 79-91. rossel, p. (2011), beyond the obvious: examining ways of consolidating early detection schemes, technological forecasting and social change, vol. 78, no. 3, pp. 375-385. rossel, p. (2012), early detection, warnings, weak signals and seeds of change: a turbulent domain of futures studies, futures, vol. 44, no. 3, pp. 229-239. rudtsch, v. et al. (2014), pattern-based business model development for cyber-physical production systems, procedia cirp, vol. 25, pp. 313-319. journal of business models (2016), vol. 4, no. 3, pp. 19-36 34 saritas, o., & smith, j. e. (2011), the big picture – trends, drivers, wild cards, discontinuities and weak signals, futures, vol. 43, no. 3, pp. 292-312. shariatmadari, m. et al. (2013), using swot analysis and sem to prioritize strategies in foreign exchange market in iran, procedia social and behavioral sciences, vol. 99, pp. 886-892. sosna, m., trevinyo-rodríguez, r., & velamuri, s. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2, pp. 383-407. stötzer, m. w., & mahler, a. (eds.). (2013), die diffusion von innovationen in der telekommunikation (vol. 17), springer-verlag, bad honnef. teece, d. j., pisano, g., & shuen, a. (1997).,dynamic capabilities and strategic management, strategic management journal, vol. 18, no. 7, pp. 509-533. triz journal (2016), “what is triz?”, availiable at: http://www.triz-journal.com/triz-what-is-triz/, (accessed 19 february 2016) tushman, m. l., & anderson, p. (1986), technological discontinuities and organizational environments, administrative science quarterly, vol. 31, no. 3, pp. 439-465. wernerfelt, b. (1984), a resource-based view of the firm, strategic management journal, vol. 5, no. 2, pp. 171-180. wu, w. w. (2010), beyond business failure prediction, expert systems with applications, vol. 37, no. 3, pp. 2371-2376. journal of business models (2016), vol. 4, no. 3, pp. 19-36 35 appendix appendix 1: variables for measuring/ operationalizing the 5 forces of porter’s bargaining power of buyers b1number and distribution of buyers b2governmental regulation, property rights, and patents b3flexibility to change to a new product or price sensitivity of buyers b4share of customers’ turnover/profits b5own strategic competitive advantage (cost leadership, differentiation, innovation, or operational) bargaining power of suppliers s1number of suppliers for the specific product s2importance as a buyer/ supplier loyalty s3own possibility to use substitutes s4governmental regulation s5own strategic competitive advantage (cost leadership, differentiation, innovation, or operational) competitive rivalry r1product/ service differentiation r2market profitability and potential r3completeness of information about the product r4surplus capacity r5government investment in development of new products and services threat of new entrants ne1existing economies of scale and scope ne2capital intensity of market entrance ne3governmental regulation, property rights and patents ne4access to trade channels ne5firm’s/brand’s reputation threat of substitutes sub1costs and risks of a return for buyers from a substitute product sub2quality and benefits of the substitute sub3buyers’ resources sub4governmental regulation sub5technological improvements journal of business models (2016), vol. 4, no. 3, pp. 19-36 36 dr. dirk lüttgens is an assistant professor in the research area time at rwth aachen university and was a visiting scholar at the haas school of business, university of berkeley, ca. his research focuses on open innovation, business model innovation, and the implications of the current digital transformation on firms. dirk obtained a ph.d. in innovation management from rwth aachen university. he also worked at the university of applied sciences in luzern, switzerland, and has been a lecturer in several executive programs. dirk’s research has been published amongst others in journal of product innovation management and journal of business economics. dr. kathleen diener is an assistant professor in the research area time at rwth aachen university and was a visiting scholar at the haas school of business, university of berkeley, ca. her research focuses on open innovation and coordination of (open) business model innovation. she studied psychology at the humboldt university and obtained a ph.d. in innovation management from rwth aachen university. she also worked at the university of applied sciences in st. gallen, switzerland, and has been a lecturer in several executive programs. kathleen is editor in chief of the global “open innovation accelerator study together with frank piller. the most significant market study of intermediaries, brokers, platforms and facilitators helping organizations to profit from open innovation and customer co-creation. about the authors journal of business models (2015), vol. 3, no. 1, pp. 62-80 6262 accounting for business models : increasing the visibility of stakeholders colin haslam1, nick tsitsianis2, tord andersson3 & pauline gleadle4 1+2 queen mary university of london, united kingdom key words: business model, stakeholder theory, value creation, value capture, conceptual framework and accounting disclosure please cite this paper as: haslam, colin; tsitsianis, nick; andersson, tord; gleadle, pauline. 2015. ‘accounting for business models : increasing the visibility of stakeholders’, journal of business models, vol. 3, no. 1, pp. 62-80 abstract purpose: this paper conceptualises a firm’s business model employing stakeholder theory as a central organising element to help inform the purpose and objective(s) of business model financial reporting and disclosure. framework: firms interact with a complex network of primary and secondary stakeholders to secure the value proposition of a firm’s business model. this value proposition is itself a complex amalgam of value creating, value capturing and value manipulating arrangements with stakeholders. from a financial accounting perspective the purpose of the value proposition for a firm’s business model is to sustain liquidity and solvency as a going concern. findings: this article argues that stakeholder relations impact upon the financial viability of a firm’s business model value proposition. however current financial reporting by function of expenses and the central organising objectives of the accounting conceptual framework conceal firm-stakeholder relations and their impact on reported financials. practical implications: the practical implication of our paper is that ‘business model’ financial reporting would require a reorientation in the accounting conceptual framework that defines the objectives and purpose of financial reporting. this reorientation would involve reporting about stakeholder relations and their impact on a firms financials not simply reporting financial information to ‘investors’. social implications: business model financial reporting has the potential to be stakeholder inclusive because the numbers and narratives reported by firms in their annual financial statements will increase the visibility of stakeholder relations and how these are being managed. what is original/value of paper: this paper’s original perspective is that it argues that a firm’s business model is structured out of stakeholder relations. it presents the firm’s value proposition as the product of value creating, capturing and manipulating firm-stakeholder relationships. the originality of this paper is that it calls into question the nature of the accounting conceptual framework. business model financial reporting will involve reporting about material stakeholder relationships and how these impact upon the viability of a firm’s business model value proposition. 3 rva consulting, sweden 4 the open university business school, united kingdom journal of business models (2015), vol. 3, no. 1, pp. 62-80 6363 1. introduction this paper constructs an alternative conceptualisation of a firm’s (reporting entity) business model as a means to challenge the way in which information, as narratives and numbers (froud et al., 2006), could be disclosed by firms in their financial statements. the professional accounting bodies and standards setting agencies have progressively reformed the ‘conceptual framework’ that governs the general purpose of financial statements disclosed by reporting entities. a number of these accounting bodies: institute of chartered accountants in england and wales (icaew, 2010), the european financial reporting advisory group (efrag, 2013) and international integrated reporting council (iirc, 2013) have recently considered how a business models approach to corporate disclosure could enhancing the relevance and clarity of information disclosed in financial statements, including the notes to the accounts. this recent debate in accounting about the relevance of business models to financial reporting and disclosure practices is informed by a more long-standing use of the term ‘business model’ derived from the business management and consultancy literature. chesbrough et al. (2007, 2010) observes that a business model serves a variety of functions but in general terms it (the firm’s business model) articulates the so-called value proposition. the value proposition (of a business model) is itself the product of value creation and value capture. management’s value creating initiatives involve the deployment of intellectual capital (beattie et al, 2013), physical resources, technologies and capabilities (within and outside of a firm) to generate new innovative products and services that map onto consumer needs. chesbrough (2010) argues that the barriers to business model innovation are inertia and a lack of entrepreneurial and managerial leadership that are required to experiment and effectuate change to a business model. magretta (2002) observes that firms deploy capabilities and resources to generate new product and services, which magretta characterizes as ‘value creating insight’. value capture is concerned with the share of the financial value chain that is secured inside the boundary of a firm and the extent to which this also enhances operating margin. how much profit margin the firm captures from its total value chain depends upon its pricing strategy, relation to distributors, retail network and capacity to out-source and offshore operating expenses. that is, to what extent can the firm within its business model exert sufficient control over stakeholders to prevent price erosion, lock-in customers and adjust the balance between internal and external costs to inflate profit margin. zott and amit (2010) observe that the business model co-determines the firm’s bargaining power and this facilitates value capture out of its value creating initiatives. they stress the importance of locating a firm’s value creating and capture initiatives within an activity network where the business model describes both intra and extra firm relations. this introduces the notion of a network architecture that involves partners in the delivery process of products and services. a firm’s business model is also about total value creation for all parties involved. it lays the foundations for the firm’s value capture by co-defining (along with the firm’s products and services) the overall ‘size of the value pie,’ which can also be considered as the upper limit of the firms value capture potential (zott and amit, 2010:218). because this involves transactions between firms and other ‘partners’ it is the collective efforts of this network that matters in a business model not simply the actions of one firm. baden-fuller and morgan (2010) also observe that a business model (as a model) connects up the ‘workings inside the firm’ to elements outside of the firm, ‘the customer side’, as a means to capture value (from the application of innovation and new technologies). according to bowman and ambrosini (2000) it is the binding between value creation and value capture that frames the viability of a business model. the strategy literature is focussed on how a firm’s value proposition in its business model involves creating and capturing value within a network of transactions with ‘partners’ where the financial boundary of the firm is not stable but malleable. amit et al. (2011) summarise the business models literature as generating four important themes: the notion of the business model as a new unit of analysis, offering a systemic perspective on how to “do business,” encompassing boundary-spanning activities and focusing on value creation as well as on value capture. these themes are journal of business models (2015), vol. 3, no. 1, pp. 62-80 6464 interconnecting and mutually reinforcing’ (amit et al., 2011:1038). however, teece is concerned that the business model concept lacks a theoretical grounding in economics and business studies (teece, 2010:5). in this paper our argument is that stakeholder theory provides a useful foundation upon which to structure a firm’s business model. accounting for a firm’s stakeholder relations generates critical insight about the nature of a firm’s business model and the viability of its value proposition. osterwalder et al. (2005), in their review article ‘clarifying business models: origins, present and future of the concept’, list one article that mentions ‘stakeholders’ and this article was concerned with ensuring that the concept of business models is easily understood by stakeholders. morris et al. (2005) in their survey of the business model literature also note that the word ‘stakeholder’ is mentioned once in the titles surveyed in a paper by gordijn et al. (2001). casadesus-masanell and ricart (2010) observe that a business model refers to the logic of the firm, the way it operates and how it creates value for its stakeholders (casadesus and ricart, 2010:196). demil et al. make a similar observation that ‘any organization aims to create value for some stakeholders; customers in a broad sense, suppliers, shareholders, etc. (demil et al., 2010:217). whilst refereed to ‘stakeholders’, it has not been central to developing a business model framework of analysis. this paper employs stakeholder theory to structure a firm’s business model and this leads on to an argument for modifying the accounting conceptual framework that governs the purpose of financial disclosures. the accounting conceptual framework is concerned with disclosures to investors whereas a business model-driven disclosure framework would require reporting entities to disclosure information about stakeholder relations and their contribution to securing a firm’s value proposition, that is, how ‘firms make money in many ways’ (jacobides, 2009). a common thread running through stakeholder theory, as applied to corporations, is the role and contribution of management in both satisfying and reconciling the needs of a variety of stakeholders that have a legitimate interest in the organisation. this responsibility of management can be broadly specified as ‘stakeholder-agency’ or more narrowly as ‘shareholder-agency’ (jensen, 1986 & 2002). evan and freeman (1993) observe that: a stakeholder theory of the firm must redefine the purpose of the firm. the very purpose of the firm is, in our view, to serve as a vehicle for coordinating stakeholder interests (evan and freeman, 1993:102-103). freeman defines stakeholders in broad terms as: ‘any group or individual who can affect or is affected by the achievements of the organization’s objective’ (freeman, 1984:46). within this theoretical framework, co-ordination between stakeholders is delivered through legally binding contracts or loose informal relationships that are structured and monitored for the mutual benefit of all parties (see freeman and evan, 1990; hill and jones, 1992). freeman et al. (2004) observe that a primary concern for management, within the firm, is with aligning various stakeholder interests. on the one hand the firm is a normative locus for reconciling stakeholder interests and on the other there is an instrumental purpose, which is to generate ‘outstanding’ performance. according to freeman, stakeholder theory: encourages managers to articulate the shared sense of the value they create, and what brings its core stakeholders together. this propels the firm forward and allows it to generate outstanding performance, determined both in terms of its purpose and marketplace financial metrics. (freeman et al., 2004:364) in this paper we argue that a firm’s business model is structured by the nature of a firm’s relations with stakeholders. these stakeholder relations may be contractual and transactive but also advisory and regulatory in nature but collectively they can impact upon a firms reported financials. for example regulatory bodies, credit rating agencies, valuation experts and accounting standards setting bodies are stakeholders that can influence a firms disclosed financials even though they are not directly involved in contracts and transactions. within accounting there is also an ongoing debate about the purpose of financial disclosure that of journal of business models (2015), vol. 3, no. 1, pp. 62-80 6565 informing investors or a broader group of stakeholders. zeff (1999) provides a valuable account of the evolution of the conceptual framework that governs financial disclosures for business enterprise in the us. zeff observes that in 1966 the american accounting association (aaa) published a pioneering monograph entitled ‘a statement of basic accounting theory (asobat)’. significantly this, according to zeff, redirected attention away from the inherent virtues of asset valuation models towards the ‘decision usefulness’ of financial statements. it defined accounting as ‘the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information’ (aaa, 1966:1). asobat was focused on the information needs of investors specifically earnings upon which predictions and valuations might be made. zeff observes that asobat also opened up the possibility for firms to record a variety of information with, for example, assets valued at historic or current cost depending upon the needs of the user(s) where users may not simply be investors but employees and managers. the american institute committee report: objectives of financial statements –trueblood report (aicpa, 1973) carried forward the issue of decision usefulness for investors. however, the trueblood committee report again discussed the use of multiple values to describe performance to a range of user groups and also proposed that social goals are no less important than economic goals. the international accounting standards board (iasb, 2013) is still engaged in a process of clarifying the purpose of the accounting conceptual framework for the financial statements. it is also suggested that information disclosed in financial statements should be relevant to a wider group of stakeholders (iirc, 2013). in the next section of this article we argue that stakeholder theory provides a basis upon which to structure a firm’s business model and understand its value proposition. this leads us to argue for a reorientation of accounting disclosure. that is a shift from ‘disclosure to investors’ towards ‘disclosures about stakeholders’ to increase the visibility of stakeholder relationships and their impact on the outcome of a firm’s business model value proposition. 2. business models: structure and value proposition in this section of the paper we structure a firm’s business model as the outcome of managing and (re) acting to complex firm-stakeholder relations to achieve an instrumental outcome which is the need to preserve liquidity and solvency for a going concern. freeman’s (1984) work on stakeholder theory informs this papers structure of a firm’s business model in terms of bilateral firm-stakeholder relations. freeman defined stakeholders as ‘any group or individual who can affect or is affected by the achievement of the organizations objectives’ (freeman, 1984:46). berman et al. (1999) discussing stakeholder theory observe that firms ‘view their stakeholders as part of an environment that must be managed in order to assure revenues, profits and ultimately returns to shareholders’ (bermen et al., 1999:491). there is both a normative and instrumental aspect to the firm’s relations with stakeholders because managers need to ‘foster trust’ with their stakeholders and from an instrumental point of view this can also ‘help firm profitability’. according to bermen et al. (1999) a firm’s resource allocation decisions and stakeholder relations are inseparable because the way in which resources are allocated also impacts upon the firm’s relationship with its stakeholders. this paper constructs a business model theoretical framework using two organising elements: structure and value proposition. in terms of structure we argue that a firm’s business model can be broadly described as the product of interactions with stakeholders both internal and external to the firm. the value proposition of a firm’s business model is how liquidity and solvency are extracted from value creating, value capturing and value manipulating arrangements with stakeholders. a firm’s business model is structured out of interactions with a complex network of stakeholders and the information that arises from these relations serves to broadly define the nature of a firms business model (haslam et al., 2012). haslam et al. argue that ‘a business model exists where information attributes congeal to establish a broad boundary within which firms can be situated: for example investment journal of business models (2015), vol. 3, no. 1, pp. 62-80 6666 banking, mixed retail, bio-pharma and digital lifestyle’ (haslam et al., 2012:55). jacobides (2009) observes that ‘many “bm (business model) innovations” are either changes within industry architecture; or changes of industry architecture’. the drivers of these changes, we argue, are adaptive and evolving interactions with a range of stakeholders. these interactions are with primary and secondary stakeholders including: customers, employees, suppliers, advisers, credit ratings agencies, industry and valuation analysts, consultants, regulatory and professional institutions to name a few. primary and secondary stakeholder relations help to broadly define the nature of a firm’s business model and may have a material financial influence over the firm’s business model value proposition in circumstances where contractual and transactive relations are informal and immaterial. the ‘value proposition’ arising out of a firm’s business model enables it (the firm) to generate liquidity and solvency to secure a going concern. cash from operations (liquidity) provides valuable information to: credit rating agencies, valuation analysts and suppliers that are making judgements about the viability of a firm’s value proposition. solvency is the difference between total assets and liabilities (current and long-term) and is a measure of net worth and an important index of enterprise value and a requirement for auditors signing off the accounts. figure 1: source: authors nature of income from products, services and trading focal firm business model value proposition: liquidity and solvency expenses (external expenses and internal labour costs) cash liquidity balance sheet: solvency asset structure: tangible, financial, goodwill and working capital. liabilities and long-term debt shareholder equity (net worth) valuation and mark to market adjustments cash distributed external cash funding journal of business models (2015), vol. 3, no. 1, pp. 62-80 6767 this depiction of a firm’s business model value proposition emphasises the importance of complex stakeholder relations and how these need to be managed and influenced to sustain liquidity and solvency. liquidity depends upon maintaining a complex balance between: old and new products and services sold to a multiplicity of customers, households, corporate and non-corporate clients. it is also influenced by the share of the financial value chain, a firm is able to capture and management of internal labour costs because both determine the margin extracted out of sales revenue. increasing the firms outsourcing arrangements without lowering internal labour costs could damage a firm’s cash margin (liquidity) within its business model (see lee and yin, 2012). sustaining a solvent firm within its business model is also a complex process that depends upon the extent to which total asset values inflate ahead of current and long-term liabilities. solvency is augmented because the firm’s business model is growing operating profits (posted into shareholder funds) or extracting asset windfalls that generate holding gains, which also inflate shareholder funds. jacobides (2009) on business models notes that firms make money in many ways – not just by summing up profits – financial structure and capitalization is key – game-plan includes not only profits, but asset windfalls’. subsumed with the value proposition of a firm’s business model is how value: creation, capture and manipulation are acting upon the reported financial numbers. the firm, subtended in its business model, will be constantly adapting to its stakeholder relations creating value by upgrading processes and generating new innovative products and services that are critical for sustaining demand and future income streams. at the same time stakeholder relations are being dynamically recalibrated to enhance the value capture potential of a firm’s business model. this might involve the displacement of costs and expenses and the capture of profit margin from outsourcing and off-shoring and general restructuring within its value chain. on the other hand value manipulation is focussed on generating on-going asset windfalls / holding gains that generate financial leverage beyond that simply from creating and capturing value from products and services sold for consumption. the value proposition of a firm’s business model is thus the outcome of complex stakeholder arrangements where value creation, capture and manipulation are operating simultaneously. for example, new product development might reinforce a strong future income trajectory but this could be associated with limited growth in cash and balance sheet solvency if value capture policies fail to gain traction. the stakeholder relations that constitute a firms business model value proposition may promote or frustrate liquidity and solvency that underwrite a going concern. this is because the value proposition of a firm’s business model depends upon complex stakeholder interventions some of which are focussed on creating value others enhancing value capture or facilitating value manipulation to generate asset windfalls. the three elements that underwrite the value proposition of a firms business model may or may not align to secure liquidity and solvency for a going concern because it is often the case that contradictory forces are in play (see fig.2). journal of business models (2015), vol. 3, no. 1, pp. 62-80 6868 in this next section we argue that there is a significant role to be played by accountants and their professional bodies in raising the visibility of stakeholder relations and their impact upon a firm’s business model value proposition. there are two key issues which, we argue, currently restrict the potential of this contribution. first, firms tend to disclose expenses by ‘function’ rather than by ‘nature’ in their financial statements and this conceals the impact that different stakeholders have upon financial line items. second, the conceptual framework governing the purpose of financial disclosure is concerned with providing information to the ‘investor’ as key stakeholder. when a broader financial disclosure project has been considered by the international accounting standard setting bodies this tends to focus on ‘disclosure to stakeholders’ rather than ‘disclosure about stakeholder relations’ and the impact these on-going arrangements have on a firms reported financials. for example, bukh and nielsen (2010) consider that the value of the ‘business model’ is that it offers up a new management technology that can inform disclosure to investors. thus, we perceive the business model as a management technology that helps management communicate and share its understanding of the business logic to external stakeholders, in our case primarily analysts and investors. (bukh and nielsen, 2010:11). figure 2: source: authors firm (reporting entity): business model stakeholder relations a business model value proposition income value creation value capture value manipulation product and process renewal cost displacement and margin capture asset price inflation and holding gains cost structure cash from operations (liquidity) balance sheet capitalisation (solvency) journal of business models (2015), vol. 3, no. 1, pp. 62-80 6969 alternatively, a business model framework of analysis might best be described as a management technology that can be employed to reveal information about the firm’s broad stakeholder relations and how these are enhancing or degrading a reporting entities value proposition. that is, to what extent are firm-stakeholder relations contributing to value creation, capture and manipulation and are financial outcomes sustaining liquidity and solvency for a going concern? 3. accounting for stakeholders: reframing financial disclosure the accounting profession and key professional bodies have been preoccupied with establishing a conceptual framework that can effectively govern the relevance and purpose of financial disclosures by reporting entities (firms). zeff (1999) provides a valuable account of the evolution of the conceptual framework governing financial disclosures for business enterprise in the us. zeff observes that in 1966 the american accounting association (aaa) published a pioneering monograph entitled ‘a statement of basic accounting theory (asobat)’. asobat shifted the field of the visible away from types of valuation approach towards the information needs of investors specifically for ‘decision usefulness’, for example, earnings upon which predictions and valuations might be made. such predictions are most crucial in the case of present and prospective equity investors and their representatives-considered by many to be the most important of the user groups (aaa, 1966:23) zeff (2013) observes that staubus (1972) ‘provides a coherent theory which effectively linked decision usefulness to the information required to make investment decisions: using discounted future cash flows as the most relevant attribute of assets and liabilities’ (zeff, 2013:24). the accounting profession continues to refine the conceptual framework governing the purpose and relevance of a reporting entities financial disclosures but this is still focussed on the provision of information that is ‘decision useful’ for investor stakeholders. a reporting entity is a circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders and other creditors who cannot obtain the information they need in making decisions about providing resources to the entity (iasb, ed,2002/3: para re2). the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit1 (iasb, 2010: para ob2) the financial statements are designed to ‘provide information to help existing and potential investors, lenders and other creditors to estimate the value of the reporting entity’ (iasb, 2010: para ob7). these financial statements conforming to the structures laid out in international accounting standards 1 (ias 1). it is significant that ias1 (iasb, 2011) takes a broad view about the users of financial information: ‘the objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions’ (ias1: p-3). in addition ias1 is concerned with the practical presentation and structure of a reporting entity’s financial statements outlining two approaches to the measurement of income; by nature of expenses and by function of expenses. the first form of analysis is the ‘nature of expense’ method. an entity aggregates expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs), and does not reallocate them among functions within the entity. this method may be simple to apply because no allocations of 1 http://www.ifrs.org/news/press-releases/documents/conceptualfw2010vb.pdf journal of business models (2015), vol. 3, no. 1, pp. 62-80 7070 expenses to functional classifications are necessary. (ias1, para 102) in practice most firms report their income statement employing the function of expenses rather than nature of expenses and within ias1 there is a suggestion that this approach provides more relevant information to the users of accounts. however, this approach to the framing of the income statement conceals rather than increases the visibility of stakeholder relations embedded in the financial numbers. the second form of analysis is the ‘function of expense’ or ‘cost of sales’ method and classifies expenses according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities. at a minimum, an entity discloses its cost of sales under this method separately from other expenses. this method can provide more relevant information to users than the classification of expenses by nature, but allocating costs to functions may require arbitrary allocations and involve considerable judgement. (ias1, para 103) for example, the functional costs line item ‘cost of goods sold’ mixes up employment costs with external costs of materials and services from suppliers whilst ‘marketing and distribution’ includes labour costs but also the expenses of marketing which may be bought-in from outside agencies. whilst ‘research and development’ expenses include labour costs but also expensed capital charges associated with research and development infrastructure. if the function of expenses approach obscures stakeholders this can be contrasted with the nature of expenses approach to structuring the income statement and this is shown in table 1. the presentation format of the nature of expenses income statement shown in table 1 modifies that which is presented in ias1 to include two sub-total line items which we describe as value retained (also known as value added) see accounting standards steering committee (assc, 1975) and earnings before interest, tax and depreciation (cash earnings or ebitda). where earnings before interest, tax, depreciation and amortisation is equivalent to a firms cash generating ability from operations (liquidity). table 1: income statement by nature of expenses revenue x other income x changes in inventories (y) raw materials and consumables used (y) value retained x employee expense (y) other internal firm expenses (e.g. pensions) (y) total expenses (y) earnings before interest tax, depreciation and amortisation (ebitda) x depriciation and amortisation (y) taxation (y) dividends/share buybacks (y) interest payments (y) retained earnings x source: http://ec.europa.eu/internal_market/accounting/docs/consolidated/ias1_en.pdf note: authors have adjusted this table from ias1 to include line for value retained and ebitda http://ec.europa.eu/internal_market/accounting/docs/consolidated/ias1_en.pdf journal of business models (2015), vol. 3, no. 1, pp. 62-80 7171 this alternative approach to formatting the statement of income reveals the way in which income is generated from sales of products and services to customers. from this income is deducted all external costs (suppliers of materials and services). the value retained used to cover employee costs so as to leave the residual cash from operations (ebitda). this cash from operations then distributed as: tax (government) dividends, share buy-backs (shareholder), interest payments (providers of debt financing) and retained earnings to boost assets and reinvestment. in 2005 the chartered financial analysts (cfa) institute called for the disclosure of financial information by its nature because this would enhance comparability and that aggregating expenses by function congealed information with variable properties thus limiting its interpretative and decision-making quality. by ‘nature’, we mean that items should be reported by the type of resource consumed, such as labor or raw materials, rather than by the function or purpose for which it is used, for example, cost of goods sold or selling, general, and administrative expense. categorization according to nature can greatly enhance comparability across companies and consistency within the statements of a single company(…) the statistical distribution properties of the various resources consumed in operations behave very differently over time. consequently, aggregation by function, the current practice, merges items with different properties, reducing the information content of the items and significantly reducing their value as decision-making factors (cfa institute, 2005:18). the authors of the corporate report (assc, 1975) were not simply concerned with the technicality of different reporting formats but wished to contextualise profit from a stakeholder perspective and make visible the fact that bottom line earnings are the outcome of a collective effort from a range of stakeholder groups and that value is created and captured by this effort. the simplest and most immediate way of putting profit into proper perspective vis-àvis the whole enterprise as a collective effort by capital, management and employees is by the presentation of a statement of value added (that is, sales income less materials and services purchased). value added is the wealth the reporting entity has been able to create by its own and its employees’ efforts. this statement would show how value added has been used to pay those contributing to its creation. it usefully elaborates on the profit and loss account and in time may come to be regarded as a preferable way of describing performance (assc, 1975: para 6.7:49). according to zeff (2013) ‘the corporate report spawned a considerable literature on value added statements, raising issues about the broader social accountability of profit-seeking enterprise. more than one-fifth of the largest uk companies produced value added statements in the late 1970s (zeff, 2013:50). michael porter was not so convinced about the significance of this accounting format, observing that: an analysis of the value chain rather than value added is the appropriate way of examine competitive advantage. value added (selling prices less the cost of purchased raw materials) has sometimes been used as the focal point for cost analysis because it was viewed as the area in which a firm can control costs. value added is not a sound basis for cost analysis, however, because it incorrectly distinguishes raw material from the many other purchased inputs used in a firm’s activities. also, the cost behaviour of activities cannot be understood without simultaneously examining the costs of the inputs used to perform them. moreover, value added fails to highlight the linkages between a firm and its suppliers that can reduce costs or enhance differentiation (porter, 1985:39). we agree in part with porter’s specific argument that a firm’s strategy will be an endeavour to influence costs or product differentiation in its global value chain and not simply focus on its own internal cost structure and capacity to influence product differentiation. however, we disagree with porter’s general conclusion that leads him to discard this accounting approach. our argument is that a nature of expenses income statement is journal of business models (2015), vol. 3, no. 1, pp. 62-80 7272 has been transformed. these disclosed numbers could then be accompanied with narratives that describe how relations with stakeholders have changed to deliver this financial transformation and associated benefits and risks. in practice it is difficult to reproduce a nature of income and expenses statement and hence undertake value capture analysis. this is because expenses by nature are often not disclosed by firms, for example, total employee expenses by us firms. furthermore, the narratives in the annual financial statements tend not to account for changes in stakeholder relations and their impact on the financial numbers. zeff (2013) notes that: ‘the corporate report, issued in 1975 in great britain, has been by far the most innovative and enterprising of the frameworks, and it reflected a much broader vision of social accountability than the investor-creditor focus which has been predominant in the united states (zeff, 2013:77). valuable because it identifies stakeholders and their impact on financial performance. in addition the nature of expenses format can be employed to discriminate between internal and external expenses and stakeholder relations and thereby also make visible adjustments in the value capture arrangements of a reporting entity. to illustrate this point we have reproduced the key value capture financial ratios using a nature of expenses2 approach for apple inc. covering the period 1992 to 2014. we observe that the value-retained ratio is transformed after the year 2000 rising from 30 to 45 per cent of sales revenue. internal labour costs in total sales revenue fall from 30 to 10 per cent as manufacturing activity and research and development (for example apps development) are outsourced. this combination of higher value retained and lower labour costs combined to boost the cash margin from 5 per cent to 35 per cent of sales (see also haslam et al., 2013). a disclosure format using the nature of expenses makes visible the extent to which value capture 2 note we estimate employment costs from the accounts as total employee compensation is not disclosed source: apple inc. 10k’s note: value retained / sales is value retained as a per cent of sales revenue and labour costs are estimated using various corporate disclosures. chart 1 apple inc: value capture ratios 1992 to 2014 50 45 40 35 30 25 20 15 10 5 0 v a lu e re ta in ed a n d la b o u r co st s in s a le s c a sh m a rg in 40 30 20 10 0 -10 -20 value retained in sales % labour costs in sales % cash margin in sales % 19 9 2 19 9 3 19 9 4 19 9 5 19 9 6 19 9 7 19 9 8 19 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 2 0 11 2 0 12 2 0 13 2 0 14 a nature of expenses disclosure format reveals the influence of changing stakeholder relations on the income, expenses and the cash residual from operations (ebitda for liquidity) but it does not include a balance sheet dimension. in an era of shareholder value managers are under constant pressure to generate excess returns on capital (i.e. returns above the cost of capital) because managerial remuneration journal of business models (2015), vol. 3, no. 1, pp. 62-80 7373 is tied into key financial performance metrics. stock market analysts are focused on valuation multiples that combine earnings with balance sheet capitalization and they use this analysis to issue buy and sell recommendations. there are no fixed or standard measures of financial performance but there exist a range of financial metrics including, for example, cash flow return on investment (cfroi), economic value added (eva™), cash return on capital employed (cash roce), earnings per share (eps), enterprise value to ebit and the price to earnings ratio (pe). these key valuation metrics used by analysts often combine market value of equity (or enterprise value) with a relevant financial metric that is assumed to have a material correlation with market value of equity. thus, financial variables such as cash roce are correlated with higher or lower market valuations when, for example, the ratio increases or falls. the inclusion of balance sheet financials into the accounting framework is significant because most analysts compare income and cash flow relative to assets or capital employed for valuations. the balance sheet is not simply a snapshot of the ‘stock’ of financial values against which we benchmark profit and cash earnings to establish investor returns. the balance sheet also records the outcome of complex stakeholder relations that have influence over a firm’s value proposition within its business model. these stakeholder interactions are influencing balance sheet values and impacting upon solvency. a property management firm can legitimately call in specialist advisers to revalue its stock of commercial and retail real estate. if valuations are raised this will generate a windfall holding gain, increase comprehensive income, shareholder equity and solvency. private equity partnerships also depend upon the revaluation of their investment portfolios held on balance sheet to improve solvency and gearing metrics that contribute to levering additional debt financing. apple inc. relies upon benchmark information provided by investment banks to adjust the recorded value of its $140bn of marketable securities held for trading on its balance sheet. in recent years apple has invested $67billion of this cash (as of september 2014) on share buy-backs a sum equivalent to double that spent on r&d over the period 1992 to 2014. these treasury shares have accumulated implicit holding gains of roughly $14 billion because apples share price has inflated to $110 as at january 2015. these windfall asset gains are a sum equivalent apples r&d spend over the period 2010 to 2014. pension actuary advisers may value a firm’s pension assets higher than liabilities when stock markets are inflating, helping, in turn, to secure reduced pension provisions out of profit as they take a pension holiday (or not as the case may be). changes in accounting regulations also impact upon the recorded financial numbers. goodwill arising from the acquisition of another firm will be accumulated as an asset on balance sheet and periodically tested for impairment rather than amortised. an impairment test reveals whether the earnings or market value attached to this goodwill are sustainable and if not the goodwill is written down. in 2008 the royal bank of scotland (rbs) was forced, by advisers, to write down £35bn of goodwill and this forced the bank towards insolvency as the net worth of bank dissolved. thus financial statements and their associated narrative disclosures could be employed to reveal how stakeholder relations within the firm’s business model are impacting on its value proposition. in order for this to become a practical reality it would be necessary to present the income statement using a nature of expenses format and review how balance sheet assets and liability valuations are also the product of specific counterparty/stakeholder relations. the professional accounting bodies are moving closer to this possibility because they are considering how a ‘business models’ framework could enhance disclosure in terms of the relevance of financial information for users. however, the accounting bodies that govern the role and purpose of accounting standard setting are still focussed on enhancing financial disclosure to the investor stakeholder. in this article we call for a reorientation in the balance of the accounting conceptual framework towards disclosures about stakeholder relations associated with the financial numbers. this would increase the visibility of material firm-stakeholder relationships and how these are evolving, adapting and impacting upon the viability of the firm’s business model value proposition. the institute of chartered accountants in england and wales (icaew) report on business models in accounting: the theory of the firm and financial reporting (2010) suggests that the concept of the journal of business models (2015), vol. 3, no. 1, pp. 62-80 7474 ‘business model’ can support the provision of relevant disclosures to those providing capital funding. the icaew report observes that the nature of a firm’s business model can influence whether fair value (market value) or historic cost recording of transactions in the balance sheet may be more appropriate. assumptions about business models have always been implicit in financial reporting standards, as it has always been the case that different businesses will account for the same asset in different ways depending on what its role is within the firm’s business model. questions of cost allocation and revenue recognition for different firms and different sectors are also closely tied to the interpretation of their business models (icaew, 2010:8). thus a business models approach can be employed to discriminate between methods of asset valuation depending upon the purpose for which these assets are to be employed. if assets are actively traded they should be ‘marked to market’ and if they are held long-term, say in insurance companies, they could legitimately to be kept at historic cost. however, the icaew application of a ‘business model’ framework for corporate disclosure is focused on disclosure to investors. a recent european financial reporting advisory group (efrag, 2013) research report: ‘the role of the business model in financial statements’ focuses on how a business models framework would contribute to modifying the ‘conceptual framework’ that governs the purpose and objectives of financial disclosure. specifically, how might a business models approach to financial disclosure affect the fundamental qualitative characteristics of the conceptual framework namely: relevance and faithful representation, comparability, timeliness and understandability. the efrag report is, like predecessors, focussed on how the reporting entity business model would enhance the way information is disclosed to investors. the international integrated reporting council report ‘integrated reporting (iirc, 2013) also employs the business model concept and in contrast to the professional accounting bodies the iirc report does incorporate the need to report to a broader group of stakeholders. the iirc report takes the position that a large group of stakeholders ‘employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers’ (iirc, 2013:4) are interested in the value creating capacity of an organisation. the professional accounting and standard setting bodies are considering how a firms ‘business model’ could enhance the disclosure of relevant information to stakeholders. in this paper we argue for a clear definition of a firms ‘business model’ one that is structured out of managing and reporting about material stakeholder relations. disclosures about material stakeholder relationships would reveal how a firm’s value proposition is being articulated through value creating, capturing and manipulating endeavours and how these endeavours are impacting on the risk to liquidity and solvency. 4. discussion and summary in this paper we conceptualise firms as belonging to a specific business model because they share common and materially significant stakeholder relation characteristics. our argument is that a firm’s business model and its associated stakeholder relations can facilitate or frustrate a viable value proposition. a firm’s value proposition within its business model is informed by elements of: value creation, value capture and value manipulation. the first of these, value creation, involves understanding how a firm’s relations with stakeholders contribute towards product and process renewal to generate innovate products and services that map on to consumer demand. value capture is about the capacity of firms, within their business model, to modify their share of the value chain and extract a higher profit margin out of total income. the third element, value manipulation, recognises that in a credit based financial system asset inflation and trading financial and tangible assets can extract windfall holding gains. these elements of a firm’s business model value proposition are collectively influencing liquidity and solvency reported by a firm. central to understanding the financial viability of a firm’s business model value proposition is the need to make visible information about how stakeholder interactions are contributing to value creation, capture and manipulation. in this paper we argue that there is a significant role for the accounting profession and associated professional bodies because a business journal of business models (2015), vol. 3, no. 1, pp. 62-80 7575 models disclosure project could significantly enhance our understanding of corporate performance and risk. there are already a number of very important initiatives but they lack a coherent business model framework. the icaew, efrag and iirc have a different perspective on what constitutes a business model depending on whether it is influenced by economic theory of the firm or a strategic management literature on business models. accounting practitioners and professional standards setting bodies could enhance stakeholder reporting by focusing on the contribution of material stakeholder relations to financial performance. there are two obstacles to this initiative. the first relates to the presentation of information in financial statements of income, which obscure than make visible the contribution of stakeholders to the financial numbers. the second relates to the primacy of investors as the key stakeholder in the accounting conceptual framework and how this governs the purpose of financial statements, which is to report to investors. currently public firms do not disclose the structure of their income statement in terms of the nature of expenses, rather preferring to disclose expenses by their function. structuring the income statement in terms of the nature of expenses would increase the visibility of stakeholders and their impact on a firm’s financials. it would also be possible, using this nature of expenses approach, to discern a firm’s financial boundary and capture intelligence about changes in the capacity of a firm to capture value and profit out of the value chain. whilst a stakeholder account of the statement of financial position (balance sheet) would capture the nature of advisory, regulatory and counterparty risk embedded in (re)valuations. zeff (1999) describes how the accounting bodies in the us have historically vacillated between reporting to investors or a broader group of stakeholders. this theme is carried forward into recent reports from the accounting profession about the value of a business models approach to corporate disclosure (efrag, 2013; icaew, 2010; iirc, 2013). on the one hand the business model can act as a filtering device that managers can use to decide whether or not to use different valuation methods for assets for investors (icaew, 2010); enhance relevance and faithful representation for investors (efrag, 2013); or help to generate coherence and integration for all stakeholders (iirc, 2013). these approaches are a valuable step forward. however they are concerned with how a business model framework might enhance disclosures to stakeholders (as users of information) rather than disclosures about stakeholder relations and their impact on the firm’s business model value proposition and its financial results in terms of liquidity and solvency for a going concern. beattie and smith (2013) observes that ‘the external reporting challenge is to find ways of reporting holistically whilst leaving out detail that cannot be included for contractual, regulatory or proprietary cost reasons’ (beattie and smith, 2013:24). there is no reason why managers cannot report in general terms about the impact of their key stakeholders on the viability of their business model. business model reporting will require a reorientation in the presentation of ‘numbers and narratives’. references accounting standards steering committee (assc).1975. the corporate report http://www.ion.icaew.com/clientfiles/6f45ef7e-1eff-41ff-909e-24eeb6e9ed15/the%20corporate%20report2. pdf american accounting association (aaa: 1966) a statement of basic accounting theory: evanston, il: aaa. american institute of certified public accountants. (aicpa: 1973). ‘objectives of financial statements’ (trueblood report): new york. http://www.ion.icaew.com/clientfiles/6f45ef7e-1eff-41ff-909e-24eeb6e9ed15/the%20corporate%20report2.pdf http://www.ion.icaew.com/clientfiles/6f45ef7e-1eff-41ff-909e-24eeb6e9ed15/the%20corporate%20report2.pdf journal of business models (2015), vol. 3, no. 1, pp. 62-80 7676 http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/pa pers/1970/1973_1001_truebloodobjectives.pdf amit, r., zott, c., & massa, l. (2011). the business model: recent development and future research. journal of management, 37(4), pp.1019-1042 baden-fuller, c. and morgan, m. s. (2010). ‘business models as models’. long range planning, 43, 156-171. barney, j. (1991). ‘firm resources and sustained competitive advantage’. journal of management, 17, 99-120. beattie, v and smith, s.j (2013) british accounting review, 45 (4) 243-254 http://www.storre.stir.ac.uk/bitstream/1893/19287/1/busmodels%20paper%20bar%202013.pdf berman, s, l., wicks, a.c., kotha, s., and jones, t.m (1999) does stakeholder orientation matter? : the relationship between stakeholder management models and firm financial performance. academy of management journal 42 (5):485-506 bowman, c. and ambrosini, v. (2000). value creation versus value capture: towards a coherent definition of value in strategy. british journal of management. 11, 1-15 bukh, p.n. and nielsen, c. (2010). understanding the health care business model: the financial analyst’s point of view. journal of health care finance, 37, 8-25 burton, j.c. and fairfield, p. (1981) ‘the role of financial information’, in burton, j.c. et al, (eds), handbook of accounting and auditing. boston: warren, gorham and lamont casadesus-masanell, r. and ricart, j.e. (2010). ‘from strategy to business models and onto tactics’. long range planning, 43, 195-215. cfa institute. 2005. ‘a comprehensive business reporting model: financial reporting for investors’, cfa institute. codes, standards, and position papers no. 6 http://www.cfapubs.org/toc/ccb/2007/2007/6 chesbrough, h. (2007). why companies should have open business models. mit sloan management review, 48(2), pp. 22-28 chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2-3), pp. 354-363 conner, k.r. and prahalad c.k. (1996). ‘a resource-based theory of the firm: knowledge versus opportunism’, organization science, 7, 478-496 demil, b. and lecocq, x. (2010). ‘business model evolution: in search of dynamic consistency’, long range planning, 43, 227-246 demil, b., lecocq, x., & ventura, j. (2010). business models as a research program in strategic management: an appraisal based on lakatos. management, 13(4): 214-225 donaldson, t and preston, l. (1995). ‘the stakeholder theory of the corporation: concepts, evidence and implications’, the academy of management review, 20, 65-91. european central bank (ecb). 2004. fair value accounting and financial stability, occasional paper 13. http://www. ecb.de/pub/pdf/scpops/ecbocp13.pdf european finance research advisory group (efrag). 2013. towards a disclosure framework for the notes, efrag, brussels. http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/papers/1970/1973_1001_truebloodobjectives.pdf http://3197d6d14b5f19f2f440-5e13d29c4c016cf96cbbfd197c579b45.r81.cf1.rackcdn.com/collection/papers/1970/1973_1001_truebloodobjectives.pdf http://www.storre.stir.ac.uk/bitstream/1893/19287/1/busmodels%20paper%20bar%202013.pdf http://www.cfapubs.org/toc/ccb/2007/2007/6 http://www.ecb.de/pub/pdf/scpops/ecbocp13.pdf http://www.ecb.de/pub/pdf/scpops/ecbocp13.pdf journal of business models (2015), vol. 3, no. 1, pp. 62-80 7777 http://www.efrag.org/files/projectdocuments/paaine%20disclosure%20framework/121015_disclosure_framework_-_final1.pdf evan, w. m. and freeman. r.e. (1993) ‘a stakeholder theory of the modern corporation: kantian capitalism’, in t. beauchamp and n. bowie (eds.), ethical theory and business: englewood cliffs, nj: prentice hall. freeman, r. e. (1984) strategic management: a stakeholder approach. london: pitman. freeman, r. e. and evan, w.m. (1990). corporate governance: a stakeholder interpretation. the journal of behavioural economics, 19, 337-359. freeman, r.e. wicks, a and parmar, b. (2004). ‘stakeholder theory and the corporate objective revisited’. organizational science, 15, 364-369. friedman, a.l and miles, s (2002) developing stakeholder theory, journal of management studies 39(1): 1-21. froud, j., johal,s., leaver, a and williams, k. (2006). financialization and strategy: narrative and numbers. london: routledge, taylor and francis. george, g., bock, a. j. (2011). ‘the business model in practice and its implications for entrepreneurship research’. entrepreneurship theory and practice, 35, 83-111. gordijn, j., akkermans, h. (2001). designing and evaluating e-business models. ieee intell. syst. 16, 11–17. haslam,c., andersson, t., tsitsianis, n and yin,y.p. (2012). redefining business models: strategies for a financialized world. london: routledge, taylor and francis. haslam, c., andersson, t., tsitsianis n. and yin,y.p (2013); apple´s financial success: the precariousness of power exercised in global value chains, accounting forum 37,268-279 hill, c and t. jones. (1992). ‘stakeholder-agency theory’, journal of management studies, 29,131-154. international accounting standards board (iasb). 2010. conceptual framework for financial reporting: the reporting entity, ed/2010:2 http://www.efrag.org/files/ed%20conceptual%20framework%20for%20financial%20reporting.%20the%20 reporting%20entity.pdf international accounting standards board (iasb). 2011. ias (1) presentation of financial statements. http://ec.europa.eu/internal_market/accounting/docs/consolidated/ias1_en.pdf international accounting standards board (iasb). 2013. a review of the conceptual framework for financial reporting. discussion paper dp/2013/1 http://www.ifrs.org/current-projects/iasb-projects/conceptual-framework/discussion-paper-july-2013/documents/discussion-paper-conceptual-framework-july-2013.pdf international integrated reporting council (iirc). 2013. consultation draft of the international <ir> framework. london:iirc http://www.theiirc.org/consultationdraft2013/ institute of chartered accountants england and wales (icaew). 2010. business models in accounting: the theory of the firm and financial reporting: information for better markets initiative. london: icaew http://www.icaew.com/~/media/files/technical/financial-reporting/information%20for%20better%20markets/bmia%20published%20report.pdf http://www.efrag.org/files/projectdocuments/paaine%20disclosure%20framework/121015_disclosure_framework_-_final1.pdf http://www.efrag.org/files/projectdocuments/paaine%20disclosure%20framework/121015_disclosure_framework_-_final1.pdf http://www.efrag.org/files/ed%20conceptual%20framework%20for%20financial%20reporting.%20the%20reporting%20entity.pdf http://www.efrag.org/files/ed%20conceptual%20framework%20for%20financial%20reporting.%20the%20reporting%20entity.pdf http://ec.europa.eu/internal_market/accounting/docs/consolidated/ias1_en.pdf http://www.ifrs.org/current-projects/iasb-projects/conceptual-framework/discussion-paper-july-2013/documents/discussion-paper-conceptual-framework-july-2013.pdf http://www.ifrs.org/current-projects/iasb-projects/conceptual-framework/discussion-paper-july-2013/documents/discussion-paper-conceptual-framework-july-2013.pdf http://www.theiirc.org/consultationdraft2013/ http://www.icaew.com/~/media/files/technical/financial-reporting/information%20for%20better%20markets/bmia%20published%20report.pdf http://www.icaew.com/~/media/files/technical/financial-reporting/information%20for%20better%20markets/bmia%20published%20report.pdf journal of business models (2015), vol. 3, no. 1, pp. 62-80 7878 jacobides, m (2009) business models in context: some biased reflections. aom meetings – chicago, il, http://www. businessmodelcommunity.com/fs/root/8v2h8-aom2009businessmodelsymposimmgj.pdf jensen, m. c. (1986). ‘agency costs of free cash flow, corporate finance, and takeovers’. american economic review. 76, 323-329. jensen, m. c. (2002). ‘value maximization, stakeholder theory and the corporate objective function’. business ethics quarterly. 20, 235-256. lazonick, w. (2008). ‘the quest for shareholder value: stock repurchases in the us economy’. louvain economic review, 74, 479–540. lee, e. and yin,y.p. (2012). ‘off-shoring and out-sourcing for shareholder value: promise versus reality’. accounting forum. 36, 18-26. magretta, j. (2002). why business models matter. harvard business review. 80(5): 86-92 morris, m., schindehutteb, m and allen, j (2005) the entrepreneur’s business model: toward a unified perspective journal of business research 58: 726– 735 nielsen, c and bukh, n. (2011). ‘what constitutes a business model: the perception of analysts’. international journal of learning and intellectual capital, 8, 256-71. osterwalder, a., pigneur, y and tucci, c. (2005). clarifying business models: origins, present and future of the concept. university of lausanne and businessmodeldesign.com. http://scholar.google.co.uk/scholar?start=10&q=busi ness+model&hl=en&as_sdt=2000 porter, m.e. (1985). competitive advantage: creating and sustaining superior performance, new york: the free press. prahalad, c.k. and hamel, g. (1990). ‘the core competence of the corporation’, harvard business review, 68, 79-91. shi, y., an manning, t. (2009). ‘understanding business model and business model risks’. the journal of private equity, 12, 49-59. staubus, g.j., 1972. an analysis of apb statement no. 4. the journal of accountancy, february, 133 (2), 36-43. svejenova, s., planellas, m. and vives, l. (2010). an individual business model in the making: a chef’s quest for creative freedom. long range planning, 43, 408-430. teece, d. j. (2010). business models, business strategy and innovation. long range planning. 43(2-3): 172-194 timmers, p. (1998). business models for electronic markets. electronic markets, 8, 3-8 zeff, s. a. (1999). ‘the evolution of the conceptual framework for business enterprises in the united states’. accounting historians journal, 26, 89-131. zeff, s. a. (2013). the objectives of financial reporting: a historical analysis. draft paper http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2196476 zott, c. and amit, r. (2010). ‘business model design: an activity system perspective’. long range planning, 43, 216-226. http://www.businessmodelcommunity.com/fs/root/8v2h8-aom2009businessmodelsymposimmgj.pdf http://www.businessmodelcommunity.com/fs/root/8v2h8-aom2009businessmodelsymposimmgj.pdf http://scholar.google.co.uk/scholar?start=10&q=business+model&hl=en&as_sdt=2000 http://scholar.google.co.uk/scholar?start=10&q=business+model&hl=en&as_sdt=2000 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2196476 journal of business models (2015), vol. 3, no. 1, pp. 62-80 7979 about the authors colin haslam is professor of accounting and finance in the school of business and management, queen mary university of london. he has acted as an adviser to the european financial reporting advisory group (efrag) ‘disclosure framework advisory panel’ and recently also the united nations environment programme/greenhouse gas protocol (unep/ ghg) working group 5 carbon-risk initiative. his recent text ‘redefining business models: strategies for a financialized world’ was published by routledge 2012. he is also joint editor of ‘business models’ a critical management important works collection for routledge, 2014. e-mail: c.haslam@qmul.ac.uk nick tsitsianis is a senior lecturer at the school of business and management at queen mary, university of london. he is an active researcher and has published on business models. he is also a member of the academy of international business (aib-uk). he has worked on consulting projects for the institute of chartered accountants scotland (icas) featuring research into the bio-pharma business model. e-mail: n.tsitsianis@qmul.ac.uk tord andersson is director of rva consulting (sweden) and finance consultant for sme-companies in sweden. prior to this he has worked as a senior investment analyst (buy-side) and financial/research analyst (sell-side) in the finance industry as well as a product manager in the telecom equipment industry. he is a visiting senior lecturer in finance at hertfordshire business school (uk). e-mail: t.andersson@herts.ac.uk mailto:c.haslam%40qmul.ac.uk?subject= mailto:n.tsitsianis%40qmul.ac.uk?subject= mailto:t.andersson%40herts.ac.uk?subject= journal of business models (2015), vol. 3, no. 1, pp. 62-80 8080 pauline gleadle is a lecturer in management at the open university business school and also on a fractional appointment with westminster university in accounting and finance. her work focuses on the impact of financialization of business models with specific reference to bio-tech firms and big-pharma. e-mail: p.gleadle@westminster.ac.uk mailto:p.gleadle%40westminster.ac.uk?subject= article_5_1_rev.indd journal of business models (2017), vol. 5, no. 1, pp. 1-13 1 journal of business models (2017), vol. 5, no. 1, pp. 1-13 1 practicing business model management in new ventures malin malmström1 and jeaneth johansson2 abstract purpose: the purpose of this paper is to enhance the knowledge of business modeling in the early phases by exploring its core components and the management of those components. this will be achieved by answering the following exploratory questions: what aspects of business model components do entrepreneurs process in the early stages? how do entrepreneurs process those aspects? design/methodology/approach: in this qualitative study, data was collected during semi-structured interviews with six entrepreneurs. findings: the fi ndings support the argument that when studying the early stages of business model management, to gain a richer understanding of the entrepreneurial process, acknowledging the resource activities is important. our fi ndings highlight that cash and competence appear to be essential focus in managing business model components in early stage. we also found that entrepreneurs may create resource slack that allows businesses to carve out a competitive position in the marketplace by focusing on business model design and management. originality/value: although business model research is developing rapidly, one prominent gap in the fi eld is how entrepreneurs manage their business models in the early start-up stages. in particular, there is a lack of knowledge about what entrepreneurs focus on in their business model management in early start-up stages and how they manage these aspects, an area to which this research contributes. please cite this paper as: malmström et al. (2017), practicing business model management in new ventures, journal of business models, vol. 5, no. 1, pp. 1-13 keywords: business model management, practice, new venture, start-up, management 1-2 luleå university of technology article_5_1_rev.indd 1 5/26/2017 9:38:40 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 2 journal of business models (2017), vol. 5, no. 1, pp. 1-13 2 introduction when a business is founded, it either explicitly or implicitly takes on a particular business model that describes the design or architecture of the value creation and the delivery of value (teece, 1988). without a well-developed business model, entrepreneurs will fail to deliver or capture value from their business. accordingly, researchers have suggested that business models are critical constructs for understanding value creation (e.g., amit and zott, 2001; chesbrough and rosenbloom, 2002; mahadevan, 2000). the business model can be understood as the underlying knowledge or core logic for generating value with a venture (chesbrough and rosenbloom, 2002; shafer et al., 2005). designing a business properly, and fi guring out, implementing and refi ning a commercially viable architecture for revenue and for costs are critical to business success. this is essential when the business is fi rst created; but keeping the business model viable is also likely to be a continuing management task. to profi t from entrepreneurship, entrepreneurs embarking in the business world need to excel not only at product innovation but also at business model design and management, including how to manage stock and the fl ow of resources (malmström et al., 2013). developing a business model that yields profi ts means developing a diff erentiated and diffi cult-to-imitate model that is compelling to customers, achieves advantageous cost and risk structures and enables signifi cant value capturing by generating and delivering products and services. business model design and management can be a pathway to competitive advantage if the model is suffi ciently diff erentiated and hard to replicate for competitors (croneer et al., 2015; malmström and johansson, 2015). although some entrepreneurs have a clearly formulated business model when they start a business, many start with partially formed and incomplete models. researchers agree that creating a business model involves experimentation. entrepreneurs learn through this process what is required to make money on a sustainable basis. a business model thus might evolve from the foundation to a more complete articulation. initially, the entrepreneur may have a clearer view of some aspects of the business model and management of it and limited notions about other aspects. as the fi rm develops and the entrepreneur learns, he or she is able to carve out clear aspects of the components (advancing the model) and develops resource stocks and fl ows that guide operations and ongoing growth. despite these insights, there is still a lack of a clear understanding of what entrepreneurs focus on in their business model management during the early start-up stages. although business model research is developing rapidly, one prominent gap in the fi eld is how entrepreneurs manage their business models in the early start-up stages (mitchell et al., 2002; morris et al., 2005) and, in particular, what entrepreneurs focus on, a gap this study aims to address. by building on penrose’s (1959) work on resource acquisition and organization process, this study addresses previous shortcomings by acknowledging entrepreneurs’ resource activities in early-stage business model management. in doing so, we adopt an orientation toward the practicing of business models. as such, the aim of this paper is to enhance the knowledge of business modeling in the early phases by exploring the core components and the management of those components. this will be achieved by answering the following exploratory questions: what aspects of business model components do entrepreneurs process in early stages? how do entrepreneurs process those aspects? the study is based on data from interviews with six entrepreneurs in the creative industry in sweden. the paper begins with a review of the business model literature to anchor this research in its specifi c context. the methodology adopted is depicted followed by the empirical fi ndings. finally, fi ndings, limitations and future avenues for research are discussed. business models at work in noticing that business models are often poorly communicated, morris et al. (2005, p. 727) considered a business model “a concise representation of how an interrelated set of…areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defi ned markets.” a business model is a map of how value can be generated. it represents how a business is organized to discover and exploit opportunities. the business model provides a framework that assists the entrepreneur in assessing consistencies and recognizing trade-off s among deciarticle_5_1_rev.indd 2 5/26/2017 9:38:42 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 3 journal of business models (2017), vol. 5, no. 1, pp. 1-13 3 sions, for example, about what to do (e.g., what off erings to launch). at the proprietary level, unique confi gurations are produced and compiled in competitive resources that can result in a sustainable advantage. this suggests that the business model and management of the business model may serve as a unique, inimitable, non-copyable, non-tradeable resource, in line with the penrose’s logic of the resource based theory (penrose, 1959; barney, 1991). the resource based theory thus links business models to resource acquisition and allocation (garnsey et al., 2008). although some entrepreneurs start their ventures with clearly formulated business models, many start with partially formed models and incomplete business models. initially, the entrepreneur may have a clear view of some aspects of the business model and management of it and limited notions about other aspects of the business model. a business model may facilitate entrepreneurs’ management of strategic-orientated decisions (johansson and abrahamsson, 2014; osterwalder and pigneur, 2013; pateli and giaglis, 2004) and help develop the business logic of the venture as the venture develop (osterwalder et al., 2005). chesborough and rosenbloom (2002) position a business model as providing a holistic perspective of the venture that outlines the venture’s internal functions and structures and its relations and interactions with the external surroundings. the business model could thus be the pathway to competitive advantage for ventures (malmström et al., 2015; penrose, 1959). in defi ning business models, scholars frequently include two central elements: the view of business models as the logic of value creation and capture (shafer et al., 2005; teece, 2010) and the structure, architecture, or framework of the business (george and bock, 2011; mason and palo, 2012; teece, 2010). these elements relate the abstract strategy level to its implementation on a practical level through action (osterwalder and pigneur, 2002; richardson, 2008). we follow teece’s (2010) broad defi nition of business models as a design for how to identify, create and deliver value and how to capture parts of this value. although there have been many attempts to defi ne the business model concept (e.g., zott et al., 2011; onetti et al., 2012), and many have endeavored to capture the essence of business models (e.g., chesbrough, 2010; linder and cantrell 2000; mcgrath, 2010; osterwalder and pigneur, 2010; sosna et al., 2010), there is a lack of knowledge about the dynamic side of business models, particularly how they are created and managed in practice, despite the implicit assumption of a process approach in the business model concept. morris et al. (2005) importantly pinpoint that the business model is never static. it is continuously developing through specifi cation, refi nement, adaptation and revision. thus, when adopting or building a business model, not only the content (i.e., the stock) but also the process (i.e., the fl ow of stock) of the business become important (ahokangas and myllykoski, 2014; zott et al., 2011). drawing on the idea of business models embedded process approach, we adopt an orientation toward the practicing of business models, where action (tikkanen et al., 2005), business setting (teece, 2010), and experiential learning (sosna et al., 2010) are important aspects of creating and managing business models in new ventures start-up phase. in practicing a business model, an entrepreneur of a new venture will face several cross-roads that require processing to decide on trade-off s between ways of doing business and thus creates the business model (markides, 2006). choosing one direction over another constrains future choices and fi lters out possibilities that are non-competitive. an eff ective business model holds unique combinations that lead to superior value creation and produce superior returns for the venture (morris et al., 2005). managing business models in dynamic environments is similar to weick’s (1993) notion of sense-making because the business model is meant to reduce uncertainty and assist entrepreneurs to make sense of the management choices entrepreneurs face. this view shows the usefulness of business models. magretta (2002) reasoned that when a business model is diffi cult to copy, it can create strong competitive advantages and consequently link the business model to the venture’s performance. therefore, an entrepreneur’s business model management should capture unique combinations that might result in new products and markets and capture the mechanisms that prevent competitors from easily copying a given advantage. article_5_1_rev.indd 3 5/26/2017 9:38:45 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 4 journal of business models (2017), vol. 5, no. 1, pp. 1-13 4 research methodology data and study context the present study is based on a qualitative methodology, which has been suggested as a suitable approach for studying unexplored areas, such as business model management in the early start-up stages (yin, 1994). the case study design adopts a grounded approach. judgment sampling was used when the cases were selected based on the main criteria: the entrepreneurs were in the start-up stage and were active in the creative industry. six entrepreneurs, all women who started private businesses, were selected as the sample as suggested by eisenhart (1989a, 1989b) and by guest, bunce and johnson (2006). data was collected through semi-structured interviews for exploring business model design and management and the focus in managing business model components. each interview lasted an average of 90 minutes. the interview guide allowed the researchers to follow up on issues raised during the course of the interviews. data analysis the data analysis involved several steps. guided by strauss and corbin’s (1998) microanalysis recommendations, we examined the transcribed text line by line and thereby identifi ed several concepts that referred to business model management. we divided these concepts into categories and then identifi ed relations among the categories. our coding process was guided by two primary questions to balance richness and direction: (1) what business model aspects do the entrepreneurs focus in their early start-up stages? (2) what business model aspects do entrepreneurs consider signifi cant when they launch their businesses on the market arena? these questions allowed us to identify key characteristics of business model management in early start-up stages. this enabled us to focus on the business model management processes involved when entrepreneurs manage early critical actions and how the entrepreneurs orient themselves in their business model management. each researcher coded the transcriptions individually. the purpose of this step was to identify themes and constructs. we scanned the data for material related to business model components. we continued by comparing and discussing the coding in the research group. this procedure of involving all researchers in the work with coding and analysis ensured that diff erent perspectives were captured when the data was interpreted and making a more objective view possible (eisenhardt, 1989a, 1989b; eisenhardt and graebner, 2007; miles and huberman, 1994). we noticed high consistency, which we believe strengthened the internal validity (gibbert et al., 2008). as a result, the core groups of business model management and several concepts for each business model component were identifi ed, and we could thus identify core groups of business model management in the early stages (denzin and lincoln, 1994). we thus used code schemas to compare and categorize the identifi ed concepts (miles and huberman, 1994). consistent with recommendations from previous research, the patterns in the empirical material were compared to predicted patterns found in the literature (denzin and lincoln, 1994; eisenhardt, 1989a, 1989b). this approach contributed to emergent theory (yin, 2003). empirical fi ndings four main business modeling components and management in the early stages in general, the business models included four main components: (1) infrastructure (key activities, key resources, key actors), (2) customers (segments, channels, relations), (3) fi nancial (capital structure, revenue, costs), and (4) off erings. in the next section, we describe how the entrepreneurs focused their business model management in the early stages to cope with uncertainties. business model management of infrastructure (key activities, key resources, key actors) mobilizing resources by resorting to domestic work space all the entrepreneurs used their domestic space to run their business but aimed to use business properties in the future when their ventures can carry the costs. example expressions were for instance, “i want to have my own studio, but while starting, i work from home so that i don’t take on large costs until i see how the business goes.” this entrepreneur added, “i would prefer to work at an incubator because it is boring to work all by yourself. so, i would rather work in a context with other businesses so that we can push each other.” another entrepreneur stated, “i work mostly out of my home, article_5_1_rev.indd 4 5/26/2017 9:38:47 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 5 journal of business models (2017), vol. 5, no. 1, pp. 1-13 5 but i intend to get a studio in the future when i make enough money. that is critical for the long-term perspective for the business.” similarly, another entrepreneur said, “i have my offi ce at home and do all business administrative work at home because i cannot aff ord rent for a studio yet.” another entrepreneur solved the need for business space by using a home, just not her own. she said, “i rent my studio from my mother-inlaw and father-in-law at a low cost. it’s a small cottage outside their house.” another entrepreneur has made the journey and moved her business out of her home. she said, “during last year, i worked completely out of my home, but now i can aff ord a studio so i only do administrative work at home.” thus, working out of one’s home at the start appears to be a resourcemobilizing practice to release fi nancial cash pressure in business model management, a focus we refer to as mobilizing resources by resorting to domestic work space and consequently creating fi nancial slack while simultaneously arranging for production space. mobilizing production rerouting disposition for early-stage business model management of production, a typical focus expressed referred to what we call mobilizing production rerouting disposition. when focusing on current mobilization of production resources, the entrepreneurs referred to temporary solutions to avoid the fi nancial risks of permanent employees. for instance, one entrepreneur said: “i don’t want to employ anyone because it includes more responsibility than buying a service when needed. when i buy a service, i can end it whenever if my business isn’t going well. if i employ someone, i put more at risk.” another entrepreneur likewise stated, “if i have a large order, i prefer to hire extra personnel temporarily and not employ anyone permanently because i don’t know yet if i can aff ord employees.” yet another entrepreneur said, “if i get an order and i see that i won’t make the deadline, i use my sister to cope. she helps me out when i need help temporarily, and therefore, i don’t have to take such great fi nancial risks.” when focusing on future mobilization of production resources, much is linked to getting the right connections and outsourcing and contracting production. one entrepreneur for example said: “in time, i will have my design produced by a factory, and i will work only with design and product development. when i have established contacts with retailers, i will know better in advance how much i should produce of a product and be able to make more exact orders from factories.” similarly, another entrepreneur said, “i will have ongoing production, and some parts of the production i will buy externally.” another entrepreneur likewise concluded, “i decided to buy parts of the production. if i manage to make my business thrive, i need to buy at least parts of the production.” an additional entrepreneur discussed her production and how to mobilize resources for such business model management by stating, “if i contracted out all my production, that would open a whole new door, but i don’t know what that will cost. i need to talk to someone who could energize me to take that next step.” thus, the focus in current and future production is mobilizing to expand production, and initially, temporary solutions are used while outsourcing and contracting are considered a feasible future route in their business model management. they also hinted at the need for external advice on how to move to a contracting situation. thus, the focus is on avoiding fi nancial risks by using solutions that enable fi nancial slack and access competence for making the production rerouting choices. mobilizing resources via external competence mobilizing resources via external competence for production was also depicted. example expressions were for instance, “i have had different mentors who have supported and guided me when i started production. i can ask her about anything regarding business venturing.” another entrepreneur likewise stated, “i have a contact who is famous for her designs, and i can call her when i need advice or to get suggestions about whom to contact in a certain matter.” similarly, other entrepreneurs emphasized their family members were mentors. one entrepreneur stated, “my sisters are active in my area of expertise, and they are truly my mentors.” another entrepreneur said, “i have a great husband, motherin-law and father-in-law. they really support me, and my sister-in-law really helps me, and my distant family are also supportive.” similarly another entrepreneur said, “my brother and my aunt have their article_5_1_rev.indd 5 5/26/2017 9:38:50 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 6 journal of business models (2017), vol. 5, no. 1, pp. 1-13 6 own businesses, which gives me the opportunity to ask them about a lot, like about taxes, and that is reassuring.” one entrepreneur said, “the network of women entrepreneurs that i am in is really valuable. we inspire each other, and all are active, and i got so much out of it. when i test an idea in the group, i get their help by putting me in contact with good people for my idea.” thus, networks and mentors are pivotal external competence resources focused on mobilizing knowledge resources in early stage business model management. importantly, using such close network contacts provided financial cash relief. typically, family members were used at no or low cost. one entrepreneur said, “i have people who i can use to check the quality of my products. my brother does it for free, and other relatives also help out for free when i need help.” another entrepreneur stated, “i use my family as ‘slaves’ [laughing]. i make them a good dinner in return.” yet another entrepreneur said, “when i am in production, my sister-in-law helps me. she helps out a lot, and in return, she gets some of my design products.” thus, using their network to get help with production for no or low cost or paying with alternative means appears to be the focused in business model management in early stages. this focus creates financial slack. bartering to mobilize fi nancial cash release bartering is an activity the entrepreneurs stated as an important focus of their business model management to release fi nancial pressure in the business and thus create fi nancial slack. for example, an entrepreneur stated, “i trade services with other businesses, not on a large scale, but one that lowers my costs.” another said, “i trade products with other businesses, and that helps keep costs down.” similarly, another stated, “i get help from a person doing my taxes, and in return, i do design services for her for free. so, we do not pay each other.” likewise, another entrepreneur said, “a friend of mine helps me a lot, and i help her, as friends. if she sends me an invoice, she may charge for one hour, but i know that she has worked much more than that.” thus, engaging in barter activities to release cash resources occurs in early stage business model management, which contributes to creating fi nancial slack. business model management of customers (channels, segments, relations) in the second component, customers, aspects of segments and channels appear to be central to focus on in business model management in early stages. the business model management meant to mitigate uncertainties and capture potential in the market is presented below. mobilizing for multiple market channels an important focus on market channels was typically expressed, which we refer to as mobilizing for multiple market channels. for instance, one entrepreneur said, “i will have my own webpage, and i will use retail stores, established stores and others’ web pages to reach my customers,” which shows the use of multiple market channels. similarly, another entrepreneur said: “i need to display my products, and i will have my own webpage to do that. on top of that, i expect the mouthto-mouth method to be eff ective and to use existing and established channels and to let the right persons know about the business. i will also display at web hotels.” likewise, another entrepreneur noted: ”i have my own web page, but until it is established, i will sell via retailers and shops, as well as be part of others’ web shops and their assortment. i might also just use my own web page as a retail window to exhibit/display my products and then sell them via retailers.” another entrepreneur said: “i have used the mouth-to-mouth method, and it is a really good method. happy customers talked about my products and return to me when they want the product that i produce. i don’t have a web page, but i am considering developing one now that i have conducted market research.” others noticed a need for advice for how to make their market channels work better. one entrepreneur said, “i realize i need help with marketing, which stores to turn to. i still don’t have a store that retails my products.” the entrepreneur added, “i have been displaying at museums, but perhaps my target customers are not those who go to museums. i think i need to discuss article_5_1_rev.indd 6 5/26/2017 9:38:52 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 7 journal of business models (2017), vol. 5, no. 1, pp. 1-13 7 more about where to display with my mentor.” thus, using multiple market channels to reach customers appears to be a focus in business model management in early stages and the need to mobilize external competence in designing an appropriate mix of multiple market channels is noticed. mobilizing fi nancial cash resources through customer sourcing to manage production, a typical focus was to mobilize fi nancing through customers, what we refer to as mobilizing fi nancial cash resources through customer sourcing either by partial invoicing or advanced payment to ease the fi nancial pressure in their business models and thus create fi nancial slack. as an example of focusing on fi nancial aspects with customers, an entrepreneur said, “when i take on long and large orders, i send partial invoices to cover cash needs over time.” another entrepreneur said, “i always request advance payment for all products that i design and produce, about a third of the fi nal sum.” another entrepreneur added, “if i take on a large order, the customer has to pay in advance.” yet another entrepreneur stated, “i request payment up front, but i do give a discount if customers pay up front.” thus, using customers as a fi nancial source to ease the pressure on cash requirement appears to be focused in business model management in early stages, which contributes to creating fi nancial slack. financial component: revenue and costs the third component of business model management is the fi nancial component, and it refers generally to fi nancial choices, fi nancial strategy and capital structure. overall, this component is central in the early stages. the focus is fi nancing alternatives and the expected eff ects of fi nancial choices rather than on calculations and discussing fi nancial ratios and fi nancial eff ects. a dominant part is the focus on managing cash fl ow. raising government funding an important focus of the fi nancial component was to raise government funding as a way to manage fi nancial risks in early stage business model management. for instance, one entrepreneur said: “i intend to apply for governmental start-up fi nancial support because i need to fi nance my business, and the conditions for government funding are good, which is why i am reluctant to apply for a regular bank loan. i can let my business grow bit by bit instead of taking on a large bank loan.” another entrepreneur said, “i intend to apply for government fi nancial support, both loans and entrepreneurship scholarships, for investments since i heard that another entrepreneur in my network got it, so i thought that i may also get it.” likewise, another entrepreneur stated, “if i need external fi nancing, i would contact [a government funding agency] to get fi nancial help; that is the way i would like to do it.” yet another entrepreneur said, “i would not go to my family or friends or the banks, but i would try to get government fi nancing.” for some who had already applied for funding, government funding is the only option that allowed them to expand their business. one entrepreneur for instance said: “the only fi nancing i got was government fi nancing for start-ups and for buying machinery for my production. but i don’t want to take on bank loans. they seem too enormous to commit to. i don’t want to take on too much debt.” an entrepreneur said, “i have had a government scholarship for two years, and due to that, i have been able to put a lot of eff ort into product development and marketing.” thus, raising government funding seems to be an important source of funding in early stages and focused in business model management, which contributes to creating fi nancial slack. merging private fi nancing with business fi nancing merging private fi nancing with business fi nancing was typically considered important to focus on in early stage business model management, by either initially retaining some of or all of one’s salary to reinvest the capital in the business instead or using own private savings as funding sources to cover initial business expenses. an example statement is, “i will use my own savings, but only so that i can get my business going.” similarly, another entrepreneur stated, “i don’t have a salary yet. i am using that capital to invest in equipment instead.” likewise, another entrepreneur said, article_5_1_rev.indd 7 5/26/2017 9:38:55 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 8 journal of business models (2017), vol. 5, no. 1, pp. 1-13 8 “what i earn in the business i will not take out as salary. i will reinvest it until i see that the business is up and running.” these merging activities of private and business fi nancing seem to be temporary solutions, and some entrepreneurs had already moved beyond those solutions. one entrepreneur for instance stated, “i often need to withhold my salary or pay myself a lower salary than i intended, but i have come so far that i no longer need to use my private savings for investments in the business.” similarly, another entrepreneur said, “in the very beginning, i often used my private savings, but that is not so common now after i managed to break even.” thus, merging private and business fi nancing by withholding one’s own salary to use for business investments or using private savings for business expenses are focused in early stage business model management which shows the focus on creating fi nancial slack. product component: off ering the fourth component includes product and service off ering aspects. these aspects focus on building trustworthiness and potential of the business (i.e., the business’s off erings) by developing convincing off erings. staying creative while capitalizing on standardized products although a few aspects of the product component are explicit and include development level and time to market, the product mix and specifi cally how to balance custom off erings and standardized products is emphasized. such aspects were typically expressed. one entrepreneur for instance stated: “i have thought about having a web shop, but i need to have additional standard products to sell via that site and be prepared to produce those items all the time. it won’t work unless i have an assortment to sell. until then, mixing standard products with custom products helps reach viable turnover and profi t levels . . . at the same time, i want to make custom products for customer-specifi c orders. i can invest my heart and soul in doing that.” an example statement that mirrors that producing custom-made products fosters creativity is: “i design and i produce high-quality products in natural materials, and all are custom-made. however, i have four standard products that i am considering getting retailers for. i have made a large investment in two of the standard products, because my business’s liquidity could take the investment.” yet another entrepreneur stated, “i produce customerspecifi c products but have a basic design for them which helps me to reach suffi cient profi ts.” these focuses infl uence the product and service mix and thus the entrepreneurs’ business model management. an entrepreneur added: “it is easy to sell cultural products, but the manufacturing process is complex, and parts of it are very timeconsuming. no one understands if you price your products according to the process. that is why i decided to use material that does not require such high cost processes.” these statements highlight a focus on striving for viability by off ering a mix of standard products (which increase profi ts and turnover) and custom products (which maintain creativity levels and thus competence acquisition) in early stage business model management, a focus we refer to as staying creative while capitalizing on standardized products. discussion this research provides fi ndings that support the argument that when studying small businesses’ business model management behavior during the early stages, it is important to acknowledge the resource activities to gain a richer understanding of the entrepreneurial process. our study depicts business model management of the infrastructure component as involving mainly a fi nancial focus by delimiting cash stock and fl ow out of the business and with some focus on competence acquisition. these focuses are labeled 1) mobilizing resources by resorting to domestic work space, 2) mobilizing production rerouting disposition, 3) mobilizing resources via external competence, and 4) bartering to mobilize fi nancial cash release. business model management of the customer component involves adopting multiple market channels and increasing cash stock and fl ow into the business. we refer to such focus as 1) mobilizing for multiple market channels, and 2) mobilizing fi nancial cash resources with customer sourcing. business model management of the fi nancial component involves a focus on the fi nancial stock and fl ow article_5_1_rev.indd 8 5/26/2017 9:38:57 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 9 journal of business models (2017), vol. 5, no. 1, pp. 1-13 9 into the business. we call these focuses 1) raising government funding and 2) merging private fi nancing with business fi nancing. finally, business model management of the product component involves how to manage the need for revenue while maintaining the creativity of the business which thus is a focus on stock, and fl ow of cash and competence in the business. we refer to this as 1) staying creative while capitalizing on standardized products. as such, this study is both a response to the absence of research on early stage business model management activities and an attempt to capture the focus that characterizes business model management behavior in the early stages of start-ups. the empirical fi ndings highlight that cash and competence appear to be essential focuses in managing business model components in early stages. therefore, mobilizing resources is central in the early stages of business model management. this study is anchored in penrose’s (1959) work on resource acquisition and organization process and the business model’s stock and fl ow of resources that follows from ventures’ aspirations for sustainability and growth. although resource-based theory proposes that a business’s competitiveness is driven by the acquisition and organization of resources, the theory off ers little guidance in understanding why some entrepreneurial businesses prosper in the marketplace with severe and persistent resource constraints. the fi ndings of this study support the notion that selective focus in business model management activities overcomes these constraints. in fact, this study shows that small businesses can deal with their resource needs by using resources that are not controlled by the business, for example, by using private fi nancial means, customers as fi nancial sources and external competence. by building on penrose’s work, this study showed that entrepreneurs create resource slack, specifi cally fi nancial slack, which allows businesses to carve out a competitive position in the marketplace by practicing district focus on business model design and management. such resource slack creates opportunities for venture sustainability and growth because the resources can be directed toward new ends (cf. mishina et al., 2004). by focusing on resource slack in early business model management, entrepreneurs are able to establish stability in the business (dalborg et al., 2012). thus, the fi ndings of this study imply that early-stage small ventures may benefi t from developing a repertoire of business model management activities to continuously manage the ventures’ resource needs. limitations and future research all empirical studies have limitations, and our eff ort to understand and conceptualize entrepreneurs’ focus on business model activities in early stages is no exception. we identify some limitations that warrants for further research. the focus on swedish entrepreneurs might limit the generalization of our fi ndings. nevertheless, we believe that the fi ndings are applicable to entrepreneurs’ business model activities in diff erent countries that are in early stages involving high levels of uncertainty. in addition, the focus on the creative industry may also limit the generalization of the fi ndings. however, the major concepts generated in this study are relevant to all types of entrepreneurs, and business model processes are largely convertible across cultures and nations. future research can enrich the context of the present study through a broader design by including a larger number of entrepreneurs in sweden and elsewhere, including entrepreneurs active in diff erent types of industries. an increased focus on these types of studies could lead to interesting theoretical knowledge in many areas beyond business venturing. thus, we recommend future studies to move beyond business model structures toward understanding business model processes and how entrepreneurs shape focus and activities in all stages of business venturing. more knowledge is needed on how, why, and in what manner entrepreneurs manage their business models. although we suggest a repertoire of business model activities in the early stages, future studies should investigate how such activities come about in entrepreneurs’ decisionmaking. such studies could lead to interesting insights. article_5_1_rev.indd 9 5/26/2017 9:39:00 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 10 journal of business models (2017), vol. 5, no. 1, pp. 1-13 10 references ahokangas, p. & myllykoski, j. (2014), the practice of creating and transforming a business model, journal of business models, vol. 2, no. 1, pp. 6-18. amit, r. & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6-7, pp. 493–520. barney, j.b. (1991), firm resources and sustained competitive advantage, journal of management, vol. 17, pp. 99-120. chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2, pp. 354-363. chesbrough, h. & rosenbloom, r.s. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, vol. 11, no. 3, pp. 529-555. chroneer, d., johansson, j., and malmstrom, m. (2015), business model management typologies-cognitive mapping of business model landscapes. international journal of business and management, vol. 10, no. 3, pp. 67-80. dalborg, c., von friedrichs, y. and wincent, j. (2012), beyond the numbers: qualitative growth in women’s businesses, international journal of gender and entrepreneurship, vol. 4, no. 3, pp. 289-315. denzin, n.k. & lincoln, y.s. (2000), handbook of qualitative research, second edition, sage publications, thousand oaks. eisenhardt, k.m. (1989a), building theories from case study research, academy of management review, vol. 14, pp. 532-550. eisenhardt, k.m. (1989b), agency theory: an assessment and review, academy of management review, vol. 14, pp. 57-74. eisenhardt, k.m. & graebner, m.e. (2007), theory building from cases: opportunities and challenges, academy of management journal, vol. 50, no. 1, pp. 25-32. garnsey, e., lorenzoni, g. and ferriani, s. (2008), speciation through entrepreneurial spin-off : the acorn-arm story, research policy, vol. 37, no. 2, pp. 210-224. gibbert, m., ruigrok, w. and wicki, b. (2008), research notes and commentaries: what passes as a rigorous case study, strategic management journal, vol. 29, pp. 1465-1474. guest, g., bunce, a. and johnson, l. (2006), how many interviews are enough? an experiment with data saturation and variability, field methods, vol. 18, pp. 59-82. johansson, m. & abrahamsson, j.t. (2014), competing with the use of business model innovation an exploratory case study of the journey of born global fi rms, journal of business models, vol. 2, no. 1, pp. 33-55. linder, j., and cantrell, s. (2000), so what is a business model anyway. accenture institute for high performance business. article_5_1_rev.indd 10 5/26/2017 9:39:02 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 11 journal of business models (2017), vol. 5, no. 1, pp. 1-13 11 magretta, j. (2002), why business models matter, harvard business review, vol. 80, pp. 86-92. mahadevan, b. (2000), business models for internet-based e-commerce: an anatomy, california management review, vol. 42, no. 4, pp. 55-69. malmström, m. m., and johansson, j. (2016), social exchange in collaborative innovation: maker or breaker. journal of innovation and entrepreneurship, vol. 5, no. 1, 1-20. malmström, m., johansson, j., and wincent, j. (2015), cognitive constructions of low-profi t and high-profi t business models: a repertory grid study of serial entrepreneurs. entrepreneurship theory and practice, vol. 39, no. 5, pp. 1083-1109. malmström, m., wincent, j. and johansson, j. (2013), managing competence acquisition and fi nancial performance: an empirical study of how small fi rms use competence acquisition strategies, journal of engineering and technology management, vol. 30, no. 4, pp. 327-349. markides, c. (2006). disruptive innovation: in need of better theory. journal of product innovation management, vol. 23, no. 1, pp. 19-25. mcgrath, r. g. (2010), business models: a discovery driven approach. long range planning, vol. 43, no. 2, pp. 247-261. miles, m.b. & huberman, m.a. (1994), an expanded sourcebook qualitative data analysis, second edition, sage publications, thousand oaks. mitchell, r.k., busenitz, l.w., lant, t., mcdougall, p.p., morse, e.a. and smith, j.b. (2002), toward a theory of entrepreneurial cognition: rethinking the people side of entrepreneurship research, entrepreneurship theory and practice, vol. 27, no. 2, pp. 93-104. mishina, y., pollock, t.g. and porac, j.f. (2004), are more resources always better for growth? resource stickiness in market and product expansion, strategic management journal, vol. 25, no. 12, pp. 1179-1197. morris, m., schindehutte, m. and allen, j. (2005), the entrepreneur’s business model: toward a unifi ed perspective, journal of business research, vol. 58, pp. 726-735. onetti, a., zucchella, a., jones, m. v., and mcdougall-covin, p. p. (2012), internationalization, innovation and entrepreneurship: business models for new technology-based fi rms. journal of management & governance, vol. 16, no. 3, pp. 337-368. osterwalder, a., pigneur, y. and tucci, c.l. (2005), clarifying business models: origins, present, and future of the concept, communications of the association for information systems, vol. 16, pp. 1-25. osterwalder, a., and pigneur, y. (2013), designing business models and similar strategic objects: the contribution of is. journal of the association for information systems, vol. 14, no. 5, pp. 237. pateli, a. g., and giaglis, g. m. (2004), a research framework for analysing ebusiness models. european journal of information systems, vol. 13, no. 4, pp. 302-314. penrose, e. (1959), the theory of the growth of the firm, oxford university press, cambridge. article_5_1_rev.indd 11 5/26/2017 9:39:05 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 12 journal of business models (2017), vol. 5, no. 1, pp. 1-13 12 richardson, j. (2008), the business model: an integrative framework for strategy execution. strategic change, vol. 17, no. 5-6, pp. 133-144. shafer, s.m., smith, h.j. and linder, j.c. (2005), the power of business models, business horizons, vol. 48, no. 3, pp. 199-207. sosna, m., trevinyo-rodríguez, r. n., and velamuri, s. r. (2010), business model innovation through trial-and-error learning: the naturhouse case. long range planning, vol. 43, no. 2, pp. 383-407. strauss, a. & corbin, j. (1990), basics of qualitative research: grounded theory procedures and techniques, sage publications, newbury park. teece, d.j. (1988), capturing value from technological innovation: integration, strategic partnering, and licensing decisions, interfaces, vol. 18, pp. 46-61. tikkanen, h., lamberg, j. a., parvinen, p., and kallunki, j. p. (2005), managerial cognition, action and the business model of the fi rm. management decision, vol. 43, no. 6, pp. 789-809. weick, k.e. (1993), the collapse of sensemaking in organizations: the mann gulch disaster, administrative science quarterly, vol. 38, pp. 628-652. yin, r.k. (1994), case study research–design and methods, second edition, applied social research methods series, vol. 5, sage publications, thousand oaks. zott, c., amit, r., and massa, l. (2011), the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp. 1019-1042. article_5_1_rev.indd 12 5/26/2017 9:39:07 pm journal of business models (2017), vol. 5, no. 1, pp. 1-13 13 journal of business models (2017), vol. 5, no. 1, pp. 1-13 13 malin malmström is a professor of entrepreneurship and innovation at luleå university of technology. much of her research revolves around behavioral, social, and organizational aspects related to business models and performance consequences. her research interests relate to cognitive foundations, competences and experiences in entrepreneurship, and innovation. jeaneth johansson is a professor of accounting and control at luleå university of technology. her research interests are in the fi elds of fi nancial decision-making, fi nancial accounting, entrepreneurship, innovation and business models. about the authors article_5_1_rev.indd 13 5/26/2017 9:39:10 pm journal of business models (2019), vol. 7, no. 2, pp. 37-52 37 the effect of business model innovation announcements on share prices — a study of us listed technology firms jan abrahamsson1, anastasia a. maga2, and christopher nicol3 abstract purpose: the purpose of this paper is to examine the immediate effect of different types of business model innovation behavior by us listed technology firms on the market performance of equity securities, in this case the share prices of the firms in question. design/methodology/approach: this study employs a quantitative research design, based on stock market data of us listed technology firms. a sample of 147 firms were chosen, considering the time period of 2014-2016. the stock market data was then matched with secondary data, outlining the firms’ business model innovation behavior. findings: our findings indicate that the stock market awards frequent business model innovators more than less frequent business model innovators, controlling for factors such as sub-industry belonging and proxies for size of the firm. research limitations/implications: the study is one of the few that connects business model innovation with stock market performance and thus contributes to research by empirically connecting business model innovation with different performance metrics. obviously, the study has inherent limitations in terms of single industry, a single stock market and variables used. practical implications: practical implications to be drawn from this study includes evidence towards how the stock market values and awards announcements of business model innovations, which is of value for corporate executives, investors and stock market analysts alike. originality/value: our study brings new insights into how business model innovation is perceived by stock market analysts and investors and consequently how announcing business model innovations can be used as a managerial tool by management to improve the firm’s performance on capital markets. please cite this paper as: abrahamsson, j., maga, a. a. and nicol, c. (2019), the effect of business model innovation announcements on share prices – a study of us listed technology firms, vol. 7, no. 2, pp. 35-50 keywords: business models, business model innovation, stock market, share prices, high-tech, innovation, business model portfolios 1 management consultant 2 stamford international university, bangkok 3 umeå school of buisness and economics journal of business models (2019), vol. 7, no. 2, pp. 37-52 38 introduction over the past decades, several studies and metastudies (e.g. rosenbusch et al. 2011) have indicated an overall positive connection between firms’ innovative behavior and their performance metrics. that is, in terms of their financial performance, extended market share or international expansion, among other things. while many previous studies have focused upon issues including r&d expenditure as a proxy for innovation, or perhaps on the release of new products and linked these types of innovative behavior to performance, significantly fewer studies have looked at business model innovation (bmi) and its contribution to a firm’s performance on a larger scale. business models are a conceptualization or a description of how a firm do business (zott and amit 2007) and consist of several inter-related dimensions, such as value creation; value delivery and value capture, as well as, frequently, value proposition and value network (e.g. shafer et al. 2004; osterwalder and pigneur 2004; clauss 2016). business model innovation is, consequently, a change that the focal firm undergoes in either one or several of these dimensions, or its accompanying resources, capabilities or external relationships (gerasymenko et al. 2015). a plethora of case study evidence on business model innovation gives credence to the transformative effects that business model innovations can have for a firm, in terms of new business opportunities are being captured, new revenue streams being opened and increased profitability (abrahamsson 2016). while business models and business model innovation have often focused on startups or other forms of younger, entrepreneurial ventures (e.g. johansson and abrahamsson 2014; malmström and johansson 2017), its importance is arguably at least at the same level for more established firms. furthermore, a study conducted by ibm in 2006 found that companies with a focus on business model innovation had an annual compound growth rate of five times, or more, than firms that have an innovation focus geared towards either operations or new products and services. similarly, kim and min (2015) underline how adding new business models positively affects incumbent firms’ performance, contingent on the right alignment of potentially conflicting assets between the new and the old business model. moreover, zott and amit (2007) further emphasize the performance effect of different business models, discovering that innovative business models positively affects firms’ stock market value. furthermore, the authors emphasize business model innovation as a source of wealth creation for firms. established incumbent firms can often be found as publicly listed companies on the stock market. any significant business model relevant changes in company operations must, therefore, be communicated to the public. provided that the performance effects of business model innovation are often assumed to be positive, such news or announcements ought to positively affect the firm share price, assuming an efficient or at least a semi-efficient market. in some instances, however, business model innovation can pose challenges for companies. for instance, by adding a new business model which yield conflicting assets for the focal firm. this can be exemplified by bringing a new online business model into a brick-and-mortar company. as such, assets are not complimentary in regard to the new and the old business model, which can have negative potential business performance impacts (webb 2002; kim and min 2015) and thus potentially influence stock market performance negatively as well. previous studies have examined the stock market impact of non-financial information announcements (eccles, krzus, and serafeim, 2011) in a similar fashion; such as that related to governance and sustainability. these studies found positive effects, although no extant research focused on business model innovation information, which we argue, might create an immediate effect on the market performance of listed companies’ shares. while business model innovation can be challenging and a risk to undertake (i.e. kim and min 2015), the risk of not undertaking it, can be worse. “… the greatest innovation risk a company can take is to decide not to create new businesses that decouple the company’s future from that of its current business units”. (christensen et al. 2016, p. 40) in particular, we are interested in the reactions from the buy-side to announcements of business model innovation, causing an outperformance in share prices of companies. market performance at the securities level has been viewed as one of the more immediate journal of business models (2019), vol. 7, no. 2, pp. 37-52 39 indicators of market interest especially from the buyside (derwall, j., koedijk, k., & ter horst, j., 2010; hong & kacperczyk, 2009 etc.) and can be taken as a measure of the business model innovation expectation effect. it needs to be noted that along with the significance of market performance for the buy side, the sole motivation for purchase being the expectation of future appreciation of the asset and the subsequent sell, there is no conclusive evidence linking the investor perception of bmi, or any other non-financial news announcement, to an actual improvement in the firm’s operations or competitive position (barber, heath, odean, 2003). subsequently, as long as the firm’s dividend policy thus becomes irrelevant the possible actual improvement is largely redundant for the buy side as well (miller and modigliani, 1961). the purpose of this paper is, therefore, to examine the immediate effect of business model innovation behavior on the market performance of equity securities. hence, our explicit research question is: what are the stock market performance implications of announcements of business model innovation? importantly, we appreciate that no organization exists within a vacuum, that is other elements such as strategy, competitive advantage and positioning are also highly relevant to their success. these are, however, beyond the scope of our focus. concretely, we study a random sample of 147 market listed technology companies from the usa and the firms’ business model innovation behavior within the time period of 20142016, with quarterly aggregated stock market data. the paper is organized as follows: we review the extant literature on the object of study, followed by describing the research methodology, and subsequently display the results of the study, which are analyzed and discussed. finally, we will deliver relevant further recommendations for academia and managerial practice, based on our findings and analysis. literature review business models and business model innovation whilst business models in terms of creation, delivery, and appropriation of value, have arguably always been tacitly integrated in the economics of doing business (teece 2010), it is only in recent decades that the concepts have gained more conceptual clarity within academia. the modern wave of business model research chiefly emanates from the it boom at the end of the last millennium when new technology (fueled by the emergence of the internet and e-business) necessitated new business models to explain how companies would create and capture value from the technical innovations brought to the market (magretta 2002; zott and amit 2011). business models can broadly be viewed upon as representations of how firms do business (zott and amit 2010; 2013). however, definitions that are more precise have offered differing perspectives over time. shafer et al. (2005), for example, view business models as the following: “we define a business model as a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network” (shafer et al. 2005, p. 202). doganova and eyquem-renault (2009) however, consider business models to be a scale model of a new venture, which has the purpose of demonstrating the venture’s feasibility and can be facilitated to attract necessary external partnerships (financing, customers, suppliers etc.). other scholars, however, such as osterwalder et al. (2005) and teece (2010) connect elements of a business model back to the underlying mechanisms of value creation and value capturing provided by shafer et al. (2005). thus, they deliver a more tangible depiction of business models than the scale model representation of a venture, as suggested by doganova and eyquem-renault (2009). intrinsically, osterwalder et al. (2005) and teece (2010) share a broadly similar view, as they essentially view business models as the design of how to identify, create and deliver value and how to capture parts of this value (generated by a particular business model) back to the focal firm. beyond what can be considered the core dimensions of a how business model (i.e. how value is created, delivered and captured) perspectives on value propositions and value networks can also be incorporated (i.e. shafer et al. 2005; clauss 2016). the value proposition is a representation of the unique customer value that the firm’s business model brings to the customer and subsequently which customer pains it will solve journal of business models (2019), vol. 7, no. 2, pp. 37-52 40 (chesbrough 2010; lindgren et al. 2010; clauss 2016). the notion of value network highlights that creation and capturing of value takes place in a context of partnerships, external to the focal firm. these include suppliers, customers and other stakeholders in the network or business ecosystem (shafer et al. 2005; lindgren et al. 2010; autio et al. 2017). business models cannot, however, be static structures because their ability to create and capture value can greatly be diminished, especially in dynamic contexts such as high technology, where business model innovation should accompany technological innovation for the focal firm (teece 2010). what constitutes an actual business model innovation, and not just an incremental change or adjustment of the business model, has been discussed in academia (e.g. björkdahl and holmen 2013; gerasymenko et al. 2015). gerasymenko et al. (2015) argue that a company needs to undergo what they call “substantial business model change” in order that the change to the current practice is enough to be a real relevant business model innovation. as such, substantial business model change refers not only to the generation of revenue or cost management (i.e. creating and capturing value), but also change that affects the firm’s core resources, capabilities or external relationships such as the value network and the focal firm’s position within the value network (gerasymenko et al. 2015). business model innovation can, moreover, emerge organically within an organization, through the deployment of dynamic capabilities (e.g. teece 2010; al-aali and teece 2013; abrahamsson 2016) for example. to exemplify, business model innovation can disrupt an existing industry (christensen et al. 2016) by bringing in a new business model, such as airbnb connecting apartment owners with visitors (ritter and lettl 2017) and thus disrupting the hospitality industry by brining buyers and sellers together on a digital platform. however, perhaps more common are business models which are new for a focal company. a well-known example of this is amazon, innovating its portfolio of business models to encompass not only e-commerce, but also b2b focused cloud-based web services (ritala et al. 2014). the above examples fit into the definition of substantial business model innovation, as they imply new management of costs and revenues, new value network relationships, new resources and capabilities. for the purpose of this study, these are the types of substantial business model innovations we seek to distill, as they are the ones most likely to impact performance, in our case stock market performance. while for instance a minor change in customer segments targeted can constitute a business model innovation (osterwalder and pigneur 2010), it can scarcely be considered a substantial one and would likely have a relatively small impact on stock market performance. hence, only business model changes that can be considered substantial business model innovations are considered in this paper. this also excludes mere product innovations, such as releasing a new or incrementally updated product or product lines. in addition to developing business models organically, firms can also add new business models by engaging in mergers and acquisitions (m&as) and, thus, develop portfolios of business models (christensen et al. 2016; aversa et al. 2017). here, an acquired firm’s business model is used in parallel to the acquirer’s business model. such an addition of an “acquired” business model can, of course, also be considered substantial business model innovation for the acquiring firm provided it is substantially different from the firms’ existing business model(s). as argued by christensen et al. (2016), new business models through m&as can lead to internal disruption of the business, necessary for renewal and growth. stock market performance and business model innovation market performance at the securities level has been viewed as one of the more immediate indicators of market interest, especially from the buy-side (derwall, j., koedijk, k., & ter horst, j., 2010; hong & kacperczyk, 2009 etc.). special attention was paid to stock price volatility as an important factor in the comparison of risk and reward between stocks and other securities (ambrosio, 2008). historical data on stock volatility can, thus, be taken as a measure of a companies’ performance and linked to independent variables, such as business model change. though current research lacks evidence of such a relationship, there have been attempts to prove the existence of such in adjacent areas. journal of business models (2019), vol. 7, no. 2, pp. 37-52 41 the extant research abounds in evidence of a relationship between innovation and market value. stock price volatility has been linked to innovative practices of firms. pakes (1981) finds a positive correlation between market value and patenting activity, whilst hall et al. (2005) relate stock performance to r&d practices. mazzucato (2006) examines how innovation dynamics affect expectations about future firm growth through stock volatility, where a significant relationship between the intensity of innovation and stock volatility is discovered. business model innovation can also be seen as a more sustainable form of innovation, which is more difficult for competitors to imitate or replicate than mere products or operational processes (amit and zott 2012), which should add to the attractiveness of business model innovation for stock market investors. as for innovation in business models, the current research lacks findings in this area. amit and zott (2009) explore the change in apple stock prices after the ipod business model was introduced, they disregard, however, the fact that a more significant change happened after the introduction of the second business model (iphone), which proves our position. to note, when referring to ipod and iphone here we are not referring to the products as such, but to the new business models and ecosystems surrounding these two products. the business model of itunes, that is the system for purchasing music for the ipod, for example. another is the integration between the app store and carrier partnerships creating the iphone’s surrounding business model. as such, apple is also a prime example of the adage of teece (2010), which is that technological innovation often is accompanied by business model innovation. consequently, the link between business model innovation (bmi) and share performance has not been established, instead of which the bmi engagement was linked to financial performance thus leaving the bmi-to-stock correlation an open question. however, as it is put by many the fluctuations of stock prices are not necessarily affected by companies’ financial performance, but rather by manipulations, rumors and speculation among the buy-side market participants (fenton o’creevy et al., 2005; mackenzie, 2006; shamsudin, mahmood, & ismail, f., 2013) thus, bmi (when announced) can have an immediate effect upon the share price. the link between non-financial information announcements and stock price fluctuation was proved in eccles, krzus, and serafeim (2011) and a number of other studies. additionally, kim and youm (2017) found that social media postings made by the focal company or its customers could influence analysts’ stock recommendations and, subsequently, the share value. such social media postings may for instance be concerning business model innovations. therefore, we conclude that market reactions should follow the announcements of significant business model changes. in summary, the market’s knowledge regarding business model innovation, in publicly listed firms, is likely to be an example of news and announcements that the market should react to positively. this is further supported by past research, highlighting links between business model innovation and different firm performance metrics (i.e. zott and amit 2007; kim and min 2015). evidence also points towards the fact that firms, repeatedly engaged in business model innovation, achieve higher growth in operating margins as compared to firms engaging in other types of innovative behavior, such as product innovation (ibm 2006). considering these arguments regarding stock market behavior and business model innovation, we present the following two hypotheses: hypothesis a: announcements of business model innovation have a positive effect on market performance of equity securities within high tech industries. hypothesis b: the amount of business model innovation announcements positively affects the market performance of equity securities within high tech industries. methodology the data used in this study comes from two different sources. first, the historical stock prices of us companies listed in financial markets were derived from bloomberg data terminal. second, bmi engagement by the chosen companies was identified through analyzing public announcements of business model innovation, published on the companies’ websites, press releases, business press articles and financial statements. the definition of bmi and, thus, the journal of business models (2019), vol. 7, no. 2, pp. 37-52 42 identification of bmi activities from the secondary data, was done by using the definition of substantial business model innovation, as provided by gerasymenko et al. (2015). i.e. focusing on business model change that influences how the focal firm generates revenues or manages its costs, but also considering areas such as core resources, competences/capabilities or relationships. it should also be noted that m&a activity could constitute a new business model, assuming the acquired firm has a different business model than the acquirer, which is in accordance with christensen et al. (2016). substantial business model innovation would hence not include, for instance, a change in customer segment targeted. nor release of new products or product lines, as that would be in the realm of product innovation (e.g. teece 2010; gerasymenko et al. 2015; abrahamsson et al. 2019). a sample of 147 companies publicly listed in the united states was randomly selected from 3000 listed technology firms, over the period of 2014 – 2016 by the quarter, derived from the bloomberg terminal software. bloomberg (2017) divides the technology sector into nine different sub-industries, namely technology hardware and storage, technology hardware and equipment, software and services, software, semiconductor and semiconductor equipment, it services, internet software and services, electronic equipment, instruments and components and communication equipment. the technology sector was chosen for its perceived high degree of change and potential for business model innovation. in other words, the rate of technological change in the industry should be matched by also announcing and implementing new business models often, in line with teece (2010). therefore, we chose the high-tech sector as a potentially fertile ground for this research endeavor. given the complexity of market performance and in response to calls for a more detailed assessment of multiple performance indicators (miller, washburn, & glick, 2013), we focus on 4 market performance indicators: exponential growth, cagr, earnings per share (eps), and volatility expressed by standard deviation. cagr – compound average growth rate used in investment as a measure of geometric progression, which assumes that a variable (say share price) grows at a constant rate of return compounded over a sample period of time (anson et al, 2010). the advantage of using cagr method is stated as a tool able to provide data on how the investment performed over a period of time provided the investment securities have the same starting date, thus cagr (ivesco). it is calculated as follows: cagr = [(vn/(v0))] ^(1/n) — 1 where vn is the ending value v0 is the beginning value n  is the number of steps (years/ time periods) between the values to compare exponential growth, that is predicting exponential growth by using existing data, is a pattern of data that shows greater increases with passing time, creating the curve of an exponential function. exponential growth formula has many uses in finance, financial modelling being only one example, stock prices on the other hand have only recently been discovered to demonstrate exponential growth patterns (jackwerth and rubinstein, 1996; stango and zinman, 2009; dempsey, 2015), where the growth rate proxies for expected return (leiss, nax, sornette, 2015). the formula for exponential growth of a variable x at the growth rate r, as time t goes on in discrete intervals, is x_t = x_0 [(1 + r)] ^t where x_0 is the value of x at time 0. the rate, thus, shows a growth trend over the measured time; the growth rate over 100% means that the stocks more than doubled in price over the period, the rate of 200% means tripling, etc. standard deviation of stock prices in finance, standard deviation is a commonly used statistical measure, which is applied to the annual rate of return of an investment; it shows historical volatility of the investment. the higher the standard deviation of a security journal of business models (2019), vol. 7, no. 2, pp. 37-52 43 the higher the price range of that security over time. it is calculated as follows: σ = √((∑(x – μ)2)/n), where x – price of individual stocks in the population μ – mean of the individual stock price over time n – number of stocks in population to test the hypotheses we need some additional controls, as a proxy for firm size we are using ‘market cap’, the measure considered to be forward-looking, market oriented, and involves firm growth opportunities and equity market condition (li, dang, 2015, 2018); and to avoid local effects we are using sub-industry dummies. the measures used have certain drawbacks when applied to investment securities historical prices. cagr does not show possible volatility and standard deviation does not show negative movements of security prices. to eliminate those drawbacks, we combine the measures and run multiple regression on standard deviation of stock prices to cagr to find the value of r, with stronger correlation of volatility to more positive growth indicating abnormal positive returns to market value. results to test the hypotheses, we specify and estimate a set of similarly unrelated regressions (sur) with market indicators as dependent variables (dvs) and bmi as core independent variable (iv), controlling for market capitalization and industry affiliation of the firm. the lack of other, especially general market, controls is based on our assumption of the efficiency of the us stock market, which implies that all relevant information immediately becomes reflected in the stock prices (fama, 1970, 1991, 1998) as later evidenced in malkiel (2003) and fenton o’creevy et al. (2005), which claim that the market price itself is a perfect gauge of all relevant information and the way market reacts to it. as market performance indicators are likely to be affected by the same unobservables, sur is a preferred specification as it allows to account for contemporaneous correlations (greene, 2012). we include market cap as a proxy for firm size (deangelo, deangelo, and stulz, 2006; dang and li, 2015, 2018) and sub-industry dummies to account for sector-specific effects – whilst all the firms in the sample belong to high technology class, the bmi effects are likely to depend on the specific line of business of each company. the results suggest that only two out of four models as significant at conventional level: dv1: growth (p=0.0162) and dv3: cagr (p=0.0045). both hypotheses are fully supported in these models as firms exhibiting high rates of business model innovation (bmi=2) exhibit higher growth (β=8.238, p<.1) and cagr (β= 0.020, p<.01) in comparison to firms with no or low levels of bmi. while we observe that rate of bmi is not reflected in share price volatility and earnings per share at conventional significance levels, the direction of the effect of bmi on earnings per share is in line with the expectations, as innovating multiple elements of the business model is positive (β=1.546) (table 1.). however, it should be noted that stock prices do not depend on the actual implementation of bmis in the companies (rather on their announcements) reflecting the market expectations of future bmi performance. the actual bmi performance is reflected in accounting results, which do not necessarily cause market reactions. thus, the announcements of bmi bear more significance to the buy-side market reactions. discussion this paper set out to investigate whether business model innovation (bmi) influences the market value of equity securities, in this case common stock, in the context of high technology firms publicly listed in the united states. as such, the paper has yielded several interesting findings, to be further discussed in this section. firstly, the announcement of a single new bmi announcement did not yield a strong positive reaction from the stock market across our four dependent variables. in fact, in some cases the responses to such an endeavor were seen as a negative by the stock market, as measured by the coefficient. however, for exponential growth and cumulative growth, we noted a positive relationship for single business model innovation, although not quite a statistically significant one. while this does not support our first hypothesis fully in terms journal of business models (2019), vol. 7, no. 2, pp. 37-52 44 m o d el 1 . d v 1: gr o w th m o d el 1 . d v 2: v o la ti li ty m o d el 3 . d v 3: c a g r m o d el 4 . d v 4 : e p st 12 m c o ef . s td . e rr . t p > t c o ef . s td . e rr . t p > t c o ef . s td . e rr . t p > t c o ef . s td . e rr . t p > t b m i 1 3. 4 6 8 4 .1 6 2 0 .8 30 0 .4 0 5 -0 .3 28 1. 6 6 1 -0 .2 0 0 0 .8 4 3 0 .0 10 0 .0 0 6 1. 53 0 0 .1 27 -0 .1 8 4 0 .5 9 4 -0 .3 10 0 .7 57 2 8 .2 38 4 .6 8 1 1. 76 0 0 .0 79 0 .8 0 0 1. 8 6 8 0 .4 30 0 .6 6 9 0 .0 20 0 .0 0 7 2. 8 10 0 .0 0 5 1. 54 6 0 .6 6 8 2. 31 0 0 .0 21 m ar k et ca p 0 .0 0 0 0 .0 0 0 0 .7 30 0 .4 6 6 0 .0 0 0 0 .0 0 0 0 .5 8 0 0 .5 6 2 0 .0 0 0 0 .0 0 0 1. 35 0 0 .1 78 0 .0 0 0 0 .0 0 0 1. 0 70 0 .2 8 4 s u b in d u st ry co m h 10 .1 4 7 12 .3 8 9 0 .8 20 0 .4 13 7. 0 0 2 4 .9 4 5 1. 4 20 0 .1 57 0 .0 4 2 0 .0 19 2. 20 0 0 .0 28 1. 6 6 3 1. 76 9 0 .9 4 0 0 .3 4 7 co m s 15 .6 97 13 .2 70 1. 18 0 0 .2 37 6 .8 74 5. 29 7 1. 30 0 0 .1 9 5 0 .0 38 0 .0 21 1. 8 4 0 0 .0 6 7 2. 15 8 1. 8 9 4 1. 14 0 0 .2 55 d e f 8 5. 51 1 23 .2 0 5 3. 6 9 0 0 .0 0 0 11 .0 0 1 9. 26 3 1. 19 0 0 .2 35 0 .0 19 0 .0 36 0 .5 4 0 0 .5 8 9 0 .0 0 9 3. 31 3 0 .0 0 0 0 .9 9 8 e c e -0 .2 8 6 23 .2 0 5 -0 .0 10 0 .9 9 0 -1 .9 6 7 9. 26 3 -0 .2 10 0 .8 32 0 .0 12 0 .0 36 0 .3 50 0 .7 30 0 .6 28 3. 31 3 0 .1 9 0 0 .8 50 e o e -0 .2 0 4 23 .2 0 5 -0 .0 10 0 .9 9 3 0 .0 9 5 9. 26 3 0 .0 10 0 .9 92 0 .0 25 0 .0 36 0 .7 0 0 0 .4 8 6 0 .9 72 3. 31 3 0 .2 9 0 0 .7 6 9 in t 12 .7 76 14 .0 30 0 .9 10 0 .3 6 3 7. 18 8 5. 6 0 0 1. 28 0 0 .2 0 0 0 .0 29 0 .0 22 1. 33 0 0 .1 8 5 -0 .2 50 2. 0 0 3 -0 .1 20 0 .9 0 1 s e m c 6 .1 4 0 12 .3 38 0 .5 0 0 0 .6 19 7. 8 16 4 .9 25 1. 59 0 0 .1 13 0 .0 4 8 0 .0 19 2. 51 0 0 .0 12 2. 4 8 6 1. 76 1 1. 4 10 0 .1 59 s f in 13 .9 26 23 .2 0 5 0 .6 0 0 0 .5 4 9 3. 0 58 9. 26 3 0 .3 30 0 .7 4 1 -0 .0 30 0 .0 36 -0 .8 20 0 .4 12 -1 .2 4 0 3. 31 3 -0 .3 70 0 .7 0 8 s o f t 12 .3 76 12 .1 57 1. 0 20 0 .3 0 9 5. 96 4 4 .8 53 1. 23 0 0 .2 20 0 .0 24 0 .0 19 1. 26 0 0 .2 0 7 1. 31 9 1. 73 6 0 .7 6 0 0 .4 4 8 t e lc e 0 .3 14 14 .2 29 0 .0 20 0 .9 8 2 0 .6 97 5. 6 8 0 0 .1 20 0 .9 0 2 0 .0 30 0 .0 22 1. 34 0 0 .1 8 0 1. 26 6 2. 0 31 0 .6 20 0 .5 33 co n st 13 .0 8 9 11 .6 0 2 1. 13 0 0 .2 6 0 4 .0 8 8 4 .6 31 0 .8 8 0 0 .3 78 -0 .0 30 0 .0 18 -1 .6 6 0 0 .0 97 -0 .4 36 1. 6 56 -0 .2 6 0 0 .7 92 r 2 0 .1 52 6 0 .0 6 16 0 .1 8 8 0 0 .1 22 9 f 2. 0 9 0 .7 3 2. 4 3 1. 36 p 0 .0 16 2 0 .7 20 9 0 .0 0 4 5 0 .1 8 33 ta b le 1 : e ff ec ts o f b m i o n m ar k et p er fo rm an ce p er fo rm an ce : e st im at es f ro m s ee m in gl y u n re la te d r eg re ss io n s journal of business models (2019), vol. 7, no. 2, pp. 37-52 45 of statistical significance, there are several interesting possible explanations. one could be that a single new business model innovation, i.e. completely re-directing the company’s business, can have negative performance impacts in the short-run. as this study only measures relatively short-term investor reactions, riskaverse investors could therefore decide to react negatively to announcements of these types of potentially risky business model innovations. this is of course consistent with notions of bmi being a risky endeavor to pursue (e.g. yip 2004; christensen et al. 2016), as it can be likened to moving from one equilibrium position through the disequilibrium to find the new equilibrium, i.e. the new business model (yip 2004). secondly, and conversely, when looking at firms announcing two or more business model innovations in the period of the study, we can see a very clear positive relationship with such announcements and stock market reactions for two out of four dependent variables, which supports our b hypothesis regarding quantity of business model innovation. for the other two variables, volatility and earnings per share; results were close to but not quite significant, especially for earnings per share. obviously such firms are highly probable to engage in so-called business model portfolios (abrahamsson 2016; aversa et al. 2017) and, thus, operate their business in a multiple business model regimen. according to aversa et al. (2017), a company with a business model portfolio has at least two simultaneous approaches for either creating or capturing value. as a company innovates and creates new business models, it does not necessarily mean that the old business model is abandoned but they rather co-exist, such as web services and e-commerce in the case of amazon (ritala et al. 2014; kim and min 2015; christensen et al. 2016). from an investor’s point of view, it can be argued that bmi activities undertaken as part of a business model portfolio can reduce the expected risk of the bmi. thus, markets react positively to multiple bmis pursued by companies, rather than singular non-portfolio bmi engagements. this is in line with christensen et al. (2016), who argue that business model portfolios are beneficial for companies, including business models coming from m&a activities. furthermore, portfolios, from a financial point of view, have the inherent ability to reduce risk through diversification. the same logic can be applied to business model portfolios as business models can be viewed as key, albeit intangible, assets (abrahamsson 2016) for a company. this is due to how a business model can potentially impact profits and losses for the company and that it has the ability to enable business opportunities (barney 1991). consequently, having a business model portfolio provides a form of asset diversification and asset diversification reduces risks for investors. therefore, stock market investors may look more favorably at companies with business model portfolios engaging in multiple business model innovation activities affecting only certain markets, technologies, business units or subsidiaries, as compared to firms pursuing a single, company-wide business model innovation. conclusions and implications as this study aimed to investigate the potential effects of business model innovation on the market price of equity securities and stocks, a number of conclusions and implications can be made based upon the findings of the study and the discussion of those findings. stock market investors tend to be risk-averse, as the risks of investing money in stocks is generally substantially lower as compared to, for instance, new venture investment by business angels or venture capitalists (hogan et al. 2017). however, especially in the dynamic field of high-technology, coming up with and implementing new business models, is pertinent for remaining competitive and in the case of high-tech firms in this study, achieving a fit between their technical innovations and vending those innovations to the market. new business models are, however (as with any larger, transformative, change within a firm) an inherent risk (yip 2004). risk-averse stock market investors, hence, might (accordingly) not react positively to a singular business model innovation, whose intent is to transform a company and therefore the company’s future is “bet” on that new business model in question. the same riskaverse investor will more easily, however, embrace a company that is already engaging in multiple business journal of business models (2019), vol. 7, no. 2, pp. 37-52 46 models, thus conducting several business model innovation endeavors within the portfolio. such bmi activity by business model portfolio firms does not “bet” the company on a single model change and allows the company to pursue a multitude of diversified business opportunities across different markets and technologies. and as such, it elevates concern of bad short-term performance due to bmi by stock market investors, as the impact would likely be smaller than in the case of singular bmi. this study, however, only considers relatively shortterm effects of bmi announcements. over time, companies in a single business model regimen might still benefit greatly (in terms of performance) with the new business model. that being said, this study has its focal point more on investor perceptions than actual business performance. that is also a limitation of this study, others include a single country-focus, a relatively few number of firms and a single industry. further research in this area might do well to mitigate all these factors, as through looking at cross-country samples across a few or several different industries. another limitation to our research is the limited information regarding the precise number of bmis within the companies, which did not allow us to assign continuous values to the bmi variable; nevertheless, it can be done in the future studies. regardless of the study’s limitations, it contributes to recent academic debates with regard to business model innovation and the effects of different types of performance that business model innovation can have. few studies have looked at bmi in conjunction with stock market data before and more studies of this type are likely needed to solidify results for more generalized conclusions. finally, the study gives the signal to managers in hightechnology listed firms that business model portfolios and multiple business model innovation, while each being smaller “bets” is looked upon favorably by stock market investors in the short term and can, therefore, also be good for the focal company in the shorter term. hence, the study provides empirical support to the notion that listed firms should dare to be innovative and experiment with several concurrent business models in order to pursue new growth opportunities, as the stock market rewards such behavior and the (arguably) balanced risk profile of this type of innovative behavior. whether pursuing a business model portfolio strategy provides superior benefits in the long-term as opposed to a single business model regimen, is, nevertheless, not answered by this study because this study only considers the relatively short-term effects of business model innovation announcements rather than longterm effects of new business model implementation journal of business models (2019), vol. 7, no. 2, pp. 37-52 47 references abrahamsson, j. (2016). beyond going global: essays on business development of international new ventures past early internationalization (doctoral dissertation, umeå universitet). abrahamsson, j., boter, h., & vanyushyn, v. (2019). business model innovation of international new ventures: an empirical study in a swedish context. journal of international entrepreneurship, 17(1), 75-102. alkassar, t. a., & alnidawiy, m. a. (2014). the role of corporate governance and its impact on the share price of industrial corporations listed on the amman stock exchange. european journal of accounting auditing and finance research, 2(6), 124–144. ambrosio, f. j., & kinniry, f. m. (2009). stock market volatility measures in perspective. vanguard investment counseling and research. amit, r., & zott, c. (2009). business model innovation: creating value in times of change. universia business review, 3, 108–121. aversa, p., haefliger, s., & reza, d. g. (2017). building a winning business model portfolio. mit sloan management review, 58(4), 49. barber, b. m., heath, c., & odean, t. (2003). good reasons sell: reason-based choice among group and individual investors in the stock market. management science, 49(12), 1636–1652. baron, jonathan (1994). thinking and deciding (2nd ed.). cambridge university press. isbn 0-521-43732-6. björkdahl, j., & holmén, m. (2013). editorial: business model innovation – the challenges ahead. international journal of product development, 18(3/4), 213–225. bloomberg – technology sector. retrieved october 10, 2017, from https://www.bloomberg.com/research/sectorandindustry/sectors/sectordetail.asp?code=45 bronwym h.hall, a. j. and m. t. (2005). market value and patent citations. rand journal of economics, 36(1), 16–38. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2); 354–363. christensen, c. m., bartman, t., & van bever, d. (2016). the hard truth about business model innovation. mit sloan management review, 58(1). clauss, t. (2016). measuring business model innovation: conceptualization, scale development, and proof of performance. r&d management (in press). dang, c., (frank) li, z., & yang, c. (2018). measuring firm size in empirical corporate finance. journal of banking & finance, 86(519), 159–176. deangelo, h., l. deangelo, and r. m. stulz, 2006. dividend policy and the earned/contributed capital mix: a test of the lifecycle theory, journal of financial economics, 81, 227-254 dempsey, m., (2015) stock markets, investments and corporate behavior: a conceptual framework of understanding, world scientific, imperial college press; isbn: 978-1-78326-699-9 journal of business models (2019), vol. 7, no. 2, pp. 37-52 48 derwall, j., koedijk, k., & ter horst, j. (2010). a tale of values-driven and profit-seeking social investors. retrieved from http://www.fairpolitics.nl/doc/values_vs_profit_driven_social_investors.pdf doganova, l., & eyquem-renault, m. (2009). what do business models do? research policy, 38(10), 1559–1570. eccles, r. g., serafein, g., & consulting, m. k. (2011). market interest in non-financial information. journal of applied corporate finance, 23(4), 113–128. fama, e. f. (1970) efficient capital markets: a review of theory and empirical work, journal of finance, 25, 2, pp. 383–428. fama, e. f. (1991); ‘efficient capital markets: ii’, journal of finance, 46, 5, pp. 1575–617. fama, e. f. (1998) market efficiency, long-term returns, and behavioral finance, journal of financial economics, 49, pp. 283–306. fenton o’creevy, m., nicholson, n., soane, e., and willman, p. (2005); traders: risks, decisions, and management in financial markets, oxford, oxford university press. gerasymenko, v., de clercq, d., & sapienza, h. j. (2015). changing the business model: effects of venture capital firms and outside ceos on portfolio company performance. strategic entrepreneurship journal, 9(1), 79–98. greene, w. w. h. 2012. econometric analysis. prentice hall, vol. 97. helweg-larsen, marie; james a. shepperd (2001). do moderators of the optimistic bias affect personal or target risk estimates? personality and social psychology review. 5 (1): 74–95. hogan, t., hutson, e., & drnevich, p. (2017). drivers of external equity funding in small high-tech ventures. journal of small business management, 55(2), 236-253. ivesco – rethinking risk strategies (https://www.invesco.com/static/us/investors/contentdetail?contentid=3a1e 3840ca29d410vgnvcm100000c2f1bf0arcrd) kahneman, d. and tversky, a. (1979); prospect theory: an analysis of decision under risk. econometrica, 47(2) 263–91. kahneman, d. and tversky, a. (1983); extensional versus intuitive reasoning: the conjunction fallacy in probability judgement, psychological review, 90(4) 439–50. kahneman, daniel; knetsch, jack l.; thaler, richard h. (1991). anomalies: the endowment effect, loss aversion, and status quo bias. the journal of economic perspectives. american economic association. 5 (1): 193–206. kim, e. h., & youm, y. (2017). how do social media affect analyst stock recommendations? evidence from s&p 500 electric power companies’ twitter accounts. strategic management journal (in press). kim, s. k., & min, s. (2015). business model innovation performance: when does adding a new business model benefit an incumbent? strategic entrepreneurship journal, 9(1), 34–57. jackwerth, j. c. and rubinstein, m. (1996), recovering probability distributions from option prices. the journal of finance, 51, 1611-1631. journal of business models (2019), vol. 7, no. 2, pp. 37-52 49 johansson, m., & abrahamsson, j. t. (2014). competing with the use of business model innovation-an exploratory case study of the journey of born global firms. journal of business models, 2(1), 33-55. lindgren, p., taran, y., & boer, h. (2010). from single firm to network-based business model innovation. international journal of entrepreneurship and innovation management, 12(2), 122–137. leiss, matthias, nax, heinrich h. and sornette, didier (2015) super-exponential growth expectations and the global financial crisis. journal of economic dynamics and control, 55. 1-13. mackenzie, d. (2006); an engine, not a camera: how financial models shape markets, cambridge ma, mit press. magretta, j. (2002). why business models matter. harvard business review, 80(5), 3–8. malkiel, b. g. (2003). the efficient market hypothesis and its critics. journal of economic perspectives, 17(1), 59-82. malmström, m., johansson j. (2017) practicing business model management in new ventures. journal of business models, 5(1), 1-13. anson, m. j., fabozzi, f. j., & jones, f. j. (2010). the handbook of traditional and alternative investment vehicles: investment characteristics and strategies (vol. 194). john wiley & sons. mazzucato, m. (2006). innovation and stock prices: a review of some recent work. revue de lobservatoire francais de conjonctures economiques. https://doi.org/10.3917/reof.073.0159 miller, c. c., washburn, n. t., & glick, w. h. (2013). the myth of firm performance. organization science, 24(3): 948–964. miller, m. h. and modigliani f. (1961). dividend policy, growth and the valuation of shares journal of business, 34(4), 411–33. osterwalder, a., & pigneur, y. (2005). clarifying business models : origins, present and future of the concept. business horizons, 16(1), 1–25. pakes, a. (1981). patents, r&amp;d, and the stock market rate of return. nber working paper series, (86). retrieved from http://www.nber.org/papers/w0786.pdf rosenbusch, n., brinckmann, j., & bausch, a. (2011). is innovation always beneficial? a meta-analysis of the relationship between innovation and performance in smes. journal of business venturing, 26(4), 441–457. ritter, t., & lettl, c. (2017). the wider implications of business-model research. long range planning. http://doi. org/10.1016/j.lrp.2017.07.005 shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, 48(3), 199–207. shamsudin, n., mahmood, w. m. w., & ismail, f. (2013). the performance of stock and the indicators. international journal of trade, economics and finance, 4(6), 409–413. spieth, p., schneckenberg, d., & ricart, j. e. (2014). business model innovation state of the art and future challenges for the field. r&d management, 44(3), 237–247. journal of business models (2019), vol. 7, no. 2, pp. 37-52 50 stango, v. and zinman, j. (2009), exponential growth bias and household finance. the journal of finance, 64, 28072849. doi:10.1111/j.1540-6261.2009.01518.x teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2–3), 172–194. http://doi.org/10.1016/j.lrp.2009.07.003 yip, g. s. (2004). using strategy to change your business model. business strategy review, 15(2), 17–24. webb kl. (2002). managing channels of distribution in the age of electronic commerce. industrial marketing management 31(1): 95–102. zott, c., & amit, r. (2007). business model design and the performance of entrepreneurial firms. organization science, 18(2), 181–199. http://doi.org/10.1287/orsc.1060.0232 zott, c., & amit, r. (2008). the fit between product market strategy and business model : implications for firm performance. strategic management journal, 26(august 2007), 1–26. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. dang, c., (frank) li, z., & yang, c. (2018). measuring firm size in empirical corporate finance. journal of banking & finance, 86(519), 159–176. http://doi.org/10.1016/j.jbankfin.2017.09.006 journal of business models (2019), vol. 7, no. 2, pp. 37-52 51 dr. jan abrahamsson, jan abrahamsson completed his doctoral thesis in the areas of business model innovation and international entrepreneurship at umeå school of business and economics in 2016. after tenures of research and lecturing in entrepreneurship and innovation in for instance toulouse business school in france and stamford international university in bangkok, thailand, he now works in sweden as a management consultant, with a focus on innovation management. dr. abrahamsson also have previous professional experience working with technology startups in diverse roles such as co-founder, part of the management team or as an adviser, as well as new venture financing. dr. anastasia a. maga, dr. anastasia maga completed her doctoral work at the transbaikal state university, russia in 2007. an accomplished researcher, dr. maga has been published in dozens of international journals. her depth of knowledge also expanded to publish a number of academic textbooks and monographs. specializing in finance and economics dr. maga has also consulted in the private and public sector as an expert and international project manager. she currently lectures in the bba program at stamford international university, bangkok. about the authors journal of business models (2019), vol. 7, no. 2, pp. 37-52 52 dr. christopher nicol, is an assistant professor at umeå school of buisness and economics, working within the management section. christopher’s research is, principally, focussed on the area of institutional theory and change, and he holds a keen interest in how change is driven within organisations. moreover, he is eagerly involved with teaching at various levels in a myriad of areas in business administration.  christopher holds a bsc from the university of bradford, school of management, in the uk and a licentiate and phd in business administration from umeå university, sweden. moreover, he is frequently involved in management consultancy projects in smes. he also has previous professional work experience in sales and sales management within british and american multinationals. about the authors journal of business models (2015), vol. 3, no. 1, pp. 4-21 4 constructing a business model taxonomy: using statistical tools to generate a valid and reliable business model taxonomy authors: pernille groth (grundfos) and christian nielsen (bmdc) keywords: classification, : business model, taxonomy, research design, cluster analysis, theory development please cite this paper as: groth, p. and c. nielsen (2015), constructing a business model taxonomy: using statistical tools to generate a valid and reliable business model taxonomy, journal of business models, vol. 3, no. 1, pp. 4-21. abstract purpose: the paper proposes a research design recipe capable of leading to future business model taxonomies and discusses the potential benefits and implications of achieving this goal. design/methodology/approach: the paper provides a review of relevant scholarly literature about business models to clarify the subject as well as highlighting the importance of past studies of business model classifications. in addition it reviews the scholarly literature on relevant methodological approaches, such as cluster analysis and latent class analysis, for constructing a business model taxonomy. the two literature streams combined to form the basis for the suggested recipe. findings: the paper highlights the need for further large-scale empirical studies leading to a potential business model taxonomy, a topic that is currently under-exposed even though its merits are highlighted continuously in the contemporary literature. however, the research stream in relation to a business model taxonomy also needs a sound starting point in order to ensure valid and reliable outcomes. in this paper a research design for conducting such studies is presented and obstacles, which need to be overcome to ensure the quality of business model taxonomy studies in the future are identified. originality/value: the paper highlights the benefits and potential implications of designing business model taxonomy studies and makes the case for ensuring the quality of future studies relating to e.g. performance. reviewing the literature on both business models and methodological theories achieves this. journal of business models (2015), vol. 3, no. 1, pp. 4-21 5 1. introduction the term business model has gained a lot of attention during the last decades from both scholars and practitioners (zott et al., 2011). many different definitions, concepts, ontologies and frameworks have emerged due to this attention, but today there are still none of these that have been universally accepted (morris et al., 2005, zott et al., 2011). the reason for this lack of agreement has also been debated. for this debate, some focus on the development of the term in different contexts depending on the researcher’s interests (zott et al., 2011), while others focus on the different areas in business model literature, such as general definitions compared to generic business model types or specific company examples (osterwalder et al., 2005). no matter the reasons, the result is that there is not a clear understanding of the term, and this lack of understanding creates both a challenge in discussing the existing literature as well as in forging the path for future studies. this context also raises the question about whether the goal is to have a unified definition of a business model or whether the multiple definitions, theories and concepts create more benefits than challenges. however, before this conclusion can be made, there is still an area in business model research that has not gained attention, although the potential benefits suggest that it should. this research has recently gained attention from lambert (2006, 2015), has been named “business model taxonomy studies,” and mainly gives an alternative methodological approach to research studies on business models. however, it is not the main focus of this paper to discuss the relevance of business model taxonomy studies because lambert (2006, 2015) has already done so comprehensively. instead, the paper focuses on the next steps and presents a research design that can be used in these kinds of studies. in relation to the research design, there will be a discussion of general possibilities and implications of business model taxonomy studies. thereby, the paper creates a more concrete starting point for doing these studies, which will potentially lead to and secure a higher level of quality because both the possibilities and implications are highlighted and discussed. quality is an important aspect of the success of future studies because high quality of the research performed and the taxonomy developed is relevant to a discussion of how business models have been presented in these studies. quality is also pertinent to a discussion of what business model studies should focus on in the future and may contribute to our understanding of the definition of business models as a whole. the research design and the discussion of the possibilities and implication of such studies are based on the current academic literature relating to business models and scientific methods. therefore, the paper will first give a short highlighting of the importance of business model taxonomy studies as, mainly, presented by lambert (2006, 2015) and then present the proposed research design, in turn discussing each element and its possibilities and implications. the discussion is based on both current knowledge from contemporary business model studies and scientific methods aimed at establishing a taxonomy. current studies in the business model area are mainly based on qualitatively oriented methodological perspectives, which differ from the quantitatively oriented methodological perspective presented in this article. other studies, especially, market ing studies, are therefore found to be relevant to introduce into this context in marketing, a number of statistical tools are used to segment customers based on characteristics (variables) (saunders, 1994), and these methods can be applied in relation to companies based on the characteristics of their business models. 2. the importance of business model taxonomy studies according to osterwalder et al. (2005), business model theory can be divided into three different areas (see table 1). the first area consists of the general, generic definitions, which can be found both as statements about what is a business model (zott et al., 2011, magretta (2002), casadesus-masanell & ricart, 2010) and as different generic frameworks (osterwalder et al., 2005, morris et al., 2005, chesbrough & rosenbloom, 2002, alt & zimmerman, 2001, viscio & pasternak, 1996). these overall definitions are often the focus in journal of business models (2015), vol. 3, no. 1, pp. 4-21 6 discussions of what a business model is as well as used in relation to specific companies’ business models. table 1 – business model areas from osterwalder et al. (2005) business model concept definition – what is a business model? meta-model – which elements belong in a business model business model types taxonomy of types – which business models resemble each other? sub-(meta)-models – what are the common characteristics? business model of … instances – view of companies modelled instances real world companies the second and the third areas are often seen in combination, because the company examples are used to illustrate the generic business model types to create a better understanding of the generic types, e.g. johnson (2010). the purpose of creating these generic types is ordering objects—hence companies—in groups based on their similarities, which helps describe the companies (lambert, 2015) and thereby how different types of companies and business models function. it is therefore important to examine the different types of business models. baden-fuller and morgan (2010) highlight that typologies are based on theoretical deductions, while a taxonomy is based on empirical induction. to date, primarily only business model typology studies have been conducted (lambert 2015). such typology studies are based on deductive methods where the typologies are identified based on theoretical categorizations and/or qualitative data. many studies have been performed with this research focus (johnson, 2010, bambury, 1998, rappa, 2003, chesbrough, 2007, linder & cantrell, 2000, timmers, 1998, betz, 2002, zott & amit, 2007, weill et al., 2004). these different studies focus on various areas, e.g. comparison to real life companies, quantitative and qualitative data analysis, and also especially business model typologies in ebusiness. by comparison are the studies called business model taxonomy studies presented both by lambert (2015) and this paper. taxonomy studies are based on inductive methods by which taxonomies are identified based on quantitative data. many different variables and statistical tools, such as cluster analysis and latent class analysis can be used for finding natural groups in the data as opposed to using predetermined groups (lambert, 2006). an important point is that the variables used in taxonomy studies are based on existing knowledge of business models based on typology studies. however, they are used differently due to different variables and the application of statistical tools. lambert (2015) highlights the important features of the two kinds of research of business models in a table, which is presented below. the table also reflects the differences between the two. table 2 characteristics and functions of typologies and taxonomies from lambert (2015) typologies taxonomies the product of essentialist philosophy the product of empiricist philosophy categories (types) are conceptually derived categories (taxa) are empirically derived few characteristics considered many characteristics considered reasoning by deduction reasoning by inference mostly qualitative classifications quantitative classifications monothetic groupings polythetic groupings specific classification general classification provides a basis for only limited generalizations provides a basis for wider generalization journal of business models (2015), vol. 3, no. 1, pp. 4-21 7 as emphasised in lambert (2015), studies of business model taxonomies have been missing in business model research. this is worrying, as they provide important insights to be used in future research on business models and furthermore contribute to the discussion of what a business model is and is not. business model taxonomy studies need large amounts of variables and data and should focus on identifying natural groupings in data by applying statistical tools. this means that the output is unknown in advance, but is identified via the data using statistical tests rather than the individual researcher’s expectations of the findings. however, this being said, the individual researcher might still influence the outcome of the research to some extent through the choice of variables and statistical tools. instead of random theoretically founded categorizations a well built and statistically valid taxonomy has the potential of leading to business model configurations applicable for multiple purposes instead of only specific purposes as in the case of the outcomes of parallel business model typology studies. several prior studies use the term “business model taxonomies” as a description of the output (the types) (lambert, 2006), but from the correct definition of the term, only two studies, namely bigliardi et al. (2005) and malone et al. (2006), actually use the described approach correctly. furthermore, there are still to date no studies that empirically derive a business model taxonomy based on criteria for classifying business models and which at the same time are relevant to multiple sectors (lambert, 2015). despite the potentials in establishing an empirically based taxonomy of business models the lack of this research means that there are not many studies to seek inspiration from or to provide a starting point for future business model taxonomy studies. instead inspiration may be sought from other sources in order to highlight the necessary methodological considerations and possible pitfalls. 3. research design for future business model taxonomy studies our proposed research design consists of five building blocks that describe the areas or phases necessary for conducting the research. the five areas are separate parts of the research design, but they are still highly correlated, and together they create a starting point for future business model taxonomy studies. the five building blocks of the research design can be seen in figure 1. figure 1 – five areas in the research design 3.1 general considerations in relation to surveys a clear purpose is crucial for the value of the research because it determines the use of potential survey data and drives decisions regarding survey design (van der stede et al., 2007). the purpose of future studies of business model taxonomies can be different. some studies will focus on testing which variables should be used to describe what a business model is, while other studies might focus on testing the different business general considerations in surveys choice of statistical tool creation of variables interpretation of result use of result figure 1 journal of business models (2015), vol. 3, no. 1, pp. 4-21 8 model configurations found in the first studies in relation to control variables such as performance, size, etc. (see different types of studies in lambert, 2006). van der stede et al. (2007) provide a general overview on surveys and have compiled a list of considerations regarding survey design. first, we need to consider whether the survey is a crosssectional study or a longitudinal study? longitudinal studies look at developments, whereas cross-sectional studies take at snapshot (van der stede et al., 2007). it is important to include in the considerations that a company’s business model is not a static concept—cf. nielsen & lund (2013)—and it can therefore change over time. longitudinal studies should therefore be made if the purpose of the study is to look at the development in or of business model configurations over a time period, e.g. to make generalizations about this perspective. if the purpose is a snapshot at this precise moment in time, then cross-sectional studies are relevant. secondly, should the study focus on a variety of industries or only one (van der stede et al., 2007)? some studies will be related to specific industries, and therefore it will be necessary to consider if one or more industries should be considered. according to zott et al. (2011), a business model is a new unit of analysis that is different from industries. therefore, the studies will not generally have a demand to focus on specific industries. the industries can however be used as a control variable to make it possible to analyze the relation between industries and business models and how certain business model configurations might spread to new industries over time. thirdly, what should be the level of analysis? the level of analysis can target individuals, groups, companies etc. according to van der stede et al. (2007), it should involve multiple respondents on different levels because it is believed that a single respondent cannot represent an entire company’s opinion (young, 1996). business models are related to a company, so the company will often be the level of analysis. it is, however, possible, especially with bigger companies, that more than one business model is in used at a given time, and the level of analysis could therefore be strategic business units (sbu) in the company with a single business model. van der stede et al. (2007) advises that at company level, more respondents should be involved to optimize the result and minimize subjective valuations about the company’s business model. however, it depends on the extent and the purpose of the study because extra resources are required to collect data from more respondents. fourthly, who is the population? the population consists of all of the elements that will form the basis of the generalization (van der stede et al., 2007) and will sometimes be a part of the purpose, and other times not. the delimitation can be related to geography, size, industries, or something else. the population is important for selecting the sample. an analysis of the whole population will often be a too comprehensive a task, and instead samples are used. one of the biggest challenges in data collection is to collect a sample that is a representative part of the population (van der stede et al., 2007). a representative sample is a sub-part of the population that highly reflects the characteristics of the population (van der stede et al., 2007). some actions can strengthen the representative of the sample by focusing on the validity of the study. the external validity is strengthened through probability samples and samples that are of a certain size (van der stede et al., 2007). this is not to suggest that probability samples always are better than non-probability ones or that a larger sample is always better than a smaller one. the internal validity is strengthened by increasing the response percentage and giving the respondents incentive to answer the questions truthfully. non-response errors are reduced by increasing the response percentage, which in turn strengthens the representativeness of the sample, because the respondents then reflect the whole sample (van der stede et al., 2007). it is also possible to test for non-response errors. according to armstrong & overton (1977), there are three different methods used to test for non-response bias, and the best and easiest method is called extrapolation. the method is built on the supposition that those who answer the questionnaire late are more similar to those who have not responded, because they are less willing to answer the questionnaire than the first group who answers (armstrong & overton, 1977). the internal validity is also about how truthfully the respondents journal of business models (2015), vol. 3, no. 1, pp. 4-21 9 answer and therefore whether incentives should be offered for the respondents to answer truthfully. the constructed validity is strengthened through well-cosidered and tried questions. all in all, the quality and validity should be weighed against how many resources should be used in the research. the considerations above are all considerations that should be done at the start of every questionnaire in studies regardless of whether the study is concerned with developing a business model taxonomy or not. these general considerations strengthen the credibility of the final results and give others the possibility to the test the research design. 3.2 choice of statistical tools the choice of statistical tools could in principle be a part of the design of the study, because choice of method is significant for how the variables should be designed. however, other methods can be chosen afterwards and be used with the same variables. choosing a method in advance makes it possible to design the study according to that choice. the choice of method is also connected to the purpose of the study, because the different methods are fitted to the different purposes. in the previous section, two different purposes were described. one purpose was to find the variables that make up the business model and different business model taxonomy types. the other purpose was to take the business model configurations or a taxonomy found in the first purpose and test them in relation to other variables such as performance, size, etc. to find connections. for the first purpose, statistical methods for segmenting companies based on variables describing the business model are central. inspiration for these statistical methods can be found in the marketing literature as well as in the general literature on statistical modeling. in the marketing literature, customers are segmented based on variables which describe their different perspectives, but the methods used in these studies can also be used to segment products, markets, companies and business models (saunders, 1994). dillon & mukherjee (2006) divided the choice of statistical tool into three parts. the first part concerns whether the result should be decided a priori or later in the analysis. the statistical tools that are used in deciding the result a priori do not meet the requirements of business model taxonomy studies, but they can instead be used in business model typology studies such as those of zott & amit (2007) or weill et al. (2004). the second part concerned with whether the result should be descriptive or predictive. based on the definition of business model, taxonomy studies will focus on descriptive results for the first purpose and then will examine the relationship between variables for the second purpose. the last part concerns whether the respondents should be divided 100 percent to each group (business model configuration type) or have an affiliation in all groups with a percentage between 0 and 100. according to the presented definition of a business model taxonomy, both choices can be used and will therefore highly depend on the purpose. for this paper, the focus will be on dividing the respondents into one group, and a statistical tool that abides by all the three parts and able to do this is cluster analysis. other statistical methods could also be used, e.g. latent class analysis, but this paper suggests using cluster analysis because it is easy to understand, easy to use, and is available in most statistical programs. cluster analysis is used to create groups based on natural groupings in the data based on many different variables instead of creating the groups based on predetermined expectations. cluster analysis is therefore apt to the first purpose. the goal of the cluster analysis is to create groups in which the respondents (here business models) are similar to each other but at the same time are different from the respondents in other groups (tan et al., 2006). cluster analysis can be divided in two groups, hence hierarchical and nonhierarchical cluster analysis. in hierarchical cluster analysis, an allocation of a respondent to a cluster (group or taxonomy) is irreversible, which means that when a respondent is allocated to a cluster, then the respondent is not removed from journal of business models (2015), vol. 3, no. 1, pp. 4-21 10 that cluster again. it begins with “n” number of clusters, where “n” is the number of respondents, and next two clusters or respondents are put together in clusters until there is only one cluster (dillon & mukherjee, 2006). the procedure does not create one final result. it is the researcher’s task to decide what are the best results and the optimal number of clusters (meyers et al., 2013). here there are two important aspects to consider. the first is about how to identify the distance between the respondents, where the distance describes the similarities between the respondents and is based on different algorithms. the distance methods euclidean distance and manhattan distance are generally seen as good methods (tufféry, 2011, saunders, 1994), but also squared euclidean distance is seen as a good method (meyers et al., 2013). the next aspect is about how to link the respondents, and different methods for linking can be chosen (meyers et al., 2013). in relation to linking methods, two methods have proven to be best, average linkage and ward’s method (punj & stewart, 1983). especially, the choice of linking method is seen as important in relation to how good the result of the analysis gets (punj & stewart, 1983), but the single study can also have influence on which methods are best to use. meyer et al. (2013) therefore recommends trying different methods in combinations to see which are best. in non-hierarchical cluster analysis, the allocation of respondents to clusters is reversible. this means that the affiliation to one cluster is not final until the analysis is completely done. this is done to optimize the clusters so they are as comprehensive as possible. there are different types of non-hierarchical cluster analysis, and one of the most popular is k-means (meyers et al., 2013). k-means starts with identifying “n” number of clusters and a related central point, which is based on all “n” dimensions (depends on the number of variables) (tan et al., 2006). the most important aspect is that the number of clusters and central points be well chosen so they are far from each other in relation to the variables, because they are the starting points for the opening clusters (meyers et al., 2013). the data should therefore be standardized to prevent outliers from being starting points (meyers et al., 2013). the clusters are formed by taking the respondents one by one and allocating them to the clusters (in the beginning it will be the central points), which are the closest (the least distance). a modified centroid method is used for calculating the distance. the respondents and clusters that have the least distance between them will be joined in a new cluster (meyers et al., 2013, tan et al., 2006). there are two possibilities when a respondent is linked to a cluster. the first possibility is that the central point of the cluster is recalculated every time a new respondent is added. this method is not recommended by meyers et al. (2013) because the structure of the analysis and the order of the respondents will implicate the result; however, tan et al. (2006) highlight some of the advantages of using this method, e.g. better accuracy and faster convergence, because it weights the value of each respondents, but also highlights the fact of the higher dependency of the order in the variables (tan et al., 2006). the other possibility is not to update the central point for the cluster every time a new respondent is added, but instead the central point is the original central point. the central points are instead updated when all the respondents have been added to a cluster, which is followed by one more round, when the respondents are replaced to the nearest cluster based on the new central points. this is done until the large distance is smaller than a threshold value set before starting the analysis or until the number of repetitions, which is specified in advance by the researcher, is reached (meyers et al., 2013). both hierarchical and non-hierarchical cluster analyses are relevant, but the two kinds of cluster analyses each have their own strengths and weaknesses. a two-step method is suggested (punj & stewart, 1983, ketchen, 1996) by which the advantages from both are used. the advantages of hierarchical cluster analysis are that the number of clusters is not stated a priori, and it is the same for the starting points of the analysis. the advantages of the non-hierarchical cluster analysis are that studies show that the method is superior compared to hierarchical cluster analysis methods (punj & stewart, 1983). a combination of both methods can therefore give a better result when the result of the hierarchical cluster analysis is used to find the number journal of business models (2015), vol. 3, no. 1, pp. 4-21 11 of clusters and starting points for the non-hierarchical cluster analysis, which creates the final results. the cluster analysis can be used for studies with the first kind of purpose, but for examining the relations between the business models (result of the cluster analysis) and other variables, other statistical methods are necessary. several different types of statistical tools exist that can examine the relations between variables, and an example of a tool is shown in zott & amit (2007)’s study which used anova to test the relation between business model typologies and performance. the statistical tools could also be cross tabulations or different kinds of non-parametric tests. each statistical tool has its own procedure, and it is not possible to determine which tool is best, because it is highly dependent on the study. however, for all of the tests, once a method is chosen, then further method choices should not be made, unlike when the cluster analysis used and there are choices about distance and linking methods. 3.3. creation of variables a central part of the future studies will be the creation of those variables, hence questions and scale, that are a part of the analysis, again, this process is highly related to the purpose of the study. in relation to the second purpose, it is possible to base the variables on previous studies’ creation of variables (business model types from studies with the first purpose or studies about variables, such as size, performance etc.), but in studies with the first purpose, the variables are unknown, because the variables describe the companies’ business models, and the variables should instead be created from the current knowledge about business models. the two purposes will not only demand different statistical tools but also different variables as well as different approaches to these variables. for variables in relation to the first purpose, it is relevant to look at both questions and scale. these two parameters are related, because the creation of questions highly affects which scale should be used, and in the same way, the variables are connected to the choice of method. non-hierarchical cluster analysis can only be used on ratio or interval scaled data, whereas hierarchical cluster analysis also can be used on binary data. ratio or interval scaled data are therefore necessary to make an analysis based on a combination of both kinds of cluster analysis. the questions are crucial for the result of the cluster analysis, because the clusters are formed based on the variables. the questions are still an undefined area, and the researchers must therefore examine data using as many variables as practical and necessary (lambert, 2015). an alternative to the purely inductive method is to seek knowledge for variable selection (ketchen, 1996). a large number of variables are still necessary; however, knowledge and a starting point for creation of these variables can be found in the existing literature, hence the existing business model literature. many of the current studies use a systematic approach to business models and can in spite of the use of a deductive methodological approach be used in forming variables. especially, business model frameworks should be used as a starting point for the questions instead of the literature concerning general definitions of business models. the reason for this is that the variables are already defined, and the overall definitions are not comprehensive enough to be used in the creation of variables. the overall definitions should instead be used as a guide for the creation of frameworks and variables. for example, the four points from zott et al. (2011) provide an ideal background for making the variables because most studies agree on these four points. firstly, a business model is a new unit of analysis that is different from company, product, industry and network. secondly, a business model focuses on a holistic approach to describe how companies do business. thirdly, activities both in and between the company and its partners are central in the business model. fourthly, a business model focuses on describing both value creation and value capture. however, these four points are not precise enough to start making variables, and therefore frameworks, e.g. osterwalder and pigneur (2010) or chesbrough and rosenbloom (2002), may be a good starting point. a recent contribution by tweedie et al. (2015) argues journal of business models (2015), vol. 3, no. 1, pp. 4-21 12 that useful frameworks for identifying relevant business model components include the two abovementioned as well as seven other frameworks from a variety of different fields such as accounting (bell et al., 1997; haslam et al., 2012), strategic management (demil and lecocq, 2010; kaplan and norton, 2001) and innovation (chesbrough, 2006; johnson et al., 2008). another perspective in the business model literature is business model types, hence typologies and taxonomies. there is a natural coherence between typologies and taxonomies (baden-fuller and morgan 2010), and the business model typology studies should therefore be used in the creation of business model variables. knowledge from business model typology studies can be used to create the answers to the overall questions, and typologies and taxonomies can be compared in relation to similarities and differences that may help foster future studies, e.g. johnson, 2010; chesbrough, 2007; linder & cantrell, 2000. the methodical approach in business model taxonomy studies gives an opportunity to focus on more variables and a broader perspective of variables; in other words, instead of only focusing on the internet’s role in the establishment of ebusiness-based business model taxonomy, this role could be just one part of more variables. the method creates the opportunity to define the two concepts differently and test the relationship between all these definitions, in this way getting closer to a more clear definition and more distinct differences between these two concepts. however, this methodology is also open to potential pitfalls. one of these pitfalls is that variables unrelated to describing business models could be mixed into the analysis and be seen as part of the business model even though from a logical point of view they do not make sense. this is of course not the intention or will not serve to create high quality in the study or a greater understanding of business models; instead it will create mistrust of the result and discussion in general. it is therefore highly important to be selective when choosing the variables, but at the same time be openminded to potential aspects that can be a part of company’s business model. again, the backbone of the variables should be found in the general definitions of business models, where business models are described determined by the business function or related to the four points presented by zott et al. (2011). another point to differentiate the relevant areas from the irrelevant areas is to follow casadesus-masanell and ricart (2010)’s definition of a business model, where a business model consists of two things: (1) a set of choices and (2) the set of consequences derived from those choices. this is similar to understanding what a business model is by how the business works and its choices and their respective consequences. another potential pitfall can be that the authors of the existing business model studies and frameworks will not use the new method as intended and the advantages of the inductive method but will instead fall back to their own business model concepts that are based on the individual researcher’s own mind. one way to overcome this pitfall is to base the variables on knowledge from more than one study, e.g. from several frameworks. here, the areas in the frameworks can be used as inspiration for testing differences as well as new concepts. in this way, the ideas from different deductive studies can be used in combination with testing the right variables just as zott et al. (2011) derived the four points that are common in most business model definitions. this can lead to investigating variables as service, employee, and customer engagement as in heskett et al. (1994), together with value proposition, market segments, value chain, etc., as in chesbrough and rosenbloom (2002). in table 3, an overview of a number of different frameworks can be seen. a lot of the frameworks focus on similar areas, and the differences should therefore sometimes be seen in the details and in the ways the areas are put together because the relationship between the areas are important. however, the studies presented in this paper provide more room for examining different minor details and seeing what the differjournal of business models (2015), vol. 3, no. 1, pp. 4-21 13 tabel 3 – business model frameworks heskett et al. (1994) bell et al. (1997) chesbrough & rosenbloom (2002 linder & cantrell (2000) petrovic, kittl et al. (2001) employee engagement customer engagement creating sustainable profit and growth external forces markets strategic management processes core business processes alliances products and service customers value proposition market segment value chain cost structure and profit potential value network competition strategy sources for revenue value proposition key factors – delivery most important assets, abilities, relationships and knowledge value model resource model production model customer relation model revenue model capital model market model alt & zimmerman (2001) gordijn et al. (2001) dubosson-torbay et al. (2001) kaplan & norton (2001) mission structur processes revenue regislation technology actors value objects value entrance value interfaces value trading value proposition market segment composite actors value activities products and services customer relationships infrastructure and partner network financial aspects financial customers internal business processes learning and growth betz (2002) mouritsen et al. (2003) morris et al. (2005) osterwalder et al. (2005) resources sale profit capital knowledge sharing management challenges initiatives indicators value proposition market internal capacities competition strategy economical factors growth/exit possibilities value proposition customer segment customer relationship delivery channels activities resources partners revenue streams cost journal of business models (2015), vol. 3, no. 1, pp. 4-21 14 business model variables also consist of the scale by which the questions are measured. several scales can be used depending on the questions, and the choice of scale relates greatly to the cluster analysis because the methods in these are based on calculation of averages. the optimal scales are therefore ratio or interval scales. at the same time, it should also make sense to measure on the scale that is used. in hierarchical cluster analysis, it is also possible to use binary data, which opens the possibilities to use yes/no questions as well as the use of categorical variables, if these are recorded as dummy variables. however, there is a disadvantage when using binary data, because the result of the cluster analysis can be hard to interpret in relation to the averages. it is hard to interpret averages that are not very close to either 1 (yes) or 0 (no), because intervals are not used, but only these two extremities. an average of 0.5 for a variable in a cluster means that the opinions of the respondents are split, but an interpretation of the 0.5 is not possible in relation to the two categories, and at the same time, an interpretation in the middle does not make sense either. it can therefore create problems if some variables have this average. ratio and interval scaled data are therefore to be preferred, but the choice depends on the questions and how they are created and which variables are appropriate for measuring them. the most important thing is that there is coherence between the question, scale, and statistical tool and that the question and the possible answers make sense, because this makes it possible for the respondent to understand the question and respond truthfully. the variables used for studies with the second purpose can be divided into two parts. the business model variables, which come from studies with the first purpose, can be used to analyze the relations in the first part, where the relationships between the variables, which constitute the a business model taxonomy, are analyzed. therefore, the same variables used with other purposes will enable the study of both within-group and inter-group relations (lambert, 2015). in the second part, the relation between the formed business model variables and other variables are therefore analyzed. these other variables can be performance, size, section, etc., and they are used to test the relation between these factors and the business model taxonomy. while the variables for the business model can be found in studies with the first purpose, the other variables are highly used in other studies, which make it possible to draw on knowledge from them. hansen & van der stede (2004) have for example made a study about variables that can measure performance, because performance is not easy to observe and should be made as a latent variable. the analysis for the second purpose can also draw on knowledge from contingency studies, e.g. chenhall (2007), which examines how variables such as size affect performance. overall, all the variables for the second purpose are based on variables from first purpose, the business model taxonomy, or other variables with knowledge from previous studies. the scales are also important to focus on, because the methods have different demands for scales; for example, anova is based on calculation of average, which makes it necessary to either use ratio or interval scaled data. 3.4. interpretation of results results will come from the statistical analyses in the studies. these results may, however, be of very different nature, and interpretations of them might differ depending on the purpose and thereby methods used. cluster analysis does not create a final result, but instead it creates a choice between optimal results based on the possibilities presented from the analysis. this applies especially for hierarchical cluster analysis, where “n” possible cluster analysis solutions are created, where “n” is the number of respondents. however, the choice between different solutions, based on the use of different input in non-hierarchical cluster analysis, does not give a final interpretation of which result is best. it is instead the individual researchers’ own interpretation of which result is best that determines the final solution. however, it is possible to use more systematical approaches for interpreting the result, hence journal of business models (2015), vol. 3, no. 1, pp. 4-21 15 looking at variances (malhotra et al., 2012) and homogeneity or heterogeneity between clusters (sharma & kumar, 2006). in the end, there is not a definite rule for interpretation, but it is instead a weighing of the different methods, the purpose of the study, and the researcher’s intuition. this also highlights the importance of using different method combinations in hierarchical cluster analysis and different starting points for the non-hierarchical cluster analysis. it also highlights the importance of performing different studies with the same variables but different interpretation methods and researchers. in this regard, the studies with the second purpose are easier to interpret, because the result for the most part is fairly clear. even though different statistical tools may be used, the method of application is the same. first, a hypothesis is made, which is later tested in relation to whether it may be rejected and thereby indicate if there is a significant relation between two or more variables. it is thereby not as much interpreted by the individual researcher’s intuition. 3.5. use of result the use of the results for future studies highly depends on the purpose of the study, because the result should address the study’s purpose. the use of the result will be different for the two kinds of studies, because they have different purposes. lambert (2006) has made some general possibilities for result usage in the studies with two purposes, especially with a focus on using deductive and inductive studies in interaction to create business model theory. in this context, the results can be used to understand what a business model consists of and to build a business model theory. furthermore, it can give valuable input to what a business model is and is not. it is, however, an interactive process by which new results can create more knowledge and support the existing knowledge. 4. research design for the two purposes together the five areas described above create a research design for the two different purposes, namely 1) identifying the variable that make up a business model taxonomy and 2) testing a business model taxonomy in relation to performance, size and relations. (see also table 2). the research design gives an overview of the areas that are relevant in future studies to secure the quality and the applications of the study. the research design is the same overall, but it gives general guidelines that can be used on all the possible different purposes. journal of business models (2015), vol. 3, no. 1, pp. 4-21 16 first purpose – identifying a business model taxonomy second purpose – testing a business model taxonomy general considerations in relation to surveys purpose, design, population, sample and validity purpose, design, population, sample and validity choice of statistical tool cluster analysis hierarchical (distance and linking methods), non-hierarchical (number and central points), combinations anova, cross tabs or other creation of variables existing business model literature – creation of new variables variables or results from the first purpose or other variables based on other studies interpretation of result intuition and/or systematical methods rejection of hypothesis use of result improvements of conceptualizations or use for the first purpose improvements of conceptualizations or starting point for creation of theory there are some issues that should be overcome in relation to future studies to secure the quality of the studies moving forward in terms of validity and reliability. the biggest issue concerns creation of the variables, which should be used for the first purpose. these variables should be based on the existing knowledge from other business model studies, but both questions and scales should also be created with a focus on the statistical possibilities. therefore, there should be more focus on creating these variables possibly through many more studies of a business model taxonomy until satisfactory results have been produced. however, if satisfactory variables are created, then the biggest issues are also overcome, and useful results can be produced. table 4 – research design with main features journal of business models (2015), vol. 3, no. 1, pp. 4-21 17 5. conclusion studies of leading to a business model taxonomy in which inductive methods and statistical tools are used to identify business model types, are still relatively new ground. this entices a need for knowledge about how to start the research process and how quality can be secured in future studies. the first purpose of the research design suggested here is to find the variables that make up the business model and can lead to the identification of a business model taxonomy. the second purpose of the research design is to take the identified business model taxonomy from the first purpose and test it in relation to other variables such as performance, size, etc. to find significant relationships. to meet this need, a research scheme that can be a starting point for future studies of a business model taxonomy has been introduced in this paper. its purpose is to contribute to a greater and more common understanding of business models. the research design consists of five areas, each of which is essential for creating quality in future studies. the future studies of a business model taxonomy can be divided into two parts that each have their own relation to the five areas in the research design, but the five parts in the research design can give overall guidelines for future studies.the first area includes general considerations in relation to surveys. these considerations create quality in the data that are collected and that are essential for the studies. the second area is the choice of statistical tools. business model taxonomy studies highly depend on statistical tools for data treatment, and the choice of statistical tools is therefore essential. the two different kinds of future studies demand different choices in statistical tools depending on the purpose of the study, hence the segmentation of companies according to their business models (statistical tool, e.g. cluster analysis) or examination of relations (statistical tool, e.g. anova or cross tabs). the third area is the creation of variables. again the two kinds of studies have a demand for different kinds of variables. variables, which describe the business model, are used for the purpose of segmentation. even though there are many studies of business models, one of the biggest challenges is identifying and creating these variables, because there is no contemporary common consent about what a business model is or which statistical tools, questions, and scale should be taken in to account in the creation of variables. this issue is due primarily to the lack of studies in these areas, and the starting point for creating the variables should instead be based on current knowledge, which should be converted to variables. the variables that should be used to examine relations between variables can either be the variables from the segmentation or other variables based on previous studies, such as studies about performance variables. pitfalls such as the possibility that researchers will fall back into old habits may exist. identifying variables on the basis of more than one current study and making sure only to include relevant variables can overcome this risk. the fourth area is the interpretation of results. the results of the cluster analysis can be interpreted based on the researcher’s intuition or based on more systematical approaches; whereas the test of relations gives a final result. another issue is therefore the interpretation of the result, which only can be accomplished by conducting more studies. the fifth area is the use of the results, because the result should not only be seen in its own narrow perspective and purpose, but also as a part of the knowledge contributed by all business model studies. both the future and current studies of business models with their different approaches create the opportunity to develop business model theory, but for this development to occur, it is important to start focusing on the yet undiscovered area of a business model taxonomy. journal of business models (2015), vol. 3, no. 1, pp. 4-21 18 references alt, r. & h.-d. zimmerman (2001). introduction to special section business models. electronic markets 11 (1): 3-9. armstrong, j. s. & t. s. overton (1977). estimating nonresponse bias in mail surveys. journal of marketing research 14: 396-402. baden-fuller, c. and morgan, m.s. (2010) “business models as models”, long range planning, 43: 156-171. bambury, p. (1998). a taxonomy on internet commerce. first monday 3 (10) http://pear.accc.uic.edu/ojs/index.php/ fm/article/view/624/545. bell, t. and i. solomon. (2002). cases in strategic-systems auditing. kpmg llp. betz, f. (2002). strategic business models. engineering management journal 14 (1): 21-27. bigliardi, b., nosella, a. & verbano, c., (2005), business models in italian biotechnology industry: a quantitative analysis. technovation, vol. 25, no. 11, pp. 1299. casadesus-masanell, r. & j. e. ricart (2010). from strategy to business models and onto tactic. longe range planning 43: 195-215. chenhall, r. h. (2007). theorizing contigencies in management control systems research. i handbook of management accounting research, s. chapman, a. g. hoopwood & m. d. shields (eds.). 163-205. chesbrough, h. (2006) open business models. how to thrive in the new innovation landscape. boston: harvard business school. chesbrough, h. (2007). business model innovation: it’s not just about technology anymore. strate-gy & leadership 35 (6): 12-17. chesbrough, h. & r. s. rosenbloom (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change 11 (3): 529-555. demil, b. and lecocq, x. (2010) “business model evolution: in search of dynamic consistency”, long range planning, 43(2-3): 227-46. dillon, w. r. & s. mukherjee (2006). a guide to the design and execution of segmentation studies. in r. grover & m. vriens (ed.) the handbook of marketing research. californien: sage publica-tions inc. hansen, s. c. & w. a. van der stede (2004). multiple facets of budgeting: an exploratory analysis. management accounting research 15 (4): 415-439. haslam, c., t. andersson, n. tsitsianis and y.p. yin (2012). redefining business models: strategies for a financialized world, london: routledge. johnson, m.w., christensen, m.c. and kagermann, h. (2008), “reinventing your business model”, harvard business review, 86(12): 50-59. journal of business models (2015), vol. 3, no. 1, pp. 4-21 19 johnson, m. w. (2010). seizing the white space: business model innovation for growth and re-newal. boston: harvard business school press. kaplan, r.s. and d.p. norton (2001). the strategy-focused organisation: how balanced scorecard companies thrive in the new business environment, boston ma: harvard business school press. ketchen, d. j., (1996), the application of cluster analysis in strategic management research: an analysis and critique. strategic management journal, vol. 17, no. 6, pp. 441-458. lambert, s. (2006). a business model research scheme. school of commerce research paper series 2: 1-19. lambert, s. (2015). the importance of classification to business model research. journal of business models, 3(1), 49-61 linder, j. c. & s. cantrell (2000). changing business models. chicago: institute for strategic change, accenture. magretta, j. (2002). why business models matters. harvard business review 80 (5): 86-92. malhotra, n. k, d. f. birks & p. wills (2012). marketing research – an applied approach. 4. udgave. england: pearson education limited. malone, t. w., weill, p., lai, r., d’urso, v. t., herman, g., apel, t. & woerner, s., (2006), do some business models perform better than others? mit sloan research paper no. 4615-06. meyers, l. s., g. gamst & a. j. guarino (2013). applied multivariate research – design and in-terpretation. 1. udgave. californien: sage publications, inc. morris, m., m. schindehutte & j. allen (2005). the entrepreneur’s business model: toward a uni-fied perspective. journal of business research 58 (6): 726-735. nielsen, c. & m. lund (2013). an introduction to business models. in c. nielsen (ed.) the basics of business models, vol. 1, no. 1. copenhagen: bookboon.com/ventus publishing aps. osterwalder, a. and y. pignuer . (2010). business model generation. hoboken nj: john wiley and sons. osterwalder, a., y. pigneur & c. l. tucci (2005). clarifying business models: origins, present, and future of the concept. communications of ais 15: 1-40. punj, g. & d. w. stewart (1983). cluster analysis in marketing research: review and suggestions for application. journal of marketing research 20 (2): 134-148. journal of business models (2015), vol. 3, no. 1, pp. 4-21 20 rappa, m. (2003). business models on the web. http://digitalenterprise.org/models/models.html (9.05.14). saunders, j. (1994). cluster analysis. i quantitative methods in marketing, g. j. hooley & m. k. hussey (eds.) london: the dryden press. sharma, s. & a. kumar (2006). cluster analysis and factor analysis. i the handbook of marketing research, r. grover & m. vriens (eds.) californien: sage publications inc. tan, p., m. steinbach & v. kumar (2006). introduction to data mining. boston: pearson education, inc. timmers, p. (1998). business models for electronic markets. electronic markets 8 (2): 3-8. tufféry, s. (2011). data mining and statistics for decision making. uk: john wiley & sons, ltd. tweedie, d., martinov-bennie, n. and c. nielsen (2015). evolution or abandonment? contextualising the business model in integrated reporting. working paper, macquarie university, australia and aalborg university, denmark. van der stede, w. a., m. young & c. x. chen (2007). doing management accounting survey research. i handbook of management accounting research, c. s. chapman, a. g. hoopwood & m. d. shields (eds.). 445-478. viscio a.j., b.a. pasternack, “toward a new business model”, strategic business; 2(1):125 – 34. weill, p., t. w. malone, v. t. d’urso & g. herman (2004). do some business models perform better than others? mit center for coordination science, working paper 226: 1-39. young, s. m. (1996). survey research in management accounting: a critical assessment. in a. j. richardson (ed.) research methods in accounting: issues and debates. cga canada: research foundation. zott, c. & r. amit (2007). business model design and the performance of entrepreneurial firms. organization science 18 (2): 181-199. zott, c., r. amit & l. massa (2011). the business model: recent developments and future research. journal of management 37 (4): 1019-1042. journal of business models (2015), vol. 3, no. 1, pp. 4-21 21 about the authors pernille groth, is a global graduate in the finance department of grundfos. pernille holds a masters degree in management accounting from aalborg university, specializing in quantitative measurements of business model configurations. during her studies she worked at the business model design center (bmdc, www.bmdc.aau.dk), where she performed market research, financial analysis and supported in collecting and analyzing research data. christian nielsen. the cutting-edge research being produced at the business model design center (bmdc) is evidence of christian nielsen’s thought-leadership. the contributions of the rigorous scholarly research have led to published works in leading scholarly journals. furthermore, the applied research and the sound strategic advice has had a significant impact on the practices of the companies with which bmdc collaborates. this is evident from the ability to attract organisations and funding. in establishing its position internationally, bmdc hosts the annual business model buzz (see 2014 resumé here: http://bit.ly/ bmb2014v), hosts the open source based journal of business models (www.journalofbusinessmodels.com) and has published textbooks downloaded by over 300.000 students to date. journal of business models (2020), vol. 8, no. 2, pp. 57-72 57 from structure to process: dynamic aspects of business model change irina atkova 1,*, and petri ahokangas2 abstract purpose: extant research on business models does not address the question of business model evolution. therefore, the purpose of this paper is to explore how we can capture the dynamism of business models. approach: we examine the applicability of the principles of complexity theory as an approach to capture the dynamic aspects of business model change. longitudinal single case study was chosen as a methodological strategy. findings: complexity theory allows capturing dynamics of the business model evolution. it does not picture a business model as a static snapshot but reveals how a new business model comes to be as a result of an intricate interplay between business model elements. in turn, it allows tracing the connection between the elements. this perspective assists in capturing emerging, as well as disappearing business model elements enabling us to understand and explain how business model evolves. additionally, complexity theory helps to comprehend the connections between different business model elements. the complexity theory approach emphasizes the multi-dimensional nature of a business model allowing to understand the dynamics of the business model evolution by looking at the different levels. additionally, complexity theory perspective reveals that dynamics of the business model evolution is predicated on different processes. it implies that contrary to the current attempts of the extant research to develop business model kinds and types, complexity theory allows appreciating unique nature of any business model without trying to classify or categorize it. value: understanding the dynamics of business model evolution helps to reflect on business model design and anticipate consequences of change. please cite this paper as: atkova, i., and ahokangas, p. (2020), from structure to process: dynamic aspects of business model change, vol. 8, no. 2, pp. 57-72 keywords: business model, complexity theory, case study 1-2 university of oulu, oulu business school, irina.atkova@oulu.fi; petri.ahokangas@oulu.fi * corresponding author journal of business models (2020), vol. 8, no. 2, pp. 57-72 58 introduction “for a moment, nothing happened. then, after a second or so, nothing continued to happen.” — douglas adams, the hitchhiker’s guide to the galaxy the extant literature on business models is very diverse: the concept has been employed in different contexts to address different research questions, prompting some scholars to claim that business model research lacks formalization and structure (zott, amit and massa, 2011; casadesus-masanell and ricart, 2010). yet, a review by zott et al. (2011) has revealed that the business model has been mainly used to address and explain such phenomena as e-commerce, value creation and value capture, and technology innovation. these streams of research brought about two different uses of the business model concept—static and instrumental. the former approached the business model as a representation of firm activities emphasizing the coherence between core business model components; the latter implied using the concept as a tool to address change and innovation (chesbrough, 2010; demil and lecocq, 2010). massa, tucci and afuah (2017) concluded that fundamentally different business model notions address either how firms do business, how the way firms do business is interpreted by organizational members, and how a business model could be represented by means of formal conceptualizations, whether symbolic, mathematical, or graphical depictions. dynamism is an essential feature of a business model concept (doganova and eyquem-renault, 2009; mcgrath, 2010; demil and lecocq, 2010), yet none of the approaches discussed above allows it to be directly captured. the static approach does not aim for it in the first place, while the instrumental approach allows discussing change but not looking at how business models evolve themselves. both approaches conceptualize the business model as a snapshot, “a quantum of information that is revealed in a flash” (winter and szulanski, 2001, p. 731). the static and instrumental perspectives discuss the business model at a particular point in time that does not allow addressing and explaining the evolution process. yet, understanding the dynamics of business model evolution would allow reflecting on business model design and anticipating the consequences of change. hence, this paper explores how we can capture the dynamism of business models. to arrive at an answer to this question, our aim in this paper is to examine the applicability of the principles of complexity theory (anderson, 1999) as an approach to capturing the dynamic aspects of business model change. regardless of how we see or try to depict a business model, it can always be seen as a system (zott and amit, 2010; morris, schindehutte and allen, 2005; tikkanen, lamberg, parvinen and kallunki, 2005; massa, gianluigi and tucci, 2018) consisting of interrelated components, as exemplified by the many business model canvas tools available today. our aim, however, is not to discuss business model components as such, but rather the properties these components might possess in relation to depicting change. as a business model is proclaimed to be an appropriate boundaryspanning unit of analysis (zott et al., 2011), a means of innovation (foss and saebi, 2017), a dynamic capability (teece, 2007), as well as a practical implementation of strategy (osterwalder and pigneur, 2002; richardson, 2008), we see it as having potential for unfolding and depicting dynamism in business. the rest of the paper is organized as follows. we start by discussing our theoretical antecedents, describe the research methodology applied, and exemplify our view by presenting an example of a case company that has 45 years of experience in developing and manufacturing innovative and unique playground equipment. at the end, we present our findings and conclusions. theoretical framework basic tenets of business model research whilst being a contested concept, a business model is nonetheless frequently defined as a representation of a firm’s activities that explains how it creates and captures value by exploring and exploiting opportunities (demil and lecocq, 2010). a model is a tool that allows simplifying and representing complexity by eliminating the unnecessary or insignificant. the contents of a business model are reflected in sub-components (wirtz, pistoia, ullrich and göttel, 2016). however, as with the definition of the business model concept, there is no unanimity between scholars with regard journal of business models (2020), vol. 8, no. 2, pp. 57-72 59 to the essential business model components. for instance, hamel’s (2000) framework includes customer interface, core strategy, strategic resources, and value network. amit and zott (2001) distinguish between the design of transaction content, structure, and governance as the key business model components. osterwalder and pigneur (2010) created the ‘business model canvas’ with nine building blocks: value proposition, partners, activities, resources, customer relationships, channels, customer segments, cost structure, and revenue streams. in turn, mason and spring (2011) discuss technology, market offering, and network architecture as the major constituent parts of a business model. from the above follows that resource structure, transaction structure, and value structure tend to be the common denominators for the seemingly diverse business model frameworks (george and bock, 2011). it is noteworthy that massa et al. (2017) emphasize that traditional approaches towards business model research focus largely only on the supply side of value creation without considering the demand side. though the literature on business models is highly fragmented (foss and saebi, 2017), there are several arguments that unite scholars in the business model research field. first, as mentioned before, a business model is progressively associated with value creation and capture activities. teece (2010, p. 173) posits that “a business model articulates the logic and provides data and other evidence that demonstrates how a business creates and delivers value to customers”. second, business models are increasingly acknowledged as new boundary-spanning units of analysis (zott et al., 2011), allowing a common ground to be created between business model researchers. third, a business model tends to be perceived not only as a vehicle for innovation but also as an object of innovation (foss and saebi, 2017). this requires a business model to be flexible in order to be easily calibrated to the constantly changing external environment (teece, 2010). in turn, business model innovation is closely tied to business scalability. for instance, chesbrough and rosenbloom (2002) perceive business models as vehicles for scaling technology into a viable business. in other words, business model innovation supports business scalability. packing complex phenomena into simple models frequently implies compressing nonlinear behavior with intricate interconnections and feedback loops into a linear model that is easier to grasp (anderson, meyer, eisenhardt, carley and pettigrew, 1999; anderson, 1999). it implies that any attempt to model firm activities leads to representation distortions. the question is, how else might we comprehend such a complex phenomenon as a business model? täuscher and abdelkafi (2017) and havemo (2018) tried to look at the visual sides of business modeling, but no attempts have been made so far to theorize the business modelrelated processes from the complexity theory perspective. it can be partially attributed to the fact that the use of complexity theory in entrepreneurship studies is quite recent (steyaert, 2007). however, complexity theory may warrant new insights into business model transformation as it focuses on the dynamics between the external and internal as new relations are created rather than on isolated actions (steyaert, 2007; massa et al., 2018). it allows business model transformation to be depicted as “a non-linear outcome resulting from phase transitions which are caused by adaptive tensions and by process of positive feedback” (mckelvey, 2004, p. 316). business models from the complexity theory perspective complexity theory suggests that some systems with multiple interactions and feedback loops between different parts can produce simple and forecastable effects, whereas others generate behavior that is impossible to predict (anderson, 1999). though complexity theory draws inspiration from many streams of thought, five basic principles of complexity theory can be identified. the connectivity principle suggests that elements of a system are partially connected to each other by feedback loops, and thus mutually influence each other (anderson, 1999). a system can be defined as a whole whose elements are interconnected (ison, 2008). in the business model context, it implies that each choice with regard to a business model will have implications for the whole structure and will involve a different business model; that is, different business model elements, activities, resources, and capabilities (zott and amit, 2010). in turn, finding the most effective business model structure involves a lengthy process of market experimentation and trial-and-error learning (mcgrath, 2010; sosna, trevinyo-rodrigez and velamuri, 2010). of note, graud and van de ven (1992) journal of business models (2020), vol. 8, no. 2, pp. 57-72 60 and van de ven and polley (1992) found no support for adaptive trial-and-error learning in the innovation process. it implies that business model experimentation through trial-and-error may not generate learning. the connectivity principle is closely linked with a notion of co-evolution that suggests that elements of a system are evolving in close symbiosis (anderson, 1999). in other words, change in one element influences system fitness, triggering continuous adaptation. it is recognized that the business model is emerging as a new unit of analysis bridging multiple levels—individual, firm, and industry (zott et al., 2011). thus, in the business model context, it implies that change in one business model element will have implications for the business model as a whole and will inevitably involve transformations on different levels. the principle of reinforcing cycles implies that positive feedback loops amplify the existing behavior, whereas negative feedback loops result in dampening out change. it suggests that positive feedback loops allow for fitness optimization within a system and between a system and the external environment (anderson, 1999). in the business model context, the loops of feedback facilitate calibration of the business model to the business context and external environment, and allow for the harmonizing of the elements of the business model to enhance its performance potential (teece, 2010; zott and amit, 2010). in a similar vein, zott and amit (2010, p. 216) define a business model as “a system of interdependent activities that transcends the focal firm and spans its boundaries”. the principle of self-organization stems from the principle of reinforcing cycles. the cycles of the reinforcing positive feedback make groups of system components locked (anderson, 1999). in turn, this leads to predictable collective behavior. in other words, systems selforganize by means of feedback loops that generate stable structures (drazin and sandelands, 1992). this order revolves around so-called attractors. “an attractor is a limited area in a system’s state space that it never departs” (anderson, 1999, p. 217). the major function of a business model is to explore and exploit opportunities (zott and amit, 2010; teece, 2010; mcgrath, 2010). in other words, a business model can be seen as being built around an opportunity (ahokangas and myllykoski, 2014), an opportunity to create and capture value. george and bock (2011, p. 99) define business models as “the design of organizational structures to enact a commercial opportunity”. thus, in the business model context opportunity plays the role of an attractor that orchestrates the process of business model evolution via “a never-ending series” of feedback loops (anderson, 1999, p. 217). in a similar vein, mcgrath (2010, p. 248) claims that a business model is “a job that is never quite finished”. the non-linearity principle suggests that there is no direct relationship between input and output. surprisingly, scholars tend to eliminate nonlinear interactions for the sake of analytical tractability, yet such interactions are essential for pattern emergence (anderson, 1999). according to weick (1979), too few components or interactions between them can hamper pattern emergence. anderson (1999, p. 222) suggests that instead of “modelling complex building blocks with few interactions, we can make them understandable by modelling simple building blocks with many interactions”. in the business model context, it implies that it is impossible to fully predict what influence change in one business model element would have on the individual, firm, and industry levels. however, we can understand business model dynamics by modeling anchoring elements with many interactions. the principle of sensitivity to initial conditions logically stems from the idea of non-linearity, which means that a small change in the initial conditions can lead to a completely different result. from the business model perspective, it entails a need to pay special attention to the business opportunity evolution —a business model is a delicate system where small changes to a few elements can send it off to a new attractor. in the extant literature, the dynamic perspective within the business model context is frequently discussed either with regard to the dynamic interaction between business model components or business model innovation (wirtz et al., 2015). for example, demil and lecocq (2010) claim that business model dynamics is revealed by “… interactions between and within the core model components”. casadesus-masarell and ricart (2010) approach business models as a set of relations and feedback loops between elements that strengthen parts of the model over time. in turn, cavalcante, kesting and ulhøi (2011) establish the missing links between business model journal of business models (2020), vol. 8, no. 2, pp. 57-72 61 dynamics and innovation, emphasizing the importance of individual agency. similarly, van putten and schief (2012) discuss business model dynamics in conjunction with business model innovation. overall, in the extant studies on business model dynamics, an evolutionary and radical approach toward business model innovation is discussed (wirtz et al., 2015). sosna et al. (2010) take a step further and approach the dynamics of business model evolution from a learning perspective. we claim that by approaching business model evolution on a meta-level, complexity theory ensures more holistic understanding. approaching the dynamics of business models from the complexity theory perspective allows systemic understanding to be achieved (ison, 2008). the complexity theory perspective allows not only the elements of a business model to be depicted, but it also enables us to pay attention to the connections between business model elements (phillips and ritala, 2019). by elucidating the structure and processes related to business model dynamics, the complexity theory perspective gives us an opportunity to capture the dynamic aspects of business model change, i.e. how a business model emerges and develops over time. the above discusses business models from the complexity theory perspective and sets up the basis for our empirical study. methodology ahokangas and myllykoski (2014) emphasize that when divorced from the context business model related processes cannot be fully understood. thus, the emphasis of this study is on understanding business model dynamics as they unfold in the context. therefore, a case study research strategy was chosen as it allows providing “an analysis of the context and processes which illuminate the theoretical issues being studied” (hartley, 2004, p. 323). additionally, the case study approach is appropriate for capturing emergent and changing properties (hartley, 2004). a case study research strategy allows for two different approaches with regard to the research design: single case study and multiple case study. this research is conducted as a single case study. according to yin (1994), a single case design is appropriate under several circumstances: when a case represents a critical, unique, typical, revelatory, or longitudinal case. our research case company, lappset, was established more than forty-five years ago with the idea to reinvent the play environment for children. this was to be done by creating equipment that would allow them not only to have fun but also to develop physically and mentally. today, lappset is an international group with subsidiaries in five different countries. it exports to more than 40 countries, resulting in most of the group’s turnover coming from overseas. the organization strives to create sustainable play-friendly areas for people of different ages. the case company has more than 45 years of experience in the industry, providing a unique opportunity to follow and capture the process of business model transformation in a longitudinal manner. within this longitudinal research strategy two methods were employed: document analysis and semi-structured interviews. document analysis is frequently used to support other qualitative research methods and to achieve triangulation – “the combination of methodologies in the study of the same phenomenon.” (bowen, 2009; denzin, 1970, p. 291) according to bowen (2009), document analysis is particularly suitable for qualitative case studies. in a similar vein, merriam (1988, p. 118) emphasized that “documents of all types can help the researcher uncover meaning, develop understanding, and discover insights relevant to the research problem.” for the purposes of this study, document analysis involved analyzing seven presentations between 2005 and 2015. the presentations included company and product presentations. the company presentations covered, among others, such aspects as the company history, strategy, internationalization process and branding. the product presentations elaborated on the company product portfolio. also, the information provided on the company website, including the website history, was analyzed. the authors examined mainly what the company offers to their customers, how and where it does it in practice, and how the company can do it profitably. these are the key questions that cover the main elements of any business model engaged in value creation and capture processes (ahokangas and myllykoski, 2014). these documents allowed for a preliminary depiction of the dynamics of the business model transformation and provided the basis for the semi-structured interviews. there are three types of interviews: structured, unstructured, and semi-structured (longhurst, 2009). journal of business models (2020), vol. 8, no. 2, pp. 57-72 62 semi-structured interviews have “some degree of predetermined order” but still ensure “flexibility in the way issues are addressed by the informant.” (dunn, 2005, p. 80) in our study, the semi-structured interview revolved around uncovering the story of the case company together with the informant (see appendix 1). we have followed the semi-structured research method as it fosters reciprocity and reflexivity, engaging both the researcher and the informant in clarification, meaning-making, and critical reflection (galletta and cross, 2013). it was particularly important for our study as it allowed us to unmask the dynamics of the company business model by encouraging alternative explanations and multiple perspectives (galletta and cross, 2013). for the purposes of this study, two semistructured interviews with the chairman of the board of the case company and with the ceo were conducted in july 2016, which lasted one and three hours respectively. the interviews were transcribed using listen n write software. to ensure the validity of the research, the data was analyzed soon after it was collected and transcribed. in order to depict the elements and transformation of lappset’s business model, the focus was on the scalable business model elements engaged in value creation and capture processes. to draw the complexity map, the data was organized around key themes that were developed based on the documents. in the process of data analysis, the themes were refined and developed that allowed for deeper understanding of the case company business model dynamics. finally, to enhance research validity the findings were checked with the case study participants. findings and discussion case overview the following case overview is based on the analysis of the presentations, web-site information and interview data. lappset (lappset.com) as a company name comprises parts of two words, lapland (the land of the lappish people) and lapset (children in finnish). the lappset entrepreneurs started their business by using unique lappish wood to develop and manufacture innovative and unique playground equipment, with the novel idea of furnishing living environments with warmer and softer-looking play equipment. in the new environment, children could have fun by climbing and playing independently. before long, the company was known throughout finland and even beyond: by the 1970s, the company was already making sales calls in scandinavia, the benelux countries, and even japan. long delivery distances and the demands for efficient production presented challenges for the young company. in response, lappset began to develop new innovative solutions, such as modular construction, and invested heavily in product and business development with a keen eye on market trends. a modular design and a special grooving were introduced to the products. the special type of grooving increased the quality of the products, and modular design provided children with the opportunity for playful learning. at that time, the public sector was seen as the main paying customer. the export logic applied by the company was innovative: where most companies would start exporting to familiar, close markets, the company chose to enter the most difficult and demanding countries first. the 1990s marked a strong international expansion for the company. china, greece, italy, taiwan, thailand, and south korea were included as new export countries, and a subsidiary was set up in sweden. by the end of the 1990s, lappset had grown into one of the biggest players in the industry. the new millennium brought about digitalization. a financial crisis in europe had triggered fierce price competition and expansion to new countries had started to slow down, growing bigger required new means. simply being different and effective was not enough anymore. the company decided to “include a microchip in the wood” and make playgrounds “smart.” the results took the company further than expected. a series of new tailored, modular product lines was introduced to enter new end-user groups, including in the private sector. the idea was not to sell sets of individual playground products, but rather to provide customers with an opportunity to build fully equipped and versatile playgrounds anywhere. with the new offering, lappset became the benchmark for the industry, the first one to introduce digital content, concept thinking, and new materials to the markets. in 2010 the company was contacted by a global brand in the mobile games industry. the company had to start reconceptualizing their offering in terms of stories, characters, and themes that also placed increased demands for the design, manufacturing, marketing, and selling capabilities of the company. the standard journal of business models (2020), vol. 8, no. 2, pp. 57-72 63 existing elements, the playground equipment with a modular digitalized design, formed the core of the new product concept—activity theme parks—combined with an external brand. parallel to the reconceptualization of the offering, the internationalization strategy of the company changed from seeking new entries to increasing sales and penetration in existing markets. customer segmentation was renewed and prioritized. business model component depiction figure 1 below depicts change in the components and logic of the business model over time in the company. this transformation can be roughly divided into three phases: the 70s, the period between 80s and 2000, and from 2000 onwards. it illustrates how company value creation and value capture processes evolved over time, thereby triggering and supporting innovation of the business model structure. in turn, structural changes in the business model induced further modifications to the value processes (teece, 2010; foss and saebi, 2017). in the first phase, lappset’s business model components (first pillar in figure 1) were straightforward and traditional in the sense that suppliers provided the material (lappish wood) to produce designed products that were then manufactured, marketed, and sold, delivered, installed, and exported to customers in domestic and export markets. the uniqueness of the business model was in the differentiated products that were sold mainly to public-sector customers. “the company started in 1970 and we didn’t have our own production…and [company name] was the one who was producing for us… and 1974, that was when we started building our own production. at the end of the 70s, lappset started exporting to belgium.”(chairman of the board) over time, as the company grew, modularization became more important. with the introduction of new product lines and bringing digital components to the products, the original idea of design transformed to modular design thinking, which was strongly supported by branding activities (pillar 2 in figure 1). “in the 80s, lappset built modular structures.” (chairman of the board) “the smartus innovation came in early 2000. and that was because my father [the founder of the company] said that you have to include the microchip into the wood. and we said he was crazy.” (chairman of the board) “we have a product line that we call interactive products, which means that we combine the digital and electronic worlds with traditional play.” (ceo of the company) “my father [the founder of the company] has always known the value of the brand. and he has always known how to market. he went out from rovaniemi with his wolf coat and he only rented it because he wanted to make sure that everybody remembered that he came from the north. and he made sure that his phone number was short, the same length as they were in helsinki. he got a 4-digit phone number for the company so that together with the rovaniemi area code it was as long as a normal helsinki normal number. so he knew that everything was important as the brand and things.” (chairman of the board) lappset’s branding activities, together with its increasing international presence, necessitated a new kind of organization for growth. sales communication activities, as well as installation and maintenance, were seen as being locally managed in different countries, but were guided by the brand and directed from headquarters. “we first changed germany, the uk and then france so that we had 100% ownership. they are separate companies and management comes from here [headquarters].” (chairman of the board) in the third phase (pillar 3 in figure 1), modularization was applied to branding as the company started to build theme parks for other brand owners. at the same time, the role of design transformed into a wider set of conceptualization and marketing activities that were seen to create value to customers. packetizing solutions and selling could be done anywhere in the same way as manufacturing and assembly, as well as installation and maintenance. a new, close-to-customer activity was realized in the form of data services through which the customers could start to optimize their investments in the company’s products and services. “…and then when we came to 2010, angry birds came to our backyard. i think that was a remarkable thing. and it started a new era.” (chairman of the board) journal of business models (2020), vol. 8, no. 2, pp. 57-72 64 the transformation of the business model components and their relationships over time characterized two challenges inherent in the business model and change: how to manage operations and their interdependencies in different markets, and at the same time, how to enable growth and internationalization. the adoption of the modularization philosophy was one of the solutions the company found to manage the interdependencies. similarly, the emergence of conceptualization at the later stages of the company development could be seen as a solution growing from component-based thinking applied to products. next we take a different kind of look and delve into the role of innovation and internationalization in the development and transformation of the company. business model complexity map depiction the creation of the complexity map of the development of lappset opens up a systematic but fundamentally different picture of the development of the company. similarly, the development of the business model complexity map can be traced over three phases: the 70s, the period between 80s and 2000, and from 2000 onwards. in the first phase, lappset’s innovation—scandinavian wooden play equipment—was born by combining product-material innovation with a nordic identity, opening up an opportunity to export differentiated products to customers. scandinavian wooden play equipment and a nordic identity are the initial conditions that directed the future evolution of the company business opportunity and business processes (anderson, 1999). in the period between 80s and 2000, consistent with the principle of reinforcing cycles, growth enabled by the innovation contributed to the emergence of a product families that further boosted lappset to the next stage of internationalization, with a local presence in an increasing number of countries (anderson, 1999). reflecting the ideas of self-organization, when the opportunities of digitalization were discovered by the company, it started to explore and invest in them, gradually transforming from product innovation thinking toward more abstract digital innovation thinking, and then to concept innovation thinking (anderson, 1999). the parallel development of lappset’s branding activities are consistent with the connectivity principle, where choices with regard to the business opportunity influenced other company activities (anderson, 1999). in the third phase, the digital product lines adopted conceptual thinking, and internal/external branding logic led to internationalization on a global scale and seizing the opportunity to develop theme parks for external brands. reflecting the non-linearity principle, it is possible only to single out the anchoring elements figure 1: business model elements and transformation journal of business models (2020), vol. 8, no. 2, pp. 57-72 65 of the innovation and internationalization processes, but it is impossible to predict how these elements will play out in the future (anderson, 1999). the creation of a new “blue ocean” market opportunity required a fundamental transformation of the business model. in turn, it enabled lappset to provide data services for its customers that made it possible to optimize the use of lappset’s offering. although the data services offered are just first steps in this direction, there are indications that web 2.0 and gamification-based business models could well be the next steps. analysis of the primary and secondary data from the complexity theory perspective has revealed that the case company’s business model has been developing thematically over several phases. during the first phase, the initial conditions for the business model included an opportunity to innovate children playgrounds, emphasizing the importance of learning in play and to differentiate from the market by accentuating its nordic identity and utilizing sustainable materials. following the idea of reinforcing cycles, a unique opportunity has allowed the company to take its first steps in the international market (anderson, 1999). “my father [the founder of the company] wanted to furnish the living environment, furnish better surroundings, and that was a great idea. and then in the 80s and 90s came growth though play. and it was a strong message. and nowadays we invite mankind outdoors.” (chairman of the board) the connectivity principle postulates that each choice has implications for the whole structure; that is, different business model elements, activities, resources, and capabilities (anderson, 1999; zott and amit, 2010). similarly, production of the play equipment product lines instead of individual items created a novel business opportunity and marked a transition to the second wave in the business model evolution. “originally, our company was only a playground company, so we made infrastructure for playgrounds. i also mentioned the interactive products. now we also have product lines that are for the total lifespan of a human being – from children to teenagers, to adults and seniors. (ceo of the company) in turn, following the idea of reinforcing cycles and selforganization, a new opportunity boosted international development in the form of regional subsidiaries and acquisitions. the principle of initial conditions and connectivity reveal that at the same time, strengthened by the concept of the nordic identity, the emphasis in figure 2: complexity map: dynamics of the business model evolution journal of business models (2020), vol. 8, no. 2, pp. 57-72 66 the innovation processes shifted toward internal brand development and utilization of new digital solutions, leading to the third wave of the business model evolution (anderson, 1999). in the third stage, novel digital solutions have fostered conceptual thinking, implying that new products represented a certain concept for play, sport, or theme parks. “and of course, santa claus is very important for us. we started with santa and we are also building santa parks around the world. we are now in the process of building one in china.” (chairman of the board) the principle of self-organization allows us to conclude that concept innovation had a tremendous effect on the business model evolution by facilitating external brand innovation, supporting the emergence of a global mindset and triggering the emergence a new business opportunity—theme parks development (anderson, 1999). in turn, a new opportunity supported further globalization and reinforced the company brand. the complexity theory perspective also allows us to differentiate between different themes in the business model evolution. the evolution dynamics is revealed in the business opportunity transformation—the development of the innovation and internationalization processes that reflect the main ideas of the complexity theory. the company started by utilizing a unique opportunity to rethink children’s playgrounds, which led to the production of play equipment with a pronounced nordic identity. this opportunity has transformed into the production of product lines and—at the start of the digital era—into digital product lines. supported by digital and concept innovation, digital product lines evolved into theme parks. innovation processes largely revolved around new business opportunities and the company brand. the internationalization process started off with small-scale export operations and progressed toward full-scale globalization. conclusions the discussion above gives rise to two sets of conclusions related to the company business model and business model transformation from the complexity perspective. as was previously discussed, extant representations of the business model concept focus largely on the supply side of value creation, without considering the demand side (massa et al., 2017). indeed, the customer is an essential part of a business model composition (osterwalder and pigneur, 2010). however, it does not play an active or proactive role, but rather is treated as a passive consumer. yet, as the principle of reinforcing cycles allows us to conclude, the flexibility and responsiveness of the case company business model allowed the demand side of the value creation chain to be taken into account, as well as allowing the customer to have a say in the final product design (anderson, 1999; massa et al., 2017). additionally, flexibility enabled business model scalability (chesbrough and rosenbloom, 2002). the product evolution is closely associated with the changing external trends— from basic quality products to product lines and modular design, and on to digital products and theme parks. in other words, modularization, digitalization, and conceptualization supported novel value creation logic and fostered business model scalability (teece, 2010; chesbrough and rosenbloom, 2002). if the depiction of the business model elements and its transformation represents a company business model at a certain development stage, the complexity map allows the forces that enable this transformation— business opportunity transformation, development of the innovation and internationalization processes— to be captured (anderson, 1999). complexity theory suggests that systems can produce foreseeable as well as unforeseeable effects (anderson, 1999). the case company initiated the internationalization process by exporting the products to a limited number of countries. organizational learning in terms of foreign market knowledge supported the intensification of the internationalization process, and eventually the company became a benchmark in the industry on a global scale. if the company’s internationalization path seems largely predictable, the development of a business opportunity takes a lot of unexpected turns over the years (anderson, 1999). the case company’s business model evolution has revealed that the choices the company made with regard to business opportunities, innovation, and internationalization processes are closely connected, and have supported and fed each other. co-evolving the processes of innovation and opportunity development http://eu.wiley.com/wileycda/section/id-302479.html?query=alexander+osterwalder http://eu.wiley.com/wileycda/section/id-302479.html?query=yves+pigneur journal of business models (2020), vol. 8, no. 2, pp. 57-72 67 in close symbiosis contributed to the expansion of international operations. in turn, the company’s internationalization process reflects the principle of the reinforcing cycles and self-organization, where the initial success in the foreign markets triggered further expansion and generated stable international growth (anderson, 1999). also, the opportunities, internationalization, and innovation also played a major role in the evolution, interdependencies, and contents of lappset’s business model components. in essence, we claim that the two figures we have presented (figure 1 and 2) enable us to capture, depict, and explain the business model change processes in the case company. approaching business opportunity transformation in combination with innovation and internationalization processes does not allow us to fully predict what effect a change in one business model component would have at the individual, firm, or industry level (teece, 2010; anderson, 1999). however, this perspective emphasizes the multi-dimensional nature of a business model and allows us to understand the dynamics of business model evolution by looking at the different levels. additionally, the complexity theory perspective emphasizes that the dynamics of business model evolution is predicated on different processes. it implies that, contrary to the current attempts of the extant research to develop business model kinds and types, complexity theory allows us to appreciate the unique nature of any business model without trying to classify or categorize it. importantly, complexity theory enables us to capture the dynamics of business model evolution (doganova and eyquem-renault, 2009; mcgrath, 2010; demil and lecocq, 2010). it does not provide a picture of a business model at a certain point in time, creating a static snapshot, but it does reveal how a new business model comes to be as a result of an intricate interplay between business model elements. in turn, it allows the connection between the elements to be traced. to sum up, complexity theory allows us to capture the process of business model development, avoiding a situation “when nothing continues to happen.” this perspective assists us in capturing emerging as well as disappearing business model elements, enabling us to understand and explain how a business model evolves. additionally, complexity theory helps us to comprehend the connections between different business model elements, to reveal its multi-faceted and unique nature. journal of business models (2020), vol. 8, no. 2, pp. 57-72 68 references ahokangas, p., atkova, i. & hurmelinna-laukkanen, p. (2017), come to the northern side – we have a business model, invincze, s. (ed.), motivating smes to cooperate and internationalize: a dynamic perspective, routledge studies in small business, routledge, london. ahokangas, p. & myllykoski, j. (2014), the practice of creating and transforming a business model, journal of business models, vol. 2, no.1, pp. 6-18. amit, r. & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6, pp. 493-520. anderson, p. (1999), complexity theory and organization science, organization science, vol. 10, no. 3, pp. 216-232. anderson, p., meyer, a., eisenhardt, k., carley, k. & pettigrew, a. (1999), introduction to the special issue: applications of complexity theory to organization science, organization science, vol. 10, no. 3, pp. 233-236. bowen, g. a. (2009), document analysis as a qualitative research method, qualitative research journal, vol 9, no. 2, pp. 27-40. cavalcante, s., kesting, p. & ulhøi, j. (2011), business model dynamics and innovation: (re)establishing the missing linkages, management decision, vol. 49, no. 8, pp. 1327-1342. casadesus-masanell, r. & ricart, j. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, no. 2-3, pp. 195-215. chesbrough, h. (2010), business model innovation, opportunities and barriers, long range planning, vol. 43, no. 2-3, pp. 354-363. chesbrough, h. & rosenbloom, r.s. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, vol. 11, no. 3, pp. 529-555. demil, b. & lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 43, no. 2-3, pp. 227-246. denzin, n. k. (1970), the research act: a theoretical introduction to sociological methods, aldine, new york. doganova, l. & eyquem-renault, m. (2009), what do business models do? innovation devices in technology entrepreneurship, research policy, vol. 38, no. 10, pp. 1559 -1570. drazin, r. & sandelands, l. (1992), autogenesis: a perspective on the process of organizing, organization science, vol. 3, no. 2, pp. 230-249. dunn, k. (2005), interviewing, in hay, i. (ed.), qualitative research methods in human geography (2nd ed.), oxford university press, melbourne, pp. 79-105. foss, n. & saebi, t. (2017), fifteen years of research on business model innovation how far have we come, and where should we go? journal of management, vol. 43, no. 1, pp. 200-227. journal of business models (2020), vol. 8, no. 2, pp. 57-72 69 galletta, a. & cross, w. e. (2013),  mastering the semi-structured interview and beyond: from research design to analysis and publication. nyu press, new york. george, g. & bock, a. (2011), the business model in practice and its implications for entrepreneurship research, entrepreneurship theory and practice, vol. 35, pp. 83-111. graud, r. & van de ven, a.h. (1992), an empirical evaluation of the internal corporate venturing process, strategic management journal, vol. 13, pp. 93-109. hamel, g. (2000), leading the revolution, harvard business school press, boston. hartley, j. (2004), case study research, in cassell, c. & symon, g. (eds.), essential guide to qualitative methods in organizational research, sage publications, london, pp. 323-333. havemo, e. (2018), a visual perspective on value creation: exploring patterns in business model diagrams. european management journal, vol. 36, no 4, pp. 441-452. ison, r. (2008), systems thinking and practice for action research, in reason, p. & bradbury, h. (eds.), the sage handbook of action research: participative inquiry and practice (2nd ed.), sage publications, london, pp. 138-158. longhurst, r. (2009), semi-structured interviews and focus groups, in clifford, n., cope, m., gillespie, t. & french, s. (eds.), key methods in geography (3rd ed.), sage publications, london, pp. 143-156. mason, k. & spring, m. (2011), the sites and practices of business models, industrial marketing management, vol. 40, no. 6, pp. 1032-1041. massa, l., tucci, c. & afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. massa, l., gianluigi, v. & tucci, c. (2018), business models and complexity. journal of business models, vol. 6, no. 1, pp. 59-71. mcgrath, r.g. (2010), business models: a discovery driven approach, long range planning, vol. 43, no. 2-3, pp. 247-261. mckelvey, b. (2004), toward a complexity science of entrepreneurship, journal of business venturing, vol. 19, pp. 313-341. merriam, s. b. (1988), case study research in education: a qualitative approach, jossey-bass, san francisco. morris, m., schindehutte, m. & allen, j. (2005), the entrepreneur’s business model: toward a unified perspective, journal of business research, vol. 58, no. 6, pp. 726-735. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers. isbn: 978-0-470-87641-1. phillips, m. a. & ritala, p. (2019), a complex adaptive systems agenda for ecosystem research methodology, technological forecasting & social change, vol. 146, pp. 119-139. http://eu.wiley.com/wileycda/section/id-302479.html?query=alexander+osterwalder http://eu.wiley.com/wileycda/section/id-302479.html?query=yves+pigneur journal of business models (2020), vol. 8, no. 2, pp. 57-72 70 sosna, m., trevinyo-rodrigez, r.n. & velamuri, s.r. (2010), business model innovation through trial-and-error learning, long range planning, vol. 43, no. 2-3, pp. 383-407. steyaert, c. (2007), “entrepreneuring” as a conceptual attractor? a review of process theories in 20 years of entrepreneurship studies, entrepreneurship and regional development, vol.19, pp. 453-477. teece, j. (2007), explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance, strategic management journal, vol. 28, no.13, pp. 1319-1350. teece, j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2-3, pp. 172-194. tikkanen, h., lamberg, j.a., parvinen, p. & kallunki, j.p. (2005), managerial cognition, action and the business model of the firm, management decision, vol. 43, no. 6, pp. 789-809. täuscher, k., & abdelkafi, n. (2017), visual tools for business model innovation: recommendations from a cognitive perspective, creativity and innovation management, vol. 26, no. 2, pp. 160-174. van de ven, a.h. & polley, a.s. (1992), learning while innovating, organization science, vol. 3, no. 1, pp. 92-116. van putten, b. & schief, m. (2012), the relation between dynamic business models and business cases, the electronic journal information systems evaluation, vol. 15, no. 1, pp. 138-148. weick, k. (1979), the social psychology of organizing, addison-wesley, reading, ma. winter, s.g. & szulanski, g. (2001), replication as strategy, organization science, vol. 12, no. 6, pp. 730-743. wirtz, b.w., pistoia, a., ullrich, s. & göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, vol. 49, pp. 36-54. yin, r. (1994), case study research: design and methods, sage publishing, beverly hills, ca. zott, c. & amit, r. (2010), designing your future business model: an activity system perspective, long range planning, vol. 43, no. 2-3, pp. 216-226. zott, c., amit, r. & massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2020), vol. 8, no. 2, pp. 57-72 71 appendix 1. initial list of questions in the semi-structured interviews. 1. could you please tell us the story of lappset from your perspective? 2. how your business opportunity has changed over time? 3. how did your key targets change over time? 4. what were the key challenges? 5. what were the key barriers? 6. what were the critical events? 7. how did you choose your export countries? journal of business models (2020), vol. 8, no. 2, pp. 57-72 72 irina atkova received her d.sc. degree (2018) from oulu business school, university of oulu. her dissertation explains how entrepreneurs create business models to capture opportunities. more specifically, it focuses on the entrepreneurial actions between the moment of opportunity identification and the inception of the functioning business model. her research interests revolve around entrepreneurship, business model creation and innovation in various contexts, including high-tech industry and start-up context. she has contributed to a number of peer-reviewed conference publications, peer-reviewed book chapters and peer-reviewed journal articles, among others journal of entrepreneurship theory and practice. she has been also involved in various international research projects, dealing with the development of the arctic and barents region, as well as with the finnish software companies as the drivers of the digital economy. dr. petri ahokangas received his d.sc. degree (1998) from university of vaasa, finland. currently he is the head of futuralis (future digital business) research group at martti ahtisaari institute, oulu business school. prior to his academic career, he worked in the telecoms/ software industry. his research is in the intersection of entrepreneurship, strategic management, international business, futures and action research, and various fields on technology. specifically, he is interested in business models, strategies, ecosystems and internationalization within digital and wireless business domains, especially in the domain of next generation (5g/6g) wireless communications. he has over 180 scientific publications and extensive experience of working in national and international research projects. about the authors journal of business models (2018), vol. 6, no. 3, pp. 45-62 45 identifying contexts of business model innovation for exploration and exploitation across value networks louise kringelum1 and allan næs gjerding2 abstract purpose: this exploratory study develops insights into how inter-organizational projects can be part of a process of intra-organizational business model innovation in an incumbent firm. design/methodology/approach: the present study is based on a longitudinal case study of an asset-based logistics intermediary. the case study focuses on four instances of inter-organizational projects in a port system. following an abductive logic, the empirical findings result in a conceptualization of business model innovation that describes how to strike a balance between exploration and exploitation across intraand inter-organizational levels. findings: we present a novel conceptualization of business model innovation as a process that bridges the exploration and exploitation of business opportunities by means of organizational integration within value networks. originality/value: business model innovation entails both exploration and exploitation of business opportunities. however, as stated by levinthal and march (1993), prior experience tends to trap firms in patterns of competences that limit future balancing of exploration and exploitation. based on the findings of a real-time case study, we suggest how firms can protect themselves against trapping by creating contexts of exploration and exploitation that span organizational boundaries. in doing so, we respond to the call put forward by wilden et al. (2018) for research on how institutional context affects the exploration-exploitation balance, which represents a research gap. addressing this research gap from a business model perspective represents a novel discourse in business model innovation. please cite this paper as: kringelum, l. and gjerding, a. n. (2018), identifying contexts of business model innovation for exploration and exploitation across value networks, vol. 6, no. 3, pp. 45-62 keywords: business model innovation; exploration; exploitation; value network 1-2 department for business and management, aalborg university, kringelum@business.aau.dk, ang@business.aau.dk file:///d:/morten%20lund/06-3/03/# file:///d:/morten%20lund/06-3/03/# journal of business models (2018), vol. 6, no. 3, pp. 45-62 46 introduction the present paper responds to the call put forward by wilden et al. (2018) for research on how institutional context affects the balance between exploration and exploitation, which represents a research gap in the surge of academic work that has followed upon the seminal contribution of the exploration-exploitation paradox by march (1991). while the paradox was originally phrased in terms of processes of organizational learning, the subsequent research has covered a broad range of additional topics, including dynamic capabilities, knowledge management, technological innovation, and the relationship between ambidexterity and organizational performance (wilden et al., 2018: 3-7). a core theme is that firms develop routines and procedures for decision-making that reflect how problems have been solved and potentials have been realized in the past, which tend to trap firms in patterns of competence that limit the ability to balance exploration and exploitation (levinthal and march, 1993), hence the paradox. the paradox represents a challenge of business model innovation, as firms must be prepared to address environmental uncertainty as opportunities that can be either explored or exploited (schneider and spieth, 2013) through the existing or new business models. in the context of business model innovation within a port system lead by a dominant asset-based logistics intermediary, we offer a conceptualization of how to strike a balance between contexts of exploration and exploitation in a value network to mitigate the trapping effect of prior experience for the focal firm. at the outset, it must be considered that the context of business model innovation is not a trivial one, since the very concept of business model is widely diffused (ghaziani and ventresca, 2005; lambert, 2015) and therefore holds no unitary definition (al-lebei and avison, 2010; jensen, 2013). according to schneckenberg, spieth and matzler (2016), this conceptual ambivalence is caused by the fact that the gestalt of the business model as a research object has not been adequately defined. it has been argued that a business model paradox exists in the sense that the concept is widely criticized while simultaneously being highly popular, prevalent, and applied among both scholars and practitioners (klang, wallnöfer and hacklin, 2014). in consequence, there is no common understanding of business model innovation (schneider and spieth, 2013; foss and saebi, 2017). because business model innovation has received increasing research and management attention since the turn of the century (wirtz, göttel and daiser, 2016), the research community has experienced a need to unify extant research on business model innovation, which has resulted in the publication of several broad, synthesizing literature reviews on the topic see; schneider and spieth (2013), schneckenberg, spieth and matzler (2016), foss and saebi (2017) and wirtz and daiser (2017). the proliferation of understandings of business model innovation represents what hirsch and levin (1999) have described as the occurrence of umbrella constructs, i.e. constructs that try to comprehend broad phenomena in new lines of research. umbrella constructs reflect that research is on the verge to establish patterns of mutual understandings that need to be validated within the scientific community. hirsch and levin (1999: 204-207) portray this process as a cycle where emerging excitement creates a validity challenge that calls for tidying up with typologies. in the following, we contribute to tidying up by identifying dominant perspectives in business model innovation and developing a conceptualization of business model innovation. our contribution is based on the application of abductive reasoning (dubois and gadde, 2002) to bridge existing theoretical explanations with a longitudinal case study in an asset-based logistics intermediary including four subcases of inter-organizational projects in a port system. inspired by nenonen and storbacka (2010), who claim that business logics with focus on value chains is being replaced by business logics focusing on value networks, we argue that the case captures an evolving trend of business model innovation. in doing so, we answer the call for more research on the intraand inter-firm challenges of business model innovation put forward by berglund and sandström (2013) and foss and saebi (2017). the remainder of this paper is organized as follows: in section 2, we present three existing perspectives on business model innovation and the fundamental journal of business models (2018), vol. 6, no. 3, pp. 45-62 47 premises of these. we discuss the interconnections between the perspectives and the existing research gaps. based on these insights, we then elaborate on the applied research methodology as well as the abductive process underlying the methodology. this is followed by a description of the longitudinal case study. section 4 covers the abductive reasoning (o’mahoney and vincent, 2014) by which we have identified different instances of business model innovation in four embedded subcases of inter-organizational projects in the longitudinal case study. subsequently, a conceptualization of business model innovation in value networks is compiled and related to existing theory in the field. finally, the scientific and managerial implications, research limitations, and future avenues for research are put forward and discussed in section 6. perspectives on business model innovation the approach taken to business models in the current paper is inspired by shafer, smith and linder (2005: 202) who, “… define a business model as a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network,” as value creation is increasingly regarded as a phenomenon occurring in value networks (massa and tucci, 2013). although often applied in research on business models, the structure of value networks is rarely defined. we adhere to the definition proposed by allee (2000), who state that: “a value network generates economic value through complex dynamic exchanges between one or more enterprises, its customers, suppliers, strategic partners, and the community” for which reason it can be regarded from the point of view of a focal firm. while the value network can function as a source of both complementary and substitutive resources (pynnönen, hallikas and ritala, 2012), this also implies that firms due to the intricate links of resources and activities across the value network cannot maintain complete control of their operations (berglund and sandström, 2013). based on the definition presented above, we regard business model innovation in incumbent firms as a process of renewal that can occur through contexts of exploitation and exploration in a value network. the research question that we address is how inter-organizational projects contribute to intra-organizational business model innovation in an incumbent firm. to answer this question, we elaborate on perspectives of business model innovation to emphasize the boundaries inherent in the existing theoretical conceptualizations, and we argue that firms can innovate their business models through contexts of exploitation and exploration across the value network. by pursuing this line of questioning, we follow the call from both spieth, schneckenberg and ricart (2014) and storbacka et al. (2012) to analyze the process of integrating stakeholders in business model innovation and to reconfigure existing models to enable collaboration. in doing so, we are inspired by a number of scholarly reviews of dimensionality in business model innovation research, notably schneider and spieth (2013) and foss and saebi (2017). furthermore, we build on a variety of contemporary business model innovation classifications and typologies, including amit and zott (2001, 2010), hock, clauss and schulz (2016), wei et al. (2014), and taran, boer and lindgren (2015). current conceptualizations of business model innovation multiple researchers have highlighted the need to integrate customers, external network partners, and additional stakeholders when undertaking business model innovation (giesen et al., 2010; frankenberger, weiblen and gassmann, 2014; spieth, schneckenberg and ricart, 2014; laudien and daxböck, 2015). it is generally acknowledged, that business model innovation is not confined to the spatial boundaries of the focal firm. rather, it goes beyond the focal firm (clauss, 2016) and its existing boundaries (cavalcante, kesting and ulhøi, 2011) and is often interlinked with the value chain or network (voelpel, leibold and tekie, 2004; girotra and netessine, 2011; breuer and lüdeke-freund, 2017). in order to identify existing conceptualizations of business model innovation that transcends firm boundaries, a theoretical review including 45 peer-reviewed papers on business model innovation was undertaken (petticrew and roberts, 2006). based on this, three perspectives were identified as recurring in business model innovation: 1) change or innovation; 2) novelty and efficiency; and 3) incremental and radical. these three perspectives journal of business models (2018), vol. 6, no. 3, pp. 45-62 48 represent summative conceptual dimensions of existing themes in the current literature on business model innovation and will be elaborated in the following to provide the foundation for the abductive reasoning behind the conceptualization presented in section 5. change or innovation since both the classification of innovation (garcia and calantone, 2002) and of business model innovation (gassmann, frankenberger and sauer, 2016; wirtz, göttel and daiser, 2016; foss and saebi, 2017) is ambiguous, a recurring question in the current literature is when to regard changes in business models as innovations (spieth and schneider, 2016). as some of the first authors to discuss this subject, linder and cantrell (2000) highlighted the static onedimensional perspective of business models, as it merely presents the status quo at one point in time, and thus does not take into account the continuous need for change. as a result, they introduced change models such as (p: 1): “... the core logic for how a firm will change over time in order to remain profitable in a dynamic environment”. four change models were advanced based on the degree of change in the core logic: realization models, renewal models, extension models, and journey models. realization and renewal models cover the exploitation and exploration, respectively, of the existing business model. therefore, they are rarely regarded as business model change according to the model presented by linder and cantrell (2000). a similar distinction is put forward by cavalcante, kesting and ulhøi (2011), in which they distinguish between business model creation, extension, revision, or termination, depending on the degree of innovation. in doing so, cavalcante, kesting and ulhøi (2011) introduced various levels of analysis regarding the innovation of processes and the change in business models as different entities as well as the role of individual agency in the process of change. the exploration of business model innovation by mitchell and coles (2003) was based on a distinction between the degrees of change and innovation, which are categorized in terms of the number of changed business model elements. based on this, they proposed four types of models: 1) business model improvement; 2) catch-up; 3) replacement; and 4) innovation. in short, current research that conceptualizes business model innovation as either change or innovation reflects a focus on both the cognitive dimension of logic and the operational dimension of building blocks and elements. the distinction between cognitive and operational dimensions reflects that business model innovation can occur at different levels of analysis. while mitchell and coles (2003) argue that the change of one building block is merely a business model improvement, linder and cantrell (2000) claim that even marginal changes can reflect innovation to the extent that the change of one building block represents a completely new business logic. consequently, the level of analysis as well as to whom the innovation represents something new must be considered as dimensions when conceptualizing business model innovation. novelty and efficiency a recurring theme in conceptualizations of business model innovation is the organization of transaction costs. this theme has arisen from one of the early perspectives on business model innovation, which was developed by amit and zott (2001) in their analysis of value creation in e-business. their model of value creation potential that can lead to new sources of innovation, i.e., business model innovation, has inspired many ensuing papers on the subject see e.g.; wei et al. (2014) and hock, clauss and schulz (2016), as well as the their own continuous development focusing on business model innovation, as seen in amit and zott (2010, 2012) and zott and amit (2008). amit and zott (2001) included four dimensions of value creation in their model: efficiency, complementarities, lock-in, and novelty. these four value drivers, which are firmly grounded in economic theories (gassmann, frankenberger and sauer, 2016), can be considered as different dimensions of change which can be deployed as means of business model innovation. especially the dimensions of efficiency and novelty, inspired by transaction cost economics and schumpeterian innovation (gassmann, frankenberger and sauer, 2016), have been acknowledged in business model research. wei et al. (2014) applied the design themes of novelty and efficiency in an analysis of the fit between technological innovation and business model design. while novelty-centered business model design covers all areas of content, structure, and governance as journal of business models (2018), vol. 6, no. 3, pp. 45-62 49 a part of the innovation, efficiency-oriented business model design is limited to focusing on the organization of the boundary-spanning activity system to enable efficiency, seemingly focusing primarily on the transactions found within the structure. the business model innovation is in this context tightly linked to the reduction or new organization of transaction costs (zott and amit, 2007; casadesus-masanell and zhu, 2013). following the same track, hock, clauss and schulz (2016) include the notions of novelty and efficiency as business model design themes in analyzing organizational value and capabilities. they employ this division in connecting business model innovation and behavioral management to show how the underlying organizational value affects the capabilities needed in the innovation process to enable new transactions or minimize existing transaction costs. incremental and radical innovation the third perspective found in extant research on business model innovation focuses on value and is frequently explored along a continuum of incremental and radical innovation. the degree of change is often analyzed in terms of changes in value proposition, value creation, and value capture (velu and jacob, 2016). based on the degree and type of innovation and the change of building blocks, witell and löfgren (2013) identified three degrees of business model innovation that occur through transition strategies: no or minor changes, incremental innovation, or radical innovation. in business model change, no or minor changes occur in the building blocks. incremental business model innovation is defined as changes in the content or structure of the business model, while radical business model innovation takes place when governance is affected, which is often marked by a change in business relationships (witell and löfgren, 2013: 528). as the distinction is essentially based on the ways in which the revenue structure of the firm changes, it is focused primarily on the demand-side of business model innovation, which is generally referred to as value creation and value capture. summary the three perspectives presented above each emphasize three converging perspectives of business model innovation. the nature of business model innovation depends on how the change in question affects the cognitive dimension of the business model and the interplay between business model constituents represented by the operational building block dimension. furthermore, the nature of business model innovations are affected by the objective of minimizing or restructuring transaction costs or increasing the value created and captured. the three perspectives presented above converge in a number of areas, and complement rather than substitute each other. essentially, value and cost are not opposites but rather reciprocal in nature. innovating transaction costs, i.e., managing costs most optimally, is basically a search for stability. in contrast, innovating to create or capture value requires flexibility and change. the contradictions inherent in this relationship of perspectives do not stand out in the existing literature, but instead represent a challenge inherent in most processes of business model innovation as one of balancing the tensions of exploration and exploitation (o’reilly and tushman, 2013). in the following abductive case analysis, the three perspectives on business model innovation have been used to bridge the empirical observations and existing theoretical explanations. a bridging mechanism is inherent in the abductive approach, and including the three perspectives have, in the present case, enabled the identification of the foci in business model innovation, cost reconfiguration or value creation, and the means for structuring the process, e.g. whether the process unfolded as change or innovation both cognitively and operationally. we applied these distinctions to explore the mechanisms affecting a process of business model innovation that occurred at various levels of analysis. the remainder of this paper is devoted to presenting a process of business model innovation by abductively combining the empirical data and the conceptual foundation presented previously. this is concluded by presenting a conceptualization of how to strike a balance between exploration and exploitation when business model innovation is undertaken across a value network. research methodology since the research described in this paper is abductive in nature, the process of developing a conceptual framework of business model innovation is based upon an engagement with the actors in the case at hand, i.e., the journal of business models (2018), vol. 6, no. 3, pp. 45-62 50 logistics intermediary. abduction entails re-describing the empirical, observable world through abstraction in order to describe the causations creating patterns in events (o’mahoney and vincent, 2014). following an abductive logic, the research process has combined empirical data, case analyses, and theoretical modeling in order to expand the knowledge on both theoretical concepts and empirical phenomena (dubois and gadde, 2002) and to develop probable explanations of causality in a critical realist sense (edwards, o’mahoney and vincent, 2014). the research has unfolded as a longitudinal process study spanning from 2013 to 2016 based primarily on qualitative data. inspired by previous research on business models (nenonen and storbacka, 2010), the research process has progressed through two phases, which will be elaborated in the following. data collection and analysis in phase 1, data were primarily collected via engaged scholarship (van de ven, 2007) in the logistics intermediary and supplemented by secondary data, summaries of meetings, and email correspondences. the engaged scholarship approach (van de ven, 2007) enabled the inclusion of perspectives from multiple stakeholders, which has in turn ensured a focus on both the theoretical and practical dimensions of the subcases. in order to gain interactional expertise (collins, 2004; langley et al., 2013) and in-depth knowledge on both the daily processes and top management decision making, we participated in and facilitated seminars at all levels of the logistics intermediary and with external stakeholders taking part in the process of innovation. we participated in eight strategy seminars with external participants of which seven were recorded, transcribed and thematically coded in nvivo (miles, huberman and saldãna, 2014). summaries were written concurrently and approved by all participants. the data were included in the analysis with the aim of identifying existing mechanisms (ackroyd and karlsson, 2014) affecting the processes of business model innovation in the logistics intermediary. to ensure breadth in describing and analyzing the process of business model innovation, the case study is presented through four embedded subcases (yin, 2003), representing four inter-organizational projects in which the logistics intermediary took part. this approach is possible because we have followed multiple projects that have been conducted as a part of the overall business model innovation within the firm of the logistics intermediary between 2013 and 2016. based on the empirical observations and a conceptual grounding in business model research, a preliminary model conceptualizing the process was developed. phase 1: developing preliminary conceptualization phase 2: reconfiguring conceptualization • prior knowledge on business models and business model innovation • initiation of a longitudinal process study at logistics intermediary • engaged scholarship approach (van de ven, 2007) to collect data through interaction with organizational members • first conceptualization of business model innovation developed based on preliminary observations • presenting and discussing results with practitioners • refining model based on inputs • theoretical literature review on business model innovation • identifying conceptual perspectives of business model innovation • analysis of four subcases in the longitudinal case • reconfiguring conceptualization based on insights gained from the literature feedback from peers and practitioners figure 1: an abductive process of conceptualizing business model innovation journal of business models (2018), vol. 6, no. 3, pp. 45-62 51 between phases 1 and 2, see figure 1, the preliminary model was presented at an academic conference and to the organizational actors of the case study. the input from these events triggered the initiation of phase 2 and the need for a more extensive literature review covering existing perspectives of business model innovation as described in section 2. a broader conceptual insight enabled the reconfiguration of the preliminary model, supplemented by an analysis of the four subcases that also substantiated the conceptualization and the constructs included herein. the case of the logistics intermediary and the value network the longitudinal case study followed the process of business model innovation in a logistics intermediary. the logistics intermediary is a municipality-owned private limited firm. the firm acts within a port system and is locally-embedded due to extensive asset commitments and a dual role of contributing to regional growth while maintaining a viable business. for this reason, the political pressure induced by being owned by a municipality affects the objectives of the firm and the competitive potential. the dual roles define the business logic of the logistics intermediary, which must balance an objective of profit maximization while also initiating projects for the benefit of a multitude of stakeholders in the port system. consequently, the logistics intermediary functions as a focal firm in a value network of logistics operators, transport intermediaries and manufacturing firms, with whom the firm is experiencing complementarity and substitutability of resources and activities due to the existing transactional links established between the firms. what initiated the case study was the baffling observation that the logistics intermediary ceo continuously stated that the existing business model was not viable. he argued that in order to ensure future survival, new approaches to manage the relations with external stakeholders had to be considered: “this is a part of our strategy now: how can we activate collaboration with companies so we can create trust, which can create intuitive exchange and openness, so we can help each other obtain lower costs and with it streamline or create new ideas” (ceo strategy seminar 2). this statement marked a break with the existing business logic in the port system, which was characterized by sub-optimization in the existing value chains, limited integration, low levels of trust and, as a result, no openness between firms, impairing the ability to meet emerging competitive challenges. the emerging challenges experienced within the port system reflect a global trend where port competitiveness is no longer determined by the result of a single firm or value chain but rather by collaborative efficiencies of value networks (meersman, van de voorde and vanelslander, 2010; van der lugt, dooms and parola, 2013). the development reflects that managerial focus increasingly needs to shift from value chain to value network (malhotra, 2000; nenonen and storbacka, 2010). however, the majority of firms observed in the port system reported that increased competitive pressures made cost reductions on primary activities necessary. given the nature of exploitative behavior, cost reductions obstructed the potential of exploration of new relations across the value network. this mismatch between future challenges and current solutions provided by firms motivated the logistics intermediary to initiate a process of business model innovation. thus, the reason for changing the existing business logic of the logistics intermediary was to pursue a managerial objective of growth by reconfiguring the relationships across the value network of the port system, thereby assuming a baffling approach to innovating the existing business model both intraand inter-organizationally. this process is explained in the four interorganizational projects presented in the following. four projects stimulating business model innovation throughout the research project, we observed and took part in four projects in which the logistics intermediary interacted with external stakeholders to strive towards the above-mentioned objective. we followed the four projects concurrently with the overall process of business model innovation in the logistics intermediary. the projects were initiated with stakeholders across the value network, as depicted in figure 2, which illustrates a section of the value network of the logistics intermediary within the port system. the arrows indicate the flow of tangible and intangible goods in which journal of business models (2018), vol. 6, no. 3, pp. 45-62 52 the logistics intermediary participated, while the dotted links represent transactions external to the firm and thus beyond the existing value network. the four projects are marked by letters and placed according to the existing transactional flows. in the first project, project a, the logistics intermediary collaborated with a local logistics operator with whom the logistics intermediary had existing transactional links based on ownership of a logistics hub. the aim of the project was twofold: 1) to operationally streamline the activities at the hub with the aim of reducing costs and increasing efficiency; and 2) to uncover the growth potential and eliminate obstacles in reaching out for new potential customers of transport intermediaries. the project was aimed at transport intermediaries with whom only the operator had recurring transactions, which meant that the project enabled an exploitation of existing value creating activities by connecting them to the existing transactions between the operator and transport intermediaries. for this reason, the project was highly dependent on the knowledge and legitimacy of the operator. project b and project c were both part of a long-term collaboration between the intermediary and a globally oriented logistics operator. the first project, project b, was based on asset similarity between the operator and the intermediary regarding the provision of services to manufacturing firms in the value network. by coordinating existing activities through both knowledgeand asset-sharing, the firms improved and expanded their range of services, thus increasing the scope of value creation whilst additionally obtaining intangible benefits through co-branding. based on the interaction and trust-building in project b, project c was initiated with the purpose of taking advantage of several expected industrial changes concerning the logistical flow across the value network. both the logistics intermediary and the global operator were expecting and threatened by future changes, and decided to proactively develop an innovative solution to support their own future value creation. the project was aimed at the triangle-flow between the global operator, manufacturing firms, and construction firms, and thus extended the existing transactional links of the logistics intermediary. for this reason, it marked a significant shift in their business logic in order to create value for firms outside their current value network. extending significantly beyond the value network of the logistics intermediary, the aim of project d was to innovate the construction process of goods from several manufacturing firms, thus radically changing the operational process underlying their supply chain. several companies, including local logistics operators and education centers, were considered as partners in terms of daily activities and management, and the value created was to be captured mostly by the construction firms. however, due to lack of both operational and cognitive links between the firms the project did not progress beyond the idea phase. figure 2: inter-organizational projects across the value network journal of business models (2018), vol. 6, no. 3, pp. 45-62 53 conceptualizing business model innovation the preliminary model developed in phase 1 (see figure 1) depicted the overall process of business model innovation for the logistics intermediary as interacting with firms in both familiar and unfamiliar contexts. the variety of perspectives reviewed in phase 2 added to the insights of what constitutes the contexts, providing a new setting for empirically conceptualizing business model innovation as changing relationships within a value network along different dimensions. the identification of the three perspectives on business model innovation – i.e. change-innovation, novelty-efficiency, and incremental-radical provided different lenses for elaborating on the mechanisms underlying the process. these complementary perspectives were relevant as the analysis of each project demonstrated that different reasoning and objectives affected the extent to which ongoing activities and the relational links of the value network were changed. in consequence, the model was augmented by the dimensions of minor, medium and major changes in logic behind the business model of the focal firm. in doing so, the theoretical perspectives of organizing transaction costs and managing activities for value creation either cognitively or operationally, enabled a reconfiguration of the two contexts to be defined respectively as contexts of exploitation and exploration of the existing business model with differing degrees of uncertainty, as illustrated in figure 3. the exploitation context entails low risk changes of the business model close to existing activities of the focal firm and within the transactional boundaries of the existing value network. the exploration context is more uncertain, extending beyond the existing value network with a potential to increase the radicality of innovations through new value creation. furthermore, the case study showed that competitive pressures increasingly challenged the business logic of cost reduction, that permeated the value network, stimulating collaboration instead of sub-optimization across firm boundaries. as a result, processes of exploring value co-creation were evolving across the value network. these insights led us to conceptualize business model innovation as a process by which firms balance exploration and exploitation through the context of the value network. the final elaboration of the conceptualization is presented in figure 3. in the following, the conceptualization will be described and discussed based on the empirical insights from the four subcases. the subcases show three important insights. first, business model innovation is driven by a change of logic in the focal firm that can be operationalized within and across the contexts of exploration and exploitation. second, exploration and exploitation does not necessarily represent opposite logics, but may be part of a continuum of logics where the distinction between change in logic change in value network context of exploitation context of exploration minor 1. fine-tuning existing activities (a) 2. exploiting opportunities, i.e., preparing them for being moved into the exploitation context medium 3. changing activities inspired by the advent or creation of new opportunities (b) 4. exploring how to exploit opportunities which are discovered or co-created (c) major 5. exploiting opportunities moving in from the exploration context 6. exploring opportunities which are discovered or co-created (d) figure 3: business model innovation logics within two contexts journal of business models (2018), vol. 6, no. 3, pp. 45-62 54 innovation and change becomes less important. third, business model innovation can be based on explorative or exploitative search, depending on the context in which it takes place, but it can also be based on a process by which explorative search in one context leads to exploitative search in another context. in the following, the conceptualization is substantiated by exploring the four inter-organizational projects of the case study. we will denote the logistics intermediary as the focal firm undertaking business model innovation by engaging in inter-organizational projects. the purpose is to distinguish between business model innovation of the focal firm and the change or reconfiguration of relationships across the value network. this distinction of microand meso-level business model innovation will be further discussed in section 6. inter-organizational projects for business model innovation a within-case analysis of the subcases revealed that the previous degree of interaction between the focal firm and the external stakeholders, and the scope in regards to affecting third parties, varied considerably. the scope ranged from seeking operationalization efficiency in activities to improved communication in order to enable value co-creation by altering the relations of the existing value network and inherent supply chains. projects a and b took place within the existing value network based on the current logic of value creation of the focal firm. the overriding aim was to exploit existing activities and appertaining relations. in project a, activities were adjusted and relations strengthened based on existing transactions, while project b provided medium changes in the value network by mitigating transaction costs through novel asset sharing. project c involved transcending the existing value network by exploring the scope of value creation in order to transcend the value network relations of the focal firm. this was enabled through value co-creation with a partner from the existing value network. as a result, the addition to the value network represented a medium change, as existing relations mediated the exploration. project d was planned as exploring completely beyond the existing value network, based on collaboration with multiple participants outside the existing value network. the value capture of projects c and d were not explicated, but were expected to ripple through the value network rather than be centered at the focal firm, based on a major reconfiguration of the value network. as mentioned previously, figure 3 embodies the modes of innovation that we have identified from our review of research on business model innovation. the conceptualization can be interpreted as instances of business model innovation, as in the case of projects a and d, but also as a cyclical process starting with general exploration beyond the existing value network (6), exploring how to exploit the identified value (co)-creation potential (5), exploiting the opportunities by establishing relations, thus extending the value network of the focal firm, followed by preparing (4) and moving (3) the project into the context of exploitation. this process can require reconfiguration and thus major changes to the value network of the focal firm. moreover, exploiting opportunities will often necessitate changing activities (2), which directly influences the micro-level business model of the focal firm. the activities must continually be fine-tuned according to developments in the value network (1). in sum, the conceptualization represents a process of business model innovation for a focal firm that is based on balancing the exploration and exploitation of business opportunities. in addition, it indicates how these opportunities can drive organizational integration as the focal firm manages the relational links of the value network in order to achieve exploration and exploitation. it emphasizes the prerequisite of moving between contexts of exploitation and exploration as one of value exchange configuration, drawing on the relational dimension of business model innovation (dyer and singh, 1998; gassmann, frankenberger and sauer, 2016). the stability-seeking approach of activity-system reconfiguration can thus inform the innovation of business models within the context of exploitation, while the context of exploration provides an arena for establishing new approaches to value creation or potential value co-creation. discussion and concluding remarks the paper has presented a novel conceptualization of business model innovation as a process that bridges the exploration and exploitation of business opportunities journal of business models (2018), vol. 6, no. 3, pp. 45-62 55 by means of organizational integration across value networks. based on a longitudinal case study involving four sub-cases, the conceptualization suggest how firms can protect themselves against being trapped by prior experience that prevent the firm from striking a new balance between exploration and exploitation. the paper contributes to the validity challenge (hirsch and levin, 1999) of current research in business model innovation, especially by responding to the call for more research on the intraand inter-firm challenges of business model innovation that has been put forward by berglund and sandström (2013) and foss and saebi (2017). we have organized the development of the conceptualization in an abductive stepwise fashion, where initial empirical insights have been interpreted in terms of overriding perspectives on business model innovation that can be inferred from extant literature. in doing so, our research contributes to the understanding of business model innovation by emphasizing, in line with laudien and daxböck (2015), that business models are contextual, which implies the blurring of organizational boundaries as value is co-created among various actors in a networked market (nenonen and storbacka, 2010; storbacka et al., 2012). in the following section, we discuss the scientific and managerial implications of the findings and contrast these with existing approaches in the research field. subsequently, we present the limitations and potential avenues for future research. here, we emphasize the need to consider the macro-, meso-, and micro-levels of business model innovation and the potential contribution from including perspectives from the ambidexterity literature. implications we have argued that business model innovation can occur in contexts of exploitation and exploration across a value network. thus, business model innovation in collaboration with external stakeholders can be regarded as an approach taken to obtain ambidexterity by balancing exploitation and exploration through domain separation (lavie, stettner and tushman, 2010; hollen, 2015). this is an important take-away for managers who struggle with the exploration-exploitation paradox. ambidextrous organizations have traditionally been perceived as firms with dual structures or a variety of organizational arrangements that facilitate the simultaneous management of exploration and exploitation (duncan, 1976; tushman and o’reilly, 1996; o’reilly and tushman, 2013), involving cognitive frames that allow paradoxical recognition (smith and tushman, 2005). this implies that ambidextrous organizations are differentiated firms that rely on an intricate balance of coordinating parallel or sequential processes of exploration and exploitation (benner and tushman, 2003; gupta, smith and shalley, 2006; o’reilly and tushman, 2013). however, as pointed out by simsek (2009), ambidexterity is not necessarily an intra-organizational phenomenon, but also occurs as inter-organizational arrangements, where ambidexterity is especially strong in cases that imply a high level of manageable diversity in inter-organizational ties. in effect, ambidexterity can be achieved by inter-organizational arrangements, however only to the extent that intra-organizational arrangements facilitate and accommodate the dynamic requirements that the inter-organizational arrangements create. we argue that the managerial implication of this is that alignment of intraand inter-organizational arrangements is contextual and changes over time as explorative activities turn into actual implementation that allows exploitation to occur. this implies that in order to be ambidextrous, a firm must possess not only intra-organizational structural and contextual ambidexterity (birkinshaw and gibson, 2004), but also the ability to develop and change these properties over time (markides, 2013; o’reilly and tushman, 2013; papachroni, heracleous and paroutis, 2015). the conceptualization of business model innovation that we have derived in the present paper (see figure 3) can serve as a prescription for how the threshold capability of structural and contextual ambidexterity can be turned into a dynamic capability by utilizing interorganizational ties to develop domain ambidexterity (lavie, stettner and tushman, 2010; hollen, 2015). our conceptualization shows that this can be done through a sequence of steps through which loose couplings gradually become tighter as explorative activities turn into coordinated or internalized exploitative activities. thus, while the conceptualization presented in figure 3 presents various instances of business model journal of business models (2018), vol. 6, no. 3, pp. 45-62 56 innovation, it also presents a generalized pattern of transition from exploration to exploitation, implying that business model innovation occurs both within a framework, i.e., a setup of an exploration-exploitation balance, and along a learning curve. furthermore, the simultaneous occurrence of instances within the framework implies that inter-organizational arrangements are a viable alternative to intra-organizational arrangements when it comes to facilitating the coexistence of different business logics along the exploration-exploitation continuum. limitations and avenues for future research based on the theoretical and empirical premises of the current research, we have identified two primary limitations. the first and most central limitation is based on the empirical setting provided by the in-depth study of the logistics intermediary. due to the fact that the logistics intermediary is required to pursue the objectives of both profit-maximization and regional growth, it is to be questioned whether similar readiness for exploitation and exploration across the value network will be found in private firms. second, research following abductive reasoning is influenced by the researcher’s theoretical frame of reference (dubois and gadde, 2002). additional central theoretical perspectives, such as network analysis (granovetter, 1973), have not been included in the current conceptualization. nevertheless, this could provide a frame for analyzing the construction of interorganizational networks more profoundly (gulati and gargiulo, 1999) and should, along with the following themes, be regarded as an avenue for future research to substantiate the current analysis of value networks and relational theory. in terms of future research, three avenues are of interest based on additional theoretical input and existing research gaps. the conceptualization proposed in the current paper can serve as a point of departure for studying business model innovation as a process occurring across various contexts for exploitation and exploration in a value network. in doing so, we emphasize the need to consider both the micro-organization level logic of business model innovation in the focal firm, the existing transactional structure of the value network, and the relational links (santos, spector and van der heyden, 2009) inherent herein. when widening the scope of business model innovation to include external stakeholders, the concept of mesolevel interaction becomes of essence. with inspiration from evolutionary economics, it could be argued that the meso-level must be taken into account when business model innovation of a focal actor affects the organizational context, thus changing the mesolevel order, which can in turn have possible repercussions for the macro domain (dopfer, foster and potts, 2004). a future line of research could pursue the levels of business model innovation inspired by a discussion of the microand meso-levels of business models, as described by storbacka et al. (2012). by initiating projects with or aimed at actors not directly included in the current value network, business model innovation goes beyond simple transactions of goods and services. as such, the relational links have to be reconsidered, as intangible transactions of alternative currencies (allee, 2000) might also influence the reconfiguration. this involves reconsidering the intertwinement of business models and value nets, as zott and amit (2008: 3-4), based on brandenburger and nalebuff (1996) state: “the players in the value net, such as competitors and certain complementors, may or may not be part of the business model because some of them may not transact with the focal firm.” maintaining this divide can mislead research to overlook relational links currently not supported by transactional activities, thereby dismissing potential avenues of business model innovation. finally, additional research is required in order to further explore business model innovation through domain separation as an approach to obtain ambidexterity. journal of business models (2018), vol. 6, no. 3, pp. 45-62 57 references ackroyd, s. and karlsson, j. c. (2014) ‘critical realism, research techniques, and research design’, in edwards, p. k., o’mahoney, j., and vincent, s. (eds) studying organizations using critical realism. oxford: oxford university press, pp. 21–45. al-lebei, m. m. and avison, d. (2010) ‘developing a unified framework of the business model concept.’, european journal of information systems. nature publishing group, 19(3), pp. 359–376. allee, v. (2000) ‘reconfiguring the value network’, journal of business strategy, 21(4), pp. 36–39. amit, r. and zott, c. (2001) ‘value creation in e-business’, strategic management journal, 22(6–7), pp. 493–520. amit, r. and zott, c. (2010) business model innovation: creating value in times of change. iese business school, spain. amit, r. and zott, c. (2012) ‘creating value through business model innovation’, mit sloan management review, 53(3), pp. 41–49. benner, m. j. and tushman, m. l. (2003) ‘exploitation, exploration, and process management: the productivity dilemma revisited’, academy of management review, 28(2), pp. 238–256. berglund, h. and sandström, c. (2013) ‘business model innovation from an open systems perspective: structural challenges and managerial solutions’, international journal of product development, 18(3/4), pp. 274–285. birkinshaw, j. and gibson, c. (2004) ‘building ambidexterity into an organization’, mit sloan management review, 45(4), pp. 47–55. brandenburger, a. m. and nalebuff, b. j. (1996) co-opetition. new york: doubleday. breuer, h. and lüdeke-freund, f. (2017) ‘values-based network and business model innovation’, international journal of innovation management, 21(3), pp. 1–35. casadesus-masanell, r. and zhu, f. (2013) ‘business model innovation and competitive imitation: the case of sponsor-based business models’, strategic management journal, 34, pp. 464–482. cavalcante, s., kesting, p. and ulhøi, j. (2011) ‘business model dynamics and innovation: (re)establishing the missing linkages’, management decision, 49(8), pp. 1327–1342. clauss, t. (2016) ‘measuring business model innovation: conceptualization, scale development, and proof of performance’, r&d management, 47(3), pp. 385–403. collins, h. (2004) ‘interactional expertise as a third kind of knowledge’, phenomenology and the cognitive sciences, 3(2), pp. 125–143. dopfer, k., foster, j. and potts, j. (2004) ‘micro-meso-macro’, journal of evolutionary economics, 14(3), pp. 263–279. dubois, a. and gadde, l. e. (2002) ‘systematic combining: an abductive approach to case research’, journal of business research, 55(7), pp. 553–560. journal of business models (2018), vol. 6, no. 3, pp. 45-62 58 duncan, r. b. (1976) ‘the ambidextrous organization: designing dual structures for innovation’, in kilmann, r. h., pondy, l. r., and slevin, d. (eds) the management of organization. new york: north holland, pp. 167–188. dyer, j. h. and singh, h. (1998) ‘the relational view: cooperative strategy and sources of interorganizational competitive advantage’, academy of management review, 23(4), pp. 660–679. edwards, p. k., o’mahoney, j. and vincent, s. (2014) studying organizations using critical realism a practical guide. edited by p. k. edwards, j. o’mahoney, and s. vincent. oxford: oxford university press. foss, n. j. and saebi, t. (2017) ‘fifteen years of research on business model innovation: how far have we come, and where should we go?’, journal of management, 43(1), pp. 200–227. frankenberger, k., weiblen, t. and gassmann, o. (2014) ‘the antecedents of open business models: an exploratory study of incumbent firms’, r&d management, 44(2), pp. 1–33. garcia, r. and calantone, r. (2002) ‘a critical look at technological innovation typology and innovativeness terminology: a literature review’, journal of product innovation management, 19(2), pp. 110–132. gassmann, o., frankenberger, k. and sauer, r. (2016) exploring the field of business model innovation. springer. ghaziani, a. and ventresca, m. j. (2005) ‘keywords and cultural change: frame analysis of business model public talk, 1975-2000’, sociological forum, 20(4), pp. 523–559. giesen, e. et al. (2010) ‘when and how to innovate your business model’, strategy & leadership, 38(4), pp. 17–26. girotra, k. and netessine, s. (2011) ‘how to build risk into your business model’, harvard business reiew, (may), pp. 100–106. granovetter, m. s. (1973) ‘the strength of weak ties’, american journal of sociology, 78(6), pp. 1360–1380. gulati, r. and gargiulo, m. (1999) ‘where do interorganizational networks come from?’, american journal of sociology, 104(5), pp. 1439–1493. gupta, a. k., smith, k. g. and shalley, c. e. (2006) ‘the interplay between exploration and exploitation’, academy of management journal, 49(4), pp. 693–706. hirsch, p. m. and levin, d. z. (1999) ‘umbrella advocates versus validity police : a life-cycle model’, organization science, 10(2), pp. 199–212. hock, m., clauss, t. and schulz, e. (2016) ‘the impact of organizational culture on a firm’s capability to innovate the business model’, r&d management, 46(3), pp. 433–450. hollen, r. (2015) exploratory studies into strategies to enhance innovation-driven international port competitiveness in a port context. erasmus university rotterdam. jensen, a. b. (2013) ‘do we need one business model definition?’, journal of business models, 1(1), pp. 61–84. klang, d., wallnöfer, m. and hacklin, f. (2014) ‘the business model paradox: a systematic review and exploration of antecedents’, international journal of management reviews, 16(4), pp. 454–478. journal of business models (2018), vol. 6, no. 3, pp. 45-62 59 lambert, s. c. (2015) ‘the importance of classification to business model research.’, journal of business models, 3(1), pp. 49–61. langley, a. et al. (2013) ‘process studies of change in organization and management: unveiling temporality, activity, and flow’, academy of management journal, 56(1), pp. 1–13. laudien, s. and daxböck, b. (2015) ‘antecedents and outcomes of collaborative business model innovation’, in the xxvi ispim conference. hungary: budapest. lavie, d., stettner, u. and tushman, m. l. (2010) ‘exploration and exploitation within and across organizations’, academy of management annals, 4(1), pp. 109–155. levinthal, d. a. and march, j. g. (1993) ‘the myopia of learning’, strategic management journal, 14(winter), pp. 95–112. linder, j. and cantrell, s. (2000) ‘changing business models : surveying the landscape’, accenture institute for strategic change, pp. 1–15. van der lugt, l., dooms, m. and parola, f. (2013) ‘strategy making by hybrid organizations: the case of the port authority’, research in transportation business and management, 8, pp. 103–113. malhotra, y. (2000) ‘knowledge management and new organization forms: a framework for business model innovation’, information resources management journal, 13(1), pp. 5–14. march, j. g. (1991) ‘exploration and exploitation in organizational learning’, organization science, 2(1), pp. 71–87. markides, c. c. (2013) ‘business model innovation: what can the ambidexterity literature teach us?’, the academy of management perspectives, 27(4), pp. 313–323. massa, l. and tucci, l. c. (2013) ‘business model innovation’, in dogson, m., gann, d., and phillips, n. (eds) the oxford handbook of innovation management. oxford: oxford university press, pp. 420–441. meersman, h., van de voorde, e. and vanelslander, t. (2010) ‘port competition revisited’, review of business and economics, 55, pp. 210–232. miles, m. b., huberman, m. a. and saldãna, j. (2014) qualitative data analysis. thousand oaks, ca: sage. mitchell, d. and coles, c. (2003) ‘the ultimate competitive advantage of continuing business model innovation’, journal of business strategy, 24(5), pp. 15–21. nenonen, s. and storbacka, k. (2010) ‘business model design: conceptualizing networked value co-creation’, international journal of quality and service sciences, 2(1), pp. 43–59. o’mahoney, j. and vincent, s. (2014) ‘critical realism as an empirical project’, in edwards, p. k., o’mahoney, j., and vincent, s. (eds) studying organizations using critical realism. oxford: oxford university press, pp. 1–20. o’reilly, c. a. and tushman, m. l. (2013) ‘organizational ambidexterity: past, present and future’, the academy of management perspectives, 27(4), pp. 324–338. journal of business models (2018), vol. 6, no. 3, pp. 45-62 60 papachroni, a., heracleous, l. and paroutis, s. (2015) ‘organizational ambidexterity through the lens of paradox theory: building a novel research agenda’, the journal of applied behavioral science, 51(1), pp. 71–93. petticrew, m. and roberts, h. (2006) systematic reviews in the social sciences: a practical guide. malden, ma: blackwell publishing. pynnönen, m., hallikas, j. and ritala, p. (2012) ‘managing customer-driven business model innovation’, international journal of innovation management, 16(4), p. 1250022. doi: 10.1142/s1363919612003836. santos, j., spector, b. and van der heyden, l. (2009) toward a theory of business model innovation within incumbent firms, insead working paper colelction. fontainebleau, france. schneckenberg, d., spieth, p. and matzler, k. (2016) ‘theorising business model innovation: mapping research dimensions and positions in an integrative framework’, in european academy of management. france: paris. schneider, s. . and spieth, p. (2013) ‘business model innovation: towards an integrated future research agenda’, international journal of innovation management, 17(1), pp. 1–34. shafer, s. m., smith, h. j. and linder, j. c. (2005) ‘the power of business models’, business horizons, 48(3), pp. 199–207. simsek, z. (2009) ‘organizational ambidexterity: towards a multilevel understanding’, journal of management studies, 46(4), pp. 597–624. smith, w. k. and tushman, m. l. (2005) ‘managing strategic contradictions: a top management model for managing innovation streams’, organization science, 16(5), pp. 522–536. spieth, p., schneckenberg, d. and ricart, j. e. (2014) ‘business model innovation state of the art and future challenges for the field’, r&d management, 44(3), pp. 237–247. spieth, p. and schneider, s. (2016) ‘business model innovativeness: designing a formative measure for business model innovation’, journal of business economics, 88(6), pp. 671–696. storbacka, k. et al. (2012) ‘designing business models for value co-creation’, review of marketing research, 9(june), pp. 51–78. taran, y., boer, h. and lindgren, p. (2015) ‘a business model innovation typology’, decision sciences, 46(2), pp. 301–331. tushman, m. l. and o’reilly, c. a. (1996) ‘ambidextrous organizations: managing evolutionary and revolutionary change’, california management review, 38(4), pp. 8–30. velu, c. and jacob, a. (2016) ‘business model innovation and owner–managers: the moderating role of competition’, r&d management, 46(3), pp. 451–463. van de ven, a. h. (2007) engaged scholarship: creating knowledge for science and practice. oxford: oxford university press. journal of business models (2018), vol. 6, no. 3, pp. 45-62 61 voelpel, s. c., leibold, m. and tekie, e. b. (2004) ‘the wheel of business model reinvention: how to reshape your business model to leapfrog competitors’, journal of change management, 4(3), pp. 259–276. wei, z. et al. (2014) ‘the fit between technological innovation and business model design for firm growth: evidence from china.’, r&d management, 44(3), pp. 288–305. wilden, r. et al. (2018) ‘revisiting james march (1991): whither exploration and exploitation’, strategic organization. wirtz, b., göttel, v. and daiser, p. (2016) ‘business model innovation: development, concept and future research directions’, journal of business models, 4(1), pp. 1–28. wirtz, b. w. and daiser, p. (2017) ‘business model innovation : an integrative conceptual framework identifying existing bmi’, journal of business models, 5(1), pp. 14–34. witell, l. and löfgren, m. (2013) ‘from service for free to service for fee: business model innovation in manufacturing firms’, journal of service management, 24(5), pp. 520–533. yin, r. k. (2003) case study research design and methods, applied social research methods series. thousand oaks, ca: sage publications inc. zott, c. and amit, r. (2007) ‘business model design and the performance of entrepreneurial firms’, organization science, 18(2), pp. 181–199. zott, c. and amit, r. (2008) ‘the fit between product market strategy and business model: implications for firm performance’, strategic management journal, 29(1), pp. 1–26. journal of business models (2018), vol. 6, no. 3, pp. 45-62 62 louise kringelum is assistant professor at department for business and management, aalborg university. in 2018 she received her ph.d. degree in intraand inter-organizational business model innovation from the faculty of social science at aalborg university denmark. she is affiliated to the center for logistics and cooperation in aalborg, where she has facilitated processes of collaborative business model innovation and studied the development of port ecosystems.  her research interests are in the field of organizational development, collaboration and inter-organizational business models. email: kringelum@business.aau.dk allan næs gjerding is associate professor and head of section at department for business and management, aalborg university. he has previously served as dean at the faculty of social science, aalborg university, and as vice president at vestas control systems. he is a senior consultant at the center for logistics and cooperation in aalborg, where he is involved in collaboration between ports and the development of port industrial parks. his current research interests are organizational development, eco systems, and varieties of collaboration, including inter-organizational business models. email: ang@business.aau.dk about the authors file:///d:/morten%20lund/06-3/03/# file:///d:/morten%20lund/06-3/03/# journal of business models (2015), vol. 3, no. 1, pp. 29-48 2929 business models for nfc based mobile payments johannes sang un chae1 & jonas hedman (corresponding author)2 1 department of it management, copenhagen business school, denmark 2 department of it management, copenhagen business school, denmark, jh.itm@cbs.dk keywords: nfc, mobile payment, mobile wallet, business model article classification: research paper please cite this paper as: sang un chae, j., hedman, j. 2015. ‘business models for nfc based mobile payments’, journal of business models, vol. 3, no. 1, pp. 29-48 abstract purpose: the purpose of the paper is to develop a business model framework for nfc based mobile payment solutions consisting of four mutually interdepended components: the value service, value network, value architecture, and value finance. design: using a comparative case study method, the paper investigates google wallet and isis mobile wallet and their underlying business models. findings: google wallet and isis mobile wallet are focusing on providing an enhanced customer experience with their mobile wallet through a multifaceted value proposition. the delivery of its offering requires cooperation from multiple stakeholders and the creation of an ecosystem. furthermore, they focus on the scalability of their value propositions. originality / value: the paper offers an applicable business model framework that allows practitioners and academics to study current and future mobile payment approaches. journal of business models (2015), vol. 3, no. 1, pp. 29-48 3030 1. introduction mobile payments are an emerging and innovative market (carton et al. 2012; ondrus and lyytinen 2011; ozcan and santos 2014; pope et al. 2011; vanetti 2010). this is reflected in research. the focus so far in mobile payment research is mainly on adoption of mobile payments (crowe et al. 2010; dan and jing 2011; de meijer and bye 2011; mallat 2007; mallat and tuunainen 2005; mallat and tuunainen 2008; plouffe et al. 2001; saji 2008; van der horst 2011; zhang 2009) from the perspective of technological innovations. one characteristic of mobile payments is the fusion of new technologies, such as mobile banking, mobile wallets, biometric payments, sms payments, qr codes, and near field communication (nfc). in particular, nfc is bespoken of as the payment solution of the future (birch 2007; ozcan and santos 2014; pope et al. 2011). one recent launched nfc based payment solutions is apple pay by apple. in short nfc is a communication protocol that enables contactless payments by establishing wireless communication between two technical devices, for instance between a mobile phone and a point of sales (pos) terminal. the market growth for nfc applications is expected to be exponential with growth in revenue from $7.7 billion in 2011 to $34.5 billion by 2016, at a projected compound annual growth rate (cagr) of 35% from 2011 to 2016 (marketsandmarkets 2012). juniper research projections are even more optimistic, suggesting a market size of $50 billion by 2014 (purcell, 2011). however, despite these prospects, claiming a stake in this industry is not an easy task; nfc mobile payment solutions have been lagging behind their expectations. so, why has this pro-claimed technology not been widely adopted? one recurring explanation for the slow market adoption is issues surrounding the business model and the complex ecosystem (see for instance delottie, 2011; crowe et al., 2010). in order to understand the slow adoption research suggests a need for an analysis of the underlying business models of mobile payment services (pousttchi et al., 2008). the purpose of the paper is to increase the understanding of nfc based mobile payment and their underlying business models. we do this by developing a business model framework for nfc based mobile payment solutions from existing literature (al-debei and avison 2010; al-debei and avison 2011; amit and zott 2001; amit et al. 2012; ballon 2007; hedman and kalling 2003; osterwalder and pigneur 2013; van bossuyt and van hove 2007; zott and amit 2007). we enhance the business model framework by empirically challenging it in a comparative case study of two nfc based mobile payment solutions, namely google wallet and isis mobile wallet (isis). we show the complexity in the mobile payment ecosystem and there is no silver bullet to success. furthermore, we show that the business model framework is applicable as a tool to understand the underlying complexity in the nfc based mobile payment landscape. thereby we contribute to research on mobile payments in general and nfc based mobile payments in specific. the next section of the paper presents a brief overview of the business model literature, including a proposal of a business model framework for mobile payment services. section three provides a description of the research method followed by a brief case summary in section four. next, the analysis and results are presented. finally, the paper concludes with a discussion and summary of the findings. 2. business model literature a business model plays a fundamental role to any organization (amit and zott, 2001; magretta, 2002; hedman and kalling, 2003; shafer et al., 2005; zott et al., 2011). most of it is due to the facilitating power that the business model provides. it allows the business and technology stakeholders to understand, communicate, analyze, and manage strategicorientated decisions among each other (osterwalder and pigneur, 2002; osterwalder and pigneur, 2013; pateli and giaglis, 2004), along with changing the business logic of the firm (osterwalder et al., 2005). in addition, chesborough and rosenbloom (2002) argue that a business model provides a holistic perspective of the business, which helps it to understand internal functions and structures, as well as its interconnectivity and interaction dynamics with the external world. there are many business model frameworks (hedman and kalling, 2003; shafer et al., 2005; al-debei and journal of business models (2015), vol. 3, no. 1, pp. 29-48 3131 avison, 2010), and they differ in their rigor and depth, as well as their complexity in which definitions, elements, and their relations are included and analyzed. more recent approaches aimed to develop a common understanding of business models and have synthesized large quantities of past research. aldebei (2010) provides an analysis of business model frameworks. the findings suggest two things. first, although the number and names of dimensions and elements included vary between frameworks, most of these business model elements correspond to distinct themes, including offering or value proposition, customer, network, and finance. second, the majority of frameworks stem from a strategy or ebusiness context (hedman and kalling 2002), and only a limited number of frameworks originate from the mobile or payments area (carton et al., 2012). third, most frameworks take an inside-out approach that focuses on the business logic of individual enterprises rather than on the dynamic interaction within value networks (solaimani and bouwman, 2012), thereby missing external threats and the characteristics of the particular industry. external marketplace dynamics are in bouwman et al. (2008). as such, they argue that businesses do not operate in a vacuum, but rather are influenced and dependent on the environment. their business model takes a network-centric view (stabell and fjeldstad 1998; zott et al. 2011) of the organization; firms are part of a value network or value web (bouwman et al., 2006) in which organizations exchange resources and capabilities in a parallel and simultaneous manner. building upon the specifics and dynamics of the mobile payment context and the literature review on existing business model frameworks, we propose a business model for mobile payments. it includes five main dimensions: value service, value network, value architecture, value finance, and threats. figure 1 depicts a summary of the framework. each of the dimensions is further decomposed into 15 sub-dimensions, which provide the second layer of analysis. figure 1. the business model mobile payment framework competing o�erings and other external threats merchants (payees) customers (payeers) value service value proposition value finance cost pricing revenue designed to enabled by generates requireenabled facilitates a�ects a�ected by a�ects a�ected by requires facilitates value architecture value configuration core competency core resources value network network mode governancepartnership distribution channel target segment journal of business models (2015), vol. 3, no. 1, pp. 29-48 3232 • the value service dimension covers all aspects of the target firm’s offering to the customers. it comprises the value proposition, target segment, and distribution channel (hedman and kalling, 2003; shafer et al., 2005; al-debei and avison, 2010). • the value network dimension incorporates the complex nature of the mobile payment industry with its numerous stakeholders. it emphasizes the inter-organization or cross-company view toward value creation and capture from innovation. this concept depicts the way in which transactions are facilitated through coordination and collaboration among parties, multiple companies, and stakeholders (camponovo and pigneur, 2003). so, when analyzing value networks it is helpful to look at them from three perspectives: partnership, network mode, and governance (al-debei and avison, 2010). • the value architecture dimension reflects a rough outlay that identifies all the required technological architecture arrangements, which allows for an efficient and effective operation (aldebei and avison, 2010). further, it specifies the organizational infrastructure arrangements, such as key functions and processes, company culture, or management mindset. this dimension comprises three elements: core resource, value configuration, and core competencies. • the value finance dimension describes the required core arrangements to ensure the economic viability of the offering (al-debei and avison, 2010). it consists of three elements: cost, pricing, and revenue structure. the revenue structure depicts all incoming revenue streams from the value offer by the mobile payment service provider. the revenue source and the revenue type characterize it. the different revenue sources can be categorized as consumers, merchants, and third parties (pousttchi z, 2008). in addition, different revenue types can be distinguished as transaction – depended or transaction – independent (turowski & pousttchi, 2004). the former is related to revenues that are generated based on each transaction. the latter depicts revenues that are not tied to the transaction volumes, but rather to nonrecurring costs and/or set costs for a certain period, such as royalty fees, integration, support and similar. in most cases, costumers with large transaction volumes prefer this latter type of fee structure in their contract. • the inclusion of the environment is represented in the threat dimension. it depicts the potential and profound threats that may endanger the economic viability of a mobile payment business model. especially in the young and emerging mobile payments market, with its uncertainties and peculiarities, unpredicted threats are more likely to occur (carton et al., 2012). three types of threats can be distinguished: market, technology, and regulation. 3. methodology given the multifaceted and context-dependent nature of mobile payments, we apply an exploratory comparative case study approach to challenge and enable re-interpretation of our proposed business model framework. morris and wood (1991) reason that case studies are valuable when the researcher’s interest is to gain a thorough understanding of the context of the particular research field and the processes being enacted. further, they argue that the case study approach helps to generate answers to the “why?” as well as the “what?” and “how?” questions. because of its ability to obtain complex details and novel understandings about the specific phenomenon under investigation, we adopt the case study approach. data was collected using publically available interviews, q&a sessions, panel discussions, and live presentations from previously identified key personnel of the case companies; see table 1 below for a summary. in order to ensure originality and authenticity of the data, only rich-media data sources from audio and video recordings or fully published transcribed interviews, i.e. not edited or summarized, were considered. to ensure validity, the authors adopted the triangulations method as suggested by yin (1994). thus, two or more independent sources of data were used to corroborate research findings within this paper. these stem from various secondary resources, directly from the case companies, or from their partners, independent publications, or industry associations. journal of business models (2015), vol. 3, no. 1, pp. 29-48 3333 table 1: overview of data sources company person role type of data topic isis michael abbott ceo transcribed interview value service, value architecture, value network, value finance isis ed busby cco video panel discussion value service, value architecture isis ryan hughes cmo video interview value service isis jaymee johnson head of marketing transcribed interview overview of isis’s activity, value finance isis jaymee johnson see above transcribed interview general isis, challenges, technology, future isis jim stapleton head of sales and account mgmt transcribed interview challenges and solution of nfc mobile wallet isis jim stapleton see above video interview market insight (different solutions, timeline, challenges) isis jim stapleton see above video interview value service, value network isis john theiss vp, merchant sales transcribed interview value service, value architecture isis tony sebetti director, pos and payment alliance video interview latest development of isis, value service isis michael grannan devices and enabling technology leader video interview digital wallet rollout isis susan novell vp of market launch transcribed interview insight and perspective on m-wallet journal of business models (2015), vol. 3, no. 1, pp. 29-48 3434 we have selected two initiatives in the field of mobile payment: google wallet and isis. backed by large information technology (it) giants with a proven track record to bring innovative products and services successfully to the mass-market, both nfc mobile wallet solutions exhibit the potency to also advance the payment sphere into the next era and commercialize the technology. based on the relative infancy of nfc m-payment solutions, as well as the new market presence of their commercial attempts, this study is one of its kind. google wallet and isis were also chosen because they operate in the same context, e.g. geographical area, demographics, and regulatory environment. 4. analysis we start the section with a short introduction of the two cases. following a three-month pilot phase, google wallet launched in the u.s. in september 2011. from the beginning, google collaborated with respective industry leaders in order to build the necessary ecosystem to deliver a seamless new payment solution to customers. aiming to revolutionize the offline shopping experience, google wallet offers a number of benefits for consumers and merchants. on the consumer side, it allows them to tap, pay, and save money at the point-of-sales, aiming to improve their shopping experience. on the merchant side, google wallet aims to enable businesses to strengthen their customer relationships by offering faster, easier shopping with relevant discounts and loyalty rewards. the mobile wallet is based on nfc and cloud technology, thus requiring nfc phones with embedded se running on the android os. the cloud aspect allows google to provide consumers the freedom to add any payment cards through a linked proxy card issued by google. however, the wallet runs on only nfc phones from selected carrier networks. isis is a joint venture between at&t, t-mobile, and verizon wireless the three largest mobile network operators in the u.s.; it was founded in november 2010, and launched in austin and salt lake city in october 2012. its mission is to create the most consumerfriendly and widely accepted mobile wallet possible. similar to google, it provides consumers a simplified way of paying, storing, and redeeming coupons, and table 1: overview of data sources isis nan edwards city development manager video interview value service, value network, value architecture google osama bedier vp google wallet and payments transcribed interview value service, value finance google osama bedier see above video interview google’s wallet opportunity, value network, value architecture google osama bedier see above video launch presentation value service, value architecture, value network, value finance google robin dua head of product management, consumer payments wallet video q&a value service, value architecture, value finance journal of business models (2015), vol. 3, no. 1, pp. 29-48 3535 collecting loyalty points all in one device. merchants’ benefit from the possibility to connect with their customers in new ways and deliver targeted offers directly into phones. they can also deploy in-store posters which consumers can “tap” through their nfcphones to access information and offers. in contrast to google, isis adopts the mobile wallet approach with se integrated in the sim card. banking partners can directly integrate their payment cards into the m-wallet and offer these services to their customers. consumers have a greater choice on available nfc phones, which can be purchased from the three largest carriers in the u.s. based on the business model framework, the two specific nfc mobile wallet initiatives google wallet and isis have been analyzed. in specific, their business models have been investigated and compared according to the five sub-elements of the developed framework. the applied analysis suggests the efficacy and value of the developed framework. it serves as a structured approach to comprehensively reveal the core elements of nfc mobile wallet initiatives as well as a means to compare them. a summary of the main differences is shown in table 2 below. table 2: main differences between the google wallet and isis business models google wallet isis value service value proposition merchants • offers based on more complex customer data • performance-based advertising • offers are based on simpler data, but customer data stays with merchants banks • fast integration and no added fees • full control of customer data and possible integration of other banking services payers • no fees attached • no fees attached value network network mode • open platform: no charge to lease platform and support of multiple se locations • walled garden: tight control of the sim se and rental fee value architecture payment credential location • embedded se and on secure servers (cloud) • se in sim card journal of business models (2015), vol. 3, no. 1, pp. 29-48 3636 threats market threats can stem from changes in the competitive landscape. as an emerging and lucrative market, the market for mobile payments gets more crowded with more initiatives arising on the horizon. next to google and isis, paypal and apple are other it giants entering the mobile payment sphere. the dynamics of the industry players are certainly affecting each other’s business models. for example, verizon has blocked the google wallet application from being loaded on its distributed nfc mobile phones (cherry, 2012). changes in technological standards or interoperability impose technology threats. in order to mitigate these, cooperation and partnerships with stakeholders are crucial, as seen by google and isis. further, they are also exposed to threats originating from the evolving regulatory framework. again, both companies are mitigating those risks by actively participating in workgroups with regulatory institutions (federal reserve bank of boston, 2012) to jointly shape the appropriate regulatory framework for the u.s. value service the value propositions of google wallet and isis are both multifaceted and target to consumers, merchants, and banks. clear focus is put on enhancing customer experience and service add-ons beyond the capabilities of a conventional payment card or wallet. differences in value propositions can be found for merchants and banks, based on the collection and usage of consumer data, making each wallet appears more or less attractive depending on the customers’ preferences and needs. a closer look at the case companies’ distribution channels reveals there excellent positions for large-scale distribution. value network google wallet and isis heavily focus on building the ecosystem with multiple partners across the payment sphere. in appendix 1, we provided more data and discussion related to the nfc ecosystem. the findings of the partnership analysis reveal a common pattern of their partnership choices. most of google and isis’s partners are big players and industry leaders in their respective fields with large customer bases, existing industry relationships, and other valuable resources and capabilities. it suggests that they have been carefully selected based on these selection criteria to quickly table 2: main differences between the google wallet and isis business models integration of cards • direct partnerships (citi) • through proxy card • only through direct partnerships (chase, capital one, barclays, amex) security features • four-digit pin for wallet access • remote account/wallet suspension online • full account numbers of debit or credit card not visible in wallet • four-digit pin for wallet access • remote wallet suspensions online and via calling isis • full account numbers of debit or credit card not visible in wallet • personal privacy: isis sees no transaction data value finance revenue sources • single source: value added services • dual source: se sim rental fee and value added services journal of business models (2015), vol. 3, no. 1, pp. 29-48 3737 progress in scale and reach. as such, partnerships have been formed to leverage their respective market powers and access complementary competencies in order to accelerate the process of broad market adoption. aspects such as enabling technological interoperability between the mobile wallets’ and partners’ systems also have played a major role. in general, the partnerships have served both functional and strategic roles. further, one can observe cross partnerships of various payment actors with both google wallet and isis. the complexity of the nfc mobile payment ecosystem requires service providers to form partnership to effectively reach mass-market penetration. this is also reflected in the numerous partnerships formed by google wallet and isis. in terms of network mode, the analysis highlights the different approaches between google wallet and isis, i.e. an open vs. a walled garden network approach. the adopted network mode reflects the characteristics of past product launches: e.g. google’s open model in products such as gmail or youtube or the isis carrier’s tightly controlled platform through locking phones, opting for the usage of only their own networks. value architecture the value architecture between google wallet and isis is significantly different as the analysis, based on the sub-elements core resource, value configuration, and core competency, highlights. both companies are financially well situated. this extended “cash runway” provides the basis to build the ecosystem and shape the market in the long run. in addition, both companies have significant brand power, which is, however, covert in the case of isis. apart from those similarities in core resources, google and isis exhibit rather different resource bases given their industry background in it and telecommunications, respectively. these resources are important pieces in the construction of the value configuration for google and isis. for example, isis’s choice to adopt the sim-centric nfc model for the mobile wallet reflects the logical consequence of its core resource, i.e. control of the mobile network and sim card. on the other hand, google’s decision to build the mobile wallet application in-house and from scratch also makes sense given its it engineering capabilities and organizational culture. the desired value service is driven by the structure of the value architecture, since the efficacy to deliver the value elements is grounded on the respective strengths in competencies and given resources. value finance the value finance section analysed the monetary aspects associated with delivering the mobile wallet services of google wallet and isis. differences between each of these dimensions’ sub-elements originate from the different configurations of the other dimensions, i.e. value service and value architecture. for example, google’s main cost driver is the double acquiring process related to its new cloud and proxy card approach; isis’s main cost driver is associated with the procurement and deployment of the higher priced nfc-enabled sim cards. significant differentiations are also reflected in pricing methods, see appendix 2 for additional data on the pricing methods. though google offers its basic services for free for consumers and banks, isis charges banks with a rental fee to be integrated in the mobile wallet application. these fees are rather steep, as some industry players have complained, especially in this early stage of the product cycle. the dissimilarities in pricing structures also affect the different revenue drivers for each of the mobile wallets: google implements only one revenue source stemming from added values from non-payment services offered to its business customers. in contrast, isis has two revenue sources put in place, which stem from rental fees and added services provided to its merchants. appendix 2 provides more data on the pricing and revenues model. 5. results in terms of the specifics of the two business models, the analysis has revealed interesting details on google and isis’s strategies to deploy their mobile wallets to the masses. they are both strongly focusing on providing an enhanced customer experience with their mobile wallet through a sound and multifaceted value proposition. the success of the delivery of its offering requires support and cooperation from multiple stakeholders. as such, significant efforts have been made in building the ecosystem, see appendix 1, that enables the deployment of a ubiquitous mobile wallet solution. journal of business models (2015), vol. 3, no. 1, pp. 29-48 3838 however, differences in their mobile wallet approaches are also apparent and have been summarized in the table 2. first, different network modes have been implemented to maneuverer through the complex m-payment ecosystem; network modes have been chosen based on their control points and value architecture basis. both network modes enabled the google wallet and isis to form partnerships and build the ecosystem, suggesting their efficacy. however, findings suggest that collaboration between both m-wallet providers would more likely accelerate the process for broad m-payment acceptance. second, differences in google and isis’s m-wallets to deliver services were found, though with both having the potency to reach the broad mass-market. further, adopted m-wallet models affected the value proposition for their customers, providing different benefits for them. lastly, variations in google and isis’s revenue models were observed, posing different risk levels for their customers. isis’s revenue structure, which charges premium prices to banks, suggests its plan to quickly recoup its investment, which appears to be a sub-optimal strategy given the uncertainties and infancy of the industry. based on the above, we expand upon existing literature (carton et al., 2012; al-debei and avison, 2010) and propose an integrated payment business model framework, depicted in figure 1. the logic of the framework is that the value service, value network, value architecture, and value finance dimensions are mutually interdependent and are challenged by external threats. 6. discussion and conclusion first, we developed the novel mobile payments business model framework, which has been derived from extant research on business models and tested on two case studies. the findings suggest the applicability of the framework to deal with the complexity and particular characteristics of nfc m-payments and related business issues. the framework considers a broad range of facets that are seen as highly relevant in the m-payment domain. the value service element depicts the nature and aspects of the new service and ensures that these are delivered to the right target segment and through the relevant distribution channels. in order to successfully deliver the desired value service, mobile wallet providers need to check that there given resource base is strong and configured in a way that adds to their core competencies. building a strong and sustainable value network significantly enhances the efficacy of the m-payment service. as highlighted through the cases, value networks provide valuable expertise as well as other complementary resources and benefits that strengthen the potency of the wallet services. the value finance element includes the financial attributes incurred and generated through delivering value to customers, and originating from the aforementioned constellations of the four value elements. lastly, the framework regards potential threats that are apparent in the emerging and volatile market of m-payments. so, given the broad coverage, the framework appears to provide a comprehensive tool for researchers and practitioners to study and analyze current and future mobile payment solutions. further, it enables them to communicate and share understandings of the different or overall aspects of the business model. second, we provide a grounded understanding of nfc mobile payment business models. past studies suggest the lack of stringent and rigorous analysis of business models of m-payment services (pousttchi et al. 2009), which is even more the case for nfc-enabled payments, given their infancy. this paper addresses this research gap and explores and compares two high profile mobile wallet approaches in the u.s. market according to five dimensions and 15 sub-dimensions. the analysis of google wallet and isis has highlighted the similarities and differences of their design approaches to deploy a mobile wallet service for a broad mass market. the analysis suggests three main findings with regards to the main differences in their configuration of the business model elements. • first, contrary to expectation, not both of the mobile wallet providers have adopted an open network mode. however, isis’s closed network mode has not hindered them from building the required ecosystem around their mobile wallet solution. in addition, google’s open network mode has not enabled them to form more partnerships. nonetheless, the adoption of nfc m-payment could be more widespread if both would agree to collaborate given their different strengths and market power. journal of business models (2015), vol. 3, no. 1, pp. 29-48 3939 • second, our findings suggest the importance of focusing on the aspect of scalability. google and isis have both aligned their value elements to create a mobile wallet solution that could quickly reach the scale to become a ubiquitous payment method. as such, they have focused on different m-wallet approaches to deliver their value service. google’s engineering and creative power has enabled it to construct a new technical approach to the wallet that overcomes its past obstacles. isis, on the other hand, has adopted an approach that leverages on existing control points, i.e. the sim card and its distribution network. however, given their relatively short market presence, no definite answer can be given in terms of which wallet approach will be more scalable and sustainable. • third, the analysis has exposed the different revenue models of the m-wallet providers. the findings suggest that these have been designed accordingly to their value services, and have been affected by the different constellations of the value architecture and value network. they also suggest that the isis revenue model may be appropriate but its price setting may be flawed, given the associated risks for customers to become part of the early stage of m-payment evolution. the results of the analysis of google and isis’s business models confirm the potency of their nfc mobile payment approaches. the value dimensions of their business models are aligned and aimed to deliver a solution that can effectively reach the mass-market. however, it is too early to make a prediction toward the long-term sustainability of the companies’ business models due to the relative infant stage of the industry with the accompanying uncertainties and threats. nonetheless, google and isis both acknowledge the long road to commercial success. in addition, it helps that they possess the necessary capabilities and resources to stay in the game for the long run. acknowledgement this work was carried with the support of copenhagen finance it region (www.cfir.dk) and was funded by the danish enterprise and construction authority grant number erdfh-09-0026. references al-debei, m. m., and avison, d. 2010. developing a unified framework of the business model concept, european journal of information systems, 19 (3): 359-376. al-debei, m. m., and avison, d. 2011. business model requirements and challenges in the mobile telecommunication sector, journal of organisational transformation & social change 8 (2): 215-235. amit, r., and zott, c. 2001. value creation in e-business, strategic management journal, 22 (6/7): 493-520. amit, r., zott, c., and pearson, a. 2012. creating value through business model innovation, mit sloan management review 53 (3): 41-49. ballon, p. 2007. changing business models for europe’s mobile telecommunications industry: the impact of alternative wireless technologies, telematics and informatics, 24 (3): 192-205. birch, d. g. w. 2007. the digital money decade, journal of internet banking & commerce, 12 (1): 1-4. bouwman, h., de reuver, m., & macinnes, i. (2006), dynamic business model framework: a comparative case study analysis, in its 2006 16th biennial conference in beijing, international telecommunication society, june 12-16. bouwman, h., de vos, h., & haaker, t. (2008), mobile service innovation and business models, springer. journal of business models (2015), vol. 3, no. 1, pp. 29-48 4040 camponovo, g. & pigneur, y. (2003), business model analysis applied to mobile business, in proceedings of the 5th international conference on enterprise information systems (iceis), 4, pp.173-183, angers, france, april 23-26. carton, f., hedman, j., damsgaard, j., tan, k.-t., and mccarthy, j. 2012. framework for mobile payments integration, electronic journal of information systems evaluation 15 (1): 14-25. cherry, s. (2012), verizon versus google wallet, ieee spectrum, available at: http://spectrum.ieee.org/podcast/ at-work/innovation/verizon-versus-google-wallet (accessed november 6, 2012). chesborough, h. & rosenbloom, r. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, 11 (3): 529-555. crowe, m., rysman, m., & stavins, j. (2010), mobile payments in the united states at retail point of sale: current market and future prospects, federal reserve bank of boston, public policy discussion paper no. 10-2: 1-39. crowe, m., rysman, m., and stavins, j. 2010. mobile payments at the retail point of sale in the united states: prospects for adoption, review of network economics 9 (4): 1-31. dan, l., and jing, z. 2011. tam-based study on factors influencing the adoption of mobile payment, china communications 8 (3): 198-204. de meijer, c. r. w., and bye, j. 2011. the increasing adoption of mobile payments in europe and remaining challenges to growth, journal of payments strategy & systems 5 (3): 273-288. federal reserve bank of boston (2012), mobile payments industry workgroup, federal reserve bank of boston, available at: http://www.bos.frb.org/bankinfo/payment-strategies/mpiw/index.htm (accessed november 6, 2012). hedman, j., and kalling, t. 2002. behind the scenes of the e-business construct, in: 4th international conference on electronic commerce, chan et. al. (ed.). hong-kong: faculty of business, city university of hong kong. hedman, j., and kalling, t. 2003. the business model concept: theoretical underpinnings and empirical illustrations, european journal of information systems, 12 (1): 49-59. magretta, j. (2002), why business models matter, harvard business review, 80: 86-92. mallat, n. 2007. exploring consumer adoption of mobile payments: a qualitative study, the journal of strategic information systems, 16 (4): 413-432. mallat, n., and tuunainen, v. k. 2005. merchant adoption of mobile payment systems, in: international conference on mobile business: icmb 2005, w. brookes, e. lawrence, r. steele and e. chang (eds.): 347-353. mallat, n., and tuunainen, v. k. 2008. exploring merchant adoption of mobile payment systems: an empirical study, e-service journal, 6 (2): 24-57. marketsandmarkets. 2012. bring-your-own-device (byod), consumerization of it (co-it) and enterprise mobility market – global advancements, business models, market forecasts & analysis (2012–2017), http://www. marketsandmarkets.com/analystbriefing/byod-enterprise-mobility-market.asp. morris, t. & wood, s. (1991), testing the survey method: continuity and change in british industrial relations, work employment and society, 5 (2): 259-82. ondrus, j., and lyytinen, k. 2011. mobile payments market: towards another clash of the titans?, in: the 10th international conference on mobile business (icmb). como, italy. http://spectrum.ieee.org/podcast/at-work/innovation/verizon-versus-google-wallet http://spectrum.ieee.org/podcast/at-work/innovation/verizon-versus-google-wallet http://www.bos.frb.org/bankinfo/payment-strategies/mpiw/index.htm http://www.marketsandmarkets.com/analystbriefing/byod-enterprise-mobility-market.asp. http://www.marketsandmarkets.com/analystbriefing/byod-enterprise-mobility-market.asp. journal of business models (2015), vol. 3, no. 1, pp. 29-48 4141 osterwalder, a. & pigneur, y. (2002), an e-business model ontology for modeling e-business, in 15th bled electronic commerce e-reality: constructing the e-economy in bled, slovenia, june 17-19. osterwalder, a., and pigneur, y. 2013. designing business models and similar strategic objects: the contribution of is, journal of the association for information systems, 14 (5): 237-244. osterwalder, a., pigneur, y., & tucci, c. (2005), clarifying business models: origins, present, and future of the concept, communications of the association for information systems, 16 (1): 1-40. ozcan, p., and santos, f. m. 2014. the market that never was: turf wars and failed alliances in mobile payments, strategic management journal, online. pateli, a. g. & giaglis, g. m. (2004), a research framework for analysing ebusiness models, european journal of information systems, 13 (4): 302-314. plouffe, c. r., vandenbosch, m., and hulland, j. 2001. intermediating technologies and multi-group adoption: a comparison of consumer and merchant adoption intentions toward a new electronic payment system, journal of product innovation management, 18 (2): 65-81. pope, m., pantages, r., enachescu, n., dinshaw, r., joshlin, c., stone, r., austria, p. a., and seal, k. 2011. mobile payments: the reality on the ground in selected asian countries and the united states, international journal of mobile marketing, 6 (2): 88-104. pousttchi, k., schiessler, m., and wiedemann, d. g. 2009. proposing a comprehensive framework for analysis and engineering of mobile payment business models, information systems and e-business management (7:3): 363-393. purcell, k. (2011), the future of mobile payments and nfc is bright (infographic), available at http://www. gottabemobile.com/2011/07/10/the-future-of-mobile-payments-and-nfc-is-bright-infographic/, accessed july 10. saji, k. b. 2008. market adoption of mobile payment solutions: an exploratory study, in: proceedings of the 2nd wseas international conference on management, marketing and finances: recent advances on development and financial engineering, l. perlovsky, i.w. sandberg and d. halkias (eds.). 109-114. shafer, s. m., smith, h. j., & linder, j. c. (2005), the power of the business models, business horizons, 48 (3): 199207. solaimani, s. & bouwman, h. (2012), a framework for the alignment of business model and business processes: a generic model for trans-sector innovation, business process management journal, 18 (4): 655-679. stabell, c. b., and fjeldstad, ø. d. 1998. configuring value for competitive advantage: on chains, shops, and networks, strategic management journal 19 (5): 413-437. van bossuyt, m., and van hove, l. 2007. mobile payment models and their implications for nextgen msps, info, 9 (5): 31-43. van der horst, d. 2011. adoption of payments for ecosystem services: an application of the hagerstrand model, applied geography, 31 (2): 668-676. vanetti, r. 2010. strategic innovation in payments systems: what are the next big things?, journal of payments strategy & systems, 4 (1): 17-25. yin, r. k. (1994), case study research: design and method (second ed.), thousand oaks, ca: sage publications inc. http://www.gottabemobile.com/2011/07/10/the-future-of-mobile-payments-and-nfc-is-bright-infographic/ http://www.gottabemobile.com/2011/07/10/the-future-of-mobile-payments-and-nfc-is-bright-infographic/ journal of business models (2015), vol. 3, no. 1, pp. 29-48 4242 zhang, h. m. 2009. the study on the influential factors of electronic payment system adoption, in: international conference on management science & engineering, h. lan (ed.): 106-111. zott, c., amit, r., and massa, l. 2011. the business model: recent developments and future research, journal of management, 37 (4): 1019-1042. zott, c., and amit, r. 2007. business model design and the performance of entrepreneurial firms, organization science, 18 (2): 181-199. appendix 1. the nfc ecosystem the complexity of the nfc mobile payment ecosystem requires service providers to form partnership to effectively reach mass-market penetration. this is also reflected in the numerous partnerships formed by google wallet and isis. a brief overview of relevant partners, including category and role description in terms of function is presented in the table below. table 1. partner in the nfc ecosystem google isis partner category actor functional role actor functional role mno • sprint • virgin mobile • distribution of nfc android mobile devices • ota google wallet app distribution • consumer marketing funding • at&t • verizon • t-mobile • distribution of all nfc mobile devices • distribution of sim card with se • ota isis mobile app distribution • consumer marketing funding • customer service payment networks • mastercard (preferred) • visa • discovery • american express • initial network brand (mastercard) • providing payment infrastructure, e.g. mastercard’s paypass, or visa’s paywave • funding support • value-added services • visa • mastercard • discover • american express • providing payment infrastructure, e.g. mastercard’s paypass, or visa’s paywave • issuing credit card into the wallet (american express only) journal of business models (2015), vol. 3, no. 1, pp. 29-48 4343 table 1. partner in the nfc ecosystem bank • citi • bancorp bank • barclaycard us • green dot • silicon valley bank • initial consumer credit accounts • issuing the card into the wallet and service the customer • providing a linked virtual prepaid mastercard card that links credit or debit cards from other banks (by bankcorp) • providing basic customer service • consumer marketing funding • chase • capitalone • barclay card • initial consumer credit accounts • issuing the card into the wallet and service the customer • providing isis visa cash card (by chase) • enlarging customer base through banks’ existing customer base • providing added value services, e.g. mobile banking functionality (in the future) • consumer marketing funding tsm • firstdata • full tsm services • lead merchant acquirer • merchant marketing funding • welcome kit fulfillment • gemalto • full tsm services mobile wallet software provider n.a. (in-house) • c-sam • providing the wallet management platform (license) and software development kit handset manufacturers • samsung • lg • htc • motorola • providing the mobile device • enabling compatibility • samsung • lg • htc • rim • sony ericsson • motorola • providing the mobile device • enabling compatibility journal of business models (2015), vol. 3, no. 1, pp. 29-48 4444 table 1. partner in the nfc ecosystem pos terminal • verifone • vivotech • ingenico • hypercom • distribution of nfc pos devices to merchants • enabling the interoperability of the mobile wallet with the pos device • verifone • vivotech • ingenico • equinox • distribution of nfc pos devices to merchants • enabling the interoperability of the mobile wallet with the pos device merchant (major) • champs • footlocker • jamba juice • macy’s • american eagle • bloomingdale • container store • duane reade • gap • guess • office max • toys r us • walgreens • enabling google’s singletap experience by accepting nfc payments, providing offers, loyalty rewards and gift cards • champs • footlocker • jamba juice • macy’s • aero-postale • coca cola • dillard’s • enabling isis’s pay&save experience by accepting nfc payments, providing offers, loyalty rewards and gift cards mobile network operator (mno) google as a technology company required distribution partners to effectively reach customers and formed partnerships with sprint and later on with virgin mobile. both partners will distribute nfc mobile devices in which google wallet is already pre-installed. for existing customers who already own nfc eligible mobile phones, the wallet app will be automatically installed through an over-the-air software update. on the other hand, isis is a joint venture between the largest mnos in the u.s., so isis is already equipped with a vast distribution network and an existing customer base to deploy its mobile wallet solution. one of the differences to google’s partnerships with its mnos is that, isis will be the main contact point for customers, thus take the main responsibility for the customer service. sprint’s customers on the other hand are redirected to google wallet for most of their issues and questions with the wallet. payment networks both google and isis managed to secure partnerships with all four major payment networks. upon launch, google selected mastercard as the preferred partner. as such, mastercard provided the initial network brand for google wallet, and more importantly access to mastercard’s paypass infrastructure. this enabled google wallet to be accepted in 144.000 paypass-enabled merchants nationally, and more than 311.000 merchants globally. isis journal of business models (2015), vol. 3, no. 1, pp. 29-48 4545 formed partnerships with all mastercard, visa, amex, and discovery right from its launch. however, the decision to integrate the existing payment networks reflected a change in strategy, as isis initially planned to introduce its own payment network to handle transactions itself. isis came to the conclusion that building an alternative payment would be to complex and time-consuming, and thus dismissed the idea. banks as new entrants in the payment sphere, partnerships with banks are important for google wallet and isis. google wallet formed a partnership with citi as the lead bank. citibank has provided its own core industrial strength in banking capabilities, and helped transforming these technical capabilities into google wallet. in addition, citi will also issue its own citibank mastercard cards into google wallet for their existing and new customer base. isis initially planned to build its own payment network, in which discover would have played the key role as the payment processor, but decided to take a similar approach to google wallet by relying on existing accounts at several bank partners, and letting bank’s customers link their existing debit or credit cards to their phones. trusted service manager google wallet and isis differ in their choice of trusted service manager. however, both selected partners are established and big players in the payment sphere. google wallet picked first data as the preferred partner. its main role is to supply the infrastructure, functionality, and services that enable the end-to-end management of payment accounts on the se of mobile phones. as such first data is involved in the secure distribution, provisioning, and management of contactless payment information for consumers on behalf of google wallet and card issuers. in addition, the partner is also taking charge in signing up small merchant to use google wallet. isis selected gemalto as its partner to provide the full service tsm provisioning. gemalto’s main role is to provide a secure link between isis and the payments or service providers that access the wallet. the tsm will securely place and provision consumers’ information for all nfc activities such as payments, transit, loyalty, smart posters or similar onto their mobile phone. one of the key arguments for selecting gemalto was its commitment towards security experience in issuing sensitive financial information to the consumer and provisioning services ota. mobile wallet software provider one of the main differences between google and isis is that google develops the software for the mobile wallet application in-house in collaboration with their launch partners. as a technology company google has the technical capabilities to engineer their own wallet solution. while isis may also have the necessary technical capabilities to built its mobile solution from scratch, the company decided to take a licensing agreement with one its partners. it has selected c-sam to provide the wallet management platform and the software development kit. the rationale behind this decision was to leverage on c-sam’s existing mobile wallet competencies rather than developing the resource intensive route to develop these from scratch. handset manufacturers google wallet runs only on the android operating system, as such works only on mobile devices that supports android. these are currently samsung, lg, htc, and motorola. isis on the other side supports different operating systems, which is why they also run on sony ericson and rim devices. isis emphasizes the importance of working with device manufacturers because it will enable consumer choice and scale that is required for widespread adoption of mobile commerce. pos device manufacturer establishing partnerships with pos device manufactures are crucial. they are the ones that could effectively encourage merchants to upgrade their existing terminals. the underlying issue here is the lack of established interface specifications for mobile offers, coupons, and loyalty in merchants’ systems. so a partnership with pos device manufacturers enables the interoperability of the mobile wallet with the pos terminal, making sure that the journal of business models (2015), vol. 3, no. 1, pp. 29-48 4646 value-added services are understood by the merchant systems and flow seamlessly. both google wallet and isis manage to secure the major players of the industry appendix 2. pricing and revenue model an overview of the different pricing set ups can be found in the table below. however, it shall be noted that some of the information are publicly not available due to confidentially agreements and may vary within customer segments, i.e. merchants and banks, based on the bargaining power of the customer. table 1. pricing differences between google wallet and isis google wallet isis consumers download/installment and use of mobile wallet application free free $2 per month maintenance fee if account has not been used for more than 9 month merchants accepting nfc payments free, merchants pay card-present rates for all transactions made using google wallet, regardless of the user’s selected cards free, merchant standard transaction fees will not be affected by accepting payments with isis value added services coupons 40%-50% of revenue share (google offers) undisclosed loyalty cards undisclosed, but assumed to be free undisclosed, but assumed to charge rental fees gift cards undisclosed, but assumed to be free undisclosed, but assumed to charge rental fees banks card provisioning and use of mobile wallet app free $5 per account and additional charges for other events journal of business models (2015), vol. 3, no. 1, pp. 29-48 4747 for consumers, the use of google wallet and isis is free, as they will not charge them anything for the download or instalment and the use of the mobile wallet application. this includes payments and other added services such as the redemption for coupons and offers. isis will also not charge customers for changing their sim cards to nfc sim cards. store employees will freely install the chip when customers bring their phone or buy a new one, as well as download the application in-store if wished. however, isis charges $2 per month account maintenance fees if the pre-paid card has not been charged every nine month. for merchants, both mobile wallet providers do not charge fees for accepting the new payment methods with nfc-powered mobile phones. instead, the regular standard transaction fees from merchant acquirers and card networks apply. however, it shall be noted that for merchants, google may be a more attractive solution when consumers use the linked virtual prepaid mastercard, since transaction fees are lower for prepaid cards compared to debit and credit cards. however, google and isis impose fees for added value services such as coupons and loyalty cards. the exact pricing structures are undisclosed and confidential, and may vary for each merchant depending on their market size. in regards to banks, google and isis implement different pricing structures for banks. google does not charge issuing banks to place their cards into the mobile wallet. so, nfc payment services are completely free for banks. isis on the other hand charges rental fees to banks for storing their payment credentials in the se of the sim. isis does not publish these fees, but insight sources have revealed to nfc times, a major industry publication, that issuing banks may be charged $5 per account per year, which is more than issuing plastic card. the analysis of the pricing structures revealed the potential revenue drivers for google wallet and isis. as such google provide most of its services free of charge for consumers, merchants, and banks. it clearly shows that google is only interested in ad revenues, i.e. incremental revenues generated from targeted offers, loyalty programs and digital downloads, rather than taking a share of current card payments revenues. the main revenue driver will be google offers, in which merchants and advertisers will be charged when they place customized ads and coupons to consumers through the mobile wallet. in comparison, isis structures its revenue model differently by implementing several revenue drivers. first, isis charges charging rental fees from its control point, the se sim. as previously mentioned, isis charges a relatively steep price for issuing banks to place their cards, and also intends to charge other service providers for placing their credentials into the se of the sim. second, another revenue stream will be offering the mobile wallet as a marketing channel for retailers. journal of business models (2015), vol. 3, no. 1, pp. 29-48 4848 about the authors johannes sang un chae, department of it management, copenhagen business school, denmark. johannes sang un chae works as a project manager for the seller program & strategy team at ebay marketplaces in the berlin area. previously, he took a role in the strategy team at paypal. he received his master from copenhagen business school. jonas hedman (corresponding author), department of it management, copenhagen business school, denmark. jh.itm@cbs.dk jonas hedman is an associate professor at the department of it management, copenhagen business school, denmark. he investigates the role of it in business and is involved in projects researching firms sourcing strategies, business models, and payments. mailto:jh.itm%40cbs.dk?subject= journal of business models (2016), vol. 4, no. 1, pp. 45-62 45 purpose: this study examines how interpersonal trust forms in business networks and anchors relationships. trust can be seen as a required factor and enabler for co-creation that is needed when business models are created. this study draws on empirical data from a case study of a finnish business network in the healthcare and pharmaceutical industries. it seeks to answer the research question: how does interpersonal trust start to develop at the business network level and how it can be supported? design: this article draws on a case study of a finnish business network which was developed through theme interviews and observation conducted in 2012. findings: the findings support existing research on interpersonal trust, and emphasize three key characteristics of interpersonal trust building: (1) it is a slow process that can be easily discontinued by definite roadblocks. (2) it requires that the parties have knowledge about one another and a rapport; that they show respect and fairness, keep their promises, and most importantly, communicate effectively. (3) it should be based on shared responsibilities among the network members. the key finding is the importance of informal meetings that is not highly noticed in the research field. informal meetings support more the building of we-spirit and crazy ideas that are important when new business models and innovations are built. research limitations / implictions: this case study considers one business network in finland. further research would be required in order to generalise the findings on a larger scale or to other contexts. originality / value: despite the significant attention given to interpersonal trust in management literature, less research has focused on understanding how it forms in inter-organisational settings. moreover, the focus is usually in dyadic relations in network studies but this study focus on the level of whole network. building interpersonal trust in business networks: enablers and roadblocks abstract please cite this paper as: hakanen et al. (2016), building interpersonal trust in business networks: enablers and roadblocks, journal of business models, vol. 4, no. 1, pp. 45-62 keywords: business networks; business modelling; communication; distrust; networking; social capital; trust 1 school of business and economics, university of jyväskylä, finland; mila.hakanen@jyu.fi 2 market intelligence manager and an independent academic researcher 3 school of business and economics, university of jyväskylä, finland. mila hakanen 1, leïla kossou 2 and tuomo takala 3 journal of business models (2016), vol. 4, no. 1, pp. 45-62 46 introduction the increasing relevance of business networks has led to burgeoning theoretical and empirical research over the past couple of decades (miles & snow, 1986; nohria, 1992; sydow, 1992; klein, palmer & conn, 2000; lorino & mourey, 2013). growing interested is towards intra and also inter-organizational network dynamics (van de bunt & groenewegen 2007). business modelling is important area in networking. the business modelling includes business model tools, such as balanced score card or the value prims that concentrates on offered service, customer segments etc., in addition, the concentration should also be on business collaboration aspects, such as trust (heikkilä et al. 2014). interpersonal trust has long been regarded as the backbone of business partnerships (deutsch, 1958; blau, 1964; oxendine, borgida, sullivan & jackson, 2003). according to this literature, interpersonal trust can be seen as the legitimate anchor of trust more generally (lewicki & bunker, 1996; williams, 2001; cited by simon, 2007). initiating interpersonal trust appears to be a challenge in many business networks. the elusory nature of trust (abrahams, cross, lesser & levin, 2003) and the fear of sharing information in a context of potential conflict between individual and collective interests, (dussauge & garette, 2009; le roy, yami & dagnino, 2010) may impede the success of business networks, including the process of business modelling. newly established business networks require initial interpersonal trust. it is therefore crucial to understand how interpersonal trust forms in business networks, before tackling the issue of how to maintain it. a few researchers have demonstrated the strong correlation of interpersonal trust with variables such as cooperation and communication (whitener, brodt, korsgaard & werner, 2006). however there has been very little research on the links between interpersonal trust and business networks (malhotra & murnighan, 2002) or on the initial formation of interpersonal trust in such settings. the literature has instead focused on the initiation of inter-organisational trust (akgün, byrne, keskin, lynn & imamoglu, 2005; mcknight, cummings & chervany, 2006; whitener, brodt, korsgaard & werner, 2006) and interpersonal trust within organisations (abrahams, cross, lesser & levin, 2003). this study is intended to advance understanding on how interpersonal trust starts forming within business networks, in the level of whole network that is not so well researched area. usually the main attention in trust building research is in dyadic relations. human and provan’s (2000) study founded that it is important to focus on internal and external legitimacy and support in the early stages of evolution of networking and they argued “at present, network researchers in business, public management, and health care services have only a marginal understanding of whole networks, despite their importance as a macro-level social issue.” this study draws on a qualitative case study of a finnish business network in the health and pharmaceutical industries. the discussion provides theoretical and managerial insights on interpersonal trust formation, which found that it is a slow and fragile process, requiring definite interpersonal elements, and involving responsibility. this study highlights the importance of informal meetings and personal chemistry. this article also provides practical guidance and recommendations to business networks about the nature of interpersonal trust formation. theoretical background trust, enabler of cooperation and networking trust has been identified as a major area of social capital, if not its most essential element within business network processes (putnam, 1993; ilmonen, 2001; erdem, ozen & atsan, 2003). social capital exists in connections among individuals with trustworthiness and reciprocity (putnam 2000), and affects the performance of business networks (batt, 2008) by promoting productivity (coleman, 1988) but also by facilitating the development of knowledge and innovation (productivity commission, 2003) that are two important area in the networked business models (solaimani & bouwman 2012). social capital can be seen including the levels of trust, the density of network relations, knowledge of the relationships and obligations and expectations inside the network (pennington & rydin 2000). trust is defined in a dictionary as a firm belief in the reliability, trust and strength of a person: a confident expectation and a reliance on the truth of a statement without examination (oed. 1996). like social capital, journal of business models (2016), vol. 4, no. 1, pp. 45-62 47 trust is also a wide concept. it can be examined from many perspectives and at several levels: individual, organisational, network and societal (batt, 2008). trust starts to build through communication and cooperation (harisalo & miettinen, 2010: 23-29) and typically develops over a long time (barnett et al., 2010: 647). sigfusson & harris (2012) study dialed with the international entrepreneurs and they defined that: ”trust is the individual, personal trust between the ie (international entrepreneur) and the relationship, reflecting a calculation of the trustworthiness, knowledge of the party involved and affection between the parties trust always included aspects of knowledge of the other party, such as honesty, value and reliance, or affective qualities, such as closeness and family ties.” lee and choi (2011: 97) developed a theory of trust as having initial and on-going forms. initial trust is based on an assumption that ’being a member of the organisation is enough to assess the trustworthiness of an individual’. it does not relate to experience of the individual actions of others, as trust towards the group generates trust towards its individual members. on-going trust is dynamic and changes over time, based on a belief about the partner´s reliability and integrity. calculusbased trust focuses on assessments of the benefits or costs involved in deciding whether to trust and cooperate, and is not based on emotional or intuitive factors (deutsch, 1962). generalized trust concerns of affiliation or reputation instead of direct knowledge. this kind of trust can be referring to trustworthiness. de wever at al. (2005) have divided trust into fragile (calculated) trust and resilient trust and they stated that the resilient trust is more positively related to network effectiveness than fragile trust – for example, less strategic resources are gained. they also divided trust into another category: to dyadic and generalized trust and they argued that dyadic trust have better influence to network effectiveness than generalized trust. when partners have a direct knowledge about each other, they are more willing to share and transfer knowledge and resources. (de wever et al. 2005.) figure 1 (below) integrates the areas of social capital and trust. trust is one dimension of social capital with communication and community. trust can be divided into levels of individual, network, organisational and societal. this study only concentrates to individual and network level. individual trust includes initial, on-going, calculus-based, generalized, fragile and resilient trust. figure 1: from social capital into the dimensions of trust journal of business models (2016), vol. 4, no. 1, pp. 45-62 48 there are many definitions for networking because it is very broadly research area in many disciplines, for example in strategic management, organizational theory and business studies. “research has shown that business relationships and their subsequent networks are as diverse and complex as the individuals who participate in them” (de lurdes veludo et al. 2006). trust is a needed factor when companies decide to join business network and create a new business model. trust is an enabler for transferring and receiving resources (de wever et al. 2005.) trust and openness provide the basis for developing a strategic partnership and the strategic network needs constant communication between its members to work effectively. it is important that the partners have the same understanding about the current state of the network as well as its vision and targets that are among the most important areas in business modelling. the network will be under on-going development (valkokari et al., 2009). interpersonal trust at business network level initial formation of interpersonal trust trust is a broad concept, so this study focuses particularly on interpersonal trust, which is seen as a central characteristic of knowledge creation and sharing needed in business development (abrams et al., 2003). interpersonal trust needs behaviour that is not only guided by self-interest, but also by their partner’s wellbeing, which needs to be acknowledged (lindenberg, 2000; nooteboom, 2002). in much of the literature, interpersonal trust is defined as the willingness of a party to be vulnerable. benevolence is one of the most important dimensions in interpersonal trust and is based on caring for others and being interested in their wellbeing and goals. time is an important aspect in trust building: “as time goes by the relationships tends to become deeper and the uncertainty between the parties decreases.” (camén et al. 2012). enablers and roadblocks of interpersonal trust “the management of relationships is an important issue that actors need to consider.” (de lurdes veludo et al. 2006). the study reveals how trust building can be supported in network where organisations differ in generalised trust: 1) frequent communication between network members that can be enabler for knowledgebased trust, 2) common platform for communication and 3) presence of intermediares that understand the both cultures if the organisations are from different cultures (gerbasi & latusek 2015). also ‘rightness’ is a key element of trust building that can be seen in the manner the partners share, their methods and processes, and their communication style. trust is very high linked with commitment. when parties are committed, they invest to cooperation which improves trust. the risk of opportunism reduces. some trust level supports that the commitment will be made in the first place but it can be decided also without trust.(wuyts & geyskens 2005). in trusted relationships, it is easier to express constructive criticism (barnett et al., 2010: 647). evidence of commitment to a long-term relationship encourages trust building. reciprocal relationships require both cognitive and affective aspects of trust (barnett et al., 2010). with the presence of trust, the partners are willing to take a risk and transfer available strategic resources (de wever 2005) and focus on the general logic of business, including the areas: business value, the customer segment, service, organisation, technology and financing (bouwman et al. 2008). communication as an enabler for trust in an atmosphere of trust, people share their opinions and ideas more freely but also warn about potential threats (harisalo & miettinen, 2010: 38-41.) distrust is the biggest barrier to effective communication (harisalo & kilpi, 2006). communication raises awareness of people’s identities and can also explain the reasons underlying their choices and viewpoints (harisalo & miettinen, 2010: 61). dialogue is the most advanced form of communication that requires trust. it contains open communication and idea sharing that generates new knowledge (harisalo & miettinen, 2010: 88) that is needed element in business modelling (heikkilä et al. 2010). it is important that individuals can share not only the facts but also their feelings, needs and desires (barnett et al., 2010: 652). however de wever at al. (2005) argued that in the certain point of frequency of interaction, the interaction can become distracting when partners focus too much to development and maintaining of interaction so that the focus is not more in strategic resources. journal of business models (2016), vol. 4, no. 1, pp. 45-62 49 distrust distrust means a lack of trust that is based on experience or information. it can grow as a consequence of insufficient communication (harisalo & miettinen, 2010: 48). unjustified criticism about others can lead to distrust. moreover, avoiding one’s responsibilities, stealing others’ ideas and revealing their secrets encourage distrust to grow (reina & reina, 1999: 144). in business networks, distrust has strong negative effects on results. it grows when actions are inconsistent with words and promises, as partners cannot trust one another’s words or assume reliability. unintended distrust can arise when the parties have a different understanding of the aims and vision of the enterprise. as the process goes forward, distrust starts to solidify among the parties and people begin to avoid the distrusted persons, causing members to grow apart. even trivial matters can be difficult to resolve (harisalo & miettinen, 2010). distrust increases the frequency of unforeseen events because consistency deteriorates and this reduces the likelihood of innovation and productivity (harisalo & miettinen, 2010: 52-53). harisalo and miettinen (2010: 53-55) outline the ideal process from distrust to trust as comprising six phases: 1) open communication, 2) constructive debate, 3) listing the causes of distrust, 4) solutions, 5) transferring to action, and 6) continual assessment. at the outset, the parties should be honest and ready to genuinely listen without prejudice. they should be willing and able to express how they have experienced and interpreted things, then they can express their viewpoint on given situations and explain the reasons for their actions. the third phase implies listing together the causes for distrust. the next phase is about co-creating ideas for resolving and strengthening the relationship. thereafter, the ideas have to be put into action. the last phase includes a continual assessment of the relationship. building trust in a business network in the finnish healthcare and pharmaceutical industries: a case story context of the case this study draws on a finnish government-funded research project that started in june 2011 and ended in may 2014. it focuses on a finnish business network involving companies in the pharmaceutical and health care industries. the network started the business creation process in the fall of 2011, aiming to deliver sustainable business solutions for contemporary health, exercise and wellbeing (hew) problems, in western industrialised countries. two of the case companies are small size and other two large size. some of these companies have also other shared business activities that are begun before this new cooperation model. this network is mainly concerned with preventing health problems (such as obesity and type 2 diabetes) by developing products and service innovations, such as “exercise prescription”. the network examined is creating business models and developing growth ventures with finnish hew expertise. methodology typically, a case study produces in-depth description of one phenomenon (robson, 2011:40) and concentrates on the dynamics within single settings (eisenhardt 1989). in this study, the dynamics were studied by concentrating on the meanings expressed by interviewees about these dynamics so the main focus was in the actor’s own perspective. the main aim of this study was to find out how network partners felt about the initial phase of networking, and more precisely, their views about interpersonal trust at this stage. the case network was chosen to research object and this pragmatic case study was implemented in a finnish business network to provide tools and guidelines about interpersonal trust building for the studied network. this study followed a case study protocol that comprises five sections: the purpose of the study, data collection, report outline, question outline and evaluation (yin 2014). because the object was to understand the interpersonal trust in a specific business network, the interviewees were chosen by this project were the network was in the early-stage. one of the interviewees was the project manager from the university team and the others were from the management level of network partners. the results could be utilized in practical management by taking into account the enablers and roadblock of initial trust building in network level when the company is starting a new network-level cooperation. journal of business models (2016), vol. 4, no. 1, pp. 45-62 50 the main research data was collected through interviews with representatives of the companies in the network and the secondary data was collected by nonstructural observation. thematic interviews are usually relevant when research aims to study and describe the interviewee´s own experiences, feelings and emotions. these interviews covered a few selected themes in a semi-structured style (merton, fiske et kendal, 1990; hirsjärvi & hurme, 1995). themes were chosen by analysing the experiences of the interviewees and examining the earlier studies. the interviews were held in the fall of 2012. they were semi-structured, face-toface interviews which lasted one hour on average. four depth-interviews were conducted consisting of three main themes: the current state of interpersonal trust, enablers of trust building, and inhibitors and roadblocks. the data was analysed by theme-based content analysis. thematic coding can be used as a realistic or constructive method. in this study, a realistic method was chosen to report the interviewees’ meanings and experience about the phenomenon. (robson 2011.) the data collection and analysis overlapped in the research process. findings and discussion the current state of interpersonal trust some of the network partners spoke about positive experiences they have had with their partner organisations where they have reached win-win situations together: ‘the building of trust is based on shared success and also actions matching with words.’ trust is developed through shared successful operations and promise-keeping. ’we have kept our promises.’ this study revealed that where initial trust was not based on shared experience with individual representatives from partner companies, it was derived from a perceived sense of trust towards the other organisations. the others appear trustworthy because they are members of a trustworthy organisation (lee & choi, 2011). small talk and informal atmosphere one interviewee did not like small talk, and preferred to focus on topics that were suited to a fact telling approach. however, small talk helped when building trust as individuals share their lives and opinions and in doing so reveal some of their personality and character. in the case study network, the partner relationships were quite new and developing, but interactions were still in a very formal state. one interviewee highlighted that this formal atmosphere does not really help to build interpersonal trust: ‘still i see that that the meetings are far more formal than they should be, thinking about trust building and conduct, and that communication could be more open.’ ”now job titles increase the gaps”, said the one interviewee. such gaps need to be actively minimised by encouraging more personal interaction. network partners need to meet in a more informal atmosphere to encourage more casual interaction which helps to foster interpersonal trust (barnett el al. 2010). communication in general, the interviewees felt that the communication has not been active at the network level but those infrequent discussions have been good. one interviewee felt that this may be because either in the early state of networking, the partners want to listen and observe others before making a move, or the organisations’ representatives did not have a mandate to proceed. business networks could be tighter and more productive. one interviewee thought that trust starts to build when the partners share information that is not usually available to the others. interpersonal trust building in the initial phase of business networking – enablers and roadblocks people should act as they have promised, in other words, they should ‘walk the talk’, as trust can be lost if promises are not kept. the words and actions should be parallel (christopher et al., 2008). one interviewee revealed that straight talk was needed. “i long for straight talk where everyone could say exactly what they want and expect.” network members should be able to communicate their interests freely, however the meetings were overly formal and focused on the past. active communication would better support trust building and encourage a future focus (barnett et al., 2010). the network members did not fully understand the pieces of the puzzle, that is, they could not see the whole business model or the particular roles of each of the network partners. the benefits of synergy were not yet fully assimilated within the network. journal of business models (2016), vol. 4, no. 1, pp. 45-62 51 another interviewee commented on the importance of informal meetings and how the environment can help to create a more casual setting which encourages making personal acquaintances and building team spirit. informal meetings eliminate the competitive position (christopher et al., 2008) and foster outside-the-box thinking and even unconstrained ideas that can lead to new innovations. one interviewee felt that at informal events it was easier to get more information about the feelings and opinions of network partners. also network members could disclose more clearly the reasons why they chose to take part in the network. one interviewee highlighted the importance of environment and atmosphere in trust building, noting that one of the network meetings in particular was better than the others. this meeting was held in a different and neutral environment in vierumäki, finland. this environment did not contain any distractions, whereas all other meetings were held in the head offices of the network companies. however one network partner felt that formal meetings could also be reframed so that the atmosphere was more casual and better able to support trust building. this network member also reflected on how trust can be lost or damaged through being too self-interested. furthermore, an overly positive image of circumstances can break trust. distrust reduces communication and information exchange, and this prevents progress (harisalo & miettinen, 2010). this study also supports earlier research findings that it takes time to create trusted relationships between network members. after a while, members should shift from addressing one another on last name terms to using first names. one interviewee noted that the important aspects of trust building are genuine listening, objectivity and adding value. personal rapport is also needed. tense and short interactions do not engender trust building and cooperation. another interviewee claimed that ’if you think about the most trustworthy persons in your life, they are those whom you are dealing with the most’. the network members should have an in-depth understanding of the business of the other network members. without this understanding, it is not possible to create business model that is based on value creation (zott & amit 2008). also, network members should focus on collective decision-making processes. partners possess different viewpoints, and these need to be negotiated. but before they are fully ready for the stage of negotiation, they need better level of trust, in another words, they need more consistent experience of the behaviour towards each other. (lewicki & bunker 1996.) a major challenge in business creation is time. an interviewee pondered how much time the representatives have to invest in business creation, as they have other daily duties. in the case study network, this business creation goal can be seen changing from a planning mode into action. definite, successful steps will, in turn, build trust amongst network partners, supporting the network’s operations and reinforcing their shared vision. figure 2 combines the enablers for interpersonal trust building in business networks that are collected from this study. the five main elements are: earlier positive experience, trustworthy actions, communication, personality and trust at the network level. earlier successful operations build positive experiences which is a good starting point for trust at the network level. trustworthy actions are needed, so trust is tested by how actions match words and how promises are kept. communication should be active. straight talk and genuine listening is needed. small talk helps to get to know each other at the personal level and an informal atmosphere helps to build trust between people. trust needs personal knowledge and rapport to grow. in addition, the environment and atmosphere play a role in trust building. informal meetings can help in developing team spirit and personal acquaintances. in cooperation between network members, decision-making processes should be fair and negotiation is needed so that the different viewpoints are heard. trust starts to build at the network level after concrete, successful steps have been achieved. journal of business models (2016), vol. 4, no. 1, pp. 45-62 52 conclusion and future research this research revealed that interpersonal trust building, based on emotions and a belief that the others are trustworthy, is essential when business networks are being established. this study supports earlier research findings that effective networking is not possible without trust (holmlund & törnroos 1997) because people cannot (or will not) share the ideas that can lead to new business models or innovations (harisalo & miettinen, 2010). direct knowledge of partner creates willingness to share and transfer resources (de wever et al. 2005). shared interests support trust-building at the network level. trust appears through the willingness of partners to propel their shared interests through developing the network. the case study provides an example of a value creation network is creating a new business model. this network is still in the development phase where the members are getting to know one another. the interviews highlighted that participants in this phase are cautious in their interactions. the formal atmosphere does not support trust building, whereas informal meetings would be more likely to invite interpersonal dialogue and foster a belief that cooperation is not based only on self-interest (christopher et al. 2008). the key findings in this research is the importance of informal meetings that offers more casual surroundings that support more the development of we-spirit and active, free discussion that could contain also crazy ideas. the crazy ideas are important when the partners are developing the new business. equal surroundings figure 2: enablers for interpersonal trust in business networks journal of business models (2016), vol. 4, no. 1, pp. 45-62 53 and atmosphere support to reach the personal level in discussions. this study focused on finding the guidance and suggestions for interpersonal trust building in the initial phase, noting that the trust-building process is slow and complex. the process follows goffman’s (1959) model of frontstage behaviour to backstage behaviour, where trust is needed so that people can take their mask off and reveal their true personality. this study also supports that the atmosphere and environment of interactions affects the trust-building process, and that it is not irrelevant where network members meet. common platform for communication is needed in business network level and it is missing also in the case network (gerbasi & latusek 2015). in a business network, the responsibility of trust building must be shared. trust builds through shared experiences, active communication, openness, and mutual respect. moreover, face-to-face interaction and personal knowledge are needed. trustworthy relationships enable communication where personal ideas and critical information can be revealed. also, without trust, opinions, questions and improvement ideas are not always taken into account by network members. interpersonal trust requires the following factors: • personal acquaintance and chemistry; • respect; • fairness; • keeping of promises; • communication; and • words matched by action. communication can be seen as one of the most essential areas and it is enhanced by trust. to be successful, full and open communication is essential when building a business network. communication should include the following elements: • genuine listening; • straight talk; • knowledge sharing; • facts; • needs; • desires; • feelings and emotions. a climate of cooperation is required, where differing opinions can be voiced and acknowledged. it is important that the inevitable differences are not set aside or ignored (cook, 2009). this study also supports the view that trust is needed to encourage business partners to fully commit to the development of business networks. this business development consists of co-creation on many levels. for example, in business modelling, trust is a crucial factor for members to be willing to share their personal ideas and critical information. the shared vision and desired targets should be internalised by each and every network member and they should all take part in the discussions and be open to hearing others’ opinions. in a business network, everyone is responsible for building trust. this study is practical oriented and to main focus was to give guidance and support for the early stages of networking how trust starts to form. the guidance is for network partners and creators but also for business consultants. we suggest that trust formation should be supported and the responsibility should be shared among network members. it is crucial to recognise the enablers and roadblock for trust building. the main enablers, such as, effective communication, promise keeping, fairness, respect and personal knowing can be seen as a corner stones for trust this research focuses on one business network embedded in the finnish context. additional research would be needed to determine if the findings can be generalised on a larger scale, or to other contexts. this study has concentrated on the development of interpersonal trust in business. further in-depth research could be conducted focusing on the design of tools and operational models that aim to support the building and maintenance of trust in business networks. also the research could be focused to, is it possible to manage trust. there are not enough studies in this area. journal of business models (2016), vol. 4, no. 1, pp. 45-62 54 reference list ahuja, g. (2000), “collaboration networks, structural holes and innovation: a longitudinal study”, administrative science quarterly, vol. 45, no. 3, pp. 425-455. akbar, z., gözübüyük, r. and milanov, h. (2010, “it’s the connections: the network perspective in interorganizational research”, the academy of management perspectives, vol. 24, no. 1, pp. 62-77. akgün, a. e., byrne, j., keskin, h., lynn, g. s., and imamoglu, s. z. (2005), “knowledge networks in new product development projects: a transactive memory perspective”, information & management, vol. 42, no. 8, pp. 1105-1120. aliouat,b. (1997), “les effets d’un changement de paradigme dans les études des stratégies d’alliance technologique”, 6th conference of association internationale du management stratégique, montréal (québec). abrams, l. c., cross, r., lesser, e., and levin, d. z. (2003), “nurturing interpersonal trust in knowledge-sharing networks”, the academy of management executive, vol. 17, no. 4, pp. 64-77. annison, m.h., and wilford, d.s. (1998), trust matters: new directions in health care leadership, jossey-bass publishers, san francisco. barnett, m., anderson, j., houle, m., higginbotham, t. and gatling, a. (2010), the process of trust building between university researchers and urban school personnel”, urban education, vol. 45, no. 5, pp. 630–660. barringer, b. r., and harrison, j. s. (2000), “walking a tightrope: creating value through interorganizational relationships“, journal of management, vol. 26, no. 3, pp. 367-403. barringer, b.r., jones, f.f. and neubaum, d.o. (2005), “a quantitative content analysis of the characteristics of rapidgrowth firms and their founders”, journal of business venturing, vol. 20 no. 5, pp. 663-87. batt, j.p. (2008), “building social capital in networks”, industrial marketing management, vol. 37, no. 5, pp. 487–491. bibb, s., and kourdi, j. (2004), trust matters for organizational and personal success, palgarve macmillan, houndsmill. bies, r.j., and moag, j.s. (1986), “interactional justice: communication criteria of fairness”, in lewicki, r.j., sheppard, b.h. and bazerman, m.h. (eds.), research on negotiation in organizations, 1 (pp. 43–55), jai press, greenwich, ct. blankenburg-holm, d., eriksson, k., and johanson, j. (1996), “business networks and and cooperation in international business relationships”, journal of international business studies, vol. 27, no. 5, pp. 1033–1053. blau, p. m. (1964), exchange and power in social life, transaction publishers. bouwman, h., de vos, h., and haaker, t. (2008), mobile service innovation and business models. springer. camén, c., gottfridsson, p. and rundh, b. (2012), “contracts as cornerstones in relationship building”, international journal of quality and service sciences, vol. 4, no. 3, pp. 208-223. castello, m. (1996), the rise of network society, blackwell, oxford. journal of business models (2016), vol. 4, no. 1, pp. 45-62 55 christopher, s., watts, w., mccormick, a., and young, s. (2008), “building and maintaining trust in a communitybased participatory research partnership”, american journal of public health, vol. 98, no. 8, pp. 1398–1406. coleman, j. (1988), “social capital in the creation of human capital”, american journal of sociology, vol. 94, pp. 95–120. cook, k.s., hardin, r. and levi, m. (2009), whom can we trust?, how groups, networks and institutions make trust possible, russell sage foundation publications, new york. covey, s. m. (1995), principle-centered leadership, simon & schuster, london. de lurdes veludo, m., macbeth, d. and purchase, s. (2006), “framework for relationships and networks”, journal of business & industrial marketing, vol. 21, no. 4, pp. 199-207. deutsch, m. (1958), “trust and suspicion”, journal of conflict resolution, pp. 265-279. deutsch, m., and jones, m. r. (1962), “cooperation and trust: some theoretical notes”, in. jones, m.r. (ed.), nebraska symposium on motivation, pp. 275–320, university of nebraska press, lincoln. deutsch, m. (1985), distributive justice, a social psychological perspective, yale university press, new haven, ct. de wever, s., martens, r. and vandenbempt, k. (2005), “the impact of trust on strategic resource acquisition through interorganizational networks: towards a conceptual model”, human relations, vol. 58, no. 12, pp. 1523-1543. dussauge, p. and garette,b. (2009), “ les stratégies d’alliances entre concurrents”, in. le roy, f. and yami, s. (éd.), management stratégique de la concurrence, pp. 121-131, dunod, paris. eisenhardt, km., (1989), “building theories from case study research authors”, the academy of management review, vol. 14, no. 4, pp. 532-550. european commission, (2010), petites entreprises: un meilleur soutien politique au moteur de l’emploi dans l’ue, ip 10/723 [online], june 2010, p. 1-3. http://europa.eu/rapid/pressreleasesaction.do?reference=ip/10/723&format=h tml&aged=1&language=fr&guilanguage=en erdem, f., and ozen, j. (2003), “cognitive and effective dimensions of trust in developing team performance”, team performance management, vol. 9, no. 5/6, pp. 131-135. ford, d. (1980), “the development of buyer-seller relationships in industrial markets”, european journal of marketing, vol. 14, no. 5/6, pp. 339-354. fukuyama, f. (1995), trust: the social virtues and the creation of prosperity, the free press, new york. galaskiewicz, j., and wasserman, s. (1994), introduction: advances in the social and behavioral sciences from social network analysis, in wasserman, s. and galaskiewicz, j. (eds.), advances in social network analysis: xi-xvii, sage, newbury park, ca. giddens, a. (1991), modernity and self-identity. self and society in the late modern age, polity press, cambridge. journal of business models (2016), vol. 4, no. 1, pp. 45-62 56 goffman, e. (1959), the presentation of self in everyday life, garden city, new york. gorden, r. l. (1969), interviewing: strategy, techniques, and tactics, dorsey press, homewood, il. granovetter, m. (1995), getting a job. a study of contacts and careers, 2nd edn., university of chicago press, chicago. hakonen, m., vartiainen, m., ja kokko n. (2004), “luottamuksen synty hajautetuissa työryhmissä”, psykologia 02/04, s. 125–133. harisalo, r., ja miettinen, e. (2010), luottamus – pääomien pääoma, tampereen yliopistopaino, tampere. harris, s. and dibben mr. (1999), “trust and co-operation in business relationship development: exploring the influence of national values”, j mark manag, vol. 15, no. 3, pp. 463–483. heikkilä, j., tyrväinen, p., and heikkilä, m. (2010), “designing for performance a technique for business model estimation”, in seppä, m., helander, n. and ilvonen, i. (eds.), proceedings of ebr. heikkilä, m., solaimani, s., soudunsaari, a., hakanen, m., kuivaniemi, l., & suoranta, m. (2014), performance estimation of networked business models: case study on a finnish ehealth service project, journal of business models, vol. 2, no. 1, pp. 71–88. hirsjärvi, s. ja hurme, h. (1995), teemahaastattelu, yliopistopaino, helsinki. hirsjärvi, s., remes, p. ja sajavaara p. (2004), tutki ja kirjoita, tammi, helsinki. hite, jm. (2003), “patterns of multidimensionality among embedded network ties: a typology of relational embeddedness in emerging entrepreneurial firms”, strateg organ, vol. 1, no. 1, pp. 9–49. hite, jm (2005), “evolutionary processes and paths of relationally embedded network ties in emerging entrepreneurial firms”, entrep theory pract, vol. 30, no.1, pp. 113–144. holmlund, m., and törnroos, j-å (1997), “what are the relationships in business networks?”, management decision, vol. 35, no. 4, pp. 304–309. human, s. e. and provan, k. g. (2000), “legitimacy building in the evolution of small-firm networks: a comparativestudy of success and demise”, administrative science quarterly, vol. 45, pp. 327-365. håkansson, h. and snehota, i. (ed.) (1997), developing relationships in business networks, international thomson business press, london. håkansson, h., and ford d. (2002), “how should companies interact in business networks?”, journal of business research, vol. 55, no. 2, pp. 133–139. håkansson, h., and snehota, i. (2006), “no business is an island: the network concept of business strategy”, scandinavian journal of management, vol. 22, pp. 256–270. ilmonen, k. (2001), “sosiaalinen pääoma: käsite ja sen ongelmallisuus”, kirjassa ilmonen, k. (toim.), sosiaalinen pääoma ja luottamus, jyväskylän yliopistopaino, jyväskylä. journal of business models (2016), vol. 4, no. 1, pp. 45-62 57 jeffries, f.l. and reed, r. (2000), “trust and adaptation in relational contracting”, academy of management review, vol. 25, no. 4, pp. 873–82. johannisson, b. (1999), networking and entrepreneurial growth, in sexton, d.l. and landstrom, (eds.), the blackwell handbook of entrepreneurship, pp 368-386, blackwell, oxford. jones, g. r., and george, j. m. (1998), “the experience and evolution of trust: implications for cooperation and teamwork”, academy of management review, vol. 23, no. 3, pp. 531-546. jøsang, a., keser, c., and dimitrakos, t. (2005), “can we manage trust?”, proceedings of the 3rd international conference on trust management, paris, france, 2005, pp. 13–29. järvenpää, s.l., knoll, k., and leidner, d.e. (1998), “is anybody out there? antecedents of trust in global virtual teams”, journal of management information systems, vol. 14, no. 4, pp. 29–64. järvinen, r. (2014), “consumer trust in banking relationships in europe”, international journal of bank marketing, vol. 32, no. 6, pp. 551-566. klein, k. j., palmer, s. l., and conn, a. b. (2000), interorganizational relationships: a multilevel perspective. knight, d. h. m., and chervany, n. l. (2006), 2 reflections on an initial trust-building model, handbook of trust research, 29. kouzes, j.m., and posner, b.z. (1993), credibility: how leaders gain and lose it, why people demand it, jossey-bass publishers, san francisco. krackhardt, d. (1992), “the strength of strong ties: the importance of philos in organizations” in. nohria, n. and eccles, r.g. (eds.), networks and organizations: structure, form and action, harvard business school press, boston. lee, j-n., and choi, b. (2011), “effects of initial and ongoing trust in it outsourcing: a bilateral perspective”, information & management, vol. 48, pp. 96–105. lewicki, r.j., and bunker, b.b. (1996), “developing and maintaining trust on work relationships revence in trust in organizations”, in. kramer, r.m. and tyler, t.r. (eds.), frontiers of theory and research, saga publications, thousand oaks. lewicki, r. j., & tomlinson, e. c. (2003). trust and trust building. beyond intractability. lind, e.a., and tyler, t.r. (1988), the social psychology of procedural justice, plenum press, new york. lindenberg, s. (1997), grounding groups in theory: functional, cognitive and structural interdependencies’, advances in group processes 14, pp. 281.331. lindenberg, s. (1998), “solidarity: its microfoundations and macrodependence. a framing approach´ in. doreian, p., and fararo t. (eds.), the problem of solidarity, theories and models, pp. 61-112, gordon and breach, london. lindenberg, s. (2000), “it takes both trust and lack of mistrust: the workings of cooperation and relational signjournal of business models (2016), vol. 4, no. 1, pp. 45-62 58 aling in contractual relationships”, journal of management and governance, vol. 4, pp. 11-33. lindenberg, s. (2003), “governance seen from a framing point of view: the employment relationship and relational signalling” in. nooteboom, b. and six, f.e. (eds.), the trust process, empirical studies of the determinants and the process of trust development, pp. 37-57, edward elgar, cheltenham. lorino, p., and mourey, d. (2013), “the experience of time in the inter-organizing inquiry: a present thickened by dialog and situations”, scandinavian journal of management, vol. 29, no. 1, pp. 48-62. luhmann, n. (1979), trust and power, wiley, chichester. luhmann, n. (2000), “familiarity, confidence, trust: problems and alternatives”, in. gambetta, d. (ed.), trust: making and breaking cooperative relations, electronic edition, university of oxford: department of sociology, pp. 94107. malhotra, d., and murnighan, j. k. (2002), “the effects of contracts on interpersonal trust”, administrative science quarterly, vol. 47, no. 3, pp. 534-559. mayer, r.c., davis, j.h., and schoorman, f.d. (1995), “an integrative model of organizational trust”, academy of management review, vol. 20, no. 3, pp. 709–734. mcallister, d. j. (1995), “affect-and cognition-based trust as foundations for interpersonal cooperation in organizations”, academy of management journal, vol. 38, no. 1, pp. 24-59. merton, r. k. marjorie fiske and patricia l. kendall (1990), the focused interview. meyerson, d., weick, k.e., and kramer, r.m. (1996), “swift trust and temporary groups”, in. kramer, k.m. and tyler, t.r. (eds.), trust in organizations, sage, thousand oaks. miles, r.e. and snow, c.c. (1986), “network organizations: new concepts for new forms”, california management review, vol. 28, no. 3, pp. 62-73. möller, k., rajala, a., ja svahn, s. (2009), tulevaisuutena liiketoimintaverkot johtaminen ja arvonluonti, teknologiateollisuus, tampere. nielsen, b.b., (2004), “the role of trust in collaborative relationships: a multi-dimensional approach, m@n@gement, vol. 7, no. 3, pp. 239-256. nohria, n. (1992), introduction: is a network perspective a useful way of studying organizations, networks and organizations: structure, form, and action, 1, 22. nonaka, i. & takeuchi, h. (1995), the knowledge-creating company, oxford university press, new york. nooteboom, b. (2002), trust: forms, foundations, functions, failures and figures, edward elgar publishing. oed (1995), concise oxford dictionary of current english, 9th ed., oxford university press, oxford. oxendine, a., borgida, e., sullivan, j. l., and jackson, m. s. (2003), “the importance of trust and community in dejournal of business models (2016), vol. 4, no. 1, pp. 45-62 59 veloping and maintaining a community electronic network”, international journal of human-computer studies, vol. 58, no. 6, pp. 671-696. pennington, m and rydin, y (2000), “researching social capital in local environment policy contexts”, policy and politics, vol. 28, pp. 233-250. pitsis, t. s., kornberger, m., and clegg, s. (2004), “the art of managing relationships in interorganizational collaboration”, m@ n@ gement, vol. 7, no. 3, pp. 47-67. portes, a. (1998), “social capital: its origins and applications in modern sociology”, annual sociology, vol. 24, pp. 1-24. productivity comission (2003), social capital: reviewing the concept and its policy implications, research paper, (no. 0307001), canberra ausinfo. provan, k. g., fish, a. and sydow, j. (2007), “interorganizational networks at the network level: a review of the empirical literature on whole networks”, journal of management, vol. 33, no. 3, pp. 479-516. putnam, r. (1993), making democracy work. civic traditions in modern italy, princeton university press, new jersey. putnam, rd. (2000), bowling alone: the collapse and revival of american community, simon & schuster, new york. ramsey, r. d. (2009), “a crash course in trust-building”, supervision, 70(10), pp. 3-5, available at: http://search. proquest.com/docview/195598486?accountid=11774 (accessed 24 october 2012). reina, d., and reina, m.l. (1999), trust & betrayal in the workplace: building effective relationships in your organization, berrett-koehler publishers, san francisco. ring, p.s., and van de ven, a.h. (1994), “development processes of cooperative interorganizational relationships”, the academy of management review, vol. 19, no. 1, pp. 90-118. robson, c. (2011), real world research: a resource for social scientists and practitioner-researchers, blackwell, oxford, cambridge, ma. roolaht, t. (2006), “the company’s involvement in international networks as an entrepreneurial decision”, baltic journal of management, vol. 1, no. 1, pp. 102-115. rousseau, d. m., sitkin, s. b., burt, r. s., and camerer, c. (1998), “not so different after all: a cross-discipline view of trust”, academy of management review, vol. 23, no. 3, pp. 393-404. ruuskanen, p. (2001), “luottamus verkostotalouden laidalla”, kirjassa ilmonen, k. (toim.), sosiaalinen pääoma ja luottamus, jyväskylän yliopistopaino, jyväskylä. sako, m. (1992), prices, quality and trust: interfirm relations in britain and japan, cambridge university press, cambridge. salgado, m., & bourcieu, s. (2002), “management des cooperations interententreprises: le cas des coopérations multipoints”, in xi° conférence internationale association internationale de management stratégique. journal of business models (2016), vol. 4, no. 1, pp. 45-62 60 sigfusson, t. and simon harris. (2012), “the relationship formation paths of international entrepreneurs”, journal of international entrepreneurship, vol. 10, no. 4, pp. 325-349. simon, f. b. (2007), einführung in die systemische organisationstheorie, vol. 1, carl-auer verlag. sitkin, s. b., & roth, n. l. (1993), “explaining the limited effectiveness of legalistic “remedies” for trust/distrust”, organization science, vol. 4, no. 3, pp. 367-392. snehota, i. and hakansson, h. (eds.)(2002), developing relationships in business networks, londres, routledge. solaimani, s., and bouwman, h. (2012), “a framework for the alignment of business model and business processes: a generic model for trans-sector innovation”, business process management journal, vol. 18, no. 4, pp. 655-679. solomon, r. v., and flores, f. (2001), building trust in business, politics, relationships, and life, oxford university press, oxford. ståhle, p., ja laento, k. (2000), strateginen kumppanuus: avain uudistumiskykyyn ja ylivoimaan, wsoy, helsinki. sydow, j. (1992). strategische netzwerke. evolution und organisation, wiesbaden, 54. taylor, c. (1989), sources of the self. the making of the modern identity, cambridge university press, cambridge. tschannen-moran, m. (2001), “collaboration and the need for trust”, journal of educational adminstration, vol. 39, pp. 308–331. uslaner, e. m. (2002), the moral foundation of trust, cambridge university press, cambridge. uzzi, b. (1996), “the sources and consequences of embeddedness for the economic performance or organizations: the network effect”, american sociological review, vol. 61, no. 4, pp. 674–698. valkokari, k., anttila, j-p, hakala, t., hyötyläinen, r., korhonen, h., kulmala, h. i., lappalainen, i., ja ruohomäki, i., (2009), muutos on pysyvää entä verkostot? kolmen liiketoimintaverkoston polut, raportteja 67, tykes, helsinki. van de bunt, g.g.. and groenewegen, p. (2007), “an actor-oriented dynamic network approach the case of interorganizational network evolution”, organizational research methods, vol. 10, no. 3, pp. 463-482. whitener, e.m., brodt, s.e., korsgaard m.a. and werner, j.m. (2006), “managers as initiators of trust: an exchange relationship framework for understanding managerial trustworthy behaviour”, the academy of management review, vol. 23, no. 3, pp. 513-530. williams, m. (2001), “in whom we trust: group membership as an affective context for trust development”, the academy of management review, vol. 26, no. 3, pp. 377-396. wuyts, shk. and geyskens, i. (2005), “the formation of buyer–supplier relationships: detailed contract drafting and close partner selection”, j mark, vol. 69, no. 4, pp. 103-117. yami, s., castaldo, s., dagnino, b., and le roy, f. (eds.), (2010), coopetition: winning strategies for the 21st century, edward elgar publishing. journal of business models (2016), vol. 4, no. 1, pp. 45-62 61 yin, r. (2014), case study research: design and methods, sage publications, inc, 5, 11. young, l. (2006), “trust: looking forward and back”, journal of business & industrial marketing, vol. 21, no. 7, pp. 439-445. zott, c. and amit, r. (2008), “the fit between product market strategy and business model: implications for firm performance”, strategic management journal, vol. 29, no. 1, pp. 1-26. zucker, l. g. (1986). production of trust: institutional sources of economic structure, 1840–1920. research in organizational behavior. journal of business models (2016), vol. 4, no. 1, pp. 45-62 62 about the authors mila hakanen is a researcher and phd candidate at the jyväskylä university school of business and economics, finland. her research focuses on the areas of interpersonal trust, communication and trust building, trust management and business networking. leïla kossou is a seasoned market intelligence manager and an independent academic researcher. leïla’s versatile background has led her to convey her strategic management expertise in international colloquia, books andpapers, with a focus on strategic intelligence, clusters and cooperation. tuomo takala is a head of management and leadership at the jyväskylä university school of business and economics, finland. his research areas are: responsible business & management, leadership & narratives and charismatic leadership. journal of business models (2018), vol. 6, no. 3, pp. 24-44 24 business model development: a customer-oriented perspective bernd w. wirtz 1 and peter daiser 2 abstract purpose: this study provides a business model development framework that explicitly focuses on the customer as well as integrating customer knowledge into the development process for enhanced value creation. the proposed framework shall enhance our understanding about this phenomenon and present a helpful guidance for researchers and practitioners. design/methodology/approach: the study follows a conceptual approach that is based on insights from prevailing literature. the deduced findings are illustrated with supplementary context from a prominent case study. findings: the findings underline the importance of customer-orientation for successful business model development. furthermore, business model development should follow an actively managed, systematic approach that takes into account distinctive customer groups, business model change intensity, and business model development types. the presented framework provides fruitful avenues for future research and valuable guidance for management. practical implications: the presented framework provides managers with a tool to plan and organize their business model development process. research limitations: given the vast amount of academic journals, it is unlikely that every applicable scientific publication is included in the analysis. the illustrative example is descriptive in nature, and thus, does not possess empirical validity. originality/value: the main contribution of the study is the explicit transfer of important aspects of the market orientation literature to the business model development phenomena and the strict integration of the customer into the associated process. thus, this study provides a customer-oriented framework on business model development that supports the field’s conceptual progress. furthermore, the study supports the normative debate in the business model literature. please cite this paper as: wirtz, b.w. and daiser, p. (2018), business model development: a customer-oriented perspective, journal of business models, vol. 6, no. 3, pp. 24-44 keywords: business model; customer; innovation; development; framework 1 german university of administrative sciences speyer, chair for information and communication management, freiherr-vom-stein-str. 2, 67346 speyer, germany, ls-wirtz@uni-speyer.de 2 professorship in e-government and digital transformation at the municipal university of administration in lower saxony, peter.daiser@nsi-hsvn.de journal of business models (2018), vol. 6, no. 3, pp. 24-44 25 introduction in 1954, drucker (1954, p.  37) stated that “it is the customer who determines what a business is”. since that time, customer perspectives have become vital concepts in many scientific disciplines. the customer also plays an important role in the business model field (foss and saebi, 2016; osterwalder et al., 2010; wirtz et al., 2016b), which, for instance, emphasizes the importance of customer value creation (cf. amit and zott, 2001; rhoads, 2015; teece, 2010). furthermore, the creation and development of business models strongly depends on the customer, who can be an important contributor for business evolution and innovation (johnsen et al., 2006; öberg, 2010; thomke and hippel, 2002). in particular, when exploring “the business model concept through the lenses of organization design and strategy, […] the focus on customers and the ability to create value for a customer plays a major role in delineating of the business model construct” (rhoads, 2015, p.  39). from this perspective, the customers can be seen as a vital source of strategic input (buur and matthews, 2008; hippel, 1986; prahalad and ramaswamy, 2000) that needs to be considered to keep them satisfied and to provide lasting superior value (hienerth et al., 2011; pynnönen et al., 2012). considering the necessity for constant business model development (bmd), it is remarkable that there are many open research issues on how business models evolve (foss and saebi, 2016; spieth et al., 2014; wirtz et al., 2016a). in particular, when looking at the results of our literature review, we noted a lack of business model frameworks that consistently connect a company’s customer base with the required bmd. this shortcoming has also been detected in recent publications on business model innovation, in which the authors, for example, assert that “despite the many good attempts to define business models, there are a limited number of frameworks that are capable of taking customerdriven change into account” (pynnönen et al., 2012, p. 5), express a shortcoming of comprehensive frameworks that support managers in innovating their business models (frankenberger et al., 2013), or criticize a lack of concepts that present “an integrated customerdriven bmi framework” (wirtz et al., 2016a, p. 14). given the importance of the customer for bmd and the finding of rhoads (2015, p. 39) that “most management research on business models does not specifically address the overlap with customer marketing focused research”, we see a great need for research concerning customer-oriented business model development (cobmd). this argumentation is reinforced by a recent call for papers of the academy of marketing science, in which the authors also expect to provide an impetus for research concerning a customer-centric perspective on business model development (gatignon et al., 2016). therefore, this study tries to develop a cobmd framework—in the form of an abstract representation of vital elements of the bmd concept within a structural frame displaying their theoretical connections—that explicitly puts the focus on the customer, and thus, supports integrating customer knowledge into the bmd process and tailoring the bmd to the customers’ needs and preferences for enhanced creation of value with customers (prahalad and ramaswamy, 2004). apart from that, several researchers claim that—given the high but dispersed amount of knowledge available (carayannis et al., 2015; schneider and spieth, 2013; wirtz and daiser, 2017)—there is also a need for a normative approach to create a common understanding and a common language of important bmi concepts (cf. bocken et al., 2014; massa and tucci, 2014; wirtz et al., 2016a) since this would support a faster and more sustainable development of the field (bocken et al., 2015). by its very nature, the cobmd framework also contributes to this debate since a conceptual framework adds to the common understanding of a topic by classifying existing knowledge and integrating it into a unified concept (cf. lambert, 2015; taran et al., 2015). from a practical perspective, this study intends to support business model management by presenting vital bmd elements and demonstrating their conceptual connections. since the conducted review of existing scientific literature could not clarify what a cobmd framework looks like, we aim to develop such a framework. this exploratory study addresses this challenge by drawing from scientific literature and complementing the deduced findings with an illustrative example. thus, we follow a conceptual descriptive approach, which seeks to guide academics and practitioners on how to assess the relevant aspects of cobmd and on how to strategically integrate the customer perspective into this concept. journal of business models (2018), vol. 6, no. 3, pp. 24-44 26 to achieve the previously mentioned goals, the article proceeds as follows: after a brief outline of the conceptual background of the study, we present the state of research on cobmd frameworks. as the scientific literature on this subject is sparse, we went on to develop the framework by integrating knowledge from related fields, in particular from the market orientation literature. having deduced the cobmd framework, we use google as an illustrative example since this company conducted numerous successful bmd during the past two decades (goggin, 2012; steiber and alänge, 2013; wirtz, 2016). the article concludes by presenting the associated findings, implications, and takeaways for academics and business model managers. conceptual perspective from a scientific research stream perspective, this study builds upon market orientation and business model literature. the market orientation literature comprises a set of publications that puts the customer as a prime perspective (gheysari et al., 2012). market orientation refers to the phenomenon that companies that continually satisfy customer needs better than their competitors create a competitive advantage and can enjoy superior profitability (day, 1994; jaworski and kohli, 1993; kirca et al., 2005; kohli and jaworski, 1990). although the concept itself had already been around since the 1950s, market orientation research took up pace in the management-oriented marketing literature in the beginning of the 1990s (e.g., jaworski and kohli, 1993; kohli and jaworski, 1990; narver and slater, 1990). later, this topic also started to enter strategic management research (e.g., connor, 2007; dobni and luffman, 2003; greenley, 1995; hult et al., 2005; hult and ketchen, 2001; slater and narver, 1999). given the customer-driven business model development perspective of the study, we thus investigate the related phenomena from a market orientation context, focusing on business model activities that occur in response to obtained customer intelligence (cf. kirca et al., 2005; kohli and jaworski, 1990). concerning the business model concept, this study looks at it from an activity system view that offers a systemic perspective (cf. zott et al., 2011). therefore, we apply a recent definition of wirtz (2011, p.  65) who specifies a business model as “a simplified and aggregated representation of the relevant activities of a company that describes how marketable information, products and/or services are generated by means of a company’s value-added component”. to characterize the term bmd, we follow the approach of casadesus-masanell and zhu (2013) who thematically demark their topic by referring to schumpeter’s (1934) five types of business alterations: new products, new methods, new sources, new markets, and new ways to organize business. since each of these five types normally affects a company’s activities, they demand modifying the existing or creating a new business model—be it a slight evolutionary change or a game-changing innovation. therefore, schumpeter’s business alterations in return represent the range of practical outcomes of bmds. against this background, bmd summarizes a set of existing research fields that deal with business model dynamics. following this approach, this study applies the term bmd to any evolution and innovation changes that occur within an existing or emerging business model (cf. jensen, 2014; wirtz et al., 2016b). literature review since customer-driven business model frameworks have so far not been the topic of particularly intense discussions, this investigation follows the implicit suggestion of rhoads (2015) to expand the literature review to customer-focused research. considering the extensity and heterogeneity of the associated literature, we conducted a query of four academic databases (academic search complete, business source complete, and econlit via ebscohost as well as web of science) to identify relevant business model frameworks. we searched the databases for peer-reviewed academic publications, which are expected to be highquality, up-to-date scientific research (cf. certo et al., 2009; webster and watson, 2002), that showed search term combinations of framework or business model and user, customer, client, market, centric, oriented, driven, or customer relationship management in the title or abstract. given the broad set of search terms and the broad spectrum of academic journals, which are included in the four databases used, we are confident that this approach captures a meaningful census as recommended by methodical literature (cf. webster and watson, 2002). journal of business models (2018), vol. 6, no. 3, pp. 24-44 27 finally, we could identify seven studies that investigate customer-driven or market-driven bmd and provide a tangible framework or strategic concept to the reader. yelmo et al. (2008) propose a business model for telecommunications services, in which customers become the collaborating third parties. thus, the operator provides a platform, on which customers can create and execute content or services, creating a network of customer-generated services. due to the practical orientation of their business model and the industry-specific service platform, the proposed model is not suitable to serve as a conceptual cobmd framework. hienerth et al. (2011) applied a multiple case study design to explore the implementation of user-centric business models as a complement of traditional, established business models. here, user-centric refers to all external stakeholders. since external stakeholders also include customers, their study appears as relevant. they identified six success factors for engaging users in business processes (real-time user-to-user interaction, transparent intellectual property policy, non-monetary incentive system, user entrepreneurship program, corporate strategy alignment, continuous communication and feedback loops). although they provide straightforward implementation and management-oriented insights concerning success factors and strategy recommendations, the study does not provide a cobmd framework. pynnönen et al. (2012) present a case study-based research on customer-driven business model innovation. they conclude that a customer perspective on business models helps companies to align business with the current and emerging customer needs and that bmd is an iterative process that is mandated by external changes. thus, their study recommends an iterative approach that is divided into four recurring phases: analyze the customer value preferences, innovate the business model, implement a customer survey to test the new model, and adjust the model. with this four-phase framework, pynnönen et al. (2012) present a four-step activity procedure of handling bmd. however, due to the framework’s process focus, it cannot provide the reader with the relevant managerial, organizational, and strategic factors that need to be considered for effective cobmd. in their longitudinal case study, wu et al. (2013) investigate the influence of customer knowledge on value creation and the role of it in value delivery and value capture. their conceptual model illustrates the links between customer knowledge management and it-based business model innovation. in sum, effective customer knowledge management creates customer value through enhanced customization, better purchase decision-making, and improved customer experience, fostering the customers’ overall consumption experience. while the model of wu et al. (2013) is not intended to serve as a conceptual framework for bmd, they nevertheless show that it is important to integrate customer knowledge into bmd. according to frankenberger et al. (2013) the business model research field lacks a comprehensive framework that supports companies in bmd. for this reason, they elaborated the 4i-framework, which structures bmd along four generic phases: initiation, ideation, integration, and implementation. their framework presents an iterative process that provides a clear implementation roadmap for companies. since they focus on a processbased concept for practical business model innovation, the study scope does not cover the aspects of different customer groups or customer-specific knowledge integration. dalby et al. (2014) propose a conceptual framework that helps managers to develop business models if these are expanded into another cultural context. for this reason, they combined business model theory (osterwalder et al., 2010) with national culture (hofstede, 2001). although dalby et al. (2014) present a clearcut framework to prepare a business model transfer to a new cultural environment, this approach is highly specific. kohler (2015) investigated several crowdsourcing platforms and conducted a series of management interviews to identify success factors and successful patterns of crowdsourcing-based business models. since he found out that these companies could not only benefit from the creativity and knowledge of many contributors— including their customers—but build a crowd-driven business model that is different from traditional producer-consumer transactions, this article also contains journal of business models (2018), vol. 6, no. 3, pp. 24-44 28 helpful information for bmd initiatives. however, the study does not provide a cobmd framework. based on the results of the literature review, we conclude that scientific literature on bmd research has so far not intensively investigated customer-oriented frameworks and has only paid little attention to the customer’s crucial role in this endeavor, which is in line with the findings of pynnönen et al. (2012), frankenberger et al. (2013), rhoads (2015) and wirtz et al. (2016a). the few existing approaches that in some way address this topic rather show processual concepts that focus on procedures and workflows for customer-oriented business model implementation or define customer-oriented business models instead of reflecting customer-driven change. apart from that, they follow a one-size-fits-all principle that does not take into account a segment-specific bmd, which considers distinct customer and development types. considering the importance of the customer and the constant requirement for bmd, the results of the literature analysis underline the previously mentioned need for research. therefore, this study elaborates a framework that explicitly puts the focus on the customer showing elements that are of particular relevance for successful cobmd. conceptual framework for cobmd market orientation is about putting the customer first (deshpande et al., 1993; houston, 1986; jaworski and kohli, 1993). following this principle in business model management means to integrate the customers’ needs and preferences into the bmd activities (osterwalder et al., 2010; pynnönen et al., 2012) or in other words, move from innovating for customers to innovating with customers (desouza et al., 2008; nambisan, 2002). thus, the customer is the starting point for cobmd. starting with the customer the identified customer-oriented business model approaches do not differentiate between different customer groups and their requirements. we believe that a bmd specifically needs to take into account the particular customer preferences of the customer groups that are affected or to be addressed by the change. because irrespective of the type of change applied, creating value for the customers remains the core principle of business models (amit and zott, 2001; rhoads, 2015; teece, 2010) and “not all customers are alike” (ganesh et al., 2000, p. 65). therefore, a cobmd framework requires a conceptual segmentation of a company’s actual and potential customer base. since we could not identify an adequate conceptual segmentation in the extant scientific literature, we have elaborated the customer groups based on different concepts. given that the cobmd framework is based on a business model developing organization mindset, we chose a demand-side perspective on the primary level (customer groups) to arrange the underlying customer needs and preferences in a transparent and applicable manner. thus, the customer groups that are introduced in the following represent clusters that contain distinctive sets of customer needs and preferences. a further benefit of using a customer group clustering is the easy transferability into the management practice since managers are used to apply comparable clusters or dimensions when generating and using customer intelligence. the life cycle classification of customer relationships of campbell and cunningham (1983) forms the basis of the conceptual customer group segmentation. they applied the life cycle concept to customers, dividing them into three groups: tomorrow’s, today’s, and yesterday’s customers. tomorrow’s customers are those customers that the company tries to gain or regain. today’s customers are old-established customers with continually engaged relationships. yesterday’s customers buy small volume or see the products or services as pure commodities. we combine today’s and yesterday’s customers into one group (steady customers) since both show a long established customer relationship and a high service offer experience. therefore, these two groups are expected to show similar customer needs and preferences. tomorrow’s customers are denominated potential customers, which also include new customers. this group looks back at a short customer relationship and is different to steady customers since they do not show the same level of satisfaction, involvement, and loyalty like steady customers (ganesh et al., 2000), have less customer experience, and require more development activities. however, they also show ample development potential and can have a considerable impact on new journal of business models (2018), vol. 6, no. 3, pp. 24-44 29 ventures and positively affect firm performance (kirmani and rao, 2000; wang et al., 2014). summing up, we derived three general conceptual customer groups: steady, new, and potential customers. ganesh et al. (2000) divide the customer base into switchers and stayers on the first level. switchers come from competitors and stayers are first-time customers that do not come from any competitor. since these two groups differ significantly and show a distinct service offer experience level, we further divide the new and potential customer segments according to the relevant service offer experience background. the idea behind this classification is that new or potential customers that are service offer experienced have different information requirements and preferences than those that have no or only very little service offer experience. this deduction is based on the marketing classification of current and potential demanders, in which, for example, distinct information and experience backgrounds are seen as key differences (meffert et al., 2012). figure 1 summarizes the segmentation of the conceptual customer groups. this is the first part of the framework, which is developed further in figure 2 and figure 3. having determined the different customer groups, the next step that we expect is the identification of the respective customer preferences and the collection of relevant customer knowledge since this particular customer intelligence needs to be generated to coordinate the consequential business model development activities. in this context, we follow the understanding of shapiro (1988), day (1990), kohli and jaworski (1990), or prahalad and ramaswamy (2004), who expressed the importance of acquiring customer information and knowledge, use it to develop and implement new strategies, and integrate it into all important corporate activities. from a bmd perspective, this means to incorporate customer input into bmd, to integrate customer intelligence into the bmd process, and thus, to create value by using customer knowledge (hienerth et al., 2011). for this purpose, companies should make systematic use of all available customer interfaces to connect with the customer. connecting with the customer the customer interfaces are the actual connection between the company and the customer (rayport and jaworski, 2004). here, recommendations, statements, questions, and complaints of customers can be accumulated and transferred into knowledge (nambisan, 2002), which can be used for deriving new value-adding products, services, and activities, based on customers’ expressed demands. this usually happens via a broad collection of customer interfaces, which can be of human (e.g., clerks) and automated (e.g., voice response units) nature. the managerial challenge as well as the key to success is to combine them into one coordinated system (rayport and jaworski, 2004) since not all customer interfaces are equally suitable to interact with the distinct customer groups. following rayport and jaworski (2004) there are different types of customer interfaces, which can be classified according to their specific interaction character. at this differentiated level, one speaks of customer touch points. these can be divided into three types (information points, service points, and transactions points), according to their primary function. information points provide information to customers (e.g., company, product, or service information on a website). transaction points deal with the conduct and completion of the product or service transaction (i.e., service-offer transaction at the cash desk, in the sales room). service points handle customer service activities that are provided before (i.e., pre-services such as appointment and delivery) and after (i.e., after-service such as complaint management, satisfaction calls) the transaction.figure 1: conceptual customer group segmentation journal of business models (2018), vol. 6, no. 3, pp. 24-44 30 by covering pre-service, service offer, and after-service, the three customer touchpoints can be used to gather customer knowledge throughout the entire interaction phase. from this perspective, they are a valuable tool to effectively manage the customer dialogue, and thus are the company’s interface for customer knowledge management, supporting value creation for the customer and increasing the company’s competitive advantage (campbell, 2003; garcia-murillo and annabi, 2002; smith and mckeen, 2005). this way, customer knowledge management moves customers from being a passive information source to empowered knowledge partners (cf. gibbert et al., 2002). customer knowledge can be gathered through typical market research and open innovation tools (for further details compare, for example, gebert et al., 2003, burns et al., 2014, and guertler et al., 2015). analyzing customer transaction and service data, customer complaint management data, customer interviews and surveys as well as market investigations are common methods to collect customer and market data (burns et al., 2014; gebert et al., 2003). ideation platform allow customers to submit, comment, and rate ideas and concepts (kaplan and haenlein, 2010). immersive product improvement is done through a systematic feedback channel, which is provided to the customers. this way, they can bring in their ideas and give feedback to positive and negative product or service aspects (kirschner et al., 2011). toolkits allow customers or partners to create or customize own designs (piller et al., 2004). netnography is a systematic approach to analyze current opinions of an existing community that is regarded as a helpful source of information (belz and baumbach, 2010). ideally, these communities contain lead users—customers that have profound product or service experience and show particular needs earlier than the majority of the customer base (hippel, 2005). malhotra (2000) proclaims that companies have to continuously interpret the signals of the market, process the collected information, and make sense of the customer information to generate applicable intelligence since there is a constant organizational need for knowledge creation and renewal if they want to remain in the market. in a similar fashion, kastalli et al. (2013) and denicolai et al. (2014) recommend to exploit external knowledge for lasting value creation. figure 2 summarizes the conceptual interfaces and processes for acquiring customer intelligence and expands the conceptual customer group segmentation, which is depicted in the previous figure. turning customer knowledge into intelligence the gathered customer information bits and pieces, which reflect specific customer needs and demands, have to be arranged and combined into potential future business model scenarios that allow to identify the gap between them and the current business model(s). thereby, relevant customer knowledge turns into intelligence since it becomes “an innate capacity to use information in order to respond to ever-changing figure 2: customer intelligence acquisition journal of business models (2018), vol. 6, no. 3, pp. 24-44 31 requirements” (macfarlane, 2013, p.  19). using this intelligence allows the company to determine the required intensity of business model change, which can be divided into four change intensity levels (cf. wirtz, 2011): stabilization, moderate change, strong change, and radical shift. although the terms cannot be distinguished incisively due to their floating transition, the awareness concerning the four distinctive business model change intensities is an important takeaway since differing implications are connected with the particular levels of change. stabilizing an existing business model, for example, is expected to place different bmd demands on a company than a radical shift. furthermore, the customer preferences and knowledge of the associated customer groups need to be balanced according to the desired bmd target. in addition, the company should distinguish between the customer groups’ information and interaction requirements that result from the bmd. therefore, each level of change intensity is expected to require an individual customer-oriented development set. in the next step, the determined intensity of business model change is transferred into the respective bmd type. these generic bmd types are important to both academics and practitioners since this approach provides a structural context for articulating a bmd. moreover, companies using clear bmd descriptions built up a competence for introducing anticipated change through bmd execution (linder and cantrell, 2000). this study uses five distinctive bmd types (cf. linder and cantrell, 2000; wirtz, 2011): the stabilization model uses only little business model modifications to make the existing business model resistant to current change. the evolution adaption model continually adapts to environmental changes with detailed modifications, while its basic structure and components rather remain constant. if the basic structure of the business model is maintained and one or more of its components are subject to significant change because new activities or functionalities are added, this refers to an extension model. in contrast, a migration model changes the basic structure due to a redesign of the business model component interactions, but more or less keeps the components untouched. in the case of the radical innovation model, both the structure and its components are transformed or newly created. applying customer intelligence the applied bmd type may relate to a business model evolution (bme) or innovation (bmi). while the stabilization and evolution adaption are expected to refer to a bme and the migration and radical innovation model to a bmi, an extension model—depending on the intensity of development—may refer to either of them. although a strict separation can be difficult in particular cases, it is important to consider both alternatives. as a rule of thumb, bme requires an existing business model that is gradually being modified. bmi calls for a change of the value proposition, modifying the value creation for the customer, or a value constellation, modifying the value chain (cf. chesbrough, 2013; magretta, 2002; teece, 2010). moreover, bmi usually demands a business model prototyping that entails more than just a mock-up of the product or service. this refers to a prototype of the entire business model, meaning to set up and configure the associated strategy, resources, competencies, financing, and so on. based on the combination of the relevant customer groups, the underlying customer intelligence, the predetermined intensity of the business model change, and the bmd type, the business model manager can prepare a customer-oriented business model development set, which uses segment-specific customer-oriented knowledge and provides an integrated approach to bmd. this way, the company follows a market-oriented bmd approach and moves from a one-size-fitsall to a systematically tailored customer group-specific bmd. in contrast to this combinatory, strategic character of creating customer-oriented development sets, the bmd process itself follows a linear processual realization structure (for the following cf. wirtz, 2011). in both forms, the process starts with a feasibility study that takes a detailed look at the customer-related demand impact of the planned cobmd, taking into account the distinctive customer groups of the company. in the case of a bmi, the next step is the prototyping phase during which the business model is put into practice for the first time and fine-tuned until one final version or a set of final alternatives of the future business model are elaborated. after making the decision about the final bmd, the determined bmd is implemented. implementation usually does not follow a linear process but rather requires constant revisions to adjust the status quo to possible deviations. having journal of business models (2018), vol. 6, no. 3, pp. 24-44 32 implemented the bmd, the performance of the business model needs to be steadily monitored and controlled to ensure proper operation. figure 3 illustrates the components of the cobmd framework and their connections and complements the previous figures. in the following, we complement the deduced conceptual findings with supplementary context from a prominent case study to highlight the elements of the cobmd framework with descriptive examples and to enrich the investigation’s explanatory power (cf. eisenhardt, 1989; eisenhardt and graebner, 2007). business model development example: google google inc. is a worldwide operating technology company that specializes in internet-related services and products, including search engines, online advertising, software, location, cloud, and email services. google was founded in 1998 and quickly turned from an internet start-up into one of the world’s largest technology companies within a couple of years. in contrast to most other companies, google does not rely on an established, persisting business model, but a professionally planned one that is continually extended and enhanced. the company’s bme and bmi endeavors constantly develop its business-relevant activities to generate marketable information, services, and products. this makes google a highly diversified company, creating an aligned network organization that pursues its core objectives by reasonably and strategically using each part of its network. one of google’s key success factors for this rapid progress is its excellent hybrid cobmd competency. we illustrate this by using two specific examples: (1) the continuous advancement of google’s web search and (2) google’s self-driving car. the search engine is still the core service component, core value proposition and the main cash generator of google’s business model. although the look and feel of the search engine website has not changed much over the years, there have been manifold bmes to increase its efficiency and effectiveness, or in other words, adapt it to the needs and preferences of the users. google has always been rewriting and refining the search algorithm to bring better search results quicker to the users. these service provision enhancements are made based on gathered customer knowledge from users that use the service offer—that is steady and new customers. google can collect a large amount of customer knowledge via its transaction points, the graphical user interface of the search engine. by applying systematic business intelligence analytics, they can derive customer-driven solutions, for example, from user search behavior and search term combinations. in addition, their service points (e.g., online forums, customer support) lead to a conglomeration figure 3: integrated framework for customer-oriented business model development journal of business models (2018), vol. 6, no. 3, pp. 24-44 33 of customer knowledge, which can be transformed into products and service development intelligence. at first glance, google uses their information mainly for one-way communication, informing customers about product and service use and developments as well as new features. however, user traffic and click statistics allow to draw conclusions on customer needs and preferences, which can be used for indirect customer knowledge creation. at this point, google jumps from a pure product or service development to a business model development since it specifically enhances its value proposition for the customer. in a similar fashion, the company developed google instant, which shows predicted search results (based on frequent search terms and topics) while you type in what you are looking for, to make the search process more efficient for the user. moreover, the search engine nowadays combines search patterns with user preferences and online behavior to deliver personalized search results. to make search more convenient for the users, google voice search was introduced. this solution allows customers to use the search engine without tiresome typing, you just speak to your online device. in 2012, the company released the online personal assistant google now that uses a language interface to proactively answer requests and make recommendations based on user search habits. other examples are google scholar, which is a freely accessible web search engine that indexes the metadata of academic literature, or google knowledge graph, which is a database that covers the 500 million most searched terms for people, places, and things and associates them with particular meta-context to instantly provide connected add-on information to the user. with the release of the google toolbar—a browser integration of the search engine—and google mobile— an integrated online search engine in the android operating system—the company brings the search engine to new environments. when looking at these bmes, they can be allocated to two business model change intensities: stabilization (search algorithm refinement, google toolbar, google mobile) and moderate change (google scholar, google knowledge graph, google instant, google voice). apart from that, they can be assigned to three bmd types: stabilization model (search algorithm refinement, google toolbar), evolution adaptation model (google voice, google mobile), and extension model (google scholar, google knowledge graph, google instant). each of these developments to a large extent used knowledge gained from steady and new customers, trying to improve the service offer to them as well as to potential customers. when looking at google’s self-driving car project, this radical shift is a textbook example of a bmi. here, google entered uncharted territory, requiring the creation of an entirely new business model. this radical innovation model is executed separately from google’s traditional economic activities, has unlimited top management attention, and can make use of all the resources of google’s organization. this way, the self-driving car project can combine the benefits of a multinational corporation with the agility of a startup. promoted targets of the self-driving car project include to cut down emissions, make driving safer, and allow more people to get around (e.g., disabled persons unable to drive). despite these altruistic goals, google still is a business that makes money. therefore, the new business model will also lead to new revenue streams. apart from that, its successful development will also support google’s current business model—the search engine—since autonomous driving allows people additional mobile internet use. given that americans, for instance, spend 46 minutes per day driving in the car (newsroom, 2015), this is a substantial factor for increasing online traffic, and thus reflects a strategic lever for google’s future revenues. the underlying radical innovation model permits google to approach potential customers by entailing new products, new methods, new sources, new markets, and new ways to organize business. while google so far is rather a pure service company, the emerging self-driving car business unit moves the company also into an automotive manufacturing setting, including typical automotive market revenue streams (e.g., car sales, service fees from after-sales and emobility concepts, royalties from product patents) and working with new business partners (e.g., automotive suppliers and car manufacturers such as bosch, continental, general motors, toyota, daimler). this requires to build up fresh competencies and customer interfaces. by handling a complex physical product, google has to establish—either by doing it themselves or journal of business models (2018), vol. 6, no. 3, pp. 24-44 34 outsourcing—additional offline customer touch points: service points (e.g., technical test center, repair shop) will have to be provided in a new manner since these require physical service activities at the product. similarly, transaction points (e.g., show room) will change to a large extent as customers will expect to see, touch, and test-drive the vehicle before placing an order. given all these substantial changes as well as the company’s strict customer focus, google started right from scratch to include customers’ needs and preferences in the development of the self-driving car. since the project aims at potential customers that require different customer interfaces, they also had to specifically expand their customer knowledge and feedback activities. for this reason, google conducts extensive customer tests and panels as well as market research, netnography, and immersive product improvement activities that help the company to elaborate what customers want and transfer this knowledge into their cobmd process. summarizing, google’s high competency of managing bmd allowed the company to quickly become a highly diversified, successful multinational organization. from this point of view, google successfully manages the entire range of bmd activities—from stabilization to radical shift. we believe that the key to google’s success in constantly developing its business model lies in the company’s philosophy, which they outline in the ten things they know to be true. the first rule “#1: focus on the user and all else will follow” (google, 2018) determines what should be done, while the other nine basically explain how this should be done—in summary, as effective, efficient, serious, righteous, professional, and innovative as possible. these corporate dogmas make google focus on providing outstanding user experience and ensuring that all activities are done to ultimately serve the customer, who again constitutes the principal ground of all bmd actions. based on this customer-centric business conception, google successfully transforms the knowledge about, from, and for the customer into applicable customer knowledge intelligence, which forms the groundwork for their business model evolution and innovation activities. equipped with this capacity, google can determine the necessary business model change intensity and deduce the respective bmd type. this way, they can ensure consistent and continuous cobmd. discussion of findings, implications, and limitations the starting point of this exploratory study was the limited scientific knowledge about cobmd. considering the necessity of companies to constantly renew their business models and the crucial role the customers play for any business, the lack of relevant bmd frameworks was surprising. therefore, this study explores important elements of customer-oriented bmd and how to strategically integrate the customer perspective into this concept, aiming to derive a conceptual cobmd framework. for this reason, our article is intended to contribute to bmd research in four ways: (1) enhance our understanding of the role of the customer in bmd, (2) present additional insights into the bmd phenomenon in a general sense, (3) supply important findings and implications for academics and practitioners, and (4) provide a basis for systematic future cobmd research. summarizing, the study indicates that customer orientation is a vital aspect. this is in accordance with the findings of other researchers (e.g., johnsen et al., 2006; öberg, 2010; selden and macmillan, 2006; thomke and hippel, 2002) as well as top tier consulting firms (cf. lamberti, 2013). furthermore, the foregoing demonstrates a high degree of transferability and applicability of the market orientation principle to a cobmd concept. while the market orientation principle shows assorted characteristics for this phenomenon that range from understanding the customers to adjust the marketing mix (e.g., houston, 1986) to an organizationwide market orientation to achieve long-term success (e.g., shapiro, 1988), the cobmd concept highlights the necessity to align the strategic, the market, and the value creation components of a firm, and thus, the entire business with the needs and preferences of the customer (for business model components see wirtz, 2016). consequently, the cobmd can be regarded an extension of the market orientation perspective by moving from a marketing leading view to an abstract and holistic business model mindset. the framework’s underlying procedure concerning a cobmd is also in line with the processes that are recommended in the market orientation literature. from a big picture point of view, the cobmd framework starts journal of business models (2018), vol. 6, no. 3, pp. 24-44 35 by generating and obtaining information concerning the customers’ needs and preferences. by transforming this information into applicable intelligence, which is constantly incorporated throughout the bmd activity, the company should apply this intelligence to derive a new or adjust its business model in order to comply with the current and upcoming customer needs and requirements. through a clear and continuous focus on sustainable and comprehensive customer orientation, companies can thus create and capture value (for similar procedures in the market orientation literature see for example kohli and jaworski, 1990 and martin and grbac, 2003). for this reason, the acquisition of customer information is a top priority. however, not all customers are the same. while current service offer experienced customers are expected to be more relevant to bme approaches, potential customers or customers without service offer experience can be more relevant to bmi. this seems reasonable since bme principally deals with the modification of an existing business model and bmi with its renewal or the creation of a new business model. the occasional customers are a further important customer group since they may become regular customers if their preferences are well-understood and effectively integrated into the business model. they are usually a great potential for business expansion since the company already has a business relationship with them, meaning that they do not need to make cold calls to get in touch with this customer group. key criteria in the next step are systematic information gathering and knowledge conversion to customer intelligence. from a conceptual perspective, there are three important customer interfaces: information points are of great relevance to acquire information from future customers as these are the key interface to new and potential customers. since service points usually require an existing customer relationship, these are valuable interfaces to regular and occasional customers. transaction points are crucial interfaces in all circumstances since these deal with the actual transaction. although there are differences concerning the respective customer interfaces, maintaining a high customer group focus without neglecting a general customer orientation across all touch points is essential for effective customer knowledge management (rayport and jaworski, 2004). for collecting customer information, the company can use a variety of tools, which are commonly applied in market research and open innovation (e.g., analyzing customer complaint management data, using customer surveys, netnography). by combining the relevant customer knowledge with the particular customer groups and by deriving the underlying intensity of business model change, the company turns the customer knowledge into intelligence since it becomes an “ability to cope with unpredictable circumstances” (macfarlane, 2013, p.  19). hereby, the company should match this information with the current business model to evaluate potential change impacts and the required business model change intensity to finally determine the respective bmd type. this allows the company to actively and systematically include their customers’ needs and preferences in their bmd activities, which reduces the risk of losing out on securing promising strategic benefits and value creation potentials. in light of the obtained findings, we can also derive a variety of recommendations for practitioners: similarly to the insights from the market orientation research stream, the customer should be the center of attention when dealing with bmd. thus, the development of the business model must be built upon and made in accordance with the needs and preferences of the respective customer groups. for this reason, there is no one-size-fits-all principle. this approach demands a differentiated customer group specific course of action that is based on a sound fund of relevant customer knowledge and takes into account the predetermined business model change intensity. the collection of the demand, preferences, and knowledge of the particular customer groups requires the use of distinctive customer interfaces. here, practitioners should aim at achieving an outstanding customer experience in the channels used in order to avoid annoying or disappointing their customers and create an appropriate mix that suits the respective requirements. similarly, managers should select an adequate mix of market research and open innovation tools to gather customer knowledge from the particular customer groups. management has to keep in mind that they need an adequate level of customer knowledge intelligence to establish a customized customer-oriented development set that determines a specific bmd journal of business models (2018), vol. 6, no. 3, pp. 24-44 36 type and clarifies the final bmd step: bme or bmi. this way, managers provide a structural context for bmd articulation and build up a competence for introducing anticipated change through bmd execution in the long-run. despite its contributions to academia and management, this study has several limitations that need to be considered. however, these limitations—regarding the exploratory research approach—provide a sound basis for future research endeavors that would enhance scientific cobmd knowledge. this exploratory study focuses on the positive side of bmd. however, in other cases there may be negative mechanisms or results through which a cobmd may hinder firm performance. according to veryzer (1998), for instance, an exclusive focus on customer knowledge may lead to an immoderate dependence on customers. thus, identifying and investigating less successful cobmd situations seems to be an interesting research endeavor. against this background, case studies will help to broaden researchers’ and practitioners’ understanding of cobmd. here, comprehensive in-depth qualitative interviews focusing on cobmd barriers and success factors are needed to better understand its intricacy. apart from qualitative studies, future research should also challenge the cobmd framework with quantitative empirical evidence on several levels. we see, for instance, a need for causal-analytical investigations that further clarify which elements of the cobmd framework are important for the respective stage and which factors are the main drivers of overall bmd success. in a similar fashion, future research should conduct quantitative studies that investigate the contextual and environmental success factors of bmd and provide solid empirical evidence for bmd scholars and managers. given the study’s target of providing a generic framework, it does not take into account that there may be additional variations on a deeper level within the customer groups or the customer intelligence part. for this reason, further studies are needed that provide additional insights into the differentiation of steady, new, and potential customers and if these groups show distinctions concerning the different bmd types. in this context, future research should also clarify if the five conceptual bmd types are suitable or if there are further bmd types that have not been addressed in the business model literature yet. concerning the need for further insights on the customer intelligence part in bmd, additional field studies and explorative interviews with bmd experts seem of high value to generate further knowledge on this issue. moreover, the theoretically underlying rather direct connection of distinct business model change intensities and specific bmd types should be further investigated. in this context, additional insights regarding cobmd are important, as scholars and managers grapple with the growing demand of ever-changing environmental conditions and continuously altering customer preferences that require constant bmd. in addition, further studies that provide insights on the internal and external conditions that lead companies to a bmi or a bme seem helpful. here, research should further elaborate the differentiation between bmi and bme and clearly define the transition between the two forms of bmd (e.g., is the transition between those two rather fluent, progressive, or clearly separated?). the illustration of the market research and open innovation tools is not exhaustive and only reflects their conceptual integration into the framework since such an analysis is out of scope of this article. here, review studies in the fashion of guertler et al. (2015) that summarize the status quo are helpful to science and management. building upon existing knowledge, new studies should also present future concepts and analyze the particular benefits and range of application of the respective tools for customer knowledge generation. since cobmd often demands to build up fresh competencies for customer knowledge generation and transformation into new business models, examining antecedents and success factors of cobmd appears as a promising direction for future research. in this context, dynamic capability view approaches that deal with the development and renewal of internal competencies (cf. augier and teece, 2007) appear expedient. furthermore, future research should empirically investigate which customer information tools and instruments are of particular importance for deriving customer intelligence in bmd settings. apart journal of business models (2018), vol. 6, no. 3, pp. 24-44 37 from that, researchers should challenge the proposed cobmd framework with regards to industry-specific modifications that may be necessary to adapt the framework to particular industry settings since there may be differences among organizations with distinctive structures and processes or among organizations that offer services and organizations that offer products. concluding, the findings of this study provide various insights into cobmd. since there also remain open issues further qualitative and quantitative research is necessary to conceptually expand and empirically validate the study ’s findings. conclusion the customer decides what a business is and how much the products and services of a business are worth (drucker, 1954). but customers’ needs and preferences change—and due to massive external disruptions the speed of chance increases. thus, managers are increasingly confronted with strategic, operational, and systemic shifts that require continuous and effective bmd to adjust the business model to the requirements of the customers. putting the customers’ needs and preferences at the center of any bmd initiative is therefore essential. furthermore, bmd has to be conducted fast and repeatable since companies today continuously have to act—as reacting can already be too late. against the still limited understanding of business model development that particularly takes into account the customers’ needs and preferences, this is a challenging issue for academics and practitioners. the proposed cobmd framework, which is derived from the business model and market orientation literature, and thus, systematically combines a holistic business model mindset with a thorough customer focus, serves as helpful guidance to research and management in this matter. throughout the entire research endeavor for this study, we learned that bmd literature can greatly benefit from the insights of the market orientation literature. therefore, we hope to see more research that connects these two fields in the near future. the core issues for successful cobmd are a clear and useful customer group specification, the acquisition of customer information, the transformation of the customer information into applicable customer intelligence, the application of the customer intelligence to derive a new or adjust the existing business model, the preparation of the customer-oriented business model development set, and the implementation of the changes that result from the business model development. against this background, scientific research should generate further theoretical insights on these issues and provide managers with solid concepts and process cycles that support them in their business model development endeavors. companies should develop the necessary skills and competencies to learn about, from, and for the customer, to transfer this knowledge into applicable business model development intelligence to better satisfy their customers’ needs and preferences, and to successfully implement their business model developments. this way, they can create competitive advantage and participate from the value that they generate for their customers. despite its contributions, this study also has several limitations, which mainly result from the exploratory research approach and the study’s key goal of providing a generic framework (for details, please see the section “discussion of findings, implications, and limitations”). thus, further studies are needed that provide additional insights to enhance scientific cobmd knowledge. journal of business models (2018), vol. 6, no. 3, pp. 24-44 38 references amit, r., zott, c., 2001. value creation in e-business. strategic management journal 22 (6/7), 493–520. augier, m., teece, d.j., 2007. competencies, capabilities and the neo-schumpeterian tradition, in: hanusch, h., pyka, a. (eds.), elgar companion to neo-schumpeterian economics. edward elgar, cheltenham, uk, pp. 267–286. belz, f.-m., baumbach, w., 2010. netnography as a method of lead user identification. creativity and innovation management 19 (3), 304–313. bocken, n.m.p., rana, p., short, s.w., 2015. value mapping for sustainable business thinking. journal of industrial and production engineering 32 (1), 67–81. bocken, n.m.p., short, s.w., rana, p., evans, s., 2014. a literature and practice review to develop sustainable business model archetypes. journal of cleaner production 65, 42–56. burns, a.c., bush, r.f., sinha, n., 2014. marketing research, 7th ed. pearson, boston, ma. buur, j., matthews, b., 2008. participatory innovation. international journal of innovation management 12 (3), 255–273. campbell, a.j., 2003. creating customer knowledge competence: managing customer relationship management programs strategically. industrial marketing management 32 (5), 375–383. campbell, n.c.g., cunningham, m.t., 1983. customer analysis for strategy development in industrial markets. strategic management journal 4 (4), 369–380. carayannis, e.g., sindakis, s., walter, c., 2015. business model innovation as lever of organizational sustainability. the journal of technology transfer 40 (1), 85–104. casadesus-masanell, r., zhu, f., 2013. business model innovation and competitive imitation: the case of sponsorbased business models. strategic management journal 34 (4), 464–482. certo, s.t., holcomb, t.r., holmes, r.m., 2009. ipo research in management and entrepreneurship: moving the agenda forward. journal of management 35 (6), 1340–1378. chesbrough, h., 2013. open business models: how to thrive in the new innovation landscape. harvard business review press, boston, ma. connor, t., 2007. market orientation and performance. strategic management journal 28 (9), 957–959. dalby, j., lueg, r., nielsen, l.s., pedersen, l., tomoni, a.c., 2014. national culture and business model change: a framework for successful expansions. journal of enterprising culture 22 (4), 463–483. day, g.s., 1990. market-driven strategy: processes for creating value. free press, new york, ny. day, g.s., 1994. the capabilities of market-driven organizations. journal of marketing 58 (4), 37–52. denicolai, s., ramirez, m., tidd, j., 2014. creating and capturing value from external knowledge: the moderating role of knowledge intensity. r&d management 44 (3), 248–264. journal of business models (2018), vol. 6, no. 3, pp. 24-44 39 deshpande, r., farley, j.u., webster, f.e., 1993. corporate culture, customer orientation, and innovativeness in japanese firms: a quadrad analysis. the journal of marketing 57 (1), 23–37. desouza, k.c., awazu, y., jha, s., dombrowski, c., papagari, s., baloh, p., kim, j.y., 2008. customer-driven innovation. research-technology management 51 (3), 35–44. dobni, c.b., luffman, g., 2003. determining the scope and impact of market orientation profiles on strategy implementation and performance. strategic management journal 24 (6), 577–585. drucker, p.f., 1954. the practice of management: a study of the most important function in american society. harper & brothers, new york, ny. eisenhardt, k.m., 1989. building theories from case study research. academy of management review 14 (4), 532–550. eisenhardt, k.m., graebner, m.e., 2007. theory building from cases: opportunities and challenges. academy of management journal 50 (1), 25–32. foss, n.j., saebi, t., 2016. fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management online first, 1-28. 10.1177/0149206316675927. frankenberger, k., weiblen, t., csik, m., gassmann, o., 2013. the 4i-framework of business model innovation: a structured view on process phases and challenges. international journal of product development 18 (3-4), 249–273. ganesh, j., arnold, m.j., reynolds, k.e., 2000. understanding the customer base of service providers: an examination of the differences between switchers and stayers. journal of marketing 64 (3), 65–87. garcia-murillo, m., annabi, h., 2002. customer knowledge management. journal of the operational research society 53 (8), 875–884. gatignon, h., sorescu, a., pauwels, k., lecocq, x., 2016. call for papers: special issue of ams review: business models for the digital economy: a marketing perspective. http://www.sitew.com/fs/root/d3mbd-call_for_papers_ for_a_special_issue_for_business_models_ams_review_final.pdf. accessed 29 march 2016. gebert, h., geib, m., kolbe, l., brenner, w., 2003. knowledge-enabled customer relationship management: integrating customer relationship management and knowledge management concepts. journal of knowledge management 7 (5), 107–123. gheysari, h., rasli, a., roghanian, p., norhalim, n., 2012. a review on the market orientation evolution. social and behavioral sciences 40 (procedia), 542–549. gibbert, m., leibold, m., probst, g., 2002. five styles of customer knowledge management, and how smart companies use them to create value. european management journal 20 (5), 459–469. goggin, g., 2012. google phone rising: the android and the politics of open source. continuum 26 (5), 741–752. google, 2018. about google. https://www.google.com/about/philosophy.html. accessed 7 december 2015. journal of business models (2018), vol. 6, no. 3, pp. 24-44 40 greenley, g.e., 1995. market orientation and company performance: empirical evidence from uk companies. british journal of management 6 (1), 1–13. guertler, m.r., saucken, c. von, tesch, a.-t., damerau, t., lindemann, u., 2015. systematic selection of suitable open innovation methods. conference paper, xxvi ispim conference in budapest, hungary on 14-17 june 2015. https:// mediatum.ub.tum.de/doc/1272083/1272083.pdf. accessed 10 december 2015. hienerth, c., keinz, p., lettl, c., 2011. exploring the nature and implementation process of user-centric business models. long range planning 44 (5), 344–374. hippel, e.a. von, 1986. lead users: a source of novel product concepts. management science 32 (7), 791–805. hippel, e.a. von, 2005. democratizing innovation. mit press, boston, ma. hofstede, g.h., 2001. culture’s consequences: comparing values, behaviors, institutions, and organizations across nations, 2nd ed. sage publications, thousand oaks, ca. houston, f.s., 1986. the marketing concept: what it is and what it is not. journal of marketing 50 (2), 81–87. hult, g.t.m., ketchen, d.j., 2001. does market orientation matter?: a test of the relationship between positional advantage and performance. strategic management journal 22 (9), 899–906. hult, g.t.m., ketchen, d.j., slater, s.f., 2005. market orientation and performance: an integration of disparate approaches. strategic management journal 26 (12), 1173–1181. jaworski, b.j., kohli, a.k., 1993. market orientation: antecedents and consequences. the journal of marketing 57 (3), 53–70. jensen, a.b., 2014. do we need one business model definition? journal of business models 1 (1), 61–84. johnsen, t., phillips, w., caldwell, n., lewis, m., 2006. rethinking the centrality of customer and supplier interaction in innovation. journal of business research 59 (6), 671–678. kaplan, a.m., haenlein, m., 2010. users of the world, unite! the challenges and opportunities of social media. business horizons 53 (1), 59–68. kastalli, v.i., van looy, b., neely, a., 2013. steering manufacturing firms towards service business model innovation: embracing indicators that reflect market performance. california management review 56 (1), 100–123. kirca, a.h., jayachandran, s., bearden, w.o., 2005. market orientation: a meta-analytic review and assessment of its antecedents and impact on performance. journal of marketing 69 (2), 24–41. kirmani, a., rao, a.r., 2000. no pain, no gain: a critical review of the literature on signaling unobservable product quality. journal of marketing 64 (2), 66–79. kirschner, r., kain, a., lang, a., lindemann, u., 2011. immersive product improvement ipi first empirical results of a new method, in: ds 68-9: proceedings of the 18th international conference on engineering design (iced 11), impacting society through engineering design. iced 11, lyngby/copenhagen, denmark. 15-19.08.2011, pp. 295–304. journal of business models (2018), vol. 6, no. 3, pp. 24-44 41 kohler, t., 2015. crowdsourcing-based business models: how to create and capture value. california management review 57 (4), 63–84. kohli, a.k., jaworski, b.j., 1990. market orientation: the construct, research propositions, and managerial implications. the journal of marketing 54 (2), 1–18. lambert, s., 2015. the importance of classification to business model research. journal of business models 3 (1), 49–61. lamberti, l., 2013. customer centricity: the construct and the operational antecedents. journal of strategic marketing 21 (7), 588–612. linder, j., cantrell, s., 2000. changing business models: surveying the landscape. http://course.shufe.edu.cn/jpkc/ zhanlue/upfiles/edit/201002/20100224120954.pdf. accessed 26 november 2015. macfarlane, a., 2013. information, knowledge & intelligence. philosophy now 98 (9/10), 18–20. magretta, j., 2002. why business models matter. harvard business review 80 (5), 86–92. malhotra, y., 2000. knowledge management and new organization forms: a framework for business model innovation. information resources management journal 13 (1), 5–14. martin, j.h., grbac, b., 2003. using supply chain management to leverage a firm’s market orientation. industrial marketing management 32 (1), 25–38. massa, l., tucci, c.l., 2014. business model innovation, in: dogdson, m., gann, d., & nelson, p. (ed.), the oxford handbook of innovation management. oxford university press, oxford, uk, pp. 420–441. meffert, h., burmann, c., kirchgeorg, m., 2012. marketing: grundlagen marktorientierter unternehmensführung; konzepte instrumente praxisbeispiele, 11th ed. gabler, wiesbaden. nambisan, s., 2002. designing virtual customer environments for new product development: toward a theory. academy of management review 27 (3), 392–413. narver, j.c., slater, s.f., 1990. the effect of a market orientation on business profitability. the journal of marketing 54 (4), 20–35. newsroom, 2015. new study reveals when, where and how much motorists drive: aaa foundation for traffic safety survey provides in-depth data on americans’ driving habits. http://newsroom.aaa.com/2015/04/newstudy-reveals-much-motorists-drive/. accessed 11 december 2015. öberg, c., 2010. customer roles in innovations. international journal of innovation management 14 (6), 989–1011. osterwalder, a., pigneur, y., clark, t., 2010. business model generation: a handbook for visionaries, game changers, and challengers. wiley, hoboken, nj, 278 pp. piller, f., ihl, c., fuller, j., stotko, c., 2004. toolkits for open innovation: the case of mobile phone games. proceedings of the 37th annual hawaii international conference on system sciences. http://dx.doi.org/10.1109/ hicss.2004.1265487. accessed 10 december 2015. journal of business models (2018), vol. 6, no. 3, pp. 24-44 42 prahalad, c.k., ramaswamy, v., 2000. co-opting customer competence. harvard business review 78 (1), 79–90. prahalad, c.k., ramaswamy, v., 2004. co-creating unique value with customers. strategy & leadership 32 (3), 4–9. pynnönen, m., hallikas, j., ritala, p., 2012. managing customer-driven business model innovation. international journal of innovation management 16 (4), 1–18. rayport, j.f., jaworski, b.j., 2004. best face forward. harvard business review 82 (12), 47–59. rhoads, k., 2015. understanding the gestalt nature of business models: a business model review. journal of management and strategy 6 (4), 34–49. schneider, s., spieth, p., 2013. business model innovation: towards an integrated future research agenda. international journal of innovation management 17 (1), 134000-1–34. schumpeter, j.a., 1934. the theory of economic development: an inquiry into profits, capital, credit, interest and the business cycle. oxford university press, london, uk. selden, l., macmillan, i.c., 2006. manage customer-centric innovation-systematically. harvard business review 84 (4), 108–117. shapiro, b.p., 1988. what the hell is market oriented. harvard business review 66, 119–125. slater, s.f., narver, j.c., 1999. market-oriented is more than being customer-led. strategic management journal 20 (12), 1165–1168. smith, h.a., mckeen, j.d., 2005. developments in practice xviii-customer knowledge management: adding value for our customers. communications of the association for information systems 16 (1), 744–755. spieth, p., schneckenberg, d., ricart, j.e., 2014. business model innovation–state of the art and future challenges for the field. r&d management 44 (3), 237–247. steiber, a., alänge, s., 2013. a corporate system for continuous innovation: the case of google inc. european journal of innovation management 16 (2), 243–264. taran, y., boer, h., lindgren, p., 2015. a business model innovation typology. decision sciences 46 (2), 301–331. teece, d.j., 2010. business models, business strategy and innovation. long range planning 43 (2), 172–194. thomke, s., hippel, e. von, 2002. customers as innovators: a new way to create value. harvard business review 80 (4), 74–81. veryzer, r.w., 1998. key factors affecting customer evaluation of discontinuous new products. journal of product innovation management 15 (2), 136–150. wang, t., song, m., zhao, y.l., 2014. legitimacy and the value of early customers. journal of product innovation management 31 (5), 1057–1075. journal of business models (2018), vol. 6, no. 3, pp. 24-44 43 webster, j., watson, r.t., 2002. analyzing the past to prepare for the future: writing a literature review. management information systems quarterly 26 (2), xiii–xxiii. wirtz, b., göttel, v., daiser, p., 2016a. business model innovation: development, concept and future research directions. journal of business models 4 (1), 1–28. wirtz, b.w., 2011. business model management: design instruments success factors. gabler, wiesbaden. wirtz, b.w., 2016. business model management: design process instruments. textbook for the digital society, 2nd ed. amazon media, speyer. wirtz, b.w., daiser, p., 2017. business model innovation: an integrative conceptual framework. journal of business models 5 (1), 14–34. wirtz, b.w., pistoia, a., ullrich, s., göttel, v., 2016b. business models: origin, development and future research perspectives. long range planning 49 (1), 36–54. wu, j., guo, b., shi, y., 2013. customer knowledge management and it-enabled business model innovation: a conceptual framework and a case study from china. european management journal 31 (4), 359–372. yelmo, j.c., del álamo, j.m., trapero, r., 2008. privacy and data protection in a user-centric business model for telecommunications services, in: fischer-hübner, s., duquenoy, p., zuccato, a., martucci, l. (eds.), the future of identity in the information society. springer, boston, ma, pp. 447–461. zott, c., amit, r., massa, l., 2011. the business model: recent developments and future research. journal of management 37 (4), 1019–1042. journal of business models (2018), vol. 6, no. 3, pp. 24-44 44 professor bernd w. wirtz holds the chair for information and communication management at the german university of administrative sciences speyer. he has published widely on issues pertaining to business models, electronic business, strategic management, media management, and marketing. email: ls-wirtz@uni-speyer.de professor peter daiser holds the professorship in e-government and digital transformation at the municipal university of administration in lower saxony. his research focuses on business models, public corporate governance, and digitalization. email: peter. daiser@nsi-hsvn.de about the authors journal of business models (2021), vol. 9, no. 3, pp. 17-24 17 from invention to innovation: teaching business models to manufacturing researchers antonio maffei1,*, eleonora boffa1 abstract the competence and skills required to bring technological advancements to the market are increasingly perceived as a key element in the engineering researchers’ toolbox. nevertheless, business modelling is rarely taught in technical engineering programs. this paper presents the design and implementation of a course called “business driven production development” for manufacturing phd students at kth royal institute of technology in stockholm, sweden. please cite this paper as: maffei, a. and boffa, e. (2021), from invention to innovation: teaching business models to manufacturing researchers, journal of business models vol. 9, no. 3, pp. 17-24 keywords: doctoral education, manufacturing, business models. acknowledgment : the development of this course and related research has been supported by the xpres initiative for excellence in production research (https://www.kth.se/itm/xpres). 1 department of production engineering. kth royal institute of technology, stockholm, sweden *corresponding author: maffei@kth.se, +46 8 790 78 71, brinellvägen 68 – 10044 stockholm, sweden introduction when describing the innovation process as the successful application of an invention, a common assumption is that the role of engineers is one of mere inventors. engineering work is perceived as a short-term oriented process that translates requirement specifications into new designs. accordingly, most engineering programs include tools and methods that equip students to solve a clearly defined problem. although partially valid, this conception must be expanded to account for the important role that engineers have in multidisciplinary research efforts that solve broader challenges such as sustainable development or system design. this work considers the three possible application patterns of new technology in the domain of production technology: the first pattern is a pull mechanism based on current problems emerging in industrial environments. this mechanism is named “invention loop” as the focus of the researcher is on solving the given problem in order to improve an already existing application. the other two patterns are push mechanisms where the focal invention is addressing a specific industry challenge but without an immediate application on current shop floors. the difference between these two patterns lies in the way technology tackles doi https://doi.org/10.5278/jbm.v9i3.2559 issn 2246-2465 https://www.kth.se/itm/xpres mailto:maffei@kth.se https://doi.org/10.5278/jbm.v9i3.2559 journal of business models (2021), vol. 9, no. 3, pp. 17-24 18 the underlying challenge: when the invention is an improvement of existing practices, it is viable to refer to “incremental innovation loops”. when, instead, the technological solution is completely different from current practices one refers to “radical innovation loops” (ettlie, bridges and o’keefe, 1984; dewar and dutton, 1986). technical engineering programs are traditionally good at preparing learners for the invention and incremental innovation loop. however, they often fall short of providing a wider picture that can support future engineers in coming up with radical innovation. business model (bm) knowledge is an important element here because it helps to describe and account for the multiple, non-technical elements connected to the application of a technology. as radical innovation usually offers higher potential benefit for industries, it becomes important for higher educational institutions in the technical field to address this educational requirement and provide graduate students with knowledge about the full spectrum how technical results can be applied. among engineers, especially researchers are in need of such knowledge because agencies and companies that provide funds for research increasingly stress the importance of producing results that serve to tackle societal challenges rather than day to day problems. in view of the above, the department of production engineering at kth royal institute of technology in stockholm (kth) has taken the initiative, back in 2015, to redesign an old educational unit from 2001 named business driven production development. this course, open to all doctoral students, is based on the modern embodiment of the concept of bm and its pivotal role in the innovation process. the aim of the course is to equip future engineers with the basic knowledge to understand the nature of technical research, and trigger reflection about positioning their interests and contributions accordingly. approach the name of the new educational unit (or course), business-driven production development, is inspired by business-driven development: a meta-methodology for developing it solutions that directly satisfy business requirements. the principle in business-driven development is to adopt a model-driven approach that starts with business strategy, requirements, and goals to subsequently transform these requirements into it solutions by aligning the business and it layers. this allows the it system to automatically follow the business evolution. this course aims at establishing business driven production development (bdpd) as a systematic approach to aligning the business layer with the production layer. in the production context, this means designing and deploying manufacturing equipment and processes according to the requirements coming from relevant business areas and not only considering the traditional objective of delivering a functional product. as such, the manufacturing system becomes a strategic asset to pursue sustainable, long-term growth. in practice, this translates into designing a manufacturing strategy through the analysis of all the elements of a firm’s bm and their influence on the production requirements. this is then synthetized in specific production solutions that match current and future needs of the firm’s internal organization, market, network, and supply chain. in order to fulfil this purpose the course has been developed using the constructive alignment approach (ca) (biggs and tang, 2011), around a set of three intended learning outcomes (ilo). at the end of the course, the learners should be able to: • ilo1. position technological research activities in either the “invention loop”, “incremental innovation loop” or “radical innovation loop” and highlight the character of engineering research as “technology push” or “application pull” effort. • ilo2. reflect on the complex nature of bms and discuss the need to use the correct epistemological approach, positivism vs. interpretivism, for different components. • ilo3. reflect on a possible pattern to successful application of the given technology: design a bm that could support such a process by choosing one of the methods suggested in the course. in constructive alignment the verbs suggested in the ilo are an important input to defining suitable teaching and learning activities (tla) and assessment tasks (at). with reference to the well-known blooms taxonomy (bloom et al., 1956), we aligned ilo, tla, and at in the bdpd course. table 1 summarizes the course design. journal of business models (2021), vol. 9, no. 3, pp. 17-24 19 the achievement of the ilos requires students to work in two consecutive phases: (1) acquiring and consolidating specific domain knowledge, and (2) reflecting on the own work from this new perspective. consequently, the course is structured in two parts: part 1 provides the theoretical background. it aims at promoting a systematic thinking about bm design that “is of crucial importance to generate viable bms for new technologies”, as shown by experience in (snihur, lamine and wright, 2018, page 9). part 2 then features practical examples and self-reflection. this is a part where students are asked to construct their knowledge with guidance from the teacher and it is specifically designed for the field of manufacturing. the following table 2 summarizes the course’s practical implementation: table 1: summary of bdpd course design ilo teaching and learning activities assessment task 1 • lectures based on flipped classroom scheme, • tutorial and example for the suggested tools, • group discussions based on relevant literature suggested by the course coordinator and presented by the students. • formative: presentation of one selected piece of literature (one for each student), • personal essay positioning own work in relation to new knowledge. 2 • lectures, • group discussion based on relevant literature suggested by the course coordinator. • formative: group work (whole class): mind map of main concepts in bms with indication of preferred research approach. 3 • group discussion based on relevant literature suggested and presented by the students. • scientific paper, possibly to be submitted to a conference, regarding the applicability aspect of own research. part 1 duration: 2.5 months reference ilo: ilo1 total no. of meetings: 4, roughly one every third week. duration of each meeting: 3 hours content of the meetings: • lectures • student´s presentation of suggested literature (see table 1): also valid as formative assessment • tutorial • group discussion on literature assessment: the positioning essay has two cycles of feedback, firstly done by peers and secondly by course leader part 2 duration: 2.5 months reference ilo: ilo2 and ilo3 total no. of meetings: 6, roughly one every second week. duration of each meeting: 3 hours content of the meetings: • lectures based on suggested literature • group work: drawing of a mind map with main concepts in bms and the related research approach; also valid as formative assessment • student´s presentation of identified literature • group discussion on literature assessment: the scientific paper has two cycles of feedback, the first done jointly by the students’ main supervisor and course leader and the second as a result of a submission to a relevant conference in the field. table 2: summary of bdpd course implementation journal of business models (2021), vol. 9, no. 3, pp. 17-24 20 with reference to part 1, there are 4 areas where the students are required to develop new knowledge for establishing bdpd: 1. innovation as composed by invention and successful application a. incremental vs radical innovation b. sustaining vs disruptive innovation 2. application of technology as a bm design exercise 3. history, definition, components and current methods to work with bms 4. bm as a complex concept with unforeseeable results these areas are addressed in 4 separate, yet related meetings. in all these meetings the most important constructs are presented and discussed with the students using a flipped classroom approach. the learners are required to read literature before class. every week, the students read a few suggested papers and write a single-page analysis as input for the discussion. one of the learners is selected to present the literature to the class during the following meeting as a means to start the discussion. the course leader has two roles: (1) contextualizing the discussion with specific short lectures where necessary, and (2) moderating the discussion to ensure all important concepts are covered. the literature list used in this phase is available upon request. the students “construct” their knowledge by maintaining an active role during the learning process. they are required to present the literature assigned for their peers as well as work with the proposed tool canvas (osterwalder et al., 2010), and the integrated bm framework (wirtz et al., 2016; wirtz and daiser, 2017). as a result of this process, students should be able to place their research within the newly established body of knowledge and document it with an essay that is shared with colleagues and the course leader. part 2 of the bdpd course consists of showing the students applications of this new knowledge in their field and stimulate them to reflect on how it impacts their work. this requires a brief introduction to the philosophical approach to scientific studies known as interpretivism, which is executed through the usual flipped classroom scheme based on specifically designed course handouts and lectures. after that, the learners are required to look at existing literature in their field to highlight good and bad examples of how other researchers in their area have dealt with the applicability of research results. the results of such literature reviews are then presented and discussed in class: this allows learners to discuss differences and similarities between applications of different technologies. the identification of such patterns is fundamental for an effective learning process and may lead students to derive their own, personal methodology. at this point, students are able to produce a personal contribution related to the applicability of their own research results. the final assessment for the course is thus based on an original conference paper in which the student analyzes his/her own specific research results and positions them in an integrated bm context, which discusses how to come from invention to innovation. the paper is reviewed internally and approved by the course responsible, in addition to normal reviews from the scientific committee of the conference selected. the paper is a useful addition to the phd dissertation of the students and can be included as supplementary reading in the impact section. for this reason, the course often also requires active involvement of the doctoral student´s main supervisor. key insight the course was run for the first time in 2017 with a group of 6 phd students. it was not a new course but an update of a course with the same name run at kth since 2001, which had been based solely on literature analysis and subsequent discussions. this old course focused only on the applicability of research results: every week, the course responsible had picked a recently published scientific article or book chapter on the process of bringing a novel technology to the market. the sole ilo of this course could be formulated as follows: describe and discuss the main trends of current leading edge literature in the domain of application of new production technology. the experience in this course was relevant to endow the student with background and learning of requirements, as formulated in the ilo presented above. at the time of writing this paper, the new course has been run only once. yet, student reactions have been positive, especially on the journal of business models (2021), vol. 9, no. 3, pp. 17-24 21 content learned and the insights acquired for the own research work. compared to the final part of the course, the first weeks have been quite slow as the students had to step out of their scientific comfort zone: this is probably due to the fact that the learners start to see actual benefits for their work only after they have acquired the main concept in part 1 of the course. it was also observed that technical students often lack the economic background that enables them to contextualize the concepts underpinning bm related knowledge. experience from this course illustrates the importance of integrating these theoretical foundations in the learning process. the following concepts have emerged as challenging and therefore require attention and deeper explanation from the course leader: • relation between capital and labor: definition and examples of laborand capital-intensive technologies were an important element to clarify that the concept of a bm is linked to market opportunities while the overall firm strategy must account for the environment. a formal introduction through a lecture that covers the relevant literature is advisable to help students understand the impact of minimum salary and import tariffs on manufacturing firms, as well as the importance of having national suppliers of manufacturing technology. • game theory: zero-sum and non-zero-sum games are useful to illustrate the impact on networks when one actors adopts a new technological solution. this is particularly important when talking about value creation. manufacturing is central in the value creation chain and often the introduction of innovative technology must be evaluated including strategic elements that go beyond costs and technical feasibility. a lecture introducing game theory and a workshop based on case studies is advisable. also examples from realistic situations are particularly useful here. examples can, for instance, be that (a) a superior manufacturing technology is not adopted for strategic reasons; (b) a product mix is not optimized to keep market segments that are not profitable but strategically important, and (c) obvious product design improvement are not implemented due to conflicts between production and other functions inside the firm. • incentives and scarcity. manufacturing can generate value for a firm beyond the simple product realization, yet students needed deep explanations on how this can be achieved. we learned that it is useful to show examples of how manufacturing technology can bring a sustainable competitive advantage to the focal firm. furthermore, a series of example where the lack of a specific material or tool or a cheap new source of energy can trigger new bms seems helpful to stress that value does not only lie in new ideas from design or a new need from marketing, because this seemed to be a bias of many students. one of the challenges in this course has also been that the doctoral students enrolled in manufacturing programs have very different backgrounds. there were mechanical, electrical, management, and industrial engineers among them. this had an impact on the students’ capability to follow the lectures. to prevent an uneven learning process among students we decided to change the planned traditional lectures into more interactive presentations including small verification moments, as well as encouraging the active involvement of the learners. one-minute papers[1] and q&a sessions have been successfully integrated in the course. in addition to that, this course represented the first time that many of the students were exposed to qualitative research methods and, in general, to a non-positivistic, or interpretivist, epistemology. one of the biggest challenges encountered was the bias that engineers usually have regarding such approaches (often labeled as not real science) and it was important to explain validity and the range of application of the presented methods. a suitable approach is to present situations in which, due to complexity of the object studied, it is impossible to obtain meaningful results with traditional scientific 1 a one-minute paper is a common technique designed to get rapid feedback on whether the teacher´s main idea is correctly perceived by the students. in the basic format, students have 60 seconds to briefly write down on paper anonymous responses to provided questions that reflect a certain aspect of the today´s lecture. for instance, students may be asked to highlight the most important points learned during that lecture. the teacher collects the responses and assesses them. journal of business models (2021), vol. 9, no. 3, pp. 17-24 22 method or engineering design processes. in this course, due to the background of the learners, examples include different perceptions of manufacturing related concepts such as quality, flexibility, industry 4.0, or manufacturing sustainability. discussing these helped the students to appreciate how an agreement in these fields emerged, or is emerging through a complex process of assimilating different perspectives, debunking biases and establishing conventions. other examples include lack of application of superior production technology due to “non-rational” reasons: lobbying, unbalanced bargaining power, loyalty to customer current requirement, or lack of information and competences. conclusion courses such as ours are filling a very relevant gap in the education of manufacturing engineers: a lack of awareness for the features and mechanics of the innovation process. this gap is common to many other applied research fields where the main focus is on the invention but not on how to bring it to the market. the course blueprint and the lesson learned can thus be a basis to introduce similar educational units in technical curricula. while part 1 of the course could rather easily be adapted to a different audience, part 2 would need to be tailored to the specific subject at hand. overall, students’ feedback and teacher observations clearly point out that the course is received favorably and deemed an important complement to their education by students. for instance, two students seek to further develop the contribution they produced in the course and include it in their phd. particularly appreciated by all students was the presentation of research methodologies not traditionally included in the engineering research education. the participants agreed that it was a valuable addition to their skill set. finally, the feedback indicates that the major contribution to the knowledge of the learners after this course is an increased capability to critically appraise the engineering problem: the course triggered students to consider new creative approaches that are based on applicable and quantifiable reasoning, thus enhancing their understanding of the innovation process. journal of business models (2021), vol. 9, no. 3, pp. 17-24 23 references biggs, j. and tang, c. (2011) teaching for quality learning at university. open university press. bloom, b. s. et al. (1956) taxonomy of educational objectives: handbook i: cognitive domain. 19th edn. new york: david mckay. dewar, r. d. and dutton, j. e. (1986) ‘the adoption of radical and incremental innovations : an empirical analysis author’, management science, 32(11), pp. 1422–1433. ettlie, j. e., bridges, w. p. and o’keefe, r. d. (1984) ‘organization strategy and structural differences for radical versus incremental innovation’, management science, 30(6), pp. 682–695. osterwalder, a. et al. (2010) business model generation: a handbook for visionaries, game changer and challengers. wiley. snihur, y., lamine, w. and wright, m. (2018) ‘educating engineers to develop new business models : exploiting entrepreneurial opportunities in technology-based firms’, technological forecasting & social change. elsevier, 164, p. 119518. doi: 10.1016/j.techfore.2018.11.011. wirtz, b. w. et al. (2016) ‘business models : origin , development and future research perspectives’, long range planning, 49(1), pp. 36–54. doi: 10.1016/j.lrp.2015.04.001. wirtz, b. w. and daiser, p. (2017) ‘business model innovation : an integrative conceptual framework’, journal of business models, 5(1), pp. 14–34. journal of business models (2021), vol. 9, no. 3, pp. 17-24 24 antonio maffei is an associate professor at the department of production engineering in kth – the royal institute for technology since 2019. his research interest includes business models for advanced automation technology, assembly technology and engineering education. he is a docent in production systems and head of the research group called digital smart production. eleonora boffa is a doctoral student in the department of production engineering at kth – the royal institute for technology since 2018. her research interest is business models within the manufacturing domain. she studied at politecnico in turin and took her bachelor’s and master’s degree in management engineering, 2014 and 2017 respectively. about the authors journal of business models (2018), vol. 6, no. 1, pp. 40-58 40 business model innovation processes: a systematic literature review bernd w. wirtz 1 and peter daiser 2 abstract purpose: the starting point of this study is the heterogeneously dispersed knowledge on the business model innovation (bmi) process. to accelerate the development of this topic in research and practice, the study explores insights concerning the bmi process to enhance our understanding about this phenomenon and to present a helpful guidance for researchers and practitioners. design/methodology/approach: given the study design (systematic review), we conducted a literaturebased investigation to identify important insights on the bmi process in the literature and derive a generic bmi process from the findings. findings: our findings underline the heterogeneous structure of bmi process knowledge in the literature. furthermore, we could detect several content-related and scope-related differences between existing bmi processes and derive seven generic bmi process steps: analysis, ideation, feasibility, prototyping, decisionmaking, implementation, and sustainability. practical implications: the literature review provides researchers and practitioners with a clear guidance on the bmi process literature and the seven generic bmi process phases serve as a blueprint for bmi initiatives in research and management. research  limitations: given the amount of academic journals, it is unlikely that every applicable scientific publication is included. originality/value: the study’s main contribution lies in the unifying approach of the dispersed knowledge on the bmi process. since our understanding of the bmi process is still limited, this study should provide further insights that support the development of the concept and guide its practical application. please cite this paper as: wirtz, b.w. and p. daiser (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, pp. 40-58 keywords: business model innovation; framework; elements; factors; conceptual study 1 german university of administrative sciences speyer, chair for information and communication management, freiherr-vom-stein-str. 2, 67346 speyer, germany, ls-wirtz@uni-speyer.de 2 german university of administrative sciences speyer, freiherr-vom-stein-str. 2, 67346 speyer, germany, daiser@uni-speyer.de journal of business models (2018), vol. 6, no. 1, pp. 40-58 41 introduction business model innovation (bmi) is a prominent topic in science and management. in particular because bmi is considered an effective and efficient form of innovation (chesbrough, 2007; wirtz et al., 2016a) that deals with new ways to organize business and which is directly linked with sustainable competitive advantage—if implemented successfully (mitchell and coles, 2003; casadesus-masanell and zhu, 2013; massa and tucci, 2014). furthermore, bmi allows companies to quickly adjust to market changes and to survive and prosper within today’s dynamic and competitive business environment (johnson et al., 2008; kastalli and van looy, 2013). a key benefit of bmi, which can be understood as an activity of modifying an existing business model or designing and implementing a new business model (massa and tucci, 2014), is that it sheds light on identifying new value propositions to generate revenues and to find new ways to create and capture value for its stakeholders (amit and zott, 2001; magretta, 2002; teece, 2010). despite the topic’s academic and managerial importance, our understanding on bmi is still limited (bocken et al., 2014; wirtz et al., 2016b; foss and saebi, 2017) and managers lack appropriate frameworks and tools that support them in their bmi endeavors (taran et al., 2016). so far, scientific bmi knowledge has developed largely in silos (zott et al., 2011) and is dispersed across various fields (schneider and spieth, 2013; massa et al., 2017). given the heterogeneous structure of bmi knowledge, several contributions in the scholarly literature recommend a consolidating research approach that fosters a common understanding of important bmi concepts and that has the potential to accelerate bmi development in research and practice (e.g., boons and lüdekefreund, 2013; massa and tucci, 2014; bocken, 2015; carayannis et al., 2015). according to the literature, the bmi process is a vital bmi concept (schneider and spieth, 2013; wirtz et al., 2016a; foss and saebi, 2017) and a fiercely debated research topic (cf. pynnönen et al., 2012; sinfield et al., 2012; frankenberger et al., 2013; wirtz and daiser, 2017). since our analysis of the literature showed that research on the bmi process mainly consists of widely-dispersed, independently developed exploratory studies, a unification of the scattered knowledge on the bmi process—following the previous recommendations in the literature concerning a consolidating approach—contributes to building a common foundation and accelerate the topic’s development (cf. boons and lüdeke-freund, 2013; massa and tucci, 2014; bocken, 2015; carayannis et al., 2015). moreover, providing further insights on the bmi process supports researchers and practitioners in scholarly and managerial bmi endeavors since the bmi process can be applied as a procedural framework for bmi. since there is—to the best of our knowledge—no study available that brings together the wide-spread insights on the bmi process, this investigation systematically analyzes extant research on the bmi process to contribute to academia and management by consolidating existing insights and by deriving a generic bmi process that can be used as a blueprint for bmi endeavors in research and practice. this way, this study explicitly addresses the call for research of schneider and spieth (2013, 23) concerning the need for further studies that “create a better understanding of the potential process and elements of business model innovation” and also contributes to an editorial question of a recent special issue on bmi, how a transformation of existing business models can “be organized to lead companies to success?” (lüttgens and montemari, 2016, p. 1). in addition, the generic bmi process can serve as a guideline to structure bmi initiatives. as extant scholarly literature provides a wealth of information on the process of bmi that is dispersed across various fields and sources, we chose to address this issue by conducting a literature-based analysis of scholarly publications bringing together available insights and consolidating them into a generic bmi process. by aggregating and integrating existing knowledge on the bmi process, the study supports the recommended consolidating research approach and also provides a handy knowledge collection on the process of bmi for managers. to achieve these aims, the study continues as follows: in the upcoming section we explain the study approach and outline the current state of research. next, we present the results of the literature analysis, which serve as a basis to deduce the generic bmi process in the following section. finally, journal of business models (2018), vol. 6, no. 1, pp. 40-58 42 the discussion and conclusions section summarizes the findings, implications, and limitations of the study and suggests directions for future research. methodology given the research aim of this study, to scrutinize scholarly literature on the bmi process to identify elements, patterns, and structures as well as to aggregate and integrate existing insights on the bmi process, we chose a systematic literature review approach since it is regarded the ideal method for this type of research problem (tranfield et al., 2003). a systematic literature review is characterized by a clearly formulated research target, a reproducible, transparent approach, a wide-ranging identification of available literature, as well as a systematic evaluation and synthesis of the relevant study content (khan et al., 2003; rousseau et al., 2008; fink, 2014). we started the literature analysis by conducting a title and abstract search in peerreviewed academic journals via ebscohost using the databases ‘academic search complete’ and ‘business source complete’ (search term: “business model innovation” or “business model evolution” or “business model development” or “business model dynamics” or “business model reinvention” or “business model innovation process” or “business model change”). we favored the database approach since the literature on bmi is dispersed across various fields and disciplines. scrutinizing these publications allowed us to identify 20 studies that explicitly deal with the bmi process.1 business model innovation processes in the scholarly literature developing a process of bmi has been an important element of bmi research. in total, we could identify 20 distinctive approaches that differ in content, procedure, and scope, showing that there are various ways how people have handled bmi so far. the identified bmi processes are presented in figure 1. 1 since we could identify more bmi process publications with the chosen approach than a recent bmi literature review (cf. wirtz et al. (2016a), which clustered bmi research into bmi subfields and assigned 15 publications to the subfield bmi process, we assume that the set of articles assures a meaningful census of the literature on the process of bmi. the first difference we noticed is the varying number of process steps, which fluctuate between three and ten. the bmi process of lindgardt et al. (2009), for instance, uses three process steps (“uncover opportunities”, “implement new business model”, and “build platform and skills”) at a rather abstract level, while the bmi process of pramataris et al. (2001) consists of ten activityoriented process steps. the second difference that came to our attention is the difference in orientation and focus of the identified bmi processes. while some processes are rather bmi design-oriented, other processes focus on the operations of bmi. the bmi process of voelpel et al. (2004), for instance, concentrates on the activities that should be conducted to successfully redesign a business model. therefore they propose four steps: (1) sensing potential for change in customer behavior and new customer value propositions, (2) sensing the strength, direction and impact of technology, (3) sensing the potential for value system (re)configuration, including organizational structure(s), and (4) sensing the economic feasibility and profitability of the proposed business model. in contrast, the six step bmi process of amit and zott (2012) shows a straightforward focus on operations: (1) analyze customer needs, (2) business model content innovation, (3) business model structure/government innovation, (4) checking value creation through novel business model, (5) defining revenue models, and (6) launching model. linder and cantrell (2000) elaborate on the related general steps of identifying the current business model, how to develop new business models and, lastly, implement the desired change of these business models. similarly, deloitte (2002, p. 20) define the bmi process steps of scan & scope, rethink & redesign, as well as plan & implement. both studies present a cross-industry approach. pramataris et al. (2001) follow a different path. they present a rather fine-grained bmi process, which consists of a sequence of ten steps and intends to facilitate bmi “under the influence of digital interactive television in the advertising industry” (pateli and giaglis, 2005, p. 169). pateli and giaglis (2005) build their bmi process upon the work of pramataris et al. (2001). they suggest a first process phase of understanding and documenting the journal of business models (2018), vol. 6, no. 1, pp. 40-58 43 figure 1: identified business model innovation processes journal of business models (2018), vol. 6, no. 1, pp. 40-58 44 figure 1: identified business model innovation processes (continued) journal of business models (2018), vol. 6, no. 1, pp. 40-58 45 current business model. in the subsequent phase, they explicitly refer to the influence of technology, which, for example, should be assessed to identify missing roles/functions. pateli and giaglis (2005) also suggest to use scenario planning to define different scenarios from which management should choose the preferred option. their process closes with the evaluation of the impact of the proposed bmi. the recommendation to define scenarios for alternative configurations of bmi can also be found in the bmi processes of chesbrough (2007), osterwalder et al. (2010), and wirtz (2011). these authors suggest that the final selection of a bmi should be preceded by a kind of experimentation phase, which serves the purpose to design, evaluate, and test different business models or business model options. johnson et al. (2008) presents a clear road map for reinventing business models which involves the steps of developing a particular value proposition, constructing a related profit formula, identifying key resources and processes, and comparing the new model to the current one in order to know which way to go and to implement the new business model. two years later, johnson (2010) breaks down the implementation step to incubation, acceleration, and transition. he explains incubation as a process that, in a first step, identifies the business assumptions that are most critical to the success of the business and, in a second step, systematically tests them to evaluate their viability. if the new business model is viable, the bmi process should enter the acceleration phase, meaning that activities and processes should become standardized and multipliable to quickly expand the new business model. the transition phase applies only to incumbent businesses since it deals with the integration of the new business model into existing structures. the bmi processes of mitchell and coles (2004), lindgardt et al. (2009), johnson (2010), osterwalder et al. (2010), sosna et al. (2010), teece (2010), and wirtz (2011) go beyond the execution phase of the new business model since they explicitly suggest post-implementation process steps. sosna et al. (2010), for instance, use a case study to exemplify the bmi process. their bmi process starts with business model design and testing and—if tested successfully—hands over to business model development. in a similar fashion like the acceleration phase, as recommended by johnson (2010), they propose to scale up the refined business model. in their final bmi process step, however, sosna et al. (2010) suggest a phase of organization-wide learning to sustain the growth of the new business model, which can be partly compared to the approach of lindgardt et al. (2009), who recommend to build a platform and the skills necessary after the implementation of the novel business model. while teece (2010) also includes a post-implementation phase in his bmi process, he places special emphasis on the implementation of isolating mechanisms to block or at least hinder imitation by competitors as well as disintermediation by customers and suppliers. osterwalder et al. (2010) introduce management-oriented process phases of assembling all needed elements, analysis of these elements, generate and test different business model options as well as selecting the best, implement the selected business model prototype in the field and, lastly, manage—adapt and modify—the business model if needed. this is comparable to wirtz (2011) who likewise stresses the importance of alternatives in the prototyping phase of the business model design process (idea generation, feasibility study, prototyping, decision-making), but additionally illustrates the subsequent phases of implementation and controlling. frankenberger et al. (2013) offer a “structured view on process phases and challenges” (p. 249) including initiation, ideation, integration, and implementation (see also gassmann et al., 2014), whereas enkel and mezger (2013) present a strongly reduced process version of design and implementation. yang et al. (2014) address the bmi process rather from a conceptual perspective by presenting generic bmi process steps that are used to illustrate the bmi procedure within their framework. when looking at the research approaches of the publications, all of them show an exploratory research design. of the 20 publications, 11 are conceptual and 9 empirical. all empirical studies are of qualitative nature, using interviews—and in 5 cases also a case study approach—to collect the insights for the analysis. the research approaches of the identified publications are summarized in table 1. journal of business models (2018), vol. 6, no. 1, pp. 40-58 46 authors research class research type research design key methodical aspects linder and cantrell, 2000 conceptual exploratory logical reasoning and case examples pramataris et al., 2001 conceptual exploratory literature and logical reasoning deloitte, 2002 conceptual exploratory logical reasoning and case examples mitchell and bruckner coles, 2004 conceptual exploratory literature and logical reasoning voelpel et al., 2004 conceptual exploratory literature and logical reasoning pateli and giaglis, 2005 empirical qualitative exploratory literature, logical reasoning, and interviews chesbrough, 2007 conceptual exploratory logical reasoning and case examples johnson et al., 2008 conceptual exploratory logical reasoning and case examples lindgardt et al., 2009 conceptual exploratory logical reasoning johnson, 2010 conceptual exploratory logical reasoning and case study examples osterwalder et al., 2010 empirical qualitative exploratory literature, logical reasoning, case study, and interviews sosna et al., 2010 empirical qualitative exploratory literature, logical reasoning, case study, and interviews teece, 2010 conceptual exploratory literature, logical reasoning, and case examples wirtz, 2011 conceptual exploratory literature, logical reasoning, and case examples amit and zott, 2012 empirical qualitative exploratory literature, logical reasoning, case examples, and interviews pynnönen et al., 2012 empirical qualitative exploratory literature, logical reasoning, case examples, and interviews enkel and mezger, 2013 empirical qualitative exploratory literature, logical reasoning, case studies, and interviews frankenberger et al., 2013 empirical qualitative exploratory literature, logical reasoning, case examples, and interviews gassmann et al., 2014 empirical qualitative exploratory literature, logical reasoning, case examples, and interviews yang et al., 2014 empirical qualitative exploratory literature, logical reasoning, and case study table 1: research approaches of the identified publications journal of business models (2018), vol. 6, no. 1, pp. 40-58 47 our findings of the literature review underline the previously mentioned heterogeneous diffusion of bmi knowledge (e.g., boons and lüdeke-freund, 2013; massa and tucci, 2014; carayannis et al., 2015; wirtz et al., 2016a). while we found a wealth of knowledge on the bmi process, this knowledge shows a high degree of independent development and is mostly scattered in different areas of application and/or different fields of research, supporting the statement of zott et al. (2011, p. 1019) that the literature on bmi “is developing largely in silos”. furthermore, the analysis of the identified publications showed that the bmi process field is so far entirely build upon exploratory research. from the findings of the literature-based analysis, we derive a generic perspective of the bmi process in the following. generic bmi process perspective to detect generic aspects and common features of the identified bmi processes, we scrutinized the bmi processes on process step level. for this purpose, we followed a three-stage approach: we examined the descriptive content of each process step (1) and arranged them in chronologically order (2). next, we— based on the content and sequence of the respective process step—formed process step clusters (3) that summarize the process-step-related findings of the identified bmi processes, and thus, support a unified approach by providing harmonized insights with regard to a generic bmi process. as with any classification approach, the forming of clusters according to common criteria is also a key challenge of this literature-based analysis. this task usually requires multiple cycles of denominating and aggregating particular characteristics and synthesizing them into a reasonable set of clusters that provide a clear and transparent picture of the subject. while this approach—by its very nature—leads to a loss of information, this limitation of literature-based analyses is generally acceptable if the gain in transparency and unification of insights outweighs the constraints (webster and watson, 2002).2 2 the bmi process step clusters of the generic bmi process are referred to as bmi process phases in the following. from a chronological sequence, the first bmi process phase, which we identified, is the phase analysis. the bmi process of linder and cantrell (2000), for instance, starts with the description of the actual business model. similarly, pateli and giaglis (2005) recommend to document the current business model and chesbrough (2007) proposes to start bmi with a business model analysis. from a content perspective, these steps clearly overlap with the analysis activities that are suggested by other authors. for example, the initial phase of deloitte (2002) is used to scan and scope the current situation, amit and zott (2012) propose to analyze the customer needs, pynnönen et al. (2012) suggest to analyze customer value preferences of the current business model, or frankenberger et al. (2013), who recommend to analyze the ecosystem as the first step. while these bmi process steps show a similar level of aggregation, the bmi process of pramataris et al. (2001) demonstrates a more detailed, slender bmi process structure. their first four bmi process steps (examining stakeholder roles, defining business objectives, identifying value flows in the market, and identifying key competitive drivers) describe particular analysis activities, and thus, these are summarized in the analysis phase of the generic bmi process, which compiles activities such as analyzing the current business model and target groups/customers. having analyzed the current bmi situation, the next chronological step is the ideation phase, which serves to generate bmi ideas (wirtz, 2011; frankenberger et al., 2013), uncover bmi opportunities (lindgardt et al., 2009), create a customer value proposition (johnson et al., 2008; johnson, 2010; teece, 2010), design a profit formula (johnson et al., 2008; johnson, 2010), and/or innovate the business model content and/or structure (amit and zott, 2012). this generic bmi process phase involves bmi activities such as determining the bmi mission, generating customer insights, and developing customer scenarios. while several bmi process steps of the identified bmi processes can be clearly allocated to this bmi process phase, this does not apply to all of the bmi processes. the bmi process steps of voelpel et al. (2004) and osterwalder et al. (2010) do rather present a higher level of abstraction, and thus, combine both phases. journal of business models (2018), vol. 6, no. 1, pp. 40-58 48 when looking at the bmi process of osterwalder et al. (2010), their first step is assembling all elements for new business model design. to our understanding, this includes the analysis and ideation activities since the determination of the elements for the new business model usually requires a preliminary analysis and idea generation process. for this reason, their initial bmi process step covers the bmi process phases analysis and ideation. after the analysis of the bmi situation and the generation of the bmi ideas, the developed bmi must be questioned concerning the feasibility of the planned bmi endeavor. several publications explicitly mention this bmi process step and recommend that responsible managers sense the feasibility and profitability of the proposed bmi, before realizing the intended changes (e.g., voelpel et al., 2004; osterwalder et al., 2010; wirtz, 2011). in this context, it is important to define the underlying assumptions about the technological requirements and the business environment, identify key resources and processes, and analyze critical interdependencies (e.g., pramataris et al., 2001; pateli and giaglis, 2005; johnson et al., 2008). pynnönen et al. (2012) and yang et al. (2014) also suggest to already address the customer perspective by recommending the use of customer surveys and evaluation feedbacks in this phase. if the feasibility and the profitability of the proposed bmi is confirmed, a prototype of the bmi (and its concept/design alternatives) should be developed (linder and cantrell, 2000; wirtz, 2011). this prototype helps to evaluate different bmi design alternatives/concepts and to refine and optimize the bmi alternatives/concepts (e.g., osterwalder et al., 2010; yang et al., 2014). furthermore, it allows a straightforward comparison with the current business model (e.g., johnson et al., 2008; johnson, 2010), and a more profound evaluation of the change impact (e.g., pateli and giaglis, 2005). since the bmi phase prototyping mainly serves the analysis of different bmi design alternatives, the impact assessment of the bmi, and the development/ refinement of particular bmi concepts, this bmi phase is a vital part concerning the decision, whether the bmi will be realized. thus, with successful completion of the prototype phase the generic bmi process moves to the decision-making phase, in which the responsible managers have to decide, whether and in which form the proposed bmi is going to be implemented. in this context, chesbrough (2007), osterwalder et al. (2010), and wirtz (2011) suggest that the decision makers should choose the best concept between the different bmi alternatives. the most commonly used bmi process step among the identified bmi processes is the following bmi phase implementation (e.g., deloitte, 2002; chesbrough, 2007; osterwalder et al., 2010). while there are also other notions for this bmi process step (e.g., linder and cantrell (2000) denominate this as change the business model, enkel and mezger (2013) as adaptation, and yang et al. (2014) as execution), it usually includes the testing, realization, and go-live of the bmi as well as the necessary change management to support a successful implementation of the bmi (wirtz, 2011). following the implementation phase, several authors recommend further activities to secure the sustainability of the bmi. lindgardt et al. (2009) and sosna et al. (2010) suggest to start scaling up the bmi, build the required skills in the organization, and promote organization-wide learning. moreover, the organization should implement isolating mechanisms to prevent the bmi from copycats and imitators and reduce potential substitution effects (teece, 2010). wirtz (2011) proposes to install a continuous bmi monitoring and controlling to sense potential market reactions and adapt and modify the bmi in response to these changes. the final bmi process step of johnson (2010) is the transition of the bmi into the current business model of the organization. however, this implementation step only applies to incumbent organizations. they have to decide, whether the bmi can be integrated into the current business model, replace it, or must remain in a separate unit. against this background, we see this bmi process step rather as a bmi activity concerning the sustainability of the bmi than as an additional phase. for this reason, the sustainability phase closes the integrated bmi process. apart from denominating and aggregating the bmi process steps to unifying bmi process phases, we also journal of business models (2018), vol. 6, no. 1, pp. 40-58 49 evaluated their level of thematization in the identified bmi processes. on the whole, the first three bmi process phases (analysis, ideation, and feasibility) are a frequent subject of discussion. nearly all bmi processes explicitly refer to these bmi process phases and stress their importance for successful bmi. compared to these bmi process phases, the bmi process phase prototyping receives less attention. this is interesting since the prototyping phase is of utmost importance for real-time testing and assessment of the proposed bmi solutions. moreover, a prototype puts the decision-makers in the position to visualize the bmi in action. similarly, the bmi process phase decision-making is rarely explicitly mentioned and often taken for granted. however, this phase should strictly precede the bmi implementation phase since it is the last opportunity for comprehensive corrections before the realization of the bmi. although some bmi processes do not explicitly mention the bmi implementation as a particular bmi process step, it forms an integral part of nearly every bmi process description. the bmi process phase sustainability has so far only received limited attention. given the importance of enduring competitive advantage, this has also been an interesting finding. the allocation of the bmi process steps to the respective bmi process phases as well as their overall thematization in the identified bmi processes is presented in figure 2. although these seven bmi process phases do not allow a fully accurate process step allocation without any overlaps, we believe that the loss of information, which is caused by the aggregation of several different process step categories, is outweighed by the gain in transparency. moreover, this approach is not supposed to detail differences between the distinctive bmi processes, but to support the creation of a generic bmi process, which summarizes the insights of the individual investigations (see figure 3). given the consolidating approach of the study, the generic bmi process contains a consolidated set of bmi process steps that are derived from the 20 studies identified. these generic bmi process steps shall reflect the potential stages of any bmi process, whether it is, for example, a bmi with comparably little impact on the current business model or a radical shift, requiring a comprehensive renewal of the existing business model. against the universal character of these bmi process steps, the generic bmi process needs to be adjusted to the particular requirements of the bmi situation (e.g., a slight change of the current business model may not require a feasibility analysis). furthermore, it needs to be noted that the generic bmi process is not a unidirectional, but a multidirectional process. for example, if the outcome of the feasibility phase is not satisfying or if the decision-making phase leads to rejecting the bmi, the company has to go back to the analysis or ideation phase. thus, some bmis may require passing some bmi stages several times. the generic bmi process starts with an analysis of the initial situation, including an analysis of the current business model, products, services, target groups, customers, market, and competition. the objective of this phase is to get a clear picture of the business model environment, in particular the strengths, weaknesses, opportunities, and threats of the current business model. summarizing, the person/team that is responsible for the bmi initiative needs to have a solid understanding of the company’s present business model and the associated business model environment. the next bmi process phase is ideation, which is used to determine the bmi mission and to create clear ideas, stories, and scenarios for the bmi. for this purpose, creativity techniques can be used to generate different proposals and to create a basis for the bmi. here, it is important that a bmi does not necessarily have to result from new ideas; they can also be the result of reacting to a weakness or threat (markides, 2008). at the end of this phase, the persons responsible should have a conceptual design of the new business model. the main objective of the feasibility phase is to evaluate the practicability and impact of the bmi. this means, the conceptual draft—the result of the ideation phase—has to be assessed concerning its realizability. in this context, it is important to analyze differences and interdependencies between the new potential business model(s) and existing structures to evaluate internal and external business model alignment necessities. for this purpose, the person/team that is responsible for the bmi should conduct an environmental analysis, journal of business models (2018), vol. 6, no. 1, pp. 40-58 50 figure 2: bmi process step allocation to generic bmi process phases journal of business models (2018), vol. 6, no. 1, pp. 40-58 51 an analysis of the market, industry and the competition as well as a technological analysis (chesbrough and rosenbloom, 2002; afuah, 2004; wirtz, 2013). in contrast to the analysis that is conducted during the first bmi process phase analysis, the focus of the feasibility phase is on the new/planned business model. if this phase leads to results that justify pursuing the desired bmi, a prototype of the bmi should be developed to evaluate different bmi design alternatives/ concepts and refine the bmi until at least a satisfactory status of the prototype/prototypes has been achieved. next, the bmi process enters the phase decision-making, which serves to evaluate the different alternatives and make a final decision concerning the further progress of the bmi. given the type, extent, and complexity of change, which the bmi may cause, this step will often include a final harmonization of the components or testing the bmi before the management takes its final decision. the decision phase closes the design-oriented part of the bmi process and hands it over to the operationsoriented part, which deals with implementing the bmi and securing its sustainability. the implementation of the bmi has a strong project and change management character at the beginning. thus, those responsible have to develop an implementation plan and should establish a competent implementation team to take care of the realization of the bmi. this leads to the final step of the bmi process: sustainability. to secure the sustainability of the bmi, the responsible managers have to assure that necessary adaptations of the new business model are applied. furthermore, they have to take the appropriate measures to protect the bmi from imitation and disintermediation and ensure a continual knowledge transfer as well as organization-wide learning. in this context, the controlling of the value proposition and the value constellation are of crucial importance. the management figure 3: generic bmi process with key activities journal of business models (2018), vol. 6, no. 1, pp. 40-58 52 needs to know if the desired value proposition and value constellation have been achieved with the bmi. if the monitoring and controlling shows that there are deviations between the actual and the target values, those responsible have to derive the appropriate conclusions and implications and make the required adjustments. furthermore, incumbent businesses have to determine the transition approach of the bmi. they have to decide, whether the bmi can be integrated into the current business model, can replace it, or must remain in a separate unit. discussion and conclusion the starting point of this systematic review is the heterogeneous structure of knowledge on bmi and the call of several scholarly contributions to unite the dispersed knowledge of fundamental bmi concepts within a consolidating approach that creates a common ground. given the importance of the bmi process, the heterogeneously disseminated knowledge on this topic, and the circumstance that the bmi process is an ongoing topic of debate, this study contributes to this consolidating approach by summarizing and aggregating available insights on the bmi process. to achieve these aims, we conducted an extensive review of related scholarly literature, from which we could identify 20 publications that investigate the bmi process. the findings of the systematic review of the literature and the deduced generic bmi process provide several contributions to research and bmi management practice. from a general research perspective, the systematic review and the generic bmi process support the recommended consolidating research approach, and thus, foster a common understanding of the bmi concept. by harmonizing and unifying important aspects of several bmi process studies, the findings and conclusions of this study should also serve as a helpful guidance for further bmi research. when looking at the findings of the literature review and the identified bmi processes, it becomes obvious that the general criticism concerning the heterogeneous and siloed structure of bmi knowledge also applies to this subfield of bmi research. concerning the bmi process we found a wealth of knowledge, which shows a high degree of independent development, and thus supports the statement of zott et al. (2011, p. 1019) that knowledge on bmi “is developing largely in silos”. although the identified studies principally try to cover the same topic, we could detect several contentrelated and scope-related differences. while some bmi processes rather approach the bmi process from a conceptual side, others show a more detailed and operations-oriented approach. thus, the bmi processes also vary significantly concerning the number of proposed bmi process steps. the bmi process of lindgardt et al. (2009), for instance, consists of three, the bmi process of linder and cantrell (2000) of four, the bmi process of amit and zott (2012) of seven, and the bmi process of pramataris et al. (2001) of ten process steps. apart from that we also encountered differences concerning the orientation of the identified bmi processes— some focus on the design of new business models, while others focus on the management and realization of bmi. this finding may also be seen as a further indicator of the partly differing views and opinions of what bmi actually is. if there are fundamental differences about the understanding of bmi, this leads to different bmi processes. against this background, this study uses a far-reaching definition of bmi to develop a generic bmi process that includes the necessary elements for narrow as well as broad bmi definitions. after scrutinizing and comparing the bmi processes on an abstract level, we could derive seven generic bmi process phases, which should be taken into account when dealing with bmi: (1) analysis, (2) ideation, (3) feasibility, (4) prototyping, (5) decision-making, (6) implementation, (7) sustainability. although the individual steps of the identified bmi processes cannot be allocated to these seven bmi process phases without any overlaps, they nevertheless reflect a wide-ranging aggregation of the recommended bmi process steps in the scholarly literature. the generic approach to the bmi process also provides a comprehensive perspective on the bmi process. while previous approaches do either not cover the entire scope of the bmi process (e.g., linder and cantrell, 2000; pateli and giaglis, 2005; enkel and mezger, 2013) or do not detail particular phases (e.g., pramataris et al., 2001; mitchell and coles, 2004; sosna et al., 2010), journal of business models (2018), vol. 6, no. 1, pp. 40-58 53 the generic bmi process supports a holistic perception. however, the generic bmi process is not a ready-made, one size fits all concept that can be blindly accepted without making any modifications. it should be seen as a bmi process framework that provides researchers and managers alike with a bmi process blueprint, which they can adapt to their specific needs. a further important conclusion of this study is the multidirectional character of the bmi process. instead of being a sequential, unidirectional, standardized procedure, the bmi process is rather a semi structured flow of activities that need to be matched with the specific requirements of the respective bmi initiative. thus, it is not an essential prerequisite that each bmi initiative actually covers each of the bmi process phases: depending on the requirements of the bmi initiative, some bmi process phases may be passed several times and some not at all. however, the initial planning of the bmi initiative should start with the extensive process, taking into account each possible bmi process phase, and each decision concerning deviations from this plan or upcoming variances from the course of the bmi initiative should always be based on a holistic bmi process perspective. given that this is—to the best of our knowledge—the first study that provides an overview of the scattered knowledge on the bmi process, this article also assists academics and practitioners in navigating in the literature and allows them to quickly get a grasp of the subject. thus, the gain in transparency provides research and management with a clear and systematic bmi process that aggregates the insights of the identified studies. against this background, especially managers should benefit from this approach since the generic bmi process can serve as a straightforward guidance for bmi development and integration. in this context, the generic bmi process can also be regarded a procedural framework that supports managers in establishing a new business model and/or renew an existing business model. moreover, the generic bmi process suggests a standard workflow and highlights the main activities that have to be performed within the respective bmi process phases. this presents managers with the opportunity to assess potential conflicts at an early stage and to align the bmi process as a whole. this way, the generic bmi process provides a transparent approach that supports managers in planning, organizing, leading, and controlling bmi initiatives. even though this study provides several benefits to research and practice, it also has its limitations. given the vast number of available journals, it is unlikely that every available, applicable publication was included in the analysis, especially as this study is limited to peer-reviewed english-language publications, excluding studies in other languages. thus, it is possible that there are further aspects of the bmi process that may have skipped our scrutiny. however, considering the extensive, systematic analysis of the literature, the article should adequately reflect extant knowledge on the bmi process. apart from that, the process of aggregating and classifying the bmi processes is an elusive procedure that by its very nature leads to a loss of information. moreover, the allocation to the abstract bmi process step categories can sometimes be questioned since the steps of the identified bmi processes occasionally match several selection criteria. however, these constraints are part of scientific practice when dealing with systematic analyses. since the authors are conscious of these limitations, the results of the analyses should be acceptable though. the findings and limitations of this study as well as the transparent illustration of previous research works also provide several opportunities for future research. since all studies identified were of exploratory character— both conceptual and empirical papers—there seems to be a need for confirmatory research. while exploratory research is often used in the beginning of new fields of research, bmi research should start to intensify the use of confirmatory approaches to substantiate previous findings. this would also support the recommended consolidating approach for the field, as empirical evidence might help to separate promising from languishing approaches. in this context, research should empirically validate the number of bmi process phases, in particular, whether one can speak of an overall bmi process (one size fits all approach) or whether the bmi process and its phases are dependent on different industries or situational conditions. furthermore the journal of business models (2018), vol. 6, no. 1, pp. 40-58 54 question remains, whether there are variations in the bmi process concerning different business model types (e.g., for online business models content, commerce, etc.). in a similar fashion, empirical research should shed light on the question, whether the bmi process really is a linear process or linear sequence of steps—as usually presented in the scholarly literature—or a whether it rather is a retrograde process or cycle. in reality, for example, innovation processes often include parallel activities and/or feedback loops that may also cause cyclical sequences. a further important aspect of the bmi process are its success factors. in this connection, research should analyze two vital elements: (1) the general success factors of the bmi process throughout all phases and (2) the phase-specific success factors. this way, research can contribute to identify crucial determinants that have a significant impact on the success of bmi endeavors. from an organization perspective it is of great importance to clarify the question, how the bmi process should be anchored in the organizational structure. does bmi, for instance, rather have a project character or does it make sense to embed the bmi process in the day-to-day management and operations. in this context, it is also interesting to clarify the respective roles, responsibilities, and accountabilities and to identify the required skills and competences that foster bmi. in this context, the connection between the individual bmi process phases and company strategy as well as operations seems to be a further interesting field—especially concerning the integration and implementation of bmi. in this context, research should, for example, provide transparent concepts on how the bmi phases and the company functions interact and have clear suggestions on how to effectively incorporate bmis in day-to-day business and how to elaborate efficient interfaces between bmi implementation, strategy, and operations. while the investigated publications generally describe bmi as a company activity that takes place during a foreseeable period of time, research should also look into mediumand long-term bmis, which rather have an evolutionary character. how are these business model evolutions to be managed and anchored in the organizational structure? and what should be the focus of these activities—rather technology-driven or customer-oriented? against the background that research has so far devoted less attention to the bmi process phases prototyping, decision-making, and sustainability, these phases should be subject to further conceptual and empirical study. furthermore, considering the different level of detail and different areas of application of the bmi processes, investigating bmi process discrepancies and particularities seems to be a fruitful avenue for future research. in this context, differences and adaptation requirements of bmi processes concerning situational, cultural, or hierarchical aspects could provide further interesting insights for research and practice. after all, bmi has established itself as a vital instrument of successfully innovating companies and shaking up entire industries and markets. hence, its importance cannot be overstated. given the still limited understanding of this phenomenon, research must continue to obtain new findings. in this context, the bmi process deserves particular attention since it plays an important role for academia and management. journal of business models (2018), vol. 6, no. 1, pp. 40-58 55 references afuah, a. (2004), business models: a strategic management approach, mcgraw-hill/irwin, boston. amit, r. and zott, c. (2001), “value creation in e-business”, strategic management journal, vol. 22, no. 6-7, pp. 493–520. amit, r. and zott, c. (2012), “creating value through business model innovation”, mit sloan management review, vol. 53, no. 3, pp. 40–50. bocken, n.m.p. (2015), “sustainable venture capital–catalyst for sustainable start-up success?”, journal of cleaner production, vol. 108, pp. 647–658. bocken, n.m.p., short, s.w., rana, p. and evans, s. (2014), “a literature and practice review to develop sustainable business model archetypes”, journal of cleaner production, vol. 65, pp. 42–56. boons, f. and lüdeke-freund, f. (2013), “business models for sustainable innovation. state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. carayannis, e.g., sindakis, s. and walter, c. (2015), “business model innovation as lever of organizational sustainability”, the journal of technology transfer, vol. 40, no. 1, pp. 85–104. casadesus-masanell, r. and zhu, f. (2013), “business model innovation and competitive imitation. the case of sponsor-based business models”, strategic management journal, vol. 34, no. 4, pp. 464–482. chesbrough, h. (2007), “business model innovation. it’s not just about technology anymore”, strategy & leadership, vol. 35, no. 6, pp. 12–17. chesbrough, h. and rosenbloom, r.s. (2002), “the role of the business model in capturing value from innovation. evidence from xerox corporation’s technology spin-off companies”, industrial and corporate change, vol. 11, no. 3, pp. 529–555. deloitte (2002), “deconstructing the formula for business model innovation: uncovering value-creating opportunities in familiar places. a competitive strategy study by deloitte consulting and deloitte & touche”, pp. 1–24. enkel, e. and mezger, f. (2013), “imitation processes and their application for business model innovation. an explorative study”, international journal of innovation management, vol. 17, no. 1, 1340005-1–34. fink, a. (2014), conducting research literature reviews: from the internet to paper, 4th ed., sage, thousand oaks. foss, n.j. and saebi, t. (2017), “fifteen years of research on business model innovation. how far have we come, and where should we go?”, journal of management, vol. 43, no. 1, pp. 200–227. frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013), “the 4i-framework of business model innovation: a structured view on process phases and challenges”, international journal of product development, vol. 18, no. 3-4, pp. 249–273. gassmann, o., frankenberger, k. and csik, m. (2014), the business model navigator: 55 models that will revolutionise your business, pearson education limited, harlow. journal of business models (2018), vol. 6, no. 1, pp. 40-58 56 johnson, m.w. (2010), seizing the white space: business model innovation for growth and renewal, harvard business press, boston. johnson, m.w., christensen, c.m. and kagermann, h. (2008), “reinventing your business model”, harvard business review, december, pp. 51–59. kastalli, i.v. and van looy, b. (2013), “servitization. disentangling the impact of service business model innovation on manufacturing firm performance”, journal of operations management, vol. 31, no. 4, pp. 169–180. khan, k.s., kunz, r., kleijnen, j. and antes, g. (2003), “five steps to conducting a systematic review”, journal of the royal society of medicine, vol. 96, no. 3, pp. 118–121. linder, j. and cantrell, s. (2000), “changing business models: surveying the landscape”, available at: http://course. shufe.edu.cn/jpkc/zhanlue/upfiles/edit/201002/20100224120954.pdf (accessed 3 june 2016). lindgardt, z., reeves, m., stalk, g. and deimler, m.s. (2009), business model innovation: when the game gets tough, change the game. lüttgens, d. and montemari, m. (2016), “editorial. new ways of developing and analyzing business model innovation”, journal of business models, vol. 4, no. 3, pp. 1–4. magretta, j. (2002), “why business models matter”, harvard business review, vol. 80, no. 5, pp. 86–92. markides, c. (2008), game-changing strategies: how to create new market space in established industries by breaking the rules, jossey-bass, san francisco. massa, l., tucci, c. and afuah, a. (2017), “a critical assessment of business model research”, academy of management annals, vol. 11, no. 1, pp. 73–104. massa, l. and tucci, c.l. (2014), “business model innovation”, in dogdson, m., gann, d., & nelson, p. (ed.), the oxford handbook of innovation management, oxford university press, oxford, uk, pp. 420–441. mitchell, d. and coles, c. (2003), “the ultimate competitive advantage of continuing business model innovation”, journal of business strategy, vol. 24, no. 5, pp. 15–21. mitchell, d.w. and coles, c. (2004), “establishing a continuing business model innovation process”, journal of business strategy, vol. 25, no. 3, pp. 39–49. osterwalder, a., pigneur, y. and clark, t. (2010), business model generation: a handbook for visionaries, game changers, and challengers, alexander osterwalder & yves pigneur, amsterdam. pateli, a.g. and giaglis, g.m. (2005), “technology innovation-induced business model change. a contingency approach”, journal of organizational change management, vol. 18, no. 2, pp. 167–183. pramataris, k.c., papakyriakopoulos, d.a., lekakos, g. and mylonopoulos, n.a. (2001), “personalized interactive tv advertising: the imedia business model”, electronic markets, vol. 11, no. 1, pp. 17–25. pynnönen, m., hallikas, j. and ritala, p. (2012), “managing customer-driven business model innovation”, international journal of innovation management, vol. 16, no. 4, 1250022-1–18. journal of business models (2018), vol. 6, no. 1, pp. 40-58 57 rousseau, d.m., manning, j. and denyer, d. (2008), “evidence in management and organizational science. assembling the field’s full weight of scientific knowledge through syntheses”, academy of management annals, vol. 2, no. 1, pp. 475–515. schneider, s. and spieth, p. (2013), “business model innovation. towards an integrated future research agenda”, international journal of innovation management, vol. 17, no. 1, 134000-1–34. sinfield, j.v., calder, e., mcconnell, b. and colson, s. (2012), “how to identify new business models”, mit sloan management review, vol. 53, no. 2, pp. 85–90. sosna, m., trevinyo-rodríguez, r.n. and velamuri, s.r. (2010), “business model innovation through trial-and-error learning: the naturhouse case”, long range planning, vol. 43, no. 2/3, pp. 383–407. taran, y., nielsen, c., montemari, m., thomsen, p. and paolone, f. (2016), “business model configurations: a five-v framework to map out potential innovation routes”, european journal of innovation management, vol. 19, no. 4, pp. 492–527. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43, no. 2-3, pp. 172–194. tranfield, d., denyer, d. and smart, p. (2003), “towards a methodology for developing evidence-informed management knowledge by means of systematic review”, british journal of management, vol. 14, no. 3, pp. 207–222. voelpel, s.c., leibold, m. and tekie, e.b. (2004), “the wheel of business model reinvention. how to reshape your business model to leapfrog competitors”, journal of change management, vol. 4, no. 3, pp. 259–276. webster, j. and watson, r.t. (2002), “analyzing the past to prepare for the future: writing a literature review”, mis quarterly, vol. 26, no. 2, pp. xiii–xxiii. wirtz, b.w. (2011), business model management: design instruments success factors, gabler, wiesbaden. wirtz, b.w. (2013), medienund internetmanagement, 8th ed., springer gabler, wiesbaden. wirtz, b.w. and daiser, p. (2017), “business model innovation: an integrative conceptual framework”, journal of business models, vol. 5, no. 1, pp. 14–34. wirtz, b.w., göttel, v. and daiser, p. (2016a), “business model innovation. development, concept, and future research directions”, journal of business models, vol. 4, no. 1, pp. 1–28. wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016b), “business models. origin, development and future research perspectives”, long range planning, vol. 49, no. 1, pp. 36–54. yang, d.-h., you, y.-y. and kwon, h.-j. (2014), “a framework for business model innovation using market, component and innovation tool”, international journal of applied engineering research, vol. 9, no. 21, pp. 9235–9248. zott, c., amit, r. and massa, l. (2011), “the business model. recent developments and future research”, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2018), vol. 6, no. 1, pp. 40-58 58 about the authors professor bernd w. wirtz holds the chair for information and communication management at the german university of administrative sciences speyer. he has published widely on issues pertaining to business models, electronic business, strategic management, media management, and marketing. email: ls-wirtz@uni-speyer.de peter daiser is a doctoral student and research assistant at the german university of administrative sciences speyer. before that, he gained extensive professional experience in strategy and management consulting with struktur management partner, kpmg and pwc. email: daiser@uni-speyer.de journal of business models (2015), vol. 3, no. 2, pp. 30-50 30 dynamics of openness in smes: a business model and innovation strategy perspective marika miriam iivari1 keywords: classification, case study, oppenness, business model, open innovation, transformation, sme, internet-based please cite this paper as: iivari, m. 2015, dynamics of openness in smes: a business model and innovation strategy perspective, journal of business models, vol. 3, no. 2, pp. 30-50. 1 doctoral candidate, oulu business school, martti ahtisaari institute of global business and economics abstract purpose: in order to explore the dynamics of openness within smes, this study investigates how business model transformation relates to innovation strategy transformation. design/methodology/approach: this research is conducted as a longitudinal qualitative single case study in order to fully follow transformation as a process. findings: this research revealed that openness in smes is not about continuously increasing the level of openness, but smes can also begin to close their innovation strategy, even though the business model stays open. the level of openness varies based on strategic openness. research limitations/implications: this study emphasizes that openness needs to be viewed as a continuum, where the level of openness may fluctuate during transformation. furthermore, openness in business models and openness in innovation indeed are separate phenomena. practical implications: having an understanding how strategic openness guides business model transformation enables practitioners to better utilize open innovation as an innovation strategy. originality/value: through focusing on the relationship between business model transformation and innovation strategy transformation, we broaden the discussion on the dynamics of openness within smes. journal of business models (2015), vol. 3, no. 2, pp. 30-50 31 introduction the advancement of technologies, shortened product life cycles, changed market forces and consumer behavior have created new kinds of challenges for companies to meet in order to survive in the global competitive landscape (collins, 2006; christensen et al., 2005; bell and loane, 2010). this new scenario has led firms to become more open to innovative sources outside their organizational boundaries (ndou et al., 2011). when firms utilize innovation strategies that rely on cooperation with external parties to get access to components, complements and customers, it is referred to as open innovation (chesbrough et al., 2006). in this respect, open innovation (oi) has been defined as “a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization’s business model” (chesbrough et al., 2014). the purpose of business models is to utilize internal and external ideas to create value for the focal firm, while defining internal mechanisms to claim some portion of that value (chesbrough, 2012). it is business models that define the requirements for how open innovation processes combine these internal and external ideas together into architectures, systems and platforms (chesbrough, 2012). hence open innovation cannot be conceived without business models (chesbrough et al., 2014, 52). however, despite of the central role of business models in open innovation, quite often these have been ignored in academic literature (west and bogers, 2014). moreover, despite the significance of openness and collaboration in modern networked economy, the effects and aspects of openness in relation to business models are not sufficiently understood (frankenberger et al., 2014, 175). openness can exist in both innovation and business models: a firm may have an open innovation strategy but a closed business model, or a closed innovation strategy with an open business model chesbrough et al., 2014). openness emerges in varying scopes and intensities (saebi and foss, 2015; enkel and bader, 2012). therefore, rather than considering openness as a battle to choose between closed and open, we should view it as a continuum (chesbrough, 2003). the challenge then is to find the right balance between coordination and openness (boscherini et al., 2013; ahokangas and myllykoski, 2014). indeed, the new kinds of challenges in sustaining competitive advantage have resulted in existing firms the need to redesign and transform their business models (hienerth et al., 2011; glova et al., 2014). yet, academic literature has not adequately tackled issues related to business model transformation (ahokangas and myllykoski, 2014). business models reflect the strategic choices of the firm (saebi and foss, 2015; shafer et al., 2005; chesbrough, 2007), open innovation being one of the possible strategies for creating competitive advantage (chesbrough et al., 2014). identification of new business opportunities and business model transformation affects all levels of the organization (casadesus-masanell and ricart, 2010), as transforming the business model means changing the organization. it has been stated that small and medium-sized enterprises (smes), in particular, engage in open innovation as a consequence of the changes in the business model for seizing new business opportunities (vanhaverbeke et al., 2012, 10). open innovation in the sme context cannot thus be studied separately from the strategic objectives of the firm as a whole (vanhaverbeke et al., 2012). therefore, this research investigates transformation both in business models and innovation strategy in order to explore the dynamics of openness in the context of smes. accordingly, our research question is: “how does business model transformation relate to innovation strategy transformation?” our literature review first discusses the role of business models and business model transformation, after which open innovation and innovation strategy transformation are focused on. the last part of the literature review focuses on the peculiarities of transformation in the sme context. in the methodology chapter, we present the rationale for choosing a longitudinal single case study method, after which we present our case and research results. in the final chapter, we reflect these back to theory. we also discuss the academic and managerial implications as well as limitations of this study, and suggest further research directions. journal of business models (2015), vol. 3, no. 2, pp. 30-50 32 business models, open innovation and transformation business model transformation the business model concept originally emerged within e-business and has most extensively been studied in that context (ahokangas et al., 2014; onetti et al., 2012; amit and zott, 2001). however, there are no unified definitions of the business model concept (for more thorough discussion see, for instance, zott et al., 2011; onetti et al., 2012; ahokangas et al., 2014). a business model nevertheless represents the firm’s core logic and strategic choices for creating value as well as capturing a portion of that value (shafer et al., 2005; chesbrough, 2007; casadesus-masanell and ricart, 2010). as a unit of analysis, a business model may portray the firm’s value creation arising from multiple sources (amit and zott, 2001). business models can be thought of as a focal firm’s boundary-spanning transactions with external parties (zott and amit, 2007). for instance, zott and amit (2010, 42) define business model as a system of interconnected activities that determine the way the company does business with its customers, partners and vendors. this means that a business model is a system of specific activities conducted to satisfy the perceived needs of the market, along with the specification of who does what, whether it is the firm or its partners, and how do these activities link to each other. hence, through the business model concept, open innovation is differentiated from earlier research on inter-organizational cooperation for innovation (west and bogers, 2014; chesbrough et al., 2006; clausen and pohjola, 2009). indeed, collaboration of the focal firm with its ecosystem is one of the defining factors of business model openness, either as a decisive or novel element (frankenberger et al., 2014). the business model connects the focal firm with the external business environment, other firms, organizations, communities and individuals (teece, 2010). whereas the majority of general business model research is firm-centric (frankenberger et al., 2014), the field of open business model researches openness independent of its locus. open business models refer to situations where the firm relies on its external partners’ competencies in joint creation, delivery and capture of value according to agreements negotiated prior to their collaboration (chesbrough et al., 2014; saebi and foss, 2015). as the value is jointly created, partners usually team up throughout the whole product lifecycle (chesbrough et al., 2014). hence, value is generated through external relations within the ecosystem (west and wood, 2008; jansson et al., 2014). as ahokangas et al. (2014, 13) write, transformation of an existing business model brings special challenges to the creation stage of a business model. business model transformation is about transforming an existing organization through repositioning the core business and adapting the current business model into the altered market place (gilbert et al., 2012; ahokangas and myllykoski, 2014). transforming an organization requires a lot from the management (giannopoulou et al., 2011) in finding the right balance between coordination and openness (boscherini et al., 2013; ahokangas and myllykoski, 2014). the old ways and the new ways of doing things (giannopoulou et al., 2011) may become a challenge, as the activities and logic related to the new business model may be incompatible with the status quo (chesbrough, 2010). consequently, the business model should always be evaluated against the business context and further calibrated in order to find an optimal fit with the environment (teece, 2010). it is the context that influences the choices made by firms about their innovation practices (bellantuono et al., 2013). similarly, business models become fully comprehensible for firms only through action in the business context where they emerge (ahokangas and myllykoski, 2014). the search for a new business model often requires an extended period of co-existence between the current and new models (chesbrough, 2010). thus, a firm does not necessarily have to confine itself to a single business model but can experiment with several models simultaneously (trimi and berbegal-mirabent, 2012). during the transformation of a business, it is not clear what the eventual new business model will turn out to be, but only though experimentation the company can gain the data needed to justify the transformation. however, although business model as a concept includes an underlying assumption of a process, academic literature has not tackled the issues related to journal of business models (2015), vol. 3, no. 2, pp. 30-50 33 business model transformation (ahokangas and myllykoski, 2014). yet, finding the right level of openness is important, as open and closed business models cannot exist in pure form. a completely closed model does not give enough space for innovation, whereas a completely open model gives insufficient opportunities for generating profit (soloviev et al., 2010). innovation strategy transformation critics argue that firms have always practiced openness in one form or another (trott and hartmann, 2009; chesbrough et al., 2014; herstad et al., 2008; huizingh, 2011). a large number of firms have experienced complications in their attempts to benefit from external knowhow (enkel and bader, 2012). for instance, birkinshaw et al. (2011), state that the adverse effects may include considerable cost increases related to ipr issues, operations and lack of trust (see also dahlander and gann, 2010). a response to this is that today’s business reality, naturally, cannot be based solely on open innovation (enkel et al., 2009) but on openness in varying scopes and intensities (saebi and foss, 2015; enkel and bader, 2012). too much openness can have a negative impact, as it could lead to loss of control and loss of core competences. the focus should therefore be on whether to opt for a closed or open strategy for finding the right level of openness (laursen and salter, 2014; roper et al., 2013; dabrowska et al., 2013).thus, the transformation from closed to open innovation should be seen as a continuum rather than a case of either-or (chesbrough, 2003). open innovation is just one possible strategy for a firm to create a competitive advantage (chesbrough et al. 2014). this means that, in an open business model, the innovation process itself needs to be organizationally decomposed (lema, 2010). organizational decomposition of the innovation process is connected with new firm structures, managerial priorities and the firms’ boundaries (lema, 2010, 25). this means that the firms are required to transform their boundaries from closed to semi-permeable, so as to enable innovation to move easily between internal innovation process and external environment (chiaroni et al., 2010). an important point stressed by dabrowska et al. (2013, 3) is that internal openness to idea generation needs to be differentiated from open innovation as an actual practice of collaborating with external parties. laursen and salter (2006) suggest that firms embracing oi increase both the number of external sources relied upon in innovative activities, i.e., the breath, as well as the extent to which firms draw from different external sources within innovation networks, i.e., the depth. here, the business model acts as a boundary-spanning unit of analysis (zott et al., 2011) that defines those boundaries, structures and processes for open innovation (chesbrough, 2010), and the role of external parties within the firm’s activities (onetti et al., 2012, zott and amit, 2010). firms may choose from an array of different business models and open innovation strategies (saebi and foss, 2015). different types of strategies require different levels of openness in terms of breadth and depth (saebi and foss, 2015). however, little is known about how to match business models and oi strategies (saebi and foss, 2015). one reason for this is that literature has viewed open innovation and open business models as the same concept (chesbrough et al., 2014). however, there are major differences between the two. openness in innovation and openness in business models need to be recognized, understood, and treated as separate phenomena (frankenberger et al., 2014). according to chesbrough et al. (2014), tapping into external technologies and setting up collaborative deals in oi is usually of temporary nature. knowledge from external parties is required, but external partners do not necessarily help in creating value. once the project has been finished, the collaboration comes to an end. the business model has a long-term and more relationship-based stance, as it extends to the commercialization phase of innovations (chesbrough, 2010; teece, 2010). open innovation and business model transformation in smes it has become increasingly difficult to create innovations ‘behind closed doors’ in modern, globalized business environment (herstad et al., 2008). consequently, also smes in various industries have started to open their innovation processes and acquire external resources and capabilities (wynarczyk et al., 2013; spithoven et al., 2013). especially the development of ict technologies and the rise of the internet have enabled even smaller and younger firms to access the global business arena (onetti et al., 2012; bell and loane, 2010). in this kind of environment, innovative smes journal of business models (2015), vol. 3, no. 2, pp. 30-50 34 hold a crucial role in local-to-global economic development, dynamism and competitiveness (lecerf, 2012; ndou et al., 2011; hotho and champion, 2011). indeed, smes are considered to be both a source and a driver of innovation and new product development (chesbrough et al., 2014; wynarczyk, 2013; wynarczyk et al., 2013). new ways to conduct business, communicate ideas and exchange information have resulted in a range of new kinds of services and business models across an ecosystem of partners (turber and smiela, 2014; christensen et al., 2005). especially the extension of digital technologies to previously non-digital fields, that is, digitalization, has affected both the role of smes in modern business as well as the nature of services built on digital platforms (ministry of employment and the economy, 2015; turber and smiela, 2014). business models are often necessitated by technological innovation, which creates a need to bring discoveries to market as well as the opportunity to respond to unmet customer needs (teece, 2010; glova et al., 2014) hence, also the business model itself may act as an example of innovation (chesbrough, 2010). however, in open innovation literature, smes have started to gain more attention only within the past few years (chesbrough et al., 2014; lee et al., 2010; wynarczyk, 2013). it is important to acknowledge that the drivers of openness for small firms tend to be different from those for large firms (lee et al., 2010, 291; spithoven et al., 2013, brunswicker and vanhaverbeke, 2015). therefore, not all oi research can be directly applied to sme context (vanhaverbeke et al., 2012). it is important to consider how (internal) organizational and (external) industry factors help or hinder smes’ decision to open up (brunswicker and vanhaverbeke, 2015). for instance, it has been argued that particularly limited resources and capabilities force smes to search for different kinds of innovation partners outside their firm boundaries (brunswicker and vanhaverbeke, 2015; van de vrande et al., 2009; lee et al., 2010). in addition, smes use non-internal means of innovation more than large firms do, because the former consider alliances or networks as ways to extend their (technological) competences (lee et al., 2010, 291; brunswicker and vanhaverbeke, 2015). moreover, small firms often have just one articulated business model, whereas large firms with several business units usually have multiple business models (lema, 2010). yet, smes tend to experiment with multiple oi practices simultaneously when introducing new offerings to the market (spithoven et al., 2013; colombo et al., 2014). hence, the relationship between business models and open innovation is not clear within the sme context. research has tended to focus on the role of innovation and business models for start-ups and new technology-based firms (see e.g., onetti et al., 2012). however, “there is an experiential and time difference between the original creation of the business model and its subsequent transformation or change—even though the basic idea of the business model as a concept remains the same” (ahokangas and myllykoski, 2014, 7). thus, it is important to acknowledge that business model creation in new firms is a process that is different from business model transformation within established firms (ahokangas and myllykoski, 2014; ahokangas et al., 2014). we focus on transformation within established smes, which we describe in figure 1 below. figure 1. dynamics of openness and transformation here, transformation occurs in the openness continuum both in business models and innovation strategy, our particular interest being on how the relationship between business model transformation and innovation strategy transformation affects the dynamism of openness within smes. to summarize, the ability to transform is crucial for the competitiveness of smes, especially in constantly changing modern business environment. journal of business models (2015), vol. 3, no. 2, pp. 30-50 35 research methodology research design this study was framed as a qualitative single case study (yin, 1994; sosna et al., 2010), which is due to the explorative nature of the research question, the limited amount of research conducted in the area of transformation and the unique characteristics of open innovation and business models in the sme context. the case was chosen as the result of strategic sampling (bergenholtz, 2011). a case study method offers the best tool to research a complex phenomenon in a holistic, processoriented fashion (yin, 1994; eisenhardt, 1989; hotho and champion, 2011). whilst the case study approach is not meant for mass generalization of theoretical and empirical findings, cases can still offer enriching data of intimate nature that is unlikely to be revealed through highly quantitative, hypothesis-based research settings (denzin and lincoln, 1994; creswell, 1998; yin, 1994). furthermore, a single case study, rather than a multiple case study, enables the researcher to attain the richness and depth of the processes and dynamics of relations concerned (bergenholtz, 2011; dyer and wilkins, 1991). as the specific focus of the research is to follow a firm’s transformation process over time in a specific context, a longitudinal perspective to the case was applied. it can be argued that transformation per definition alone requires a similar perspective to capture its evolution. data collection and analysis in order to deeper the understanding of transformation as a phenomenon, the researchers carried out a triangulation of sources and adapted several techniques during the data collection process. the types of employed primary data collection techniques included semi-structured interviews, observation, documentation, and community-based research. the data consisted of interview data, email exchanges, project documents, proposals, briefs, meeting memos, budgetary and financial data, and human resource and partner databases. secondary data mainly included website information and general publicly available digital documents, print media, as well as social and online mediea. this kind of approach is said to maximize the robustness of the study (denzin and lincoln, 1994; creswell, 1998). the researchers also actively followed the firm’s participation in local business arena in formal and informal seminars and events. the recorded data were analyzed afterwards, based on thematic analysis (coffey and atkinson, 1996; aronson, 1994). to increase the validity and reliability of the research, also analyst triangulation was applied. for instance, during the interviews, one researcher performed questioning, and second researcher acted as a silent observer. afterwards, their notes were compared and combined. information was also forwarded to the interviewees for doublechecking and confirmation. over the period of four years, 11 semi-structured interviews were conducted among the key personnel of the firm (the founder, the ceo and the marketing manager) to elicit in-depth information about open innovation and business model transformation as well as contextual information particular to digital 3d design industry. interviews were supported by researcher participation in meetings, presentations and seminars. altogether 22.9 hours of recorded primary data was collected. when no interviews were conducted, the researchers focused on gathering secondary data. the rationale for leaving gaps between the interview dates was to allow a sufficient time for the business model changes to emerge as a strategy put in action rather than as a mere plan, as we claim that openness always has to lead to action in order to be a strategic approach. hence, the basic interview framework (appendix 1) was the same in all the interviews, as it allowed us to focus to pinpoint how transformation took place. the following table presents in more detail the recorded data of the study. journal of business models (2015), vol. 3, no. 2, pp. 30-50 36 table 1 details of recorded data type of data interviewee/event time and date semi-structured interview semi-structured interview semi-structured interview semi-structured interview semi-structured interview seminar semi-structured interview semi-structured interview semi-structured interview seminar semi-structured interview seminar semi-structured interview semi-structured interview founder ceo marketing manager assistant founder international business development seminar ceo founder founder business model development panel discussion founder international organization design founder founder 45min march 18, 2011 45min march 18, 2011 30min march 18, 2011 30min march 18, 2011 56min sep. 13, 2011 3h45min sep. 14, 2011 37min feb. 21, 2013 2h5min march 26, 2013 1h45min jan. 13, 2014 6,5h feb. 14, 2014 46min april 4, 2014 4h april 16, 2014 march 7, 2015 email interview april 22, 2015 email interview case analysis case description the case firm of this study, cubicasa, comes from digital design industry. the company focuses on offering interactive, 3d-technology-based, digital floor plans for real estate agencies. a digital floor plan is a virtual image of a physical floor plan of an apartment or property that is intended for sale or for rent. cubicasa started operating in 2005, with its main office in finland and production facilities in bangladesh. however, in 2008, when the global economic downturn hit, construction industry being one of the worst to suffer, the firm’s business practically ceased and the business was put on hold. in 2011, the management team decided to give the business another chance, and the total transformation of the business model began. in 2013, the new model was launched successfully, and the business started to grow steadily. the firm received venture capital funding in 2014 for boosting access to international real estate markets and for developing business opportunities based on the digitalized floor plan data. in 2015, the firm held 10 percent of the real estate market in finland, with a monthly growth rate of 15 percent, and has started to expand steadily in the us market. journal of business models (2015), vol. 3, no. 2, pp. 30-50 37 business models reflect the strategic choices of the company, and thus the choice of open innovation requires the firm to “define those ways to create, deliver and capture value in conjunction with external partners that are consistent with open innovation” (saebi and foss, 2015, 201). a business model should not only define what to do but also where to do it and by whom (onetti et al., 2012, 361). hence, we use the business model as a unit of analysis and apply a business model template that includes external business environmentas a unit of analysis and apply a business model template that includes external business environment model (see ahokangas et al. 2014). this template covers the elements of what the firm is offering, how business is conducted and why the firm thinks the product/service can be executed profitably and, lastly, where this all is to take place – all previous elements can be located internally or externally to the firm, as each part of the business model can be executed with outside parties (ahokangas et al. 2014, 15). case analysis in order to illustrate the business model transformation of cubicasa, we first present its prior business model and then describe the new business model. we then discuss, in more detail, what has changed during the transformation process and why. what – offering, value proposition, customer segments and differentiation floor plans are an important but a simple part of property business. the earlier business model focused on offering a range of project-based services for real estate and construction industries. the rationale was to offer a digitalized, animated form of traditional printed floor plans. hence the business opportunity was built around digital 3d floor plans. main competition consisted of studios producing non-animated images of houses and apartments. however, as the firm built up their re-entry to the markets, there was very little room for differentiation and the firm struggled to build competitive advantage. the firm needed a new strategy to rely on. the new vision of the founders included launching a genuinely global and virtually functioning web service that would be physically close to customers. the management decided to focus solely on real estate industry and started to build their business model around interactive, high-quality digital floor plans. in the new business model, the business opportunity was built around interactive indoor spaces concept. this was enabled by the high-quality technology and cloud-based service platform. the basic idea of cubicasa was that even a floor plan drawn on a napkin can be transformed into a digital form. the offering includes both single projects and on-going subscriptions. the firm states that they have a product that is simple to do, easy to control and fast to sell; “cubicasa is about letting things go from our grip. let’s use the power of internet for the first time in cubicasa’s history what it is really designed for.” figure 2. business model transformation in cubicasa journal of business models (2015), vol. 3, no. 2, pp. 30-50 38 how – key operations, basis of advantage, mode of delivery, selling and marketing the service itself was digital from the start, but, in the old model, sales and marketing was still based on traditional promotion tools, e.g., travelling salesmen, and there was no clear e-business strategy. last minute changes were difficult to master due to a fixed production system. in the past, the company website was mainly used for portraying product portfolio and did not have an active role in customer interaction. “we did manual labor; we were like headless chickens running around. we should have done better project management; better customer ordering system and everything else, and we didn’t do that... time for traditional sales in this business is over, and we need to be more clever and more clear about web-based businesses.” the software was originally licensed from another firm based in denmark. however, cubicasa innovated the business idea and its application beyond the scope and breadth of the original technology. the founder acquired the license and partnered up with a local firm in finland. during this partnership, the digital platform was developed to its peak and is now a crucial part of the current service and its functionality. in the new model, the venture operates completely online. a floor plan can be ordered and paid for by one click, and the delivery is straight to the client’s email within 24 hours. the floor plan design process works through a cloud-based platform, where floor plans are assigned to producers from bangladesh and vietnam. a cloud in this context refers to the practice of sharing computer resources by utilizing external servers for connectivity, management and storage of data, rather than using local servers or personal computers. also quality control and customer support happens through the same platform. the rationale for basing operations in the developed world is in the utilization of “impact sourcing”, which is a social mission for bringing internet-based jobs to disadvantaged communities (a million plans, accessed 8.3.2015; impacthub, accessed 8.3.2015). why – base of pricing, way of charging, cost elements and cost drivers in the old model, a large part of the budget consisted of sales and travel costs. if amendments to the blueprints were required, these resulted in additional costs due to the fixed production system. as operational costs were high, also the base of pricing was related to costbased invoicing. hence, expenses were vast compared to the small margins that came out of the floor plans. therefore, value-capture logic required a major overhaul. in the new model, pricing is based on online transactions through the digital platform. the use of cloud computing enables low costs and fast scaling up of production. the base of pricing is the same for each floor plan, the purpose of which is to make it clear for clients what they are paying for. this has been an important factor from the viewpoint of internationalization. the company also offers a subscription-based service for business clientele, with monthly invoicing. the firm provides both 2d and 3d models of the property for all, but subscribed clients also receive a link to an add-on interior design service. floor plans are created through crowdsourcing via the concept of “minitasking”, which speeds up the delivery and again offers a low-cost way of production, as any of the producers can take an order to process as soon as it appears on the platform. the utilization of impact sourcing enables high-quality floor plans with a competitive price, and the producers earn a commission for each floor plan produced. where – location of activities/items, internally or externally in the network or ecosystem the where-element in the business model is the most central element that implies the role of external environment. what is done in-house, what is executed through collaboration? during the transformation process, partnerships and collaboration became a very important part of the business. “for a small firm like us, doing everything from scratch on our own would have been costly, time consuming and quite impossible. we have a good technology and things are going well with our partner so it would have made no sense to do all that on our own! ” the core thinking is that the service should be as open as possible, with crowdsourcing (see von hippel and von krogh, 2006; marjanovic, fry and chataway, 2012) as an important strategy in both sales and production of floor plans. as nearly everything happens on an internet-platform between geographically distant journal of business models (2015), vol. 3, no. 2, pp. 30-50 39 locations, the location of activities is external. the firm is also in active dialogue with different parties of the local business ecosystem, but in every part of the venture’s activities external partners are utilized. the company has decided to opt for transparency in describing their operations, with international impact sourcing as an important part of the low-cost but ethical strategy. not only are they utilizing external parties, the firm is also providing a service where external developers are also able to benefit from cubicasa’s technology and partnership in developing their own services and applications. however, now that the firm is internationalizing actively into north american markets, they have started to build their own intellectual property (ip) with plans to take over the technology completely later on. the rationale is that, as the service is built on digital floor plan data and external developers are able to partake as well, more security and protection is needed. discussion summary of business model transformation cubicasa initiated its transformation by re-focusing on a single customer group of real estate business with both residential and commercial real estate markets. they simplified and sophisticated their offering, made it easier to use and easier to produce. the core – high quality 3d floor plans – has not changed, but the offering has been positioned differently around an interactive indoor space concept. steady turnover generated by floor plans made their business development efforts easier, as the firm is not solely dependent on external funds. they have resources of their own and are not confined by typical resource limitations faced by smes, as suggested by literature. digitalization in this transformation was one of the most important elements. the firm completely changed the way they operate and built their operations onto an online platform. this extended to all aspects of the business model in terms of the offering itself – rather than using technology and the internet as a technical addition, the firm decided to differentiate itself through an interactive service. as all key operations were online, their streamlining was easy to handle, from customer orders to support and quality control. this improved the visibility of operations but also provided transparency to customers. the utilization of cloud computing further reduced the need to own resources. it also speeded up operation processes, which resulted in new cost structure and better profit margins. this technology also enabled cubicasa to store floor plan data for future business development purposes. hence, the data can be used to extend the original business idea of digital 3d floor plans to create and experiment with other concepts and business models. by analyzing the business model transformation, the relationship to innovation strategy transformation can be exposed. collaboration with external parties in technology and service development has always been important. the firm has active interactions with other businesses, public organizations and with general public. in the case of cubicasa, their technology has always been open, first through licensing agreement and then through partnership. an interesting discovery is that only in the verge of internationalization and direction towards more data-reliant internet of things –world, the firm has started to develop their own intellectual property. in this sense, they are closing up a part of their innovation strategy. on the other hand, they have built an additional service where external developers are able to use cubicasa’s technology as part of their own services and applications. hence, cubicasa is not only taking advantage of the inclusion of external parties in their own innovation process but they have also opened their business model for others to benefit. hence, in terms of dynamics of openness, we can state that the firm is heading towards a closed innovation strategy but with an open business model. strategic openness even though the business model defines the requirements for open innovation in value creation and capture, our findings highlight that transformation in business models and innovation strategy do not necessarily travel to the same direction. to further clarify, we illustrate the transformation of cubicasa in figure 3 below and introduce the concept of strategic openness. we define strategic openness as “a conscious strategic move to incorporate external parties as part of the firm’s innovative activities”. through strategic openness, we are able to demonstrate how the journal of business models (2015), vol. 3, no. 2, pp. 30-50 40 figure 3. strategic openness relationship between business model transformation and innovation strategy transformation develops. based on findings of empirical research, we label the horizontal axis as the degree of openness and vertical axis as the importance of openness. these two dimensions determine not only how transformation takes place but also why transformation takes place as a strategic move. the degree of openness refers to how much the firm relies on external parties for innovation in terms of scope and/or intensity, whereas the importance of openness refers to the role of these external parties within the firm’s innovation activities. ownershipdriven openness refers to the traditional, closed innovation model. here, the strategic decisions are guided by the need or will to protect the firm’s own assets and competitive advantage. therefore, openness is not considered important. as more closed approach to innovation is taken as a strategic move, hence also the degree of openness is small. when the degree of openness is low, but the importance is high, we talk of resource-driven openness. here, firms are at the verge of openness and may not yet have a wide breadth or depth of external linkages in the innovation process. nevertheless, these linkages are considered very important for the survival of the firm. this is typical in case smes are constrained by lack of resources, in which case openness is a necessity rather than an option. when the importance of openness is low, but degree of openness high, firms can rely on contractually-driven openness. it is not so crucial to build relationships for joint innovation activities, as contracts are enough to provide assets the firm needs. when both the importance of openness and the degree of openness are high, we talk of relationship-based openness. here, close collaboration with other parties characterizes the nature of openness. this is most typical for smes that practice open innovation and have managed to pass the need to collaborate to access resources and where formal, distant contracts do not provide enough flexibility for the innovative purposes of the firm. here, openness relates more to co-creation and co-capture of value. as our purpose is to describe transformation as a process where openness is to be understood as a continuum, we are not aiming to build strict typologies. as our case illustrates, firms can be positioned on journal of business models (2015), vol. 3, no. 2, pp. 30-50 41 different points of strategic openness. furthermore, we do not claim that, for instance, contracts cannot be a way for resource-driven smes to access open innovation, but we stress the main drivers behind strategic decision-making, i.e., we refer to openness as a conscious strategic move. the case shows that there is also no clear time for when a business model is “complete”. the strategic choices of the firm guide the business model and determine the course of transformation. for cubicasa, resourcedriven openness has never been the main driver for transformation. the original business model was built around contractual-driven openness, as licensing was a major open innovation strategy for the firm. during the course of transformation, the company moved to relationship-driven openness, where close collaboration became highlighted for many years and co-creation of services was an important part of the collaborating firms’ offering. the most interesting direction is the firm’s strategic move towards ownership-driven openness. cubicasa’s current business model is still built around relationship-driven openness, but, in the future, the firm intends to start practicing internal r&d that they have not done before. our results indicate that openness for smes is not only about the inclusion of external parties as part of the business model and the innovation strategy but, as a strategic move, the firm can also close up. this is an important implication for viewing open innovation as a continuum. openness is not only going forward as a continuously increasing level of openness; the degree of openness can also revert back if the strategic direction of the firm requires so. hence, in terms of the dynamics of openness, it fluctuates both ways. conclusions this study utilized the business model as the unit of analysis in investigating how business model transformation relates to innovation strategy transformation. within the case company, the important trigger for transformation was the economic downturn the world faced in 2008. this resulted in changes in most elements of the business model, from offering to revenue streams. all changes in how-elements, i.e., delivery of the services and whyelements, i.e., basis of pricing, were subject to the decision to take full advantage of digitalization and base all operations online ‘in the cloud’ as well as to utilize crowdsourcing to develop the original business idea of high-quality service into an interactive platform. the role of ict in the case firm’s transformation was therefore central. in the case firm, the dynamics of openness was twofold, as it fluctuated both ways in the openness continuum. the internal and external dynamics of openness vary depending on the degree of openness and the importance of openness for the firm. therefore, the context smes operate should always be taken into account, as it influences the strategic choices firms make about their innovation practices, as pointed out by bellantuono et al. (2013), and ahokangas and myllykoski (2014). academic and practical implications our results emphasize that openness in business models and innovation indeed needs to be studied as separate phenomena, as stressed by chesbrough et al. (2014). our case illustrates that, also in the sme context, a closed innovation model does not mean that the firm cannot have an open business model. reflecting back to literature that states that smes utilize external parties due to lack of resources and capabilities capabilities (van de vrande et al., 2009, lee et al., 2010), it was not the case with this company. despite being an sme, cubicasa’s activities are very much directed by strategic decision-making. hence, we introduced strategic openness as a concept to explain the relationship between business model transformation and innovation strategy transformation. thus, we contribute to the academic discussions in both open innovation literature and business model literature. particularly, we aim to increase the body of knowledge in relation to smes (brunswicker and vanhaverbeke, 2015), as well as on the relationship between business models and open innovation (west and bogers, 2014; frankenberger et al., 2014). having an understanding about the role of the business model enables practitioners to determine the relationship between internal and external dynamics of openness in the firm’s activities, what is done inhouse and what is outsourced. indeed, it is important to understand that openness is not only about opening the organization with no going back but that firms need to be aware on the relationship between business journal of business models (2015), vol. 3, no. 2, pp. 30-50 42 models and innovation strategy. limitations and future research directions the main limitations relate to utilizing a single case study methodology. the case was only a representation of openness and transformation within an industry-specific sme. the role of digitalization and technology were emphasized in this firm’s transformation, but how transformation occurs in non-digital sme field was not addressed. however, this study offers several interesting research possibilities, both quantitative and qualitative in nature. the concept of strategic openness could be used in various contexts to investigate how the relationship between business models and innovation strategy develops. literature on open innovation has tended to focus on the need of smes to open up due to their lack of resources. our case revealed that also smes can close their innovation strategy. it would be interesting to see further studies on the dynamics of openness from this perspective. the case also shortly discussed the potential of multiple business models in smes. this would be a fruitful topic to tackle in future research, as it is not only large organizations with several departments that may have several business models (lema, 2010). this research discussed transformation, implying that also organizational change is required to fully benefit from openness. more research in this field is needed, as currently there are very few contributions with an organizational change perspective on the adoption of oi (chiaroni et al., 2010; boscherini et al., 2013). journal of business models (2015), vol. 3, no. 2, pp. 30-50 43 references ahokangas, p., juntunen, m. & myllykoski j. (2014) cloud computing and transformation of international e-business models. research in competence-based management, vol. 7, pp. 3-28. ahokangas, p. & myllykoski, j. (2014) the practice of creating and transforming a business model. journal of business models, vol. 2, no. 1, pp. 6-18. a million plans, cubicasa, available at http://www.millionplans.org/#!cubicasa/cf60 (accessed 8.3.2015) amit, r. & zott, c. (2001) value creation in e-business. strategic management journal, vol. 22, no. 6-7, pp. 493520. aronson, j. (1994) a pragmatic view of thematic analysis. the qualitative report, vol. 2, no. 1. bell, j. & loane s. (2010) ‘new wave’ global firms: web 2.0 and sme internationalization. journal of marketing management, vol. 26, no. 3-4, pp. 213-229. bellantuono, n., pontrandolfo, p. & scozzi, b. (2013) different practices for open innovation: a context-based approach. journal of knowledge management, vol. 17, no. 4, pp. 558-568. bergenholtz, c. (2011) knowledge brokering: spanning technological and network boundaries. european journal of innovation management , vol. 14, no. 1, pp. 74-92. birkinshaw, j., bouquet, c. & barsoux, j.-l. (2011) the 5 myths of innovation. mit sloan management review, vol. 52, no. 2, pp. 43-50. boscherini, l., chiaroni, d., chiesa, v. & frattini, f. (2013) the process of organisational change in open innovation: evidence from high tech firms. international journal of entrepreneurship and innovation management, vol. 17, pp. 177-205. brunswicker, s. & vanhaverbeke, w. (2015) open innovation in small and medium-sized enterprises (smes): external knowledge sourcing strategies and internal organizational facilitators. journal of small business management, vol. 3, no. 4, pp. 1241-1263. casadesus-masanell, r. & ricart, j. (2010) from strategy to business models and onto tactics. long range planning, vol. 43, pp. 195-215. chesbrough, h. (2012) open innovation: where we’ve been and where we’re going. research technology management, vol. 55, no. 4, pp. 20-27. chesbrough, h. (2010) business model innovation: opportunities and barriers. long range planning, vol. 43, pp. 354-363. chesbrough, h. (2007). why companies should have open business models. mit sloan management review, vol. 48, no. 2, pp. 22–28. chesbrough, h. (2003) the era of open innovation. mit sloan management review, vol. 44, no. 3, pp. 35-41. chesbrough, h., vanhaverbeke, w. and west, j. (2014.) new frontiers in open innovation. oxford university press, oxford journal of business models (2015), vol. 3, no. 2, pp. 30-50 44 chesbrough, h., vanhaverbeke, w. & west, j. (2006) open innovation: researching a new paradigm, oxford university press, oxford. chiaroni, d., chiesa, v., & frattini, f. (2010) unravelling the process from closed to open innovation: evidence from mature, asset-intensive industries. r&d management, vol. 40, no. 3, pp. 222-245. christensen, j.f., olesen, m.h. & kjær, j.s. (2005) the industrial dynamics of open innovation: evidence from the transformation of consumer electronics. research policy, vol. 34, pp. 1533–1549. clausen, t.h. & pohjola, m. (2009) international competitiveness: internal capabilities and open innovation as a source of export performance. micro-dyn working paper, university of oslo, oslo. coffey, a. & atkinson, p. (1996) making sense of qualitative data: complementary research strategies, sage publications, london. collins, l. (2006) opening up the innovation process. engineering management, february/march 2006, 14-17. colombo, m.g., piva, e. & rossi-lamastra, c. (2014) open innovation and within-industry diversification in small and medium enterprises: the case of open source software firms. research policy, vol. 43, no. 5, pp. 891-902. creswell, j. w. (1998). qualitative inquiry and research design: choosing among five designs. sage publications. thousand oaks, california. dabrowska, j., fiegenbaum, i. & kutvonen, a. (2013) mapping the perception and reality of open innovation. international journal of innovation management, vol. 17, no. 6, pp. 1-25. dahlander, l. & gann, d.m. (2010) how open is innovation? research policy vol. 39, pp. 699-709. denzin, n.k. & lincoln, y.s. (2008) strategies of qualitative inquiry, 3rd ed., sage publications. thousand oaks, california. dyer, g.w. and wilkins, a.l. (1991), “better stories, not better constructs, to generate better theory: a rejoinder to eisenhardt”, academy of management review, vol. 16 no. 3, pp. 613-9. eisenhardt, k. (1989) building theories from case study research academy of management review, vol. 14 no. 4, pp. 532-550. enkel, e. & bader, k. (2012) balancing open and closed innovation: strategy and culture as determinants. presented at the xxiii ispim conference, june 17-20, 2012, barcelona. enkel, e., gassmann o. & chesbrough h. (2009) open r&d and open innovation: exploring the phenomenon. r&d management vol. 39, no. 4, pp. 311-316. frankenberger, k., weiblen, t. & gassmann, o. (2014) the antecedents of open business models: an exploratory study of incumbent firms. r&d management, vol. 44, no. 2, pp. 173-188. giannopoulou, e., yström, a. & ollila, s. (2011) turning open innovation into practice: open innovation research through the lens of managers. international journal of innovation management, vol. 15, no. 3, pp. 505-524. gilbert, c., eyring, m. & foster, r.n. (2012) two routes to resilience – rebuild your core while you reinvent your business model. harvard business review, december 2012, pp. 1-9. glova, j., sabol, t. & vajda, v. (2014) business models for the internet of things environment. procedia economics journal of business models (2015), vol. 3, no. 2, pp. 30-50 45 and finance, vol. 15, pp. 1122-1129. herstad, s.j., bloch, c., ebersberger, b. & van de velde, e. (2008) open innovation and globalisation: theory, evidence and implications. vision: era-net, available: http://www.tem.fi/files/25709/open_innovation_and_ globalisation.pdf (accessed 29.4.2015) hienerth, c., keinz, p. & lettl, c. (2011) exploring the nature and implementation process of user-centric business models. long range planning, vol. 44, pp. 344-374. hotho, s. & champion, k. (2011) small businesses in the new creative industries: innovation as a people management challenge. management decision, vol. 49, no.1, pp. 29-54. huizingh, e.k.r.e, (2011) open innovation: state of the art and future perspectives. technovation, vol. 31, pp. 2-9. impacthub, what’s impact sourcing? available at http://impacthub.org/about/ (accessed 8.3.2015) jansson, n., ahokangas, p., iivari, m., perälä-heape, m. & salo, s. (2014) the competitive advantage of an ecosystemic business model: the case of ouluhealth. interdisciplinary studies journal, vol. 3, no. 4, pp. 282-295. laursen, k. & salter, a. (2006) open for innovation: the role of openness in explaining innovation performance among u.k. manufacturing firms. strategic maanagement journal, vol. 27, pp. 131-150. laursen, k. & salter, a, (2014) the paradox of openness: appropriability, external search and collaboration. research policy, vol. 43, no. 5, pp. 867-878. lecerf, m. (2012) internationalization and innovation: the effects of a strategy mix on the economic performance of french smes. international business research, vol. 5 no. 6, pp. 2-13. lee, s., park, g., yoon, b. & park j. (2010) open innovation in smes – an intermediated network model. research policy, vol. 39, pp. 290-300. lema, r. (2010) adoption of open business models in the west and innovation in india’s software industry, ids research report 62, institute of development studies, university of sussex, uk marjanovic, m., fry, c. & chataway, j. (2012) crowdsourcing based business models: in search of evidence for innovation 2.0. science and public policy, vol. 39, pp. 318-332. ndou, v., del vecchio, p. & schina, l. (2011) open innovation networks: the role of innovative marketplaces for small and medium enterprises’ value creation. international journal of innovation and technology management, vol. 8, no. 3, pp. 437–453. onetti, a., zucchella, a., jones, m. & mcdougall-covin, p. (2012) internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management and governance, vol. 16, pp. 337-368. roper, s., vahter, p. and love, j.h. (2013) externalities of openness in innovation. research policy vol. 42, pp. 15441554. saebi, t. & foss, n.j. (2015) business models for open innovation: matching heterogenous open innovation strategies with business model dimensions. european management journal, vol. 33, no. 3, pp. 201-213. journal of business models (2015), vol. 3, no. 2, pp. 30-50 46 service economy revolution and digitalisation – finland’s growth potential (2015), publications of the ministry of employment and the economy, 41/2015, ministry of employment and the economy, finland. available at: http:// www.tem.fi/files/43374/temjul_41_2015_web_22062015.pdf shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, vol. 48, no. 3, pp. 199–207. soloviev, v.i., kurochkin, p.a., rendiuk, a.v. & zazuk, a.v. (2010) innovative business models in the media industry. annales universitatis apulensis series oeconomica, vol. 12, no. 2, pp. 692-697. sosna, m., trevinyo-rodríguez, r.n. & velamuri, s.r. (2010) business model innovation through trial-and-error learning. long range planning, vol. 43, pp. 383-407. spithoven, a., vanhaverbeke, w. & roijakkers, n. (2013) open innovation practices in smes and large enterprises. small business economics, vol. 41, no. 3, pp. 537-562. teece, d.j. (2010) business models, business strategy and innovation. longe range planning, vol. 43, pp. 172-194. trimi, s. & berbegal-mirabent, j. (2012) business model innovation in entrepreneurship. international entrepreneurship management journal, vol. 8, 449-465. trott p. and hartmann d. (2009). why ‘open innovation’ is old wine in new bottles. international journal of innovation management vol. 13, pp. 715-736. turber, s. & smiela, c. (2014) a business model type for the internet of things, presented at the twenty second european conference on information systems, tel aviv. van de vrande, v, de jong, j.p.j, vanhaverbeke, w & de rochemont, m. (2009) open innovation in smes: trends, motives and management challenges. technovation, vol. 29, pp. 423-437. vanhaverbeke, w., vermeesch, i. & de zutter, s. (2012) open innovation in smes: how can small companies and start-ups benefit from open innovation strategies? flanders dc study, available: http://www.sciencebusiness. net/eif/documents/open-innovation-in-smes.pdf (accessed 1.4.2015) von hippel & von krogh, g (2006) free revealing and the private-collective model for innovation incentives. r&d management, vol. 36, no. 3, pp. 295-306. west, j. & bogers, m. (2014) leveraging external sources of innovation: a review of research on open innovation. journal of product innovation management. vol. 31, no. 4, pp. 814-831. west, j., & wood, d. (2008). creating and evolving an open innovation ecosystem: lessons from symbian ltd, presented at the hbs-mit user and open innovation workshop, august 2008, boston, ma wynarczyk, p. (2013), open innovation in smes: a dynamic approach to modern entrepreneurship in the twentyfirst century. journal of small business and enterprise development, vol. 20, no. 2, pp. 258-278. wynarczyk, p., piperopoulos, p. & mcadam, m (2013) open innovation in small and medium-sized enterprises: an overview. international small business journal, pp. 1-16. published online 13 january 2012. yin, r.k. (1994), case study research, design and methods (2nd ed.) newbury park, ca. sage publications. zott, c. & amit, r. (2010) business model design: an activity system perspective. long range planning, vol. 43, pp. 216-226. journal of business models (2015), vol. 3, no. 2, pp. 30-50 47 zott, c. & amit, r. (2007) business model design and the performance of entrepreneurial firms. organization science, vol. 18, no. 2, pp. 181–199. zott, c., amit, r. & massa, l. (2011) the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2015), vol. 3, no. 2, pp. 30-50 48 appendix 1. interview questions to guide thematic interviews current strategy and business model 1. what is your business and industry context like? 2. do you have a formally drafted strategy and business model? 3. what has the innovation strategy in cubicasa been so far? how has it worked or not worked? 4. what do you think the reasons for those are? 5. how do you measure success/performance? 6. how well do you know of open innovation as a concept? strategy and business model transformation 1. how has your strategy changed and developed? 2. how about your business model, if you compare it to the past, how has it transformed? what were the key reasons for the change? 3. what is the new business model and strategy for cubicasa? 4. what does openness mean to you in terms of business model, business practices and innovation management? 5. you mentioned that the “old way of doing sales” was over and internet needed to be better utilized for sales. can you explain further? 6. what is the role of external collaboration in relation to a. key resources (e.g., internet platform) b. key partners (what kind, where) c. customers (segments, relationships, push, pull, level of collaboration) 7. what are the main open innovation practices and how important are they? a. information sources for innovation b. sources for external r&d c. types of collaborative innovation d. ip protection methods for innovation journal of business models (2015), vol. 3, no. 2, pp. 30-50 49 8. how systematic is the use of open practices? are these stated in the strategy “this is how we do it?” “this is important?” 9. what have been the most fruitful types of open innovation practices in terms of validating the new business model and value proposition? 10. do you think you could have achieved what you have achieved so far if you only did internal development? why is that? future forward 11. what are your views about open innovation as an internationalization strategy? 12. in terms of scaling and internationalizing the business, what are the main issues with external collaboration and innovation? 13. what is your position now in terms of thinking for future strategy? open or closed innovation, or both? (how and when to be open, when not?) 14. what do you think could be the potential challenges with open innovation strategy? what would be an alternative? 15. where do you draw the limit on openness? what is too much openness? journal of business models (2015), vol. 3, no. 2, pp. 30-50 50 about the author ms. marika iivari (m.sc. in international business) is a doctoral candidate at the aacsb accredited oulu business school, finland. she is completing her doctoral dissertation on business models and open innovation in the context of innovation ecosystems. she is currently working on a research project on industrial internet, business models and transformation. previously she has worked on living labs and open innovation ecosystem in the context of integrative urban planning and smart cities. journal of business models (2016), vol.4 , no. 2, pp. 22-41 22 purpose: in the magazine publishing industry, viable online business models are still rare to absent. to prepare for the ‘digital future’ and safeguard their long-term survival, many publishers are currently in the process of transforming their online business model. against this backdrop, this study aims to develop a deeper understanding of (1) how the different building blocks of an online business model are transformed over time and (2) how sources of value creation unfold during this transformation process. methodology: to answer our research question, we conducted a longitudinal case study with a leading german business magazine publisher (called biz). data was triangulated from multiple sources including interviews, internal documents, and direct observations. findings: based on our case study, we find that biz used the transformation process to differentiate its online business model from its traditional print business model along several dimensions, and that biz’s online business model changed from an efficiencyto a complementarityto a novelty-based model during this process. research implications: our findings suggest that different business model transformation phases relate to different value sources, questioning the appropriateness of value source-based approaches for classifying business models. practical implications: the results of our case study highlight the need for online-offline business model differentiation and point to the important distinction between service and product differentiation. originality: our study contributes to the business model literature by applying a dynamic and holistic perspective on the link between online business model changes and unfolding value sources. the unfolding of value sources during online business model transformation nadja hoßbach1 (corresponding author), martin wiener2, carol s. saunders3 abstract please cite this paper as: n. hoßbach, m. wiener, c.s. saunders, (2016) the unfolding of value sources during online business model transformation, journal of business models, vol. 4, no. 2 keywords: online business model, business model dimensions and elements, transformation process, value sources, magazine publishing industry, case study. 1 friedrich-alexander university of erlangen-nuremberg, chair of information systems iii, lange gasse 20, 90403 nuremberg, germany phone: +49 911 5302-801, email: nadja.hossbach@fau.de 2 bentley university, information and process management department 175 forest street, waltham, ma 02452, usa 3 northern arizona university, w. a. franke college of business po box 5638, flagstaff, az 86011, usa journal of business models (2016), vol.4 , no. 2, pp. 22-41 23 introduction rapid advances in internet-based technologies have provided companies with new business opportunities (rayport and sviokla, 1995) and prompted many to supplement their traditional offline business models (bms) with new online bms. an online bm can be described as a “blueprint of how a company does business [on the internet]” (osterwalder et al., 2005, p. 2). in many industries such as entertainment, media, retail and software, the relative importance of online bms is continuously increasing (e.g., chan-olmsted and ha, 2003; gebauer and ginsburg, 2010; swatman et al., 2006). this is particularly true for the magazine publishing industry, where changing customer demands led to a steady decrease in print copy sales and print advertising revenues (e.g., krüger et al., 2004; mottweiler et al., 2013). to prepare for the ‘digital’ future and to cushion the decrease in print revenues, magazine publishers introduced new online bms by offering free content on ad-financed websites (wellbrock and schnittka, 2014). nonetheless, most publishers continue to rely heavily on their offline bm since profitable online bms are still rare to absent (silva, 2011). the struggle for profitability is mainly driven by the unwillingness of users to pay for online content (chyi, 2005). against this backdrop, many magazine publishers are currently transforming their online bm in an effort to make it profitable and to safeguard their long-term survival and success. over the last fifteen years, research on (online) bm transformation has accumulated a growing body of knowledge. specifically, existing studies contribute to a deeper understanding of the barriers and drivers (e.g., chesbrough, 2010), the types (e.g., cavalcante et al., 2011), and the phases of bm transformation (e.g., kuivalainen et al., 2009) as well as the role of capabilities (e.g., khanagha et al., 2014) and experimentation (e.g., sosna et al., 2010) in transforming bms. moreover, earlier research establishes the link between bm innovation and value creation in terms of organizational performance (e.g., heij et al., 2014). despite these considerable advances, two gaps in the extant literature are particularly noteworthy. first, existing bm research tends to “only consider one or a few pieces of the whole” (al-debei and avison, 2010, p. 364). this shortcoming also applies to prior research in the specific context of the publishing industry, where studies often focus on online revenue models (e.g., chyi, 2005; fetscherin and knolmayer, 2004; gallaugher et al., 2001). although the revenue model clearly represents a focal element of any bm, it still represents only one element among many (al-debei and avison, 2010; osterwalder et al., 2005). existing research therefore partly fails to provide a more comprehensive understanding of how the different and interrelated building blocks of a bm are affected by transformation processes. second, existing research predominantly studies the link between bm transformation and value creation on an aggregated level and from a rather static perspective (e.g., amit and zott, 2012; aspara et al., 2010; heij et al., 2014; schief, 2013). in other words, prior studies typically focus on assessing final outcomes (e.g., firm performance) of bm transformation processes at a particular point in time. in contrast, a more dynamic perspective that takes into account how bm changes relate to emerging sources of value creation is widely lacking. consequently, our understanding of how and in what sequence value sources unfold during bm transformation is still limited. to address the above-highlighted research gaps, we conducted a longitudinal case study with a german business magazine publisher, biz (pseudonym), on the transformation of its online bm. in particular, our study aims to answer the following two research questions (rq): • rq1: how are the different building blocks of an online bm transformed over time? • rq2: how do sources of value creation unfold during the online bm transformation process? the remainder of the paper is structured as follows: in section 2, we introduce the bm concept and review prior literature on (online) bm transformation and value creation on the internet. section 3 describes the research methodology and context. we then outline the initial configuration of biz’s online bm in section 4, and present the case results in section 5. section 6 summarizes key case findings and discusses theoretical and practical implications. we conclude by highlighting our study’s main contributions. journal of business models (2016), vol.4 , no. 2, pp. 22-41 24 theoretical background business model concept in many disciplines such as management, entrepreneurship, innovation, and information systems (is), one can observe an increasing interest in studying bms (e.g., johnson et al., 2008; veit et al., 2014; zott et al., 2011). nevertheless, the bm concept is still “fuzzy and vague and there is little consensus on its definition and compositional elements” (fielt, 2013, p. 86). to address this shortcoming, al-debei and avison (2010) developed a unified bm definition and framework that accounts for “the complex nature of businesses today” (p. 359). based on their review of 22 wellestablished bm conceptualizations (e.g., including those by chesbrough and rosenbloom, 2002; hedman and kalling, 2003; osterwalder et al., 2005), al-debei and avison define a bm as “an abstract representation […] of all core interrelated architectural, co-operational, and financial arrangements designed and developed by an organization [and] all core products and/or services the organization offers” (p. 372), and propose a four-dimensional bm framework (see fig. 1). in this study, we adopt the four bm dimensions proposed by al-debei and avison (2010) and tailor them to the particularities of the magazine publishing industry (e.g., fielt, 2013): • product and services – captures a company’s market offerings as well as target customers and their preferences. main customers of magazine publishers include both advertisers (b2b) and readers (b2c). • architecture – refers to a company’s core resources and their configuration as well as key activities required for generating the market offerings. in the publishing industry, key activities include information gathering, organizing, filtering and synthesizing, as well as content distribution (rayport and sviokla, 1995; wirtz et al., 2010). • network – describes interactions and relationships with key external partners, such as other publishing houses, news agencies, etc. • finance – covers the economic configuration including a company’s cost and revenue structures. al-debei and avison’s (2010) bm framework, which originated from the information systems literature, seems to be well suited for understanding, guiding, and structuring our analysis in the specific context of online bm transformation. furthermore, by adopting their framework, our study takes into the account the multidimensionality of the bm concept (e.g., günzel and holm, 2013; wikström and ellonen, 2012) and its applicability to the publishing industry. this is in clear contrast to many earlier studies, which focused on a subset of bm dimensions or even a single bm element (e.g., giessmann and stanoevska-slabeva, 2012; wirtz et al., 2010). among others, this has led to research on publishers’ online revenue models (e.g., chyi, 2005; fetscherin and knolmayer, 2004; gallaugher et al., 2001). business model transformation while early research tends to view a company’s bm as static, more recent research emphasizes that bms are frequently revised and adapted (sosna et al., 2010) and that they are in “a permanent state of disequilibrium” (demil and lecocq, 2010, p. 242). this is referred to as bm transformation, which describes how a company’s bm changes over time. such changes may relate to one specific bm element (e.g., core resources) or may affect several elements (e.g., core resources and products). existing research contributes to our knowledge on bm transformation by bracketing the transformation process into phases (e.g., khanagha et al., 2014; kuivalainen et al., 2009; sosna et al., 2010). relatedly, chesbrough (2010, p. 362) identifies an “effectual attitude toward business model experimentation” and “internal leaders for business model change” as key facilitators for bm innovation. this is consistent with other studies stressing the importance of experimentation and trialand-error learning (e.g., khanagha et al., 2014; rindova fig. 1 business model dimensions and elements (building blocks) journal of business models (2016), vol.4 , no. 2, pp. 22-41 25 and kotha, 2001) as well as dynamic capabilities (e.g., daniel and wilson, 2003; johansson and abrahamsson, 2014) in relation to bm innovation and organizational renewal. furthermore, prior research suggests different types of bm transformation, such as creation, extension, revision, and termination (e.g., cavalcante et al., 2011; günzel and holm, 2013). several studies also highlight the central role of a company’s bm for creating customer value (e.g., teece, 2010; weill and woerner, 2013), or, more generally, for creating value for each party in the company’s network (al-debei and avison, 2010; amit and zott, 2001). relatedly, a company’s bm is acknowledged as a source of competitive advantage (e.g., casadesus-masanell and ricart, 2011; markides and charitou, 2004) and is used to explain firm performance in terms of profitability, revenue, and headcount growth (e.g., amit and zott, 2012; heij et al., 2014; schief, 2013). however, given the predominant focus on aggregated bm transformation outcomes (e.g., competitive advantage or firm performance), existing research tends to oversimplify the relationship between bm transformation and value creation. this is consistent with amit and zott (2001) who identify four sources of value creation on the internet, thereby describing more direct outcomes of online bm transformation processes. sources of value creation on the internet amit and zott (2001) argue that explaining the value creation potentials of online business (models) goes beyond the scope of single entrepreneurship and strategic management theories. drawing on and integrating different theoretical perspectives, such as the resource-based view of the firm (barney, 1991) and porter’s (1985) value chain framework, amit and zott (2001) identify four key sources of value creation on the internet: efficiency, complementarities, novelty, and lock-in (see fig. 2). efficiency relates to lower transaction costs in online business and can be assessed in comparison to a company’s offline business or other companies’ online businesses (amit and zott, 2001). specifically, the internet helps reduce information asymmetries (gregor et al., 2006) as well as costs related to marketing, sales, distribution, and coordination (e.g., bakos and treacy, 1986). it also enables improved transaction scalability, speed, and staff productivity (amit and zott, 2001). complementarities refer to the value-enhancing effect of (positive) interdependencies among companies (e.g., access to products, services, and resources of a partner company), between online and offline bms, as well as between different online bm elements (amit and zott, 2012). novelty concerns value creation potentials that are new to a given company’s (online) bm, and thus “captures the degree of bm innovation that is embodied by the activity system” (amit and zott, 2012, pp. 45-46). the internet enables not only new online products and services, but also access to new customer groups and data as well as the development of new market capabilities. furthermore, it enables new transaction structures (e.g., ebay) and helps bring together market actors that were not previously connected (amit and zott, 2001). fig. 2 value sources in online business (based on amit and zott, 2001) journal of business models (2016), vol.4 , no. 2, pp. 22-41 26 lock-in refers to bm features that “create switching costs or enhanced incentives for [customers] to stay and transact within the activity system” (amit and zott, 2012, p. 45-46). for example, the internet enables companies to foster customer involvement and participation (e.g., through user-generated content) and to benefit from network externalities, which occur “when the value created for customers increases with the size of the customer base” (amit and zott, 2001, p. 507). it is important to note that amit and zott’s (2001) study adopts a broad view of value, which refers to “the total value created in [online] transactions regardless of whether it is the firm, the customer, or any other participant in the transaction who appropriates that value” (p. 503). our study, however, adopts a more narrow view of value by focusing on value creation potentials from the perspective of the firm that runs the online bm. in summary, our study draws on two well-established (structural) frameworks: al debei and avison’s (2010) bm framework for conceptualizing the building blocks of an online bm and amit and zott’s (2001) valuesource framework for conceptualizing the value sources that result from (changes to) the online bm configuration. ‘continuously’ applying these two frameworks at different points in time enabled us to explore the dynamics and behavioral aspects of the online bm transformation process in a structured manner, and thus to answer our research questions. interestingly, while several studies use amit and zott’s value-source framework to classify bms in terms of their dominant source of value creation (e.g., bornemann, 2009; johansson and abrahamsson, 2014; zott and amit, 2010), our study uses their framework to characterize online bm dynamics during the transformation process. research methodology to answer our research questions, we conducted a longitudinal single-case study with a major german business magazine publisher called biz (pseudonym). the case-study approach is particularly suitable for studying “how” research questions (yin, 2014), and allowed us to conduct an in-depth investigation of the transformation process of biz’s online bm—our focal unit of analysis—in its real-life context and over an extended period of time, 2010-2014 (flyvbjerg, 2006; yin, 2014). case context and selection the magazine (and newspaper) industry “went through more structural changes in the past ten years than in the whole second half of [the 20th] century” (silva, 2011, p. 301). these changes were primarily driven by the emergence of new internet-based technologies, including smartphones and tablet pcs, web 2.0 and social media platforms, etc. (bharadwaj et al., 2013; wikström and ellonen, 2012). most importantly, these technologies provided internet users with an unprecedented wealth of freely accessible online content, thereby reducing the incentives for customers to buy print copies and pay for content in general (sumner, 2010). ‘digital natives’ especially tend to have less appreciation for high-quality, research-intensive content since they often lack “the ability to read deeply and to sustain a prolonged engagement in reading” (liu, 2005, p. 701). the rise of the internet age thus led to shrinking print copy sales (see also fig. 3) and print advertising revenues in the magazine publishing industry, and ultimately to massive market shakeouts. for instance, in the german market, there were 13 business magazines in 2003, while there were only six left in 2013 (ivw, 2014). in contrast, the online advertising market has been growing considerably in recent years. for instance, in germany, online advertising budgets grew by 69.2% from 2013 to 2014 (statista, 2014). consequently, even though profitable online bms are still rare to absent (silva, 2011), the relative importance of these bms is steadily increasing in the magazine publishing industry (jarren et al., 2012; mottweiler et al., 2013; wikström and ellonen, 2012). the rationale for selecting biz as the case company followed an information-oriented selection strategy fig. 3 development of german business magazines’ print copy sales (ivw, 2014) journal of business models (2016), vol.4 , no. 2, pp. 22-41 27 (flyvbjerg, 2006). this strategy aims to maximize the utility of information from single cases by selecting a case “on the basis of expectations about [its] information content” (p. 230). specifically, there were two main reasons for selecting biz. first, founded in the 1970s, biz is an established key player in the german business magazine market, and is considered to be the market leader in its segment. second, while biz’s online bm had been relatively stable since its launch in the mid 2000s, a management review in 2010 triggered a series of major changes to the online bm in subsequent years. data collection consistent with established guidelines on case-study research (eisenhardt, 1989; yin, 2014), we collected data from multiple sources. this data triangulation allowed us to do pattern matching across data sources and helped us identify convergent lines of inquiry. first, before the main data collection, we scheduled a series of informational meetings with biz’s management. these meetings provided us with a solid understanding of biz’s history, business context and key events related to the transformation of biz’s online bm. second, we conducted ten semi-structured interviews with key biz representatives on different hierarchical levels and from different functional areas over an extended time period (april to september 2014). seven interviews were carried out with the managing director of biz. interviewing him multiple times enabled us to develop a detailed understanding of the online bm transformation process and progress. the other interviews were conducted with the online editor in chief (eic), an online editor, and the senior it manager. the interviews followed myers and newman’s (2007) guidelines for qualitative interviews, and lasted from 30 minutes to over two hours. before each interview, an interview guideline with sample questions was sent to the interview partner. the interviews were taperecorded, transcribed, enriched with case notes, and aggregated into a case study database. follow-up emails and phone calls were used to clarify questions that arose during the interview transcription and data analysis. third, we regularly visited the case site, which enabled us to better understand the case context and make direct observations (yin, 2014). for example, during one visit, we were able to observe how the online eic used a new website control system to access real-time performance information on biz’s online content offerings. fourth, the interview partners provided us with internal presentations, monthly management reports, and meeting minutes covering the period from april 2010 through september 2014. we also reviewed internal documentation concerning the implemented changes to the biz website and the historical development of the website reach dating back to early 2010. fifth, we retrieved external quantitative data from ivw (informationsgemeinschaft zur feststellung der verbreitung von werbeträgern e. v.) and agof (arbeitsgemeinschaft online forschung e.v.). on their publicly accessible websites, these associations provide detailed performance data on the reach of biz’s website (e.g., website visits). sixth and finally, we scanned industry insider blogs and business news websites to gather external qualitative data about biz’s online bm developments. the main purpose for collecting such external data was to enrich and validate the data collected internally (huber and power, 1985). data analysis we approached the analysis of our case data with a deep understanding of the theoretical domains of our study (bm transformation and value creation on the internet). to analyze the collected data, we performed a combination of conceptand data-driven coding (gibbs, 2010) with help of a qualitative data analysis software (nvivo 9). we derived the initial coding scheme from the bm dimensions proposed by al-debei and avison (2010) as well as the value sources identified by amit and zott (2001), and subsequently refined it by codes that emerged from our line-by-line coding. the coding was done by the first author in an iterative process. preliminary results were discussed with the other authors to resolve ambiguities and uncertainties. in these discussions, the authors alternated between constructive and critical positions (eisenhardt, 1989) to consolidate the coding scheme and ensure consistent coding across the case data. during the coding process, we also wrote memos to document the timeline 1 coefficient of reliability = 2m / (n1+n2), where m is the number of coding decisions upon which the two coders agree, and n1 and n2 are the numbers of coding decisions made by coder 1 and coder 2, respectively. journal of business models (2016), vol.4 , no. 2, pp. 22-41 28 of events, capture the relationships between different codes, and link the codes with existing literature. we continued the iterative coding process until we reached theoretical saturation, which occurred when no new codes and relationships between codes emerged from our data (yin, 2014). to ensure the reliability of the coding process, a second, independent researcher (who is not part of the author team) re-coded two randomly selected interview transcripts. we then calculated the inter-rater agreement using holsti’s (1969) coefficient of reliability1 , which was 88%. according to neuendorf (2002), a coefficient of 90% or greater is acceptable in all, and a coefficient of 80% or greater is “acceptable in most situations” (p. 145). to analyze the process of how biz transformed the different dimensions and elements of its online bm, we sorted the developed codes in chronological order. here, we identified several critical events that triggered a set of related changes. these changes are ‘bracketed’ into four phases and describe the transformation of biz’s online bm as well as the related unfolding of value sources between april 2010 (when biz performed a critical review of its online bm) and september 2014. according to langley (1999), a temporal bracketing strategy is well suited for single-case studies such as ours. finally, we compared the results of our analysis with prior research results to draw and explain conclusions, and also discussed our conclusions with biz management for validation purposes. initial configuration of biz’s online business model this section depicts the configuration of biz’s online bm in early 2010, the starting point of our investigation, along the four bm dimensions (see fig. 1 above). the main results of our case study follow in section 5. products and services: the core products of biz’s online bm comprised offerings for online readers and advertisers. for its readers, biz provided up-to-date business news and business-related articles (such as company analyses) on its website. all website content was generated by biz’s online editorial office, and was offered free of charge. for advertisers, biz offered static advertising formats (e.g., online banners), either separately or combined with print advertising space. the targeted customers were middleand upper-class business people seeking thoroughly researched, high-quality business content. consequently, biz targeted advertisers selling products and services that match with the preferences of the targeted readers, e.g., luxury goods and private wealth management services. architecture: in 2010, core resources of biz’s online bm included the editorial office staffed with highly skilled business journalists as well as the brand that the biz website ‘inherited’ from the print magazine. the latter implies that biz’s online offerings also had a reputation for high-quality, investigative business journalism. the managing director highlighted the importance of the (offline) brand for biz’s online bm: “the brand [biz] is a gift for both the print and the online advertising market because it justifies higher advertising prices and because everyone immediately understands that it addresses a premium target group...” (managing director)2 at this point in time, the online editorial office was part of an affiliate company whose management, along with biz management, were jointly responsible for biz’s online bm. key activities in the online bm related to data and information sourcing as well as online content creation and publication. on average, each online editor published one content item (business news/article) per day on the website. network: back in 2010, the most important external partners within biz’s online network were news agencies and freelance editors. furthermore, biz outsourced most back-office activities, such as human resources management, sales of advertising space, and it services (e.g., hosting and maintenance of the website editorial system) to external service providers. in contrast, all editorial activities were carried out by biz’s online editorial office. finance: biz’s online bm was mainly based on a singlerevenue source, namely, selling advertising space to business customers. additional revenues from selling proprietary content to other news websites were only marginal. in 2010, personnel expenses for the online editorial staff clearly dominate the cost structure of biz’s online bm. as the advertising revenues did not cover the incurred cost, biz’s online bm had to be crosssubsidized by the print bm. 2 all interview quotes were translated from german to english. journal of business models (2016), vol.4 , no. 2, pp. 22-41 29 transformation and value sources of biz’s online business model below we map critical events onto the development of the website reach. the transformation of biz’s online bm can be divided into four phases, namely consolidation, service addition, service experimentation, and product experimentation (see fig. 4). in the following, we present a phase-by-phase account of the critical events that triggered the different bm transformation phases (see fig. 4 for an overview), the implemented bm changes, and the resulting value sources that unfolded during the respective phases. consolidation phase since its installation in the late 1990s, biz’s online editorial office had steadily grown to 22 editors by 2010, whereas the online reach of biz’s website had started to decline steadily since 2008. adding to this, in 2010, the churn rate of biz’s print magazine reached a historical high of almost 12%, which restricted biz’s financial ability to cross-subsidize the online bm. given the unfavorable cost structure of the online bm and the reduced ‘appetite’ to subsidize this bm, biz management conducted a critical review of its online strategy in april 2010, which triggered the subsequent consolidation phase. the bm changes implemented in this phase concerned the architecture and finance dimensions of biz’s online bm, and were primarily targeted towards increasing the efficiency of biz’s online operations. first, biz’s online editorial office was carved out from an affiliate company, where it had been pooled together with other online editorial offices of the publishing group. it was transferred into a separate legal entity and formally assigned to biz. as a consequence, biz management gained a clearer understanding of the cost and revenue structures of its online bm, thereby improving financial transparency (efficiency), and was able to exercise direct control over its online editorial office (efficiency). the revised company structure also enabled biz to strengthen the collaboration between its online and print editorial offices by providing online editors easier access to the editorial resources of the print magazine (complementarities). for example, online editors benefitted from the business and editorial knowledge as well as the informant networks of their print colleagues. the managing director and the print eic of biz commented on the closer organizational infig. 4 phases of biz’s online bm transformation (and development of website reach) journal of business models (2016), vol.4 , no. 2, pp. 22-41 30 tegration between the online and offline bms, thereby also highlighting the importance of considering the transformation of the online bm from a top-down perspective as well as from a bottom-up perspective: “…we came to the conclusion that we have to consider the [digital] transformation from an overall company perspective and that we cannot operate [our offline and online businesses] completely separately.” (managing director) “[from now on, our] print and online editorial offices will operate in close alignment and answer our claim of ‘first-hand business journalism’ on all channels.” (print eic)3 moreover, the reorganization of biz’s company structure was accompanied by a cost-cutting initiative. here, biz decided to lay off more than 30% of its online editors. despite the reduced headcount, the remaining online editors managed to increase their productivity (efficiency) and limited the decline of website visits to 7% in the same time period. service addition phase a continuing decline in website visits further increased the pressure on biz’s management to find a viable bm for its online activities and triggered the second transformation phase, referred to as service addition phase. here, biz initiated substantial changes that affected the products & services, network, and finance dimensions of its online bm. these changes primarily resulted in complementarities with partner firms as well as between biz’s online content and its new online services. they enabled biz to double its website visits (see fig. 4). in 2011, biz entered into a joint venture with an affiliate company for the purpose of launching a career service portal, which included job postings and career-related content such as company, industry, and job portraits. this broadened biz’s targeted customer group of middleand upper-class business professionals to younger people with a general interest in business topics (e.g., job seekers). the online eic highlighted the rationale of this step as follows: “the idea behind the [career service portal] was to attract people who are at the beginning of their career, who need a pension plan, who earn their first money, who want to buy their first car; who are eventually also the talents looking for a job.” (online eic) an affiliate company managed the design and implementation of the career service portal and an external firm with a particular focus on offering (online) career services was contracted for the underlying job database. biz and the affiliate supplied the service portal with career-related content: “…there are a lot of things that we can transfer from our website [to the career portal]; for example, when we report on the top employers, or when we do a salary report.“ (managing director) the service portal was offered for free, but created an additional revenue stream in terms of service-related advertising revenues. regarding the value sources that unfolded during the service addition phase, the decision to offer online career services represented a novelty for biz. the significant increase in website visits during this phase, however, can be mainly attributed to complementarities enabled by the joint venture. first, biz gained access to the affiliate’s editorial resources and the two pooled their editorial staff to generate or leverage content for the career portal. second, biz gained access to the customer groups of both the affiliate and job database provider. third, biz observed considerable ‘transit’ traffic on its website, i.e., website visitors who accessed the biz website via the service portal. service experimentation phase inspired by the positive development of the website reach, a newly hired online eic started to experiment with additional services, triggering a new transformation phase referred to as the service experimentation phase. the related changes created a need for new capabilities (i.e., competences) and affected the products & services, architecture, and network dimensions of biz’s online bm. ultimately, biz unfolded new value sources in terms of both complementarities and novelty. the new online eic expanded the scope of the joint 3 extracted from public interview in 2010. journal of business models (2016), vol.4 , no. 2, pp. 22-41 31 venture with the affiliate company by an online stock information service. furthermore, he assigned biz-internal staff to design and implement three additional online services. consequently, the in-house development of service concepts became another key activity of biz’s online bm. one of these services was an online real estate service (novelty). the real-estate listings were sourced from another external partner firm. herewith, biz not only gained access to complementary data resources, but also created synergies between this new service and the print magazine since print editors used the service data to write articles on the development of the german real-estate market (complementarities). from a technical perspective, the other two services were more complex and biz experienced a series of setbacks during their implementation. after almost one year, biz’s management finally decided to cancel the implementation of these services: “...there was this watch service, where we failed to merge different databases. and this was exactly the point: an [online] editor in chief, who does not really have the competences of an it guy, still tried to manage such a project.” (managing director) although biz managed to successfully implement and launch at least two new online services (real estate and stock information), these services did not result in the anticipated further growth of the website reach. given their primary focus on biz’s original target customer group, these services only seemed to have led to a redistribution of website traffic: “the final outcome was [that the real estate service] did not result in a significant increase of the overall website reach. […] the service itself was successful, but the clicks [generated by this service] were missing in other areas.” (managing director) the failed services led to a conflict regarding the future development of biz’s online bm: while the management was convinced that the existing core product did not have the potential to achieve a sufficient website reach, the print eic argued that the online editorial office needed to embrace the core values of the print magazine (i.e., investigative business journalism). to resolve this conflict, biz management replaced the print and online eics and revised the editorial management structure: a new shared eic and two vice-eics (one for online and one for print) were from now on responsible for biz’s print and online activities. this change enabled synergies between biz’s online and offline editorial resources in two ways (complementarities). first, both benefited from the editorial competences and network of the new shared eic. second, the new online vice-eic worked as print editor for about 20% of his time, thereby fostering the exchange of information between the editorial offices. consequently, biz was able to leverage the complementary activities to its strategic advantage (porter, 1996). furthermore, with the new ‘protagonists’, biz also acquired a new organizational mindset towards digital topics (novelty). ultimately, this led to an increased openness and willingness to experiment with new ‘things’. product experimentation phase the fourth transformation phase was characterized by extensive product experimentation, affecting the products & services and architecture dimensions of biz’s online bm. it resulted in the unfolding of manifold value sources, with novelty being the dominant value source. to broaden the targeted customer group (novelty), the new shared eic extended the original scope of the website’s core product (i.e., elaborated business articles) by including short articles on more lightweight, entertainment topics (e.g., manager rankings). this change also required new modes of content creation. first, acting as so-called ‘trend scouts’, online editors began to curate content. that is, they collected content from various sources (e.g., internet blogs), verified and summarized the content, and added their own opinions or perspectives. second, biz started to syndicate content, which refers to the procurement of complete articles and news items. third, biz invited industry experts to publish short opinion articles on its website. the managing director and the online eic of biz commented on the implemented changes: “…we changed the ‘swing’ of the website, which means we changed the product. the product we had in the past was a product that consisted almost entirely of proprijournal of business models (2016), vol.4 , no. 2, pp. 22-41 32 etary content […], e.g., company analyses with an unfavorable cost-benefit ratio. we could not continue to operate like this, given that we wanted to become profitable.” (managing director) “…we wanted to become more trend-oriented and also more international, so we have to accept that we cannot oversee everything – this is simply not possible, this is too big. however, we can identify other persons […] or other media.” (online eic) with these change in place, the daily output per editor doubled (efficiency) since the new content formats (novelty) could be produced much faster than the proprietary ones. in addition, the online staff developed new editorial competences (novelty) to produce the new formats. also, print editors used some trends identified by online editors as input for elaborated articles in the magazine (complementarities). to strengthen the online marketing of its content and services, biz hired a social media expert (facebook, twitter) and a search engine optimization (seo) consultant. the latter, for example, trained online editors on how to formulate headlines so that they are easily retrievable by search engines. through this, biz acquired/developed new content marketing and it capabilities (novelty). furthermore, biz enriched its website, enabling readers to interact with online editors and to participate in discussions of articles and news with other readers (lock-in). the growing social media presence created new incentives for other readers to participate in biz’s social media channels, leading to positive network externalities (lock-in). for advertisers, biz offered new advertising formats (novelty) such as multi-media and native advertising. being generated by the website’s editorial content system and therefore resembling the regular editorial content, the key advantage of native advertising is that it is not detected by advertising blocker software. finally, biz implemented a website control system for evaluating the content reach as well as the reading behaviors of online readers. a key feature was the so-called “a/b testing” functionality used for testing two alternative article and news headlines (a and b) and then selecting the headline that ‘clicked better’. another key system feature was a control panel, which automatically rearranged the order of the articles and news items on biz’s website based on their popularity. the website control system provided an unprecedented amount and quality of real-time data on customer behaviors and content performance (novelty). consequently, the responsiveness of biz’s online editorial office increased as they were now able to react on website traffic dips in real-time (efficiency). in addition, the real-time data helped biz to better forecast the traffic on its website and to steer its online advertising sales in accordance with expected traffic highs and lows. summary the results of our longitudinal case study show that biz substantially transformed its online bm during the table 1 implemented bm changes and unfolding value sources by transformation phase phase consolidation service addition service experimentation product experimentation trigger critical review of online bm all-time low of website reach new online eic new shared eic products & services • introduction of career service • broadening of customer group • introduction of additional services (real estate and stock information) • extension of core product • further broadening of customer group • additional advertising products (e.g., native advertising) journal of business models (2016), vol.4 , no. 2, pp. 22-41 33 architecture • spin-off of online editorial office in separate legal unit and assignment to biz • development of service concepts • replacement of print and online eics and addition of shared eic • syndication and curation of online content • hiring of social media expert and seo consultant • implementation of website control system network • setup of joint venture with affiliate company • partnership with external service provider finance • reduction of editorial staff • addition of service-related advertising revenue stream efficiency • direct control • improved financial transparency • increased staff productivity • increased staff productivity • increased responsiveness complementarities • access to print editorial resources • access to affiliate’s editorial resources • access to partners’ customer groups • synergies between online content and online services (‘transit’ traffic) • access to partner firm’s data resources • synergies between online services and print content (real estate data) • synergies between online and offline editorial resources • synergies between online and print content (online trend scouting) novelty • new service offering • new service offerings • new organizational mindset • new content formats • new customer groups • new editorial, marketing, and it capabilities • new advertising formats • new real-time data lock-in • customer participation • positive network externalities dominant value source efficiency complementarities complementarities and novelty novelty biz website development slight decrease strong increase low volatility moderate volatility journal of business models (2016), vol.4 , no. 2, pp. 22-41 34 studied time period (april 2010 to september 2014). table 1 summarizes the changes implemented in the four bm dimensions (rq1; see first half of the table below) and the unfolding value sources (rq2; see second half) along the four phases of the online bm transformation process. discussion based on a longitudinal case study of a major german magazine publisher, biz, we aimed to develop a deeper understanding of (1) how different dimensions and elements of an online bm are transformed over time and (2) how value creation sources unfold during this transformation process. in the following, we discuss theoretical implications of our case findings and suggest promising areas for future research. we then highlight practical implications and discuss the limitations of our study. theoretical implications & future research regarding our first research question, we find that the transformation of biz’s online bm can be divided into four phases: consolidation, service addition, service experimentation, and product experimentation. these phases closely resemble the bm transformation phases described in related studies. for example, kuivalainen et al. (2009) identify three phases (initial steps, rapid growth and crisis, and new growth), which largely match with our phases. in particular, after the consolidation of its online bm (initial steps), biz managed to double the number of website visits by expanding its network of partner firms and adding a career service portal to its website (rapid growth). experimenting with other online services, however, did not yield the expected results leading to the replacement of key managers and the revision of biz’s management structure (crisis). not until biz started to experiment with the extension of its core products did the number of website visits reach new peaks (new growth). the observed sequence of the bm transformation process suggests that setbacks (“crises”) paved the way for more significant bm changes. this is consistent with the results of prior studies (e.g., kuivalainen et al., 2009;), which suggest that “a severe crisis can provide a strong impetus […] to initiate deep enough reflection on the currently prevailing dominant logic and status quo of the business model design” (sosna et al., 2010, p. 397). furthermore, the transformation process sequence suggests that the bm changes implemented in earlier phases primarily concerned the cost structure, the partner network, and the service offerings, while later changes predominantly affected all elements of the products & services and architecture dimensions. a key finding of our case study is that biz used the transformation process to differentiate its online bm from its traditional print bm. the importance of bm differentiation is also highlighted by prior research. for example, in their multiple-case study of xerox subsidiaries, chesbrough and rosenbloom (2002) show that subsidiaries with a bm that is differentiated from the parent company’s bm performed significantly better than other subsidiaries with a similar bm. relatedly, kuivalainen et al. (2009) find that a critical success factor of the online bm of a finnish magazine publisher was that its “website was established as an independent medium” (p. 148). however, as our study’s results suggest, bm differentiation is by no means limited to the product element of a bm: biz’s decision to add new content formats also led to online-offline differentiation in terms of key activities (content sourcing vs. creation) and key capabilities (editorial vs. it capabilities). against this backdrop, an interesting opportunity for future research could be to develop an instrument for measuring the level of differentiation between online and offline bms. such an instrument may help explain the inconclusive results of prior studies as to whether online and offline bms complement (e.g., chyi and huang, 2011) or cannibalize (e.g., fetscherin and knolmayer, 2004) each other. another key insight gained from our study relates to how biz differentiated its online bm from its offline bm. while biz’s decision to add services to its content offerings (service addition and experimentation phases) represents an extension of the online bm, its decision to experiment with new content and formats (product experimentation phase) is a bm revision (cavalcante et al., 2011). interestingly, biz experienced more problems with extending its online bm than with revising it (e.g., in the service experimentation phase, technical problems with two additional services prompted biz to stop the implementation of these services). this observation stands in marked contrast to the results of cavalcante et al. (2011), who argue that bm revision journal of business models (2016), vol.4 , no. 2, pp. 22-41 35 is “likely to involve significantly more challenges than business model extension, because it requires more fundamental changes.” (p. 1333). a potential explanation for these contradictory findings relates to biz’s transformation sequence of its online bm: at first, biz was reluctant to revise its core product. rather, it focused on making this product more attractive by adding complementary services. later, biz started to think about major changes but this was not before experiencing problems in implementing additional services, which ultimately led to the replacement of the print and online eics and the addition of the new shared eic. this pattern of resistance to bm change is in line with earlier research, which finds that companies tend to adhere to organizational routines (teece et al., 1997) and ways of thinking (johnson et al., 2008), and that innovation barriers lie in prevailing business values (chesbrough, 2010; christensen and overdorf, 2000). furthermore, despite the challenges that biz experienced in the service experimentation phase, our case data shows that the addition of the career service portal was the bm change with the greatest impact on biz’s online performance, helping biz double the number of website visits in only 16 months (fig, 4). this finding calls for future research on the characteristics that qualify a service for a given online bm as well as on the conditions under which a company should develop complementary online services in-house or involve an external partner. turning to our second research question, we find that, during the transformation process, biz’s online bm changed from an efficiencyto a complementarityto a novelty-based model. this finding challenges the results of existing studies, which use amit and zott’s (2001) value-sources framework to classify the bms (bornemann, 2009; johansson and abrahamsson, 2014; zott and amit, 2010). more specifically, the results of our study show that this classification approach neglects bm dynamics, and is therefore only applicable for ‘static’ bm comparisons (at a particular point in time). consequently, future research is needed to develop bm classification frameworks that better take into account the dynamic nature of bms. our case results further suggest that the aforementioned dynamics in terms of value-source focus also entailed a shift from short-term considerations (e.g., cost-cutting and profitability) to more long-term considerations (e.g., new capabilities). in other words, the transformation of biz’s online bm resulted in a need for, and the development of, new editorial, marketing, and it capabilities, which helped biz prepare for its ‘digital future’. this shift in focus can be explained from a knowledge-based view of the firm. for instance, kogut and zander (1992) highlight that “too strong reliance on current profitability can deflect from the wider development of capabilities” (p. 393) and that new capabilities may serve as “platforms into new markets” (p. 395). our findings also relate to tushman and anderson’s (1986) distinction between competence-enhancing and competence-destroying technological shifts. the latter requires the development of new capabilities, which is what biz ended up doing when transforming its online bm. the capabilities required for the online bm were fundamentally different from those required for the print bm, and it took biz almost four phases to realize this. a potential explanation may be that biz is a leader in its industry and it hoped to exploit its offline capabilities to gain competitive advantage in the online space. relatedly, markides (2013) proposes that “managing two different and conflicting business models simultaneously can be framed as an ambidexterity challenge” (p. 313). hence, we argue that biz became more ambidextrous by developing new editorial, marketing, and it capabilities and by differentiating the online from the offline bm. in this regard, future research could explore the conditions that favor different types of organizational ambidexterity (i.e., spatial, temporal, and contextual) as well as the organizational benefits and challenges associated with each type (markides, 2013). for example, gilbert (2006) finds that structural separation (i.e., spatial ambidexterity) decreases the need to integrate the online and offline bms on the subunit level; but, at the same time, increases the need to manage inconsistencies across the bms on the senior management level. this is consistent with the results of our case study, which point to the importance of considering online bm transformation from both a bottom-up and a top-down perspective. against this backdrop, future research could also look into the level of online-offline bm integration as well as the integration capabilities and mechanisms that need to be in place to exploit synergies between the online and offline bms (markides, 2013; porter, 1996). such research journal of business models (2016), vol.4 , no. 2, pp. 22-41 36 may, for example, draw on the critical role of the “business architect” (hendrickx, 2015) to develop a deeper understanding of the critical capabilities required to compete with dual bms. practical implications the results of our case study provide valuable implications for companies, especially publishing companies that are currently transforming their online bm. first, for companies that consider adding complementary services to their online product offerings, our findings highlight the need to carefully select the ‘right’ services and partners since the introduction of additional services may require specific capabilities often not available in incumbent firms. for example, biz management had to stop the development of more sophisticated online services due to a lack of internal it capabilities. second, our case results indicate that high-quality website content does not necessarily require exclusive reliance on proprietary, research-intensive content. for example, by involving external partners in content creation (e.g., industry experts for opinion articles) and relying on new modes of content creation, biz reduced its level of vertical integration without cutting back on the desired level of quality or harming the strong print brand. in addition, leveraging the resources of partner firms facilitated the introduction of new online services, which, in turn, also served the offline bm. third, the findings from our case study support the results of earlier studies, which find that focusing on immediate revenues and profitability is too shortsighted and may, in the worst case, jeopardize the company’s long-term survival. thus, when transforming their online bm, incumbent firms need to make a careful trade-off between ensuring short-term cash inflows by leveraging existing offline capabilities and ensuring long-term competitiveness by developing new online capabilities (lee and baskerville, 2003). a particularly effective way to expand a company’s capability base seems to be the engagement in experimentation and trial-and-error learning processes as well as the involvement of consultants to facilitate the former. fourth, our case findings provide insight on how to compete with dual bms. specifically, our findings point to the importance of differentiating an incumbent firm’s online bm from its traditional offline bm. bm differentiation not only helped biz increase the attractiveness of its website but also helped mitigate the risk of cannibalization effects between its ‘free’ website and its print magazine (e.g., fetscherin and knolmayer, 2004; simon and kadiyali, 2007). in line with prior research results (e.g., christensen and overdorf, 2000; koen et al., 2011; markides and charitou, 2004), we found that online bms require their own ‘playground’ in terms of organizational decision-making and values. limitations our case study results should be interpreted with the following limitations in mind. first, they are based on a single-case study in a specific industry, the magazine publishing industry. to address the problem of results generalizability, we followed established guidelines on conducting single-case study research (yin, 2014). in particular, our study sheds new empirical light on existing theoretical concepts (al-debei and avison, 2010; amit and zott, 2001) for the purpose of analytical generalization as opposed to statistical generalization. our study also provides a ‘thick’ description of the case context, which allows other researchers to assess to what extent our results can be translated to other company and industry contexts. second, the four identified online bm transformation phases served primarily as a means for structuring the transformation process of biz’s online bm, enabling us to study how value sources unfolded during this process. in contrast, although the four phases resemble the bm transformation phases identified in other studies (e.g., kuivalainen et al., 2009), the goal of our study was not to develop a process theory that applies to all online bm transformations. for instance, related research indicates that some online bms take off very slowly but then grow very quickly without consolidation during the first phase. third, drawing on amit and zott’s (2001) seminal article on value creation in online businesses, our case study focuses on sources of value creation (i.e., value creation drivers or potentials). in particular, we studied what and how value sources unfolded from the online bm changes implemented by biz. in contrast, the actual value (in terms of profitability, etc.) resulting from the identified value sources was not the focus of our study. nevertheless, consistent with the knowledge-based view of the firm, some of the identified value sources (e.g., new capabilities) can be regarded journal of business models (2016), vol.4 , no. 2, pp. 22-41 37 as actual value themselves. fourth, to investigate how value sources unfolded during the bm transformation process, we assigned new value sources to the transformation phase in which they emerged. using this approach, we do not know to what extent value sources that unfolded in earlier transformation phases transfer to later phases. a promising area for future research is to study whether and how value sources transfer across bm transformation phases, as well as how companies can sustain value sources once they are established. conclusions based on a longitudinal case study, we show how a leading german business magazine publisher transformed and differentiated its online bm from its traditional offline bm, and how different value sources unfolded during the transformation process. the study’s main contributions are threefold: first, earlier bm research tends to focus on single bm dimensions or elements (al-debei and avison, 2010). taking into account the multidimensionality of the bm concept, our study provides a refined understanding of how a company transforms the different building blocks of its online bm over time. a major conclusion of our study is that earlier transformation phases tend to focus on single bm elements (e.g., cost structure, partner network, and service offerings), while later changes predominantly affected all elements of the products & services and architecture dimensions. on a related note, the results of our study also point to the important distinction between service and product differentiation, and the greater impact of the former on online bm performance. second, prior research typically studies the direct link between bm transformation and value creation on an aggregated level (e.g., heij et al., 2014; schief, 2013), thereby neglecting the actual sources of value creation. by addressing this research gap, our study contributes to a deeper understanding of how different bm changes relate to distinct value sources. third, most existing studies focus on rather static aspects of bm transformation and value creation. in contrast, our study applies a dynamic perspective and shows how bm transformation phases vary in terms of their dominant sources of value creation. taken together, we believe that our results can inform future research on the ongoing transformation of online bms in the (magazine) publishing industry as well as in other industries, such as the entertainment, media, retail and software industries, where companies face challenges akin to those in the publishing industry. references al-debei, m. m. and avison, d. (2010), developing a unified framework of the business model concept, european journal of information systems, vol. 19, no. 3, pp. 359-376. amit, r. and zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6/7, pp. 493-520. amit, r. and zott, c. (2012), creating value through business model innovation, mit sloan management review, vol. 53, no. 3, pp. 41-49. aspara, j., hietanen, j. and tikkanena, h. (2010), business model innovation vs replication: financial performance implications of strategic emphases, journal of strategic marketing, vol. 18, no. 1, pp. 39-56. bakos, j. y. and treacy, m. e. (1986), information technology and corporate strategy: a research perspective, mis quarterly, vol. 10, no. 2, pp. 107-119. barney, j. (1991), firm resources and sustained competitive advantage, journal of management, vol. 17, no. 1, pp. 99-120. journal of business models (2016), vol.4 , no. 2, pp. 22-41 38 bharadwaj, a., el sawy, o. a., pavlou, p. a. and venkatraman, n. (2013), digital business strategy: toward a next generation of insights, mis quarterly, special issue digital business strategy, vol. 37, no. 2, pp. 471-482. bornemann, m. (2009), “performance implications of the business model and the moderating effects of the environment”, in academy of management proceedings, pp. 1-6. casadesus-masanell, r. and ricart, j. e. (2011), how to design a winning business model, harvard business review, vol. 89, no. 1/2, pp. 100107. cavalcante, s., kesting, p. and ulhøi, j. (2011), business model dynamics and innovation: (re)establishing the missing linkages, management decision, vol. 49, no. 8, pp. 1327-1342. chan-olmsted, s. m. and ha, l. s. (2003), internet business models for broadcasters: how television stations perceive and integrate the internet, journal of broadcasting & electronic media vol. 47, no. 4, pp. 597-616. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, no. 2/3, pp. 354-363. chesbrough, h. and rosenbloom, r. s. (2002), the role of business model in capturing value from innovation: evidence from xerox corporation’s technology spin off companies, industrial and corporate change, vol. 11, no. 3, pp. 529-555. christensen, c. m. and overdorf, m. (2000), meeting the challenge of disruptive change, harvard business review, vol. 78, no. 2, pp. 66-76. chyi, h. i. (2005), willingness to pay for online news: an empirical study on the viability of the subscription model, journal of media economics, vol. 18, no. 2, pp. 131-142. chyi, h. i. and huang, j. s. (2011), demystifying the demand relationship between online and print products under one newspaper brand: the case of taiwan and the emergence of a universal pattern, asian journal of communication, vol. 21, no. 3, pp. 243-261. daniel, e. m. and wilson, h. n. (2003), the role of dynamic capabilities in e-business transformation, european journal of information systems, vol. 12, no. 4, 282–296. demil, b. and lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 42, no. 2/3, pp. 227246. eisenhardt, k. m. (1989), building theories from case study research, the academy of management review, vol. 14, no. 4, pp. 532-550. fetscherin, m. and knolmayer, g. (2004), business models for content delivery: an empirical analysis of the newspaper and magazine industry, the international journal on media management, vol. 6, no. 1/2, pp. 4-11. fielt, e. (2013), conceptualising business models: definitions, frameworks and classifications, journal of business models, vol. 1, no. 1, pp. 85-105. gallaugher, j. m., auger, p. and barnir, a. (2001), revenue streams and digital content providers: an empirical investigation, information & management, vol. 38, no. 7, 473–485. gebauer, j. and ginsburg, m. (2010), the us wine industry and the internet: an analysis of success factors for online business models, electronic markets, vol. 13, no. 1, pp. 59-66. gibbs, g. (2010), analyzing qualitative data, sage, london. giessmann, a. and stanoevska-slabeva, k. (2012), business models of platform as a service (paas) providers: current state and future directions, journal of information technology theory and application, vol. 13, no. 4, pp. 31-55. gilbert, c. g. (2006), change in the presence of residual fit: can competing frames coexist?, organization science, vol. 17, no. 1, pp. 150-167. gregor, s., martin, m., fernandez, w., stern, s. and vitale, m. (2006), the transformational dimension in the realization of business value from information technology, the journal of strategic information systems, vol. 15, no. 3, pp. 249–270. günzel, f. and holm, a. b. (2013), one size does not fit all understanding the front-end and back-end of business model innovation, international journal of innovation management, vol. 17, no. 1, pp. 1-35. hedman, j. and kalling, t. (2003), the business model concept: theoretical underpinnings and empirical illustrations, european journal of information systems, vol. 12, no. 1, pp. 49-59. journal of business models (2016), vol.4 , no. 2, pp. 22-41 39 heij, c. v., volberda, h. w. and van den bosch, f. a. j. (2014), “how does business model innovation influence firm performance: the effect of environmental dynamism”, in humphreys, j. (ed.), 74th annual meeting of the academy of management, pp. 1502-1507. hendrickx, h. h. m. (2015), business architect: a critical role in enterprise transformation, journal of enterprise transformation, vol. 5, no. 1, pp. 1-29. holsti, o. r. (1969), content analysis for the social sciences and humanities, addison-wesley reading, ma. huber, g. p. and power, d. j. (1985), retrospective reports of strategic-level managers: guidelines for increasing their accuracy, strategic management journal, vol. 6, no. 2, pp. 171–180. ivw (2014), “informationsgemeinschaft zur feststellung der verbreitung von werbeträgern e.v.”, available at: www.ivw.de (accessed 30 november 2014). jarren, o., künzler, m. and puppis, m. (2012), medienwandel oder medienkrise?, in jarren, o., künzler, m. & puppis, m. (eds.), medienwandel oder medienkrise? folgen für medienstrukturen und ihre erforschung, nomos, baden-baden, pp. 11-24. johansson, m. and abrahamsson, j. t. (2014), competing with the use of business model innovation an exploratory case study of the journey of born global firms, journal of business models, vol. 2, no. 1, pp. 33-55. johnson, m. w., christensen, c. c. and kagermann, h. (2008), reinventing your business model, harvard business review, vol. 86, no. 12, pp. 50-59. khanagha, s., volberda, h. and oshri, i. (2014), business model renewal and ambidexterity: structural alteration and strategy formation process during transition to a cloud business model, r&d management, vol. 44, no. 3, pp. 322-340. koen, p. a., bertels, h. m. j. and elsum, i. r. (2011), three faces of business model innovation: challenges for established firms, research technology management, vol. 54, no. 3, pp. 52-59. kogut, b. and zander, u. (1992), knowledge of the firm, combinative capabilities, and the replication of technology, organization science, vol. 3, no. 3, pp. 383-397. krüger, c., swatman, p. and beek, k. v. d. (2004), “new and emerging business models for online news: a survey of 10 european countries”, in proceedings of the 17th international bled electronic commerce conference (bled), slovenia, pp. 1-16. kuivalainen, o., ellonen, h.-k. and sainio, l.-m. (2009), complementary role of website in business model development, in lee, i. (ed.), emergent strategies for e-business processes, services, and implications: advancing corporate frameworks, information science reference, hershey, pp. 136-154. langley, a. (1999), strategies for theorizing from process data, the academy of management review, vol. 24, no. 4, pp. 691-710. lee, a. s. and baskerville, r. l. (2003), generalizing generalizability in information systems research, information systems research, vol. 14, no. 3, pp. 221-243. liu, z. (2005), reading behavior in the digital environment: changes in reading behavior over the past ten years, journal of documentation, vol. 61, no. 6, pp. 700-712. markides, c. and charitou, c. d. (2004), competing with dual business models: a contingency approach, the academy of management executive, vol. 18, no. 3, pp. 22-36. markides, c. c. (2013), business model innovation: what can the ambidexterity literature teach us?, academy of management perspectives, vol. 27, no. 4, pp. 313-323. mottweiler, h., tünte, m. and kulenović, d. (2013), von “kutschen” zu “autos”: die verlagsindustrie im digitalen wandel, in hafkesbrink, j. and shire, k. (eds.), flexibilität und stabilität in der verlagsund medienbranche: konzepte beidhändiger unternehmensstrategien, eul, lohmar, pp. 3-22. myers, m. d. and newman, m. (2007), the qualitative interview in is research: examining the craft, information and organization, vol. 17, no. 1, pp. 2-26. neuendorf, k. a. (2002), the content analysis guidebook, sage, thousand oaks, ca. journal of business models (2016), vol.4 , no. 2, pp. 22-41 40 osterwalder, a., pigneur, y. and tucci, c. l. (2005), clarifying business models: origins, present, and future of the concept, communications of the acm, vol. 16, 1-25. porter, m. e. (1985), competitive advantage: creating and sustaining superior performance, free press, new york, ny. porter, m. e. (1996), what is strategy?, harvard business review, vol. 74, no. 6, pp. 61-78. rayport, j. f. and sviokla, j. j. (1995), exploiting the virtual value chain, harvard business review, vol. 73, no. 6, pp. 75-85. rindova, v. p. and kotha, s. (2001), continuous “morphing”: competing through dynamic capabilities, form, and function, academy of management science, vol. 44, no. 6, pp. 1263-1280. schief, m. (2013), “software business model determinants of performance insights from germany”, in proceedings of the 21st european conference on information systems (ecis) in utrecht, netherlands, pp. 1-12. silva, d. s. (2011), the future of digital magazine publishing, information services & use, vol. 31, no. 3/4, 66-76. simon, d. h. and kadiyali, v. (2007), the effect of a magazine’s free digital content on its print circulation: cannibalization or complementarity?, information economics and policy, vol. 19, no. 3/4, pp. 344-361. sosna, m., trevinyo-rodríguez, r. n. and velamuri, s. r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2/3, pp. 383-407. statista (2014), “entwicklung der bruttowerbespendings in den einzelnen mediengattungen in deutschland von januar bis oktober 2014 (gegenüber dem vorjahr)”, available at: http://de.statista.com/statistik/daten/studie/160579/umfrage/bruttowerbespendings-in-denmediengattungen-gegenueber-vorjahr/ (accessed 21 november 2014). sumner, d. e. (2010), the magazine century: american magazines since 1900, 9, peter lang publishing, new york, ny. swatman, p. m. c., krueger, c. and van der beek, k. (2006), the changing digital content landscape: an evaluation of e-business model development in european online news and music, internet research, vol. 16, no. 1, pp. 53-80. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2/3, pp. 172-194. teece, d. j., pisano, g. and shuen, a. (1997), dynamic capabilities and strategic management, strategic management journal, vol. 18, no. 7, pp. 509–533. tushman, m. l. and anderson, p. (1986), technological discontinuities and organizational environments, administrative science quarterly, vol. 31, no. 3, pp. 439-465. veit, d., clemons, e., benlian, a., buxmann, p., hess, t., kundisch, d., leimeister, j. m., loos, p. and spann, m. (2014), geschäftsmodelle: eine forschungsagenda für die wirtschaftsinformatik, wirtschaftsinformatik, vol. 56, no. 1, pp. 55-64. weill, p. and woerner, s. l. (2013), optimizing your digital business model, mit sloan management review, vol. 54, no. 3, pp. 71-78. wellbrock, c.-m. and schnittka, o. (2014), does it really hurt? consumer reactions to content sponsorships in daily newspapers, journal of business economics, vol. 85, no. 2, pp. 1-22. wikström, p. and ellonen, h.-k. (2012), the impact of social media features on print media firms’ online business models, journal of media business studies, vol. 9, no. 3, pp. 63-80. wirtz, b. w., schilke, o. and ullrich, s. (2010), strategic development of business models implications of the web 2.0 for creation value on the internet, long range planning, vol. 43, no. 2/3, pp. 272-290. yin, r. k. (2014), case study research design and methods, sage, los angeles, ca. zott, c. and amit, r. (2010), business model design: an activity system perspective, long range planning, vol. 43, no. 2/3, pp. 216-226. zott, c., amit, r. and massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2016), vol.4 , no. 2, pp. 22-41 41 about the authors nadja hoßbach is a ph.d. student at the chair of information systems iii of the friedrich-alexander university in erlangen-nuremberg (germany). her doctoral thesis deals with the management and transformation of online business models as well as the interplay between traditional offline and emerging online business models with a particular focus on the media and retail industries. her research has been published in major information systems conference proceedings (americas conference on information systems). before returning to academia, nadja has been working as a project leader and (it) management consultant with international companies for more than seven years. martin wiener is associate professor in the information and process management department at bentley university (usa). he is also managing director of the dr. theo and friedl schoeller research center for business and society at the university of erlangen-nuremberg (germany), and affiliated researcher at the stockholm school of economics institute for research (sweden). his research concerns is project control, it sourcing strategies, and digital business models, and has been published in outlets such as european journal of information systems, information systems journal, journal of information technology, and journal of strategic information systems. martin regularly serves as track chair and associate editor for major international is conferences, and reviews for top-ranked is journals. carol saunders is research professor at the w. a. franke college of business at northern arizona university (usa). carol has received lifetime accomplishment awards from two disciplines: the leo award in information systems and the lifetime achievement award from the ocis division of the academy of management. she served on a number of editorial boards, as editor-in-chief of mis quarterly, as general conference chair of icis 1999, and as program co-chair of amcis 2015. she now serves on several editorial boards including organization science and journal of strategic information systems. her current research interests include overload, sourcing, virtual teams, and coopetition. she has published in top-ranked management, is, computer science, and communication journals. journal of business models (2016), vol. 4, no. 3, pp. 48-67 48 purpose: the purpose of this research is to explore the role of market in the development of young entrepreneurial startups business models and their subsequent experimentation with business models. we focus on the demand-side to analyze how the market and (potential) customers can influence decisions to develop or innovate a firm’s business model. design: data were gathered from firms through interviews with open-ended questions about the evolution of their business model over time. data were analyzed by using grounded-theory method. findings: two themes emerged, one regarding engaging with the market and another concerning experimentation with business models and changes made after reviewing the situation on the market (firm’s responsiveness). taken together, firm responsiveness and market engagement were used to establish four categories of firm types: passive, active, unfocused, and focused firms. we observe that experimenting with business models is high initially and diminishes over time. practical implictions: changing the business model is essential for success and survival. firms will be able to take advantage of new opportunities and expand their products and services. other firms may pivot into different market spaces than originally intended but by doing so rapidly decrease the time to market. originality / value: our research fills a gap in the literature by exploring the role of market in the development of young entrepreneurial it startups’ business models over time. we propose a framework allowing an analysis of business model innovation in different stages of firm’s development. development of market-driven business models in the it industry. how firms experiment with their business models? abstract please cite this paper as: zalewska-kurek et al. (2016), development of market-driven business models in the it industry. how firms experiment with their business models?, journal of business models, vol. 4, no. 3, pp. 48-67 keywords: business model innovation, market engagement, startups 1-2 nikos: centre for knowledge intensive entrepreneurship, institute for governance studies, university of twente 3-4 campbell school of business, berry college and nikos, university of twente kasia zalewska-kurek 1, selim kandemir 2, basil g. englis 3 and paula danskin englis 4 journal of business models (2016), vol. 4, no. 3, pp. 48-67 49 introduction new firms often enough collide their ideal products or services with reality, i.e. the market. the acceptance of new products and needs of customers might differ from what firms first have imagined. commercializing an idea in a situation where there is no need for firm’s value proposition is costly thus to avoid a failure new firms develop their strategies and business models incrementally in a discovery driven (mcgrath, 2010) or lean startup method (ries, 2011) rather than in a planned, deliberate manner. the former assumes iteration of business models after testing different business propositions with the market. whereas the idea of involving consumers in the creation of value is not new and traces back to the concept of lead users by von hippel (1986), little research has been found on engaging customers in the development of strategies or business models. yet firms more and more use “crowdsourcing”, i.e. a network of people (howe, 2006) or customer participation (vargo and lusch, 2008; hoyer, chandy, dorotic, krafft, singh, 2010; verhees and meulenberg, 2004) to develop innovative business models. take threadless as an example of a firm who generated a platform for the user community to create products: artistic t-shirts (or canvases). cisco went even further and incorporated customers into their organization by outsourcing help desk to them. platforms are also interesting examples of making consumers part of the firm’s business model (e.g. appstore). in a recent article, priem, butler and li (2013) observe that the strategic management literature does not sufficiently focus on the consumer-driven business models emphasizing value for customers. since the 1990’s the pendulum in strategy research has been swinging very much towards the resource based view (rbv) and internal organization of the firm (hoskisson, hitt and yiu, 1999) focusing more on value capture than on creating value for customers (priem, et al. 2013). the business model literature that sees customers only as addressees of products and services, therefore, does not keep up with the demand of firms to integrate customers in the development of business models. in this paper we aim to fill this gap by exploring the role of market (especially customers) in the development of young entrepreneurial it startups’ business models and experimentation with business models. we focus on the demand-side to analyze how the market and (potential) customers can influence decisions to develop or change a firm’s business model. we systematically analyze the elements of business models of these firms, i.e. value proposition, value architecture, value network, and value finances as defined by al-debei and avison (2010). interviews with 9 entrepreneurs allowed us to identify two themes characterizing firm’s behavior: market engagement and firm responsiveness. these two themes give a basis for a taxonomy of the behavior of firms in developing business models over various stages of development. we observe that experimenting with business models is high initially and diminishes over time. this research is part of a larger project that aims at explaining to what extent business model change and market engagement affect the success of a company. the paper reports on an exploratory study that identifies dimensions of market-driven business model development and proposes a framework of business model development over different business development stages. we firstly discuss previous studies and literature on business model innovation and market engagement our study builds on. then we outline the method of data collection and analysis applied in the study. the methodology chapter is followed by the results of interviews and our analysis that of the firm’s behavior over different stages of development. we conclude the paper with a discussion on our results and their relation to the existing literature. we also provide argument why and how this study is relevant for both practitioners and theory. theoretical background to achieve sustainable value creation, firms must adapt their business models to cope with changes in the competitive environment or else they risk failing in the market (doz and kosonen, 2010; achtenhagen, melin, and naldi, 2013). according to many authors, a business model is not static but a dynamic concept requiring shaping, adapting and renewing a firm’s business model on a regular basis (e.g. osterwalder and pigneur, 2009; chesbrough, 2010; teece, 2010). such a dynamic journal of business models (2016), vol. 4, no. 3, pp. 48-67 50 approach to business models means reconfiguring the business model elements in a new way and allowing interaction between resources, competencies, organization, and value proposition of the firm to capture value from a technological innovation (chesbrough, 2010; demil and lecocq, 2010). firm’s orientation towards experimenting and exploiting new business opportunities is one of the critical capabilities that lead to business model changes (achtenhagen et al., 2013). a study of lehoux et al. (2014) shows that technology startups usually start with a vague value proposition and business model evolving over time validated by stakeholders such as e.g. investors. a firm that continues exploiting the established business model and is afraid of experimenting, might miss the potential value of an innovated business model (chesbrough, 2010). barriers to business model innovation (or adaptation) can be overcome by effectuation and experimentation (chesbrough, 2010) that triggers business activity through the generation of new data from interactions with potential customers or through real-world experiments with new products (sarasvathy, 2008). such effectuation processes are similar to discovery-driven planning (mcgrath, 2010), which enables companies to evaluate key assumptions that have been made in a business model by further experimentation and adapting the initial business model (chesbrough, 2010). this process is driven by updated information concerning the economic viability of previous assumptions made in constructing the current business model (mcgrath, 2010). other work concerning “lean startup” methods stresses testing business-hypotheses, product iteration and validated learning as the means to shorten the product development cycle and reduce market risks before moving into the next stages of business development (ries, 2011). a core conclusion of these perspectives is that firms need to find a way to replace the old, reliable business model with a new one in order to be profitable in a turbulent market by experimenting and learning from their environment. they do it in different stages: initial business model design and testing, business model development, scaling up the refined business model and sustaining growth through organizational learning as showed by sosna, trevinjorodrigues, and velamuri (2010). innovating on a business model is a (dynamic) capability of a company to react to market changes (sosna, et al, 2010). to observe the dynamics of business models we observe four primary dimensions or components of a business model: value proposition (description of product/service and market segment), value architecture (organizational and technological infrastructure of an organization), value network (inter-firm relationships of an organization and its position in the value chain), and value finance (costs and revenue models) recognized by al-debei and avison (2010) as the most occurring in the business model literature. business model innovation (or adaptation) can thus result from reinventing the established (of an existing firm or established in industry) value proposition, existing customer base, deconstructing traditional value networks or the firm’s role in the existing value chain (magretta, 2002; govindarajan and gupta, 2001). most of the definitions of the concept of business model view customers as an audience for the firm’s value proposition and not as a valuable “actor” to be involved in the process of helping firms define their product offering, revenue model, value network or value architecture (e.g., osterwalder, 2004; al-debei and avison, 2010). to the best of our knowledge, only the study of plé, lecocq and angot (2010) integrates customers into the business model concept. their customer integrated business model (cibm) incorporates customers as resources of the firm that affects its organization and value proposition. the emergent approach to developing a business model suggests that a business model should be evaluated against its current ecosystem of suppliers, competitors and customers and against how the ecosystem may evolve (teece, 2010; lehoux et al., 2014). thomke and von hippel (2002) recommend integrating users into the new product development process, while pynnonen, hallikas, and ritala (2012) go even further and propose customer-driven business model innovation that involves testing business hypotheses in customer research and then implementing them into the business model. market engagement to explore how startups engage the market in developing their business models in more details, we rely on the concepts of market orientation and customer involvement. we use the term “market engagement” to capture the activities related to both the market and customers. in this way we integrate two sepajournal of business models (2016), vol. 4, no. 3, pp. 48-67 51 rate literature streams to capture an inclusive view on how firms engage the market and use customer and competitor information in developing their business model. market orientation is a firm’s ability to understand and make use of the knowledge it holds about its customers, competitors and markets (hakala, 2010). market orientated firms analyze and react to changes in the behavior of both customers and competitors in the market (hakala, 2010). down the road, knowledge about the market is turned into actions and exploiting new market opportunities (hakala, 2010; narver and slater, 1990). two approaches to studying market orientation have dominated the literature to date. one approach splits market orientation into three different elements: customer orientation, competitor orientation and interfunctional coordination (narver and slater, 1990). the second approach considers market orientation as intelligence generation, intelligence dissemination and responsiveness (jaworski and kohli, 1993). the most notable difference between these two approaches toward market orientation is that jaworski and kohli (1993) include firm responsiveness in the market orientation construct. in contrast to later work (narver, slater, maclachlan, 2004), responsiveness does not distinguish between expressed or latent customer needs. responsiveness is concerned with taking action and reacting to market intelligence by selecting target markets, offering new products to customers or changing the way firms produce or distribute their products (jaworski and kohli, 1990). homburg et al. (2007) have studied the mechanisms that drive the responsiveness of customer oriented and competitor oriented firms. these researchers measure firm responsiveness as the speed of reaction to customer or competitor information. the impact of firm responsiveness on the business model remains an underexplored area in the business model literature. the notion of customer involvement is mainly concerned with information exchange between customers and firms during various stages of new product development (npd) stages in order to achieve a more favorable cost vs. time development curve and to reduce risks inherent with the innovation process (lundkvist and yakhlef, 2004). customer involvement includes customer co-creation (von hippel and katz, 2002, von hippel, 2005; hoyer et al., 2010; o’hern and rindfleisch, 2009) and customer participation (vargo and lusch, 2008). von hippel (2005) stresses the importance of information asymmetry in the npd process. ideally, customers have the most accurate information about their needs, whereas manufacturers potentially have the most accurate knowledge of how to satisfy those needs. thomke and von hippel (2002) argue that a firm can reduce this information asymmetry by engaging customers more proactively in the npd process. innovation by customers occurs mostly through the efforts of lead users (oliveira and von hippel, 2011). lead users are characterized as being ahead of the rest of the market with regard to the product domain and related problems that customers encounter (oliveira and von hippel, 2011). lead users are particularly important for high-tech firms that are operating in highly dynamic and complex environments (von hippel, 1986). other research confirms the importance of customer involvement in the npd process and its value as an important way to reduce time and expense (e.g., hoyer et al., 2010), and maps the most appropriate types of input as a function of npd stage (e.g., kaulio, 1998). o’hern and rindfleisch (2009) proposed a typology of customer contributions that identifies four types of npd contributions: collaborating, tinkering, submitting and co-designing. collaborating is defined as a process in which customers have the power collectively to develop the core components of a product. tinkering is a process in which customers make small modifications to a commercially available product. submitting means the direct communication of new product ideas between the customer and the firm. finally, co-designing is a process in which a small group of customers provides a firm with new product designs (o’hern and rindfleisch, 2009). thus, these two literature streams agree on the importance of customer involvement and firm’s responsiveness on the other hand in the new product development. however, research on market orientation and customer involvement in changing business models is limited. in this paper we implement the ideas of engaging customers and responding to market knowledge to look into the insights of business model dynamics in various phases of business development. using this emphasis, we hope to provide a framework for understanding activities that are necessary for successfully journal of business models (2016), vol. 4, no. 3, pp. 48-67 52 managing business model change over time. data collection and analysis data for this study were collected at six relatively young high-tech software startups and three established software smes. the it industry was chosen because of the relative flexibility in adjusting software products to the needs of the customers and because it companies are examples of value co-creation companies (the agile concept of working). these particular companies were selected based on the diversity of their products as well as the level of innovativeness of the ideas or already existing products. the companies in the sample serve different market segments. as shown in table 1, the products and served markets ranged from professional soccer teams to procurement organizations, facility management software for hotels, customer intelligence for retailers, location-based advertising for retailers, hiking and cycling software, indoor navigation for hospitals and office buildings and driver intelligence systems for taxi drivers. although all of the name/ status fte company profile marker startup 2 marker is a firm that specializes in detecting and locating smartphones. marker’s technology enables to detect the presence and/or localization of smartphones with superior accuracy. /b2c river startup 2 river puts taxi drivers in the right place at the right time. river helps to locate passengers, improve occupancy and increase fare revenue of professional drivers. /b2c sporter startup 3 sporter converges scientific models to intuitive tools in sports. their first product is the wssa-model which helps scouts with the selection of new players. /b2b cooler startup 30 cooler allows users to replace the old concept of collecting physical coupons with a mobile application so you can collect and redeem the coupons that you have nearby specific locations of businesses. /b2b itech established 10 itech provides its customers with motion tracking and vibration monitoring tools. /b2b motile startup 3 motile provides hotels with standard software-as-a service facility management apps to increase their quality of service and revenue. /b2b alife established 8 alife has developed an application that provides routes for hiking and cycling enthusiasts. /b2c e-proc established 11 e-proc specializes in developing and selling e-procurement software to a broad range of actors in the value chain. /b2b smarts startup 7 smarts dynamic and personal way finding within buildings and surrounding environments. /b2b table 1: company profiles journal of business models (2016), vol. 4, no. 3, pp. 48-67 53 companies studied are smes, they ranged in size from 2 to 30 ftes. (nb. the names of the companies have been replaced by fictitious names in order to provide anonymity to respondents.) most of the companies were past research and development and market introduction phases. some had already started scaling up their business model, whereas others had recently introduced their product on the market. one startup was still in the prototyping phase. this feature of the dataset is particularly valuable for analyzing business model dynamics in different business model development phases. data were gathered through interviews with key members of the firms and from secondary sources (e.g., company websites, archival records, etc.). respondents were either ceos or business development managers. information obtained from company websites and news articles was used to tailor interview questions appropriately for each firm. nine in-depth interviews were conducted, with duration of at least an hour. respondents were asked a series of open-ended questions and appropriate probes about the evolution of their business model over time and what factors played an important role in this process. the interview guide used in this research consisted of four sections: the interview began with grand-tour questions and discussion about how the product and target market of the company had evolved over time. this was followed by questions and discussion that focused on the firm’s openness to business model experimentation. the third section was dedicated to exploring how the firm engaged the market in developing its business model. the final part of the interview involved discussion of the firm’s openness to scaling up the business and the future vision of respondents. the interview data were analyzed by employing the coding techniques and grounded-theory method proposed by strauss et al. (1998). this process started with open coding which led to the initial identification of concepts, properties and dimensions. underdeveloped codes that could not be found in most cases were then eliminated in order to focus on the prominent codes that would allow for better comparison of cases. axial coding was used to relate categories to their subcategories and to gain additional insight in how properties and dimensions of the concepts are linked to each other. we coded the interview data to capture what the companies in the sample did to gather information from the market and the extent they changed their business models in relation to feedback from the market. results as we focused on market engagement we specifically looked at how the companies we interviewed created their ideas for businesses, how they gathered information in the process of developing their businesses, how they dealt with the feedback they got from the market, and how they changed during the business development process in various stages of development. two major themes emerged from the analysis, one regarding engaging with the market (market engagement) and another one concerning experimentation with business models and changes made after reviewing the situation on the market (firm’s responsiveness). market engagement when talking about the beginnings of their companies and product development, respondents told us how they tested their ideas with customers or potential customers. some of those companies did desk research on the competitive situation on the market and industry. sometimes they performed formal market research. as an example, one of the ceos mentioned, “what i needed to learn was mostly how to quantify a market size (…) and find out whether my assumptions were correct to validate what i had in mind. partly that’s desk checking or searching. just using research data about the size of the market.” (river) other data shows that some companies monitor technology and their competition. “delivering standardized and end-to-end solutions is an ongoing trend in the ict industry. firms don’t want a lot of hassle in their own ict infrastructure”. in addition, another manager mentioned, “we are also moving from saying we will install a server to saying we will provide a server in the cloud. service in the cloud is ‘in’ right now”. (e-proc) journal of business models (2016), vol. 4, no. 3, pp. 48-67 54 “we keep track of them (competitors: expl. authors) as much as we can at the international level. we use the internet and visit fairs.” (marker) “it was researching the market purely, i would say. being a quite technology driven software engineer, i know exactly what is possible to build with the technology that surrounds us. for me it’s more a learning journey of defining a product or problem the market has, understand the market and understand the size of that market and what they need to solve their problem.” (river) if the firms talked to customers or potential customers, they would do it in an informal way not necessarily with a large and formal research such as focus groups or conjoint analysis. they engaged in conversations with customers. some companies were approached by people who had heard about their products. these interactions with the customer were similar to what sarasvathy (2008) suggests. “we actually got a request for our firm a couple of times to build a hotel management application. we’ve talked about different features for the app with parties that were interested”. (motile) “but then somebody from hospitals came to us and asked us for our product when we were not ready to sell yet.” (smarts) some companies are being more proactive and engage in product pilot programs. they engaged their customers in the development of a prototype. this is consistent with the expectations of oliveira and von hippel (2011). “our app is in a pilot phase at the moment. we are looking to validate that and our targets for user engagement to be able to scale it further. we should have testimonial information from our pilot customers”. (river) this quote already indicates that the company intends to grow and the growth is very much dependent on the success of the product testing. the results show different levels of engagement with the market that could be seen as two extremes of a continuum. one end of the continuum indicates low level of engagement with the market seen in engaging in desk research. the other end: high market engagement, involves conversation with customers and formal product testing. firm responsiveness the companies also told us about how they changed their businesses over time. from this the theme of firm’s responsiveness emerged. this theme indicates how the companies reacted to the voice of the consumer. since we used the elements of a business model proposed by al-debei and avison (2010), we paid special attention when the respondents mentioned their products and/or customers (value proposition), revenue models (value finance), way they organize the company (value architecture), and their relationships with partners (value network). some of the companies changed or adjusted their products or shifted to other markets. we list a few examples of firms’ reactions. they will be discussed in more detail later in the paper. here is an example of a change of the market: “i wouldn’t say that the market size really informed or led to decisions of the functionality that we had. it certainly was developed hand in hand with the target market that we wanted to go on and pursue. when we looked initially at more ride sharing type of product, i was looking at some of the user numbers that existing services had, i was looking at the competitors around us. i wouldn’t say it was a market size analysis at such, but at that point we moved away initially from ride sharing, because that was quite a crowded space and it had been tried a number of times before. i felt even though we had potentially a strong technical innovation to bring to the market, it was still a very crowded space.” (river) another example indicates a change in their initial idea for a value proposition and indicated that: “we decided to continue with our first idea. however, people in the football world our second idea much easier. you have to look at what concepts and ideas the market understands and what they are used to. we sell our first idea as an additional feature. we were talking to some scouts and it appeared that they didn’t have a very high educational level. these people have to use your product journal of business models (2016), vol. 4, no. 3, pp. 48-67 55 and understand how it works. you have to make sure that the software you build works seamlessly so that they don’t switch over to other alternatives. we’ve delayed our first idea for six months to test and see if our first idea is going to work.” (sporter). an interesting observation is that the change of the product was heavily influenced by both experts in the field and regular customers to the point that the market introduction phase was delayed. this confirms an observation of christensen (1997) that the market is not always ready for innovation. this company changed also the way a company would charge its customers (i.e. their value finance). after talking to some potential clients and experts in the industry, they realized that the initial price would have been too low. “then we talked to some football players and they’ve told us that taking 1% of the transfer sum was a very low price, so we increased our percentage to 3 plus another 3% if a player gets sold by another club and the selling party makes a profit.” (sporter) another company also had to revise their revenue model. “so according to our initial concept, we would charge them around 100.000 euro per year. that’s serious money. the retailers were asking: how do you know that cooler actually works and how do you know that you can execute your idea? the retailers were not willing to participate for this amount of money”. (cooler) another quote confirmed the value of getting information from the market (hakala, 2010). “we saw the effect that offering something for free wasn’t being valued by our customers. (…) we are not doing it for free anymore, we are doing it for a fixed amount of 99 euro per year” (cooler) the latter exemplar is interesting as it shows that the company realized that their success was related to the value they deliver to customers. revenue model was one of the business model elements that have changed in the business model of this particular firm after engaging with the market. taxonomy of firm’s behavior those two themes combined result in a two-by-two matrix that describes the behavior of companies in developing business models as reaction (or no) to the market. figure 1 shows this taxonomy. firm responsiveness varies from low to high responsiveness. firms that are not responsive make few changes in one or two components of their business model (e.g., adjust their value proposition to the needs of customers), whereas firms with high responsiveness show more frequent figure 1. taxonomy of firm’s behavior based on the level of market engagement and firm responsiveness journal of business models (2016), vol. 4, no. 3, pp. 48-67 56 changes in different elements of their business model (more than just in value proposition). high responsive behavior is indicated by e.g., moving from one market to another and adjusting the product and revenue model accordingly. the concept of market engagement has been discussed above and is concerned with the level of involving customers in providing feedback about the product. taken together, firm responsiveness and market engagement were used to establish four categories of firm types: passive, active, reactive and deliberate firms. passive behavior is characterized by a low to normal level of market engagement by relying on intelligence generating mechanisms such as desk checking, reading publications and monitoring trends. however, firms that engage in this behavior typically do not react to the information generated from these methods, which suggests that these firms may generate market information just to check on market conditions as a kind of “defense mechanism” and only react to the information if it is absolutely necessary. for example itech had conducted a small-scale market research project, but the reaction of the firm to this information was not evident. e-proc also conducted a small-scale formal market research, but the ceo mentioned that the firm did not formulate any new course of action based on information. although smarts conducted formal market research and the data suggested that the firm should target the hotel market, the firm did not follow through on the data. the firm instead targeted the hospital market because customers from the hospital market approached the firm to build software for them and because smarts thought it would be easier to execute against the hospital market’s requirements. active behavior is characterized by a medium to high level of market engagement by relying on intelligence generating mechanisms such as customer meetings, small-scale product testing and using customer case studies. these firms react to the information they obtain from these intelligence generation methods, which suggests that these firms change their business model or continuously fine-tune their product offering. we classified river, sporter, marker, cooler and e-proc as active firms in the market validation, product development and business-scaling phases. river has revised their product features and revenue model according to customer case studies and small-scale product testing. cooler engaged in rigorous customer discussions and adapted its value finance two times on the basis of customer feedback of consumers (first quote) and customers (second quote). “we saw the effect that offering something for free wasn’t being valued by our customers. (...) we are not doing it for free anymore, we are doing it for a fixed amount of 99 euro per year” (cooler) “so according to our initial concept, we would charge them around 100,000 euro per year. that’s serious money. the retailers were asking: how do you know that cooler actually works and how do you know that you can execute your idea? the retailers were not willing to participate for this amount of money”. (cooler) marker responded to the idea of the market, customers and strategic partners and changed their initial product concept development. “we noticed that indoor navigation is difficult (…). in these though economic circumstances it is hard to sell ‘nice-to-have’ things. (…) yes. we have heard it from customers and also from companies that help us in delivering our product. for instance, companies that sell our product, like installation firms and firms that sell office space. we noticed that the market for our initial idea was not really feasible” marker engaged in multiple customer discussions to validate interest expressed by retailers and acted on the information by targeting the retail market with a different product. reactive behavior is characterized by a low level of market engagement and a high level of firm responsiveness. this means that these firms react to information gained from desk checking and formal market research. these firms mainly use to this kind of broader market information to determine the viability of the market before moving into it and to bring focus to their product concept. however, constantly reacting to information generated from desk checking may not be always be a wise idea, since it can lead to many new unjournal of business models (2016), vol. 4, no. 3, pp. 48-67 57 tested (with customers) business models. firms that do not test their business model in the market through customer meetings remain reactive, since they change their initial business model frequently without making the decision to pursue one specific business model. an example from the interview data is the firm river that reacted to information generated by desk checking to move away from their initial target market into another market that was less crowded with competitors. this event occurred in the idea generation phase. “i looked at the market and found that doing ride sharing groups is difficult, it’s been attempted before. technology-wise it was an interesting step in innovation to make there, but i looked at the market forces and basically decided that it would be quite difficult to execute if not impossible, so i’ve looked for other area in this sector to solve problems. you might hear this a lot, but we’ve moved through a few different iterations of the idea from when i first came up with things in my head to when i actually started to write code and develop a product”. (river) however, this firm didn’t dwell too long in the idea generation phase and moved into the market validation phase. deliberate behavior is characterized by a high level of market engagement by using small-scale product testing and no react to the information obtained from this activity unless it is not absolutely necessary. the reasons for not reacting may be that the firm is currently executing a well-established product strategy and has no room to consider alternatives. this could lead to very small changes in a firm’s business model component if it is necessary. smarts is an example of a deliberate behavior. it was in the product development phase and nearing the market introduction phase when the firm learned from a lead user that the user interface was not appropriate for that category of user. smarts decided last-minute to change the user interface of the program, because otherwise, the product would likely receive negative feedback after launching it in the market. “one month before the opening of the hospitals our interfaces were ready, everything was approved. and we got this email from somebody we never heard of before saying: this will not work, and lots of criticism. (...) he said the interface was for an it company, would not work for a nurse. (…) we made an interface for nurses”. (smarts) development of market-oriented business models over different stages of development we observed a pattern of behavior over various stages of development as seen in figure 2. figure 2 integrated framework of business model dynamics journal of business models (2016), vol. 4, no. 3, pp. 48-67 58 we found that the behavior of firms changes over time from first being reactive and finding the right idea for a product and a business model that would capture value from it. we observe that experimenting with business models is high in the first phases and to almost diminish in the market introduction phase. also engaging the market changes over time from first being less engaged towards more interaction with customers and/ or users. in the idea generation phase firms are rather developing ideas within the firm and experiment with their business model that might lead to changes in all four components of the business model, including the value proposition, value architecture, value finance and value network. here, firms interacted with the market to determine their entire business model, instead of limiting market engagement to construct one component. this type of firms was classified as a reactive firm that is at the beginning of constructing its business idea or business model. typically, these firms did not engage the market on a high level, because they did not have a fixed business model to validate in the market. these firms mainly used desk-checking techniques to see whether it was viable to pursue an opportunity with a new business model. if it turned out as not viable to exploit an opportunity with a business model that the firm had in mind in the first place, firms chose to pursue a different market opportunity with an entirely different business model. firms could change their business model so drastically in this phase, because they did not make a commitment to their business model by executing it. the interview data suggests that the firm river fits this profile. river went through different ideas and concepts in the idea generation phase, which also led the firm to reconsider their value proposition, value finance, value architecture and value network. other firms did not change their entire business model so drastically in the idea generation phase. later in the process, we saw firms change one or two components of their business model driven by reaction to medium market engagement. firms tried to validate their initial idea of a business model by engaging in interactions with customers. marker, sporter and motile changed their business model in terms of the value proposition in the market validation phase, which was mainly influenced by arranging customer meetings and discussing product features. sporter and motile also changed their value finance in the market validation phase, since some customers gave feedback on the charging methods used by both companies. we found that the more active companies became in interacting with the market, the more detailed information they can get to fine-tune their initial business model. the components that changed the most in the market validation phase were the value proposition and value finance. in the product development phase firms would typically develop their product further that has probably been revised already after interactions with customers. in this phase startups tend to engage their customers to further tweak their offering or revenue model. they might get feedback through small-scale testing on product details or on specific charging methods that the company was using. that was the case with river, cooler and smarts. river iterated their product in terms of product features by using small-scale pilot testing. furthermore, river’s ceo mentioned that changes in product features might also influences changes in the firm’s revenue model. the company was still revising its revenue model based on small-scale testing. cooler fine-tuned their revenue model through rigorous customer discussions. smarts tweaked their product by replacing the old user interface by a different user interface, which would be better suitable for their target market according to customer feedback. after the market introduction phase cooler worked on a version 2.0 of their app and fine-tuned their value proposition. alife also made small revision in the revenue model by selling individual hiking routes rather than bundles, because customers didn’t prefer to pay the price for bundled routes. an interesting case was itech who their product portfolio by introducing vibration monitoring as a result of customer feedback and information exchange during product fairs. in this way they expanded into a new market and needed to adapt their value architecture and value network. they did not change their business model but rather developed a new one thus started the process of market engagement and responsiveness all over again. established companies in the business-scaling phase did not experiment with their business models much as observed in e-proc and alife. we only saw tweakjournal of business models (2016), vol. 4, no. 3, pp. 48-67 59 ing the value proposition element by these companies. the reason for this phenomenon could be that young startups, which do not have a product that has been validated yet by the market, adjust and fine-tune their product offering, while established companies adapt an existing business model that needs refinement, because of changing market conditions or legal barriers, like the case of the company it. development stage examples of actions firm id ea g en er at io n market engagement • river used desk-checking and research data to quantify the market size and number of competitors in the market. • motile before expanding into a new market, searched the internet for market data. • smarts have conducted formal market research on a small scale to keep track of industry trends. • sporter has used news blogs and social media to keep track of industry trends. river, motile, sporter, smarts business model experimentation • developing value proposition based on scientific projects (smarts on smart cities; itech on motion sensor) or master’s thesis project (sporter on selecting football players). • getting ideas what potential competitors do and what they charge for similar products • scanning the market for products fulfilling similar needs • alife’s value proposition was a result of a gap on the market. • river changed its value proposition from ride sharing to a taxi driver intelligence system targeting taxi drivers. smarts, sporter, alife, river, itech m ar k et v al id at io n market engagement • marker, river, sporter, motile and cooler arranged meetings with potential customers and talked to lead users about product features and gained insight in how customers want to be charged for the product. marker, sporter, cooler, motile, river business model experimentation • determining customer interests by targeting initial customer segments and bringing focus to the product. • sporter decided to postpone the initial idea (selecting football players in a club’s transfer list that would fit a football team‘s characteristics in the most appropriate way) and work on a new value proposition, which was about determining an initial transfer list for football clubs. • sporter revised their revenue model during the early market validation phase and increased the re-sale value percentage of football players • cooler’s revenue model changed from an initial monthly subscription-based revenue model in combination with activation fees to a one time fixed fee without activation fees to an entirely free service for the first couple of advertisements and eventually a model that is similar to online advertising models where customers are being charged on the basis of cost per list view, cost per e-mail and cost per detail view. as they grew they hired more employees (value architecture) the business model required a change in value network: new investors and advertising partners. sporter, cooler table 2: firms’ actions in various development stage. journal of business models (2016), vol. 4, no. 3, pp. 48-67 60 p ro d u ct d ev el o p m en t market engagement • river and alife used small-scale testing/ prototyping to fine-tune product details. river used a case-study approach to determine what to precisely charge customers. • the ceo of smarts mentioned that they were approached last-minute by a customer who gave feedback on the user interface. river, alife, smarts business model experimentation • fine-tuning product features by small-scale product testing. • using a ‘dummy app’ to convince potential customers before market introduction. • finding the right pricing model according to a case study approach. • river’s revenue model is subject to continuous change influenced by the product’s feature set and the results of its ongoing case study. sporter, river m ar k et i n tr o d u ct io n market engagement • sporter used small-scale testing of software updates. • itech gets continuous feedback from users. • alife used app store reviews to reconsider their offering on trials and charging methods. • cooler used blind tests and focus groups to fine-tune the app after market introduction. cooler, itech, sporter, alife business model experimentation • sporter refused to build custom apps for certain customers after the market introduction phase, because of potential scalability issues. • cooler’s value proposition did not see a drastic change, other than added product features after launching the app in the market. • smarts intends to grow and to make tailor-made solutions for customers to test new possible markets (value proposition & value finance). sporter, cooler, smarts b u si n es s sc al in g market engagement • itech conducted formal market research on a small-scale to monitor industry trends. • e-proc started with internal discussions to refine their business model and talked with potential customers to validate the new business model and also engaged in small-scale testing after this process. • cooler started with internal discussions about new product features and charging methods for the 2.0 version of the app. • developing initial prototypes to let potential customers test it. • itech started testing a new value proposition with new customers (after introducing new business model the process of market engagement started again). e-proc, alife, itech, cooler business model experimentation • e-proc still provides its customer with procurement software, but has added new product features to its value proposition and a new customer segment as they have an ambition to grow. the company now serves the entire value chain from supplier to buyer with a newly develop e-proc network. also, it now provides basic, plus and complete software-as-a-service packages to different types of customers. e-proc initially charged its customers a high fixed price for a software module in the form of a server license and a yearly maintenance fee. it has changed this model into a pay-as-you-go/ pay-per-use model without an initial start-up fee. • to expand (their current market is growing very slowly), itech needed a new business model with new value proposition and new market (industrial applications). they also expanded their value network to new partners. e-proc, itech journal of business models (2016), vol. 4, no. 3, pp. 48-67 61 discussion in this paper we examined whether young (startups and established) entrepreneurial it firms change not only their value proposition but also other elements of their business models. we looked at a specific industry that is very close to the market and often works with the principles of a lean startup. one of the main aims of this research was to explore to what degree reacting to market information and engaging with the market actually led to changes in a firm’s business model as suggested previous research (al-debei and avison, 2010; hakala, 2010; osterwalder, 2004; plé, lecocq and angot, 2010). to analyze this behavior we propose taxonomy based on the dimensions of market engagement and firm responsiveness resulting in four types of behavior: reactive, active, deliberate, and passive. our study shows that firms change certain business model components and the impact of the change in business model varied for different firms and in different phases of business model development confirming previous research (i.e., sosna et al., 2010; bigdeli, li, and shi, 2015). although the interviewed companies did not all change their business model in one specific business model development stage, it can be observed that most of the interviewed startups made adjustments to their business model in the market validation phase. the most distinguishable business model changes in the companies occurred in the value proposition and value finance components. examples of business model change in these companies were for instance adding requested features to the product according to customer suggestions, adjusting product details according to small-scale testing of software updates, changing the target market of the company, positioning the product away from the competition or revising product price and the method that companies use to charge customer e.g. monthly subscription fees, fixed fees or activity-based online revenue models. these findings suggest that software startups focus mainly on getting the value proposition and value finance right in the market validation phase. a reason for this might be that startups develop their value network and value architecture after the core product and target market were made valid in terms of financial viability. for the reason of financial viability it is important to involve the market in the first stages of business development to target the right market with the right value proposition. also the value proposition might influence which partners and which competences are necessary to deliver the validated value proposition to customers. changes in terms of the value network and value architecture, as a direct result of market engagement did not occur as often as changes in terms of value proposition and value finance. in other words, while market engagement might not have a direct impact on the value architecture and value network, these elements of the business model are still subject to change due to the interdependent nature of the value proposition and value finance with these components. however, it was observed that mostly established companies expanded on the number of full time employees over time, whereas startups generally consisted of three to five full time employees until at least the market introduction phase. implications for practitioners it companies that adapt their value propositions and their business models based on market engagement are likely to have higher levels of performance in terms of operation success and reducing time to market than those that do not. the results of our research have practical implications, particularly for companies that operate in rapidly changing competitive environments like the it industry. our research shows that business models do change over time (demil and lecocq, 2010). the extent of business model change depends on the types of behaviors the firm adopts (passive, active, deliberate and reactive) and where in the phase of development the firm is. firms can use different behaviors over time as they move through these phases of development. changing the business model is essential for success and survival. firms will be able to take advantage of new opportunities and expand their products and services. other firms may pivot into different market spaces than originally intended (smarts) but by doing so, rapidly decrease the time to market. by understanding the broad changes in the level of sophistication and technology that consumers have, firms can find different paths to market (i.e., app vs. pda, alife) that have a less expensive and more efficient business model. by changing mode of delivery, alife also increased its journal of business models (2016), vol. 4, no. 3, pp. 48-67 62 market segment from a narrow niche to a mass market. revenue models and value propositions can also change based on feedback from experts and customers (sporter). in sum, figure 2 shows some useful business intelligence mechanisms that can be employed depending on which phase of development the firm is. it can serve as a toolbox for firms that want to experiment with their business models to fit into their markets. we anticipate that this cycle will ebb and flow as new products are introduced and the firm moves into new market spaces. implications for theory our research fills a gap in the literature by exploring the role of market in the development of young entrepreneurial it startups’ business models over time. we propose a framework allowing an analysis of business model changes in different stages of firm’s development. this framework of market-driven business models delivers a set of conditions for firms to experiment with business models. previous studies have shown that market orientation increases firm’s performance (narver and slater, 1990; han et al., 1998; grinstein, 2008); however, these studies focused on new product development and not on the development of business models. this paper also answers the call for research of priem et al. (2013) on consumer-driven business models that focus on strategies of firms emphasizing value for customers. the results of this research support previous studies (achtenhagen et al., 2013; chesborough, 2010; demil and lecocq, 2010; mcgrath, 2010; teece, 2010) that business models are dynamic and change over time. we follow up on the idea of cibm by plé et al. (2010) and add to the research of sosna et al. (2010) by exploring the stages of business model development and focusing on including the voice of the customer into the process. we observe and report on the different patterns of behavior of companies in different stages of development. as the literature on business models often deals with established firms (even though the concept is used for startups by practitioners), we shy the light into the development of business models by startups as the majority in our sample are startups. so far, few studies analyze how business models of startups evolve over time (bigdeli et al., 2015). our conclusion based on the results is that young entrepreneurial it startups should involve their market in the development of their business models early in the development phase. this conclusion goes back to moore (1991) who advocated involving customers and creating relationships with customers in developing high tech products or services. in view of a recent study by bigdeli et al. (2015), an interesting observation is that firms in our sample change their business models most in the early phases of the development. bigdeli et al. (2015) analyzed university spinoffs and found that these spinoffs were changing their business models over longer time – until the scale up phase. this difference can be explained by differences in products and industries, but it can also be explained by the early engagement of the market in the development of business models. as we claim in this paper, any startup should validate their ideas before making investments. limitations and future research this study has several limitations. firstly, the sample size restricts generalizability of the results. we observed various changes in the behavior of it startups, however, to falsify our results a larger study should be performed. we suggest that future research build on our findings to include larger samples of firms capable of handling different analysis, and different methods of collecting customer and market input. for the same reason, generalizability of the results to other contexts cannot be claimed. our sample consisted of it startups. in different industries, the dynamics are likely different. in the it industry where change is rampant and is likely to be more significant whereas in a mature industry like food, change is more likely to be incremental. we suggest that other industries including low and high technology will be included in future research. the change of business models seems to impact performance. besides increasing sales, firms can get to market quicker, make their business models more efficient, and if they are quick enough in changing, they can take advantage of being the first mover in the new market space. future research should look more closely at the performance implications of changing business models. our assumption for future research is that certain types of behavior will lead to differences in performance this being e.g. faster time to market, success. zott and amit (2008) showed that strategy and business model can predict perceived firm’s performance. we also acknowledge the lack of longitudinal data coljournal of business models (2016), vol. 4, no. 3, pp. 48-67 63 lection. more longitudinal research such as achtenhagen et al. (2013) and quantitative is called for that should more closely examine the business model change and subsequent impact on firm performance. journal of business models (2016), vol. 4, no. 3, pp. 48-67 64 reference list abachtenhagen, l., melin, l., naldi, l. (2013). dynamics of business models – strategizing, critical capabilities and activities for sustained value creation. long range planning, vol. 46, no. 6, pp. 427-42. al-debei, m. m., & avison, d. (2010). developing a unified framework of the business model concept. european journal of information systems, vol. 19, no. 3, pp. 359–376. bigdeli a.z., li f., shi x. (2015). sustainability and scalability of university spinouts: a business model perspective. r&d management 46(3), pp. 504-518. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, vol. 43, pp. 354-363. christensen c.m. (1997). the innovator’s dilemma. when new technologies cause great firms to fail. harvard business school press, boston. isbn 0-87584-585-1 demil, b., lecocq, x. (2010). business model evolution: in search of dynamic consistency. long range planning, vol. 43, pp. 227-246. doz, y.l., kosonen, m. (2010). embedding strategic agility: a leadership agenda for accelerating business model renewal. long range planning, vol. 43, pp. 370-382. govindarajan, v., gupta, a. k. (2001). strategic innovation: a conceptual road map. business horizon, vol.44, pp. 3 –12. grinstein, a. (2008). the effect of market orientation and its components on innovation consequences: a metaanalysis. journal of academic marketing science, pp. 166-173. hakala, h. (2010). strategic orientations in management literature: three approaches to understanding the interaction between market, technology, entrepreneurial and learning orientations. international journal of management reviews, vol. 13, pp. 199-217. han, j. k., namwoon kim, srivastava r. k. (1998). market orientation and organizational performance: is innovation a missing link? journal of marketing, vol. 62, pp. 30-45. homburg, c., grozdanovic, m. and klarmann, m. (2007). responsiveness to customers and competitors: the role of affective and cognitive organizational systems. journal of marketing, vol. 71, no. 3, pp. 18-38. hoskisson r.e., hitt m.a., wan w.p., yiu d. (1999). theory and research in strategic management: swings of a pendulum. journal of management vol. 25, no. 3, pp. 417-456. hoyer, w.d., chandy, r., dorotic, m., krafft. m., singh, s.s. (2010). consumer cocreation in new product development. journal of service research, vol 13, pp. 283-296. howe j. (2006). the rise of crowdsourcing. wired magazine. issue 14.06. jaworski, b. and kohli, a. (1993). market orientation: antecedents and consequences. journal of marketing, vol. 57, pp. 53–70. journal of business models (2016), vol. 4, no. 3, pp. 48-67 65 lehoux p., daudelin g., williams-jones b., denis j. l., longo c. (2014). how do business model and health technology desing influence each other? insights from a longitudinal case study of three academic spin-off. research policy vol. 43, no. 6, pp. 1025-1038. lundkvist, a., & yakhlef, a. (2004). customer involvement in new service development: a conversational approach. managing service quality, vol. 14, no. 2-3, pp. 249-257. kaulio, m. a. (1998). customer, consumer and user involvement in product development: a framework and a review of selected methods, total quality management, vol. 9, no. 1, pp. 141-149. magretta, j. (2002). why business models matter. harvard business review, vol. 80, pp. 86-92. mcgrath, r. g., (2010). business models: a discovery driven approach. long range planning, vol. 43, pp.247-261. moore g. a. (1991). crossing the chasm. marketing and selling high-tech products to mainstream customers. harperbusiness. narver, j. c. and slater s.f. (1990), the effect of a market orientation on business profitability, journal of marketing, vol. 54, pp. 20–35. narver j.c., slater s.f, maclachlan d.l. (2004). responsive and proactive market orientation and new-product success. journal of product innovation management, vol. 21, pp. 334-347. o’hern, m. s. & a. rindfleisch (2009), customer co-creation: a typology and research agenda. marketing research, vol. 6, pp. 84-106. oliveira, p. and von hippel, e. (2011). users as service innovators: the case of banking services. research policy, vol. 40, no. 6, pp. 806-818. osterwalder, a. (2004). the business model ontology: a proposition in the design science approach. phd dissertation, university of lausanne. osterwalder, a., pigneur, y. (2009). business model generation: modderman drukwerk, amsterdam. plé, l., lecocq, x., angot, j. (2010). customer-integrated business models: a theoretical framework. m@n@gement, vol. 13, pp. 226-265. priem r.l., butler j.e., li s. (2013). toward reimaging strategy research: retrospection and prospection on the 2011 amr decade award article. academy of management review, vol. 38, no. 4, pp. 471-489. pynnonen m., hallikas j., ritala p. (2012). managing customer-driven business model innovation. international journal of innovation management, vol. 16, no. 4. ries e. (2011). the lean startup. how today’s entrepreneurs use continuous innovation to create radically successful businesses. crown business. new york. teece, d.j. (2010). business models, business strategy and innovation. long range planning, vol. 43, pp. 172-194. journal of business models (2016), vol. 4, no. 3, pp. 48-67 66 thomke s., von hippel e. (2002). customers as innovators: a new way to create value. harvard business review, vol. 80, no. 4. sarasvathy, s. effectuation, edward elgar, london, uk (2008); h. simon, the sciences of the artificial (3rd edn), mit press, cambridge, ma (1996). sosna, m., trevinjo-rodrigues, r.n., velamuri, s.r. (2010). business model innovation through trial-and-error learning: the naturhouse case. long range planning, vol. 43, pp. 383-407. strauss, a.l, juliet, m. (1998). basics of qualitative research: techniques and procedures for developing grounded theory. sage publications, inc. vargo, s. l., & lusch, r. f. (2008). service-dominant logic: continuing the evolution. journal of the academy of marketing science, vol. 36, pp. 1-10. verhees, f.j.h.m., meulenberg, m.t.g. (2004). market orientation, innovativeness, product innovation, and performance in small firms. journal of small business management, vol 42, pp. 134-154. von hippel, e. (1986). “lead users: a source of novel product concepts,” management science, vol. 32, no. 7, pp. 791-805. von hippel, e. (2005). democratizing innovation. cambridge, ma: mit press. von hippel, e, and katz, r. (2002). “shifting innovation to users via toolkits.” management science, vol. 48, no. 7, pp. 821–833. zott c., amit r. (2008). the fit between product market strategy and business model: implications for firm performance. strategic management journal, vol. 29, pp. 1-26. journal of business models (2016), vol. 4, no. 3, pp. 48-67 67 kasia zalewska-kurek is assistant professor at the university of twente. she holds an m.a. degree in sociology from the university of wroclaw and a ph.d. in sociology of science from the university of twente. currently, her research focuses on university-industry interactions and on the development of strategy and business model innovation by start-ups. selim kandemir holds a m.sc. degree in business administration from the university of twente. currently he works at a consultancy firm. basil g. englis is the richard edgerton professor of marketing in the campbell school of business at berry college. he is also a research fellow at nikos at the university of twente, the netherlands. dr. englis holds a b.a. degree in psychology from the city university of new york and a ph.d. in experimental psychology with minors in social psychology and statistics from dartmouth college. about the authors paula danskin englis is professor and chair of the management and marketing department at the campbell school of business, berry college and is research fellow at nikos at the university of twente, the netherlands. she has published more than 50 journal articles, book chapters, and case studies in a number of leading journals. journal of business models (2021), vol. 9, no. 3, pp. 39-49 39 designing smart cities: a participatory approach to business model teaching tim mosig1, wafa said mosleh2, and claudia lehmann3 abstract this paper presents the design and content of a business model course for executive education. the course is inspired by the scandinavian participatory design approach, which invites cross-disciplinary and interactive engagement. it demonstrates how a situated learning experience enables a contextual process of inquiry among participants. please cite the paper as: mosig, t., mosleh, w. s., and lehmann, c. (2021), designing smart cities: a participatory approach to business model teaching., vol. 9, no. 3, pp. 39-49 keywords: business models, participatory design, situated learning 1 hhl leipzig graduate school of management – center for leading innovation and cooperation, tim.mosig@hhl.de 2 department of design and communication – university of southern denmark/danske bank, wafamosleh@gmail.com 3 hhl leipzig graduate school of management – lf group chair of digital innovation in service industries, claudia.lehmann@hhl.de dio: https://doi.org/10.5278/jbm.v9i3.2566 issn 2246-2465 introduction in recent years, business models (bms), which support articulating “how a business creates and delivers value to customers” (teece, 2010, p. 173), have received increased attention in academia and practice (zott et al., 2011). this practical approach helps explain the underlying economic logic of how businesses can deliver value at a reasonable cost and, inspired by osterwalder’s (2004) bm canvas, how they can be developed and visualized in a structured way. although various bm ontologies and frameworks have provided a shared language for the description and visualization of bms, its development still requires interdisciplinary knowledge from the fields of marketing (customer segmentation), strategic management (value propositions), and procurement and logistics (key resources). furthermore, as models are simplified representations of reality (stähler, 2002), bms’ multidimensionality (evans et al., 2017) and complexity increase as constant technological and socio-economic developments influence business and society. at the same time, globalization increases competitiveness, which requires businesses to remain responsive to the market. hence, it is necessary for a business to continually question and reframe its bm (osterwalder, 2004). while bms were previously the joint affair of management and business experts, interdisciplinary journal of business models (2021), vol. 9, no. 3, pp. 39-49 40 efforts have increasingly proven to be crucial for the development and implementation of new ideas (buur et al., 2013). thus, facilitating meaningful interdisciplinary conversations regarding bm development has, over the last decade, increasingly become a key concern for businesses. as a result, bms have found their way into academic curriculums. teaching bms with the purpose of bridging theory and practice requires us to think of learning as a situated practice that invites participation in activities (exploration, problem-solving, and reflection) that contribute to the development of successful bms. the activities designed for the course presented in this paper are based on the understanding that learning is situated (lave & wenger, 2008) and thereby a contextual process of inquiry. furthermore, in the spirit of lave and wenger’s (2008) theory of communities of practice, such learning is not simply an individual experience, but something that emerges between participants. with this foundation, we emphasize that the teaching and learning of bms cannot be defined as or limited to a cognitive activity. instead, we understand learning as understanding in practice (lave, 1997) and as a relational process that emerges as patterns of meaning in the evolving relationships between those involved (stacey, 2005). thus, with bm development involving various stakeholders, we emphasize that teaching and learning about it emerges through collaborative inquiry that embraces the participatory design (pd) approach presented as the foundation of our course design. developing bms for smart cities based on the above-described challenges and opportunities, we developed a bm course for mba students (as part of executive education) using a participatory format to explore the topic from an interdisciplinary perspective and facilitate interaction among participants throughout the course (hains & smith, 2012). the learning objectives are to: 1. understand the components of a bm and describe and analyze different types of bm designs, 2. strengthen their capacity to develop digital and technology-enabled bms, 3. gain the knowledge needed to use pd tools to work on new and innovative bms, and 4. recognize and reflect on the customer experience journey and apply relevant methods to explore customer needs. the course was taught at a well-known business school in europe and was run three times at different lengths: 1) part time across five consecutive days, 2) part time over two days, and 3) full time for one day. altogether, the three courses involved 122 participants from different geographical locations in europe. to ensure a practice-oriented approach for teaching bms, we chose to ground the course in the concept of smart cities. we contextualized the structure and content around the smart city topic, using the following definition: a smart city is a well-defined geographical area, in which high technologies such as information and communication technology [ict], logistics, energy production, and so on, cooperate to create benefits for citizens in terms of well-being, inclusion, and participation, environmental quality, [and] intelligent development. (dameri, 2013, p. 2549) in addition to this definition, a smart city shows the following dimensions (table 1). dimensions of a smart city related aspect of urban life smart economy smart people smart governance smart mobility smart environment smart living industry education e-democracy logistics & infrastructures efficiency & sustainability security & quality table 1: dimensions and related aspects of urban life in a smart city (lombardi et al., 2012) the word smart is stressed in the course material. each dimension of a smart city consists of numerous products and services (smart components) connected to one another. according to kulakov et al. (2016), smart services utilize intelligent components, such as information, decision provision, and communication, to continuously acquire and apply knowledge. this helps adapt the services to customers’ preferences and improves quality, reliability, and user experience. journal of business models (2021), vol. 9, no. 3, pp. 39-49 41 in terms of products, smart cities have “the ability to communicate and interact with their environment and other smart products by using internet-based services […] as well as the capability to react in real-time and their potential for dynamic reconfiguration” (abramovici et al., 2018, p. 734). thus, a smart city relies on services and products that are interconnected and communicate with its environment. due to the broad application of ict solutions and the importance of them in the context of smart city development, it is possible to collect data that may contribute to a citizen-centered, sustainable, and value-creating smart city design. using the smart city concept for teaching and training bms has proven advantageous, as it focuses on the benefits of citizens, implying that participants should take a customer-centric perspective. the customer focus is increasingly taken into account in businesses’ strategic considerations. at the same time, a smart city needs to offer different services and facilities, grouped into functional districts (lee &  lee, 2014), to its citizens, such as education and healthcare (washburn & sindhu, 2010). therefore, each service and functional district requires different input factors, leads to particular outputs, and thereby adds value for the citizens in different ways (albino et al., 2015). hence, we can compare the different functional districts of a smart city to businesses that offer various products and services, as both need to keep end customers in mind. based on the smart city topic, the mba course was designed in six different stages, which participants needed to complete as part of their learning process about bm development. in the following sections, we present the methodological approach to the design and structure of the course and the details of those six stages. approach the mba course design is founded on the scandinavian pd approach (sanders & stappers, 2008), of which the central component is to invite and facilitate participation in co-design processes. as pd represents a growing family of design practices that entails using a wide range of methods, it is difficult to describe it as simply one approach or as tools and techniques that may be applied regardless of the problem at hand (brandt et al., 2013). instead, the activities must be strategically organized to serve a particular focus by remaining attentive to the complete experience that the participants will be engaged in. thus, each activity needs to be coherently linked to the subsequent one to enable participation (sanders & stappers, 2008). brandt et al. (2013) suggest the combination of activities that invite telling, making, and enacting to enable participants to influence future ways of living, learning, and being. this, in particular, is what the seminar program encourages through multiple modes of collaborative activity (see figure 1). together, these enable engagement of diverse groups (age, organizational hierarchy, functional and disciplinary backgrounds, and prior training) and support different stages of idea development (sanders & stappers, 2008). inviting participation through these methods encourage the exchange of different perspectives (andersen & mosleh, 2020) and professional disciplines in the group work (burns et al., 2006) and allow for new meaning to emerge. while the mba course was designed based on a scandinavian pd approach, participation emerges in the social interaction between participants and not necessarily due to the staging/facilitation of the activities (mosleh & larsen, 2020). thus, participation in the workshop is not understood as an ideal of democratic engagement, which is mediated through specific methods, but rather as engagement that is encourages through the methods and which temporally unfolds in processes of social relating. the activities are an invitation to confront particular themes using particular methods, but the social interaction of participants is improvised, and the outcomes of such engagement are thereby unpredictable. thus, participation cannot be staged or controlled through specific forms of engagement (mosleh & larsen, 2020), which generally challenges more traditional ways of understanding pd practices (mattelmäki & sleeswijk visser, 2011). talking, telling, and explaining making tangible things acting, enacting, and playing figure 1: framework of practicing pd; own illustration, adapted from sanders & stappers (2008) journal of business models (2021), vol. 9, no. 3, pp. 39-49 42 the application of the described pd approach is realized in the design and structure of the course, where participants are invited to engage with the following six themes: 1) problems & challenges, 2) divergence & convergence, 3) connectivity & sustainability, 4) experience creation, 5) construction i, and 6) construction ii. notably, these themes involved a variety of methods, such as the lego®serious®play1 methodology, customer experience journey, and persona development. a comprehensive overview of the methods involved and how they contribute to the understanding of bms is provided in table 2. additionally, in the following 1 https://www.lego.com/en-us/seriousplay/trademark-guidelines paragraphs, the themes, how they are addressed using the different methods, and how they may contribute to the teaching of bms are delineated. before commencing the activities, participants received a brief kick-off lecture on the topic of smart cities. the lecture related to current events and/or economic, technological, or social challenges that are known to influence a company’s bm. stage 1. problems and challenges the participants were divided into groups of three to five and each assigned to one particular district, e.g., retail, culture and education, mobility, and health. the methods applied in the seminar method comments on how method(s) affect(s) the business model step 1 – problems and challenges • developing a short interview guide • conducting semi-structured (customer) interviews • analysis and discussion of findings • developing a persona • to know who the customer is • to address real customer needs and not aspects assumed the customer wants get solved or addressed • to later on exactly know what the value is delivered to the customer and to articulate the value proposition(s) for the business model accordingly step 2 – diverge and converge • 6-3-5-method • group discussions • iterative process structures of getting feedback and refining ideas as it is also done in design thinking • to explore as many (business) opportunities as possible arising from customer needs identified before • to then choose the options addressing the customer need best • to define the activities/products/ services representing the activities step 3 – connectivity and sustainability • brainstorming • group discussions • to define key resources, partners, and output factors of the business model step 4 – experience creation • customer experience journey • prototyping with craft materials • group discussions • to create the processes connecting all aspects defined so far for the business model • to see what kind of processes make most sense also considering the customer perspective step 5 – construction i • prototyping using: ° lego® serious® play methodology ° other craft materials • group discussions • to test the business models, processes, and workflows step 6 – construction ii • prototyping using: ° lego® serious® play methodology ° other craft materials • group discussions • to implement the business (model) and connecting with external partners table 2: comprehensive overview of the methods applied throughout the seminar journal of business models (2021), vol. 9, no. 3, pp. 39-49 43 groups were asked to develop products, services, and processes to satisfy citizens’ needs and solve challenges central to the smart city concept. they also developed the corresponding bm for these districts throughout the duration of the course. during the first stage, the groups were asked to develop a short semi-structured interview guide (blomberg & burrell, 2012) to help them explore the existing challenges and needs of users/citizens in the context of the particular district. here, the district was viewed as a real-life business situation that the customer establishes contact with. subsequently, the interview was conducted with either the general public in the streets or some of the other course participants. during the interviews, participants gathered relevant details about the needs, challenges, and reasons as to why those needs are important to the customers/citizens. finally, they discussed the collected insights and summarized their findings. this led to the development of a persona—a stereotypical person—that they wanted to develop their solutions for in the following stages. in some cases, two personas were developed if the needs and challenges were too diverse to fit into one. effectively, the goal was to empathize with the customer/ citizen and identify real needs that can be addressed and resolved by the bm. in this manner, customer centricity was taken into account. stage 2. divergence and convergence during the second stage, participants underwent a process of divergence and convergence. the objective was to generate as many ideas as possible within a short time and then to narrow them down to two to three ideas. each idea needed to be a service or product capable of addressing the previously identified customer need(s). the participants started by applying what we call the 6-3-5 method: six participants in a group passed three ideas around to receive feedback five times. in our case, based on the number of participants, the groups chose the same number of challenges from a set of problems that they identified during the problems and challenges stage. each participant was assigned one challenge (a previously identified customer need). to address this challenge, participants were asked to explore three distinct (potentially “smart”) services or products. those ideas were then passed around to other participants within the group for feedback, which, in this case, was mainly a remark on how to develop the idea further. this method was adapted according to the number of participants in each group. having circulated the ideas mentioned earlier, each participant came to know all the proposals made by others. in a group discussion, they reflected upon the various ideas and finally agreed on one approach per challenge. in some cases, several ideas were combined. through the subsequent discussions, participants then delineated the proposals and presented a clear, actionable solution for each challenge chosen. at the end of the discussion, the group agreed upon one product or service they wanted to work with. this needed to be a well-defined solution that clearly explicated how it can help meet a need/resolve a customer’s challenge and thereby contribute to value creation in a smart urban environment. effective and efficient communication was essential as the learning inside the individual participant was shared among all participants within the group via social interplay. stage 3. connectivity and sustainability in this stage, participants engaged in addressing value propositions, delivering, and capturing, thereby dealing with the core aspects of a bm. additionally, they were invited to consider key partners, resources, and channels. as each group addressed more than one customer need for their chosen district, all groups were required to ensure coherence in the value propositions of their proposals so that they were prepared for the subsequent step. during the connectivity and sustainability stage, participants considered the underlying value propositions of their proposals (i.e., the services or products). at this point, it was important to determine the different value propositions coherently so that they could narrate a reasoned story to the customer/citizen as to why these offerings are best suited to address a particular need. accordingly, participants decided how the value was to be delivered to the customer/citizen. participants needed to delve deeper into their solution proposals and determine the necessary input and output factors. they discussed the necessary means to realize the solution in terms of key resources and partners and what the outcome of the solution may be. meanwhile, participants also needed to consider journal of business models (2021), vol. 9, no. 3, pp. 39-49 44 how to deal with output factors and the number/type of districts they could connect to achieve sustainability. effectively, participants also dealt with the question of how the value should be captured. hence, each group developed key elements of a new bm. regarding input factors, particular data could become necessary to realize and deliver the service(s) or product(s). however, the data may have already been generated in another district or at another citizen touchpoint. therefore, at a later stage, participants would need to identify connection points with other districts. in this current stage, they only needed to remain attentive to the circumstances and potential challenges to delivering the solution. stage 4. experience creation in this stage, participants approached the first physical artifacts. all considerations they had made, along with their interim results, were now weaved into a story. the participants were asked to design a customer experience journey including all services or products, their related value propositions, and channels in addition to the identified input and output factors. the customer experience journey supported the participants’ thinking about how the solutions they developed for their persona might help improve the life of this persona as a citizen in a smart city. additional questions that needed clarification included how the persona may feel while experiencing the services or products and a mechanism to determine the value propositions. here, empathy was an important competence to achieve convincing results. the participants needed to clarify the persona’s experiences while utilizing their developed services or products using a prototype of a storyboard. the storyboards could be sketched on paper or physicalized through the use of crafting materials. thus, storytelling became important for the imagination of a personal experience. working with paper and other tangible materials enabled participants to discuss their ideas and visualize the customer experience journey to pinpoint how their services and products are interconnected and may help them further develop the journey. stage 5. construction i the fifth stage of the bm development encouraged collaboration within the group to support a deeper level of understanding, explore relationships between different parts of the bm, and discuss their proposed solutions. to make it easier to incorporate changes in their proposed solutions, we integrated lego®serious®play materials alongside other supplies and items that can be assembled and disassembled so that participants can explore the best possible physical representation of their solution. the predominant focus of this stage was to create a physical prototype. for this purpose, the lego®serious®play methodology was used to build a tangible structure of a conceptual, intangible idea that the participants could discuss, show to others, and further develop in the remaining part of the mba course (gudiksen, 2015). the participants were thus asked to construct their smart city district. they illustrated the customer experience journey, extended by constructing facilities, exhibiting incoming and outgoing connections to or from other potential districts, and converting their ideas/solutions for the services or products into a physical representation. hence, this step further solidified the understanding of the relationship between different facets of the bm and clarified how value is delivered and captured in a customer/ citizen-oriented manner according to the value propositions. in doing this, participants may have discovered potential challenges to realizing the ideas, which then also needed to be addressed. at the end of this stage, each group presented their prototype and briefly explained the meaning of the different objects and items embedded in it. stage 6. construction ii the last stage aimed to help participants understand the complexity of the world we live in and that a district in a smart city or a business is just a small part of a much larger ecosystem. this ecosystem only works successfully if all the different parts it consists of are aligned with each other. once all groups presented their prototypes, they began engaging with one another. the task at hand in construction ii entailed discussion between all groups to imagine a potential setup of a holistic smart city by integrating all the districts constructed by the individual groups. thus, the prototypes of each district needed to be connected (e.g., via infrastructure and items that signify data flow and exchange between journal of business models (2021), vol. 9, no. 3, pp. 39-49 45 different districts and throughout the entire city). again, the lego®serious®play methodology and materials were integrated. participants considered the input and output factors from which synergy effects might potentially arise. this also meant reconsidering how value is delivered and captured within and across the districts. in the end, the groups presented their overall prototype and explained the setup of all parts of the bm. key insights the tasks of the six stages were demanding. however, the interactive pd approach helped with structuring and inviting participants to playfully engage in the given tasks. effectively, the different methods used enabled the facilitator to touch upon various aspects of a bm without having to name them specifically. however, the relation to bms needed to be made for a sustainable learning outcome. in particular, the participants’ reflections at the end of the course established the most important learning, as they, in a situated manner, drew connections between the activities and bm development. during the courses, several points proved to be important for the best possible outcome. firstly, the inspirational kick-off lecture should not be too long or specific to avoid participant bias during a later stage. secondly, each stage should be explained individually and then be carefully carried out by the groups. after each stage, a reflection should take place to elicit a clearer meaning of the steps followed and understand how the tasks align with different aspects of bms. we found that providing all instructions at once led to irritation and frustration among participants, which in turn adversely affected the desired outcome. thirdly, most support and additional explanations need to be provided during stage 3, connectivity and sustainability. the underlying reason seems to be about the level of abstraction of what a value proposition is and how the transition between the proposed solutions and the value proposition may be. lastly, to improve the learning outcome and make it more sustainable, it was helpful to document the interim results and prototypes of each step through photography. the photos can be integrated into the presentation slide deck and forwarded to the participants for documentation purposes. reflecting on the limitations of the course design, we found that the number of participants in each cohort should not exceed 40 to ensure that the facilitator is able to provide all groups with sufficient support. additionally, the quality of the course is dependent on the material and equipment available. in particular, the prototyping material needs to be suitable for the topic at hand to enable the participants to craft meaningful, tangible artifacts. the final point that should be considered is time, with some activities utilizing a fast ideation process to develop as many idea proposals as possible while others demanded sufficient time to think about a particular topic or initiate discussions with other group members. our findings show that to meet the expectations of well-elaborated and meaningful outcomes and a sustainable learning process, the course should not be scheduled for just one day but should instead last between three to five days. discussion and conclusion the coherent organization of the pd activities enabled all participants to engage (sanders &  stappers, 2008) and supported them in imagining future ways of living, learning, and being (brandt et al., 2013). within the groups, this combination of activities invited the exchange of different viewpoints (andersen & mosleh, 2020), enabling a collaborative and contextual process of inquiry, leading to the emergence of new ideas and meaning. the social interplay between participants supported a situated experience that emphasized learning as a relational process. this structure and content are advantageous for the teaching of bms, as it gives space for collaborative sense making and activity rather than the sole agenda of completing a bm canvas. the participatory nature of the course helped participants achieve the learning goals in a way that did not limit them to a cognitive activity, as they together simulated and experienced the bm by experimenting with different future scenarios and possibilities using tangible objects, allowing for flexibility and change. effectively, this course combines a rich set of different methods adopting elements of design thinking, project-based learning, customer experience journeys, journal of business models (2021), vol. 9, no. 3, pp. 39-49 46 personas, the lego®serious®play methodology, and an array of other pd techniques. collectively, these methods provided sustainable learning outcomes for the participants by dealing with the topic of bms in a detailed yet hands-on manner that supported them developing the content by themselves. additionally, they were equipped with methodological knowledge to adapt and re-apply in different contexts and to other topics, expanding the value derived from the course. our findings show that participants were happy with the learning experience, particularly the playful and participatory way of deriving and applying knowledge, which encourages us to develop the design and content further. in the future, we will apply the structure and content of the course to other topics as well, particularly within the field of digitization, using other themes are such as smart homes and buildings, e-/smart government, and advanced manufacturing. in conclusion, teaching bm in a way that supports a situated learning experience is a challenge, but we found that integrating a pd approach proved helpful, as it enabled participants to collaboratively undergo a contextual process of inquiry and imagine future ways of living in smart cities. the pd approach likewise encouraged the exchange of different perspectives and supported our idea of learning being a social activity rather than a cognitive one. this paper thereby highlighted that teaching and learning about bms is a collaborative inquiry, which is invited and supported by the strategic organization of pd methods. journal of business models (2021), vol. 9, no. 3, pp. 39-49 47 references abramovici m., savarino p., göbel j. c., adwernat s., gebus p., 2018. systematization of virtual product twin models in the context of smart product reconfiguration during the product use phase. procedia cirp, 69: 734–739. albino  v., berardi  u., dangelico  r.  m., 2015. smart cities: definitions, dimensions, performance, and initiatives. journal of urban technology, 22 (1): 3–21. andersen p. v. k., mosleh w. s., 2020. conflicts in co-design: engaging with tangible artifacts in multi-stakeholder collaboration. codesign: international journal of cocreation in design and the arts, 1–20. blomberg j., burrell m., 2012. an ethnographic approach to design. in j. a. jacko (ed.), the human-computer interaction handbook: fundamentals, evolving technologies, and emerging applications (3rd ed., pp. 1025–1052). london: lea. brandt e., binder t., sanders e. b.-n., 2013. tools and techniques: ways to engage telling, making, and enacting. in j. simonsen & t. robertson (eds.), routledge international handbook of participatory design (pp. 145–181). london: routledge. burns c., cottam h., vanstone c., winhall j., 2006. transformation design (red paper 02). london: design council. buur j., ankenbrand b., mitchell r., 2013. participatory business modelling. codesign, 9 (1): 55–71. dameri r. p., 2013. searching for smart city definition: a comprehensive proposal. international journal of computers and technology, 11 (5): 2544–2551. evans s., vladimirova d., holgado m., van fossen k., yang m., silva e. a., barlow c. y., 2017. business model innovation for sustainability: towards a unified perspective for creation of sustainable business models. business strategy and the environment, 26 (5): 597–608. gudiksen s., 2015. business model design games: rules and procedures to challenge assumptions and elicit surprises. creativity and innovation management, 24 (2): 307–322. hains b. j., smith b., 2012. student-centered course design: empowering students to become self-directed learners. journal of experiential education, 35 (2): 357–374. kulakov  k.  a., petrina  o.  b., korzun  d.  g., varfolomeyev  a.  g., 2016. towards an understanding of smart service: the case study for cultural heritage e-tourism. in s. i. balandin (ed.), proceedings of the 18th conference of open innovations association fruct and seminar on information security and protection of information technology: st. petersburg, russia, 18-22 april 2016 (pp. 145–152). piscataway, nj: ieee. lave j., 1997. the culture of acquisition and the practice of understanding. in j. w. stigler (ed.), cultural psychology: essays on comparative human development (pp. 309–327). cambridge: cambridge university press. lave j., wenger e., 2008. situated learning: legitimate peripheral participation (18th print). learning in doing. cambridge: cambridge university press. lee j., lee h., 2014. developing and validating a citizen-centric typology for smart city services. government information quarterly, 31 (1): 93-105. journal of business models (2021), vol. 9, no. 3, pp. 39-49 48 lombardi p., giordano s., farouh h., yousef w., 2012. modelling the smart city performance. innovation: the european journal of social science research, 25 (2): 137–149. mattelmäki t., sleeswijk visser f., 2011. lost in co-x: interpretations of co-design and co-creation. in n. roozenburg, l.-l. chen, & p. j. stappers (eds.), proceedings of the iasdr 2011, the 4th world conference on design research. delft, the netherlands: international association of societies of design research (iasdr). mosleh w. s., larsen h., 2020. exploring the complexity of participation. codesign, 1–19. osterwalder a., 2004. the business model ontology: a proposition in a design science approach (dissertation). lausanne, switzerland: university of lausanne. sanders e. b.-n., stappers, p. j., 2008. co-creation and the new landscapes of design. codesign, 4 (1): 5–18. stacey r., 2005. complex responsive processes in organizations: learning and knowledge creation. abingdon, oxon: taylor and francis. stähler p., 2002. business models as a unit of analysis for strategizing. proceedings of 1st international workshop on business models, lausanne, switzerland. retrieved from http://www.business-model-innovation.com/english/ definitions.html teece d. j., 2010. business models, business strategy and innovation. long range planning, 43 (2-3): 172–194. washburn d., sindhu u., 2010. helping cios understand “smart city” initiatives. retrieved from http://www.uwforum.org/upload/board/forrester_help_cios_smart_city.pdf zott c., amit r., massa l., 2011. the business model: recent developments and future research. journal of management, 37 (4): 1019–1042. journal of business models (2021), vol. 9, no. 3, pp. 39-49 49 tim mosig, m.sc., is a research associate at the center for leading innovation and cooperation, a competence center of the hhl leipzig graduate school of management. there, he conducts research on a variety of german and european innovation projects. additionally, he teaches and provides workshops to international mba classes dealing with numerous aspects related to digitization. for his phd, he is working in the field of data-driven business model innovation. dr. wafa said mosleh is a post-doc at the university of southern denmark. she holds a phd in participatory innovation and has undertaken research and consultancy work within larger organizations, such as lego and lufthansa systems. with a background in product design and an interest in the analytical nature of field research, mosleh combines practices of design and anthropology to better understand organizational innovation processes from the experiences of local interaction. during her phd, she was involved in developing and delivering education modules on design thinking and innovation for industry practitioners as well as graduate students. prof. dr. claudia lehmann is a professor of the lf group chair for digital innovation in service industries at hhl leipzig graduate school of management. since 2015, she has also been executive director of the center for leading innovation and cooperation (clic), a competence center of the hhl leipzig graduate school of management. professor lehmann coordinates numerous german and european innovation projects and designs customized innovation strategies with her team and a broad network of institutions and experts. about the authors journal of business models (2019), vol. 7, no. 4, pp. 39-44 39 de-internationalization: a business model perspective jesper c. sort romeo v. turcan aalborg university, dk abstract through business model theoretical lenses, we explore the impact of de-internationalization on firms and their industries and challenges in re-configuring their business models and re-thinking their value propositions in response to de-internationalization. this is a conceptual paper. we put forward a multilevel framework to advance our understanding of this intersection. please cite this paper as: sort, j. c. and turcan, r. v. (2019), de-internationalization: a business model perspective, vol. 7, no. 4, pp. 39-44 keywords: business model, de-internationalization, value renewal, re-internationalization introduction in this paper we explore through business model theoretical lenses the impact of de-internationalization on firms and their industries and challenges in re-configuring their business models and re-thinking their value propositions in response to de-internationalization. the challenge of this paper is threefold. one, the extant research in business models (bms) focuses mainly on the outcomes of business model changes when companies grow (chesbrough, 2007; gambardella and mcgahan, 2010) or are disruptive (hwang and christensen, 2008), but it is rather scarce on understanding how companies reinvent themselves and their bms in situations such as de-investing, de-exporting, back-shoring or re-shoring. two, de-internationalization that undeniably adds to the variance and complexity of the international business field has received little consideration from the international business scholars (turcan, 2003; 2013; 2016). and the minute you establish an organisation, it starts to decay. ross johnson, ceo, rjr nabisco (in burrough and helyar, 1990) journal of business models (2019), vol. 7, no. 4, pp. 39-44 40 three, as logically expected, theoretical and empirical research at the de-internationalization and business model intersection is virtually non-existent. with this paper we aim to address this knowledge gap. approach this is a theoretical paper. we draw on a number of sources to develop a multilevel framework to advance our understanding of the de-internationalization and business model intersection. first, we build on business model theory (foss and saebi, 2017; nielsen et al. 2019) and de-internationalization theory of the firm (turcan, 2006) and conceptualize the intersection. second, we bring the idea of analysing publicly available data and trends, anecdotal evidence where de-internationalization-business-model intersection we study is explicitly observable. key insights the last decade has witnessed a number of global trends that affected in a dramatic way industries and global value chains nationally and internationally. these trends include, but not limited to: rise of nationalist and protectionist policies on trade and economic development in europe, uk, and us, contributing to unfair competition, the reorganisation of the global economy , incl., deinternationalization (such as de-investing, de-licensing, de-exporting; see figure 1) of national firms by brining production or other parts of their corporate value chains back to home country, hence also contributing to dramatic reconfiguration of global value chains and global alliances; development of innovative and disruptive technologies, contributing to large scale displacement of labour force and other resources; disrupting, dismantling and reconfiguration of industries, global value chains and global alliances, incl., re-shoring, back-shoeing and nearshoring (figure 1); challenging firms to open up and collaborate with each other and other potential knowledge holders; at the same time, making it easier for firms to communicate and manage across borders. the abovementioned global trends have contributed to the disruption, dismantling and reconfiguration of industries and global value chains, e.g., by eroding advantages of scale and arbitrage; downsizing internal markets for trade to 1/3 with external value chains doing the rest; making source: derived from turcan 2006 de-internationalization total withdrawal partial withdrawal de-investing de-franchising de-exporting franchising contracting-out selling-off lbo spinning-off asset-swapping exporting in-ward activity ceasing trading mode package combination focusing on home market optimizing entry mode mix optimizing operations value offering forms of organizing social capital cocooning optimizing number of markets figure 1: de-internationalization modes journal of business models (2019), vol. 7, no. 4, pp. 39-44 41 global value chains more knowledge intensive, service oriented; making industries and value chains that tried to globalized work best when national or regional (see e.g. economist, 2017; economist, 2018) in response to these global trends, firms de-internationalize or withdraw from international markets partially or totally (figure 1) and as a result rethink their business models. both research streams – de-internationalization and business models – suffer from selection bias (chesbrough and rosenbloom, 2002; chesbrough, 2007; hwang and christensen, 2008; gambardella and mcgahan, 2010; turcan 2013). business model research stream focuses mainly on bm design and reconfiguration in successful companies seen as best practice examples (chesbrough and rosenbloom, 2002; hwang and christensen, 2008; gambardella and mcgahan, 2010). indeed, the need for companies and entrepreneurs to adapt to changing environment (e.g., massa and tucci, 2014; osiyevskyy and dewald, 2015) and understand their business model configuration and the possibilities to reconfigure said configuration to take advantage of new opportunities (massa and tucci, 2014; massa et al., 2017) are not new in business model research. however, research on how changes, evolution and externalities affect firms’ bms is in its infancy. to the above selection bias, the business model research is also dominated by a theoretical bias. according to nielsen et al. (2018), knowledge and research is lacking to connect specific types of business models with specific performance measures, as well as testing how bm elements predict financial values. de-internationalization is seen as inconvenient, undesirable research endeavour as it is perceived as a failure (turcan, 2003; 2013). overall, research in international business focuses on positive growth and ignores firms that failed or chose to withdraw from their international activities (turcan, 2006; 2010). we side with turcan (2003; 2006) who maintains that de-internationalization should not be seen as a failure, but an opportunity to re-grow and comeback with an even stronger value proposition to the market than before. extant knowledge at this intersection of de-internationalization and business model is scares. with this paper, we aim to explore how and why firms de-internationalize with specific focus on what business models these smes adopt while de-internationalizing, what lessons they have learned, what business models they create in order to re-internationalize, and how deand re-internationalization effect the rebuilt of value propositions at industry, firm and global value chain levels. discussion massa and tucci (2013) suggest splitting the notion of business model innovation into two different categories: business model design and business model reconfiguration. the former relates to inventing new businesses and business models, whereas the latter is about restructuring and generating new ideas within existing business models. from business model perspective, de-internationalization could be seen as a process of restructuring and generating new ideas within existing business models. de-internationalization framework (figure 1) offers initial point of departure to study how withdrawal from international markets affects firms’ business models. was the initial business model appropriate for the international market? was the value proposition imperfect? or how will or can a firm change or adapt its business model in response to international market withdrawal activities and make it more competitive to drive firm’s re-internationalization efforts? in taran et al. (2016), mcdonalds and starbucks are exemplars of franchising, emphasizing ‘positive’ side of the phenomenon. but, as part of ‘optimizing entry mode mix’, de-internationalised company might view franchising as a potential for reconfiguration of the company’s business model aiming to re-internationalize. in this as in the other similar processes the challenge is to identify consequences or obstacles in business model re-deign before considering a company ‘unsuccessful’ or ‘successful’. selling-off or contracting-out, fairly common in the strategic literature, further contributes to our understanding of the intersection by asking how they affect firm’s business model and its reconfiguration. is the company selling-off in an attempt to reconfigure into a journal of business models (2019), vol. 7, no. 4, pp. 39-44 42 more ‘core-focused’ reconfiguration or contracting-out to achieve a configuration of an ‘external sales force’? another interesting question that the intersection generates is what companies are trying to achieve when they are optimizing operations and/or their value offering? from a business model perspective, optimizing could mean re-configuration of several business models. a new value offering could mean anything from ‘full service provider’ to a ‘no-frills’ solution depending on the reasons for de-internationalization. conclusion this is the first attempt to propose a conceptualization in the de-internationalization-business-model intersection. the above insights not only contribute to theorising this intersection, they also demonstrate its relevance to decision makers. we call for future conceptual and empirical studies to understand it across various global, reginal, national, global value chain, industry, and firm levels, setting out a number of relevant directions for future research into the de-internationalization-business-model intersection. for example, what are the benefits or downsides of de-internationalization? what are the implications of de-internationalization on the firm’ business model? which parts of firm’ business model are affected most, how and why by de-internationalization? how value creating, capturing and delivery activities are affected by de-internationalization; how they are redesigned not only to cope with the effects of de-internationalization but also to prepare the firm to re-internationalize. with this paper we aim to achieve cross-fertilization between business model and de-internationalization research streams. we expect business model frameworks help enhance our understanding why and how firms de-internationalize. at the same time, we foresee that de-internationalization of firms will contribute to our understanding how firms re-configure or re-invent their business models during failures, growth declines, or (strategic) departures from what is normal or expected. clearly this intersection poses at this time more questions than answers, but this is what makes it an interesting venue for future research. journal of business models (2019), vol. 7, no. 4, pp. 39-44 43 references afuah, a. 2014. business model innovation: concepts, analysis and cases. new york, ny: routledge. chesbrough, h. (2007). business model innovation: it’s not just about technology anymore.  strategy & leadership, 35(6), 12-17. chesbrough, h. w., & rosenbloom, r. s. 2002. the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change, 11: 529–555 burrough, b. and helyar, j. (1990). barbarians at the gate: the fall of rjr nabisco. harper & row. economist. (2017a). in retreat; the multinational company. the economist; london, vol. 422, iss. 9025. economist. (2017b). in the lurch; left-behind places. the economist; london, vol. 425, iss. 9063. foss, n. j., & saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go?. journal of management, 43(1), 200-227. gambardella, a., & mcgahan, a. m. (2010). business-model innovation: general purpose technologies and their implications for industry structure. long range planning, 43(2-3), 262-271. hwang, j., & christensen, c. m. (2008). disruptive innovation in health care delivery: a framework for businessmodel innovation. health affairs, 27(5), 1329-1335 massa, l., & tucci, c. l. (2013). business model innovation. the oxford handbook of innovation management, 20(18), 420-441. massa, l., tucci, c. l., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73-104. nielsen, c., lund, m., montemari, m., francesco, p., massaro, m. and dumay, j. (2019) business models: a research overview. routledge, new york nielsen, c., lund, m., thomsen, p., brøndum, k., sort, j., byrge, c., ... & simoni, l. (2018). depicting a performative research agenda: the 4th stage of business model research. journal of business models, 6(2), 59-64. osiyevskyy, o., & dewald, j. 2015. explorative versus exploitative business model change: the cognitive antecedents of firm level responses to disruptive innovation. strategic entrepreneurship journal, 9: 58–78. taran, y., nielsen, c., montemari, m., thomsen, p., & paolone, f. (2016). business model configurations: a five-v framework to map out potential innovation routes. european journal of innovation management, 19(4), 492-527. turcan, r. (2003). de-internationalization and the small firm. in c. wheeler, f. mcdonald and i. greaves (eds.), internationalization: firm strategies and management (pp. 208-222). great britain: palgrave. turcan, r. v. (2006). de-internationalisation of small high-technology firms: an international entrepreneurship perspective. doctoral dissertation. university of strathclyde: glasgow, uk. journal of business models (2019), vol. 7, no. 4, pp. 39-44 44 turcan, r. v., mäkelä, m., sørensen, o. j., & rönkkö, m. (2010). mitigating theoretical and coverage biases in the design of theory-building research: an example from international entrepreneurship. international entrepreneurship and management journal, 6(4), 399-417. turcan, r. v. (2013). the philosophy of turning points: a case of de-internationalization. advances in international management, 26, 219-235. turcan, r. v. (2016). exploring late globalization: a viewpoint. markets, globalization & development review, 1(2), [4]. journal of business models (2019), vol. 7, no. 4, pp. 53-58 53 tactical shapeshifting in business modeling walter van andel culture commons quest office, faculty of business and economics, university of antwerp, belgium abstract this paper looks at ‘bottom-up’ architecture firms. these firms focus on co-production and participation, as they develop designs that stimulate social change. as such, they are placed in a hybrid position between citizens and governments. the paper identifies four ‘business model tactics’ they utilize in maneuvering between different institutional fields. please cite this paper as: andel, w. v. (2019), tactical shapeshifting in business modeling. vol. 7, no. 4, pp. 53-58 keywords: business model tactics; institutional tensions; bottom-up architecture acknowledgements: this work was supported by the fund for scientific research flanders (fonds voor wetenschappelijk onderzoek vlaanderen, fwo) and its odysseus research program. introduction by defining a business model as the ‘overall logic through which an organization creates, delivers and captures value’, as it often is described, the concept takes on a holistic  perspective on how firms conduct business focusing on the ‘big picture’ rather than on small operational details. however, there seems to be a certain vagueness about how this ‘holistic’ rationality can be applied to day-to-day actions necessary to make this strategic tool function, especially in situations in which the organization is faced with unstable and difficult to navigate environments. this paper focuses on this gap, by emphasizing the importance of applying business model ‘tactics’ as one way of making a business model consistently work in everyday operations despite volatile and uncertain circumstances. for this paper, an emphasis is placed on organizations within a specific emerging subsector within architecture and urbanism: ‘bottom-up’ or ‘commons-based’ architecture. increasingly, architects are attempting to redefine the role of architectural practice in light of growing inequality in urban settings, leading to a subfield which can be characterized by different goals, often related to a vision of a different, more egalitarian journal of business models (2019), vol. 7, no. 4, pp. 53-58 54 society (see e.g. markussen, 2013). as opposed to traditional large-scale governmental, corporate or privately-led development, these bottom-up architectural practices can typically be related to low-cost, small-scale and intentionally functional modifications of the built environment, developed through community participatory projects initiated by the end-users of the buildings (bradley, 2015). importantly, the specifics of the practice of bottom-up architecture bring an interesting case to study for business modeling purposes, as the environments they operate can at times be extremely complex, which raises several specific organizational and operational challenges. processes in bottom-up architecture involve broader groups of stakeholders such as citizens, local communities, local authorities, political ambassadors and, often times, students, researchers and artists. given the fact that there is often no single client or commissioner, processes of bottom-up architecture may thus be plagued by difficulties to align a plethora of heterogenous and diverse interests, both internally and externally (parker and schmidt, 2017), while navigating administrative and legal systems. this means that organizations in bottom-up architecture tend to have the necessity to constantly adapt to diverse contexts. hence, it is evident that bottom-up architecture firms are exposed to an environment consisting of a plurality of influences on how to behave, and a multitude of conflicting pressures. in the extremes, there are two clearly different institutional worlds in which they are simultaneously present: direct cooperation with citizens is key in their ‘grassroots’ approach, while they inevitably need to work in close collaboration with and sometimes in assignment of local governments. this entails a delicate balancing act between the ‘logics’ of the different dialogues and discourses. often times, this context results in contradictory demands and difficulties to run the organization in a long-term, impactful, creative and mentally satisfactory manner. skillfully maneuvering in between these contexts is a key element for creating long-term impact. an important factor in achieving this, this article posits, is through thoughtfully utilizing an organization’s business model by exploiting business model tactics. harnessing multiple tensions within a single business model is challenging because each of the opposing domains may require a different and often incompatible activity set (markides, 2013). one manner to deal with such tensions is highlighted by casadesus-masanell and ricart (2010). on a strategic level, these authors make an important distinction between business models on the one hand, and tactics on the other, which in their view happens in a sequential manner. in the first stage, firms choose a ‘logic of value creation and value capture’ (i.e., choose their business model), and in the second, they make tactical choices within their chosen business model framework in order to make the business model function. so, if the higher-order strategic tool of business models refers to the overall logic of the firm, the way it operates and how it creates value for its stakeholders, the lower-order strategic tool of tactics refers to the residual choices open to a firm by virtue of the business model it chooses to employ. tactics are therefore what allows an organization to maneuver within their overall business model. this paper claims that the thoughtful use of these tactics is essential for organizations in complex contexts. the maneuverability unlocked through exploiting business model tactics can prove vital in the ability to harness contextually induced tensions. approach through a method of purposeful intensity sampling three cases are selected that provide “excellent examples of the phenomenon of interest, but not highly unusual cases… cases that manifest sufficient intensity to illuminate the nature of success or failure, but not at the extreme” (patton, 2002, p. 234) raumlabor (berlin, germany), recetas urbanas (seville, spain), and endeavour (antwerp, belgium). the first two organizations are regularly regarded as some of the leaders of the bottom-up movement, as is for instance exemplified by both organizations being the recipient of the global award for sustainable architecture (respectively in 2018 and 2015). the third organization is a younger group of architects and urbanists, whose attempt for a neighborhood to collectively purchase a significant building in the city of antwerp sparked a lively local debate about new forms of cooperative development, co-financing and shared use of space. these organizations unavoidably work with both sides in order to achieve (long-term) results. this leads to journal of business models (2019), vol. 7, no. 4, pp. 53-58 55 specific power dynamics, as indicated by the following conundrum, emphasized by the founders of endeavour: how can those involved in pursuing participatory planning in the neo-liberal city employ a critical stance while retaining influential strategic relationships and access to shaping policy (kaethler et al., 2017)? this paper researches the specific position in which these three organizations are situated, and reviews in what ways they utilize business model tactics in order to maneuver between institutional fields. data for this paper were collected through a combination of thirteen semi-structured in-depth interviews with the members of endeavour, recetas urbanas and raumlabor complemented with an analysis of internal and external policy documents in which the organizations reflected on their inner workings and field observations. key insights: tactical shapeshifting within the three different organizations, four tactics have been identified that these organizations utilize to maneuver between institutional fields and thus be able to simultaneously follow the rules of multiple games. a first tactic is following the logic of fluidity, or undefined strategic direction. many of the classic strategy theories emphasize the value of strategic clarity, however, the focus organizations employ a different strategy. for instance, raumlabor deliberately chose to not declare a manifesto, which is often standard practice in architecture and urbanism. by not defining what actually is raumlabor, it remains a ‘fluid entity, different in each member’s head’. this fluidity makes raumlabor not fixed to what they are, or what they should do, making the reality of raumlabor constantly shaped by ongoing activities. in the case of endeavour, a similar type of fluidity has been self-defined as ‘strategic ambiguity’ (kaethler et al., 2017). their intentional strategic unclarity allows them to on the one hand adjust their organizational narrative to the project and stakeholders at hand, and on the other leave room open towards a wide variety of non-profit, self-initiated projects that are of personal importance to the different people in the organization. “we see such endeavors as an integral part of our dna, allowing us to continuously question or reinvent our role within spatial processes” (tasan-kok et al., 2016, p. 637). a second tactic for dealing with the institutional pluralism is deliberately creating and playing out multifaceted identities. classic organizational scholars such as albert and whetten (1985) have traditionally defined identity as something which is central, enduring, distinctive, and singular about an organization’s character. however, since the turn of the century, researchers have been making increasing notion of organizations having multiple identities (see e.g. the discourse initiated by gioia et al., 2000). all three organizations play with this tactic in different ways. on an organizational level, all three organizations have different identity positionings that can be utilized. endeavour mediates between (academic) researchers, activists and urban professionals, while raumlabor and recetas urbanas playout identities that include both those of architects and artists. each role allows the organization to be highly legitimate in different contexts and toward different people. for example, as artists, these organizations are highly legitimate to perform different interventions in public and they can use the territory of art as platforms to not only achieve civic results beyond what is possible as mere architects, but also express their position as activists to a wider audience, in their quest for a podium to reconsider the position of architecture in our society (gandolfi, 2008). in all cases of multifaceted identities, each identity comes with its own possibilities, allows to utilize different approaches, to build up different relationships, to adhere to different norms and to discuss in different discourses, making the three organizations agile in their institutional positioning. utilizing a high degree of boundaryless, informality and openness is a third tactic. all three organizations are essentially in certain ways not owned by anybody, either in official statutes (referring to the collective / cooperative status of raumlabor and endeavour) or in daily working as is reflected in their participative practices. this makes these organizations not limited by organizational demarcations. for example, in contrast to top-down architectural processes in which citizen involvement often becomes reduced to a pro forma, all three organizations directly involve all stakeholders within their activities, going as far as the actual design and construction work being carried out by involved citizens. as the end-users and local authorities involved are constantly not only involved with, but at times decisive in determining the planning, designing, and journal of business models (2019), vol. 7, no. 4, pp. 53-58 56 construction, they are at that moment essentially an integral part of the three case organizations. these organizations as open systems as such become a direct bridge between both institutional worlds. essentially, as markus bader of raumlabor states: raumlabor is owned by everyone and no one at the same time (bader, 2018). by combining this informality and extreme openness with strong shared core values which are exemplified in all practices, the organizations are able to informally articulate a common category of membership so that all different stakeholders view one another as part of an ingroup, leading to a high degree of identification or perception of ‘oneness’ with the organization. a final tactic being employed is to strategically utilize complexity. in the case of recetas urbanas, this is to be found in legal structures. they do not so much encourage people to rebel against society, but rather to re-appropriate the city without breaking the law (markussen, 2012). for this, the architects cipher through the law to find legal loopholes that help citizens to forgo bureaucratic procedures and barriers that are often insurmountable for ordinary people. at the same time, recetas urbanas distributes instructions for others on how to do so the same within the legal system. endeavour employs a different manner for utilizing complexity. by bringing the different stakeholders in urban projects and all their different voices and opinions together in a co-productive approach to neighborhood development, the organization deliberately attempts to create a ‘manageable complexity’ within the project. by deliberately not simplifying the process, but focusing on the complexity of achieving a long-term inclusive solution, endeavour can utilize their position as experts in socio-spatial phenomena. this expertise role within this (self-raised) complexity gives endeavour a mandate from all stakeholders to set the agenda for the process, cementing their value in reaching out to and bridging both institutional worlds. discussion and conclusions the theory on business models state that it can be regarded as the overall logic through which an organization creates, delivers and captures value. this is often said to manifest itself through the deliberate actions an organization chooses to undertake. in a well-functioning business model, all decisions and actions reinforce itself, making a complete and logical story. however, a shortcoming in the theory on business models is that its applicability is often stuck on a rather conceptual and abstract level. even though several commercially-successful tools have been made developed that attempt to make business model thinking practical for example through visualizing the process (e.g. osterwalder and pigneur, 2010) still the translation from the conceptual idea to a successfully functioning model is often where limits of using business modelling as a strategic tool are encountered. this article sheds light on the importance of ‘tactics’ in order to make a business model function. these tactical actions are not what some would describe as the ‘primary process’ of each of the organizations. the organizations described in this paper are architects and urbanists, and thus primarily design buildings and create plans. moreover, these tactics are tacit rather than explicit: they are not described on the “about section” of an organization’s website, nor are they in any operating manuals. nevertheless, they are at the core of the day-to-day activities of an organization, functioning as the grease that makes the different major components of the business model run smoothly and therefore they are crucial to make the organization’s story logical and complete. utilizing these tactics allows the organizations to have more maneuverability within the overall business model, opening up more pathways for exploration and growth. by focusing on tactical actions rather than the (on a strategic level) higher level business model actions, this article aims to uncover some of the ‘black box’ content that is a functioning business model. with the exploration of the specific tactics used by organizations that are ‘in between’ institutional spheres, this paper has attempted to advance its conceptualization in a way that better represents the essential nature of achieving legitimacy in pluralistic worlds. as the case examples illustrate, many standard strategic tools need to be redefined when an organization is in such a complex institutional environment. navigating between art and politics creates specific tensions that need a delicate balancing in order to bridge the gap between pragmatism and idealism. this paper has identified four tactics that are being utilized in different forms by these bottom-up firms of journal of business models (2019), vol. 7, no. 4, pp. 53-58 57 architecture and urbanism. a common theme throughout them is a high degree of variability, in strategy, identity and form. this variability makes for a high degree of institutional agility making it possible to following simultaneously the rules of different games. by making room in the business model for this sort of tactical shapeshifting, these organizations are able to redefine the role of architecture in modern society: as an instrument for (re)legitimizing people’s role in our society. journal of business models (2019), vol. 7, no. 4, pp. 53-58 58 references albert, s., & whetten, d., (1985), organizational identity, in cummings, l.l., staw, b.m. (eds.), research in organizational behavior, jai press, greenwich ct, pp. 263–295. bader, m., (2018), urban practice: the form of the informal, raumlabor, berlin. bradley, k., (2015), open-source urbanism: creating, multiplying and managing urban commons, footprint, pp. 91–108. casadesus-masanell, r., & ricart, j.e., (2010), from strategy to business models and onto tactics, long range planning, vol. 43, pp. 195–215. gandolfi, e., (2008), strategies for a better world, architectural research quarterly, vol. 12, pp. 125–133. gioia, d.a., schultz, m., & corley, k.g., (2000), organizational identity, image, and adaptive instability, the academy of management review, vol. 25, pp. 63–81. kaethler, m., de blust, s., & devos, t., (2017), ambiguity as agency: critical opportunists in the neoliberal city. codesign, vol. 13, pp. 175–186. markides, c.c., (2013), business model innovation: what can the ambidexterity literature teach us? academy of management perspectives, vol. 27, pp. 313–323. markussen, t., (2013), the disruptive aesthetics of design activism: enacting design between art and politics, design issues, vol. 29, pp. 38–50. markussen, t., (2012), the disruptive aesthetics of hijacking urban space, journal of aesthetics & culture, vol. 4, pp. 1-9. osterwalder, a., & pigneur, y., (2010), business model generation: a handbook for visionaries, game changers, and challengers, 1st ed. wiley, hoboken. parker, p., & schmidt, s., (2017), enabling urban commons, codesign, vol. 13, pp. 202–213. patton, m.q., (2002), qualitative research & evaluation methods, 3rd edition, sage publications, inc, thousand oaks, california. tasan-kok, t., bertolini, l., costa, s.o., lothan, h., carvalho, h., desmet, m., blust, s.d., devos, t., kimyon, d., zoete, j.a., & ahmad, p., (2016). “float like a butterfly, sting like a bee”: giving voice to planning practitioners, planning theory & practice, vol. 17, pp. 621–651. journal of business models (2016), vol. 4, no. 2, pp. 60 80 60 purpose: to facilitate futures business research by proposing a novel way to combine business models as a conceptual tool with futures research techniques. design: a futures perspective is adopted to foresight business models of the internet of things (iot) enabled healthcare sector by using business models as a futures business research tool. in doing so, business model is coupled with one of the most prominent foresight methodology, causal layered analysis (cla). qualitative analysis provides deeper understanding of the phenomenon through the layers of cla; litany, social causes, worldview and myth. findings: it is difficult to predict the far future for a technology oriented sector like healthcare. this paper presents three scenarios for short-, mediumand long-term future. based on these scenarios we also present a set of business model elements for different future time frames. this paper shows a way to combine business models with cla, a foresight methodology; in order to apply business models in futures business research. besides offering early results for futures business research, this study proposes a conceptual space to work with individual business models for managerial stakeholders. originality / value: several research on business model has offered conceptualization of the phenomenon, innovation through business model and transformation of business models. however, existing literature does not offer much on using business model as a futures research tool. enabled by futures thinking, we collected key business model elements and building blocks for the futures market and analyzed them through the cla framework. futures business models for an iot enabled healthcare sector: a causal layered analysis perspective julius francis gomes 1 and sara moqaddemerad 2 abstract please cite this paper as: gomes and moqaddamerad (2016) futures business models for an iot enabled healthcare sector: a causal layered analysis perspective, journal of business models, vol. 4, no. 2 keywords: business models, cla, iot, foresight, healthcare, mhealth 1 oulu business school, university of oulu, julius.francisgomes@oulu.fi 2 oulu business school, university of oulu, sara.moqaddamerad@oulu.fi journal of business models (2016), vol. 4, no. 2, pp. 60 80 61 introduction since the introduction of internet for public use in the early 1990s, the sphere of technology advancements has propelled extensively till today. internet has evolved from being only the “internet of computers” to be the “internet of people”, and now to be the “internet of things” (iot) by enacting possibilities of small “things” benefitting humankind with higher scale of usable information (coetzee & eksteen, 2011). with billions of connected devices, iot promises to enhance decision making and data analysis to a heightened level. one major application sector of iot identified by numerous researchers is healthcare, since the early stage of iot innovations (atzori, iera & morabito, 2010; domingo, 2012; xu, he & li, 2014), where iot eventually combines all three perspectives of internet, namely computers, people and things, to solve different problems. despite enormous hype about iot’s contribution in healthcare from an innovation perspective, we are still to be sure about economic and business feasibility of such innovations for the longer future. to gain better sight on this ground business model as an analytical concept can play a handy role. recent studies concerning business models suggest that industrial actors are playing more with their business models than ever to have longer lasting and efficient organizational performance across various industries (nielsen et al., 2014). in practice, the use of business models has grown significantly in recent years by companies especially to gain and secure competitive advantage (johnson, christensen & kagermann, 2008; wirtz et al., 2015). business model has been defined by different authors with varied attributes due to its potential multi-dimensional application. based on significant advancement in business model research, ahokangas et al. (2015) argues that the next generation of business model research will focus on the future centrism of the concept. pondering on amit & zott’s (2001) perspective on business models as “unit of analysis”, we consider building on futures thinking, and perceive that industrial future can be foresighted by using business model as the basis of analysis previous researches involving iot and healthcare mostly stress upon narrow specific healthcare context and application possibilities (domingo, 2012; atzori et al, 2010, & farnandez & pallis, 2014). on the other hand, business model focused studies for on iot (westerlund, leminen & rajahonka, 2014) and business model focused studies for iot-healthcare (pang et al, 2015) hints of ecosystemic business model. additionally, there are technical studies focusing of health care iots which covers part of the overall business models, but lacks the depth in analysis from a business model view point due to discipline differences (liu & jia, 2010; whitmore, agarwal & xu, 2015). iot is acclaimed to foster the healthcare sector for longer term throughout literature, but the lack of analytical evidence for the promised future in available texts makes it interesting to look into the issue with a longer term and big picture perspective. according to masini (2006), “we, in the present time, need to look at the future in ways that go beyond the creation of beautifully conceived but ultimately illusive utopias. our future must not only be foreseen and dreamt of, but also chosen and built.” (p:1159). business models are often perceived to be seen as the practical implementation of abstract strategies (richardson, 2008). from a strategy perspective, porter (1991) claimed that many differentiation advantages that firms gain actually comes from initial conditions and managerial choices (hedman & kalling, 2003). these initial conditions and managerial choices are arguably covered by different business model elements. thus, building on futures thinking we attempt to apply business model as basis of analysis to uncover future market for the longer term. this way, for individual organization business model innovation, organizations can make informed “managerial choices” for the future. this paper displays a novel way to look at industry future potential using business models combined with one of the most prominently used futures research methodologies, causal layered analysis (cla) (inayatullah, 2004). the objective of this paper is twofold. first, since the emerging market context of iot enabled healthcare lacks proper attention from business perspective in the academic literature, this paper provides an interesting perspective by looking at the future. secondly, we use the business model concept to analyze future market ecosystem combining with a scientific foresight methodology. however, since the business model as a concept has not been applied in such a way in the existing journal of business models (2016), vol. 4, no. 2, pp. 60 80 62 literature so far, the key research question that we handle in this paper is as follows: how the business model framework can be applied to cla to study the future of an industry? the rest of this paper is structured as follows. first, we introduce the theoretical framework surrounding discussions on the iot enabled healthcare sector, business models and an introductory note on cla due to lack of using this method in business research. then the research design is presented. next, three linear futures scenarios with three different time horizon will illustrate the conceptual and temporal space defined in the layers of cla followed by concise discussion on the created scenarios. a list of probable business model elements for different time frames in the future is exhibited. finally, the conclusion of the paper will discuss how the created scenarios from the cla layers can plug into and deepen the future business models of the iot enabled healthcare sector. also, we briefly discuss how business model as a concept can bring additional structure to foresight methodologies for business research. theoretical framework we construct the theoretical framework by first introducing the iot enabled healthcare sector from a conceptual viewpoint, then present our perception of business models. finally, we introduce the concept of futures research and cla. iot enabled healthcare sector internet has brought about and enabled numerous advancements since its introduction. one of the most significant aspects of internet has been varied ways of its utilization. although there are some deviated definitions of iot within the literature (atzori, iera & morabito, 2010), we use the definition from coetzee & eksteen (2011). iot, a vision where objects become part of the internet through unique identification, accessibility to the network, position and status, where services and intelligence are added to this expanded internet. the concept is to fuse digital and physical world to impact professional, personal and social environments. mobile device assisted healthcare and medical applications are believed to create the next big advancement in the health industry (balandin et al, 2013) due to increasing usage of mobile technologies and mobile devices (not limited to mobile phones only) in the recent years (briggs et al, 2012). this trend is gaining momentum for longer sustainability by more and more introduction of wearables, environmental or implanted medical iot devices and solutions (amendola et al, 2014). a recent industry focused study about the trends and facts within mobile health (mhealth) marks business models are going to evolve and broaden (research2guidance, 2013) as the mhealth industry has recently exited the trial phase and now entered the commercialization phase in the market (research and market, 2013). however, the challenge for a modern industrial firm lies in understanding the internal and external market environment to keep up with the rapid changes (hayward, 2004). these rapid changes pose dynamic opportunities in some cases and in other cases lead to complex threats, which need to be tackled with longer term vision for sustainability. the healthcare sector has fostered in the era of internet with relative cost efficiency and smart solutions. the biggest advantage of health iot solutions is perhaps personalized solutions and providing a universally accessible database for better healthcare maintenance (xu, he & li, 2014). successful and wide adaptation of iot in healthcare will present billions of sensors accumulating a robust network of data collection and sharing coupled with ubiquitous identification system; which will enable the sector with better monitoring, sensing, communicating and controlling abilities. different types of healthcare information like logistics, diagnosis, recovery, therapy, meditation, management, finance and even daily activities can be collected through the iot architecture (domingo, 2012; xu, he & li, 2014). the definition of healthcare innovation has changed dramatically over time, now innovations in patient care, wellness or health tech are considered as innovations in healthcare. iot can play a substantial role in either of these scopes. fernandez & pallis (2014) listed existing wearable devices powered by iot, which includes heart rate monitors, ecg monitors, glucose monitors, pulse oximeters and blood pressure monitors. a similar notion was shared by atzori, iera & morabito (2010) earlier when they spoke of four major application scope of iot in healthcare as tracking, identification and authentijournal of business models (2016), vol. 4, no. 2, pp. 60 80 63 cation, data collection and sensing. business model the business model concept can be defined as a description (applegate, 2001; weill & vitale, 2013), an architecture (timmers, 1998; dubosson-torbay, ostwewalder & pigneur, 2002), a representation (morris, schindehutte & allen, 2005; shafer, smith & linder, 2005), a model or conceptual tool (osterwalder, 2004; osterwalder, pigneur & tucci, 2005), a structural template (amit & zott, 2001), a method (afuah & tucci 2001), a recipe (baden-fuller & morgan, 2010) a framework (afuah, 2004) and a set (seelos & mair, 2007) for business proliferation within academic literature. this dense description of how different authors think about the phenomenon already provides readers with basic understanding of the key logics. however, at the same time it triggers the idea of definitional ambiguity (jensen, 2014; osterwalder, pigneur & tucci, 2005) among readers questions why a phenomenon should have so many single worded/phrased meanings. in the latest stream of business models research, different tools are offered as meta-models where authors have accumulated multiple components from the definitions and constructed algorithmic or a flowing relational model. osterwalder & pigneur’s (2010) business model canvas is one of the most popularly used tools where the author accumulated nine components; they are: value propositions, customer segments, customer relationships, channels, key activities, key resources, key partnerships, cost structure and revenue streams. the business model canvas has provided the concept of business model with tremendous momentum in practice of business model as models. recently ahokangas et al (2014) introduced the business model wheel (bmw) where it is argued for business opportunities as the heart of business modeling instead of value proposition. business model wheel as a tool is inspired by onetti et al’s (2012) locus, focus and modus view on business modelling. with opportunity at the center, bmw asks what, how and why questions from the business activities of an entity. we perceive business modeling to be an opportunity centric and cyclic process. this approach to business model considers the way a company “do business” depends on what opportunity is there in the market to exploit. often companies find an opportunity that suits their resources and competencies; and in some cases companies might have resources and offerings for the market which lacks a good enough market opportunity. thus we argue aligning ahokangas et al (2014), an opportunity should be identified or discovered first to design the most benefitting business model for an organization. additionally, we admit that in the modern hyper-volatile technology fueled market, a single opportunity can rarely sustain for a longer period. in such cases, companies need to find newer opportunities and align their overall business model by keeping the business opportunity at the center and gain more competitive advantage by nurturing identified opportunities. research on how the concept of business model can be applied in practice has shown different avenues. amit & zott (2001) identified business model as a new unit of analysis and a system-level, holistic approach to explain how a firm “do business” as two key streams which can be considered relevant when considering the future of an industry. additionally, bouwman et al (2012) discusses conceptual tools like business model road mapping and business model stress testing for future development of individual organization business model. for individual organizations both these tools seem viable. however, to study a wider sphere of an industry’s future, process generalization is required. also, the concept of business model transformation, appears to be relevant to the future, acknowledging transformation of existing organizations through positioning the core business logic by adapting newer business models into a new market place (ahokangas & myllykoski, 2014; ivari, 2015). the future can be perceived as the new market place and such transformation by repositioning core business logic harnessing the possibilities of business models can take place industry wide over time. we consider the business model as a dynamic transformational force which helps practitioners conceptualize the rationale behind the overall value creation and delivery for long term economic sustainability. we use the concept of business model to understand the future and analyze an industry development. in doing so, we apply the business model wheel coupled with a foresight technique named causal layered analysis (cla). in the following subchapter, a brief review on scientific journal of business models (2016), vol. 4, no. 2, pp. 60 80 64 foresight and cla is depicted. foresight and causal layered analysis (cla) futures studies as a discipline dates back to the second world war. nonetheless, since the beginning of human civilization, practice of thinking about the future regardless of exact time-extent of intervention was always present in the back of individual’s mind (masini, 2006). futures research involves active learning and participation, timing of intervention, and deconstruction of reality in order to construct a preferred future (inayatullah, 2000). it also enables us to consume surprise as an element and design alternative scenarios towards a vision (masini, 2006). foresighting gives managers and strategizers a tool for looking for alternative and probable outcomes of a given situation and act on the result they get using foresighting (inayatullah, 2008). in learning the potential business opportunities of the iot enabled health care sector and probable business model elements, we applied cla which is one of the most widely appreciated futures research methodologies. cla involves integrating empiricist, interpretive, critical and action learning modes of knowing to unleash the future (inayatullah, 2004). unlike other foresight/futures methodologies, cla involves less of predicting the future rather it focuses on creating transformative conceptual spaces to create preferable and alternative futures. cla is usually applied to go into the deeper future as one of its specialty and longer term policy change feature (inayatullah, 1998). there are four layers in cla. the first layer is known as “litany”; here it starts from the surface level of the problem with empirical data and then it moves to a deeper level to find the reasons for the problems detected from the surface layer and analyze them; this layer is entitled as “systemic/ social causes”. further down it moves to look for the causes and the developments in the worldviews and discourse of the society, known as “worldviews”. finally, to uncover deepest logic of a problem, cla uses “myths and metaphors” to translate problems often in an artistic or poetic language (inayatullah, 2000), figure 1 illustrates these layers. we can delve into the different layers of business models of the iot enabled healthcare sector to understand a space for future growth and sustainability. figure 1: 4 layers of cla (adapted from inayatullah 2005) research design and data collection since the future is elusive and business opportunities are also difficult to identify sometimes, this study realizes that the most suitable methodology for conducting this research is to use qualitative approaches. to delve into deeper layers with cla, empirical dataset should be translatable in a qualitative manner for wider and in-depth understanding. qualitative methods provide researchers with flexibility and sensitivity to the context that has been less explored, and it can help understand how things work in a particularly complex setting (mason 2002). realizing the fact that the interest of this study is the near and far future of a specific sector, single qualitative case study is observed as the most suitable strategy. additionally, as we consider the findings of previous studies on business models for iot and business model for healthcare, we tend to look for ecosystemic developments. thus, by not focusing on a specific company case, this study tempts to organize an industry-wide single case by accumulating different stakeholders to understand the future market. this study deals with the contextual setting of an iot enabled healthcare sector from an industrial/managerial perspective, besides the academic interest of this study is to find a deployment logic of business models as a futures technique. thus it was central for the aims of the research that a network of relevant actors is located to have deep insight of the sector regarding current status and also the futures business model logics of an iot enabled healthcare sector. the case network was chosen with the support from the extended network actors of the digile internet of things project, journal of business models (2016), vol. 4, no. 2, pp. 60 80 65 where different stakeholders from the futures industry could be interviewed. based on the results of the literature review conducted for this research, we focused on collecting primary data. from the case network we communicated to several specialists from the industry coming from different stakeholder background. five face-to-face oneon-one interviews were conducted for the purposes of this research during may, 2015 and june, 2015. each interviewee was in a leading role in their organizations and has deep understanding of the industry and its stakeholders. the interview framework was developed as a two-axis matrix, having business model components in one axis and the layers of cla on the other. a semi-structured and themed framework was employed with a qualitative stance for the interviews. the basic framework (appendix 1) for all of the interviews were same except for the future time horizon. while questioning about the future, respondents were given either short term, or medium term, or long term in the future. a summary of the interviews and the participants are presented in the following table. each of the interviews were conducted by a single and same interviewer. altogether 350 minutes of primary data was recorded and transcribed. data collection through semi-structured interviews was followed by qualitative content analysis to create congruency within the whole data set and to construct three linear futures scenarios. upon transcription and analysis from a cla perspective, each interviewees were shared with interview transcription and analysis, so that the validity of the analysis is maintained as superior future. these scenarios provide us with a holistic picture of the industry including different business model elements, how they evolve and change in the future from a business model perspective. findings and future scenarios in this chapter, three futures scenario with a cla perspective is illustrated. first, the surface level of each scenario is presented, then it is attempted to figure out underlying logics and relations between them in order to understand the feasibility of reaching different futures. in the created scenarios, the short-term scenario represents the business as usual future for five (5) years from now as “the ploughed field”. the medium-term scenario indicates the probable future for ten (10) years in the future from now is titled as “the breaking dawn”. finally, the long-term future scenario is considered as the preferable future called “the ant super-colony” which indicates developments in the market for fifteen (15) years from now. on the litany layer, we tend to identify the business model elements in each scenario and then move deeper to understand the social causes and worldviews. finally, we summarize each scenario with relevant metaphors. as a part of the semi-structured interviews, interviewees were asked for metaphorizing specific future. once the overall dataset was combined, we deduced the three mentioned metaphors which reflects the respective futures based on the previous layers. the bm-cla combo aided interview framework enabled the data collection to ask questions focusing on the future. interview outcomes were compiled and analyzed with an exploratory approach based on each time frame. each scenario presents the futures industrial elements with four different layers of cla to argue deeper causes and to justify feasibility of elements discussed in the litany layer. table 1: interviews conducted for the research interviewee role of the interviewee date duration nv ceo of a wellness startup company 26/05/2015 75:26 tk md of a health tech association 27/05/2015 88:14 sh md of a medical research organization 29/05/2015 43:50 jh innovation and business architect, new business development, leading network & telecommunications company 03/06/2015 67:36 ek ceo of health innovation academy 30/06/2015 74:37 journal of business models (2016), vol. 4, no. 2, pp. 60 80 66 short-term future: “the ploughed field” scenario litany: a lot of newly introduced technology enabled health services/ solutions will be offered besides conventional services. as an emerging technology, iot will start marking its footprint in patient care industry, wellness and health tech in one way or another during the short term future. this is because we are spectating cuts in the social sector, thus healthcare expense will rise and an obvious way of saving is through using efficient technology. the business opportunity for the short term is more likely to come from assisted living and elderly care. to grab that, companies need to be ready with proper services through a connected society in a digital way which is easily usable by the targeted customer group. though there will be cuts in health benefits, public sector as customers will still be the major payer of services in this industry for the short term future. however, different wellness services empowered by iot will gain revenue mostly from the private consumers. many startups are now designing health related solutions and waiting for medical acceptance for their services. digital health information services like mydata and kanta will gain more visibility and acceptance in the society in the short term future. though the question of transparency and data privacy will remain high as to how the data will be used. it is being promised that the users will own their own data and have the authority to allow access to others. the startup scene in finland stays active and operates within the healthcare sector and thus the search for funding will be consistent. finding sustainable funding solutions will be one of the major operations besides innovation. product lifetime has already shortened compared with a business context of 20-30 years earlier; companies will understand it better and start designing innovative service based offers to some extent. basis of pricing for different services will accordingly start changing; a lot of new pricing models will appear for testing in this short-term period. in one of the interviews, tk mentioned, “pricing will be based on the benefit we provide to customers. so, the value that customer gets from using our services, solutions and products”. it means pricing models for this sector should be well thought and value adjusted. wellness sector will help in gamifying individual’s health and getting healthy by looking at statistics with their value proposition. the patient care sector will be offering more digital services for the young digital natives; and this will take place because of the pull from consumer need. the mentality for competing will start changing. organizations in this sector will realize the need for partnering and taking part in a network that complements each other’s need. to keep up and gain metaphor: a recently ploughed field; no seeds were planted; sprouts are appearing from the seeds brought by birds; some very old trees in the field; good symbiosis is needed for better harvest. worldview: global diverse economic condition of individuals; geolocation of a specific market; access to internet of specific market. social causes: the online social networking paradigm; individual’s intention to stay connected all the time; privacy & security issues; available & ready technology. litany: healthcare expenses rises for consumers; public sector participation as customer reduces, but still the major payer; digital health information services gain popularity; assisted living & elderly care: probable business opportunities. figure 2: summary of the short term future “the ploughed field” scenario journal of business models (2016), vol. 4, no. 2, pp. 60 80 67 competitive advantage, companies need to evolve all the time regardless of their size and functions. major cost drivers for this industry on the short run will be r&d for device innovation itself and the network & infrastructure cost. jh and nv, both admits that r&d costs for health iot solutions are probably going to be much higher compared to other industries because most of the products will need medical acceptance. perpetual sustainability is not an option for any product in a highly competitive market. product development becomes even more vital when it is supposed to serve for human health. additionally, there is currently a blind spot in the health industry in understanding the extent of network cost, which might come as a surprise to many smaller companies according to jh. there are network providers in the market with proper readiness for the industry but small companies might find it challenging to meet the expenses at first for a perfect connected solution with limited resources. social causes: the online social networking paradigm has changed the social practices to a great extent in the recent past. the concept of being connected has evolved over the past few years. despite more and more individuals are adapting digital services more than ever but still there is a group that will stay vigilant about matters like privacy and security. on top of that, we also have the technology available, which is improving fast, that will enable companies offer more digital services and offer more jobs in finland. worldview: economic conditions of individuals, societies and countries have major impact when it comes to healthcare. depending on location and economic condition, a person’s choice of healthcare remedies varies. access to internet will play a vital role in the expansion of iot healthcare services as well. metaphor: one of the interviewees, jh, metaphorized the short term future of the iot enabled healthcare sector in finland as a field that has been recently ploughed. seeds were not planted but wind and birds brought different types of seeds to the field which has started sprouting. there are also some very old and big trees to provide shadow for smaller sprouts. besides that, these big old trees will also need to fight for their own sustainability. good symbiosis is needed among the new sprouts and the older trees. some of the sprouts will live longer term and some of them will die out. there are also a lot of good insects in the field to help trees grow faster and be fruitful. in time, this field of sprouts will be an orchard of various kinds of tasty fruits. thus, for the short-term future, we anticipate numbers of enthusiastic startups and smes coming in to the iot enabled healthcare sector. having global corporations thriving for similar goals, these smaller companies take lessons and reuse channels as well. for a sustainable future and profitable growth, this sector will need cooperation among participants. medium-term future: “the breaking dawn” scenario litany: iot as a technology to boost the healthcare sector has made its mark real in this medium term future. there will be numbers of business networks working within healthcare, wellness and health tech arena. health iot device producers will start selling to more business entities besides actual end users. a great number of products and services which were technology based previously, but did not utilize the real power of cloud & fog technologies and internet, will start realizing the benefits. many services will be enabled by different software and applications where we do not see them now. also, we will see more cooperation among companies who has medical certification for their products and hospitals. cooperation among companies instead of neck and neck competition will be higher in the domestic market, thus, networks will perform better. however, the stride towards something bigger than networks will be taken, which can be referred to as ecosystems. sh, another expert stated during an interview, “we have competitors working together in research projects because we do pre-commercial research. the companies believe they can build joint knowledge which they all can use in their own way. i also believe in ecosystems, not only networks. because companies only participate in networks when they need something. but in the ecosystem they will do something together.” the evidence indicates that at the moment, the concept of an ecosystem is still somewhat abstract. by the journal of business models (2016), vol. 4, no. 2, pp. 60 80 68 medium term future, market players and researchers will develop scientific knowledge to define an ecosystem and how to converge more companies in networks and networks into an effective ecosystem. since finland’s strongest link is its technology development, companies will focus more to that. some major business activities will be outsourced to third party service providers. companies in finland realize the domestic market size is not enough for globally competitive business. thus, they will start internationalizing more in numbers with their high quality certified iot healthcare solutions. service quality, accuracy, reliability and trust will be the major issues in gaining competitive advantage than fighting with price of other products in the western market. there will be some companies that will differentiate their products by pricing too. companies differentiating with price are more likely to expand in some asian and african markets. companies that are differentiating with accuracy and reliability are likely to expand in the north american markets with higher price margin. marketing and sales alongside human resources will likely incur the major share of expenses due to outsourcing of activities. business opportunities in this era will be endless for iot enabled healthcare solutions due to the fact that the digital natives will be the drivers of the society. this group of people will be everywhere, they will be the consumers, and they will be researchers, innovators and legislators. sh marked, “for the wellbeing business, it is private business and i believe that in future consumers will be more interested to buy different kinds of services”. the digital natives’ understanding of technology will boost the acceptance and mass adaption of such services. the wellness sector will see a massive boom in this medium term future due to the mass adaption. social causes: numbers of companies look for profitable exits from the market; thus, the decision for outsourced solutions seems legitimate. digital natives will obviously have impact on the mass adaption of more digital services. additionally, digital living makes people lazy and leads to an unhealthy life. that will also encourage people adapting iot enabled wellness solutions. working people will be working more than regular shifts to keep up with the global competition which also increases the need for additional health attention. worldview: global business competition will have direct impact on how the country’s industries will operate. golden days of the western world are now past. a country with a population of less than 6 million and not a significant group of immigrants will have to work more than ever to keep up with highly volatile global competition in each sector. at the same time, the recent trend in finland’s winding down and minimalistic metaphor: summer time breaking dawn; like a sign for something better to occur; mass adaption and acceptance of iot enabled health services. worldview: global intense business competition; finland’s total population of less than 6 million people; insignificant amount of immigrant human resources. social causes: more and more companies are interested in profitable exits; existence of digital native; negative impacts of digital living and stressful work schedule. litany: business will evolve from b2c to more b2b models; mass utilization of cloud and fog technologies; cooperation rather than competition; concept of ecosystem and implement early models; wellness sector: business opportunity. figure 3: summary of the medium term future: “the breaking dawn” scenario journal of business models (2016), vol. 4, no. 2, pp. 60 80 69 lifestyle in one’s retirement age will also offer some opportunities that introduce simplified multipurpose solutions. metaphor: we compare this medium term future with the summer time breaking dawn. when the dawn breaks roosters crow, birds chirp, birds flap together in groups and we as human beings wake up for another beautiful day. the time of breaking dawn is like a calling or a sign for something good to come. the sense of ecosystem building and stride towards that are such signs. similarly, mass adaption and acceptance of digital services in this era will signify as the dawn for a better day. by this medium-term future, participants in this sector will realize the benefits of working in clusters and early examples of ecosystems will also surface. the medium-term future is vital to show positive remarks on internationalization, working in networks and ecosystems for the organizations in this sector. based on the results during this period, the long-term future will be shaped. long-term future: “the ant super-colony” scenario litany: on the long run with better understanding of ecosystems and how it operates, we will see multiple ecosystems working simultaneously in a complementing manner. however, by this time many ecosystems have been created and perished due to early trial issues. preventive care and rehabilitation sector is likely to pose the bigger business opportunities alongside the need to create a single global platform for healthcare services. different streams of technological advancements in different countries will offer opportunities. finnish iot enabled healthcare industry as a whole will be a big export-based industry. the role of insurance companies will change significantly; they can even offer health care solutions to citizens and not only partner with healthcare providers. we will be spectating better cooperation between public and private sector. public sector as client who pays for health services will regain its strength. a lot of startups from the shorter term will die by then, but on the other hand the surviving ones will become good sized smes. as there will be better working ecosystems in act, value propositions offered by companies will complement other companies to provide total solutions for citizens. there will be countless products and services for healthcare/wellness empowered by iot, but how many of them will be of the desired quality? consequently, the real value for money will bring competitive advantage for companies. almost all of the the earlier blind spot for technology & network cost in healthcare will be better absorbed by then. the cost for r&d will be relatively lower because most device innovation will reach maturity. however, the cost of human resources is going to drive the biggest share of costs. finnish companies will find their place in global value chains. this industry will have a good impact on the overall economy of finland. thus the leaders from the industry will be better heard by the politicians and policy changes will be possible in a comparatively easier way than now. social causes: at this moment there is no global giant originated from finland in the global business picture. there are a lot of tech based health service startups in the present market. some of them will survive for a longer period and many more will be created. to make finland’s economy sustainable, there will be a need for jobs and a good portion can be created in this sector. the country needs a constant balance between taxation, regulation and business in this sector for continuous prosperity. for that, the industry first needs to reflect smart gross production by contributing to the national economy and then can be heard by the politicians for policy changes. all in all, finland needs a healthy workforce that can work its way out with the limited population of the country. worldview: a large group of aged population added to a consistently very low population growth rate puts the faster economic growth in question. at the same time, all the countries in the world are greedy for power, assets and talents. finland needs to be competent in these fights to retain local talents and assets. global competition is multifold; companies need to compete with quality, price or accessibility and trust on a global level. global competition will surely come from both developed and developing countries. constant balance is thus required to maintain market position. journal of business models (2016), vol. 4, no. 2, pp. 60 80 70 metaphor: we call it the ant super-colony. according to bbc (walker 2009) earth news in 2009 scientists discovered an ant super-colony in southern europe stretching over 6,000 kilometers and populating several billion ants together happily. altogether this supercolony nested 33 different populations living in a connected system. we are aware of the team work ability of ants. when that is added to the ecosystem idea, it seems like a justified comparison to be encouraged for global dominance. the overall healthcare sector in finland will have multiple ecosystems simultaneously. we see a substantial role of iot in those ecosystems’ building and growth. discussion & conclusions futures business models of iot enabled healthcare sector at a glance, the business model changes for the future iot health arena might seem pretty predictable if we consider each scenario in isolation. however, if the scenarios are considered as a broader picture, we can find a story underlying. authors observe the role of the public sector as customer, being changed over time and again is becoming stronger on the long run, which is an exciting stream. also, the role of r&d as a key operation is going to change in different time frames. additionally, the prospect of iot being an enabler in the health sector across wellness, care and health tech seems evident and is growing over time. table 2 summarizes the probable business model elements for each scenario and each time frame. healthcare companies in finland currently lack somewhat of marketing and sales styles that reflect in the future as well. it is time that organizations start learning the art of creative marketing and selling. similarly, on the short run future for better business results for iot health solutions, finnish companies need to work on better user experience and the usability of services. these early improvements should provide the sector with traction for a longer lasting globally sustainable competition. having a small population, finland will need the industry to be export-oriented and operate globally. this research foresees, more and more successful internationalization of firms from this sector during the medium-term future and beyond. we approached the study with a linear sight towards the future and tended to understand the logics that will emerge and evolve. some congruent trends that came up from professionals’ viewpoint highlight, that, finland should work for ecosystem environments in the healthcare as a whole, where iot is a definite part, for the future. one of the interviewees marked that currently messages from industry players are too fragmented. this fragmentation needs to be reduced and that can be done when companies become part of a bigger cluster, larger networks and finally an ecosysfigure 4: summary of the long term future: “the ant super-colony” scenario metaphor: the ant super-colony; team work like ants; an ant super-colony was discovered in 2009 in southern europe stretched over 6000 kilometers populating several billion ants living in the same ecosystem; worldview: a large group of aged population; international interest in power, assets and talent; multiple dimensions of global competition. social causes: continuous need to create more jobs; need for balance between taxation, regulation and business; finland need a healthy workforce to globally compete. litany: multiple ecosystems working in a complementing manner; rehab sector and preventive care: business opportunities; radicalized role of insurance providers; some startups from the short term becomes well established smes; value for money will be assessed more by consumers. journal of business models (2016), vol. 4, no. 2, pp. 60 80 71 table 2: probable business models of an iot enabled healthcare sector in finland bm element short term medium term long term business opportunity assisted living, elderly care through connected services mass market for the digital natives, pull from consumer side, wellness sector preventive care, rehabilitation sector, global business expansion what customer groups public sector as major payer, private consumers for wellness business more b2b customers, private consumers for wellness business export based industry, b2b customers, public sector as major payer again value proposition gamifying health with statistics, digital services for digital natives, different points of care digital services at all levels total solution, complement other companies’ value promises product offerings service based solutions software and application enabled services endless types and numbers of offers and digital services competition and partnering traditional competition, cooperation with others when needed networks will emerge in numbers in the sector efficiently working ecosystems how competitive advantage companies need to evolve and keep up with changes service quality, accuracy, reliability and price better partnering, networking, agility marketing and sales more like as it is now, niche marketing for niche products outsourced, brand marketing private product/services sold through public channels key resources technological readiness, network and connectivity, sales channels medical acceptance of many services, strong technology infrastructure global value chains, science based knowledge, efficient working ecosystems. key operations r&d, create science based knowledge, improve usability and user experience r&d about ecosystems, internationalization internationalization, attract international investment why basis of pricing service oriented pricing will emerge market competitive prices, prices will come down due to r&d maturity service oriented pricing throughout the market, better value adjusted cost drivers and elements r&d, network and connectivity marketing & sales, human resources human resources journal of business models (2016), vol. 4, no. 2, pp. 60 80 72 tem. another respondent thinks there will be working ecosystems in the industry by the medium term future; however she expressed her doubts of seeing a single ecosystem lasting for longer period without wisdom, leadership, navigation, change management and adaptation. one more major observation of this study is that finnish companies in this sector are already realizing the needs and benefits of working in cooperation rather than competing while the major competitors are waiting outside the national border. this understanding about cooperated international competition will help approach many challenges which would be more difficult if the task was left for an individual company. the startup scene in finland has played a vital role in this course. some products and services that are being developed now are breathtaking according to another interviewee. these services need a global market for longer sustainability. however, global digital literacy and connectivity issues stand as obstacles now. given enough time and simplifying these innovations, it is possible to deliver them to any part of the globe, whether to more advanced north american markets or comparatively less advanced sub-saharan africa. the challenge for companies is to anticipate proper timing for expansion in the proper direction depending on their own readiness and the market’s readiness in regard to economic condition, digital literacy, network and connectivity standards. as stated earlier, this research considers business opportunities to lie at the heart of the business model. so, for each time frame some potential key business opportunities are identified. finland has a huge group of ageing population who needs proper care. for the short term future elderly care and assisted living seems to be the most prospective business opportunities. in a few years, we will have a society full of digital natives who never saw a society without computers, mobile phones and the internet. thus a huge market full of digital natives will offer wider opportunities for many companies to experiment and offer. during the medium-term future, we will see extensive adaptation of wellness products and applications aided by iot. for the long-term future, this research identifies preventive care and rehabilitation sector to be the potential flourishers for iot interventions. besides, by the longterm future companies in finland will gain better understanding about global markets. internationalization will be another aspect of business opportunity during the medium to the long term future. the table provides a conceptual space by depicting different business model elements, as what it could be at that time frame but not exact prediction. this accumulation of business model elements can serve industry players to better model their own business model as a part of the industry. business model and cla recently, the attention has been focused on the evolution and transformation of the business models as a method of researching the futures (ahokangas & myllykoski, 2014). this change is due to the characteristics of today’s world market where a growing number of small companies with new and alternative business models and fast innovation progress that challenges the incumbents (rohrbeck, döhler & arnold, 2009) are emerging. as a result, a successful reinvention of business models to respond to environmental shifts is substantially influencing the possible future success of an enterprise (wirtz, schilke & ullrich, 2010). it is arguable that from an industry point of view, similar successes are achievable if industry business models can be mapped by creating a wholesome picture. using the future as a setting where transformation will happen is about the habits and world views (inayatullah, 2007); however, the notion of business model reflects the realized strategy of the firm (masanell & ricart, 2009) which includes the logic of the value creation and capture as well as the architecture of the business. thus, the combination of these two concepts provides a firm tool for researching and creating sustainable prospective business models. cla is a future-oriented method that can be utilized in many circumstances. it leads to creating transformative spaces for generating alternative futures by questioning the past, present and future. it is grounded on the premise that the way a problem or an issue is formulated and framed influences how it is perceived and changes the actors who are responsible for solving them. cla applies deconstructed linguistics to elicit knowledge and experience on the whole context journal of business models (2016), vol. 4, no. 2, pp. 60 80 73 by moving up and down in these four layers/ways of knowing. the litany view point is simplistic and ruleoriented. the social causes view is able to analyze the world complications subtly. the discourse/worldview layer is concerned with rather profound analysis of complications. (inayatullah & milojević, 2015). at the abstract level, business models are complex entities that are embedded in the organizations (casadesus-masanell and ricart, 2010). however, they are socially constructed and representable using words or meta-models. understanding the construction of the business models is influenced by our perception of a model which might range from “ideographic understandings to general and perceptive (nomothetic)”. therefore, business models can be static or dynamic entities which contain elements of learning based on the understanding the linkages and the causal relationships among the building blocks of the model (jensen, 2013). the horizontal analysis of cla investigates alternative ways of knowing within a certain layer through scenarios. it originally occurs in social causes and discourse/ worldview layers. social causes questioning discloses multiple understanding of an issue which can be corresponded to the horizontal dimension of the business model concept. discourse/world view asks about values, perspectives, viewpoints and their effects. finally, the metaphor layer can help build and choose a future instead of only foreseeing. in that sense, business models can be transformed based on available resources, relations and logic. these are also are associated with actors, processes and outcomes. therefore, they are connected to the future market. this paper attempted to display a way of using the business model-cla combo to understand and analyze the future of finnish iot enabled healthcare sector. unlike other foresight methodologies, cla professes less of predicting the actual future rather opening up transformational conceptual space for practitioners. we argue that the combination of business model wheel (bmw) as a tool and cla offers additional structure to look at the industry future. this bm-cla structured lens provides us the tool to create a wholesome picture. then we can break it down into smaller parts and find out probable future business model elements for the industry. for this study, first, we designed the interview framework combining business models and cla by creating a two-axis matrix. this matrix helped us to develop a focused but wide enough question set, so that we could collect the required data that eventually enabled us to create a wide and holistic picture of the sector. to succeed in looking at the future of an industry by using business models, it is necessary to understand the overall market opportunities, market context, market participants, competitors, partners, customer groups, different value streams, basis of pricing, different product offerings and financial aspects as a whole. while looking at the future of an industry instead of a certain company we utilize some steps from the bouwman et al (2012) tools like identifying desired changes, analyzing the impact of desired changes, translating bm changes and identifying uncertainties. also, as bouwman et al suggests in their discussion that all these should be translated to specific activities. however, because we focus on industry level, the findings of this study thus can be a guide for individual organizations for developing their business models and identify specific activities for alternation. this also complements the claim from cla perspective by not predicting exact future of an entity, rather offering transformative conceptual space for development. business model wheel in this case offers additional space for conceptualizing by emphasizing market opportunities unlike other prominent tools. based on the interview outcomes three linear progressive future business scenarios were constructed for the context of the study. scenario planning is virtually applicable to any situation where the intension is to imagine how the future might unfold (schoemaker, 1995; jetter & kok, 2014). schoemaker (1995) also stated “scenario planning simplifies the avalanche of data into a limited number of possible states (pp. 27)” to open a space for better strategic planning. empirical evidence supported the feasibility of the created scenarios which tell a whole story about the market for three different time horizons. for this study, the shortterm future is considered as 5 years in the future, the medium-term future as 10 years ahead and the longterm future is considered as 15 years from now. the use journal of business models (2016), vol. 4, no. 2, pp. 60 80 74 of cla layers in scenario writing expands the range and richness of each scenario and helps to analyze feasibility (inayatullah, 2004). finally, we further analyze the cla translated qualitative scenarios to concretize the list of probable futures business model. conclusion ahokangas et al (2015) argued for future centrism in the next generation of business modeling research. bouwman et al (2012) offered different tools for organization specific approach to handle business model development for the future. building on futures thinking and amit & zott’s (2001) note, we consider it is just to use the business model as the basis of analyzing the industry future and open up space for thinking for the practitioners. thus, in this paper we display a way of applying the business model concept to analyze an industry and industry opportunities. with theoretical understanding coupled with qualitative empirical data, we developed and translated three linear continuous future scenarios using the business model-cla combo. we presented a holistic conceptual space of the future for the context of the study. we have analyzed the empirical data to create futures scenarios and derived different business models. we explicated some probable future trends in business models and how they might evolve. we have identified major business models elements including opportunity, revenue, cost perspective, value proposition, customer, competencies and competition perspective. the interview framework that we developed was a balance between business model wheel framework and cla. finally, using the concept of busing models alongside cla, we have created the futures business picture of an industry. the series of congruent scenarios was created based on different time frames to understand the future more profoundly. besides, the created approach could have helped identifying business model elements and lifecycles (i.e. 5, 10 and 15 years ahead) as a guide for the future market over time. the concept of ecosystem is elusive, complex and very little understood till now. there is need for more research in that perspective, in order to understand what can be called an ecosystem and how to organize such a setup. the healthcare industry in finland is growing fast and iot is surely going to play an outstanding role in its development. the interest lies in finding out how much iot will foster the speed of growth in this sector. change is complex, and necessary, when we think about the future. instead of disregarding the future, we illustrated three future scenarios out of many other possible ones with an attempt to create a more harmonized long-term real future where finnish companies take lead globally and operate in an ecosystem that complements local entities in order to provide a total solution for public health. besides the cla-bm combo, we perceive additional theoretical contributions of the paper for the business model literature. this study shows how business models are going to be transformed over a longer period of time in the future for the industry. further studies can also hence explore strategic transformations that are needed for policy developments (ivari, 2015). our findings suggest the need for new service concepts and pricing models which resembles the notion on how these can help companies gain competitive advantage (petri, 2014). furthermore, we point out the existing interest on ecosystem ideation and building for the industry. to do so, we observe a potential to apply concepts like network-based business models (lund & nielsen, 2014). there are few limitations in this current study to mention. first, because we adapted a futures research methodology and applied it to look at far future, we needed to draw conclusions based on logical assumptions and not exact predictions about the future. second, this research presents empirical analysis of the iot enabled healthcare sector from a futures perspective, which is one of many industries which might benefit from the use of business modelcla combo to look at the future. since this study proposes a novel way to combine business model and cla, it is arguable that the exploratory approach is applicable to other industries as well. additionally, because this is the first attempt to combine business models and a futures research methodology to look at industry’s future, there were no existing literature to reflect and compare the findings’ application. despite the limitations, this research opens the way for further research in the futures avenue for business problems. one possibility can be employ the exploratojournal of business models (2016), vol. 4, no. 2, pp. 60 80 75 ry approach of business model-cla combo in researching other industries. in addition, further research with similar approach can result in a standardized futures business research technique. from a contextual point of view, it is evident that the iot/healthcare industry calls for further research on the concept of business ecosystems from the network-based business models perspective. reference list afuah, a., & tucci, c, l. (2001), internet business models and strategies: text and cases, 1st edn, mcgraw-hill higher education. afuah, a. (2004), business models: a strategic management approach, mcgraw-hill/irwin., new york. ahokangas, p., atkova, i., moqaddamerad, s. & juntunen, m. (2015), “bringing futures thinking to business model innovation”, paper presented at 23rd nordic academy of management conference 2015, copenhagen, 12-14 august. ahokangas, p., juntunen, m. & myllykoski, j. (2014), “cloud computing and transformation of international e-business models”, a focused issue on building new competences in dynamic environments (research in competencebased management, volume 7) emerald group publishing limited, 7, 3-28. ahokangas, p. (2014). the practice of creating and transforming a business model. journal of business models, 2(1). amendola, s., lodato, r., manzari, s., occhiuzzi, c. & marrocco, g. (2014), “rfid technology for iot-based personal healthcare in smart spaces”, internet of things journal, ieee, vol. 1, no. 2, pp. 144-152. amit, r. & zott, c. (2001), “value creation in e-business”, strategic management journal, vol. 22, no. 6, pp. 493-520. applegate, l., m. (2001), “e-business models: making sense of the internet business landscape”, information technology and the future enterprise: new models for managers, prentice hall, upper saddle river, pp. 49-94. atzori, l., iera, a. & morabito, g. (2010), “the internet of things: a survey”, computer networks, vol. 54, no. 15, pp. 2787-2805. baden-fuller, c. & morgan, m.s. (2010), “business models as models”, long range planning, vol. 43, no. 2, pp. 156-171. balandin, s., balandina, e., koucheryavy, y., kramar, v. & medvedev, o. (2013), “main trends in mhealth use scenarios”, journal on selected topics in nano electronics and computing, vol. 1, no. 1, pp. 64-70. bouwman, w. a. g. a., de reuver, g. a., solaimani kartalaei, h., daas, d., haaker, t., janssen, w., ... & walenkamp, b. (2012), “business models: tooling and a research agenda. in 25th bled econference edependability: reliable and trustworthy estructures, eprocesses, eoperations and eservices for the future”, 17-20 june 2012, bled, slovenia. bled ecommerce conference. briggs, j., adams, c., fallahkhair, s., iluyemi, a. & prytherch, d. (2013), “m-health review: joining up healthcare in a wireless world.” working paper. university of portsmouth, portsmouth. casadesus-masanell, r. & ricart, j. e. 2010. from strategy to business models and onto tactics. long range planning,43, 195-215. journal of business models (2016), vol. 4, no. 2, pp. 60 80 76 coetzee, l. & eksteen, j. (2011), “the internet of things promise for the future? an introduction”, ist-africa conference proceedings 2011, ieee, pp. 1-9. domingo, m.c. (2012), “an overview of the internet of things for people with disabilities”, journal of network and computer applications, vol. 35, no. 2, pp. 584-596. dubosson-torbay, m., osterwalder, a. & pigneur, y. (2002), “e-business model design, classification, and measurements”, thunderbird international business review, vol. 44, no. 1, pp. 5-23. fernandez, f. & pallis, g.c. (2014), “opportunities and challenges of the internet of things for healthcare: systems engineering perspective”, wireless mobile communication and healthcare (mobihealth), 2014 eai 4th international conference on, pp. 263. hayward, p. (2004), “facilitating foresight: where the foresight function is placed in organisations.”, foresight, vol. 6, no. 1, pp. 19-30. hedman, j., & kalling, t. (2003). the business model concept: theoretical underpinnings and empirical illustrations. european journal of information systems, 12(1), 49-59. inayatullah, s. & milojević, i. (2015). transformative research in theory and practice. tamkang university publication. taipei, taiwan. inayatullah, s. (2008), “six pillars: futures thinking for transforming”, foresight, vol. 10, no. 1, pp. 4-21. inayatullah, s. (2007). questioning the future: methods and tools for organizational and societal transformation. ed. third, tamkang university press. taipei, taiwan. inayatullah, s. (2005), questioning the future: methods and tools for organizational and societal transformation. taipei: tamakang university press. inayatullah, s. (2004), the causal layered analysis (cla) reader: theory and case studies of an integrative and transformative methodology. taipei: tamkang university press. inayatullah, s. (2000), “tips and pitfalls of the futures studies trade”, foresight, vol. 2, no. 4, pp. 369-374. inayatullah, s. (1998), “causal layered analysis: poststructuralism as method”, futures, vol. 30, no. 8, pp. 815-829. iivari, m. m. (2015). dynamics of openness in smes: a business model and innovation strategy perspective. journal of business models, 3(2). jensen, a. b. (2014). “do we need one business model definition?”. journal of business models, 1(1), pp. 61-84. jetter, a. j., kok, k. (2014). “fuzzy cognitive maps for futures studiesa methodological assessment of concepts and methods”. foresight, 1, 27. johnson, m.w., christensen, c.m. & kagermann, h. (2008), “reinventing your business model”, harvard business review, 86(12), pp. 57-68. journal of business models (2016), vol. 4, no. 2, pp. 60 80 77 liu, l. & jia, w. (2010), “business model for drug supply chain based on the internet of things”, 2nd ieee international conference on network infrastructure and digital content, pp. 982-986. lund, m., & nielsen, c. (2014). the evolution of network-based business models illustrated through the case study of an entrepreneurship project. journal of business models, 2(1). masanell, r.c & ricart, j.e (2009). from strategy to business models and to tactics. working paper. iese business schooluniversity of navarra. masini, e. (2006), “rethinking futures studies”, futures, vol. 38, no. 10, pp. 1158-1168. morris, m., schindehutte, m. & allen, j. (2005), “the entrepreneur’s business model: toward a unified perspective”, journal of business research, vol. 58, no. 6, pp. 726-735. nielsen, c., ahokangas, p., cöster, m., westelius, a., iveroth, e. & petri, c. (2014), “editorial: the business model eruption and how game changing mind sets challenge existing nodes of business”, journal of business models, vol. 2, no. 1, pp. 1-5. onetti, a., zucchella, a., jones, m.v. & mcdougall-covin, p.p. (2012), “internationalization, innovation and entrepreneurship: business models for new technology-based firms”, journal of management & governance, vol. 16, no. 3, pp. 337-368. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, wiley, hoboken, nj [etc.]. osterwalder, a. (2004), “the business model ontology: a proposition in a design science approach”, universite de lausanne, lusanne. pigneur, y. & tucci, c.l. (2005), “clarifying business models: origins, present, and future of the concept”, communications of the association for information systems, vol. 16, no. 1, pp. 1. pang, z., zheng, l., tian, j., kao-walter, s., dubrova, e., & chen, q. (2015). design of a terminal solution for integration of in-home health care devices and services towards the internet-of-things. enterprise information systems, 9(1), 86-116. petri, c. j. (2014). using an innovative price model to leverage the business model–the case of price model innovation in the largest swedish taxi company. journal of business models, 2(1). porter, m. e. (1991). towards a dynamic theory of strategy. strategic management journal, 12(s2), 95-117. research and market. (2013), mobile health trends and figures 2013-2017 report highlights 10 key trends that will shape the mhealth market until 2017, url: http://www.reuters.com/article/2013/07/23/research-and-marketsidusnbw236434a+100+bsw20130723, (accessed 07 march 2015). research2guidance. (2013), mobile health trends and figures 2013-2017, url: http://research2guidance.com/product/mobile-health-trends-and-figures-2013-2017/, (accessed 31 march 2016). richardson, j. (2008). the business model: an integrative framework for strategy execution. strategic change, 17(5journal of business models (2016), vol. 4, no. 2, pp. 60 80 78 6), 133-144. rohrbeck, r., do¨hler, m. & arnold, h. (2009) creating growth with externalization of r&d results: the spin-along approach. global business and organizational excellence. schoemaker, p. j. (1995). “scenario planning: a tool for strategic thinking”. sloan management review, 36(2), 25-50. seelos, c. & mair, j. (2007), “profitable business models and market creation in the context of deep poverty: a strategic view”, the academy of management perspectives, vol. 21, no. 4, pp. 49-63. shafer, s.m., smith, h.j. & linder, j.c. (2005), “the power of business models”, business horizons, vol. 48, no. 3, pp. 199-207. timmers, p. (1998), “business models for electronic markets”, electronic markets, vol. 8, no. 2, pp. 3-8. walker, m. (2009), ant mega-colony takes over world, url: http://news.bbc.co.uk/earth/hi/earth_news/newsid_8127000/8127519.stm, (accessed 31 march 2016) weill, p. & vitale, m. (2013), place to space: migrating to ebusiness models, harvard business press. westerlund, m., leminen, s., & rajahonka, m. (2014). designing business models for the internet of things. technology innovation management review, 4(7), 5. whitmore, a., agarwal, a. & xu da, l. (2015), “the internet of things—a survey of topics and trends”, information systems frontiers, vol. 17, no. 2, pp. 261-274. wirtz, b.w., pistoia, a., ullrich, s. & göttel, v. (2015), “business models: origin, development and future research perspectives”, long range planning. wirtz, b.w, schilke, o., ullrich (2010). strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning 43, 272-290. xu, li. da., he, wu., & li, shancang. (2014), “internet of things in industries: a survey”, industrial informatics, ieee transactions on, vol. 10, no. 4, pp. 2233-2243. journal of business models (2016), vol. 4, no. 2, pp. 60 80 79 what: customers, offering, value proposition, value networks, competition how: selling & marketing, service delivery, competitive advantage, key operation why: pricing, charging, cost elements, cost drivers where: organizational environment (internal), external organizational environment opportunity litany: 1. how do you think customers groups can be identified and segmented in the future 7. how do you think the selling and marketing activities will change in the future from now 13. how might the pricing model and basis of pricing be changed in the future 19. how do you think the impact of organizational environment on business performances will change over time in the future 23. what could be the business opportunity for in the future in your opinion? 2. what might be the different value propositions designed in in the future your opinion 8. what mode of service delivery can take lead in your opinion 14. what sort of current cost elements could be there in the future 3. do you think business networks and competition will be different in the future compared to current markets? if yes, how? 9. how can companies gain competitive advantages in this industry 15. what sort of new cost elements might come up in the future 20. how do you think the impact of external business environment on business performance will change over time in the future 4. what sort of product/service offerings can be there in the future in the health iot business 10. what will be the key operations and resources in the future in your opinion 16. what will be the major cost drivers for the health iot business social causes: 5. why do you think companies would be interested to act like this in the future 11. why would companies design such campaigns in future in your opinion 17. what could cause such pricing and cost structure changes in the way you mentioned 21. what might encourage such changes in impact of organizational and external environments on business perfomanace will change over time 24. why do you think the business opportunity might come from that specific source or in that form worldviews: 6. what deeper reason could be causing the social changes that is likely to interest companies in such a way 12. why do you think such social changes will take place 18. why do you think such cause will take place 22. why do you think such encouragements arise 25. what global issues might have an impact on such opportunity being generated or identified metaphor: 26. if you are asked to compare the overall structure of the futures business model of an iot enabled business model, how would compare it to a metaphorical setting appendix 1: interview framework this framework was used a guide for the interviews. in most cases questions were rephrased and adjusted to the progression of discussion. journal of business models (2016), vol. 4, no. 2, pp. 60 80 80 julius francis gomes is pursuing his phd in international business from the university of oulu. he currently works for the oulu business school as a doctoral student to research the futuristic business models for entities which will be involved in a tech oriented business arena. his research focuses on using business models as a mean to look in to far future of an industry. he holds a master’s degree in international business from the university of oulu. prior to that he acquired another master’s degree in business administration specializing in managing information systems in business applications. francis gomes has enjoyed about three years in a top tier bank in bangladesh as a channel innovator. he also participated in various projects organized by different startups in finland during his master’s degree at the university of oulu. sara moqaddamerad is a project researcher and doctoral candidate in management in oulu business school. with a background in futures studies, she is enthusiastic about developing the practice of foresight and its merits in organizations and industries; especially in the strategic planning domain. she has practiced different foresight methods during her master studies and worked in finland futures research center as an intern. currently, she is working on the innovative and future-oriented design of the business models for mobile network operators and network infrastructure vendors in 5g era. her main areas of research include foresight, corporate foresight, innovation management, strategic planning, business model architecture, organizational ambidexterity and wireless communication technologies and innovations. journal of business models (2016), vol 4, no 2 pp. 1-21 1 the purpose of this study is to contribute to a better understanding of the strategic and organisational configurations that companies can use to generate value with product-market systems and their business models that have been dominant in the past but forced back into niche positions by innovation. the former dominant music format vinyl was rapidly substituted after the introduction of digital music. however, still nowadays some customers use and buy old technology-based products – vinyl sales boom again since 2007. due to the two-sided nature of the market, customers have to get access to complementary goods. we are thus interested in technologies which have been outdated by the emergence of new technologies. the originality lies in the combination of the two areas: business models and old technologies. furthermore, vinyl is an example not analysed in depth by scholars so far. we approached this by undertaking an in-depth literature review to generate hypotheses regarding the value-adding activities of old-technology based businesses as a basis for further research in this area. in addition the paper gives first insights into the constellations to be expected over time for old technologybased businesses models in platform markets. we here focus on a neglected topic in the strategy literature which, however, bears relevance for many businesses locked into product-market systems which make it hard for them to (completely) switch to a new technology emerging in the market. it is especially valuable to describe the consequences in a systematic fashion. old but sexy: value creation of old technology-based businesses models oke christian beckmann1, susanne royer1, francesco schiavone2 abstract please cite this paper as: o.c. beckmann, s. royer, f. schiavone (2016) old but sexy: value creation of old technology-based businesses models, journal of business models, vol. 4, no. 2 pp. 1-21 keywords: value creation architecture; business model; old technology; competitive advantage; resources; platform market 1 http://www.uni-flensburg.de/strategie, europa-universität flensburg, germany 2 university parthenope, italy journal of business models (2016), vol 4, no 2 pp. 1-21 2 introduction: can old technologies create value? in the strategy field implications of a dynamically changing environment are widely researched: innovative technologies in new and quickly changing markets are the drivers to investigate questions of efficient and effective organisational forms and relevant underlying resources and/or capabilities (e.g., bosch et al., 1999; chatterjee, 2013; ismail et al., 2014). such organisational forms may include market-related, cooperative and hierarchical elements. in more established marketplaces similar questions stay relevant with the industry going through the more mature phases of the lifecycle (e.g., mcdermott et al., 2013, p. 3). technological change greatly affects the structures of industries (schumpeter, 1942) and therefore is also suggested to impact business models and related exchange partners. as soon as an industry context is on the decline due to the emergence of a revolutionary new technology, management research seems to somewhat lose interest, at least in business models which are locked into the production and/ or distribution of the outdated product (for exceptions see cooper and schendel, 1976; adner and snow 2010). at the same time it can be observed that usually some firms in declining industries (e.g., analogous photography, typewriters, mechanical watches and vinyl records) go on to exist with the old product focus for a relatively long time span after it is clear that new technologies would make the sustainability of the success at least highly questionable. understanding how businesses may be able to create as much value as possible in a declining industry context in which they are locked into by their product-systemspecific investments thus is an interesting and relevant question. the research deficit sketched is the point of reference for this paper and the emerging literature on business models (e.g., amit and zott, 2012; teece, 2010; zott and amit, 2013; yrjölä, 2014; ahokangas and myllykoski, 2014; lund and nielsen, 2014) is suggested to deliver fruitful input. based on the work of afuah and tucci (2001), osterwalder et al. (2005) and zott et al. (2011), massa and tucci suggest to conceptualize business models broadly “as depicting the rationale of how an organization (a firm or other type of organization) creates, delivers, and captures value (economic, social, or other forms of value) in relationship with a network of exchange partners” (massa and tucci, 2014, p. 423). this understanding of business models – as one among a vast number of existing business model definitions (ahokangas and myllykoski, 2014) – guides us in this paper. value creation by old technology driven players requires a long-term perspective. since “[b]usiness model choices define the architecture of the business, and expansion paths develop from there on out” (teece, 2010, p. 181) a certain path dependency has to be taken into account: this on the one hand side can form an isolating mechanism against competitors, on the other hand, however, it also may lock a focal player into a particular structure hard to change after once being established (teece, 2010). thus, it is interesting to investigate if and how business models in a certain market change after revolutionary technological innovations. while teece (2010) wants to investigate how business models bring firms in a position to capture value from technological innovation, this article addresses the issue of value creation and appropriation of old technology-based firms. we use one aspect of the broad concept of business models here: value creation architectures (vca). in this paper we understand value creation architectures as “the structure and relationships of all the valueadding activities that are carried out by various actors and companies to bring a particular product or service to market” (dietl et al., 2009, p. 26). vca thus can be understood as a specification of the broad concept of a business model, which leads to a more in-depth understanding of how value creation is embedded into different intraand inter-firm organisational structures. over the last decades a trend towards disintegrated value chains could be observed in many industry contexts (mcdermott et al., 2013, p. 1; lund and nielsen, 2014, p. 106) and vcas can range on a continuum from highly disintegrated to very much integrated forms with different hybrid/cooperative forms in-between. to understand strategic advantages of firms it is not sufficient anymore to stop at firm boundaries but a functional perspective appears more appropriate to compare different value-creating structures competing in bringing a certain type of product into the market. choosing this perspective enables the inclusion of journal of business models (2016), vol 4, no 2 pp. 1-21 3 a loose network of small players into analysis in the same way as a large, highly integrated player. we here follow the understanding of sah and stiglitz (1986, p. 716) who suggest that the performance of an organisation should not solely be put in relation to the internal structures but that the underlying architecture should be taken into account. competitive advantage is rooted in the ability of a firm to create customer willingness to pay for a product or service. therefore the offered service or product in the marketplace is our starting point. we identify the value creation activities necessary to offer the service or product to come to an understanding of the vca. the field of strategy delivers the fundament here with different conceptualisations of competitive advantage from a resource-oriented (e.g., peteraf, 1993), a dynamic capabilities-based (e.g., teece, pisano and shuen, 1997) and a relational perspective (dyer and singh, 1998). the performance of the vca in the relevant competitive environment can be assessed building on a market-based perspective (e.g., porter, 2008) complemented by taking further market specificities into account: market contexts where the quality and availability of complements is strategically relevant became known as platform markets and recently have been intensely investigated regarding useful strategy and organizational design (e.g., parker and van alstyne, 2014). in the current literature it is in focus how an actor may be successful in starting a superior productmarket-system in such a two-sided market or remain a platform leader (e.g., eisenmann et al., 2011; gawer and cusumano, 2014; suarez and kirtley, 2012; lund and nielsen, 2014, p. 115-116). the consequences for the incumbents in the then inferior product-market system (which has been dominant previously) are of less interest and thus reflect that a research deficit exists here. incumbents competing with an old technology in a platform market are in the focus of this research. as the areas of business models, value creation architectures and platform markets are still under development, scholars did not pay much attention to date on how firms, after technological change, arrange their value creation activities to support the survival of an old declining product. however, it is not uncommon to see old technological products (for instance, analogue cameras and turntables or also mechanical watches) that, even after the rise of a new superior technology, survive for very long time and go on generating value for some firms. however, the inner “creative destruction” of technological change (schumpeter, 1942) will be likely to lead firms to modify the traditional implementation of their business processes, for example in terms of integration and/or disintegration. various scholars analysed the strategic reactions of established companies to technological change (cooper and smith, 1992; adner and snow, 2010; schiavone, 2011; schiavone and borzillo, 2014). great emphasis was given to the reasons leading firms to failure (christensen, 1997). conversely, scarce attention was paid to the evolution of vca (as a specification of business models) of incumbent firms after new technology emerges and their products suddenly became old and obsolete. therefore, the core research question of this study is: how do companies (re-) design their value creation architectures for old technology-based products where demand declined after technological change? the article is organised as follows: the next section reviews the main literature about vcas and the strategizing of old technology-based companies after technological change in order to form the conceptual fundament for the study. implications of the existence of complete product-market systems that became old fashioned are taken into account. the third section describes propositions for future research in this area and illustrates in some detail possible research strategies to investigate this further. the fourth section summarises the main conclusions. to come to fruitful avenues for future research, considerations are developed for a case-based analysis of remaining players in the vinyl industry as one prominent example of old technology. towards a useful conceptualisation: competitive advantage, value creation architectures and old technology-based firms the following sections highlight core findings of the literature regarding competitive advantage realisation of different vcas as well as the effects of technological changes on old-technology-based businesses. the literature review results in a conceptual fundament for further investigations. journal of business models (2016), vol 4, no 2 pp. 1-21 4 value creation architectures and competitive advantage creating value for the customers is central for firms in order to generate returns for the firm owners (porter, 1996; hambrick and fredrickson, 2001). the fundamental question in the field of strategy is how do firms achieve and sustain competitive advantage (royer, 2005). “strategic management, in both theory and practice, tries to understand how firms may improve their performance in competitive interactions with other firms” (sanchez and heene, 1997, p. 303). strategic management thus wants to understand why some firms perform better than others with regard to this objective. performance in terms of competitive advantage realisation in the economic strategic management approaches is conceptualised in different types of rents: firms may earn monopolistic rents on the basis of positioning strategies in imperfect markets (porter, 1980). taking into account resource heterogeneity, ricardian rents accrue from the possession of scarce resources (peteraf, 1993). while such ricardian rents may lead to sustainable competitive advantage, schumpeterian or entrepreneurial rents (teece et al., 1997) rather imply temporary advantage. firms realise them on the basis of certain capabilities and through risk taking and entrepreneurial insights in an uncertain or complex environment. over time the underlying capabilities diffuse into the market and become best practice. in cooperative ventures relationship-specific assets, knowledgesharing routines, complementary resources and capabilities as well as effective governance may generate relational rents for the partners (dyer and singh, 1998). especially the recent developments in the strategy literature regarding relational rent generation highlight that it is acknowledged that an internal firm analysis is not sufficient for understanding strategic opportunities (dyer and singh, 1998; lavie, 2006). it also has to be understood where cooperative core competencies (duschek, 2004) or network resources (gulati, 1999) may be used to generate competitive advantage. isolating mechanisms such as causal ambiguity (dierickx and cool, 1989; barney, 1991), inter-organisational asset interconnectedness, scarcity of partners, indivisibility of resources and certain institutional environments are suggested to protect such relational rents against imitation (dyer and singh, 1998, p. 672). however, cooperation partners may also face a danger in what lavie (2006, p. 647) calls spillover rents. such rents may be generated by one partner in an opportunistic fashion on the basis of network resources. on the basis of the strategy literature with economic roots we want to take into account competitive advantage generated on the basis of network resources as well as firm-internal resources and capabilities. we do extent our perspective beyond firm boundaries and focus on a vca competing in a certain market to bring a particular product or service to the customer (dietl et al., 2009). “[t]emplates that emerge in a sector and circumscribe the division of labor among a set of co-specialized firms” are called industry architectures (jacobides, knudsen and augier, 2006, p. 1201). since we assume different architectures in the same industry context, we here use the term vca and suggest that different degrees of (dis)integration compete against each other in the same market. findings from case studies of the european automotive industry back this view (see dietl et al., 2009 and stratmann, 2010). two levels of competition become relevant for our analysis: (1) the competition between different vcas (inter-architecture competition) and (2) the competition between the actors in the same vca to appropriate a high share of the resulting rents within that particular system (intra-architecture competition). figure 1 summarises the vca approach we are using for this analysis. thereafter the analysis of vcas deals with the level of integration in production (production depth and production control) and the level of integration of distribution (distribution depth and distribution control). both, the choice of a certain level of depth of production and distribution, can lead to value creation and competitive advantage of the focal actor at the intraand interarchitectural level (dietl et al., 2009). hence different vcas can have significantly different characteristics which are, as an extension of coase’s (1937) differentiation of internal production and the use of the market and the transaction cost economics’ view by williamson (1985), grouped in three distinct generic categories: integrated, disintegrated and quasi-integrated forms of vcas. referring to figure 1 ‘integrated’ means a high level of journal of business models (2016), vol 4, no 2 pp. 1-21 5 figure 11: conceptual framework linking value creation architectures with competitive advantage production and distribution depth. on the other side of this continuum disintegrated vcas can be found: this form is characterised by a low level of production and distribution depth and therewith the usage of markets to procure inputs (jacobides and billinger, 2006; dietl et al., 2009). in between mixed forms can be found which are characterised by low production and distribution depth combined with a certain level of control and coordination for the other actors of the same vca. such control and coordination mechanism may include selfenforcing safeguards (e.g., trust or hostages) and thirdparty safeguards (e.g., legal contracts) and potentially generate relational rents (dyer and singh, 1998). when we use the term ‘control’ here, we are interested in how close the focal actors’ relationships with external partners via formal and/or informal mechanisms are. product innovations often are not sufficient for gaining competitive advantage as competitors are in many cases quickly able to copy these (cliffe, 2011; matzler et al., 2013). hence vca innovation (as part of bm innovation) is an opportunity to build sustainable competitive advantage (teece, 2010). this can be achieved if customer value increases and a new value creation and revenue model gets established so that a new way of value appropriation is possible (matzler et al., 2013). for multinational corporations, for example, it is in a fast changing global environment suggested to be important to repeatedly re-evaluate and reconfigure their value chains to gain competitive advantage and to stay ahead of the competitors (maitland and sammartino, 2012). the american computer manufacturer ibm at a certain time had valuable resources and excellent capabilities to build pcs and hence was able to create great value with its pc business. looking at a distinction made by gawer and cusumano (2014) who suggest to differentiate between different types of platforms in terms of internal (firm or product) platforms as well as external (industry) platforms one may say that ibm was even able to establish their product as an industry platform (gawer and cusumano, 2014, pp. 417). however, their value creation architecture put suppliers such as microsoft and intel into such strong positions that the focal player of the vca, ibm, failed to appropriate the value created and to build a long-term competitive advantage in this field and industry/architectural leadership in the 1980s shifted to intel and microsoft (gawer and cusumano, 2014, pp. 423). the example shows the importance of the design of vcas and the link to competitive advantage. questions of how to find a balance between competition and cooperation thus seem to be highly relevant, especially in areas where we have dynamic technological change. however, what about old-technology-based industries such as the vinyl pressing industry? here, the environment seems to be more stable making a vertically integrated structure more likely to lead to benefits (mcdermott, 2013, p. 3). comparing e.g. the vinyl pressing industry with other audio segments such as cds, the sales numbers are relatively small, yet increasing. the number of players still in the market thus also can be assumed to be declining. this decline leads – next to other implications – to a lack of potential cooperation partners on a horizontal as well as vertical level. on the basis of this reasoning we assume that firm 1: source: dietl et al., 2009, p. 31. journal of business models (2016), vol 4, no 2 pp. 1-21 6 internal resources play a central role in old technology (niche) markets as for example the vinyl industry to come into a position to generate competitive advantage. the relevance of shared and network resources may be lower. the underlying reasoning is that a relatively integrated vca would be beneficial in old technology markets while a disintegrated structure may be favourable in new technology contexts. when analysing old technology vcas, the aspect of competition between rivalling vcas (inter-architecture competition) thus is more in our focus than competition and competitive advantage realisation in a single vca (intraarchitecture competition). old technology-based firms after technological change a review of the literature about the main strategic reactions of incumbent firms during or after technological change outlines different behaviours for preserving and/or renewing their vcas. adner and snow (2010a) analyse old technology firms that do not want to exit from the market or switch to a new technology. this strategy of maintaining the focus on the old technology implies the creation of “coexistence between obsolete and superior technologies” (de liso and filatrella, 2008, p. 593). in this context it can be differentiated between mainly two strategies called racing and retreat strategies. a racing strategy implies that firms behave in a way that is sometimes labelled as the sailing ship effect (cooper and schendel, 1976; gilfillan, 1935; de liso and filatrella, 2008 and 2011; liesenkötter and schewe, 2013; for a critical perspective see howells, 2002 and mendoca, 2013). the key element of this reaction is the improvement of the performance and the characteristics of old-technology – the companies hence continue to invest in the old technology and “technologies diffuse slowly” (chari and hopenhayn, 1991, p. 1161). gilfillan (1935) shaped the term sailing ship effect when he described how the sailing ship was heavily improved as soon as the steam ships emerged during the 19th century (gilfillan, 1935, pp. 156). the model of competing technology s curves goes back to foster (1986, pp. 101). figure 2 shows an established, now old, technology (to) that has secured its position over other available technologies (tox) and from a certain time on was confronted with a new technology (tn) with a technology which was superior from time t* on. however, the old technology improved (to+1) with the introduction of the new technology. this effect is a “process whereby the advent of a new technology engenders a response aimed at improving the incumbent technology” (de liso and filatrella 2008, p. 593). the case of sailing ships first described by gilfillan (1935) shows how at the beginning of the 1900s the rate of technological innovation of sailing ships, after the introduction of steam ships, lasted for over 30 years (since 1850 up to the 1880s) and the period of substitution between the two competing technologies lasted for over 70 years. the sailing ship producers perceived the steam ships as a threat and, thus, improved the performance and innovated their traditional products: “it is paradoxical, but on examination logical, that this noble flowering of the sailing ship, this apotheosis during her decline and just before extermination, was partly vouchsafed by her supplanter, the steamer” (gilfillan, 1935, pp. 156). some scholars (howells, 2002 and mendoca, 2013) analysed in detail the sailing ship effect and, overall, criticised the conclusions by gilfillan. the results of their studies show that the real existence of this phenomenon is questionable. howells (2002) argues that in practice the sailing ship effect is the output of superficial knowledge about the cases analysed. such misleading view is supported (howells, 2002, p. 903) by (1) the coexistence of apparently substituting technolofigure 22: scheme of technology competition: the sailing-ship effect 2:source: own figure based on adner and snow (2010a) and sandström (2013) journal of business models (2016), vol 4, no 2 pp. 1-21 7 gies through long periods of time and (2) the confusion of continuous innovation in the old technology with innovation induced by the threat of substitution. similarly, the historical analysis by mendoca (2013) shows that the technological competition between sailing ships and steam boats was a distortion of what really happened. for instance, when new technology emerged, sailing ships were already in the most innovative phase of their history and that both technologies rather complemented each other even hybrid forms existed for some time (mendonca, 2013, p. 1732). however, mendonca also concludes that “the ‘sailing ship effect’ may hold true for other industries” (mendonca, 2013, p. 1735). these arguments, however, highlight various endemic problems of conceptualisations and empirical research about the so-called sailing ship effect. howells (2002) attempts to find proofs for the sailingship effect as one of three possible generic responses (exist, switch, sailing-ship effect) to substitution by analysing the two cases of sail and alkali (howells, 2002, p. 887). for these cases howells could not find strong evidence but emphasized the radical notion of change of these examples (howells, 2002, p. 905). rather other cases should be analysed (howells, 2002, p. 905). he even describes the most cited source of the sailingship effect, gilfillan (1935), as misinterpreted: “not only does gilfillan not make an explicit claim for the ‘sailingship effect’ as private sector phenomenon, he provides persuasive evidence that government was the more important funding agency […]” (howells, 2002, p. 892). howells (2002) thus states that switch or exit are the dominant strategies for old tech firms. however, there is another possibility: stick to the old technology to be able to create value from a niche position. despite the real existence of the sailing ship effect is hard to clearly identify in the available empirical patterns; this technological concept anyway outlines a number of interesting strategic implications when companies face technological change: • companies have used their r&d efforts and innovation resources to analyse/develop both old and new technology over the transition phase. • the emergence of new superior technology reshapes the old industry. differences in reaction by users and producers might lead to industry-specific strategic and competitive configurations more complex than the classifications by howells (2002). • the destiny of old technologies may be to disappear from the marker in the long term but in the short-medium term they can still provide room for value creation, niche companies may even be able to sustain their competitive position in the long run. another example of technology race between old and new technologies is the case of carburettors: with the introduction of electronic fuel injection (efi) the number of cars sold with carburettors declined sharply by 1984 whereas the fuel economy (measured in miles per gallon, mpg) increased heavily at the same time. however, various other industry examples of this phenomenon are provided in the literature (utterback, 1994; snow, 2008), e.g. vacuum tubes vs. transistors, steam locomotives vs. diesel-electric, fountain pens vs. ball-point pen, fossil fuel power plants vs. nuclear power plants, safety razors vs. electric razors, aircraft propellers vs. jet engines, leather vs. polyvinyl chloride plastics (cooper and schendel, 1976, p. 64-65). all these examples were studied by cooper and schendel (1976) and they concluded that “[i]n every industry studied, the old technology continued to be improved and reached its highest stage of technical development after the new technology was introduced […]” (cooper and schendel, 1976, p. 67). furthermore, cooper and schendel (1976) found out that most firms followed a dual strategy, divided their resources and were active in both the new and the old technology. their commitments to the old technology stayed substantial. “perhaps this demonstrates the difficulty of changing the patterns of resource allocation in an established organization” (cooper and schendel, 1976, pp. 67). where the old technology continued growing the companies could keep their competitive and financial advantages especially as the new technology firms never entered the old technologies market (cooper and schendel, 1976, p. 68). in a later study cooper and smith (1992) studied eight young industries and 27 firms that were threatened by that new technology to analyse the respond strategies, espejournal of business models (2016), vol 4, no 2 pp. 1-21 8 cially the case of entering the emerging young industry (cooper and smith, 1992, pp. 55). the limited number of successful examples, however, made it only possible to come up with the problems associated with a strategy of participation in the new industry and suggest ways how to avoid them rather than to develop success formulas (cooper and smith, 1992, pp. 67). one key point is that it is not the challenge to also introduce the new product but to being able to further improve performance, quality and costs which is necessary for the commercial success (which is easier if the company has very strong r&d and financial resources or competition does not yet exist). they also saw a tendency of trying to fold the new product into the old strategy and were slow in trying out new concepts rather than to allow new experimental strategies and to carefully analyse the strategies of the new technology firms which often have different resources, skills, and ideas and do not care about the status quo (cooper and smith, 1992, pp. 68). technological retreat (adner and snow, 2010) is a strategic approach by which old technology companies retrench their products in a niche position within their traditional market and/or search for new market applications (see figure 3). hence the goal is not growth and expansion but rather survival and contraction which is “contrary to traditionally assumed firm objectives” (adner and snow, 2010, p. 1657). if an old technology loses the mainstream this does not necessarily mean that it loses the entire market. even though it is possible that all customers uniformly prefer the new technology, it is a matter of evaluation criteria. there exist “several drivers for variance that may lead parts of the market to continue to prefer the old technology to the new” (adner and snow, 2010, p. 1662). reasons might be budget constraints, heterogeneity of preferences over attribute bundles or emotional/ nostalgic elements of the old technology (adner and snow, 2010, p. 1662). another reason might be lock-in by an industry which arthur shows on the examples of nuclear-reactor technology and petrol-versus-steam cars (arthur, 1989, pp. 126.). farell and saloner (1986) describe the lockin from the customer side: customers who decided to adopt a technology that became old through the introduction of a new technology are described as installed base that are “somewhat tied to the old technology” (farell and saloner, 1986, p. 954), also described as stranding effect (farell and saloner, 1986, p. 941) and quite common in platform markets. liesenkötter and schewe (2013) follow the idea of lock-in of industries by combining the concept of path dependency with the sailing-ship effect and an analysis of patents for different car engine types to explain why it does not make sense for the car manufacturer to immediately change technology to electric or hybrid cars (liesenkötter and schewe, 2013, p. 276). the vehicle manufacturers as the focal actors of the current automotive industry have their core competences in the design and production of combustion engines (dietl, royer and beckmann, 2013, p. 23). this means that they are somewhat locked into this bundle of resources specific to cars that need fuel and not electricity. these types of reactions imply changes on both the production-side and the demandside for companies. figure 33: technological retreat 3: source: own figure. journal of business models (2016), vol 4, no 2 pp. 1-21 9 this reviewed body of literature focuses mainly on the innovation, marketing and/or strategy of old technology-based companies reacting to technological change. an in depth analysis of how the companies underlying vcas may change (or not) due to new technology still lacks in the literature. however, technological races and technological retreats have different and deep implications within and outside organisations. firms have to develop new marketing, manufacturing and engineering capabilities despite they keep focusing on the old technology. the first concern is to develop these internally or by integration of new and necessary capabilities. referring to the internal development, acquisitions are a typical but risky way to coping with change by disruptive technology and creating capabilities (christensen, 1997). a well-known example of such risks is the 1984 acquisition of rolm by ibm in the pc industry. the ibm mistake to push rolm resources into its original large computer business destroyed a large part of the value of the acquired company in few years (christensen, 1997). referring to the external environment, the usual reduction of the market size of old products entails the traditional economies of scale are not achievable anymore by companies. old technology firms must search for flexibility (adner and snow, 2010). the inclusion of new technology-based components in the old declining products should reduce, therefore, the extent of integration of the production process of retrofitted (improved) old technological products. a critical issue of old technology-based companies and their competitive advantage, thus, is to keep legitimacy in their business ecosystem (adner and snow, 2010). when a technology starts declining the firm has to face the issue of revising its set of suppliers. many of them might decide to exit from the industry or switch to new technology. companies performing technological retreats, thus, should try to keep the best suppliers and redesign their vca accordingly with the new components. the repositioning of old technology products from mass to niche market could affect also the selection of distribution partners and channels. for instance, after the rise of quartz watches some firms manufacturing mechanical watches repositioned and sold their products by new distribution partners. general purpose technologies might introduce new technological competencies and distribution channels or partners into the industry which affect old technology and its (retrofitted or not) products. for instance, the widespread of e-commerce pushed old technology firms in many industries to extend their vcas by integrating reliable ecommerce providers and global shipping companies. it can also be a possible move to establish own brick-andmortar-outlets to compensate for a decreasing number of attractive sales outlets in the market. sellers of high end cutlery or porcelain may lose their established sales infrastructure due to the decline of certain types of shops for exclusive homeware or jewellery stores and follow the sketched avenue. conceptualising relevant elements of vcas of old technology firms after the discussion of relevant elements from the literature the further research process shall be fuelled with propositions which may be contrasted with reality in the course of future research. the aim of this paper is to come to a sound conceptualisation of propositions about vcas for providers of old technology on the chain of arguments developed from the literature. the propositions are elaborated with the explicit objective to develop them further towards testable hypotheses. therefore, next to a thorough description of the variables in the propositions, we want to sketch first concrete ideas for the operationalisation of these constructs. from the literature on old-technology firms and value creation architectures we have derived several propositions: building on the reasoning developed from the literature and showed above we deducted that two levels of competition are relevant for our analysis, i.e. the competition between different vcas (inter-architecture competition) as well as the competition between the actors in the same vca to appropriate a high share of the resulting rents within that particular system (intra-architecture competition) (see dietl et al., 2009). due to the specificities of old technology firms – as outlined above and using adner and snow’s (2010) considerations as a point of reference – we in the first step of research propose to focus on inter-architecture competition as intra-architecture competition seems to play journal of business models (2016), vol 4, no 2 pp. 1-21 10 a minor role due to the assumed decreasing number of suppliers and other potential partners in the vca. when we want to understand value creation possibilities for old-technology firms we suggest that we have to come to an understanding of the situation before and after the dominance of a superior new technology. therefore the analysis of the process of technological change can be – similar to what is shown in figure 1 building on adner and snow (2010a) and sandström (2013) split into two relevant time periods: (1) time period 1 [tp1] as the time span when old-technology firms see their possibilities to realise rents threatened by the emergence of a superior technology, and (2) time period 2 [tp2] as the time span after new technology became dominant, some old-technology firms were forced to leave the market and only a smaller number of niche players competes on the basis of the old technology (see figure 3 again). we assume that old-technology firms usually have to fight hard against also threatened old-technology competitors when a superior technology emerges in a market in tp1 when they are locked into the old technology product-market system and cannot switch to the new technology. this assumption is in line with porter’s (2008, p. 85) understanding of a high intensity of rivalry in a given industry being pushed by fights of incumbents for market share in an environment characterised by declining growth and exit barriers due to specific investments. competition between the incumbents (and therewith between their vcas) is fierce in this point in time since they all have a lot to lose and they are all due to their specific investment into the whole platform forced to fight hard or leave the market with high investment ruins. they basically fight for their survival in a marketplace where the expected total rents to be gained are shrinking. this reasoning leads to the first proposition: proposition 1: old-technology firms focus on out-competing other old technology-based rivals in tp1 so that a fierce (inter-architecture) rivalry between the incumbents comes into being. however, from the perspective of an old-technology incumbent the rivalry in tp1 is not limited to the other oldtechnology competitors. further, obviously the newtechnology firms are a major threat to profitability for an old-technology player as well. after reviewing the literature on old technologies and the strategic reactions of race and retreat (e.g., adner and snow, 2010a; de liso and filatrella, 2008) a link between these two may be assumed: before a technology retreats in a niche market in tp2, it races with the new emerging technology and therewith improves (see cooper and schendel, 1976; gilfillan, 1935; de liso and filatrella, 2008 and 2011 for an elaboration of this sailing ship effect). it thus may be assumed that an old technology gets improved through the pressure of the introduction of a new technology (i.e., a race gets started): proposition 2: old technology firms facing the introduction of a superior technology into the market show a high level of product innovation in tp1. building on that chain of assumptions as well as the assumption that just companies with strong (however, locked-into the old technology) resources (e.g., patents and/or r&d capabilities) stay into the old technology market, we on the basis of adner and snow’s (2010) considerations on retreat strategiessuggest the following: the old-technology firms with a high level of innovations in the first phase are also the later old-tech survivors in the second analysed phase. in this phase they then retrench into a market niche. furthermore, we assume that they will gain significant market share/ importance in this specific niche as the number of players will be increasingly limited with the structural market changes. these assumptions are phrased in the following two propositions: proposition 3a: old technology firms with a high level of product innovation in tp1, are likely to survive in tp2. proposition 3b: old technology firms with a high level of product innovation in tp1, follow differentiation strategies in tp2 and thereby retrench into strategic niche positions of the overall market. on the basis of the vca concept (dietl et al. 2009) we suggest that old-technology firms which are successful in surviving the introduction of a superior technology into their markets face a situation which is characterised by a small number of competing niche players in the old-technology segment in tp2. by having retreated to a niche there is also a certain protection against journal of business models (2016), vol 4, no 2 pp. 1-21 11 new-technology firms as well as against new entrants. thus, we assume that the old-tech survivors usually lay respectively have to lay major focus on competitive advantage realisation inside the borders of their vca. we suggest that old technology firms have to concentrate on their own resources and capabilities since the number of vertical and horizontal partners and competitors is declining with the decline of the old technology. since their products can be characterised as niche products it can be assumed that old-technology based firms are more likely to compete in a relatively stable industry context once the number of other old-tech providers is relatively small. in such a market they are able to appropriate value and build long-term competitive advantage with an integrated value creation architecture. from this reasoning a further proposition arises: proposition 4: old-technology firms surviving the introduction of a new technology build highly integrated value creation architectures for the old technology in tp2. furthermore, old technology firms in platform markets are usually locked-in to the old product, e.g. through resource allocation and path dependency as well as compatibility issues (see arthur, 1989 for an elaboration of the lock-in phenomenon). old-tech companies may in addition find it hard to totally giving up the old technology due to economic as well as emotional lockins. this may have the implication that they stick to the old technology, even when they make parallel efforts to switch to the new technology, i.e. follow a dual strategy. proposition 5: old-technology firms with sufficient resources often follow a dual strategy with the old and the new technology after tp2. conclusions and implications for further research about vcas in the vinyl market within this piece of research we focused an area which often is not regarded by scholars even though it is important and highly interesting: the area of old-technology firms which survived and still operate today. we therefore reviewed the main literature about vcas and the strategies of old technology-based companies after technological change. based on these analyses we elaborated the following six propositions (see table 1 for a summary of the propositions) for further research in this area. table 14: propositions about the structure and strategy of old-tech providers in platform markets proposition 1 old-technology firms focus on out-competing other old technology-based rivals in tp1 so that a fierce (inter-architecture) rivalry between the incumbents comes into being. proposition 2 old technology firms facing the introduction of a superior technology into the market show a high level of product innovation in tp1. proposition 3a old technology firms with a high level of product innovation in tp1, are likely to survive in tp2. proposition 3b old technology firms with a high level of product innovation in tp1, follow differentiation strategies in tp2 and thereby retrench into strategic niche positions of the overall market. 4: tp1 = time span when old-technology firms see their possibilities to realise rents threatened by the emergence of a superior technology; tp2 = time span after new technology became dominant and only a smaller number of niche players competes in old technology segment journal of business models (2016), vol 4, no 2 pp. 1-21 12 proposition 4 old-technology firms surviving the introduction of a new technology build highly integrated value creation architectures for the old technology in tp2 proposition 5 old-technology firms with sufficient resources often follow a dual strategy with the old and the new technology after tp2. further research is needed to discuss these propositions and contrast them with the reality e.g. by applying a case study research strategy. we suggest the case of the vinyl industry in europe to be a good example and worth to study in-depth as it shows interesting market characteristics with its boom after many years of decline of sales. there still exists a good number of vinyl pressing companies with different degree of integration of their value creation architectures. the next step in this research regarding vcas in old technology context in our eyes thus has to be an empirical investigation. a case study approach may be developed to contrast for instances our proposition 4 which suggests that a relatively integrated vca would be beneficial in old technology markets with the reality. we plan to explore this in a case study where we apply the concept to analyse value creation architectures in the industry context of vinyl, focusing on the vinyl pressing businesses as the focal actors. vinyl seems to be an attractive example to investigate: a vinyl revival occurred over the last ten years. latest statistics report that the amount of vinyl purchased in the u.s. in 2012 reached 4.6 million units which is an increase of 17.7% compared to 2011 (nielsen, 2012). even though 2014 was a bad year for the u.s. music industry overall, vinyl stayed a noteworthy trend with its 51.8% rise in sales compared to 2013 which means 9.2 million vinyl sales and 6% of all physical music sales. compact disc sales on the other hand declined by 14.9%. (nielsen, 2015). physical formats still account for more than half of all global revenues, vinyl here grows as a nice product (ifpi, 2014, p. 7). the vinyl sales in the u.s. in 2012 accounted for 177 million usd, while it was only 166 million usd in 1997 (ifpi, 2013). one of the motivations explaining the current purchase of vinyl by end-users and the current value creation in this industry lies in the fact that vinyl became popular and trendy between young artists as well as music listeners (e.g., pankinkis, 2012). the sound quality of vinyl is perceived to be much higher than of cds or mp3s by these customers. some labels or stores (e.g., amazon) meanwhile offer to download the songs for free as mp3 when buying the vinyl album and therewith combine the best of both worlds. another motivation relates to the on-going use of turntables by some (vintage) communities of djs (e.g., schiavone, 2013). when put in relation to the music market vinyl album sales have accounted for 1.4% (2.3%) of all album sales (all physical album sales) (hughes, 2013, p. 27). the market share documents that it is a niche market (christman, 2013). music companies foster this niche by producing a limited number of vinyl records as a deluxe product (james and grogan, 2011, p.51). to analyse the theoretical approach in a real-life context a multiple case design may be useful (yin, 2003, p. 39). case studies are a useful approach to illustrate general facts or theoretical concepts (boos, 1992). they are an “[…] empirical inquiry that investigates a contemporary phenomenon within its real-life context […]” (yin, 2003, p. 13) and “copes with the technically distinctive situation in which there will be many more variables of interest than data points, and as one result relies on multiple sources of evidence, with data needing to coverage in a triangulating fashion […]” (yin, 2003, pp. 13-14). we here suggest to use a cases study strategy further since the research subject in terms of the complex variables and the interdependencies between them can only be sufficiently analysed when data from different journal of business models (2016), vol 4, no 2 pp. 1-21 13 sources are taken into account and in-depth interviews are conducted with industry experts which excludes analysing a large number of cases (weber, mayrhofer, nienhüser, rodehuth & rüther, 1994, p. 55). we suggest a nomothetic case study research design here to be able to actually contrast the propositions with the reality and thereby test them. nomothetic in this context refers to the fact that each of the cases of old tech players investigated in the vinyl market is to be classified on the basis of the theoretical considerations from the developed propositions. data maybe collected with quantitative as well as qualitative methods which both can be useful. the aim of a hypotheses testing nomothetic case study lies in eliminating implausible hypotheses in a process of comparing them with the characteristics the variables show in the different cases investigated (fisch and boos, 1987, p. 356; weber et al., 1994, p. 51). after setting up the propositions as an outcome of the theoretical discussion of the vca of old-technology firms one tricky part therefore lies in operationalising the complex constructs used in the variables. we thus here want to come up with first ideas regarding the operationalization of them with regard to a cases study research of different remaining players in the european vinyl market(see table 2). within further research the propositions are to be tested with the help of a case study analysis in the vinyl industry (or other fitting industry contexts). we think that it is fruitful to analyse the vinyl pressing industry which in our view is a good example of an old-technology based industry which survived building a niche market for some players and even grows nowadays. as cases we would choose remaining players (respectively their vcas) in the european vinyl market. limitations of our approach lie in the fact that so far we have no empirical data included. however, due to the complexity of the field we saw it as highly relevant to focus on a sound conceptualisation of propositions in the first step and test them in follow up studies. the aim of this paper was to generate propositions regarding the companies’ value-adding activities in order to sustain an old platform or establish new platforms for old products in decline. thereby we focus on a neglected topic in the strategy literature which, however, bears relevance for many businesses locked into product-market systems which make it hard for them to (completely) switch to a new technology emerging in the market. it is relevant to describe the consequences in a systematic fashion and this is what we did on the basis of the strategic literature used. in addition, we wanted to come to a deeper understanding of the relationships between different elements in that context which led us to the formulation of the propositions summarised in table 1. these are a good fundament for future research in this area as well as first insights into the constellations to be expected over time for old tech businesses in platform markets. journal of business models (2016), vol 4, no 2 pp. 1-21 14 table 2: avenues towards operationalising the relevant variables variables time possible measures tp1 relevant time period suggested for the vinyl market 1981 – 1989 tp2 relevant time period suggested for the vinyl market 2006 – 2012 rivalry/ competition tp1 price discounting (porter, 2008, p. 32) [number] of new product introductions (porter, 2008, p. 32) [number] of advertising campaigns (porter, 2008, p. 32) service improvements (porter, 2008, p. 32) industry growth in % (slow growth precipitates fights for market share; porter, 2008: 32) industry decline in % [number] of relevant companies offering the product/ competitors product innovation tp1 [number] of old products revitalised; [number] of new products developed; [number] of new patents survival tp2 [years] of existence (year of closure/ today minus founding year) niche position tp2 market share in overall market in [%] journal of business models (2016), vol 4, no 2 pp. 1-21 15 differentiation tp2 focus on special sales [price level], e.g. high-end/ luxury, compared to new technology, quality focus [number] of distribution channels/ distribution partners [number] raising and creating elements the industry has never offered (porter, 2008) differences in [quality] which are usually accompanied by differences in [price] differences in functional features or design ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing [buyer behaviour] sales promotion activities of sellers and, in particular, advertising, e.g. [number] of campaigns differences in availability (e.g., timing and location) (sharp and dawes, 2001) integration tp2 production depth: ideally [%] of inhouse processes compared to outsourced ones (production steps) production control: duration in [years] and sustainability of relationships in [number] of suppliers (multiple sourcing vs. exclusive supplier); [level] of location-specific investments (geographic proximity of supplier plants), integration of direct suppliers – focus on direct tier 1 supplier distribution depth: ideally [%] of direct sales/ direct involvement and intervention compared to sales via third parties distribution control: [type] of sales and contracts with dealers (e.g., franchise); [level] of specific investments at dealers – focus on relationships with direct distributors journal of business models (2016), vol 4, no 2 pp. 1-21 16 references adner r. and snow d. (2010), old technology responses to new technology threats: demand heterogeneity and graceful technology retreats, in: industrial and corporate change 19 (5), pp. 1655-1675. afuah, a. and tucci, c. l. (2001): internet business models and strategies, new york: mcgraw-hill. ahokangas, p. and myllykoski, j. (2014): the practice of creating and transforming a business model, in: journal of business models 2 (1), pp. 6-18. amit, r. and zott, c. (2012): creating value through business model innovation, in: sloan management review 53 (3), pp. 41–49. arthur, w. b. (1989), competing technologies, increasing returns, and lock-in by historical events, the economic journal 99 (394), pp. 116-131. barney, j. b. (1991), firm resources and sustained competitive advantage, in: journal of management 17 (1), pp. 99120. boos, m. (1992), a typology of case studies, research on cases and theories, vol. 1. bosch, f. a. j. van den, volberda, h. w. and boer, m. de (1999), coevolution of firm absorptive capacity and knowledge environment: organiszational forms and combinative capabilities, in: organization science 10 (5), pp. 551-568. business wire (2013), amazon autorip extends to vinyl, in: business wire (english) 04/03/2013. chari, v. v. and hopenhayn, h. (1991), vintage human capital, growth, and the diffusion of new technology, in: journal of political economy 99 (6), pp. 1142-1165. chatterjee, s. (2013), simple rules for designing business models, in: california management review 55 (2), pp. 97-124. christensen l. m. (1997), the innovator’s dilemma: when new technologies cause great firms to fail, boston, ma: harvard business school press. christman, e. (2013), vinyl resurgence, in: billboard, april 20, p. 28. cliffe, s. (2011), when your business model is in trouble interview with rita g. mcgrath, in: harvard business review, jan-feb, pp. 96-98. coase, r. h. (1937), the nature of the firm, in: economica 4, pp. 386-405. cooper, a. c. and schendel, d. (1976), strategic responses to technological threats, in: business horizons, february 1976, pp. 61-69. cooper a.c. and smith c. g. (1992), how established firms respond to threatening technologies, in: academy of management executive 6 (2), pp. 56–69. journal of business models (2016), vol 4, no 2 pp. 1-21 17 de liso, n. and filatrella, g. (2008), on technology competition: a formal analysis of the “sailing-ship-effect”, econ. innov. new technology 17(6), pp. 593-610. de liso, n. and filatrella, g. (2011), technological persistence through r&d on an old technology: the “sailing ship effect”, in: de liso, n. and leoncini, r. (eds.), internationalization, technological change and the theory of the firm, london: routledge, chapter 3. dietl h., royer s. and stratmann u., (2009), value creation architectures and competitive advantage: lessons from the european automobile industry, in: california management review 51 (3), pp. 24-48. dietl, h.m., royer, s. and beckmann, o.c. (2013), die bedeutung von netzwerkkreuzeffekten für den erfolg der elektromobilität strategische überlegungen zu möglichen distributionsarchitekturen, in: zeitschrift für die gesamte wertschöpfungskette automobilwirtschaft (zfaw) 16 (3), pp. 14-26. duscheck, s. (2014), inter-firm resources and sustained competitive advantage, in: management revue 15 (1), pp. 53-73. dyer, j. h. and singh, h. (1998), the relational view: cooperative strategies and sources of interorganizational competitive advantage, in: academy of management review 23 (4), 1998: 660-679. eisenmann, t., parker, g. and van alstyne, m. (2011), platform envelopment, in: strategic management journal 32, pp. 1270-1285. farell, j. and saloner, g. (1986), installed base and compatibility: innovation, product preannouncements, and predation, the american economic review, 76 (5), pp.940-955. fisch, r. and boos, m. (1985): die fallstudie in der organizationsforschung, arbeitsbericht nr. 5 des sonderforschungsbereichs 221: verwaltung im wandel, universität konstanz 1985. foster, r. n. (1986), innovation: the attacker’s advantage, new york: summit books. gawer, a. and cusumano, m. a. (2014), industry platforms and ecosystem innovation, in: journal of product innovation management 31 (3), pp. 417-433. gilfillan, s. c. (1935), inventing the ship, chicago: follet publishing company. gulati, r. (1999), network location and learning: the influence of network resources and firm capabilities on alliance formation, in: strategic management journal 20 (5), pp. 397-420. hambrick, d. and fredrickson, j. (2001), are you sure you have a strategy? in: the academy of management executive 15 (4), pp. 48-59. howells j. (2002), the response of old technology incumbents to technological competition: does the sailing ship effect exist? in: journal of management studies 39 (7), pp. 887-906. hughes, h. (2013), vinyl mania, in: billboard, april 20, pp. 26-28. ifpi (2014), ifpi digital music report 2014, http://www.ifpi.org/downloads/digital-music-report-2014.pdf (acjournal of business models (2016), vol 4, no 2 pp. 1-21 18 cessed 22 february 2015). ifpi (2013), recording industry annual report. ismail, s., malone, m. s. and van geest, y. (2014), exponential organizations, new york: diversion books. james, t. and grogan, a. (2011), back in the groove, in: engineering & technology, pp. 50-53. jacobides, m. g. and billinger, s. (2006), designing the boundaries of the firm: “make, buy, or ally” to the dynamic benefits of vertical architecture, in: organization science 17 (2), pp. 249-261. jacobides, m. g., knudsen, t. and augier, m. (2006), benefiting from innovation: value creation, value appropriation and the role of industry architectures, in: research policy 35 (8), pp. 1200-1221. lavie, d. (2006), the competitive advantage of interconnected firms: an extension of the resource-based view,in: academy of management review 31 (3), pp. 638–658. liesenkötter, b. and schewe, g. (2013), der sailing-ship-effect in der automobilwirtschaft, in: proff, h., pascha, w., schönhartig, j. and schramm, d. (eds.): schritte in die künftige mobilität – technische und betriebswirtschaftliche aspekte, springer gabler: wiesbaden, pp. 273-286. lund, m. and nielsen, c. (2014): the evolution of network-based business models illustrated through the case study of an entrepreneurship project, in: journal of business models 2 (1), pp. 105-121. maitland and sammartino (2012), flexible footprints: reconfiguring for new value opportunities, in: california management review 54 (2), pp. 92-117. massa, l. and tucci, c. l. (2014), business model innovation, in: dodgson, m., gann, d. m. and phillips, n. (eds.), the oxford handbook of innovation management, oxford university press, pp. 420-441. matzler, k., bailom, f., von der eichen, s. f. and kohler, t. (2013), business model innovation: coffee triumphs for nespresso, in: journal of business strategy 34 (2), pp. 30-37. mcdermott, g., mudambi, r. and parente, r. (2013), strategic modularity and the architecture of multinational firm, in: global strategy journal 3 (1), pp. 1-7. mendoca, s. (2013), the „sailing ship effect“: reassessing history as a source of insight into technical change, in: research policy 42, pp. 1724-1738. nielsen (2015), 2014 nielsen music u.s. report, http://www.nielsen.com/content/dam/corporate/us/en/public%20 factsheets/soundscan/nielsen-2014-year-end-music-report-us.pdf (accessed 22 february 2015). nielsen (2012), soundscan annual report. osterwalder, a., pigneur, y and tucci, c.l. (2005), clarifying business models: ‘origins, present and future of the concept’, in: communications of the association for information science (cais) 16, pp. 1-25. parker, g. and van alstyne, m. (2014), platform strategy survey, electronic copy available at: http://ssrn.com/abjournal of business models (2016), vol 4, no 2 pp. 1-21 19 stract=2439323. peteraf, m. a. (1993), the cornerstones of competitive advantage: a resource based view, in: strategic management journal 14 (3), pp. 179-91. porter, m. e. (1980), competitive strategy, boston ma: the free press. porter, m. e. (1996), what is strategy? in: harvard business review 74 (6), pp. 61-78. porter, m. e. (2008), the five competitive forces that shape strategy, in: harvard business review, january 2008, pp. 78-93. royer, s. (2005), strategic management and online-selling: creating competitive advantage with intangible web goods, london/new york: routledge. sah, r. and stiglitz, j. (1986), the architecture of economic systems: hierarchies and polyarchies, in: american economic review 76 (4), pp. 716-727. sanchez, r. and heene, a. (1997), reinventing strategic management: new theory and practice for competencebased competition, in: european management journal 15 (3), pp. 303-17. sandström (2013), “the sailing ship effect”, slideshare presentation, http://de.slideshare.net/christiansandstrom/technology-sailing-effects (last accessed 22 december 2015). schiavone f. (2011), strategic reactions to technology competition. a decision-making model, in management decision 49 (5), pp. 801-809. schiavone f. (2013), communities of practice and vintage innovation, berlin: springer. schiavone, f. and borzillo, s. (2014): creating technological knowledge in vintage communities of practice”, journal of knowledge management 18 (5), pp. 991 – 1003. schumpeter j.a. (1942), capitalism, socialism and democracy. new york: harper and brothers. snow, d.c. (2008), beware of old technologies’ last gasps, in: harvard business review (january 2008), pp. 17-18. suarez, f.f. and kirtley, j. (2012), dethroning an established platform, in: sloan management review 53(4), pp. 3541. teece, d. j., pisano, g. and shuen, a. (1997), dynamic capabilities and strategic management, in: strategic management journal 18 (7), pp. 509-33. teece, d. j. (2010), business models, business strategy and innovation, in: long range planning 23, pp. 172-194. utterback, j. m. (1994), mastering the dynamics of innovation, boston: harvard business school press. utterback, j. m. and acee, h. j. (2005), disruptive technologies: an expanded view, in: international journal of innovation management 9 (1), pp. 1-17. journal of business models (2016), vol 4, no 2 pp. 1-21 20 weber, w., mayrhofer, w., nienhüser, w., rodehuth, m. and rüther, b. (1994): betriebliche bildungsentscheidungen – entscheidungsverläufe und entscheidungsergebnisse, münchen/mering: hampp. williamson, o. e. (1985), the economic institutions of capitalism: firms, markets, relative contracting, new york: the free press. yin, r. (2003), case study research: design and methods, beverly hills, ca: sage publishing. yrjölä, m. (2014): value creation challenges in multichannel retail business models, in: journal of business models 2 (1), pp. 89-104. zott, c. and amit, r. (2013): the business model: a theoretically anchored robust construct for strategic analysis, in: strategic organization 11 (4), 2013: 403-411. journal of business models (2016), vol 4, no 2 pp. 1-21 21 about thr authors oke christian beckmann studied at baden-wuerttemberg cooperative state university mannheim, lincoln university in christchurch/ new zealand and the university of flensburg. he gained practical experience at volkswagen retail in hamburg and the international car distribution programme (icdp) in frankfurt. since 2013 oke is doctoral student and research assistant at the department of strategic and international management at europa-universität flensburg (euf). his research interests lie in the area of business models, value creation, platform markets and e-mobility. susanne royer studied, earned her doctorate and habilitated at the university of paderborn. since 2004 she is professor for strategic and international management at europa-universität flensburg. she is also adjunct professor at the school of management at queensland university of technology in brisbane/ australia. her research interests lie in the area of cooperative business activities in global value creation architectures as well as in regional clusters. francesco schiavone received the ph.d. degree in network economics and knowledge management from the ca’ foscari university of venice, italy, in 2006. since 2007, he has been an assistant professor in management at university parthenope, naples, italy. he is also an affiliated professor in innovation management at paris school of business and visiting professor at ieseg business school (france). since 2010, he has been involved in research on strategic reactions to technological change by companies and communities of users. in december 2013 dr. schiavone has been habilitated as associate professor in management by miur (italian ministry of education and research). journal of business models (2019), vol. 7, no. 1, pp. 13-38 13 business models for sustainability—change in dynamic environments jessica lagerstedt wadin 1 and kajsa ahlgren ode 2 abstract purpose: the purpose of this paper is to enrich the debate on business models for sustainability in contingent situations. approach: we employ literature on business models for sustainability and a contingency framework advanced in previous literature. we apply qualitative methods and investigate multiple cases of business models for sustainability dynamics in contingent situations and examine how four solar companies manage to align their business models with changes in the business environment. findings: we provide detailed insights into business model for sustainability changes, made to align to dynamic environments, as well as empirical evidence that confirms and supports the contingency framework on business model dynamics and how it can be extended. adding a conceptual framework helps to understand the roles of the components in more detail, revealing that each component can face multiple environmental dynamics. for example, dramatically reduced policy-supporting schemes and customers wanting to be green led to adjustments to the value proposition and the revenue model. all companies in this study developed sensitivity toward intangible customer values and needs and tried to incorporate the customer experience into their business models. we therefore suggest customer sensitivity as a way to better understand the interaction between the firm and the customer. originality: combining contingency theory and business models for sustainability approaches provides a novel way of studying and explaining alternative modes of sustainable value creation. jointly, our findings provide new detailed insights on business models for sustainability changes in dynamic environments. please cite this paper as: wadin, j. l. and 1 and ode, k. a. (2019), business models for sustainability change in dynamic environments, vol. 7, no. 1, pp. 3-38 keywords: business model dynamics; business models for sustainability; contingency theory; solar energy acknowledgements: the authors acknowledge the financial assistance of research by grant p 40639-1 from swedish energy agency. we are also grateful for valuable feedback from anonymous reviewers on how to improve the paper. a special thanks to prof. lars bengtsson for valuable discussions on contingency theory perspectives. 1–2 innovation engineering, department of design sciences, lund university, tel: +46 76 7682841, jessica.wadin@design.lth.se; tel: +46 734 207002, kajsa.ahlgren@design.lth.se mailto:kajsa.ahlgren@design.lth.se journal of business models (2019), vol. 7, no. 1, pp. 13-38 14 introduction scholars increasingly recognize that business models can constitute an important link in transforming high potential sustainable ideas to marketable sustainable innovations (cf. boons & lüdeke-freund, 2013; stubbs and cocklin, 2008) and in scaling up sustainable solutions, thereby contributing to the sustainable transformation of markets and society (cf. wadin et al. 2017; schaltegger et al, 2016a). the literature on business models and business models for sustainability has, however, often focused on then business model outcome, rather than acknowledging the continuous adjustments made to business models (teece, 2018; evans et al., 2017; foss and saebi, 2017). these adaptations are due to different market circumstances (e.g., johnson et al., 2008; voelpel et al., 2004), especially the changing conditions associated with the adaptive transformation that characterizes sustainable development (roome and louche, 2016). in their review of the business model innovation literature, foss and saebi (2017) suggest there is a need for further research on contingency and moderating variables (macro-, firm-, and micro-level moderators) influencing business model innovation. haas (2018) argue that it is essential to determine the interaction effects between business model components to predict the effects of business model change. in addition, strupeit and palm (2016) point to a lack of research on the dynamics of business models for solar photovoltaics (pv)1 and to the response of business models to changes in the business environment. although earlier studies on business models for solar pv contribute to our understanding of drivers and barriers for bringing pv technology to the market in different countries (cf. strupeit and palm, 2016; ahlgren et al., 2015; karakaya and sriwannawit, 2015), they do not explore how business models for sustainability change in response to environmental contingencies. this understanding is essential for the future success and development of new business models for sustainability, as well as for current business models for sustainability, to adapt to maturing market conditions (strupeit and palm, 2016; overholm, 2015). it further influences the potential success of business models for solar pv developed on new markets with differing conditions. business models for 1 pv = photovoltaics; a system generating electricity from solar radiation sustainability, in general, and business models for solar pv, in particular, illustrate the importance of considering the value destroyed by maintaining an old, less sustainable business model (evans et al., 2017; roome and louche, 2016). the energy sector contributes to one fourth of global ghg emissions (ipcc, 2014), so to increase the use of renewable sources and create a shift in the energy sector is of great importance. hence, by leading to a reduction of destroyed value, an increased understanding of business models for sustainability will decrease environmental and social damage. in this paper, we respond to current calls for studies on business model change in contingent situations (teece, 2018; foss and saebi, 2017), especially business models for sustainability (evans et al., 2017) and solar pv (strupeit and palm, 2016). we do this by exploring multiple cases of business models for sustainability dynamics in contingent situations. provided the rapidly changing circumstances on the residential solar energy markets in germany and california during the last decade, these two markets constitute suitable settings for our study. the californian market can be described as a high-velocity marketplace with intense competition, whereas the german market has gone through a major regulatory shift and discontinuous transformation. the term business model change is used as an umbrella term for business model evolution, business model adaption and business model innovation, and the term change is interchangeably used with adjustment. to achieve the aim of enriching the debate on business models for sustainability in contingent situations, this paper answers the following research questions: 1. what environmental dynamics, i.e., what relevant market drivers, prompt business model change? 2. what kind of business model changes do they cause? and 3. what kind of dynamic capabilities are needed to manage those changes? building on a contingency framework on business model dynamics provided by saebi (2015), we investigate business model changes for solar pv under two distinct market conditions. this conceptual framework was developed to understand the conditions in the business environment that prompt different types of business model change and the dynamic capabilities journal of business models (2019), vol. 7, no. 1, pp. 13-38 15 that support this business model change (saebi, 2015). we apply the contingency framework as a lens to analyze the business model dynamics of our four business model for sustainability cases as they develop. the paper consists of five additional sections. next, we provide a theoretical background to business models, business models for sustainability, business models and residential solar pv, and a contingency framework on business model dynamics. thereafter, we present the case-study setting, methods applied, followed by the results of the study. we then discuss the implications of our research and end with the contribution to literature, limitations, and avenues for future research. theoretical background the business model concept the business model concept has gained increased attention as a unit of analysis among both academics and practitioners during the last 20 years (for a review, see, e.g., massa et al., 2017; wirtz et al., 2016; zott et al., 2011). scholars from various fields participate in the discourse on the topic, which has led to a heterogeneous understanding of the concept and a realization that terms and definitions are not always consistently applied (massa et al., 2017). however, scholars seem to agree that the business model offers a system-level and holistic approach to how firms do business and that an emphasis on customer value creation is central (zott et al., 2011). a number of studies have especially pointed to the importance of understanding who the customers are and engaging in their needs (badenfuller and haefliger, 2013; magretta, 2002), creating customer surplus (zott and amit, 2010), and delivering customer satisfaction (baden-fuller and haefliger, 2013). according to foss and saebi (2017), there seems to be a convergence toward a unified understanding that the business model involves how a company creates, captures, and delivers value (teece, 2010). moreover, there are four constructs commonly defined as part of the business-model concept, namely, value proposition, business structure, customer interface, and revenue model (c.f. osterwalder et al., 2005; chesbrough & rosenbloom, 2002). in this four-component framework, the value proposition is the value that the firm offers the customer with its products and/or services. a firm’s business structure explains how the firm delivers value to the customer (key resources, activities, and partnerships). the customer interface constitutes communication channels, market segments, and customer relationships, and the revenue model describes the financial set-up, i.e., costs and benefits from the other business model elements and their distribution across business model stakeholders. business models for sustainability a decade ago, stubbs and cocklin (2008) introduced the concept of business models in the sustainability literature. various attempts have been made to define a sustainable business model (c.f. raith and siebold, 2018; schaltegger et al., 2016a; lüdeke-freund, 2013; stubbs and cocklin, 2008), and the “sustainable business model” concept is emerging and evolving (breuer et al., 2018; dentchev et al., 2018; lüdeke-freund and dembek, 2017). one stream of literature stresses the importance of incorporating a triple bottom line approach, including a wide range of stakeholder interests, environment and society (cf. schaltegger et al., 2016b; bocken et al, 2014). boons & lüdeke-freund (2013), on the other hand, suggest that a business model for sustainability can be considered a vehicle to bring sustainable innovations – technological, organizational, or social in character – to the market. building on the four components presented in the business model literature, they extend them to include social and environmental value creation. they propose that the value proposition generates social and/or environmental value in addition to economic value, and that the business structure (in boons and lüdeke-freund, 2013, called the supply chain or business infrastructure) concerns how value is delivered to the customer in a responsible way. the revenue model (in boons and lüdeke-freund, 2013, called the financial model) covers how value – economic, social, and environmental – is captured both within the firm and among its stakeholders, and the customer interface includes how the firm communicates with customers and motivates them to consume in a responsible way. similar to business model literature in general, business models for sustainability are also underpinned by the concept of values, e.g., to support the value proposition to the customer (evans et al., 2017). while the concept of the business model has been specifically journal of business models (2019), vol. 7, no. 1, pp. 13-38 16 focused on the realization of economic value (chesbrough and rosenbloom, 2002), business models for sustainability have looked at the concept of value through other lenses too, e.g., societal and environmental (evans et al., 2017). in this study, we rely on the broad definition of a business model for sustainability provided by boons and lüdeke-freund (2013, p. 10), who argue that the business model can constitute an important link in transforming high-potential sustainable ideas to marketable sustainable innovations, i.e., through business model innovation, companies can commercialize new sustainable technologies. hence, the definition is relevant for the spread of solar pv. furthermore, this four-component framework provides a useful lens to analyze business model component change. business models and residential solar pv during the last decade, the rapid growth of residential solar energy markets in countries and regions such as japan, the netherlands, germany (de), and california (ca) have contributed to a rapid development of pv technology, a globalization of the value chain, and an enormous price reduction for modules, as well as a development of business models for bringing solar pv to the residential market. even though business models have shown the potential to bring pv technology to the market (cf. strupeit and palm, 2016; ahlgren et al., 2015; overholm, 2015), they are continuously subjected to conditional changes in their business environment. for example, the rapidly falling prices of pv systems, policy changes, and hypercompetition, are changes to which the firms have to adapt their business models in order to survive, and for pv to diffuse on the market. various types and characteristics of business models and markets for solar energy deployment have been studied, for example, energy communities (hamwi and lizarralde, 2017), cross-sales offers (strupeit and palm 2016), products service system (pss2) (overholm, 2015), and host-owned offers (strupeit and palm, 2016). in the energy community business model, resources are pooled and shared between the community members, allowing citizens the opportunity to 2 pss = products service system; the firm offers a service instead of a product and transforms the up-front investment into a monthly fee participate according to their financial capacity (hamwi and lizarralde, 2017). in the cross-sales model, the pv system is included in another offer, such as prefabricated homes, which allows companies dedicated to non-pv-related activities to capitalize on existing customer loyalty and relationships, which reduces the cost for customer acquisition (strupeit and palm, 2016). overholm (2015) examined how various alliances for initiating and offering pss in california can contribute to firm performance. in a pss or third part ownership (tpo3) offering, which is an example of service-based business models (kindström, 2010), the firm offers a service instead of a product and transforms the upfront investment of the product into a monthly fee for the service, which also removes hassles with maintenance and other ownership-related issues (strupeit and palm, 2016). another type of non-purchase business model is the power purchase agreement (ppa4), which is an electricity contract between two parties, a seller and a buyer, where the buyer agrees to buy all electricity produced (from the pv system installed on the buyer’s roof) at a predetermined price. in the host-owned business model (strupeit and palm, 2016), sometimes referred to as plug and play (provance et al., 2011) or customer-owned business model (huijben and verbong, 2013), focus is on the traditional method of direct product purchase to turn the consumer into a prosumer (customer and producer at the same time). strupeit and palm (2016) explored a host-owned feedin model in germany and a pss model in california, and they identified a wide range of factors in the specific national and contextual conditions that shape the business model design, such as homeowners’ savings rate, access to capital, how accustomed the customers are to leasing in general, and national policy instruments to build the revenue model. ahlgren et al. (2015) and provance et al. (2011) showed that business model development differs between markets and depends on the local context. even though these studies thoroughly address various types of stakeholder collaborations, alliances, and barriers to overcome renewable energy diffusion, they only provide a snapshot of a 3 tpo = third part ownership; a kind of pss where a third party owns the product or system 4 ppa= power purchase agreement; a kind of tpo, an electricity contact between two parties, a seller and a buyer, where the buyer agrees to buy all electricity produced (from the pv system installed on the buyer’s roof) at a predetermined price journal of business models (2019), vol. 7, no. 1, pp. 13-38 17 specific moment in time and, therefore, offer limited insights on business-model dynamics in the perspective of business environment change. a contingency framework on business model dynamics contingency theorists argue that, since the fit of organizational characteristics to contingencies leads to high performance, organizations seek to attain fit (c.f. donaldson, 2001). in line with this reasoning, organizations are motivated to avoid misfit, which results after contingencies change. hence, an organization becomes shaped by its contingencies. contingency theory contains the environment (burns and stalker, 1961), organizational size (child, 1974), and organizational strategy (chandler, 1962). for example, environmental stability, e.g., the rate and amplitude of change in competition or a technological breakthrough, affects whether the structure of the organization is mechanistic (i.e., hierarchical) or organic (i.e., participatory; burns and stalker, 1961), (pennings, 1992). pugh and hickson (1976) argue that, as a hierarchical approach is efficient for routine operations, a mechanistic structure fits a stable environment, while an organic structure fits an unstable environment as a participatory approach is required for innovation. in an early work by lawrence and lorsch (1969), they suggest that each organizational unit in a firm needs to anticipate the relevant environmental changes of its relevant environmental sector. the emergence of business models has, however, predominantly been viewed from a static perspective (amit and zott, 2011). even though this static view is about to be replaced by a dynamic and transformational take on business models (cf. haas, 2018; doz and kosonen, 2010; sosna et al., 2010; teece, 2010), there is a need to study business models from a more dynamic perspective (teece, 2018; saebi, 2015). to better understand what conditions in a firm’s external environment prompt different types of business model change and the dynamic capabilities that support these changes, saebi (2015) introduced a contingency framework on business model dynamics. this framework builds on a comprehensive literature review and constitutes three parts (see tab. 1.). it uses a business model definition that includes the firm’s configuration of intraand extra-organizational activities and relations geared toward creating, delivering, and capturing value. the first part of the framework, environmental dynamics (venkatraman and prescott, 1990) identifies different types of environmental change that prompt business model change, i.e., opportunities and threats in the firm’s external environment (saebi, 2015). the occurrence of business model change can be attributed to different environmental conditions, e.g., change in competition or a technological breakthrough, meaning that the business model needs to be matched with adjustments to the firm’s business model to purposefully reflect the new circumstances (doz and kosonen, 2010; teece, 2010). regular environmental change refers to stable environments with low-intensity gradual changes (suarez and oliva, 2005), where the pattern of change is highly predictable, the pace of change environmental dynamics regular environmental change environmental competitiveness environmental shift type of business model change business model evolution (bme) business model adaption (bma) business model innovation (bmi) type of dynamic capability evolutionary change capability adaptive change capability innovative change capability underlying capability dimension dynamic consistency customer agility, strategic flexibility, exploitation exploration, business model know-how, dedicated org. units for bmi table 1: contingency framework on business model dynamics (saebi, 2015) journal of business models (2019), vol. 7, no. 1, pp. 13-38 18 is slow, and the amplitude is limited. hence, the need for business model changes is related to incremental adjustments and improvements. environmental competiveness is characterized by periodically changing competitive demands and high-velocity environments in perpetual flux or churn (eisenhardt and tabrizi, 1995). intense competition (matusik and hill, 1998; miller, 1987) is, furthermore, often associated with intensive pressure for higher efficiency and lower prices (pablo et al., 2007; matusik and hill, 1998). this situation is sometimes referred to as hypercompetition (brown and eisenhardt, 1997; eisenhardt and tabrizi, 1995; d’aveni, 1994) or environmental turbulence (easterby-smith et al., 2009). thus, firms need to quickly change their business models to the new market demands (saebi, 2015). environmental shifts can be described as dramatic or discontinuous change to a firm’s environment, e.g., by disruptive technologies (tushman and anderson, 1986), new competitors (simon et al., 2007), or major regulatory or political regime changes (dixon et al., 2013; suarez and oliva, 2005). these shifts appear infrequently and rarely repeat themselves. moreover, they are highly unpredictable and cause a high degree of instability in the environment (dess and beard, 1984). such situations require firms to make changes along multiple dimensions of their business models, often including radical changes in the organization and a shift in a firm’s core values and beliefs, as well as the firm’s strategy, structure, and control systems (agarwal and helfat, 2009). the second part deals with types of business model change, which can be defined as the process by which management actively alters the intraand/or extraorganizational systems of activities and relations of the business model in response to changing environmental conditions (saebi, 2015). the kind of changes caused in the business model are dependent on the pace, frequency, amplitude, predictability, and velocity of disturbance in the external environment (cf. doz and kosonen, 2010; teece, 2010; bourgeois and eisenhardt, 1988). three types of business model change processes are identified in the business model literature: business model evolution (bme) (demil and lecocq, 2010), business model adaption (bma) (teece, 2010; sosna et al., 2010), and business model innovation (bmi) (chesbrough, 2010). evolution refers to the effective implementation and maintenance mode of an existing business model occurring under stable conditions and low-intensity gradual changes (demil and lecocq, 2010). bma refers to the need for continuous change to attain alignment with changing market conditions (sosna et al. 2010; teece, 2010), often associated with intensive pressures for higher efficiency and lower prices (matusik and hill, 1998). bmi is the need for creating disruptive innovation in response to dramatic and discontinuous changes in market conditions (chesbrough, 2010), a so-called environmental shift, which could be brought about by disruptive technologies (tushman and anderson, 1986), new competitors, or major regulatory changes. the third part constitutes dynamic capabilities, which is defined as the “capacity of an organization to purposefully create, extend or modify its resource base” (helfat et al., 2007, p. 4). furthermore, a firm’s capabilities are involved when business model changes are translated into organizational transformation, requiring excellent asset orchestration skills to effectively manage new business structures (tecce, 2018). like dynamic capabilities, a firm’s abilities to change its business model effectively (demil and lecocq, 2010; doz and kosonen, 2010) are underpinned by managerial skills and organizational routines (teece, 2007). while skills are embodied in individuals, routines are found at the organizational level, operating as rules of conduct or best practices for the members of the organization (saebi, 2015). saebi (2015) suggests that firms should, therefore, cultivate preparedness for business model change by developing a business model change capability that enables them to change their business models in a systematic efficient and organized way. evolutionary change capability is centered around the standardization, implementation, and maintenance of the existing business model. doz and kosonen (2010) suggest a dynamic consistency capability embodied in managers’ understanding of what their bm is and how it works, and how to fine-tune and make their bm effective and preserve its efficiency (p. 243). adaptive change capability is related to sensing and quickly responding to changes in customer preferences (day, 1994; jayachandran et al., 2004). these capabilities are manifested in sensing and responding capabilities (teece, 2007), and they relate to a firm’s ability to quickly scan, learn, and interpret market and competitors’ movements, journal of business models (2019), vol. 7, no. 1, pp. 13-38 19 as well as the ability to mobilize the firm’s current resources and processes to respond quickly to these movements, sometimes also referred to as organizational agility or customer agility (cf. haeckel, 1999; zaheer and zaheer, 1997). these types of capabilities are building on search for routines (helfat, 1998) or exploitative learning (march, 1991) and are found both on the organizational level, as well as on the individual level. given that environmental shifts are often brought about by radical changes in the marketplace, business model innovation can enable firms to get ahead of the competition, requiring innovative change capabilities. under such circumstances, exploratory learning processes become central, both on a cognitive (individual) and organizational level. managements’ extensive understanding of the firm’s business model and underlying assumptions, and dedicated organizational units for explorative learning are important factors for innovative change. case study setting an in-depth background to the environmental dynamics of the californian and german solar pv markets is provided in this section, as well as business model characteristics during the stable period before environmental change. a brief background to the four company settings (the names are fictitious) in which we study our business model cases is also presented. market background the californian residential solar pv market after failed efforts to deregulate the californian energy market in the late 1990s, the market is now regulated again, and a few utilities provide energy to residential customers. the pricing is set in negotiation between the utilities and the californian government and follows a tier system, meaning that the price per kwh increases according to the more energy a household consumes. solar energy is seen as the primary opportunity to shift towards renewable energy sources in california, and national incentives, in combination with state subsidies, have created an opportunity for new businesses to enter the solar energy market. national subsidies provide a tax reduction on the installation, and since 1996, net-metering (nem5) allows californian residential customers to consume the same amount of energy they feed into the grid at zero cost (seia). this has created incentives for residential customers to reduce their use of energy provided by utilities, i.e., to reach a lower tier and thereby decrease their electricity bill. due to the monopoly-like situation on the market, utilities are not allowed to enter the californian residential solar energy market. in 2005, solar pv start-ups adopted a business model for leasing that was previously applied on cars and heat pumps, for example (overholm, 2015). the so-called tpo business model turned out to effectively address barriers for residential customers to “go solar” by making it possible to install a pv system without any initial down payment (strupeit and palm, 2016). rather, a third party financed and owned the system, while the customer paid a monthly fee over a 20-year period to cover the costs. based on the four components of the business model presented in this paper, the tpo business model can be described as follows. the value proposition consisted of a turnkey solution with an immediate electricity cost saving, no upfront cost, a predictable electricity cost over a 15to 25-year period, including maintenance and guarantees. the customer interface included door-to-door sales, advertising campaigns, and retail store partnerships. the business structure was built on a partner network of pv panel suppliers, pv system installer and maintenance firms, insurance companies, and financial institutions. the revenue model consisted of periodical payments associated with the tpo fee, covering all costs included and expected interest rates on invested capital. hence, in california, a plethora of sunny days, supportive solar energy policies, statewide carbon reduction targets, and renewable energy goals contributed to long-term favorable market conditions. net-metering and tax reduction incentives in combination with falling technology prices and rising electricity prices (see fig 1) laid the foundation for the introduction of a tpo offer on the californian market. 5 nem = net-metering, which allows customers to consume the same amount of energy they feed into the grid at zero cost journal of business models (2019), vol. 7, no. 1, pp. 13-38 20 company 1 business model case california horizontal tpo california horizontal was established in california in 2007. their mission is to make as many people as possible “go solar” and to create a global network of distributed solar pv through their business model. in california, they primarily focus on a tpo offer. their global network is dependent on partnerships with suppliers, investors, insurance companies, and installers who manage installations and maintenance. california horizontal is a certified b corporation, meaning that they, for example, meet the highest standards of verified social and environmental performance, and they are third-party certified by the nonprofit b-lab (www. bcorporation.net). company 2 – business model case california vertical tpo california vertical is among the biggest solar providers in the us, providing solar energy in a large number of states. with its headquarters in california, the company started operations in 2007 and entered the leasing market in 2008. california vertical focuses on vertical integration and operates sales, system design and system installation, and maintenance themselves. they primarily collaborate with financing partners and insurance companies to be able to provide a tpo offer. moreover, california vertical is a profit-driven company. the german residential solar pv market with the energiewende (energy transition), germany set the target to achieve a share of 60% renewable energy, and consequently, numerous mechanisms and policy instruments were initiated to foster the development of the pv sector. from 2000 to 2011, the german solar market was characterized by high governmental subsidies consisting of high feed-in-tariffs (fits6) and tax credits on installed systems. this paved the way for the domestic pv solar industry to take off and played an important role in stimulating the global pv industry (hansen, 2018). during this era, a rooftop add-on pv system purchased by the property owner dominated the german residential pv market. this so-called host-owned feed-in business model was based on residential customers getting a high return (much higher than the average electricity price) on each kwh of solar energy they fed into the electricity grid. this high rate of return, in combination with the tax credit on installed systems, contributed to short payback times on the investment, despite the rather expensive pv panel systems at the time. the business model was mainly applied by small existing 6 fits = feed-in-tariffs = electric utilities are obliged to purchase electricity generated from a renewable energy source (e.g., pv) on a fixed-period contract and a fixed price.   0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 0 1000 2000 3000 4000 5000 6000 7000 8000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 el ec tr ic it y  pr ic e  (€  c en ts /k w h) a vg . p ri ce  o f p v  s ys te m  (€ /k w p) year avg. price of pv systems electricity price/net metering figure 1: graphical illustration of the development of electricity price, net-metering, and price of pv systems in california. the blue line refers to the average price of pv systems in €/kwp, and the red line refers to the electricity price / net-metering, €/kwh journal of business models (2019), vol. 7, no. 1, pp. 13-38 21 businesses with an already established customer base (e.g., electricians and plumbers). the host-owned feed-in model can be described as follows. the value proposition included a green and low-risk investment, offering residential customers the opportunity to produce their own green energy at a favorable rate of return. the customer interface consisted of both personal and already established relations between installer firms and customers and between customers by word of mouth. the business structure was built on partnerships with pv panel suppliers and wholesalers of pv systems. the revenue model was based on systems sold and installation fees. hence, in germany, generous state incentives paved the way for a business model dependent on high fits and tax credits on installed capacity. these incentives made it lucrative for residential customers to buy a pv system at a rather high price. without these incentives, the pv installers would have to offer pv systems at a lower price in order to have an attractive offer. however, this would not cover their costs and would thereby make their business model obsolete. company 3, business model case german tpo german tpo is a small start-up company established in 2012 with the goal of providing the german market with decentralized energy in a new way. the company is located in northern germany, but aims to serve the whole country through a large network of installers. one of the founders worked in the solar energy industry in california during 2007 and 2008 and was involved in the early development of the tpo offer there. german tpo was one of the first companies to provide a leasing offer on the german market. company 4, business model case german smart grid german smart grid is an established and locally wellknown family-owned architect firm in northern germany. since 1980, they have been selling plots for building family houses and have established a long-term business relationship with the city authorities. in 2013, german smart grid saw an opportunity to diversify their business and contribute to a sustainable society (the disruptive market situation opened an opportunity for the company to do something different and test a new idea). in collaboration with the city authorities, they sell plots for family houses, including a solar panel system, an electrical vehicle, and a community grid for independent energy production and consumption. research method and design in this study, we use a multiple-case-study approach (yin, 2014; eisenhardt, 1989) and a multidisciplinary perspective (cf. bansal and roth, 2000) to retrospectively   0 10 20 30 40 50 60 0 1000 2000 3000 4000 5000 6000 7000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 €  ce nt s/ kw h a vg . p ri ce  o f p v  s ys te m  (€ /k w p) year avg. price of pv systems fit electricity price figure 2: graphical illustration of the development of the fit, electricity price, and the price of pv systems on the german pv market. the blue line refers to the average price of pv systems in €/kwp, the red line refers to reimbursement from the fit, €/kwh, and the grey line refers to the electricity price, €/kwh journal of business models (2019), vol. 7, no. 1, pp. 13-38 22 examine the business model dynamics of four business models in the context of emerging or small firms. the business models were found in three start-ups and one established small firm offering solar pv on two distinct markets undergoing conditional change. given the unstructured and blurry phenomena, a qualitative approach was best suited, since it emphasizes an understanding of the critical elements involved and how they change over time (eisenhardt, 1989). furthermore, a multiple-case design allows replication logic to compare or confirm the emerging insights derived from each case (yin, 2014). research design the aim of this study was to explore multiple business models to understand how they changed over time due to environmental dynamics. in this paper, we see the business model as a means to potentially reduce barriers for adopting sustainable technologies, specifically, in this study, pv technology. we use the business model for sustainability concept provided by boons and lüdeke-freund (2013) as our unit of analysis, a lens of four clearly defined components, through which we investigate changes in our four business model cases. the starting point of the study was to explore business model development on two leading markets for residential solar pv. in germany, the total installed capacity in 2014 exceeded 15.5 gw (iea, 2014) and contributed to a share of solar energy above 5% of national energy production (wirth, 2014). in california, the total installed capacity of pv solar was 6.4 gw (iea-pv, 2014), which corresponded to almost 50% of the us pv market (seia). at the time, many other markets were experiencing a deadlock due to withdrawn subsidies, as a consequence of drastically falling prices on pv systems (e.g., italy, spain, and denmark). although these were initially potential markets to investigate, they were not selected due to the deadlock on the markets. as the united states differs broadly in terms of market regulations and stimulations, california has been treated as a separate market. the pre-study phase (swedberg, 2012) consisted of interviews with selected pv experts, e.g., city planners, consultancies, and other firms offering pv. we also attended an official workshop in california to gain market insights, and met with potential pv customers. in addition, we conducted an extensive desktop research, e.g., pv industry reports and news-letters of various pv companies. during this phase, we concluded that business model development on the two markets was dependent on current market conditions; a contingency perspective was therefore applied. based on the prestudy, we selected two business model cases on each market, which were considered representative (yin, 2009) for each market, i.e., one case equals one business model found in a specific company setting. the two business models in california were found in california horizontal and california vertical, which have been part of the development of the tpo business model founded there. at the time of the study, these companies were also two of the largest companies offering residential solar pv in california, hence, competing on this market. the two business model cases in germany were found in german tpo and german smart grid, which illustrates two innovative business models born out of the disruptive market conditions caused by heavily reduced governmental subsidies on the german solar market. due to limited examples of offers from large incumbents in the early phases of industry transformation toward sustainability (hockerts and wüstenhagen, 2010; schaltegger et al., 2012), we have only chosen to study business models in three emerging firms and one established small firm. data collection between december 2013 and december 2014, we collected both retrospective and real-time data, applying multiple data-collection techniques. in the pre-study phase, we collected a broad range of data, including industry reports, industry news, press releases, and a wide range of company websites. we also conducted a number of semi-structured interviews (kvale, 1996), following the business model theme (60 – 90 minutes each) with pv market experts on the german and californian market to access a better insight to the current market dynamics. finally, we reviewed the literature on business models for solar pv (see table 2 for an overview of data collection and analysis in the pre-study and casestudy phase), which, at the time, was rather scarce. the case-study phase partly relies on data collected in the pre-study phase (e.g., industry reports and statistics). in addition, more in-depth desktop research was carried out for each case company, and semi-structured journal of business models (2019), vol. 7, no. 1, pp. 13-38 23 interviews with top managers or founders were conducted (see table 2). the interview guideline (see appendix 1) was based on the four components of the business model framework that we applied, as well as the relation among environmental dynamics, business model change, and firm capabilities. each interview lasted 60 to 120 minutes, and all interviews except one were tape-recorded. the two researchers took on different roles during the interviews; one was in charge of the interview, and the other was taking notes and listening on several levels, i.e., observing nonverbal communication, like body language (yin, 2011). data analysis the data collected in the pre-study phase was structured and analyzed under a number of categories, such as national subsidy schemes, energy market regulations, and types of actors on the market. numerical data was compiled in excel, and qualitative market information was summarized in a write-up of each market. to structure the analysis of the business models of the four case companies and their interplay with the business environment, data from the case-study phase was mapped out in the business-model construct, presented by boons and lüdeke-freund (2013), and together with the data from the pre-study, analyzed according to the contingency framework provided by saebi (2015). as a first step, a within-case analysis for each case was conducted (eisenhardt, 1989; yin, 2009). the two authors independently followed a summary-aided approach analysis, including field notes, write-ups, and coding (miles and huberman, 1984; miles et al, 2014). in the write-ups, we made extensive use of citations from the interviews, as well as notions of body language and feelings expressed by the interviewees, which allowed us to fine-tune our understanding of the cases. data collection data analysis pre-study phase: market background • industry reports (e.g., renewable energy capacity statistics, 2015 (irena), iea pvps reports: t1-24:2014, t1-27:2015, t1-29:2016, global status report (ren 21), rethinking energy, 2014 (irena), recent fact about photovoltaics in germany (wirth, 2014) • desktop research of actors on the solar energy market on the german and californian market, e.g., website of pv firms, and in pv green tech industry news such as cleantechnica, greentechmedia, and eurostat newsrelease • 6 expert interviews: 1 solar consultant (ger) 1 utility manager (ger) 3 utility managers (ca) 1 government representative (ca) • academic literature on business models for solar pv. • attended a solar pv workshop for prospective customers (ca) • numerical data compiled in excel. • qualitative data summarized in market write-ups. • data analyzed according to predefined categories: background information (e.g., population), energy market, regulations, solar pv actors, type of solar pv offers, installed capacity, pv subsidies and incentives, pv system prices, electricity prices, etc. case study phase: conditional change • desktop research on case companies (e.g., press releases, websites, media) • industry reports (see above) • 7 qualitative interviews at case companies: 2 top managers (case 1) 1 top manager (case 2) 2 founders (case 3) 2 with one founder (case 4) • 1 solar pv customer on each market • building on business model components and contingency framework. • summary-aided analysis by each research individually • analysis meeting to compare independent analysis and reach consensus. • cross-case analysis according to standard techniques (miles et al., 2014) table 2: overview of data collection and analysis journal of business models (2019), vol. 7, no. 1, pp. 13-38 24 the coding was related to the four business-model components and the three parts of the contingency framework (environmental dynamics, business model change, and dynamic capabilities). it was considered especially important to capture the changes made to the business models. during the analysis meeting (miles et al., 2014), the two researchers compared and discussed their analysis until a common understanding was reached. in the second step of the case study analysis, we conducted a cross-case analysis (eisenhardt, 1989) to compare the finding of the cases within each market, followed by comparisons of the cases between the two markets. this was done using standard techniques, e.g., matrix analysis (miles and huberman, 2014), to analyze linkages between cases (miles et al., 2014). in the results, both similarities and differences within and between each market are presented. results in this section, we present our business model for sustainability case findings, using three parts of the contingency framework (saebi, 2015) as a lens to identify: environmental dynamics, different type business model changes, including changes in the business model components, and dynamic capabilities supporting these changes. we use examples and citations from the cases to illustrate the business-model adjustments made to the new market circumstances to flesh out our arguments rather than to present exact theoretical concepts. case study findings applying the contingency framework, overall findings from the case studies are summarized in table 3. zooming in on the four business model components, more specific findings are summarized in table 4. market california germany environmental business dynamics environmental competiveness, low amplitude, and high pace, generating a hypercompetitive marketplace environmental shift, high amplitude, and slow pace, creating a disruptive market condition driving forces for business model change multiple pressures, e.g., long-term stable policy, increasing utility electricity prices, falling prices on pv systems, customer isomorphism, low entry barriers for new firms and set-up of the tpo business model dramatic policy change, heavily reduced fits business model case california horizontal tpo california vertical tpo german tpo german smart grid type of business model change business model adaption business model adaption business model innovation business model innovation type of dynamic capability adaptive change capability adaptive change capability innovative change capability innovative change capability underlying capability dimension strategic understanding to rapidly adjust and implement improvements, efficiency in organizational routines: standardization, flexibility, customer sensitivity, culture / employee commitment, strategic partnership for lead generation strategic understanding to rapidly adjust and implement improvements, standardization, flexibility, efficiency in organizational routines, customer sensitivity, and common organizational culture business model knowhow, explorative learning, strategic partnerships with investors and installers, customer sensitivity, and agility explorative learning, strategic partnership with city authority, customer sensitivity, and agility table 3: summary of overall findings from the case studies journal of business models (2019), vol. 7, no. 1, pp. 13-38 25 market california germany business model case california horizontal tpo california vertical tpo german tpo german smart grid environmental dynamics stable customer base and long-term policies stable customer base and longterm policies policy shift, new customer preferences, e.g., to go off-grid policy shift, new customer preferences, e.g., to go off-grid value proposition change evolution: well-known and successful, fine-tuning the offer evolution: well-known and successful, fine-tuning the offer innovation: simplified turn-key solution, leasing set-up,100% green innovation: turn-key solution, cross sales, sharing, 100% green underlying capabilities dynamic consistency, incremental adjustments dynamic consistency incremental adjustments business model know-how, experimentation, explorative learning experimentation, explorative learning environmental dynamics stable financial institution stable financial institution shift to new financial bodies shift to new financial bodies revenue model change evolution well-known and successful, fine-tuning billing evolution well-known and successful, fine-tuning billing innovation: new sources of revenues built on portfolios of long-term contracts innovation: new sources of revenues based on a sharing community and units sold underlying capabilities dynamic consistency incremental adjustments dynamic consistency incremental adjustments business model know-how, experimenting, explorative learning, strategic partnerships experimenting and explorative learning environmental dynamics intense competition and rapid ict development intense competition and rapid ict development stable channels of suppliers and installers stable channels of suppliers and installers business structure change adaption and innovation: standardized sales process, dedicated functional teams, ict-based quotes and design, customer qualification scheme adaption and innovation: standardized sales process, dedicated functional teams, ict based quotes and design, customer qualification scheme evolution: established a network of installers doing sales and installations evolution: collaboration with local city authority and friends who can design and purchase systems underlying capabilities improvements, efficiency, and flexibility in routines, sensing and responding to new technology improvements, efficiency and flexibility in routines, sensing and responding to new technology strategic partnerships with well-known network of partners strategic partnerships with well-known network of partners environmental dynamics intangible customer desires, rapid ict development intangible customer desires, rapid ict development stable channels of suppliers and installers stable channels of suppliers and installers customer interface change adaption and innovation: single point of contact, extremely positive experience, lead generation through network, remote contact using ict adaption and innovation: single point of contact, partners, remote contact using ict evolution: via established and well-known installers evolution: via established channels for sale of land underlying capabilities customer sensitivity, organizational culture, employee commitment, strategic partnership, sensing and responding to new technology customer sensitivity, sensing and responding to new technology strategic partnerships with installers, education, customer, agility, and sensitivity strategic partnership with city authority, education, customer agility, and sensitivity table 4: summary of detailed findings from the case studies journal of business models (2019), vol. 7, no. 1, pp. 13-38 26 the californian market a hypercompetitive market for solar pv since its introduction in 2005, tpo has become the dominant offer on the californian market (overholm, 2015), leading to the solar energy market growing exponentially and converging into a hypercompetitive situation around 2013-2014, when leasing offers peaked at above 70% of the residential market. “…an unbelievably dynamic industry – things change very fast”, a manager at california horizontal numerous factors created multiple pressures on the solar companies, contributing to a highly competitive situation associated with intense pressure for increased efficiency and lower prices: a “race to the bottom” among solar companies. first, the long-term and supportive policies led to a stable market situation. in 2014, however, the nem policy was proposed to end in 2016, leading to an increased interest among solar firms to close as many contracts as possible under prevailing conditions. second, the residential electricity prices of utilities have been increasing over the last decade, a motivation for customers to turn to cheaper sources of energy. third, with falling prices on pv systems, the margins on components decreased, leading to a need for increasing volumes to stay economically viable. fourth, isomorphism, a mimetic process that encourage imitation (dimaggio and powell, 1983), was observed to play an important role among customers wanting to go solar, meaning that customers, just like everyone else down the street, wanted to save money on their energy bill. fifth, the solar firms pioneering the tpo model had already established trust and legitimacy among financial institutions, which together with all of the other factors, created low entry barriers for new solar firms to enter the market. finally, the actual set-up of the tpo business model in itself affected the competitive market situation as well. as the business model is built on scale, a certain number of contracts are required to establish and secure a portfolio. closing a number of portfolios is essential for economic viability, increasing the competition even further. all together, these multiple market demands created intense pressure on the firms to quickly adapt their business models to new circumstances. keeping a well-known and successful offer during this period, purchase offers were beginning to increase; the main part of the offers (more than 70%) were, therefore, still associated with the successful value proposition of the tpo, including immediate electricity cost savings on the electricity bill, no upfront costs, no administrative hassle, a predictable longterm electricity price (20-year contract), and no technology risk. “… (more than 70% of) the offers were still associated with the successful value proposition of immediate electricity cost savings…”, a manager at california horizontal even though different variants of billing were elaborated, e.g., power purchase agreement (ppa), no major changes in the offer in any of the firms were observed, which in these cases that the revenue model was also kept as before. standardization of the sales process and trusted advisor both companies were experiencing enormous pressure from competitors, and therefore, were constantly introducing new efficiency measures in the customer interface and the business structure to keep costs for customer acquisition down. for example, in the customer interface, there was an emphasis to establish a strong customer relationship and build trust, “holding the hand of the customer” throughout the process, as well as an emphasis on the strategic importance of being the single point of contact for the customer. in california horizontal, they wanted to make the journey “going solar” more personal and an unduly positive experience. one of the reasons for doing that was to increase the possibility to achieve more referrals of a positive encounter with the company and, thereby, generate new leads (route of means to become contracts). “…the customer experience we use is highly scripted – we want people to get excited about it (solar) right away…”, a manager at california horizontal the companies also developed dedicated sales teams and a highly detailed, ict-based, and standardized sales process with customer qualification schemes. to eliminate the time and cost of home visits, solar journal of business models (2019), vol. 7, no. 1, pp. 13-38 27 horizontal was first to introduce and develop proprietary ict-based sales tools. these remote design tools enabled the company to offer a quote and a pv system without visiting the customer’s home, but it also meant that they had to earn the customer’s trust over the phone. these ict tools changed the customer interface completely and reduced the cost of customer acquisition, which has now become more frequent among all actors on the californian residential pv market. in terms of business structure, in both firms, we observed a bundling of offerings, indicating simplicity of information and transactions. even though customers were offered a variety of financial solutions, all offers had a specific and predefined set-up, making the sales process and handling of contracts more standardized, efficient, and scalable. various ict tools were also used to design and quote pv systems. in addition, the firms also used early customer qualification schemes to make sure to spend as little time on non-qualifying customers as possible. to keep costs for lead generation down (in order to receive the attention of potential customers), both firms used various types of partners e.g., local do-it-yourself stores, however california horizontal had established a network of partners. rapid adjustments and implementing improvements due to a need to quickly align resources to stay competitive, various types of dynamic capabilities were observed. first, the managers of both firms quickly scanned the market and sensed multiple external triggers (managerial skills), leading to a hypercompetitive situation and realized that they had to rapidly adjust and implement improvements to stay competitive. rapid adjustments in the customer interface and business structure were made, while not making any radical changes in the successful value proposition or revenue model. to quickly reduce transaction costs in the business structure, agility in organizational routines was observed. “how do we get those transaction costs out of the model?”, a manager at california horizontal with large sales forces organized in specialized units and pushing out numerous offers according to preset arrangements, early customer qualification, standardization, and professionalization of the sales process was evident. these factors made the sales organization both functional and more flexible, which allowed them quickly to reposition various groups in the sales team when needed. in addition, the managers at california horizontal made sure to control bottleneck assets critical to value capture (teece, 2018), i.e., controlling all contracts with the customers, while externalizing nonspecialized value chain activities, like outsourcing lead generation and installation. in addition, managers at both firms had the ability to innovate both the customer interface and the business structure. the managers sensed the rapid development of ict and managed to develop and implement routines to make the customer interface (remote customer contact) and the business structure (access data to design and monitor pv systems) remote, using various ict tools. “…..we want to keep control of a few partners”, a manager at california vertical at california vertical, on the other hand, they wanted to control the whole value chain and focused on integrating the business structure to keep control of a few partners. at both firms, however, the sales team exhibited extreme responsiveness to customers’ experience and intangible needs. “… to make sure that our customers love the experience (of going solar) so that they refer their friends and family”, a manager at california horizontal in california horizontal, we observed that managers also had laid the foundation, managerial skills, for a strong common culture (employee commitment) throughout the sales process and the whole company, for continuous understanding of the customers’ needs in the customer interface, articulated in the insane customer experience. all together, these dynamic capabilities allowed for the companies to close deals with a higher turnover rate, simplify the handling of customer contracts, and enable scalability, thereby responding to the market triggers. the german market a disruptive solar pv market situation – a change of the game in 2011, drastic amendments in policy instruments were made, i.e., fits were heavily reduced to fit current solar-energy industry conditions. because of this severe situation, the game changed radically, making current journal of business models (2019), vol. 7, no. 1, pp. 13-38 28 “host-owned” business models obsolete and creating a disruptive situation on the solar market. subsequently, this led to a shakeout of numerous market players. many companies went out of business, and those left have reached a second and more mature phase; some companies were born out of this disruptive situation. this phase is characterized by modest fits, insecure regulation, and a high degree of market instability, prompting distrust in policymakers and utilities and a willingness among customers to go off-grid. in this situation, continuous adjustment of existing business models was no longer sufficient to fit the environmental shift, and there was a need for developing new and more innovative ways of doing business, which yielded various innovative business model outcomes. experimenting with new simplified turn-key solutions born out of environmental shift, both companies elaborated with, to the market, new offers to fit the new market situation. this indicated an ambition to create new value propositions compared to the earlier product purchase offers. following in the footsteps of californian solar companies, german tpo experimented with new sources of revenues, e.g., leasing and crowd-funding, and new types of pv offers, like turnkey leasing solutions, including a battery for local energy storage. even though the business model was not new per se, it was new to the german market. with an ambition to establish a crosssale offer and turnkey solution, german smart grid experimented with a simplified package, i.e., selling land, including a roof-mounted pv system and an electric vehicle, at a fixed price. “…it’s a sharing system more or less…independent from the grid”, a manager at german smart grid the idea was based on a smart-grid community of, in this case, 30 households, each with a pv system, a battery for storage, and an electrical vehicle; all were connected with each other and independent from the regional grid, i.e., a community self-sufficient on renewable energy, creating a sharing community and their own energy market. as a response to the customers’ distrust in large utilities and quest for environmentally conscious electricity solutions, both firms built their value propositions around being 100% green and independent from utilities. to reduce complexity in the new energy landscape, the companies stressed that they only wanted a few simplified offers for the customers. “…a customer benefit is: not dealing with details around it (the solar offer)...”, a manager at german tpo utilizing established and well-known networks in both cases, the companies utilized already established networks to reach customers and deliver customer value. at the same time and to this end, both companies needed to invest time and money in educating all partners involved to make them understand the new value proposition. “… most of them (installers/partners) we know for quite a while when we were making business with them in other roles…”, a manager at german tpo german tpo, being a small and young company with limited resources, was dependent on others. for example, since the business model is based on heavy assets, a critical aspect is to secure capital for the solar systems, but they are also dependent on installers to sell and install the systems. therefore, german tpo utilized and trained an already existing network of installers, who had an established trust on the market, to reach prospective customers and install systems. these installer networks had been established during the high fit era (2000-2011), and were now stranded after the shakeout of the market. german tpo also started to establish partnerships with green and local utilities to expand their customer base. “…the city is our main partner in the project…” , a manager at german smart grid being a well-established architect firm on the market, german smart grid could utilize already existing contacts. for example, a long-term business relation with the local city authority helped them in the process of buying land in this district. since projects like this are in line with the local authority’s ambition to become co 2 neutral, thus facilitating for german smart grid to gain access to land. furthermore, they could reach prospective customers through their already established website and via reference customers (word-of-mouth). journal of business models (2019), vol. 7, no. 1, pp. 13-38 29 however, as a small family-owned business with no previous pv experience, they were also dependent on external expertise. for example, a friend who was a consultant in the pv sector was helping them to design and procure the pv systems. sensing the conditions in the new market situation as the business models in both cases were born out of the disruptive pv market situation, the managers at both firms were able to sense the conditions in the new market situation and develop offers and collaborations new to the german residential pv market. our data indicated that the managers exhibited an ability to develop an understanding for new types of customer needs, like customers wanting to become independent from the grid, utility aversion, and the importance of being green, upon which they built new types of pv offers (managerial skills). even though the offers were completely different, the firms needed to educate the customer about the new offers, and therefore, develop a customer sensitivity in the customer interface. both firms also developed new types of collaborations, e.g., with investors and municipalities, which had not existed on the market before. with good knowledge about business models and a systematic business model development approach, the managers at german tpo were able to organize themselves for explorative learning from other markets, partners, and competitors (managerial skills and organizational learning). they also realized that they needed to obtain funding for their heavy asset business model, and they experimented with various ways to access financing and secure capital. for example, they established new types of collaborations (e.g., with investors and crowd-funding) and new ways of improving the revenue model by testing different time lengths of the leasing contract. furthermore, the managers recognized (managerial skills) that they were in need of an ict sales toolkit to make the sales process more coherent and efficient for future competition, thus preparing for exploitative activities. they were for example trying to reduce complexity by simplifying offers for customers and using a network of installers for distribution of tasks (organizational routines). “…we also learn from the project…. we are not in the electricity business…”, manager at german smart grid by collaborating with installers, the solar companies gained resources to do sales and perform installations, but they also acquired new competences, like the technical aspect of installing solar panels. german smart grid, on the other hand, exhibited true explorative activities. even though they lacked business model know-how and pv experience, and the business model components seemed loosely coupled, they knew how to establish a good relationship with the city authority to obtain access to land (managerial skills), which also became a competitive advantage for them. the fact that they started with a full-scale project of 30 households (and planned for another 800 during the coming five years) without previous pv experience indicated that they were brave and not afraid to test new concepts. even though we did not observe any (organizational) routines for learning from experimentation and failures, managers at german smart grid were aware that they needed to learn and reflected on improvement in the set-up of their projects. discussion our analysis reveals that, depending on the environmental dynamics, adjustments to the business model need to be performed, and related dynamic capabilities to support these changes are needed. these findings provide support for the overall approach of the contingency framework provided by saebi (2015). our study, however, also depicts a more detailed picture of the components in the business model for sustainability (boon and lüdeke-freund, 2013). zooming in on the bm components, we observe that each component does not necessarily face the same type of environmental dynamics. this implies that one bm component can face a stable environment, while another component, at the same time, might face a turbulent and/or competitive environment. even though the contingency framework (saebi, 2015) suggests that different types of environmental dynamics affect business model change, our findings clearly indicate that the business models for sustainability and its components can face not one, but multiple environments at the same time. in california, for example, both the value proposition and the revenue model components were facing a stable environment of customers wanting to save money on going solar, financial institutions wanting to invest journal of business models (2019), vol. 7, no. 1, pp. 13-38 30 in the tpo contracts and a stable regulatory environment; hence, no major changes in the value proposition and the revenue model were observed, suggesting bm component evolution. the business structure and customer interface were facing a completely different reality; theirs was an intense race among competitors, leading to small changes being made quickly to improve customer acquisition and efficiency, indicating bm component adaption. at the same time, the rapid development of ict was bringing new ideas to remotely establish contact with prospective customers, leading to innovation in the customer interface. these findings imply that various environments can trigger several types of changes, even within the same business model component. in the altogether different situation on the german solar market, similar results were observed in the german cases. the governmental decision to dramatically reduce policy-supporting schemes led to an environmental shift (disruptive market situation), triggering radical adjustments to the value proposition and the revenue model, indicating bm component innovation. the business structure and the customer interface were, on the other hand, facing well-known and established channels of suppliers and partners, leading to small adjustments in the business model component, indicating bm component evolution. hence, to attain business model environmental fit, each component needs to be considered with the relevant environmental dynamics it is facing. even though it was in another context, transforming organizations, gauthier and gilomen (2016) observed the benefits of considering the role played by business model components. moreover, our analysis reveals that, no matter the market situations, the business models are geared toward a greater focus on understanding customer needs. however, this does not necessarily mean understanding customer preferences (what customers want) to be expressed in the value proposition, as in the contingency framework (saebi, 2015). we rather observe understanding customer needs in the customer interface as a responsive action toward a more personal customer contact, indicating agility and sensitivity in the customer interface and the inclusion of intangible values in the customer experience. this sensitivity is, in all cases, expressed as an understanding of how customers perceive and understand a new offer, or the customer experience of going solar. at california horizontal, the managers established a common understanding, creating an employee commitment embedded in the culture of the firm, for providing tentative customers an unduly positive experience of going solar. this situation can also be seen as a process to build trust and to improve customer acquisition and confidence in the companies, as previously observed by kindström (2010) in studies of service-based business models. in the german cases, though, understanding customers’ needs in the customer interface was equally important, although it was expressed in different ways. while the companies experimented with new offers and new sources of revenues, they simultaneously had to educate all stakeholders, e.g., prospective customers, partners, and investors, to make them understand what the new value proposition and revenue model was all about. the importance of educating customers during the introduction of the tpo business model in california has been observed by overholm (2015). contributions to the literature extending the conceptual framework lens not only do our findings corroborate with the conceptual idea behind recent research, suggesting a contingency framework on business model dynamics (saebi, 2015), we also go further to show that, to successfully change a business model in accordance with its environmental dynamics, the framework can be extended in several ways. by adding a four-component business-model for sustainability framework (boons and lüdeke-freund, 2013) as a lens to analyze the business model dynamics, more detailed information about the role of each business model component is uncovered. based on the findings of this study, we suggest that the contingency framework (saebi, 2015) would be enhanced by including a conceptual business model framework, such as the four-component framework (boons and lüdeke-freund, 2013), and a set of multiple environments facing the bm components. building on the work of lawrence and lorsch (1969), who propose that different organizational units face multiple environments, we suggest that the bm components face the following environments: customers, competitors, partners, science and technology development, suppliers, financial institutions, and regulatory agencies. as these findings are related to the spread of sustainable technologies, they primarily contribute to business journal of business models (2019), vol. 7, no. 1, pp. 13-38 31 models for sustainability literature. similar ideas could, however, be true for conventional business modeling processes as well. furthermore, we identified that customer values need not only be addressed explicitly in the value proposition, but also more implicitly in the customer interface, for example, by capturing intangible values of customer experience to obtain acceptance for sustainable technologies on a market. this situation implies developing new capabilities in order to create value for the customer, suggesting customer sensitivity. customer sensitivity can be seen as a dynamic capability hard to copy, bringing an opportunity for competitive advantage, which is especially important for introduction or diffusion of sustainable. our findings are highly relevant for understanding business models for sustainability changes in dynamic business environments and, thereby, the spread of and scale up of sustainable technologies. as sustainable development is characterized by adaptive transformation (roome and louche, 2016), bringing these types of considerations into the business model for sustainability literature would enrich our understanding and acceptance of spreading and scaling up sustainable technologies in contingent environments. limitations and future research the findings in this study are based on an in-depth examination of a limited number of cases in particular settings from two markets. even though this research design allows us to compare the cases, its findings are contextualized. other market development conditions might, of course, differ from those studied, especially in developing countries. we therefore encourage additional case studies that could add data from other markets under conditional change to support and be compared with the findings of this study. we also suggest further in-depth studies of specific processes of how these business models develop over time, and what effects various environments have on the decisions taken by managers as solar markets evolve. journal of business models (2019), vol. 7, no. 1, pp. 13-38 32 references ahlgren, k., wadin, j.l. & bengtsson, l. (2015), characteristics of customer-side business models – the case of solar energy deployment, academy of management, proceedings 2015:1 14218. agarwal, r. & helfat, c. e. (2009), strategic renewal of organizations, organization science, vol. 20, no. 2, pp. 281-293. baden-fuller, c & haefliger, s. (2013), business models and technological innovation, long range planning, vol. 46, no. 6, pp. 419-426. bansal, p. & roth, k. (2000), why companies go green: a model of ecological responsiveness, academy of management journal, vol. 48, no. 4, pp. 717-786. bocken n.m.p., short s.w., rana p. & evans s. (2014), a literature practice review to develop sustainable business model archetypes, journal of cleaner production, vol. 65, pp. 42-56. boons, f. & lüdeke-freund, f. (2013), business models for sustainable innovation: state-of-the-art and steps towards a research agenda, journal of cleaner production, vol. 45, pp. 9-19. bourgeois, l. j. & eisenhardt, k. m. (1998), strategic decision process in high velocity environments: four cases in the microcomputer industry, management science, vol. 34, no. 7, pp. 816-835. breuer, h., fichter, k., lüdeke-freund, f. & tiemann, i. (2018), sustainability-oriented business model development: principles, criteria, and tools, international journal of entrepreneurial venturing, vol. 10, no. 2, pp. 256-286. brown, s. l. & eisenhardt, k. m. (1997), the art of continuous change: linking complexity theory and time-paced evolution in relentlessly shifting organizations, administrative science quarterly, vol. 42, no. 1, pp. 1-34. burns, l. b. & stalker g. m. (1961), the management of innovation, london, tavistock. chandler, a. d. (1962), strategy and structure: chapters in the history of the industrial enterprise, cambridge, mit press. chesbrough, h. & rosenbloom, r. s. (2002), the role of the business model in capturing value from innovation: evidence from the xerox corporation’s technology spin-off companies. industrial and corporate change, vol. 11, no. 3, pp. 529-555. chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning, vol. 43, pp. 354-363. child, j. (1974), managerial and organizational factors associated with company performance, part 2: a contingency analysis, journal of management studies, vol. 11, no. 3, pp.12-27. d’aveni, r. a. (1994), hypercompetition: managing dynamics of strategic maneuvering, free press nueva york, ny, eeuu. day, g. s. (1994), the capabilities of market-driven organizations, the journal of marketing, vol. 58, no. 4, pp. 37-52. journal of business models (2019), vol. 7, no. 1, pp. 13-38 33 demil, b. & lecoq, x. (2010), business model evolution: in search of dynamic consistency. long range planning, vol. 43, pp. 227-246. dentchev, n., rauter, r., jóhannsdóttir, l., snihur, y., rosano, m., baumgartner, r., & jonker, j. 2018, embracing the variety of sustainable business models: a prolific field of research and a future research agenda. journal of cleaner production, vol. 194, pp. 695–703. dess, g. g. & beard, d. w. (1984), dimensions of organizational task environments, administrative science quarterly, vol. 29, no. 1, pp. 52-73. dixon, s., meyer, k. & day, m. (2013), building dynamic capabilities of adaption and innovation: a study of microfoundations in a transition economy, long range planning, vol. 47, no. 4, pp. 186-205. donaldson, l. (2001), the contingency theory of organizations, sage publications, thousand oaks. doz, y.l. & kosonen, m. (2010), embedding strategic agility: a leadership agenda for accelerating business model renewal. long range planning, vol. 43, no. 2, pp. 370-382. eisenhardt, k.m. (1989), building theories from case study research, academy of management review, vol. 14, pp. 532–550. eisenhardt, k.m. & tabrizi, b. n. (1995), accelerating adaptive processes: product innovation in the global computer industry. administrative science quarterly, vol. 40, no. 1, pp. 84-110. easterby-smith, m., lyles, m. a. & peteraf, m. a. (2009), dynamic capabilities: current debates and future directions, british journal of management, vol. 20, no.1, pp.1-8. epia (2014), global market outlook for photovoltaics 2014-2018, european photovoltaics industry association, brussels. evans, s., vladimirova, d., holgado, m., van fossen, k., yang, m., silva, e.a. & barlow, c.y. (2017), business model innovation for sustainability: towards a unified perspective for creation of sustainable business models, business strategy and the environment, vol. 26, no.5, pp. 597-608. foss n. & saebi t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management, vol. 43, no.1, pp 200-227. haas y. (2018), a qualitative approach to business model dynamics, journal of business models, vol. 6, no. 2, pp 37-43 haeckel s. h. (1999), adaptive enterprise: creating and leading sense and respond organizations, harvard business press, usa. hamwi, m. & lizarralde, i. (2017), “a review of business models towards service-oriented electricity systems”, in procedia cirp 64, circular perspectives on pss, 19-21st june, 2017, copenhagen, denmark, elsevier, pp. 109-114. hansen e. h., lüdeke-freund, f., quan, x. i. & west, j. (2018), cross-national complementarity of technology push, demand pull, and manufacturing push policies: the case of photovoltaics, ieee transactions on engineering management, vol. 65, no. 4., pp. 1-17 journal of business models (2019), vol. 7, no. 1, pp. 13-38 34 helfat, c. e, finkelstein, s., mitchell, w., peteraf, m., singh, h. t., teece d. j. & winter s. g. (2007), dynamic capabilities, understanding strategic change in organizations, wiley, usa. hockerts, k. & wüstenhagen, r. (2010), greening goliaths versus emerging davids — theorizing about the role of incumbents and new entrants in sustainable entrepreneurship, journal of business venturing, vol. 25, no. 5, pp. 481-492. huijben, j. & verbong, g.p. j. (2013), breakthrough without subsidies? pv business model experiments in the netherlands, energy policy, vol. 56, 362-370. iea-pvps t1-24: 2014, snapshot of global pv 1992-2013, international energy agency report, france. iea-pvps t1-27:2015, trends 2015 in pv applications, executive summary, international energy agency report, france. iea-pvps t1-29:2016, a snapshot of global pv markets, international energy agency report, france. ipcc, 2014, summary for policymakers, in: climate change 2014, mitigation of climate change. contributions of working group iii to the fifth assessment report of the intergovernmental panel on climate change [o. edenhofer, r. pichs-madruga, y. sokona, e.. farahani, s. kadner, k. seyboth, a. adler, i. baum, s. brunner, p. eickemeier, b. kriemann, j. savolainen, s. schlömer, c. von stechow, t. zwickel and j.c minx (eds.)], cambridge university press, cambridge, united kingdom and new york, ny, usa. irena, 2014, rethinking energy, international renewable energy agency. irena, 2015, renewable energy capacity statistics, international renewable energy agency jayachandran, s., hewett, k. & kaufman, p. (2004), customer response capability in a sense-and-respond era: the role of customer knowledge process, journal of the academy of marketing science, vol. 32, no. 3, pp. 219-233. johnson, m. w., christensen, c. m. & kagermann, h. (2008), reinventing your business model. harvard business review, vol. 86, no. 12, pp. 50–59. karakaya, e., & sriwannawit p. (2015), barriers to the adoption of photovoltaic systems: the state of the art, renewable and sustainable energy reviews vol. 49, pp. 60-66. kindström, d. (2010), towards a service-based business model – key aspects for future competitive advantage, european management journal, vol. 28, no. 6, pp. 479-490. kvale, s. (1996), interviews: an introduction to qualitative research interviewing, sage publications, london. lawrence, p. r., & lorsch, j. w. (1969), organization – environment interface, in lawrence and lorsch, developing organizations: diagnosis and action, 1969, reading mass., addison-wesley, pp. 23-30. lovins, a. b., lovins, h. & hawken, p. (1999), a road map to natural capitalism, harvard business review, vol. 77, no. 3, pp. 145-158. lüdeke-freund, f. & dembek, k. (2017), sustainable business model research and practice: emerging field or passing fancy?, journal of cleaner production, vol. 168, pp. 1668–1678. journal of business models (2019), vol. 7, no. 1, pp. 13-38 35 magretta, j. (2002), why business models matter, harvard business review, vol. 80, no. 5, pp. 86-92. march, j. g. (1991), exploration and exploitation in organizational learning, organization science, vol. 2, no. 1, pp. 71-87. massa, l. & tucci, c. l. (2013), business model innovation. in m. dodgson, gann d.m., n. phillips (eds.). the oxford handbook of innovation, oxford: oxford university press, pp. 420-441. massa l., tucci c., & afuah, a. (2017), a critical assessment of business model research. academy of management annals, vol. 11, no. 1, pp. 73-104. matusik, s. f. & hill, c. w. l. (1998), the utilization of contingent work: knowledge creation and competitive advantage. academy of management review, vol. 23, no. 4, pp. 680-697. miles, m. b. & huberman, a. m. (1994), qualitative data analysis: an expanded sourcebook (2nd edition), sage publications, thousand oaks. miles, m. b., huberman, a. m., and saldaña, j. 2014, qualitative data analysis: a methods sourcebook (3rd ed.), sage publications, thousand oaks. miller, d. (1987), the structural and environmental correlates of business strategy, strategic management journal, vol. 8, no. 1, pp. 55-76. osterwalder, a., pigneur, y. & tucci, c. l. (2005), clarifying business models: origins, present and future of the concept, communications of the association of information science, vol. 16, pp. 1-25. overholm, h. (2015), alliance formation by intermediary ventures in the solar service industry: implications for product-service systems research, journal of cleaner production, vol. 140, pp. 288-298. pablo, a. l., reay, t., dewald, j. r. & casebeer, a. l. (2007), identifying, enabling and managing dynamic capabilities in the public sector, journal of managements studies, vol. 44, no. 5, pp. 687-708. pennings, j. m. (1992), structural contingency theory: a reappraisal, in staw b. m. & cummings l.l (eds.), research in organizational behavior, vol. 14, pp. 267-309, greenwich, jai press. provance, m., donnelly, r.g. & carayannis, e.g. (2011), institutional influences on business model choice by new ventures in the micro-generated energy industry. energy policy, vol. 39, no. 9, pp. 5630-5637. pugh, d. s. & hickson, d. j. (1976), organizational structure in its context: the aston programme i, farnborough, hants, uk: saxon house. raith, m. g. & siebold, n. (2018), building business models around sustainable development goals, journal of business models, vol. 6, no. 2, pp. 71-77 ren 21 (2013), global status report, renewables 2013. roome n. & louche c. (2016), journeying towards business models for sustainability, organization & environment, vol. 29, no. 1, pp.11-35. journal of business models (2019), vol. 7, no. 1, pp. 13-38 36 saebi, t. (2015), evolution, adaption, or innovation? a contingency framework on business model dynamics, in j. foss and t saebi (eds.) business model innovation – the organizational dimension, pp. 145-168, oxford university press. schaltegger s., lüdeke-freund, f. & hansen, e. g. (2012), business cases for sustainability: the role of business models innovation for corporate sustainability, international journal of innovation & sustainable development, vol. 6, no. 2, pp. 95-119. schaltegger s., hansen, e. g. & lüdeke-freund, f. (2016a), business models for sustainability: origins, present research, and future avenues, organization & environment, vol. 29, no. 1, pp. 3-10. schaltegger, s., hansen, e.g. & lüdeke-freund, f. (2016b), business models for sustainability: a co-evolutionary analysis of sustainable entrepreneurship, innovation and transformation, organization & environment, vol. 29, no. 3, pp. 264-289 seia, solar energy industries association, available at: https://www.seia.org/, (accessed 20 november 2014). simon, d. g., hitt, m. a. & ireland, r. d. (2007), managing firm resources in dynamic environments to create value: looking inside the black box. academy of management review, vol. 32, no. 1, pp. 273-292. sosna, m., trevinyo-rodriguez, r. n. & velamuri, s. r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2, pp. 383-407. strupeit, l. & palm, a. (2016), overcoming barriers to renewable energy diffusion: business models for customersited solar photovoltaics in japan, germany and the united states, journal of cleaner production, vol. 123, pp.124-136. stubbs, w. & cocklin, c. (2008), conceptualizing a “sustainability business model”, organization & environment, vol. 21, no. 2, pp. 103-127. suarez, f. f. & oliva, r. (2005), environmental change and organizational transformation, industrial and corporate change, vol. 14, no. 6, pp. 1017-1041. swedberg, r. (2012), theorizing in sociology and social science : turning to the context of discovery, theory and society, vol. 41, no. 1, pp 1-40. teece, d.j. (2007), explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance, strategic management journal, vol. 28, no. 13, pp. 1319-1350. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol. 43, pp. 172-194. teece, d.j. (2018), business models and dynamic capabilities, long range planning, vol. 51, pp. 40-49. tushman, m. l. & anderson, p. (1986), technological discontinuities and organizational environments, administrative science quarterly, vol. 31, no. 3, pp. 439-465. ventkatraman, n., & prescott, j. e. (1990), environment-strategy co-alignment: an empirical test of its performance implications, strategic management journal, vol. 11, no. 1, pp. 1-23. voelpel, s. c., leibold, m. & tekie, e. b. (2004), the wheel of business model reinvention: how to reshape your business model to leapfrog competitors. journal of change management, vol. 4, no. 3, pp. 259–276. https://www.seia.org/ journal of business models (2019), vol. 7, no. 1, pp. 13-38 37 wadin j.l., ahlgren, k. & bengtsson, l. (2017), joint business model innovation of industries – a large multinational utility in alliance with a small solar energy company, journal of cleaner production, vol. 160, pp. 139-150. wirth, h. (2014), recent facts about photovoltaics in germany, fraunhofer ise report. wirtz, b. w., pistoia, a., ullrich, s. & göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, vol. 49, no. 1, pp. 36-54. yin, r. k. (2009), case study research: design and methods (fourth edition), sage publications, london. yin, r. k. (2011), applications of case study research (third edition), sage publications, thousand oaks. yin, r.k. (2014), case study research: design and methods, sage publications, thousand oaks. zaheer, a. & zaheer, s. (1997), catching the wave: alertness, responsiveness and market influence in global electronic networks, management science, vol. 43, no. 11, pp. 1493-1509. zott, c. & amit, r. (2010), business model design: an activity system perspective. long range planning, vol. 43, no. 2-3, pp. 216-226. zott, c., amit, r. & massa, l. (2011), the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp.1019–1042. journal of business models (2019), vol. 7, no. 1, pp. 13-38 38 jessica lagerstedt wadin is associate professor in innovation engineering, lund university, sweden. she received her phd in ecodesign at royal institute of technology, stockholm, 2003. jessica has more than ten years of experience from the railway manufacturing and technical consultancy business in the areas of sustainability, strategic analysis, project management, marketing and sales. her current research focuses on sustainable business model innovation. kajsa ahlgren is a phd in industrial engineering and management, lund university, sweden. her thesis work focused on business models for distributed solar energy, and she is particularly interested in qualitatively exploring  how these business models develop over time, and as they spread between markets. about the authors journal of business models (2021), vol. 9, no. 3, pp. 60-69 60 developing impactful entrepreneurial teaching using a business model framework kenneth lundholm stenkjær1, kristian brøndum2, jesper sort3 and morten lund4 abstract this paper provides insights regarding the development, structure and results of the entrepreneurial course “new venture creation”. the course engages with the business model canvas and the lean start-up methodology but modified to encompass a higher educational institution’s demands, which has shown positive results among students, external stakeholders, and incubators. please cite this paper as: stenkjær, k.l., brøndum,, k., sort, j., and lund, m. (2021), developing impactful entrepreneurial teaching using a business model framework., vol. 9, no. 3, pp. 60-69 keywords: teaching; entrepreneurship; business models acknowledgment : we want to thank all our colleagues at the business design lab and supervisors and lecturers at the new venture creation course for their input to the development of the course. issn: 2246-2465 doi: https://doi.org/10.5278/jbm.v9i3.2581 1–4 aalborg university business school introduction entrepreneurship is considered one of the most important topics at universities worldwide (robinson and heynes, 1991). there are many reasons for including entrepreneurship teaching in the study curriculum (hindle, 2007). these reasons include students obtaining skills, such as communication, fostering new ideas and collaboration, which are highly valued by employers (al-atabi and deboer, 2014). entrepreneurship teaching can enhance entrepreneurial skills, such as handling novel situations, working with others, perseverance in situations of failure, idea generation and many others, but developing these skills requires effort and support (nadelson et al., 2018). research has shown that such skills can be developed through instruction (mansfield et al., 1978); i.e., it is possible to teach entrepreneurial skills (rodov and truong, 2015). in recent years, entrepreneurship teaching has evolved from a business plan-centric understanding (start-ups as smaller versions of a large company) towards a business model-centric understanding (start-ups need new management tools for search and discovery) (blank et al., 2014). at aalborg university (aau) in denmark, the course “new venture creation” (nvc) aims to teach entrepreneurial skills using a business model (bm) framework in a practical and applicable manner. the course builds on the foundation of the lean start-up methodology, as first developed by ries (2011), and follows the step-by-step guide for building a great https://doi.org/10.5278/jbm.v9i3.2581 journal of business models (2021), vol. 9, no. 3, pp. 60-69 61 company by blank and dorf (2012). this guide structures the entrepreneurial process around the business model canvas (bmc) developed by osterwalder and pigneur (2010). together with the lean launchpad (blank et al., 2014), these ideas and frameworks have provided a starting point for the nvc course, which has been continuously modified over time based on new learnings and understandings. nvc is a semester-long cross-university 30 ects elective course at master’s level, offered to students following various study programs from all aau faculties: humanities, social sciences, engineering and medicine. the course has become one of the main pathways for new entrepreneurs entering the aau incubator programs. moreover, external stakeholders such as investors, entrepreneurial consultants and innovators from established companies reviewing the course have recognised that it is developing sound and validated business ideas and entrepreneurial talents worth investing in. some of the student projects developed through the course turn into businesses that make their first sales already during the course and others after the course is finished, meaning there are concrete entrepreneurial outcomes. this paper synthesises over seven years’ experience of initiating, developing and teaching the course and provides the insights and results in the following sections. after the general approach is described, some of the key insights are highlighted. finally, some pros and cons will be discussed and concluded in the final section. approach the nvc course is based on the understanding that a start-up is “a temporary organisation in search for a scalable, repeatable, and profitable business model” (blank and dorf, 2012, p. 24) that moves quickly from failure to failure while adapting, testing new iterations, improving initial ideas and learning from customers. the course is designed to support students in the process of searching for a repeatable and scalable business model related to an idea or opportunity that originates from a problem. the ambition is that the students go through the entrepreneurial process of starting a company by developing a business model through careful market validation during the semester-long course. the course has developed further from its original sole focus on blank and dorf’s (2012) “how-to guide”, to include other important aspects, such as problem generation, team formation and creativity, which happens before to the structured approach proposed by blank & dorf (2012). the reason for this change is that most similar educational hands-on entrepreneurship courses, for example “the lean launchpad” (for students) and “i-corps™” (for companies) (blank et al., 2014), only enrol teams that already have a start-up idea, while the nvc course allow all students interested in entrepreneurship to register. also, the development of the course has led to springboard sessions and learning reports to align with university requirements, which will be explained in more detail below. the nvc course has the following structure: first, an introductory three-week boot-camp provides the students with an entrepreneurial and creative toolbox as well as supports the subsequent team formation process. subsequently, the course follows a 10-week business model process concurrent with a customer development process (see blank and dorf, 2012). the overview of the structure and class flow are presented in table 1 and figure 1 below. table 1 presents an overview of the themes during the nvc course, while figure 1 illustrates the weeks’ structure. in figure 1, the blue areas are marked as the days the students need to be in class or at supervision. it is highlighted that in the boot-camp weeks, the students should attend the class every day (coloured figure 1: journal of business models (2021), vol. 9, no. 3, pp. 60-69 62 blue). following the initial three weeks, the students give presentations each monday as well as attend a lecture on the new topic (the topic being the theme described in table 1). furthermore, they set aside time for a supervision meeting each tuesday. in contrast, the rest of the week is reserved for the students to do customer development by “getting out of the building” and start talking to potential customers, thus getting evidence from the market related to their entrepreneurial endeavour. the term customer can include all types of stakeholders such as customers, users, channel partners, suppliers, domain experts, and sometimes also competitors. from week two, students are required to identify and talk to the first potential customers, called early evangelists (blank, 2020). from week four, the students need to validate business model assumptions by interviewing1 10–20 potential customers a week. the interaction with customers ensures market engagement and improves bm experimentation, as suggested by 1 interviews are the standard method in this course because we want the students to really understand the problem by talking to the people experiencing the problem (“the customers”). later in the process, the students can use questionnaires to test their assumptions at a larger scale. zaleqska-kurek et al. (2016). assignments related to the bm-themed lectures, the idea development and the customer feedback obtained during the week are presented during the monday presentations. boot-camp weeks the first boot-camp week is dedicated to teaching the students about the key concepts of the course, which includes entrepreneurship theory, introduction to lean start-up methodology, bms, the bmc, as well as methods such as (customer) interviews. these sessions are usually structured as traditional class lectures with small workshops to discuss and apply some of the aspects of cases. the lean start-up methodology sessions follow the first chapters of the book by blank and dorf (2012), and the bm/bmc lectures follow the osterwalder and pigneur (2010) book but modified with new (local) cases and problem-based learning (see sort and brøndum, 2021, for examples of this). the first week’s aim is for the students to understand how the course is structured, especially because it is very different from most other teaching environments where students are trained to find “correct answers” and where failure is frowned upon (beghetto, 2010). at the nvc course, failure is a requirement and seen as a valuable learning experience. focus week no. theme introduction 1-3 boot-camp business designing 4 customer segments: understanding customers, customer profiles, customer archetypes, identifying customer pains/gains 5 value proposition: how to design a compelling value proposition, product & service features, gain creators, pain relievers 6 product-market fit: prototyping, minimum viable product, creating a fit between customers and the value proposition 7 channels: channel-customer fit, channel economics 8 customer relationships: how to get, keep, and grow customers 9 revenue streams: revenue model strategy, pricing tactics, customer feature and price sensitivity 10 key activities / key resources / partners: partner-resource/activity fit, company architecture, most important resources and activities 11 cost structure / operational plan, fundraising: financial forecasts, budgeting, fundraising 12 pitch training 13 springboard (external evaluation) reporting 14-19 learning report table 1: overview of the themes for each week journal of business models (2021), vol. 9, no. 3, pp. 60-69 63 in the second boot-camp week, creativity is the focal point. inspired by  parnes (1992),  amabile (1988) creativity theory, process methods and training are introduced. while the general introduction into creativity theory is important from a theoretical perspective, this week is also about hands-on approaches. as many students do not have a business idea or problem to work on from the beginning of the course, the second week allows them to generate ideas and identify problems worth solving in a creative manner. at the end of the second week, the students should have developed a portfolio of different problems that could be interesting to explore further. in the third week, students vote for the problems they find most original and promising. this selection process keeps the motivation as high as possible, as students are allowed to follow their own interests, which is also suggested by amabile (1988) and aulet (2013). working with a smaller portfolio of problems, the students go through a facilitated process to select a problem to focus on for the rest of the course and form teams. entrepreneurial teams are one of the cornerstones of nvc, as studies have shown team-based start-ups tend to be more successful (aulet, 2013). we facilitate this process and encourage the students to form groups with team members from different study areas so they have a diverse set of theory, experience and background. after team mobilisation, the third bootcamp week involves further lectures and workshops on framing their chosen problem in a bmc and finding and interviewing their first potential customers. weeks 4–13 the fourth week marks the beginning of the course structure illustrated on the right in figure 1. the week begins with a 10-minute presentation from each student team, followed by 10 minutes of feedback from the supervisor and fellow students. afterwards, a lecture provides a new bm theme for the teams to focus their attention on in the following days. these lectures consist of conventional teaching combined with workshop-based teaching, where the students get to apply some of the theories and frameworks on their project. the combination of lectures and workshops has shown to give the students a great understanding of the theme they need to investigate further that week and speeds up the learning curve as the lecturer is available to support the process during the workshop. the rest of the week is dedicated to team-based customer development activities outside the classroom (interviewing ten or more potential customers) and supervision meetings (if needed). weeks 5–11 follow the same structure as week four, with student presentations, a lecture and workshop, supervision, and team-based customer development. however, as shown in table 1, week 10 focuses on multiple bm themes related to the infrastructure of the business idea. we have merged these themes into one because students find it hard to distinguish between key resources, key activities and key partners across separate weeks, as they are interconnected. week six also deviates from the bmc building blocks and focuses on the fit between customer segments and the value proposition. here, we elaborate on some of the key aspects of the lean start-up methodology, including minimum viable products (mvps), prototyping and feature testing with customers, which we have found warrant further attention. at the end of week 11, the student teams have gone through all of the building blocks in the bmc and simultaneously developed a comprehensive and validated business prospect through the customer development process. during each week, the students have practiced their presentation skills, but in week 12, we change the perspective from “lesson learned” presentations (cf. blank & dorf, 2012) to actual “business pitching”. this change of perspective is done for several reasons but predominately because the students have to pitch to an external “springboard” in week 13, where the pitch should be convincing, to the point and persuasive. at this point, most students are ready to talk to potential investors and other stakeholders, so a good business pitch is essential. the week is thus dedicated to creating, refining and rehearsing the “perfect” pitch. week 13 marks the official end of the “business designing” part of the course and initiates the “validation” part of the course. the validation phase typically includes more than 100 customer interviews, although often, the number is closer to 200. in this phase, the students are also allowed to do questionnaires to test their business hypotheses on a larger scale. journal of business models (2021), vol. 9, no. 3, pp. 60-69 64 the concluding “pitch day” is normally structured with two consecutive rounds of pitches. every team is expected to do a pitch in front of an internal evaluation board, consisting of the involved supervisors and lecturers. the internal evaluation ends with the supervisors picking the teams that have “qualified” for the afternoon session. the later round of pitches is done in front of a board of external evaluators, called external springboard, consisting of one or two business angels or private investors, one or two corporate investors (typically from large companies in the region) and one representative from the aau incubator programs. the external stakeholders provide feedback to each team after their pitch, followed by a round of q&a’s. in the end, the external springboard selects the “best performing team” based on an evaluation form developed by the faculty2. following week 13, the students have to write a learning report, which they hand in at the end of the course. we require a written learning report because most universities cannot (and probably should not) base an examination and grade on an entrepreneurial endeavour’s success or failure, particularly as 9 out of 10 startups fail within five years (chakrabarti, 2017). the learning report consists of a theoretical and method section, where the students have to identify and describe the main theories and methods applied. following this, the students have to reflect on the three major changes during the process known as “pivots” (cf. ries, 2011; blank and dorf, 2012; blank et al., 2014). the learning report gives the students an opportunity to reflect on the empirics they have collected during the customer development process, what they learned from the pivots they experienced, how they progressed in terms of the bm development as well as learning process, based on theory and empirics. in the next part of the report, the students have to assess their final business model and its viability using the terms from lean start-up methodology (not to evaluate the economic potential, but their learnings and ability to apply the theory). finally, the students have to discuss and 2 in the last few years, the evaluation criteria has been the following: 25% innovation (uniqueness, need, business idea, pain), 25% verification (value, research, market, cure), 25% business (business concept, proof of …, team, profit), and 25% convince (desire, potential, strategy, persuasion). make conclusions on their significant learnings and how they will continue after the course both on a business and personal level. the role of the teacher, supervisor and externals different people engage with the students in different roles during the course. the teacher’s primary responsibility is to give the lectures, which means running class each day in the boot-camp weeks and every monday in weeks 4–13 (see figure 1). the general ambition is that the teachers give a traditional lecture and facilitate workshops with the students where they apply the new insights they learn from the lectures. since application of knowledge is one of the main foci in this course, the workshops are valuable to help and enable the students. key insights separation of business pitch and learning report is a must the nvc course has evolved over the last seven years. one of the main issues with practice-oriented entrepreneurship courses is the conflict between creating hands-on learning and starting a viable business while still fulfilling traditional universities’ requirements regarding theorizing, applying methodology, examination, and evaluation. during the first iterations of the course, the students were required to write a report explaining the business idea and their learning experiences. students were often confused about why the oral examination was mostly related to theory, method and learning outcomes rather than the business they spent so much time developing during the course. the separation of the business pitch and learning report was intended to address this confusion and better align with the university’s requirements, which has proven successful in the latest feedback we have received from the students. external stakeholders and springboards are valuable including an external springboard as part of the concluding “pitch day” is an exciting way for the students to get further inspiration from others than their supervisors and lecturers. moreover, the students typically enjoy this opportunity to pitch in front of real investors and high-ranking executives. both the students journal of business models (2021), vol. 9, no. 3, pp. 60-69 65 and the course, in general, have received very positive feedback from the external stakeholders. the head of innovation at aalborg university has stated that “the nvc course is providing some of the best entrepreneurs into our innovation programs with the students having strong concepts and very developed entrepreneurial competencies.” the involved investors attribute this to; firstly, they have been impressed by the high number of validations and bm experiments each team has done and, secondly, the student’s insights towards their potential bm. over the years, we have found that inviting external stakeholders into the course has provided several valuable outcomes and, indeed, worked as a launch pad for the students. not only have students ended up being employed by some of the investors. several teams have secured early-stage funding for their entrepreneurial concept and some of the involved investors have invited teams into their professional network for further development of the idea. students change perception at the beginning of the course, the main barrier for students is the customer development part, where the students have to validate the market by interviewing potential customers, partners, suppliers, and domain experts each week. most students are somewhat fearful of this requirement from the outset and try to figure out ways to avoid it. by the end of the course, it is quite interesting that the customer development process is evaluated very positively by the students, as they come to appreciate the skills they have developed by interacting with potential customers each week. in post-evaluations of the course and after talking to many of the previous enrolled students after some years, students state that these skills have helped them in their final courses and onwards. for example, in the application process for their first job and in their everyday professional life as an employee. the bmc has limitations – flexibility and creativity is needed to a large extent, the course flow (from week 4 to 11) follows the building blocks of the bmc as described by osterwalder and pigneur (2010). structuring the course around the building blocks of the bmc has some obvious strengths, as it is a very generic framework and “easy-to-use” tool. on the other hand, the genericness of the bmc is also a drawback. we found that flexibility is needed depending on the different settings of the student projects. furthermore, we found that using the bmc together with the lean start-up methodology limits creativity due to the prescribed structure and analytical model. this is in line with the criticism raised in the study by bocken & snihur (2020). as such, we will shortly address how the nvc course has addressed some of these considerations in the below. first of all, the bmc is generally developed to analyse and innovate existing bms, not bm for start-ups. blank & dorf (2012) made some changes to the original canvas to facilitate this. for example, early evangelists and customer archetypes are the focus in the customer segments building block; the channel building block is about finding the right product-channel fit; the customer relationship building block focuses on how to get, keep, and grow customers; the revenue streams building block also includes pricing tactics. even with these small iterations, we found that the bmc still does not fit all start-up ideas. some of our social enterprise or non-profit teams has ended up using the “social business model canvas” and teams wanting to start a platform business sometimes use “the platform business model canvas” as their reference framework during the course. these other frameworks can bring more value for some teams, but the teaching flow still follows the bmc for practical reasons. furthermore, we introduce the creativity training during the bootcamp weeks to stimulate the creative flow and develop the students’ creative competencies. we have done this to counterweight some of the criticism of the lean start-up methodology being too structured and hindering creativity (e.g., bocken & snihur, 2020). from our experience, introducing creativity training has been a success, as the students reflect on their use of creativity as part of their learning report and how this complements their customer discovery iterations with new insights. for example, the students use some of the creativity techniques to get new ideas on how to use customer feedback to improve their entrepreneurial idea, how to approach customers in a creative way, how to persuade customers more, and how to create the best way of testing a hypothesis as part of the customer discovery. journal of business models (2021), vol. 9, no. 3, pp. 60-69 66 supervisors should be flexible and change roles from a teaching perspective, it is essential that the supervisors also allow room for failure and accept that these “errors” will actually turn into new learnings, which will enhance the students’ understanding and process. we have found that the supervisors should play the role of “process” supervisors in the first 13 weeks, with a strong focus on business development aspects, guiding the students in new (original) directions and pushing them outside their comfort zone. supervision meetings in these weeks are more focused on co-creation activities than traditional supervision. during the co-creation, it would be natural for the supervisor to follow-up on the theories and methods leading to the business development, so the supervisor indirectly helps the students reflect upon their process, which is an integral part of the co-creation activity. in the final weeks (14–19) of the course, the supervisor’s role changes into a more “normal” academic supervision role, where the focus is on the written report. even though the supervision approach is different, we have seen that the more we push and encourage the students during supervision meetings, the better the performance. strive for interdisciplinarity our experiences have also shown that the best performing teams (both on the business and learning part) are multidisciplinary teams. by having a different set of competencies, the student teams see problems and opportunities from various perspectives, which enhances the end-result. however, this also poses the greatest challenge for an interdisciplinary, cross-university course like nvc; it requires a flexible university structure. students should be allowed to realise their ambition by participating in courses relevant to their future careers and courses that motivate them. nevertheless, many universities reproduce what is termed “silo-thinking” (jeal, 2014), where information, economy and students are kept within each faculty without the possibility to attend cross-disciplinary courses. hopefully, universities, faculties and departments can see the potential and impact made by a course like nvc and start opening up the silo-thinking for the better of the students. discussion and conclusion following students both during and after the course has shown us that a hands-on entrepreneurial course, like nvc, strengthens students’ skills by enabling them to start their own businesses and become attractive employees for companies. in line with the findings by al-atabi and deboer (2014), the students attending the nvc course have been appraised during the business pitch for their strong communication skills and companies that have hired nvc graduates have reported back about the high innovativeness of these students. in general, the students with the entrepreneurial abilities provided by this course perform well in the talks we conduct with them and industry stakeholders continuously. furthermore, the students have both on a personal and professional level learned how to adjust and overcome problems and find solutions to challenges faced both as an entrepreneur but also if employed in established companies, which should also be the advantage of such entrepreneurial skills, according to nadelson et al. (2018). a limitation of this approach is connected to the theoretical limitations found in the lean start-up methodology. questions remain whether this is most applicable to the domain of the existing market/new product quadrant of the ansoff matrix (ansoff, 1957) and the existing product/new market quadrant. further, the lean start-up methodology shows some weaknesses when applied in the existing market/existing product quadrant and especially in the new market/new product quadrant. these concerns are mostly derived on a theoretical level where market knowledge equals full information. our experience, however, shows that students often have limited knowledge about the existing market and products. therefore, the approach is still applicable and entrepreneurial teams have found viable solutions in most quadrants over the years. creating and developing entrepreneurial teaching and a course like nvc has been an exciting journey. initially, based on the lean start-up methodology, this course has transformed into a versatile course that fits the hei requirements. the structure of blended presentations, lectures, workshops, external activities, and journal of business models (2021), vol. 9, no. 3, pp. 60-69 67 reflection through the final report, provides students with skills applicable in different educational and professional pathways. we have applied the basic ideas explained in this paper in different settings. we have turned the whole course into a high-intense two-week process, equivalent to 3 ects. this short process has no written assignments, and the expectations regarding the number of customer interviews to be performed are lower than at the 30-ects version. still, the students show a noticeable improvement in entrepreneurial skills from just two weeks of lectures, learning-by-doing, and presentations. journal of business models (2021), vol. 9, no. 3, pp. 60-69 68 references al-atabi, m., & deboer, j. (2014), teaching entrepreneurship using massive open online course (mooc), technovation, vol. 34. no. 4, pp. 261-264. amabile, t. m. (1988), a model of creativity and innovation in organizations. research in organizational behavior, vol. 10, pp. 123-167 ansoff, h. i. (1957), strategies for diversification, harvard business review, vol. 35, no. 5, pp. 113-124. aulet, b. (2013), disciplined entrepreneurship: 24 steps to a successful startup, john wiley & sons. beghetto r. a. (2010), creativity in the classroom, in kaufman, j. c., & sternberg, r. j. (eds.), the cambridge handbook of creativity, cambridge university press, pp. 447-464. blank, s. (2020), the four steps to the epiphany: successful strategies for products that win, john wiley & sons. blank, s., & dorf, b. (2012),  the startup owner’s manual: the step-by-step guide for building a great company, bookbaby. blank, s., engel, j., & hornthal, j. (2014), lean launchpad: evidence-based entrepreneurship educators guide. bocken, n., & snihur, y. (2020). lean startup and the business model: experi- menting for novelty and impact. long range planning, 53(4), pp. 1-9  chakrabarti, r. (2017), “#9 out of 10 start-ups fail. here’s why!” available at: https://www.entrepreneur.com/article/295798 (accessed 12 december 2018). hindle, k. (2007), teaching entrepreneurship at university: from the wrong building to the right philosophy, in fayolle, a. (ed.), handbook of research in entrepreneurship education, being competitive and successful, edward elgar publishing, cheltenham, uk, pp. 104-126. jeal, y. (2014), strategic alignment at the university of manchester library: ambitions, transitions, and new values, new review of academic librarianship, vol. 20, no. 3, pp. 278-295. mansfield, r. s., busse, t. v., & krepelka, e. j. (1978), the effectiveness of creativity training, review of educational research, vol. 48, no. 4, pp. 517-536. nadelson, l. s., palmer, a. d. n., benton, t., basnet, r., bissonnette, m., cantwell, l., ... & lanci, s. (2018), developing next generation of innovators: teaching entrepreneurial mindset elements across disciplines, international journal of higher education, vol. 7, no. 5, pp. 114-126. parnes, s. j. (1992), a source book for creative problem solving, creative behavior foundation, buffalo. ries, e. (2011), the lean startup: how today’s entrepreneurs use continuous innovation to create radically successful businesses, crown books. robinson, p., & haynes, m. (1991), entrepreneurship education in america’s major universities,  entrepreneurship theory and practice, vol. 15, no. 3, pp. 41-52. https://www.entrepreneur.com/article/295798 https://www.entrepreneur.com/article/295798 journal of business models (2021), vol. 9, no. 3, pp. 60-69 69 rodov, f., & truong, s. (2015), “why schools should teach entrepreneurship”, available at: https://www.entrepreneur.com/article/245038 (accessed 16 july 2018). sort, j. c., & brøndum, k. (2021), experiences from a decade: a universal approach to business model teaching, journal of business models, online first (2021), pp. i-x. zalewska-kurek, k., kandemir, s., englis, b. g., & englis, p. d. (2016), development of market-driven business models in the it industry. how firms experiment with their business models? journal of business models, vol. 4, no 3. pp. 48-67. https://www.entrepreneur.com/article/245038 https://www.entrepreneur.com/article/245038 journal of business models (2019), vol. 7, no. 3, pp. 131-142 131 booster cards: a practical tool for unlocking business model innovation peter thomsen1, jesper chrautwald sort2, and kristian brøndum3 abstract business model innovation is an interesting yet challenging teaching area. both teachers and students encounter barriers, such as dominant logic and a limited level of capabilities. in this paper, we present an analogy-based approach to enhance the teaching process and elevate student motivation using business model stimulus cards. please cite this paper as: thomsen, p., sort, j. c., and brøndum, k. (2019), booster cards: a practical tool for unlocking business model innovation, vol. 7, no. 3, pp. 131-142 keywords: business models, business model innovation, teaching 1–3 aalborg university journal of business models (2019), vol. 7, no. 3, pp. 131-142 132 introduction many different fields of teaching and researching business models (bms) and bm innovation (bmi) exist. the diversity of the research fields raises questions on how to teach bmi to students and enable them to unlock the complexity of applying bmi. massa and tucci (2013) suggested splitting the notion of bmi into two categories: bm design and bm reconfiguration. the first is related to inventing new businesses and bms, whereas the latter concerns restructuring and generating new ideas within existing bms. the notion of bmi (both designing and configuration) is a challenging and complicated art (teece, 2007). although research within this area has been quite heterogeneous, wirtz and daiser (2018) derived a generic seven-step bmi process in their systematic review, namely analysis, ideation, feasibility, prototyping, decision-making, implementation, and sustainability. this paper will contribute by identifying a way to enable bmi in teaching, especially in the earlier stages of bmi, such as ideation. when addressing the issue of teaching bmi, one needs to understand some of the inherent barriers in addressing innovation. the typical barriers that teachers face are related to the dominant logic and level of capabilities of their students. the dominant logic comprises how the firm creates and captures value, which can be difficult to assess due to prejudice and other subjective matters (bettis and prahalad, 1995; chesbrough, 2003). the level of capabilities in this sense refers to the restrained repertoire of a person’s ability to see new ideas (pisano, 2006). these issues are, in our experience, common when students try to develop new bm ideas in a bmi process. often, the restraints are less challenging when addressing new business designs but become more complex and challenging when doing bm reconfiguration (teece, 2007; massa and tucci, 2013; lüttgens and diener, 2016). thus, teachers often must overcome these barriers of underlying assumptions in the dominant logic and restrained capabilities. if not appropriately addressed, the result will be a limitation of the potential variety of inputs to the bmi process (rumble and minto, 2017), as students will often replicate and conform to the known norms (e.g. de jong and van dijk, 2015), arguably compromising the idea of teaching innovation in the first place. nonetheless, there are several techniques to overcome these barriers, enabling the teacher and class to stimulate novel and creative ideas through bmi. in the literature, there have been various suggestions on how to improve the ability to innovate bms. one of the topics concerns the idea of using experiments to generate different solutions (ahokangas and myllykoski, 2014) and ultimately identify the optimal solution (chesbrough, 2010). however, this quickly turns into a ‘catch-22’ paradox1 because the experiment designs are often restricted by the dominant logic present in the individuals and by their (limited) capabilities. this is why we have invented a set of booster cards to help students create experiments and develop better and more original bm designs and bm reconfigurations. in line with the work by smith (1998) on creative triggers, we intended the booster cards to act as a stimulus to amplify the idea generation process. smith (1998) distinguished between the following three types of stimuli: • concrete stimuli (higgings, 1994): use physical items or pictures in idea generation sessions. • related stimuli (vangundy, 1988): provide stimuli that are connected to the problem-solving task. • remote stimuli (rickards, 1974): provide stimuli that are unrelated to the problem-solving task. the booster cards essentially combine all three types but are mainly based on related and remote stimuli. we do this by only providing topic-specific stimuli (hence, the bm configuration typology), while simultaneously forcing the students to assess and reflect upon the individual and sometimes unrelated bm configurations. the latter refers to bm configurations that immediately appear illogical or distant to the case at hand. in other words: the booster cards will constitute ‘provocations’ to enable the students to think ‘outside of the box’. converting bm typologies into playing cards is not a new invention (e.g. the bmi lab at st. gallen university developed bmi pattern cards; see gassmann et al., 2013, 2014). however, we did not find these cards comprehensive to our satisfaction in terms of typology and categorisation. a decision was made to develop a 1 a catch-22 is a paradoxical situation from which an individual cannot escape because of contradictory rules (e.g. a bank will never issue someone a loan if they need the money). journal of business models (2019), vol. 7, no. 3, pp. 131-142 133 deck of playing cards designed according to an alreadydefined bmi framework: the 5v framework by taran et al. (2016). this will be elaborated on in greater detail later in the article. the booster cards are built on the principle of creating analogical reasoning. analogical reasoning is understood as applying insight from one setting to another, which is a method found to be useful for creating novel bm ideas (gavetti and rivkin, 2005; martins et al., 2015; rumble and minto, 2017). a known example of applying analogies is nespresso. traditional coffee machine manufacturers focus on selling machines with high margins, which is essentially the core of their bm. in contrast, nespresso coffee machines are sold with a low margin, but the company compensates by earning high margins on the coffee pods. at the core of the bm, nespresso is creating a lock-in effect towards the consumer,  as the machines only can be used with nespresso pods. nespresso developed and succeeded with this bmi by adopting elements (or analogies) from the razor-andblade model known from gillette (matzler et al., 2013), and many have since tried to copy them in the industry. the story of nespresso shows the strength of using analogies by removing the constraints of dominant logic (coffee machines are the core) within the same industry or sets of assumptions. furthermore, a set of different bm patterns or recipes (baden-fuller and morgan, 2010; osterwalder and pigneur, 2010; taran et al., 2016) can help overcome the limited capabilities of students, for example (rumble and minto, 2017). the booster cards help break the barriers of dominant logic and the limited capabilities by enabling students to experiment with various ideas through different analogies of the cards. these analogies support students to overcome their dominant logic from a given context and further provide a range of diverse alternatives, reducing the barrier of limited capabilities. the cards are based on 71 different bm configurations identified in the work by taran et al. (2016). each card in the deck represents a specific configuration and contains a short description of the configuration and reallife example to strengthen the analogy further. the description might give room to gain context-free ideas, but if the students are having issues with generating ideas or understanding the concept, the real-life examples often spur them in the right direction. an example can be found in figure 1, where the configuration ‘free for advertising’ provides both a short explanatory text of the general concept and empirical references (in this case of facebook and google). figure 1: examples of booster cards. journal of business models (2019), vol. 7, no. 3, pp. 131-142 134 thus far, the cards have been tested in different contexts ranging from more than 125 business administration students at the bachelor’s level in a workshop-teaching format to more than 30 international business master’s students in a traditional classroom setting for three years. the cards have also been tested with professionals and business developers. through various trials, the booster cards have proven to act well as a facilitator of discussing different business opportunities and future scenarios by providing new ideas on how to design or reconfigure bms. we will elaborate on these outcomes later in the paper. approach initial understanding and requirements the booster cards can be implemented in various settings, such as a workshop with practitioners and lectures with students. the latter will be exemplified in the paper. it is essential to add that the cards function primarily as a facilitator or add-on to use in the teaching context. the participants will need a basic understanding of bms, and it is also preferable to have experience in working with a bm framework, such as osterwalder and pigneur’s (2010) bm canvas (bmc). the notion of a framework (e.g. bmc) helps to illustrate how the cards affect a given bm, which is an essential element in bm reconfiguration. however, as mentioned earlier, this paper will focus on the earlier stages of bmi. following the original work of taran et al. (2016), the 71 cards are divided into five different categories. these five categories address key areas found throughout both empirical and theoretical bm research in the following ways: • value proposition (vp): what is the company offering (pink cards)? • value segment (vs): to whom is the company offering it (green cards)? • value capture (vc): how much and in what way does the company generate revenue (brown cards)? • value network (vn): with whom does the company collaborate to develop, distribute, and/or sell the offering (blue cards)? • value configuration (vco): how does the company develop and distribute this offering cost-effectively (yellow cards)? the number of configurations (i.e. cards) is not evenly distributed across the above-mentioned categories. as such, there are 23 vp, 8 vs, 14 vc, 10 vn, and 16 vco cards. the taran et al. (2016) framework was chosen because it offers an increased number of categories and configurations compared to other frameworks. previous to this study, the only academic work on bmi cards was found in gassmann et al. (2013). in comparison, the taran et al. (2016) framework 1) employs five categories instead of four (resulting in a clear separation between the bm elements of customers and distribution), 2) entails the most exhausting list of configurations (71 compared to the original 55), and 3) offers the most recent review. we have also found other bmi cards, all of which comprise 50 to 68 cards (e.g. boardofinnovation.com, businessmakeover.eu, and methodkit.com). nevertheless, none of these are scientifically derived but rather are based on practical work, experience, and consultancy tasks. in short, the 71 configurations offered by taran et al. (2016) comprise the most extensive, scientifically developed, and updated list we were able to find. for further information about the configurations, we refer to taran et al. (2016). in the teaching setting, the initial approach would include one or several lectures introducing bms in general and potentially the bmc. using the terminology of the bmc helps to frame the experiments that the booster cards facilitate. figure 2 exemplifies how the configuration of ‘leasing’ not only affects its main category (vc) but also how designing or reconfiguring a bm to the leasing configuration would affect other parts of the bm. the effects are not explained in the cards, as they are different from case to case; hence, the participants will need to reflect upon these in each situation. having established the basic knowledge regarding bms, it becomes essential to frame the notion of bmi and how experimenting with the cards is meant to improve the students’ ideas. in entrepreneurial courses, the cards are more relevant in the lines of bm ideation, where they can be explored as inspiration to generate novel bm design ideas for new business opportunities, problems, or projects. in settings where students work with real-life cases (e.g. established companies with existing bms), the cards provide new journal of business models (2019), vol. 7, no. 3, pp. 131-142 135 inspiration to stimulate bm reconfiguration. in both instances, the cards enhance the experimentation with ideas that might not have been produced without this stimulation, thereby overcoming the cognition biases of the dominant logic and limited competences of the students. following byrge and hansen (2014), we found that the approach of first working individually, then in pairs, and lastly all together in the group (presented in steps 5-9) will enhance the ideation process by bringing more knowledge into play. if time is short, steps 3 and 6 could be skipped. using a real-life case the approach described above has also been tested several times with real-life cases where a business representative (e.g. owner, manager, or an employee) presents their company in front of the class, potentially stating an innovation dilemma. as stated in the introduction, the company is often restrained by the dominant logic or/and capabilities; hence, they are prepared to seek inspiration from other sources, such as students. to ensure the students are not predominantly influenced by the logic and constraints of the company representatives, the use of analogies through the booster cards aids the students to have an open mind and generate novel ideas continuously. in this setting, it is essential to have the students map the company’s current bm using the bmc (or other bm frameworks) as an initial phase before the steps mentioned above; otherwise, the students will have a hard time understanding the underlying basis of the company case. the students can also use the booster cards to identify the current patterns or configurations of the company to understand and interpret the current setting.2 subsequently, the students are asked to either generate new ideas or innovate in the current setting. the process could evolve around various objectives, such as targeting specific customer problems, innovation issues, or technological challenges, or it could merely be an open task. as stated earlier, the students often rely heavily on the logic or context presented by the company if the process is not facilitated. if a real-life case gives away too much information about the vision for the future, the students end up developing ideas that are not new to the company or novel or interesting in any way. we experienced this when a company accidentally told the students that their next market would be wholesalers. afterwards, around 80% of all the ideas developed by the students addressed wholesalers as the ‘new 2 interpreting is also an often-found phase in analogy models (e.g. see rumble and minto, 2017, for more details). figure 2: configuration of leasing. journal of business models (2019), vol. 7, no. 3, pp. 131-142 136 innovative strategy’ for the company. the example shows how quickly students absorb dominant logic and experience difficulties, diverting from it. from our experience, fostering novel ideas and new insight occurs more frequently when the cards are incorporated as a medium in the ideation process right after the mapping of the existing bm. the booster cards provoke new thought patterns and thereby amplify the pool of ideas the students are creating. the analogies and stimulation through the cards help the students develop relevant ideas that are directly transferable from the cards. other times, the students have ‘wild’ ideas that are not related to the cards, but the line of thought was initiated using the cards. although these initial ‘wild’ ideas are unrealistic, we have seen many examples where they eventually spur new ideas that are viable. an example of the above was observed during a reallife case workshop where the company in question had too-high costs. from the card representing the configuration ‘external sales force’, one group had the idea of only having salespeople from low-income countries. this idea was pretty ‘wild’ and unrealistic, but together with the booster card representing the configuration ‘target the poor’, they started wondering why the company did not address low-income countries. as the company made modular products, the relatively high production cost could be lowered by the economy of scale, making the market of developing countries attractive as a new source of income. in essence, the table 1: booster cards manual journal of business models (2019), vol. 7, no. 3, pp. 131-142 137 original idea would have little chance of success, but the evolution or development from the initial ‘crazy’ idea proved to be an important novel idea that the company wanted to investigate further and eventually implement as part of their future strategy. in all the workshops and lectures that we have facilitated in this manner, the company representative has always left with new inspiration and often reasonably implementable bm ideas and innovation routes. key insight through the use of analogies, the booster cards seemingly provide a practical and understandable method of breaking down some of the barriers in the oftenimpeded bmi process. repeatedly, students or companies become stuck within their inherent limitations and dominant logic, which rarely spurs original ideas. with a relatively minimal amount of preliminary knowledge, students, companies, entrepreneurs, and business developers can gain new inspiration on how to either design or reconfigure bms. furthermore, the booster card analogies and their configurations are built on both generic text explanations and case examples, which often makes the process very intuitive for students at all levels. the cards provide a hands-on and tangible approach rather than the more ‘fluffy’ theoretical approaches. the use of the booster cards is especially relevant in courses that undertake a practical approach to understand, innovate, and test bms. moreover, the booster cards and pertaining processes have continuously led to new innovative ideas and inspiration on how to innovate bms, which was the overall ambition of introducing the booster cards. reflecting on the learning outcomes of using the booster cards, we have likewise seen positive results. we have not performed statistical experiments but have some experience that shows how students adopt and apply the analogical use of the booster cards after a workshop or lecture. through written exam essays on the topic of bmi, we have found that students apply the knowledge from the booster cards and analogical learning to explain different bm concepts and existing bms of case companies. consequently, this shows that students gain a deeper understanding of the topic and learning objectives of the course. additionally, students that are using the booster cards often manage to develop a greater variety of bm ideas. while not statistically proven, the development of more bm ideas was agreed upon by both the internal lecturers and external examiners of the assignments. the same type of evidence can be found in the vast number of oral exams we have done over the years. students who have been introduced to the booster cards (and actively used these in their project work, written assignments, etc.) demonstrate better insight into the subject and can have more complex discussions during the exam compared to students without this knowledge. moreover, the workshops have successfully generated novel, inspiring, and applicable new bm ideas; hence, the case companies, without request, have all expressed their interest in participating again. discussion and conclusion the idea of using inspiration from generic bms is not new in a bm setting. the booster cards are similar to gaining inspiration from bm patterns (osterwalder and pigneur, 2010; gassmann et al., 2014), analogies (rumble and minto, 2017), analogical reasoning and conceptual combinations (martins et al., 2015), bm recipes (baden-fuller and morgan, 2010; sabatier et al., 2010), and so on. nonetheless, the booster cards offer the students a more hands-on experience, which often supports the experimentation or ideation phase of bmi, compared to directing them to a book or webpage. the analogies of the cards help to break down the main barriers to bmi, that is, the dominant logic around how firms create and capture value (bettis and prahalad, 1995; chesbrough, 2003) and the missing ability to generate new ideas (pisano, 2006). the fact that the booster cards are not a standalone solution might potentially also constitute their main limitation. students need a certain understanding of the bm concept, and it is also preferable to have experience in working with a bm framework to use the cards most efficiently. however, if this basic knowledge is achieved, the booster cards are reasonably intuitive. furthermore, an advanced class could also address related matters, such as the effect a new configuration might have on the supply chain, management accounting, performance measurement, and other topics on how to operationalise the suggested changes to journal of business models (2019), vol. 7, no. 3, pp. 131-142 138 a specific bm. however, due to limitations of the short paper format, these are not addressed here. another limitation worth mentioning is the time factor. in general, we recommend at minimum a threehour workshop for using the booster cards, including a short introduction to bm configurations, the booster cards, and then the hands-on approach. dedicating enough time is vital for the students to understand the booster cards and reflect upon their ideas and designs. if rushed, the result will typically be half-finished unoriginal ideas, which they will be more reluctant to present. ultimately, this will naturally negatively affect the learning output. the most impressive part of using the booster cards as an analogy stimulus is the variety of bm ideas generated by the students. even when applying the same business case in different workshops with diverse students, we have observed radically diverse bm ideas each time. in addition, the students appear to enjoy ‘playing’ with the booster cards even after the workshop session is over. for the students, it is not only a fun exercise, but they also gain more comprehensive knowledge and competencies in understanding and working with bms. ultimately, these skills will help the students fulfil learning objectives related to an innovation course. hence, the adoption of the booster cards enables the students to not only reach the learning objectives of the course but also build valuable bmi skills for future employment. journal of business models (2019), vol. 7, no. 3, pp. 131-142 139 references ahokangas, p. & myllykoski, j. (2014), the practice of creating and transforming a business model, journal of business models, vol. 2, no. 1, pp. 6-18. baden-fuller, c. and morgan, m.s. (2010), business models as models, long range planning, vol. 43, no. 2, pp. 156-171. bettis, r. a., & prahalad, c. k. (1995), the dominant logic: retrospective and extension. strategic management journal, vol. 16, no. 1, pp. 5-14. byrge, c., & hansen, s. (2014), enhancing creativity for individuals, groups and organizations: creativity as the unlimited application of knowledge. frydenlund, frederiksberg. chesbrough, h. (2003), open innovation: the new imperative for creating and profiting from technology, harvard business school press, boston, ma. chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2-3, pp. 354-363. de jong, m., & van dijk, m. (2015), disrupting beliefs: a new approach to business-model innovation, mckinsey quarterly, vol. 3, pp, 66-75. gassmann, o., frankenberger, k., & csik, m. (2013), “the st. gallen business model navigator”, working paper, institute of technology management, university of st. gallen, st. gallen. gassmann, o., frankenberger, k., & csik, m. (2014), the business model navigator: 55 models that will revolutionise your business, pearson, uk. gavetti, g., & rivkin, j. w. (2005), how strategists really think, harvard business review, vol. 83, no. 4, pp. 54-63. higgings. j. m. (1994), 101 creative problem-solving techniques, new management publishing company, winter park, fl. lüttgens, d., & diener, k. (2016), business model patterns used as a tool for creating (new) innovative business models, journal of business models, vol. 4, no. 3, pp. 19-36. martins, l. l., rindova, v. o., and greenbaum, b. e. (2015), unlocking the hidden value of concepts: a cognitive approach to business model innovation, strategic entrepreneurship journal, vol. 9, pp. 99-117. massa, l., & tucci, c. l. (2013), business model innovation, in dodgson, m., gann, d. m. & nelson, p. (eds.), the oxford handbook of innovation management, oxford university press, oxford, uk, pp. 420-441. matzler, k., bailom, f., von den eichen, s. f., & kohler, t. (2013), business model innovation: coffee triumphs for nespresso, journal of business strategy, vol. 34, no. 2, pp. 30-37. osterwalder, a., & pigneur, y. (2010).  business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons, hoboken, new jersey. journal of business models (2019), vol. 7, no. 3, pp. 131-142 140 pisano, g. (2006), profiting from innovation and the intellectual property revolution, research policy, vol. 35, pp. 1122-1130. rickards, t. (1974), problem-solving through creative analysis, gower press, essex, uk. rumble, r., & minto, n. a. (2017), how to use analogies for creative business modelling, journal of business strategy, vol. 38, no. 2, pp. 76-82. sabatier, v., mangemtin, v. & rousselle, t. (2010), from recipe to dinner: business model portfolios in the european biopharmaceutical industry, long range planning, vol. 43, no. 2, pp. 431-447. smith, g.f. (1998), idea-generation techniques: a formulary of active ingredients, journal of creative behavior, vol. 32, pp. 107-133. taran, y., nielsen, c., montemari, m., thomsen, p., & paolone, f. (2016), business model configurations: a five-v framework to map out potential innovation routes, european journal of innovation management, vol. 19, no. 4, pp. 492-527. teece, d. j. (2007), explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance, strategic management journal, vol. 28, no. 13, pp. 1319-1350. vangundy, a. b. (1988), techniques of structured problem solving, quorum books, new york. wirtz, b.w. & p. daiser (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, 40-58. journal of business models (2019), vol. 7, no. 3, pp. 131-142 141 peter thomsen is ph.d in business models and performance measurement. with a point of reference in his researchand entrepreneurial experience, peter has built up expert knowledge on successful business models and how these can be created. from the initial creativity processes, to simulation and testing, to implementing and managing business models through performance benchmarking and best practice principles. peter is also an experienced speaker and motivator on business models and keen to share his knowledge to both corporate and educational environments. ppt@business.aau.dk jesper chrautwald sort is assistant professor and head of teaching at business design center, aalborg university in denmark. jesper is working in the fields of business models, value creation, performance management, investment processes and knowledge edification. currently, his work involves understanding and improving entrepreneurs and smes to develop their businesses to become future growth companies. furthermore, he focusses on how larger companies use business models and performance management as strategic tools towards different stakeholders. jso@business.aau.dk about the authors journal of business models (2019), vol. 7, no. 3, pp. 131-142 142 kristian brøndum is phd fellow at the department of business and management at aalborg university in denmark. his phd project is within the field of corporate entrepreneurship, focusing on the development and design of a new way to spot intrapreneurial individuals in organisations. additionally, he is interested in how to get more knowledge and entrepreneurial potential into play in business development processes through creative methods and techniques. before entering the phd programme, kristian has worked with the development and innovation of business models for everything from start-ups, public institutions to large global groups as a project manager and consultant. kbk@business.aau.dk about the authors journal of business models (2019), vol. 7, no. 4, pp. 73-78 73 a unified framework for classification of business model transformations of established firms dr. dror yeger1 dr. aaron j. shenhar2 1 entrepreneur, researcher, consultant and a lecturer in several faculties including design, industrial engineering and business administration 2professor of project and technology management, rutgers university (retired)” abstract this study presents a framework for assessing and classifying business model transformation (bmt) of established firms. using teece’s definition of interlinked bm dimensions, we propose a diamond model to describe a change in a given firm’s bm based on the following four dimensions: target market; value proposition; value delivery and value capture. the extent of change on each dimension is quantified as no change, medium change and high change. aggregating change on all dimensions enables classifying a specific bmt as incremental, semi-radical, or radical. such modeling may provide better insights into the nature of a firms’ transformation. please cite this paper as: yeger, d. and shenhar. a. j. (2019), a unified framework for classification of business model transformations of established firms, vol. 7, no. 4, pp. 73-78 keywords: introduction as defined by govindarajan & trimble (2005) and aspara et al. (2011), business model transformation (bmt) deals with established companies’ transformation their existing bm to achieve strategic renewal. bmt has been identified as an important research issue (lambert and davidson, 2012), however, its current research base was characterized as somewhat scant (frankenberger et al., 2013). in this paper, we propose a four-dimensional model to describe a given firm bmt. the basis for the model is teece’s (2010) definition of bm as “the architecture of the firm’s value creation, delivery and capture journal of business models (2019), vol. 7, no. 4, pp. 73-78 74 mechanisms”. thus, the basis for our model identifies change in (1) target market; (2) value proposition; (3) value delivery and  (4) value capture. similar dimensions have been proposed by baden-fuller & haefliger (2013); baden-fuller & mangematin (2013) and frankenberger et al. (2013). each dimension is quantified by three elements using a risk/ reward hierarchy (christensen & bower, 1996; merton, 2013): no change, medium change, and high change. dimension 1: change in target market target market is a key component in most bm constructs and frameworks (chesbrough, 2010; osterwalder and pigneur, 2010; teece, 2010): no change: stay with current target market; medium change: focus on a sub-segment of current market (porter, 1985) or simultaneously stay with current market and approach a new market segment. example: dell approaching smb in addition to consumers; high change: leave existing market for a completely new market example: motorola exits the mobile phone consumer market and focuses on the public communication market (rebranding itself as “motorola solutions”). dimension 2: change in value propositiondescribes the values (or benefits) the firms create to customers (priem, 2007; kim & mauborgne, 2005): no change: stay with current value proposition; medium change: current value enhancement better performance on already known industry metrics (rigby et al., 2002; christensen, 2003) examples: samsung offering higher battery time in its smartphone; dell offering higher processing capabilities for its laptops etc.’; or current value complementarities additional adjacent values that offered/bundled with current products or services (mcgrath and macmillan, 2005; zott and amit, 2010) examples: apple offering the itunes store in addition to its media player; ebay providing secure financial transactions service etc.’ ; high change: cost innovation changing current value proposition to be based on extremely low price compared to the firm’s industry (christensen, 2006; williamson, 2010) examples: p&g low cost electric toothbrush (spinbrush); haier low cost wine-storage refrigerators;  or novel offering changing current value proposition to be based on an offering totally new compared to the firm’s industry (kim and mauborgne, 2000; mcgrath & macmillan, 2005; foss and saebi 2017) sony transistor radio, cirque de soliel , yellow tail wine . dimension 3: change in value delivery defined as “the linked set of value-creating activities all the way through from basic raw material sources for component suppliers to the ultimate end-use product delivered into the final consumer’s hands” (govindarajan & gupta, 2001): no change: stay with current value delivery activities; medium change: new activities, architecture or governance (zott and amit, 2010). examples: new activities -toyota just in time; ge six-sigma; new architecturewalmart cross docking process, zara’s ability to develop a new product and deliver it to stores in just two weeks (vs. 6 month), new governance nikeid and fiat 500self designed shoes/ cars, ikeado it yourself (diy) ; high change: developing/implementing new technologies compared to the firm’s industry (christensen, 1997; utterback,1996; anderson & tushman,1990) examples: airbus a380, apple touch screen technology, microsoft kinetic etc’. dimension 4: change in value capturedefined as ”a set of strategies that enable capturing as much as possible portion of value appropriated by the firm itself, in the form of profits, rather than by other chain members or competitors” (bowman & ambrosini, 2000; makadok & coff, 2002; aspara & tikkanen, 2012). no change: stay with current value capture activities; medium change: adding additional marketing/sales channels (sabatier et al., 2010); or selling additional products/ services based on current activity (mcgrath and macmillan, 2005). examples: amazon affiliate marketing, edmunds selling its data base to third parties, victoria secret selling classical music cd; high change: adding activities that create high incentives for customers journal of business models (2019), vol. 7, no. 4, pp. 73-78 75 initial engagement ,e.g. “bait”, bundled with activities to “lock” customers, e.g. “hook” (zott and amit, 2010; osterwalder and pigneur, 2010); or a utilitybased engagement e.g. pay per usage (desyllas and sako 2013) or pay per result (ding & yip,2013; mcgrath & macmillan 2005). examples: bait and hooknespresso capsule, hp inkjet. utility-based engagement rolls-royce engines ”power by the hour®, consulting firm fahrenheit 212 -’outcome-obsessed, outcomepaid’ business model , google’s “pay per click”. designing or identifying factors for customer lockin mechanism are rather rare and might even daunt potential customers and partners as was the case with better place the electric vehicles company (christensen et al 2012; levine 2013). utility-based engagement involves an inherited risk of not reaching the desired performance and thus not being paid. hence their position under high change. approach in order to test and verify the bmtf, we studied seven firms that underwent bmt. the study involved 14 interviews and supplemental material. firms were chosen based on the following criteria: 1) a small/medium size technology company which transformed its bm; 2) two executives who were involved in the bmt agreed to a face-to-face interview; 3) the bmt outcome was successful (a successful bmt had produced new revenues streams and defined by its managers as successful). the data was then verified and triangulated with additional data sources (leedy and ormrod 2010, yin 2009). several modifications and refinements of the bmtf were then added. key insights according to foss and saebi (2017), teece’s notion of “architecture” relates to mapping the functional relations among dimensions and their underlying activities. in other words, all dimensions should be seen as one construct, linked by the firm’s architecture, we propose that by charting a given firm bmt on the framework, one can conceptualize and measure the extent of a given bmt by a higher level of abstraction and granularity. here is a common example from the bm literature: example: rolls-royce plc rolls-royce transformed its bm in the 1980s: instead of selling aircraft engines and spare parts to operators they ”gave the engine for free,” and for a fixed sum per flying hour, provided a complete engine and accessory replacement service. ”the key feature was to provide operators with fixed engine maintenance costs over an extended period of time. operators were assured accurate cost projections and avoided unpredictable breakdown costs associated” cohen and netessine, 2010. rolls-royce, (1) stayed within its current market; (2) created a novel offering; (3) devised a complicated architecture and activities to deliver the novel offering and; (4) engaged the market on a pay per usage basis. journal of business models (2019), vol. 7, no. 4, pp. 73-78 76 defining three levels of transformation: incremental, semi-radical, radical bmt several researchers suggested that one can measure bmt through the degree of change in the bm building blocks (amit and zott 2001, osterwalder et al. 2005) or the number of building blocks that have been changed simultaneously (skarzynski and gibson 2008). accordingly, the proposed model can measure transformation per dimensions (d1, d2, d3, d4) and/or their group of elements (e0, e1, e2). we define (e) as number of elements changed on any dimension with a value range of (0 ≤ e ≤ 2); we define (d) as the number of dimensions on which change has been realized with a value range of (1 ≤ d ≤ 4); we can now calculate total change (tc) with a value range of 1 ≤ ∑ (tc) ≤8. dimensions /elements e0 e1 e2 d1 0 ∑(tc) = 1 ∑(tc) = 2 d2 ∑(tc) = 2 ∑(tc) = 3 ∑(tc) = 4 d3 ∑(tc) = 4 ∑(tc) = 5 ∑(tc) = 6 d4 ∑(tc) = 6 ∑(tc) = 7 ∑(tc) = 8 factoring both elements and dimensions allows us to construct a three-level scale for ranking tc: incremental= 1 ≤ ∑(tc) ≤ 2, semi-radical= 3 ≤ ∑(tc) ≤ 5 and radical= 6 ≤ ∑(tc) ≤ 8. as reflected on the bmtf, one can conclude that rolls-royce realized a semi-radical bmt since their tc = 5. discussion and conclusions as bmt research evolves, we hope this work would contribute to better defining and quantifying this phenomena. by moving beyond generic typologies, a greater level of abstraction and a higher degree of granularity is proposed, hopefully providing a new way to operationalize and measure bmt. from a practitioner standpoint, since every industry/sector eventually declines, in order to survive, firms need to constantly reinvent themselves and their business model. hopefully, this work will inspire other researchers and practitioners to further contribute to bmt research resulting in the creation of better tools, knowledge and consequently help more firms to achieve superior business results. journal of business models (2019), vol. 7, no. 4, pp. 73-78 77 bibliography aspara, j., lamberg, j. -a., laukia, a., & tikkanen, h. (2011). strategic management of business model transformation: lessons from nokia. management decision, 49, baden-fuller, c., & haefliger, s. (2013). business models and technological innovation.  long range planning. baden-fuller, c., & mangematin, v. (2013). business models: a challenging agenda.  strategic organization, 11(4), 418-427. budde christensen, t., wells, p., & cipcigan, l. (2012). can innovative business models overcome resistance to electric vehicles? better place and battery electric cars in denmark. energy policy. chan, w., & mauborgne, r. (2005).  blue ocean strategy: how to create uncontested market space and make competition irrelevant. harvard business press. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2), 354-363. christensen, c. m., & raynor, m. e. (2003).  the innovator's solution: creating and sustaining successful growth. harvard business school press. cohen, m. a., and s. netessine. "power by the hour': can paying only for performance redefine how products are sold and serviced." retrieved may 11 (2007): 2010. frankenberger, k., weiblen, t., csik, m., & gassmann, o. (2013). the 4i–framework of business model innovation: a structured view on process phases and challenges.  international journal of product development, 18(3), 249-273. govindarajan, v., vijay govindarajan, m. b. a., & trimble, c. (2005). ten rules for strategic innovators: from idea to execution. harvard business school press. lambert, s. c., & davidson, r. a. (2012). applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. european management journal. leedy, p. d., & ormrod, j. e. (2010). practical research: planning and design (9 ed.). mcgrath, r. g., & macmillan, i. c. (2005). marketbusting. harvard business review, 83(3), 80-89. ng, i. c., ding, d. x., & yip, n. (2013). outcome-based contracts as new business model: the role of partnership and value-driven relational assets. industrial marketing management. osterwalder, a., pigneur, y., & tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of the association for information systems, 16(1), 1-25. sabatier, v., mangematin, v., & rousselle, t. (2010). from recipe to dinner: business model portfolios in the european biopharmaceutical industry. long range planning, 43(2), 431-447 journal of business models (2019), vol. 7, no. 4, pp. 73-78 78 teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2), 172-194. williamson, p. j. (2010). cost innovation: preparing for a ‘value-for-money’ revolution. long range planning, 43(2), 343-353. zott, c., & amit, r. (2010). business model design: an activity system perspective.  long range planning,  43(2), 216-226. journal of business models (2018), vol. 6, no. 3, pp. 1-23 1 eaas: electricity as a service? yueqiang xu1, *, petri ahokangas1, emmanuelle reuter2 abstract purpose: like a number of other traditional industries, the energy industry is undergoing a major transformation. with the advent of smart grids, the industry is transforming from a centralized energy system to a distributed energy network, and from the traditional product-based to a service business model. an essential question is “what types of value creation and value capture opportunities emerge at the level of ecosystems as the energy and smart grid industry shifts from the existing product-based business model to a greater service orientation?” design: the study utilizes the 4c ecosystemic framework and the xaas (everything as a service) digital service business model typologies, and collects business model case data from 15 eu horizon 2020 innovation projects. the research uses a two-stage approach that includes interpretive case analysis and action research to analyze and create an ecosystemic business model framework. findings: the paper uncovers the following business model typologies for the digitalization of the energy business ecosystem: connection as a service (caas), supply as a service (saas), data as a service (daas), and energy application as a service (eaaas). research limitations/implications: a key outcome is the proposition of the electricity as a service (eaas) concept for the energy sector, proposing a new service business paradigm for the energy ecosystem. one limitation is that the research has a strong regional focus on european cases. originality / value: the study adopts a value-based and service-dominant lens focused on business model research at the ecosystemic level. for the first time, the study introduces the xaas service business typology, investigating how this well-established ict (information and communication technology) business framework can enable the digitalization of the energy industry. please cite this paper as: xu, y., ahokangas, p., reuter, e. (2018), eaas: electricity as a service?, vol. 6, no. 3, pp. 1-23 acknowledgements: this research has been supported by the european union horizon 2020 program. the authors would like to acknowledge the support of the h2020 p2p smartest and h2020 empower project consortiums. this research is part of the activities of sccer crest, which is financially supported by the swiss commission for technology and innovation (cti). keywords: business model, business ecosystem, service-dominant logic, value-based strategy, xaas, saas, smart grid, electricity-as-a-service. 1 martti ahtisaari institute, oulu business school, university of oulu pentti kaiteran katu 1, p.o. box 4600, fi-90014 oulu, finland yueqiang.xu@oulu.fi, petri.ahokangas@oulu.fi 2 university of neuchâtel, switzerland institut de l’entreprise rue a.-l. breguet 2 2000 neuchâtel, switzerland emmanuelle.reuter@unine.ch * corresponding author: yueqiang xu, yueqiang.xu@oulu.fi journal of business models (2018), vol. 6, no. 3, pp. 1-23 2 introduction new and innovative business models have been transforming and disrupting traditional industries at an unprecedented speed (downes and nunes, 2014). the energy industry is no exception (amin, 2011). traditionally, the industry has a dominant business model with the sole responsibility to generate electricity at central power plants and distribute the energy to end consumers through transmission and distribution networks. this responsibility of delivering power is now being transformed into a dynamic mode of operation due to the deployment of smart meters, the diffusion of renewables and distributed generations, and the development of smart energy applications (zahedi, 2011). smart grid technology enables a shift from the old, centralized production and distribution energy system to a modern network incorporating two-way, end-toend communication, and decentralized management of generation, transmission and distribution (xu et al., 2016) (reuter, loock, & cousse, 2019), covering four technological layers, infrastructure/hardware, platforms/data, equipment/devices, and applications/services (moqaddamerad et al., 2016). the european union (eu) and the united states (us) define the functions of a smart grid as enabling new products, services, and markets while operating and optimizing assets efficiently (amin, 2011; gajic and eli, 2013). with the advent of smart grids, energy firms have the potential to seize novel business opportunities. what new forms of business models arise for firms in the energy industry is a question of central concern addressed in this paper. to address that question, we build on the bridge initiative of the horizon 2020 program, which was launched by the european commission in 2016. the bridge initiative provides an opportunity to witness novel forms of value creation and of value capture first-hand, as it observes the impact of the technological, commercial, and regulatory transitions that take place in the energy industry at the european level. the program focuses on smart grid and energy storage projects to create a structured view of the innovations and cross-cutting issues that are encountered in the demonstration projects. the energy business model and consumer engagement are two of the four key interest areas addressed in this large-scale initiative, with 31 major horizon 2020 energy research projects to date (as the time of this research). through a collaborative review of business models in the energy field, we discover an emerging pattern of new and innovative business models in the energy and smart grid ecosystem: there is a visible shift from product-based business models towards service orientation. at the same time, furr (2016) points to similar transitions in a number of digitalized industries such as e-commerce (amazon), search engine and online advertising (google), and smart energy (nest). hui (2014) differentiates the service-oriented business model from the product-based business, suggesting that new opportunities for value creation and capture emerge which are not limited to physical product sales. other revenue streams over the customer lifetime become possible after the initial product sale, including value-added services, subscriptions, and apps, which can remarkably exceed the initial purchase price, creating new value for both companies and their customers. yet, there are inherent tensions between the two business logics, fundamental distinctions between an asset and transaction revenue model, and between differentiation strategy and network-based competitive advantage (furr, 2016). at a general level, and compared to the classic product business, service-based businesses build on different types of value creation and value capture. theoretical research gaps related to the energy and smart grid industry through reviewing the extant business model literature, we identified a number of gaps related to business model research in general as well as to energy and smart grids in particular: 1) the lack of a unified explanation about the value created and how such value is captured in the context of industries that transition from product to service businesses. multiple terms of business models are used (zott, amit, and massa, 2011) without further clarification of what exactly are value creation and value capture, such as chesbrough’s (2007) revenue mechanism, johnson et al.’s (2008) profit formula, and osterwalder and pigneur’s (2010) cost structure and revenue streams; 2) the lack of ecosystem thinking when large and complex industries (e.g., the energy sector) require firms to pay attention to ecosystem-level relationships and interactions (iansiti and richards, 2006), as value is created by the network of business models co-existing in an ecosystem journal of business models (2018), vol. 6, no. 3, pp. 1-23 3 (jansson et al., 2014: 3). the existing business model literature has extensively studied how a focal company creates and captures value for itself, by means of its own operation (magretta, 2002) or by interactions with external partners (amit and zott, 2001; osterwalder and pigneur, 2010; casadesus-masanell and ricart, 2011) or by utilizing an extended network (moore, 1996; iansiti and richards, 2006). however, how value is created and captured at the level of an ecosystem (or the systemic value in the energy industry) has rarely been investigated (xu et al., 2017). yet at the level of entire ecosystems, new opportunities for value creation emerge that build upon the complementarities among collaborating partners. as such, an enhanced understanding of what these sources of value creation are and how they may be captured is of crucial concern. empirical challenges related to the energy and smart grid industry in particular, and like in a number of other industries, new sources of value creation and value capture emerge as industries shift to a “smart” and digital age. today’s companies fundamentally rethink their business models and logic about value creation and value capture (hui, 2014), as they seek to take advantage of information and communication technology (ict). in particular, the inception of the smart grid is an indicator that the energy industry has shifted towards greater digitalization and that information-based competition has come (wessel et al., 2015). in this new era, the implications for business model innovation are huge. to take advantage of information and communication technology (ict)based opportunities, today’s companies will need to fundamentally rethink their business models and logic about value creation and value capture (hui, 2014; reuter et al., 2019). for instance, in a connected world, products are no longer stand-alone. over-the-cloud updates enable new features and functionality to be pushed to the connected consumer devices on a regular basis. the products can now be connected with other products, leading to new data and information (wessel et al., 2015), new services (hui, 2014; reuter and loock, 2017), and new customer experiences (hokkanen et al., 2016). as stressed by wessel et al. (2015), despite the inevitability of this “smart” future, most large companies struggle to get the most out of the digital age, such as the amounts of data they have collected through smart meters and sensors or the internet-of-things (iot). energy companies are required to recognize and seize the opportunities for new value creation and capture. they need to update the decades-old management mentality and systems to embrace new digital opportunities (wessel et al., 2015). the shift from the classical energy product and commodity business to greater serviceorientation is huge for the traditionally asset-intensive energy companies. compared to other industries, such as retailing or media, energy firms face new standards as regards customer services. metering, installation, energy management are just a few examples of service opportunities, through which energy firms have the potential to create novel value going forward. empirical case analysis shows that traditional energy players face inherent challenges in making that transition. key observations are that new and industryremote players (e.g. telecommunications firms) enter the market in offering innovative energy services. this may be due to the lower asset intensity of the service business and lower barriers to market entry. moreover, traditional energy players (with energy as commodity business) tend to have a low customer orientation. a shift towards greater service orientation requires energy players to know their customers better, to be able to craft services accordingly. they need to learn how to monetize service with completely new revenue models. as such, new capabilities are required that are by definition remote from the classical energy product business. that said, energy firms do make the transition towards greater service business. yet, it occurs slowly and with many challenges. to address the above empirical and theoretical issues and challenges, we utilize the value-based perspective on a business model conceptualization in combination with the layered ict ecosystem framework to propose and investigate the service-dominant logic and xaas (everything as a service) business model typologies for the energy industry. by doing so, we expand the theoretical and empirical frontiers of business model studies, going beyond the conventional single actor-focused and product-based business models of the industry. after discussing a number of theoretical and empirical research gaps that surround the conceptualization of the service business model in smart grids in the following section, we identify an essential question for the journal of business models (2018), vol. 6, no. 3, pp. 1-23 4 transition in the energy industry: “what types of value creation and value capture opportunities emerge at the level of the ecosystem, as the energy and smart grid industry shift from the existing product-based business model to a greater service orientation?” to address this research question, we follow a two-stage approach, including an interpretive case study for case analysis and an action research approach for the development of the eaas framework. section 4 will present the detailed research methodology. the rest of the paper is organized as follows. section 2 presents related literature on the business model, business ecosystem, and service-dominant logic discussion in general. section 3 provides a discussion on energy and smart grid business models. the research methodology is explained in section 4. a mapping and aggregated analysis of 51 energy business model cases is given in section 5 to present key findings of the study, including the identification of four types of energy as a service (eaas) or service-oriented business model typologies in the energy and smart grid ecosystem. finally, the theoretical and empirical implications arising from the study are discussed in section 6. the value-based perspective on the business model and service dominant logic this section starts with the value-based view on the actor-focused business model and expands to the service dominant logic on the ecosystem and business model. understanding business model concepts the concept of business model has attracted tremendous attention and raised profound debate among scholars concerning how to define and conceptualize the business model (jensen, 2013). for instance, chesbrough and rosenbloom (2002) conceive of business models as focusing devices that explain how economic value could be extracted from a technology or business idea. morris et al. (2005) define the business model as a set of decision variables that are interconnected to create a sustainable competitive advantage. other conceptualizations include examples such as an architectural model (timmers, 1998), a narrative model (magretta, 2002), a design model (demil and lecocq, 2010; amit and zott, 2001), a dynamic system (casadesus-masanell and ricart, 2011), and conceptual tools (osterwalder and pigneur, 2010; ahokangas et al., 2014; lüttgens and diener, 2016; martins, rindova, & greenbaum, 2015). (martins, rindova, & greenbaum, 2015) referring to several studies (ahokangas and atkova, 2015; xu et al., 2016), the origin of business model can be traced back to the business idea: “what a company offers to whom and how” (normann, 1977). it consisted of components such as resources and competencies, an internal and external organizational structure (demil and lecocq, 2010), a customer value proposition (chesbrough, 2007; johnson et al., 2008; zalewska-kurek et al., 2016), and a cost and revenue structure (osterwalder and pigneur, 2010). overall, we identify the business model as a boundaryspanning unit referring to value creation and capture, opportunity exploration and exploitation, and company performance improvement and competitive advantage establishment (chesbrough, 2010; zott et al., 2011; onetti et al., 2012; zott and amit, 2013; xu et al., 2017). value-based perspective on the business model the notions of value, value creation and value capture are inherent in the definition of a business model (lund and nielsen, 2018) (reinhold, reuter, & bieger, 2011). according to nielsen and lund (2015), integrating the aspect of value has tremendously influenced the existing streams of business model studies. one of the common definitions of business model is “the logic of the firm, the way it operates to create and capture value for its stakeholders” (casadesus-masanell and ricart 2010, p. 196). zott et al. (2010) suggest business model as a construct that conceptualizes the value creation and value capturing of a firm. to go one step further, hui (2014) defines value creation of the business model as involving the performing activities that increase the value of a company’s offering and encourage customer willingness to pay, which is in line with brandenburger and stuart’s (1996) value-based perspective. therefore, value is the sum of the firm’s profits and consumer surplus (casadesus-masanell and llanes, 2011). as initially discussed in the strategy research domain, porter (1996) addresses the importance of a strategic “position” that brings value. porter (1996) also adopts journal of business models (2018), vol. 6, no. 3, pp. 1-23 5 a value activity approach to strategy, considering the firm as a cluster of activities responsible for bringing a product to market. these “activity systems” can be designed well or poorly; well-designed systems include activities that are complementary and perform better together than they do individually (casadesusmasanell and zhu, 2013). brandenburger and stuart (1996) coined the term “valuebased” strategy, suggesting that value comes from creating “added value” by any actor within the entire value chain or industry. the “added value” from a focal actor is defined as the value created by all the actors in the vertical value chain, deducting the value created by all the other actors except the focal actor in question, as illustrated in figure 1. the key to value capture (or value appropriation) is the possession of a positive added value. such positive added value from the firm can be generated from sources that lead to the creation of value asymmetries, including maximizing customer’s willingness-to-pay or minimizing opportunity costs of the suppliers, or the combination of both. the accrued value is seen as the wedge between customer’s willingness to pay and supplier’s willingness to sell (brandenburger and stuart, 1996) and how value would be captured as profit. with regard specifically to value creation, the extant literature builds on porter’s (1996) theory, conceptualizing it as the representation of the activity system including the actions responsible for inbound logistics, operations, outbound logistics, marketing and sales, service, and support activities. these value-adding and re-enforcing activities create value, as each is applied successively to another (brandenburger and stuart, 1996; casadesus-masanell and zhu, 2013). development in the literature on value capture distinguishes between two essentially different processes (brandenburger and stuart, 1996; macdonald and ryall, 2004). on the one hand, firms have “bargaining power” that assures them some cut of the value that has been created, which has to do with how much added value they create and how easily they can be replaced. on the other hand, there is a margin of value that goes uncaptured, even after various slices have been allocated to various players. because creating value is a cooperative process and everyone has a claim to what is left, firms cannot rely on their “bargaining power” to secure a share of these “leftovers”; instead, they must utilize their value-capture ability (grennan, 2013; casadesusmasanell and zhu, 2013). value capture in the business model is the monetization of customer value, the proportion of the value created that is appropriated by the company (hui, 2014; casadesus-masanell and llanes, 2011). to this end, what embodies value capture in a business model can be chesbrough’s (2007) revenue mechanism or casadesus-masanell and zhu’s (2013) profit function. menychtas et al. (2014) provide a comprehensive view of these elements in the business model: 1) the revenue model, which measures the ability of a company figure 1: value creation and the division of value (adapted from brandenburger and stuart, 1996). journal of business models (2018), vol. 6, no. 3, pp. 1-23 6 to translate the value it offers to its customers into money and therefore generates incoming revenue streams (dubosson-torbay et al., 2002). 2) the costs structure, which measures all the costs a firm incurs in order to create, commercialize, and deliver value to its customers (kashef and altmann, 2012). for instance, directly used products generate costs for their value proposition usage. 3)  the profit model, which is the difference between the revenue model and the cost structure (hamilton, 2004). thus, the profit model is the revenue that is generated from the revenue model minus the costs that are generated from the cost model (menychtas et al., 2014). the rise of business ecosystem thinking a review of the business model literature shows that the majority of the modern frameworks remain focused on the company level. however, the competitive landscape of modern business has changed to a highly networked economic environment. this is further exacerbated in digitized industries, as digital platforms enable cooperation among complementary firms. in this context, ecosystems and business models within ecosystems are emerging as a new domain of strategy research (iivari et al., 2016). moore (1996) defined the concept of the business ecosystem as an economic community of organizations and individuals, including producers, suppliers, competitors, and other stakeholders that produce goods and services that generate value for the customers and users. iansiti and richards (2006) describe business ecosystems as highly complex, interdependent, cooperative, competitive, and convolutional in pursuit of innovations. importantly, as the unit of analysis shifts from single companies to entire business ecosystems among collaborating companies, classical analyses of value creation and value capture become obsolete. instead, new approaches are needed that account for the cooperation among complementary firms. in this vein, amit and zott’s (2001) study on sources of value creation in e-businesses highlights how value is created at the level of transactions among suppliers, partners and customers. based on a cross-case analysis of e-businesses, they identify efficiency, complementarities, lock-in, and novelty as key value drivers of e-businesses. from this perspective, a business model refers to the design of transaction content, structure, and governance, as it seeks to exploit business opportunities in an ecosystem. shifting to the service-dominant logic of the business ecosystem as the first generation of ecosystem thinking, moore (1996) presents an individual company-centric view of the business ecosystem (core enterprise, extended enterprise, and ecosystem), where the business ecosystem is created to serve a focal company, or the keystone (moore, 1996). jansson et al. (2014) expand the business ecosystem concept towards a more systemic perspective, viewing business ecosystem as a bundle of business models where the interlinked process of value co-creation, co-capture, co-opetition, and co-evolution prevails, conceptualizing the ecosystem as a network of individual business models. a true systemic view of a business ecosystem and an associated ecosystemic business model is proposed by vargo and lusch (2016) in recent marketing literature, highlighting not only the importance of systemic and institutional perspectives but also their convergence. the concept of the service ecosystem describes a business ecosystem as “a relatively self-contained, self-adjusting system of resource integrating actors connected by shared institutional arrangements and mutual value creation through service exchange” (vargo and lusch, 2016, p. 10-11). zalewska-kurek et al. (2016) further argue that customers are essential to developing the core element of the business model, and they should not be viewed just as an audience but as a valuable “actor.” utilizing gummesson’s (2011) dynamism argument, service ecosystem scholars (wieland et al., 2017) replace labels such as buyers and sellers and refer only to actors interacting with other actors. similarly, adopting this actor-to-actor perspective, the service-dominant logic researchers suggest all ecosystem actors, such as end users and firms who engage in exchange, are integrating resources and exchanging services to achieve value co-creation. while the network perspective of the business ecosystem and business model recognizes the importance of collaboration among companies, this view is still wrapped around the focal company and overlooks the systemic participation of actors in the dynamic value co-creation among actors. instead, the service ecosystem perspective sees the shift from company-centricity and the sole production of outputs to activities and processes in which ecosystem actors participate in service exchange (vargo and lusch, 2016). a service ecosystem is also aligned with journal of business models (2018), vol. 6, no. 3, pp. 1-23 7 brandenburger and stuart’s (1996) value-based strategy, in the way that the institutionalization of the new norm and value increases consumer’s willingness-topay (or willingness to engage in exchange) in the ecosystem, while actors’ (companies’) opportunity costs are reduced, thanks to the co-creation activities and shared access to resources within the ecosystem. smart grid ecosystemic business model prior to introducing the service-dominant logic and service ecosystem view to energy and smart grids, xu et al. (2016) identify that when analyzing the transition of the utility-led centralized energy system to a distributed smart grid system, the traditional companycentric business model conceptualization and tools do not suit the purpose. on the other hand, this research gap is rarely studied in the business model literature or addressed in energy-related studies. xu et al. (2016) systemically study the categories of value that can be created and delivered by the adoption of a smart grid in today’s energy system, suggesting that the use of the ecosystemic business model in the smart grid domain can unlock and create five types of value in the energy ecosystem and society in general. the categories of value include economic (e.g., reducing unnecessary cost and investment in constructing backup generation capacity), environmental (e.g., facilitating the integration of renewables), reliability (e.g., the use of next-generation ict technologies to improve network reliability), energy security (e.g., ramping up renewables to reduce reliance on depleting fossil fuel resources), and consumer engagement and interaction (e.g., turning consumers into prosumers, facilitating active market participation). the discussion of how these categories of value are created with a smart grid ecosystemic business model is presented in the following sections 3.1 and 3.2. the 4c ecosystemic business model for smart grids incorporating the service ecosystem logic for this study, we first adopt a typological 4c framework (wirtz et al., 2010) that is used to study ict-enabled digital ecosystems such as 5g (yrjölä et al., 2015) and smart grids (xu et al., 2016, 2017). one reason behind the utilization of the 4c ecosystemic model is related to vargo and lusch’s (2016) service ecosystem thinking, showing that the transition of smart grid is a performative process, in which business models, technologies, and markets are developed and continually shaped by a broad range of actors influencing the value creation and capture practices. in this circumstance, business models cannot be studied in isolation. the separation of a business model from its technological and economic context is less suited for investigating the interdependence of the companies and actors that are evolving in the same business ecosystem (alanne and saari, 2006), as in the case of smart grids. the 4c framework consists of four essential business models, each with different value propositions and revenue mechanisms: connection, content, context, and commerce (table 1). yrjölä et al. (2015) suggest a key characteristic of the 4c framework is that the upper layers can be enabled by lower layers in an ict ecosystem. four typological value propositions (value of connection, value of content, value of context, and value of commerce) are utilized to describe the value structure of the business ecosystem. the value embedded in the value propositions can be created and captured in individual layers, multiple layers, and combinations of different layers (yrjölä et al., 2015; xu et al., 2016, 2017), which can be seen as “value-in-layers” with the main value in certain layers and the enabling value in other layers. the detailed demonstration and adaptation of the 4c framework in the energy industry and smart grids are presented in section 5.1. layer description commerce service providers offer all stakeholders an application or marketplace for trading alternative connectivity solutions, content, or context data. context service providers offer data and information-related context services. content service providers offer any content the customers would want or need. connection service providers offer connectivity solutions to one or several networks. table 1: the 4c ecosystemic business model and value framework (adapted from wirtz et al., 2010; xu et al., 2016, 2017; moqaddamerad et al., 2017). journal of business models (2018), vol. 6, no. 3, pp. 1-23 8 moreover, to illustrate the different types of value that may be related to ecosystem thinking, this paper utilizes xu et al.’s (2016) study of multiple value streams to be recognized and realized in the context of the energy industry and smart grids. referring to xu et al. (2016), business models need to create not just economic value, but also environmental value, reliability value, energy security value, and consumer engagement/interaction value in the energy ecosystem. xaas service business model typologies in the traditional product business, creating value is associated with identifying enduring customer needs and manufacturing well-engineered solutions. the competition was primarily feature-versus-feature warfare. when product feature improvement and innovation become too incremental, price competition arises and eventually makes the product obsolete. in contrast, the service business is seen to create continuous value or multiple revenue streams rather than sales of the product (hui, 2014). in the digital services domain, the notion of xaas (everything as a service) gains popularity for digitally enabled systems (lenk et al., 2009). in this direction, a large number of digital service providers can be identified to offer a variety of cloud-based services across the cloud stack layers. according to mell and grance’s (2011) model, the most widely accepted digital service models are software as a service (saas), platform as a service (paas), and infrastructure as a service (iaas). various characteristics, such as virtualization of hardware, rapid service provisioning, scalability, elasticity, accounting granularity, and cost allocation models, enable the proliferation of xaas, and the notion of xaas (saas, paas, and iaas) is completely changing the way software is produced, consumed, and distributed. consumers do not buy licenses for software products anymore; they pay for its usage on a pay-per-use basis (giessmann and stanoevska-slabeva, 2013). the saas layer is the most visible service of cloud computing, which makes software applications accessed directly by the end users (stanoevska-slabeva and wozniak, 2009). these applications are deployed and executed in cloud systems and can be accessed from various client devices through a client interface such as a web browser (mell and grance, 2011). the iaas layer offers computing resources such as processing, storage, networks, and other fundamental computing resources that can be obtained as a service (mell and grance, 2011). connecting the iaas and saas layers, the paas layer is a web-based development platform which is open to external developers for new component and application development (giessmann and stanoevska-slabeva, 2013). the pricing model of xaas is classified into four categories by menychtas et al. (2014) as (1) subscription: customer pays for a time frame during which the product can be used; (2) pay-per-use event: customer pays for the event of interaction with the service; (3) payper-use time: customer pays for the time (duration) of the actual interaction with the service; (4) pay-per-use quantity: customer pays for the quantity of resources consumed by interacting with the service. to conclude the above discussion in section 3.1 and section 3.2, we see that xaas represents a holistic view to digital service architecture, which is embodied in three digital service business model typologies (saas, paas, and iaas). by combining xaas service business model typologies and the 4c ecosystemic framework, we conduct mapping and analysis of the innovative business model cases identified by experts from the eu bridge initiative. research design and data collection this study follows the methodology of the interpretive case study (walsham, 2006; andrade, 2009; bhattacharya, 2012) to analyze the energy business cases in the first stage and action research to construct the eaas framework in the second stage. the study is carried out as the joint research work of two eu-level energy innovation research projects. one project studies the peer-to-peer technical platform that facilitates decentralized energy market design and the peer-topeer energy exchange of smart grid, while the other develops a local marketplace and innovative business models to encourage micro-generation and the active participation of prosumers to exploit the flexibility created for the benefit of connected local grids. in the first stage, the study embarks on a systematic analysis of 51 innovative business cases that have launched new business models. based on the journal of business models (2018), vol. 6, no. 3, pp. 1-23 9 theoretical background previously outlined, the cases are analyzed and mapped in the proposed 4c framework and in the xaas typology in order to address our research question posed at the outset. this approach enables us to gain insight into what types of value are created in smart grid ecosystems and the related business model typologies in the energy and smart grid industry. some succeeded in radically changing the industry. in the second stage, the study takes an action-oriented approach (eden and huxham, 2006; koshy et al., 2011) to construct the energy-as-a-service logic through the xaas typology. the emphasis is on the use of a servicedominant logic. according to bahari et al. (2015), action research methodology in management science leads to producing scientific knowledge that can serve the action; and it enables the formalization and contextualization of models and tools, leading to new knowledge capable of facilitating organizational change. the data is collected from the bridge initiative of the european commission, a collaborative initiative for major european smart grid and energy storage projects, of which 15 projects contributed energy business cases to bridge’s business model working group. the data is retrieved in the form of business model cases, which are provided by a wide range of energy experts, business enterprises, policymakers, and research institutions with expertise and knowledge of the smart grid and energy landscape internationally. the study includes a total of 34 business model cases from the bridge program and is further complemented by 16 cases from the two horizon 2020 projects that are both participating in the bridge and have authored this paper. the cases cover a wide spectrum of the smart grid ecosystem, including distribution network, aggregation platform, virtual power plant, energy storage, smart home service, trading platform, and blockchainenabled energy solutions. overall, the data utilized in the research is provided by the aforementioned parties and participants in 2016 and 2017, which ensures a timely study and analysis of the state-of-the-art business models in energy and smart grids. in the next section, we present the key takeaways from our research and suggest how they can help innovators transform the energy industry. findings and discussion this section presents the results of the study with the proposition of the eaas ecosystemic framework. mapping of business models in the 4c ecosystemic framework by mapping a range of successful business cases in the proposed 4c framework and in the xaas typology, we could gain insight into what types of value are created in smart grid ecosystems. the emphasis has been on the value that is created from a service-dominant-logic standpoint and the related business model typologies (figure 2). the four layers of connection, content, context, and commerce are organized into four verticals. it is necessary to note that the unmarked cases mainly represent a certain part that is required to form the smart grid ecosystem but does not have a major digital component in their business models. connection is the first layer in the 4c ecosystemic framework. the role of a connection business in smart grids is to build and manage facilities for massive network operations. the imperatives of the infrastructure business are about economies of scale, creating the value of reliability, and security. connection business models are traditionally operated by the energy network operators, such as distribution system operators (dsos), who focus on delivering electricity at lower cost and satisfactory power reliability. the uk national grid is an example of a dso that manages private distribution grids, providing grid-scale storage and offering commercial maintenance services. the content layer presents the value propositions that focus on power quality, renewable energy integration, and consumption feedback. balancing energy supply and network constraints is a prime focus; thus the businesses in this layer exhibit more collaborative behavior. there are product-based companies such as caterva, a german startup that offers batteries to residential customers directly through selling or renting. there are also product-service hybrid companies like the us-based solarcity (developing turnkey solutions for residential solar panels and providing on-going support services). on top of the content layer, the contextual value is created and captured in the “context” layer. flexibility is the primary value, thus requiring coordinated activities among journal of business models (2018), vol. 6, no. 3, pp. 1-23 10 the ecosystem actors. here, the context-related value is refined to fit specific use cases, such as flexibility forecast and network load feedback (xu et al., 2016) (helms, loock, & bohnsack, 2016). the main offerings in this layer are usually the efficiency and flexibility services. energy aggregator is a viable business model that optimizing energy consumption at the customer site while providing customers with energy management tools such as energy monitoring, peak control, and demand response (dr). ingrid is another context business case that builds a technical platform to facilitate the integration of renewables and distributed generation (dg) in the main power grids. data has been identified as playing a critical role in the context layer; and firms employ different approaches to keep data accrued in their operations in closed, partially open, or fully open manners. for instance, restore is an aggregator of industrial and commercial energy customers, who partially opens its data to allow grid operators to tap into its customers’ reserve, providing a balancing service for the grid operators while rewarding the flexibility providers. in the commerce layer, open energy trading platforms are emerging. trading service providers, such as vandebron, empower and open utility, allow the participation of smaller customers having restricted access and participation in the energy market due to regulatory barriers. for instance, vandebron enables small-scale renewable energy producers to trade green energy directly with end customers. yet, the actual operation of open energy trading platforms are still limited due to regulatory restrictions (loock, reuter, & cousse, 2017; loock, reuter, & vandertann, 2016). it is worth noting that in the content and context layers, there are a few business cases that involve creating both content and context value due to their unique business models. for instance, ingrid does not only produce hardware and storage systems for renewable integration in the smart grids, but also develops software solutions to help manage the power grids in different contexts. ingrid’s business model covers both content business and context business. in this case, we give ingrid a unique identifier for each layer and map the case, as does ingrid (content) for its content business and ingrid (context) for its context business, in order to support a more granular analysis of how xaas business models can be applied to each individual value unit or value proposition in an integrated business model. the table 2 below summarizes the five value categories (name) identified and mapped across the four 4c ecosystemic layers. figure 2: mapping of energy business models in the 4c ecosystemic framework. journal of business models (2018), vol. 6, no. 3, pp. 1-23 11 from xaas to eaas: service business typologies in a smart grid ecosystem after the mapping and analysis of energy business model cases in the 4c ecosystemic framework, the research moves on to aggregate the business cases and construct a service-oriented framework at a higher abstract level with the three business model typologies of xaas. we identify how an energy and smart grid ecosystem is shifting to a service-dominant logic with service-oriented business models. by adapting to the xaas logic, we propose four electricity as a service (eaas) business model types (figure 3). generally speaking, the eaas business models follow the 4c ecosystemic framework’s “value-in-layers” structure, in which there are main value layers and the enabling value layer. the enabling value layer is usually the connection layer at the bottom of the framework as a foundation of the digital ecosystem. however, depending on the case, other layers can also become such layers to enable the main value creation and capture. first, the connection business is very similar to the iaas business typology. in smart grids, the incumbent dsos have adopted the service business model by building and maintaining an electricity network to enable the delivery of energy through the electrical network at different voltage levels. these dsos charge a network usage fee, capturing value through a subscription-based pricing mechanism that is often regulated by regulators and policymakers. depending on the regulation, such pricing is either incorporated into a single energy bill or a separate network usage bill (such as in finland) for consumers. however, it is important to stress that such a dso model is mainly applicable in liberalized markets such as the eu, australia, new zealand, and some states in the us. in other countries and regions, the integrated utility business model remains dominant, where dso is an integrated function in the entire utility operation, from electricity generation to transmission and distribution and to retail. in the case of an integrated utility business model, product-oriented logic is still being utilized, as both energy costs and network costs are aggregated in the final energy bill. the emerging concept of shared network access (sna) for dsos (li et al., 2016) shows further servitization economic value categories of value in the smart grid ecosystem environmental value reliability value energy security value engagement/ interaction value v al u e re la te d t o t h e 4 c e co sy st em ic la ye rs commercerelated value enabling prosumers to participate in energy market and trading enabling the trade of small-scale renewables lowering barriers for end customers to interact with the energy producers context-related value reducing economic costs arising from network constraints enhanced use of renewables and distributed generation reliability stemming from forecasting and providing flexibility to the grid customer engagement and interaction in smart grids content-related value integrating different renewables power quality feedback on energy consumption connectionrelated value economies of scale to provide economic benefits network reliability security of energy supply and the energy network table 2: the mapping of the value categories across the 4c ecosystemic layers. journal of business models (2018), vol. 6, no. 3, pp. 1-23 12 potential for the connection business. essentially, sna is a business model that incentivizes the incumbent dsos to give up its exclusive access to the network asset and operations, leasing the spare and underutilized capacity to licensed independent third parties. the ownership of assets is retained by the incumbent dso, while competition is introduced in the operation of the spare capacity. the new secondary dsos can introduce new service offerings and create more value without having to own the physical energy distribution network, thus becoming a provider of “connection as a service” that enables universal accessibility. second, we identify that the content and context business models resemble the paas typology and can be analyzed in two sub-categories (content business and context business). the content business is primarily focused on building physical platforms on top of the energy infrastructure to facilitate the energy supply that flows in the electrical grid. such a business model is built upon the existing grid infrastructure to be able to create and capture value, that is to say, the core of such a business model is about combining the grid infrastructure operated by dsos with an energy supply infrastructure. the examples can be the renewable energy aggregators or the energy storage networks operators such as ingrid, senec, and lichtblick. these companies manage network energy generation or storage facilities coupled with ict technologies to facilitate the ever-increasing supply of distributed energy resources such as solar and wind generations. these business models operate as different platforms to co-create value for the energy ecosystem while competing with each other, since they all fully or partially develop proprietary storage and control technologies that are only compatible if new applications are developed according to their technical standards and specifications. the use cases such as ingrid’s flexibility and renewable dispatch service in the context layer, senec’s grid platform, and lichtblick’s schwarmenergie all illustrate how these physically oriented platforms can enable new applications. furthermore, it is evident that all of these physical platforms represent the shift from product-based logic to service-oriented logic in the energy industry, in other words, from microgeneration and energy storage product vendors to platform operators. well-known players such as solarcity are adopting service-oriented logic as well. for instance, solarcity introduces a “zero up-front investment” model for home solar pv and focuses on the maintenance and support service contract to generate cash flow in the long run. all of these content business models are moving towards a “supply as a service” logic instead of strictly sales of products and equipment. within the empower project, a large-scale survey of customers in norway, switzerland, spain and germany uncovered customers’ interest in energyrelated services (reuter and loock, 2017). figure 3: eaas business model typologies. journal of business models (2018), vol. 6, no. 3, pp. 1-23 13 another type of paas is developed out of the software and data platforms in contrast to the aforementioned physical platforms. thanks to increasing digitalization in the energy industry, such as the mandated rollout of smart meters in the eu, massive data is captured using ict technologies, enabling and facilitating the emergence of context services. for example, clluc as a software platform developer creates a blockchain platform to remove intermediaries and improve operational efficiency for a number of industries, such as energy and finance (xu et al., 2017). the platform allows customers and third parties to collaborate and develop new solutions and offerings through its software platform to enable grid flexibility and consumption reporting services. fingrid’s data hub is another example. the open data hub is a subsidiary of fingrid, the finnish transmission system operator. this system operator manages the open data hub and provides finnish energy ecosystem actors with open access to retail electricity and consumption data. by establishing an open platform with “data as a service,” new smart energy applications and services are expected to be developed, allowing energy ecosystem actors to create and capture new value. third, we discover that the saas business model typology can find real-life applications in the content, context, and commerce layers. altogether, we address these applications as “energy application as a service.” vandebron and open utility are remarkably new business models that offer commercial service applications. vandebron operates an “airbnb-like” open renewable marketplace for smaller generators and prosumers to trade their renewable energy directly to the end consumers. the marketplace itself is not an entity that involves energy trading, but rather empowers a peer-to-peer energy exchange with others. it can be considered as a software-enabled e-commerce application that is built on top of the physical and software infrastructures (e.g., connection, content). empower is also a similar case within this typology. virtual power plant (vpp) as an emerging new business model in the energy ecosystem can be categorized within the saas typology. shabanzadeh et al. (2016) suggest that vpp is a cloud-based software control center that takes advantage of ict and internet of things (iot) devices to aggregate the capacity of heterogeneous energy resources including different types of dg units, energy storage systems, and flexible loads to form an energy resource pooling with the key purpose of providing ancillary services for system operators such as dsos. vpps, such as next kraftwerke, provide a network balancing service based on contextual data and information, which can be considered as a stand-alone service application in the context layer. energy service applications can also be found in the content layer. for instance, helsinki energia’s (helen’s) suvilahti solar project is a service business model. on the one hand, it allows residential consumers to own and invest in shares of solar generation in a central and optimal location to maximize return on investment and create value for the utility’s customers. on the other hand, helen charges a monthly service fee for managing solar generation on behalf of its customers, shifting from sales of green energy to the provision of renewable energy services. the ecosystem actors may collaborate on either the value creation side or the value capture side. in the case of smart grids, dsos and mobile network operators (mnos) may jointly create a network load feedback service and provide it to aggregators and consumers/ prosumers. on the other hand, consumers/prosumers may allow behavioral data to be stored and utilized by dsos and mnos, while the true value of such data is captured by aggregators. the aggregators can provide data as a service (daas) that renders flexibility forecasting service to the network operators (like dsos) or provides consumption and usage behavioral analytics to enable energy retailers to gain a better insight into user behavior, which in return facilitates more valueadded services to be created for the consumers/prosumers. furthermore, in the case of smart grid dr, vpp operators like cybergrid can co-create value with consumers and prosumers to provide balancing service to the electric distribution network, benefiting network operators with the value of reliability and security. vpp operators will share the profit with prosumers and consumers by means of monetary rewards or the economic and environmental value. in this way, all parties can create and capture multiple streams of value all together for the ecosystem, which is in line with vargo and lusch’ (2016) service ecosystem logic. journal of business models (2018), vol. 6, no. 3, pp. 1-23 14 conclusion and implications generally, the paper shows that vargo and lusch’s (2016) service ecosystem view can be applied to the energy ecosystem through the 4c ecosystemic framework. in this setting, vargo and lusch’s (2016) mutual value creation through service exchange is identified as such that different layers within the 4c ecosystem can create value and service offerings that can later enable new types of value and service offerings in other layers of the ecosystem. based on yrjölä et al.’s (2015) suggestion for the ecosystemic perspective, the 4c typologies are placed as layers where businesses on lower layers are required as enabler and value levers for higher layers to exist. the different stakeholders or actors within the ecosystem can offer businesses alone or as bundled value creation, and the business potential of the entire ecosystem depends on the ecosystem actors’ synergy when providing their services to other actors within the ecosystem. to sum up, an important finding from the paper is related to whether the digitalized energy ecosystem leads to the formation of xaas, the well-known system design and architecture typology in software and digital business. the research shows that there is a two-way interplay. for instance, vargo and lusch’s (2016) service ecosystem concept explains that the institutional frictions within the energy industry provide the impetus for the digitalization of the energy industry, the uptake of digitalization of energy industry, and the development of smart grid technologies and innovations. on the other hand, the xaas concept that is adopted by innovative (digital) energy companies stimulates and steers the industry towards a service-oriented ecosystem, since the collaborative value creation and capture approach enables the companies to tap into new business territories that would not be possible if all actors adopt a closed business mind set (as the aggregator and vpp cases discussed in section 5 of the paper). research implications the academic contribution of the study is the proposition of a service-dominant logic for the business model and ecosystem research to complement the existing value-based perspective (value creation and value capture) in business model studies. for the first time, the study introduces the xaas service business model typologies that are widely known in the ict research domain to the energy sector and investigates how the three service-oriented business model types can be used to enable and facilitate the digitalized transition of the energy industry and smart grids in particular. the paper studies the service-dominant logic of the energy industry through the investigation of innovative business cases collected by the energy experts from the eu bridge initiative. through the 4c ecosystemic framework, the paper is able to identify and categorize how these business cases can be recognized and placed in different layers of the energy ecosystem. then the action research and utilization of the xaas concept and typology constructs the service ecosystem framework for the digitalized energy business models. building on these concepts and frameworks, the paper demonstrates how innovative businesses can provide different energy services create value that cross multiple layers of the energy ecosystem with the engagement and involvement of different energy industry actors. thus, it goes beyond the conventional utility-centric and productbased business model of the energy industry, emphasizing the maximization of ecosystemic value for actors involved in a business ecosystem, in contrast to the conventional wisdom on value maximization for a focal actor of the business ecosystem. as argued by wieland et al. (2017), this is an issue regarding the unsatisfactory definitions and normative prescriptions of the business model in the extant literature, due to the many researchers adopting the concept with ease. when a scholar or practitioner frames a business model in a dyadic transfer of value for money, this individual is likely to view the value creation, value capture, and value exchange practices with a rather static value. in contrast, when an actor’s business model frames the actions of the firms, customers, and other ecosystem actors in a collaborative manner, this actor is likely to actively engage in business model development with a broad range of stakeholders and seek the maximization of mutual benefit and value in the ecosystem. this is suggested as an important step in the further exploration of business models and business model development in a systemic and dynamic context (wieland et al., 2017). the utilization of xaas typology and the 4c ecosystemic framework in an energy ecosystem setting demonstrates journal of business models (2018), vol. 6, no. 3, pp. 1-23 15 evidence that a more general digitalization framework such as xaas can be used to study conventional industries that have been digitalized or are undergoing the process of digitalization. on the one hand, this study shows that the xaas typology is a phenomenological business model classification tool for digital business across different sectors (the focal section of this paper is energy). on the other hand, it is necessary to apply or further develop the framework with adaptive thinking: one should not take such a digitalization framework without thinking critically and adapting to the specific context, such as industry, market, or regulation. that is to say, the eaas framework is an adaptation of the original xaas typology by taking into account the ecosystem characteristics of the energy industry. furthermore, this study derives its findings from the analysis of the real-life business model cases identified by experts from 15 of the eu major energy projects through a collaboration with two horizon 2020 energy research and innovation projects, providing a solid ground supported by empirical data for business model conceptualization on a large scale. practical implications the study’s practical implications relate to the possibility of analyzing the smart grid business models with xaas and service-oriented logic. the study proposes a new paradigm for energy companies and policymakers to examine the business potential of a future energy and smart grid ecosystem without having to dwell on the old product-based logic, enabling new value creation and capture in the energy industry, as addressed by high-level government bodies such as the eu. the novelty of the research relates to the proposing of xaas typologies for the energy industry, including infrastructure-oriented xaas, or connection as a service (caas); platform-oriented xaas, or supply as a service (saas) and data as a service (daas); and application-oriented xaas, or energy application as a service (eaaas). these typologies as a whole are considered as eaas. with these new digital service business typologies and the concept of eaas, we aim to propose and evangelize a service-oriented mind set for the practitioners and actors in the energy ecosystem to innovatively create and capture new value arising in the smart grid era. furthermore, the study presents the insight for energy companies and practitioners to explore new avenues of creating and capturing value in service business territories and exploit new growth opportunities arising from the service-oriented transition of the energy industry. reverting to the first section of the paper, we call for an update of the management mind-set for business executives and practitioners in this digitalized and connected era. at last, the mapping of the business model cases shows that a number of product-based companies utilize a product-service hybrid model, stacking a service application layer on top of its product business. we recommend further research to study the role of hybrid business models in the business ecosystem: how they create and capture value and contribute to the broader context of industry transition and service digitalization. journal of business models (2018), vol. 6, no. 3, pp. 1-23 16 references ablondi, b. (2010), consumer attitudes and the benefits of smart grid technologies. ahokangas, p. and atkova, i. (2015), “unveiling the janus face of the business model”, rent research in entrepreneurship and small business conference, zagreb, p. volume 29. ahokangas, p., juntunen, m. and myllykoski, j. (2014), “cloud computing and transformation of international e-business models”, in sanchez, r. and heene, a. (eds.), a focused issue on building new competences in dynamic environments (research in competence-based management, volume 7), pp. 3–28. alanne, k. and saari, a. (2006), “distributed energy generation and sustainable development”, renewable and sustainable energy reviews, vol. 10 no. 6, pp. 539–558. amin, s.m. (2011), “smart grid: overview, issues and opportunities. advances and challenges in sensing, modeling, simulation, optimization and control”, european journal of control, elsevier, vol. 17 no. 5–6, pp. 547–567. amit, r. and zott, c. (2001), “value creation in e-business”, strategic management journal, vol. 22, pp. 493–520. andrade, a.d. (2009), “interpretive research aiming at theory building : adopting and adapting the case study design”, the qualitative report, vol. 14 no. 1, pp. 42–60. bahari, n., maniak, r. and fernandez, v. (2015), “ecosystem business model design”, xxive conférence internationale de management stratégique, aims, paris, pp. 1–18. bhattacharya, h. (2012), “interpretive research”, in given, l.m. (ed.), the sage encyclopedia of qualitative research methods, sage publications, thousand oaks, pp. 465–467. brandenburger, a.m. and stuart, h.w.j. (1996), “value based business strategy”, journal of economics & management strategy. casadesus-masanell, r. and llanes, g. (2011), “mixed source”, management science, vol. 57 no. december 2015, pp. 1212–1230. casadesus-masanell, r. (2010), “business model innovation and competitive imitation: the case of sponsor-based business models”, business, vol. 1 no. 213, p. 46. casadesus-masanell, r. and ricart, j.e. (2011), “how to design a winning business model”, harvard business review, no. february. casadesus-masanell, r. and ricart, j.e. (2010), “from strategy to business models and onto tactics”, long range planning, elsevier ltd, vol. 43 no. 2-3, pp. 195–215. casadesus-masanell, r. and zhu, f. (2013), “business model innovation and competitive imitation: the case of sponsor-based business models”, strategic management journal, vol. 34 no. 4, pp. 464–482. chesbrough, h. (2007), “business model innovation: it’s not just about technology anymore”, strategy & leadership, vol. 35, pp. 12–17. journal of business models (2018), vol. 6, no. 3, pp. 1-23 17 chesbrough, h. (2010), “business model innovation: opportunities and barriers”, long range planning, elsevier ltd, vol. 43 no. 2-3, pp. 354–363. chesbrough, h. and rosenbloom, r.s. (2002), “the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies”, industrial and corporate change, vol. 11 no. 3, pp. 529–555. demil, b. and lecocq, x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, vol. 43 no. 2-3, pp. 227–246. downes, l. and nunes, p.f. (2014), big-bang disruption, vol. 91, penguin group, new york, ny. dubosson-torbay, m., osterwalder, a. and pigneur, y. (2002), “e-business model design, classification, and measurements”, thunderbird international business review, vol. 44 no. 1, pp. 5–23. eden, c. and huxham, c. (2006), “researching organizations using action research”, in clegg, s.r., hardy, c., lawrence, t.b. and nord, w.r. (eds.), the sage handbook of organization studies, sage publications, london, pp. 389–408. furr, n. (2016), “hybrid business models look ugly, but they work”, harvard business review. gajic, i. and eli, g.w. (2013), “potential of new consumer services within the smart grid context”, no. june, p. 144. giessmann, a. and stanoevska-slabeva, k. (2013), “business models of platform as a service (paas) providers: current state and future directions”, journal of information technology theory and application, vol. 13 no. 4, pp. 31–55. grennan, b.m. (2013), “price discrimination and bargaining: empirical evidence from medical devices†”, american economic review, vol. 103 no. 1, pp. 145–177. gummesson, e. (2011), total relationship marketing, 3rd ed., routledge, new york. hall, s. and roelich, k. (2016), “business model innovation in electricity supply markets: the role of complex value in the united kingdom”, energy policy, elsevier, vol. 92, pp. 286–298. hamilton, j. (2004), “service value networks: value, performance and strategy for the services industry”, journal of systems science and systems engineering, vol. 13 no. 4, pp. 469–489. helms, t., loock, m. and bohnsack, r. (2016), “timing-based business models for flexibility creation in the electric power sector”, energy policy, 92, 348-358. doi:10.1016/j.enpol.2016.02.036 hokkanen, l., xu, y. and väänänen, k. (2016), “focusing on user experience and business models in startups : investigation of two-dimensional value creation”, mindtrek 2016. hui, g. (2014), “how the internet of things changes business models”, harvard business review, available at: https:// hbr.org/2014/07/how-the-internet-of-things-changes-business-models (accessed 1 may 2017). iansiti, m. and richards, g.l. (2006), “information technology ecosystem health and performance”, antitrust bulletin, vol. 51 no. i, pp. 77–110. journal of business models (2018), vol. 6, no. 3, pp. 1-23 18 iivari, m.m., ahokangas, p., komi, m., tihinen, m. and valtanen, k. (2016), “toward ecosystemic business models in the context of industrial internet”, journal of business models, vol. 4 no. 2, pp. 42–59. jansson, n., ahokangas, p., iivari, m., perälä-heape, m. and salo, s. (2014), “the competitive advantage of an ecosystemic business model: the case of ouluhealth”, interdisciplinary studies journal, vol. 3 no. 4, pp. 282–295. jensen, a.b. (2014), “do we need one business model definition?”, journal of business models, vol. 1 no. 1, pp. 61–84. johnson, m., christensen, c.m. and kagermann, h. (2008), “reinventing your business model”, harvard business review, no. december, pp. 50–60. kashef, m.m. and altmann, j. (2012), “a cost model for hybrid clouds”, in vanmechelen, v., altmann, j. and rana, o.f. (eds.), economics of grids, clouds, systems, and services. gecon 2011. lecture notes in computer science, vol. 7150, heidelberg, berlin, pp. 46–60. koshy, e., koshy, v. and waterman, h. (2011), action research in healthcare, sage publications, thousand oaks, ca. lenk, a., klems, m., nimis, j., tai, s., sandholm, t. and alto, p. (2009), “what’s inside the cloud? an architectural map of the cloud landscape”, proceedings of the 2009 icse workshop on software engineering challenges of cloud computing, cloud 2009, ieee computer society, washington dc, pp. 23–31. li, r., zhang, z., li, f. and ahokangas, p. (2016), “a shared network access business model for distribution networks”, ieee transactions on power systems. loock, m., reuter, e. and cousse, j. (2017), “regulation and smart grids”, unpublished report for the empower project 2017; grant agreement n° 646476. retrieved from: http://empowerh2020.eu/tag/deliverables/ loock, m., reuter, e. and vandertann, c. (2016), “ideal-type business models in local smart grids”, unpublished report for the empower project 2016; grant agreement n° 646476. retrieved from: http://empowerh2020.eu/ tag/deliverables/ lund, m. and nielsen, c. (2018), “the concept of business model scalability”, journal of business models, vol. 6 no. 1, pp. 1–18. lüttgens, d. and diener, k. (2016), “business model patterns used as a tool for creating (new) innovative business models”, journal of business models, vol. 4 no. 3, pp. 19–36. macdonald, g. and ryall, m.d. (2004), “how do value creation and competition determine whether a firm appropriates value?”, management science, vol. 50 no. 10, pp. 1319–1333. magretta, j. (2002), “why business models matter”, harvard business review, vol. 80 no. 5, pp. 86–87. martins, l. l., rindova, v. p. and greenbaum, b. e. (2015) , “unlocking the hidden value of concepts: a cognitive approach to business model innovation”, strategic entrepreneurship journal, 9(1), 99-117. doi:10.1002/ sej.1191 massoud amin, s. (2011), “smart grid: overview, issues and opportunities. advances and challenges in sensing, modeling, simulation, optimization and control”, european journal of control, elsevier, vol. 17 no. 5-6, pp. 547–567. journal of business models (2018), vol. 6, no. 3, pp. 1-23 19 mell, p.m. and grance, t. (2011), the nist definition of cloud computing. nist special publication (vol. 145), gaithersburg, md, available at: http://doi.org/10.6028/nist.sp.800-145. menychtas, a., vogel, j., giessmann, a., gatzioura, a., garcia gomez, s., moulos, v., junker, f., et al. (2014), “4caast marketplace: an advanced business environment for trading cloud services”, future generation computer systems, vol. 41 no. november, pp. 104–120. moore, j.f. (1996), “the death of competition: leadership and strategy in the age of business ecosystems”, leadership, p. 297. moqaddamerad, s., ahokangas, p., matinmikko, m. and rohrbeck, r. (2017), “using scenario-based business modelling to explore the 5g telecommunication market”, journal of futures studies, vol. 22 no. 1, pp. 1–18. moqaddamerad, s., xu, y., iivari, m. and ahokangas, p. (2016), “business models based on co-opetition in a hyperconnected era—the case of 5g-enabled smart grids”, pro-ve 2016, springer, porto, pp. 1–10. morris, m., schindehutte, m. and allen, j. (2005), “the entrepreneur’s business model: toward a unified perspective”, journal of business research, vol. 58 no. 6, pp. 726–735. nielsen, c. and lund, m. (2015), “the concept of business model scalability”, social science research network, harvard business school press, boston, vol. 1, pp. 1–20. normann, r. (1977), management for growth, john wiley & sons ltd, chichester. onetti, a., zucchella, a., jones, m. v. and mcdougall-covin, p.p. (2012), “internationalization, innovation and entrepreneurship: business models for new technology-based firms”, journal of management and governance, vol. 16 no. 3, pp. 337–368. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, a handbook for visionaries, game changers, and challengers, wiley, hoboken, new jersey. porter, m.e. (1996), “what is strategy?”, harvard business review, no. november-december. reinhold, s., reuter, e. and bieger, t. (2011) , “innovative geschäftsmodelle: die sicht des management”, in t. bieger, d. zuknyphausen-aufsess, & c. krys (eds.), innovative geschäftsmodelle: konzeptionelle grundlagen, gestaltungsfelder und unternehmerische praxis (pp. 71-91). berlin: springer. reuter, e. and loock, m. (2017), “empowering local electricity markets: a survey study from switzerland, norway, spain and germany”, university of st gallen. retrieved from : https://www.alexandria.unisg.ch/252125/ reuter, e., loock, m. and cousse, j. (2019) , “digital business models for local and micro power markets”, in a. sumper (ed.), accepted for publication in: micro and local power markets: wiley. shabanzadeh, m., sheikh-el-eslami, m.k. and haghifam, m.r. (2016), “a medium-term coalition-forming model of heterogeneous ders for a commercial virtual power plant”, applied energy, elsevier ltd, vol. 169, pp. 663–681. stanoevska-slabeva, k. and wozniak, t. (2009), “cloud basics―an introduction to cloud computing”, in stanoevskaslabeva, k., wozniak, t. and ristol, s. (eds.), grid and cloud computing: a business perspective on technology and applications, springer, berlin heidelberg, pp. 47–61. journal of business models (2018), vol. 6, no. 3, pp. 1-23 20 timmers, p. (1998), “business models for electronic markets”, electronic-markets, vol. 8 no. april, pp. 3–8. vargo, s.l. and lusch, r.f. (2016), “institutions and axioms: an extension and update of service-dominant logic”, journal of the academy of marketing science, vol. 44, pp. 1–19. walsham, g. (2006), “doing interpretive research”, european journal of information systems, vol. 15 no. 3, pp. 320–330. wessel, m., allworth, j. and levie, a. (2015), “old management systems stifle new business models”, harvard business review, available at: https://hbr.org/2015/04/old-management-systems-stifle-new-business-models (accessed 23 april 2017). wieland, h., hartmann, n.n. and vargo, s.l. (2017), “business models as service strategy”, journal of the academy of marketing science. wirtz, b.w., schilke, o. and ullrich, s. (2010), “strategic development of business models: implications of the web 2.0 for creating value on the internet”, long range planning, vol. 43 no. 2-3, pp. 272–290. xu, y., ahokangas, p. and pussinen, p. (2017), “monetizing the electric shock”, business model conference, venice, italy, pp. 1–7. xu, y., kopsakangas-savolainen, m., ahokangas, p. and li, f. (2016), “ecosystemic business model and value in the peer-to-peer smart grid”, global energy interconnection 2016. yrjölä, s., ahokangas, p. and matinmikko, m. (2015), “evaluation of recent spectrum sharing concepts from business model scalability point of view”, dynamic spectrum access networks (dyspan), ieee, stockholm, pp. 246–255. zahedi, a. (2011), “smart grid opportunities & challenges for power industry to manage the grid more efficiently”, power and energy engineering conference (appeec), ieee, asia-pacific. zalewska-kurek, k., kandemir, s., englis, b.g. and englis, p.d. (2016), “development of market-driven business models in the it industry. how firms experiment with their business models?”, journal of business models, vol. 4 no. 3, pp. 48–67. zott, c. and amit, r. (2013), “the business model: a theoretically anchored robust construct for strategic analysis”, strategic organization, vol. 11 no. 4, pp. 403–411. zott, c., amit, r. and massa, l. (2010), “the business model: theoretical roots, recent developments, and future research”, iese research papers, vol. 3 no. september, p. 45. zott, c., amit, r. and massa, l. (2011), “the business model: recent developments and future research”, journal of management, vol. 37 no. 4, pp. 1019–1042. journal of business models (2018), vol. 6, no. 3, pp. 1-23 21 appendix layer companies / business cases included in the study commerce tempus energy, sonnen community, open utility, vandebron, change38, trianel, buzzn, p2p smartest platform operator, greypower, kiwi power, transactive grid, empower context stem, cpower, cybergrid vpp, restore, kiwi grid, ingrid (context), enernoc, nest, ampard, fingrid datahub, tiko, flexitricity, next kraftwerke, senec econamic grid, gridsense, clean energy sources, clluc content ingrid (content), ecovat, mygreenheating/dimplex, ukpn smarter network storage, sonnen, caterva, younicos, tidalys, solar city, smappee, bosch smart home, sharp, tesla powerwall, alginet, carbon coop, beegy, mosaic energy, helen suvilahti, lichtbick, senec, ecopower connection uk national grid, comodule, micro operator, traditional dso, shared network access of dso journal of business models (2018), vol. 6, no. 3, pp. 1-23 22 about the authors yueqiang xu is a project researcher and phd candidate at martti ahtisaari institute, the university of oulu, finland. his research areas include smart grid, digitalization of energy and other ict related domains. his professional experience in energy industry includes conducting research and consulting projects for energy utilities, ict and smart grid solution providers as well as regulatory organizations, for example, the world energy council, microsoft, edf (france), abb (global), ademe (france), australian renewable energy agency (australia), beama (uk), dong energy (denmark), opower (usa) and the european union. dr. petri ahokangas is senior research fellow and leader of futuralis research group at martti ahtisaari institute of oulu business school at the university of oulu, finland. futuralis focuses on future digital businesses models and ecosystems. he is also adjunct professor of international software entrepreneurship at the university of oulu. his research interests are in how innovation and technological change affect international business creation, transformation, and strategies in highly technology-intensive or software-intensive business domains. he is co-editor-in chief of journal or business models, and he has over 140 publications in scientific journals, books, conference proceedings, and other reports. he is actively working in several ict-focused research consortia leading the business research activities. prior to his academic career, he worked in the telecommunications software industry. he is also a serial entrepreneur and active consultant in the field on digitalization, strategy and internationalization. journal of business models (2018), vol. 6, no. 3, pp. 1-23 23 emmanuelle reuter (dr. oec. hsg) is an assistant professor of innovation management at the university of neuchâtel, switzerland. she received her phd in management from the university of st. gallen, switzerland. her research focus lies at the intersection of innovation, strategic management, organization theory and sustainability. she specifically investigates into the underpinnings of strategic, organizational, institutional and social innovation, with a particular emphasis on the role of individuals, the cognitive and cultural dynamics in creating and inhibiting change. she consulted regularly and published reports on the private banking and electric utilities’ industries, which served as empirical contexts of study. journal of business models (2019), vol. 7, no. 3, pp. 77-88 77 five strategic foresight tools to enhance business model innovation teaching matthew j. spaniol1,2*, christina bidmon1,2, anna b. holm1,2, rené rohrbeck1,2 abstract we discuss our lessons from 8 years of teaching business model innovation to executives in our part-time mba program. we examine how strategic foresight tools are particularly useful to help students to overcome the cognitive bounds that inhibit business model innovation and discuss the considerations of using studentowned live cases. please cite this paper as: spaniol et al. (2019), five strategic foresight tools to enhance business model innovation teaching, vol. 7, no. 3, pp. 77-88 keywords: strategic foresight; business model innovation; mba teaching; live cases; cognitive bounds 1 department of management, aarhus bss, denmark 2 strategic foresight research network *corresponding author acknowledgements: matthew j. spaniol is supported by eu-interreg periscope project, grant/award number: j-no.: 38-2-13-17. journal of business models (2019), vol. 7, no. 3, pp. 77-88 78 introduction this paper reflects upon 8 years of teaching business model innovation (bmi) to executives in the part-time mba program at aarhus bss. executives who return to the classroom for part-time mba education are different from other business school students. they have accumulated on-the-job experience, have gained indepth knowledge of their industries, and thoroughly comprehend the business models of their organizations (garvin, 2007). for teachers, this provides opportunities for deeper discussions of the subject matter. for example, in our part-time mba course on bmi, we use live cases from students’ organizations to apply the lessons. these discussions are motivating and rewarding for students. in fact, many students sign up for the course because they are concerned about the future performance potential of their organizations’ business models. however, teaching bmi to executives is not without challenges. having worked in their organizations for years, such students have often developed hardened cognitive frames that make it challenging to see how their business model could be different. “this would never work in my organization” is a common remark that teachers encounter. in our teaching approach, we have therefore decided to equip students with the tools and methods of strategic foresight to systematically reduce cognitive bounds to bmi. strategic foresight is particularly suitable for this task, given its focus on learning, exploring uncertainty, and decision making (vecchiato, 2012; rhisiart, miller and brooks, 2015). strategic foresight provides a rich toolbox for identifying, observing, and interpreting, the factors that induce change; determining possible organization-specific implications; and triggering appropriate responses (voros, 2003; rohrbeck, battistella and huizingh, 2015). strategic foresight methods and processes are generally aimed at (1) identifying key factors that drive change in an organization’s environment, (2) simulating and understanding the impact of potential futures, and (3) deriving actions that can improve an organization’s long-term competitiveness. examples of strategic foresight methods include trend audits, scenario planning, backcasting, and roadmapping (popper, 2008; gordon, 2010; rohrbeck, 2013; spaniol and rowland, 2019). by including such methods, we aim to overcome executives’ cognitive bounds to bmi. research has established that business models must be “changed, refined and innovated on a systematic basis if companies aim to survive and stay competitive over time” (nielsen et al., 2019: 9) however, path dependencies and lock-in effects make it difficult for executives to detect the need to explore new business models and implement the necessary changes in their organizations (tripsas and gavetti, 2000; chesbrough, 2010; dasilva and trkman, 2014). for example, managers fear negative consequences for their current businesses and are hesitant to move away from business models that still yield profitable returns (e.g. chesbrough, 2010; günzel & holm, 2013; sosna, trevinyorodríguez, & velamuri, 2010). research on strategic decision-making, and strategic foresight in particular, has provided further explanations for the origin of such managerial resistance. gavetti (2012) describes three obstacles that managers must overcome to detect and exploit new business opportunities: • the rationality bound results from dominant representations shared across an industry or sector: managers attend to the world around them and fail to recognize more distant and radically innovative business opportunities. • the plasticity bound results from inertia, which can have cognitive or physical roots: firms might fail to act on opportunities because they fail to see how they could, or they might lack the resources or capabilities to address a new opportunity. • the shaping-ability bound describes the inability to legitimize needed action: managers fail to secure the necessary buy-in of stakeholders, such as board members or investors, on a new course of action. overcoming these bounds in the minds of our executive students motivates the curriculum design for the bmi course at aarhus bss. in the following section, we describe our course’s structural setup and introduce five strategic foresight methods that, in our experience, have proven to be particularly helpful for overcoming executives’ cognitive bounds to bmi. we limit our discussion to these lesser-known tools, and, to the likely dissatisfaction of many readers, make mere mention of the more established tools and techniques, such as dual bms and bm roadmapping (markides and charitou, 2004; de reuver, bouwman journal of business models (2019), vol. 7, no. 3, pp. 77-88 79 and haaker, 2013). we conclude with a few reflections on the feasibility of our approach in other settings. course context and structure our part-time mba students are typically middle-level managers in their 40s preparing for upper-management roles. the primary reason they choose the bmi course is the search for knowledge, approaches, and tools to solve strategic challenges and lead change efforts in their organizations. consequently, our bmi course is designed to achieve three core learning outcomes: (1) being able to describe and assess any business model using systematic tools, (2) making cognitive leaps towards novel business models, and (3) ensuring transferability—that participants can select from across a portfolio of tools and apply the appropriate ones to overcome the three cognitive bounds and drive bmi in their organizations. the bmi course is a semester-long elective that includes in-class instruction modules at the beginning and end of the course. each module lasts 2 days, and class sizes range from 15 to 30 participants. day 1 draws from osterwalder and pigneur (2010), supplemented with discussion on the importance of creating strong narratives about a company’s bm.[insert footnote 1 here] day 2 introduces, demonstrates, and has students work with two strategic foresight (sf) tools, the trend audit and stress test, to identify weaknesses in current business models. the principles of innovating bm complete the first in-class module. days 3 and 4 are designed to expand the innovation toolbox and identify creative solutions for bm challenges. here, we use additional sf tools, namely science fiction, design thinking, and forecasting future markets, to explain how to create quantitative estimates about market sizes in the future. on the last day, students learn how to evaluate bms, work with dual business models, and prepare for implementation. figure 1 below shows the structure of the course. on the first day of in-class teaching, the class is divided into groups of 4–6 students and each student is asked to describe their employing organizations’ business model to the group. students then select one group member’s organization to serve as the live case that they will work on for the duration of the semester. groups are checked to avoid that colleagues or students from competitor organizations are together and to ensure a diversity of backgrounds. we ensure that the cases selected are neither those of ceos – as they are already in highly bounded role – nor are those of start-up organizations, because the cognitive bounds may not have been sufficiently hardened. the case “owner” serves as an authority and proxy for application simulation, and the information she or he provides forms the platform for applying the methods and tools that the group members learn throughout the course. it is within this particularly challenging environment of student-owned live cases that the strategic foresight methods must overcome cognitive bounds, break away from path dependency, and unstick cognitive inertia. figure 1: course structure journal of business models (2019), vol. 7, no. 3, pp. 77-88 80 the group must produce a report of no more than fifteen pages that consists of three parts: (1) a description and stress test of the current business model, (2) proposed innovations to the business model, and (3) a transition plan for implementation. students are provided with a template to guide the project work for the next two months. the 2-month project phase is split into 9 steps. the first three steps (describe and analyse, trend audit, and stress test) produce three outputs: (1) the current bm represented as a canvas and a narrative, (2) a list of stress factors, and (3) a stress test map. each group’s output is presented toand reviewed bythe instructor(s) in a 1-hour session. steps 5-7 (innovate, describe future bm, propose transition plan) occupy the students for the following 4 weeks, with each participant allocating 20–25 hours to the project. to improve the knowledge of other students’ cases and to intensify reflection on the assignment, the output from these steps is added to the first part of the project, and the whole project is subjected to a peerfeedback review in which comments and suggestions for improvement are provided by individual students based on a rubric provided by the instructors (reinholz, 2016). the peer-feedback criteria include transparency in the description of the current bm, analysis of challenges, convincing new value proposition, consistency of new bm, feasibility of development and transition plan, clarity of report, and overall feasibility of the proposed bmi. following peer feedback, a final 1-hour review session with the instructors completes the project work. to intensify the learning experience of defending the new bm, we often invite colleagues of the case owner or external case providers to join the review sessions, i.e. steps 4 and 9. during the second two-day in-class module, an instructor delivers a “best of ” presentation that consists of a compilation of elements (images) selected from across the interim reports of all groups in an attempt to “raise the bar” of the expected quality of the final reports. while instruction is concentrated during the four teaching days, the main learning outcomes—and the knowledge transfer in particular—are realized through the group project. we have observed that the success of the project depends heavily on the suitability of the live case. the main two criteria for choosing a case are that it has a medium level of complexity and that it is possible to identify a clear value proposition and customer(s). we prefer to include both for-profit and non-profit/governmental cases to broaden in-class discussions and deepen the learning outcomes. students are, as a consequence, better prepared to use the methods and tools in different contexts and can comprehensively reflect on their application and usefulness. below, we elaborate on the five strategic foresight methods that are taught in the class and explain how they are applied for bmi. five strategic foresight tools applied to business modelling the five strategic foresight tools that we use are based on our experiences as instructors, and play a crucial role in expanding the solution space that participants consider when innovating their business models. collectively, they aim to overcome the cognitive bounds associated with the failure to change bms—the rationality, plasticity, and shaping-ability bounds (see table 1). trend audit (assessment) to execute the trend audit, groups are tasked to identify 3–5 trends that are driving change in the larger industry or sector in which the case is situated. the challenge here is to look beyond the scope of the current business, by anticipating 3 or more years into the future. after a brainstorming session to create a list of candidate trends, those that are deemed particularly important to the business model are selected and subjected to a “trend audit” that consists of four questions (gordon, 2010): • what are the driving forces that create and sustain the trend? • what enables, catalyses, or supports the drivers of the trend? • what inadvertently stands in the way of the trend, slowing it down? • what or who is working to actively block the trend? the trend of digitalisation, for example, can be thought of as driven by the human need for social connection and journal of business models (2019), vol. 7, no. 3, pp. 77-88 81 pressures to increase productivity; these may encounter friction in the form of legacy software and dominant products in the market. counter-cultural movements to urge people offline also work against this trend. the trend audit establishes an understanding of the complexity inherent in the larger contextual environment in which the case, in a first attempt to persuade students to embrace a wider perspective on external forces that will shape the bm in the future. the trend audit provides the material and shared language to construct and make explicit hypothetical statements about futures (rowland and spaniol, 2015). business model stress testing to stress-test the current business model, we apply an approach loosely based on haaker, bouwman, janssen, and de reuver (2017) that assesses a bm’s robustness in the medium term (5 years) and in the long term (10 years). groups are tasked to assess how each building block would perform under the conditions of the trends (stress factors) that they identified as being salient to their case. students assign colours to bm elements that reflect the viability, or the “level of stress”, that affects the bm elements. this results in a visualization that shows how the current, well-functioning business model will increasingly fail as trends unfold their disruptive force (see figure 2 below). the output from the stress test creates a sense of urgency, which, in a real situation, is imperative to create buy-in among upper management and other relevant stakeholders. in class, it allows group members to consolidate complex discussions about the robustness of their existing bm. it also facilitates a focused discussion on how the pending failure of the bm can be linked to individual building blocks. science fiction in this step, we use science fiction vignettes, images, and states of the future to help students think through radically different frames. they may be dystopian or utopian in nature and often involve an exaggeration of current technological capabilities. these images challenge the status quo and current mental models by inciting fear or optimism, and reframe our conceptualization of “how things work” (peper, 2017). in class, examples of technological innovation sparked by science fiction novels are given, and students are lectured on the power of storytelling and imagining oneself in a distant reality. a group exercise is undertaken to create a business model for a problem described for a fictitious future society. we use passages from science fiction novels and invite students to prototype a business model for a future use case (schwarz and liebl, 2013). science fictioning broadens students’ horizons and search scope, allowing them to move outside existing mental frames, and lays the foundation for nonincremental innovation. the utility of a mobile phone that allows the captain of the star trek ship enterprise to stay in contact with his crew when he is on another planet is obvious to fans. in organizations, these science-fiction inspired visions can play the role of powerful catalysts that consolidate and refines bmi initiatives across technical and marketing units, as well as top management. in other words, science fiction, strategic foresight, and bmi can be brought into figure 2: exemplary output of the bm stress testing journal of business models (2019), vol. 7, no. 3, pp. 77-88 82 a mutually reinforcing relationship through this technique (zaidi, 2017). forecasting future markets the forecasting future markets block teaches students how to create quantitative estimates about market sizes. the groups are tasked with forecasting the commercial viability of business models by first creating a value formula and estimating the values for the variables. we explain different approaches to estimate calculations (e.g. fermi’s approximate calculation of the number of piano tuners in chicago) and various ways of running estimate calculations (top-down, bottom-up, and explicit estimates). we aggregate these calculations using the principle of triangulation to produce to a future market forecast. in the classroom, groups work to forecast the market for a fictitious product before its launch in europe, after which the groups compare their market potential estimates (in number of sold units). as a result, they are equipped with a method for making assumptions and forecasting the future market potential of their project’s new business model. bm wind-tunnelling strategic wind-tunnelling builds upon, but goes beyond, the stress test. the metaphor comes from the testing of plane designs in controlled environments— in front of a large fan—where wind and other weather conditions are blasted at a prototype until the wings fall off or other structural failures occur. wind-tunnelling requires a set of scenarios, each of which describes a different future state of the operating environment. it is important that the scenarios cover all plausible futures and that they are sufficiently distinct from the status quo without becoming unrealistic (van der heijden, 2005). again, we leverage outputs from the trend audit and identify branching points in the trends that could result in different outcomes and implications. different outcomes from multiple trends are combined to provide base elements from which the scenarios can be constructed (see also van der heijden, 1996). wind-tunnelling is undertaken in a role-play activity in which one advocate explains why the bm will perform well in a given scenario, and the other team members explain how and where failure might occur. this can be seen as a lean version of scenario-based business wargaming (schwarz, ram and rohrbeck, 2018). this is repeated for each scenario while changing the roles of advocates and adversaries, who act as stand-ins for management, investors, and colleagues in the case organization. this process provides a time-efficient to check on the robustness of a bm under various conditions and from various perspectives. discussion and conclusion one of the major obstacles in bmi is the difficulty of breaking free from cognitive bounds due to managers’ deep embeddedness in the daily life of the existing organizations and their business model logic (gavetti, 2012). even when managers are confronted with the task of bmi in the relatively safe environment of an mba class, they find it difficult to move beyond obvious rationalizations. this state of cognitive lock-in, or cognitive inertia, is clearly observed by the course instructors in those students working on the cases from their own organizations. managers’ hardened cognitive frames make it difficult to evolve beyond their current business models and ideate novel business models. in real-life situations, this also prevents managers from overcoming the threefold cognitive bounds (gavetti, 2012). one design principle of the course is the use of visualizations that can be expected to help in collaboration, but are also associated with decreased creativity and willingness to adopt new bmi ideas (eppler and hoffmann, 2012). we therefore also adopted a second design principle to apply strategic foresight tools where creativity and out-ofthe-box thinking are particularly necessary. the impact journal of business models (2019), vol. 7, no. 3, pp. 77-88 83 of the sf tools on cognitive bounds and learning outcomes is summarized in table 1. unlike other approaches, strategic foresight provides a toolbox of methods that can be expected to broaden the solution-search scope and offer a systematic framework for exploring distant strategic options (gavetti and menon, 2016; lehr et al., 2017). they complement the classic bmi tools of design thinking and the use of analogies, and are guided by instructors in the knowledge transfer process to enhance the likelihood of successful implementation. we therefore foresee the continued combination of various bmi tools with future-oriented strategizing approaches to expand the bmi horizons and cut across bmi process phases to have a bigger impact on strategy development in general (wirtz and daiser, 2018). over the years, we have also learned that groups with complex cases (e.g. regulated industries, high-tech service providers with interrelated offers, and governmental agencies) face more difficulties than groups with easier cases, such as a company that manufactures one consumer product or provides a single service. with difficult cases, executive students often need to be urged during the process or sparring sessions to suspend their disbelief for the sake of the group and to complete the assignment, regardless of whether the actual bmi will be implemented. the challenge of overcoming mental models is aggravated by using studentowned live cases. however, we still prefer to present this challenge in the classroom rather than leaving it to the participants to attempt implementation alone when back in their organizations. for students who are working on other students’ live cases, it is important to provide space to envision and plan how implementation could happen in their own organizations. by making their anticipated difficulties explicit in plenum, students can exchange implementation ideas to which the instructor can provide guidance. at the end, instructors pose questions to the class to foster reflection for increasing the likelihood of successful implementation, such as: • which tools will (and will not) be attempted; • why (why not); • when (and when might timing be suitable); and • who (and who not) to include. for the oral exam, students are asked to start with a five-minute reflection, and many of them choose to tool purpose impact on bound* learning outcome rb pb sab trend audit increase awareness of the need to change the current business model  learn how to systematically scan the environment for changes and assess their impact on bms stress testing assess the impact of trends on the current bm and the robustness of the new bm  learn how to use visualizations to help decision-making science fiction open students’ perspective and broaden the solution scope  learn how to use mental images to induce change and motivation to move forecasting future market potential reduce anxiety related to having to develop fully-fledged business plans  learn how to develop estimates quickly and systematically enhance forecast quality strategic wind-tunnelling engage the leadership team in checking the robustness of bms   learn how to use novel tools in a decisionmaking arena *rb= rationality bound; pb= plasticity bound; sab= shaping-ability bound table 1: summary of strategic foresight tools and their impact journal of business models (2019), vol. 7, no. 3, pp. 77-88 84 reflect on such implementation considerations in their organizations. we would, however, advise teachers to reflect carefully on the feasibility of running these exercises with students who have no prior work experience. another consideration is that our propositions might work best for smaller classes or classes where the primary teacher is supported by teaching assistants. interim reports, sparring sessions, and clear guidelines on how to structure group reports have proven to be fundamental for success of the course—because not only the tools and techniques are foreign, but also because students appreciate the attention and the instructor can address any problems the students face. additionally, the inclass facilitation skills of the instructor(s) are important to ensuring the correct use of foresight methods (rohrbeck, 2014; rowland and spaniol, 2017). thus, we recommended this approach in settings and structures where instructor(s) are acquainted with strategic foresight methods and have the opportunity to work closely with the groups throughout the course. our motivation to incorporate foresight into bmi teaching stem from the experience of teaching mba students and executives. however, what we described in this article may not be limited to this audience. strategic foresight tools have emerged and matured in practice before their assignation by academics to the rational, evolutionary, processual, or other paradigm of strategic management, where the tools serve to mediate and discipline strategic conversations (lehr et al., 2017). our aspiration is not only that learning takes place in the classroom, but that students put the tools to work in their organizations to create better strategies. as we move forward, we are delighted when past students return to us with their bmi success stories, which we proudly present to the newest cohort. 1 here we use the video of charles baden-fuller, https://www.youtube.com/watch?v=_ab1s4pc48k journal of business models (2019), vol. 7, no. 3, pp. 77-88 85 references chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, no. 2, pp. 354–363. dasilva, c. m. & trkman, p. (2014), business model: what it is and what it is not, long range planning, vol. 47, no. 6, pp. 379–389. eppler, m. j. & hoffmann, f. (2012), does method matter? an experiment on collaborative business model idea generation in teams, innovation, vol. 14, no. 3, pp. 388–403. garvin, d. a. (2007), teaching executives and teaching mbas: reflections on the case method, academy of management learning and education, vol. 6 no. 3, pp. 364–374. gavetti, g. (2012) perspective—toward a behavioral theory of strategy, organization science, vol. 23, no. 1, pp. 267–285. gavetti, g. & menon, a. (2016), evolution cum agency: toward a model of strategic foresight, strategy science, vol. 1, no. 3, pp. 207–233. gordon, a. (2010), a deft approach to trend-based foresight, foresight, vol. 17, pp. 13–19. günzel, f. & holm, a. b. (2013), one size does not fit all — understanding the front-end and back-end of business model innovation, international journal of innovation management, vol. 17, no. 1, pp. 1-34. haaker, t., bouwman, h., janssen, w., & de reuver, m. (2017), business model stress testing: a practical approach to test the robustness of a business model, futures, vol. 89, pp. 14–25. van der heijden, k. (1996), scenarios: the art of strategic conversation. chichester: john wiley & sons. lehr, t. lorenz, u., willert, m., & rohrbeck, r. (2017), scenario-based strategizing: advancing the applicability in strategists’ teams, technological forecasting and social change, vol 124, pp. 214–224 markides, c. & charitou, c. d. (2004), competing with dual business models: a contingency approach, academy of management perspectives, vol 18, no. 3, pp. 22–36. nielsen, c., lund, m., montemari, m., paolone, f., massaro, m., & dumay, j. (2019). business models: a research overview. routledge, oxford. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challenges. new jersey: wiley & sons. peper, e. (2017), why business leaders need to read more science fiction, harvard business review, online, july. popper, r. (2008), how are foresight methods selected?, foresight, vol. 10, no. 6, pp. 14–17. reinholz, d. (2016), the assessment cycle: a model for learning through peer assessment, assessment & evaluation in higher education. routledge, vol. 41, no. 2, pp. 301–315. journal of business models (2019), vol. 7, no. 3, pp. 77-88 86 de reuver, m., bouwman, h. & haaker, t. (2013), business model roadmapping: a practical approach to come from an existing to a desired business model, international journal of innovation management, vol. 17, no. 1, pp. 1-18. rhisiart, m., miller, r. & brooks, s. (2015), learning to use the future: developing foresight capabilities through scenario processes, technological forecasting and social change, vol. 101, pp. 124–133. rohrbeck, r. (2014), trend scanning, scouting and foresight techniques, in gassmann, o. & schweitzer, f. (eds.), management of the fuzzy front end of innovation. wiesbaden: springer, pp. 59–73. rohrbeck, r., battistella, c. & huizingh, e. (2015), corporate foresight: an emerging field with a rich tradition, technological forecasting and social change, vol. 101, pp. 1–9 rowland, n. j. & spaniol, m. j. (2015), the future multiple, foresight, vol. 17, no. 6, pp. 556–573. rowland, n. j. & spaniol, m. j. (2017), social foundation of scenario planning, technological forecasting and social change, vol. 124, pp. 6–15. schwarz, j. o. & liebl, f. (2013), cultural products and their implications for business models: why science fiction needs socio-cultural fiction, futures, vol. 50, pp. 66–73. schwarz, j. o., ram, c. & rohrbeck, r. (2018), combining scenario planning and business wargaming to better anticipate future competitive dynamics, futures, vol. 105, pp. 133–142. sosna, m., trevinyo-rodríguez, r. n. & velamuri, s. r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2-3, pp. 383–407. spaniol, m. j. & rowland, n. j. (2019), defining scenario, futures & foresight science, vol. 1, no. 1, e3. tripsas, m. & gavetti, g. (2000), capabilities, cognition, and intertia: evidence from digital marketing, strategic management journal, vol. 21, no. 10-11, pp. 1147–1161. vecchiato, r. (2012), environmental uncertainty , foresight and strategic decision making : an integrated study, technological forecasting & social change, vol. 79, no. 3, pp. 436–447. voros, j. (2003), a generic foresight process framework, foresight, vol. 5 no. 3, pp. 10–21. wirtz, b. w. & daiser, p. (2018), business model innovation processes: a systematic literature review, journal of business models, 6(1), pp. 40–58. zaidi, l. (2017), building brave new worlds: science fiction and transition design. ocad university. journal of business models (2019), vol. 7, no. 3, pp. 77-88 87 matthew j. spaniol is a postdoctoral fellow at aarhus bss, where he manages the periscope project, an eu-interreg collaboration using open foresight to catalyze business model innovation and entrepreneurial discovery in the maritime, marine, and ocean economies. he completed his phd dissertation, “scenario planning in practice: empirical philosophy, social foundation, paradox, and definitions” in 2017. he is from the united states of america. christina m. bidmon is a phd candidate at aarhus bss, aarhus university, where she works within the strategic foresight research network. her research interests include the emergence of novelty in incumbent organizations, sustainability-driven innovation, and business modelling. about the authors journal of business models (2019), vol. 7, no. 3, pp. 77-88 88 anna b. holm is associate professor at the department of management, aarhus university, denmark. she holds a phd (2010) in organization and management theory from aarhus university, and an mba (1995) from the bradford university school of management, uk. her research areas include virtual organizing, business model design and innovation, and media management. prior to her academic career, anna worked for over a decade as business development consultant and in various managerial positions in industry. rené rohrbeck is professor of strategy and associate dean for corporate relations at aarhus bss, aarhus university. he leads the strategic foresight research network that develops methods for participatory foresight and scenario-based strategizing and runs regular benchmarking studies. about the authors journal of business models (2019), vol. 7, no. 3 pp. 119-130 119 the startup jungle: four-dimensional business modelling ryan rumble1 abstract the startup jungle is a four-dimensional business-modelling tool used in masters level entrepreneurship education. it combines a metaphorical jungle landscape with the dynamics of interplay to map business ecosystems, model new ones, develop implementation strategies, consider consequences, and scenario plan. please cite this paper as: rumble, r. (2019), the startup jungle: four-dimensional business modelling, vol. 7, no. 3, pp. 119-130 keywords: business model; serious game; ecosystem 1 institute of innovation and entrepreneurship, university of gothenburg, sweden, ryan.rumble@gu.se journal of business models (2019), vol. 7, no. 3 pp. 119-130 120 introduction new business model (bm) tools have rarely departed from the assumption that such tools should be flat; that is, paper-based or digital. in this paper, i argue that many of the limitations of contemporary bm tools stem from their materiality rather than their content; including their ability to represent complex interrelations, to consider implementation rather than desired outcome, and to investigate multiple scenarios. as an alternative, this article presents a four-dimensional bm tool called the startup jungle, which addresses these issues. flat modalities contemporary bm tools – canvases, cards, apps, etc. – generally model businesses in two-dimensions. there are many advantages to these kinds of methods. they have an elegant simplicity, making them easy to comprehend. they are also practical to transport and reproduce. however, it is unclear whether this twodimensional straightforwardness is ideal in all business modelling situations. our reliance on two-dimensional learning materials is being questioned both within (rumble & mangematin, 2015) and beyond the business sphere. roger kneebone, professor of surgical education at imperial college, london, recently lamented that new students lack basic competences, reasoning that: ”a lot of things are reduced to swiping on a two-dimensional flat screen” (coughlan, 2018). the unintended consequences of digitalization raise the question: when might it be more prudent to move beyond flat modalities to more hands-on approaches? three-dimensional modelling the use of three-dimensional tools in design, pedagogy, and strategizing is not without precedent. architects build 3-d miniatures of their plans to express their vision to non-specialist audiences and to investigate features not apparent in blueprints. medical examiners use dollhouse murder scenes to train forensic investors (miller, 2005). child psychiatrists utilise models to facilitate communication with their patients. militaries use three-dimensional terrain models known as sand tables to identify obstacles and opportunities that otherwise might go unnoticed, devise complicated tactics, and communicate them with relative ease (see figure 1). sand tables have a long history dating back to stone age and are still used today, even by technologically sophisticated military organisations (smith 2010; weiner, 1959). such models are able to represent a great deal of information that would take pages of text to convey. users can survey and revisit this information rapidly and with little cognitive effort. if a picture is worth a thousand words, how many more a three-dimensional model? models are representations of interconnected elements; the manipulation of one affects others. through the manipulation of these elements, modellers investigate ‘what could/would happen’. this is what makes models useful as tools of enquiry, rather than simply a means of codification (morgan, 2012). the use of 3-d models makes such modification and investigation simple and intuitive. figure 1: contemporary use of a sand table by the us army (credit: cheryl rodewig) journal of business models (2019), vol. 7, no. 3 pp. 119-130 121 time, the fourth dimension implemented bms have a tendency to evolve over time in response to dynamic environments (demil & lecocq, 2010; wadin & ahlgren, 2019). previous tools have attempted to capture this time element by creating snapshots of a bm at different time points, in a process called ‘versioning’ (fritscher & pigneur, 2009). however, versioning is not without its limitations. first, it rarely takes into account how the stakeholders might react to a bm, or how one bm constrains or enables future iterations. as an alternative to versioning, sand tables rely upon the ‘dynamics of interplay’ to represent time. here, decisions have consequences, which reconfigure the range of alternatives at different time points (weiner, 1959). with each movement, the modeller changes the state of play; new threats and opportunities emerge altering the range of possible future decisions, thus capturing a more path dependent process. second, whereas versioning depicts various endstates, the act of physically moving pieces around the board encourages the user to focus on what they will need in order to create those end-states. thus, versioning articulates ideal situations, while the dynamics of interplay focuses on execution. third, it can be taxing to recreate multiple scenarios from scratch using the versioning method. the dynamics of interplay allow the modeller to simulate multiple future states in rapid succession. additionally, modellers can devise new scenarios with sand tables in the time it takes to reposition a few models. as smith (2010, p.7) notes: “though the visual representation provided the initial value of the practice, the map or playing board on which multiple options could be compared proved to be even more powerful. these tools allowed leaders and their staff members to compete against each other or against historical records in an attempt to determine which ideas would be the most effective”. incorporating insights from sand tables the startup jungle was developed as a four-dimension tool enabling students to conceptualize, study, and communicate bms. the tool was created by hans alveros and further developed by the author, and it is regularly employed in the knowledge-based entrepreneurship master’s programme at the university of gothenburg. the tool was designed to incorporate insights from modelling in other fields, principally by adapting the military sand table concept to create a metaphorical business landscape. the sand table elegantly expresses temporality through sequential repositioning of figures, eliminating the need to create multiple canvases. expressing change through repositioning also ensures that modifications in the model are explicit and obvious, rather than implied by differences between canvases. the tool the startup jungle is a teaching and strategizing methodology used in entrepreneurship education1 centred on a jungle landscape (symbolizing a business ecosystem) and various animal models (signifying different stakeholders). the tool corresponds to the inter-organizational perspective of business modelling, and users are encouraged to conceptualize business model innovation as a process of integrating internal and external actors across value networks (normann & ramirez, 1993; kringelum & gjerding, 2018). the objective of the tool is to get users to position these animal actors on the landscape to convey business ecosystems metaphorically. users do this for several reasons: 1. to sensemake and communicate their understanding of their ecosystem (gioia & chittipeddi, 1991) 2. to reconfigure their ecosystem into new bms 3. to experiment with and investigate their ecosystem. jungle theme the canvas’s jungle theme is not simply aesthetic. first, it distances the tool from any militaristic associations that users may have with sand tables. second, the jungle metaphor frames the business environment as an ecosystem, the dominant metaphor used in academia (cf. moore, 1996). metaphorical 1 it has also been adapted for corporate strategy sessions. due to word count limitations, this article only discusses its pedagogical application. more information can be found at: https://www. brainspotexecutive.se/startup-jungle/ journal of business models (2019), vol. 7, no. 3 pp. 119-130 122 framing significantly influences individuals’ perceptions and decisions (thibodeau & boroditsky, 2011). third, the jungle setting gamifies the tool. metastudies have empirically demonstrated that serious games are more effective for learning than conventional techniques (wouters et al., 2013). fourth, the jungle landscape acts as a boundary object, encouraging users to speak in a common language of chimpanzees, lions, and sloths. tactics can be explained with both visual and verbal clarity; e.g., users can communicate complex financial strategies by straightforwardly repositioning animals and resources next to one another. the landscape the layout of the landscape is metaphorically embedded with management theories (distinguishing it from the lego serious play method). we felt that the incorporation of theory into the landscape was important in order to help users recognise the external environment is not a ‘white space’, but is subject to socio-economic structures and mechanisms of which they should be aware. first, there is the river, which represents the diffusion of a product/service to different customer segments. rogers (2003) described the diffusion of innovations as driven by different types of customers at different time points, each with different needs. moore (2014) developed this idea by empirically identifying a ‘chasm’ between early adopters and the early majority that most innovations fail to cross (figure 2). this is represented in the landscape as a twisting river (see figure 3, point a), signifying the product/service will need to pivot throughout its product lifecycle to appeal to different customer segments. there is a break in the river (point b), indicating the aforementioned chasm, as well as ‘break-even island’ (point c) and ‘profitability lake’ (point d), drawing on the insight from the product-lifecycle that products/services tend to remain unprofitable until a threshold of customers came be acquired. figure 3: the startup jungle landscape figure 2: moore’s chasm model journal of business models (2019), vol. 7, no. 3 pp. 119-130 123 second, there is the firm, represented by the encampment (point e). the encampment is subdivided to represent internal divisions; for example, r&d volcano (point f) and executive hut (point g). cross-departmental collaboration can be represented by moving actors within the firm. the firm is fenced but gated, representing the semi-permeable barrier between the firm and its environment. during a strategy session, users can signify the need for certain internal actors to ‘get out of the building’ by positioning them outside this fence. alternatively, the incorporation of external actors into internal operations can be signified by bringing these actors within. the animals the animal models serve as metaphors for different stakeholders (see figure 4). customers are divided into subgroups representing each of roger’s adopter categories. this is an important distinction since it is not uncommon for entrepreneurship students to conceptualise target customers as generic whole, without considering the sequential nature of new customer adoption. customers are signified with the following animal models: 1. chimpanzees (early adopters): curious consumers who are interested in novelty. less-risk adverse than the majority and willing to buy innovative products/services that are still undergoing product development. 2. lions (early majority): more cautious consumers. enjoy hunting down novelty but more risk-adverse than chimpanzees. will tend to wait until the value of the product/service is more developed. 3. zebras (late majority): these consumers tend to follow the herd. not interested in novelty, but see the value enjoyed by earlier customer groups and (eventually) follow suit. 4. sloths (laggards): very little interest in keeping up with the latest trends in this market. often persuaded by the less-enthusiastic zebras. additional animals are included to represent other stakeholders. while we do make some recommendations about which animals typify which stakeholders, there are no compelling reasons why students should not define their own associations, giving them the freedom to assign the range of actors based upon their own situation and selecting the animal metaphor that most resonates with them. key stakeholders to consider are partners, suppliers, investors, governing bodies, and competitors. resources tokens the tool also has chunky brass tokens to represent resources (figure 4). the weight, colour, and size of these tokens is deliberate, since larger, heavier objects tend to perceived as having more value (alban & kelley, 2013; jostmann et al., 2009), psychologically nudging users not treat them lightly. their golden colour also alludes to their value. method the method outlined below describes how the author employs the tool in the methods of practical entrepreneurship 2 course. students in this course work in small groups to develop real business ideas from a concept to pre-incubation (teachers could also use the tool for historical/hypothetical case studies). the purpose of the workshop is to enable students to consider how their business ideas can create and capture value through stakeholder interaction over time. a typical classroom session takes three hours, divided into the following stages: 1. icebreaker stage (20 minutes) 2. opening stage (40 minutes) 3. strategizing/scenario stage (100 minutes) 4. closing stage (20 minutes). figure 4: a brass resource token (centre) flanked by animals models representing different customer groups journal of business models (2019), vol. 7, no. 3 pp. 119-130 124 the tool requires a facilitator on its first use to explain the methodology and coach students throughout the session (once familiar with the tool, students should be able to self-coordinate). the facilitator should place the landscape on a large table somewhere where users can stand around it. i have never had a student express scepticism towards using the tool (quite the opposite). nevertheless, some students might see the jungle setting and discount the tool as frivolous. it may be prudent to emphasis at the start of the session that professional organizations use similar methods routinely for serious purposes, as noted in the introduction. icebreaker stage the session should begin with a hands-on icebreaker, encouraging students to interact comfortably with the tool. one simple icebreaker is a variation of the rivercrossing puzzle. here, four animals – the chimp, the lion, the zebra, and the sloth – are placed on one side of the river and students are given the task of getting all the animals to the other side. the animals must cross by a boat that only the chimp can operate, and this boat only allows the chimp to take one passenger at a time. however, certain animal combinations must not be left on one side of the riverbank without the chimp’s supervision: the lion will eat the zebra, and the zebra will trample the sloth. the group now has the responsibility of solving this puzzle as a team. in order for the icebreaker to encourage familiarity with the tool, each member is assigned an animal that only they can touch, so they must collectively interact with the landscape. students should be encouraged the solve the problem through trial-and-error by physically interacting with the model, rather than trying to solve it verbally or mentally. opening stage: sensemaking the current business situation first, the layout of the canvas is explained. it helps if students are already somewhat familiar with theoretical concepts embedded in the design (e.g., product lifecycles, customer types). if they are masters students, they likely already understand most of these concepts. if not, i would recommended that students are at least briefed on them before the session. students may wish to label key areas of the board or certain animals using sticky notes if they have trouble remembering what these represent. next, the facilitator introduces animals sequentially. the customer groups are explained first. it is fairly common for students not to have considered the segmentation of the target market(s) by time to adoption, and so students are given a moment to discuss who their early adopters are, then their early majority, and so forth. facilitators should encourage students to hold up each model and ask the question: who is our [chimpanzee]? this physical interaction with the models and the framing of the question helps students to associate the model with the actor it represents. after the students have identified each customer segment, they are then asked to position them on the board based upon where they perceive each group currently exists on this landscape. it is common for the chimpanzees to be positioned at the start of the river, the lions further down by the chasm, the zebras by breakeven island, and the sloths towards the end of the river, signifying the customers’ respective position along the product lifecycle. however, students may have exceptional reasons to position them elsewhere. for instance, if the early adopters are co-developing the product, they may place the chimpanzee inside the firm. the positioning of the animals is ultimately metaphorical so there is no ‘correct’ placement. what is important is that the students collectively understand why they have placed a model where they have. this is achieved by getting the students to explain why they are positioning stakeholders where they are as they are doing so. the tool’s value ultimately derives from its ability to help students to sensemake and sensegive (gioia & chittipeddi, 1991; weick et al., 2005), and not in their adherence to where to facilitators think each model belongs. nonetheless, the facilitators do have a vital role here in asking questions. if a certain placement looks peculiar (e.g., placing laggard sloths at the start of the river), they should ask the students to clarify why. clarification helps in two ways: first, it draws students’ attention to implications that they might have overlooked or misjudged (rumble & minto, 2017). second, if the journal of business models (2019), vol. 7, no. 3 pp. 119-130 125 unusual positioning of an actor was purposeful, it gives the student an opportunity to communicate their reasoning to the team. once the customers have been positioned, students then start positioning other key actors relevant to their business. again, the positioning of actors is at the discretion of the students. they may, for example, conceive of financers being inside the firm where such investors are actively providing advice to the firm, or outside if investors have a hands-off role. next, they can identify key resources and position resource tokens where they believe those resources lie (e.g., finance next to investors, ip next to a licence holder). once the landscape is populated, the students are asked to reflect upon what insights they can gain from it. they may notice that certain actors seem isolated from one another. alternatively, the facilitator may notice this and ask the students if they believe this signifies something. the question may itself encourage the students to create signification for this that was not there before. strategizing/scenario stage the facilitator now asks the students to reposition the stakeholders in order for their planned business concept to work. this may include identifying key partners (if they are not already on the landscape, they can be added) and positioning them within or adjacent to the firm, or sending out representatives to customer groups, or bringing actors within the firm (see figure 5). this continues sequentially to explore how the bm might evolve at different stages of the new venture, including how decisions at one time enable/restrict later decisions, or how stakeholders might react to decisions. at an early stage, students will probably focus on the early adopter chimps, while later stages include the majority customer groups or new constellations of partners and financing. this strategizing stage has the added advantage in that it gets students to consider not just their planned bm evolution, but also what activities they have to do and relationships they have to form in order to make it a reality. during this stage, the facilitator can ask students a number of questions: how will other actors respond to this new situation? how might you make this happen in the real world? these questions help the students consider the implications, threats, and opportunities of such an arrangement. asking these questions early on tends to result in students asking themselves these questions at later stages without prompting by the facilitator. in addition to mapping and strategizing, the tool can also be used for scenario planning, asking questions such as what happens if the product does not appeal to the [lion]? the stakeholders and tokens can be repositioned to represent these scenarios. in practice, there are no sharp distinctions between strategizing and scenario planning. students tend to reposition, question, and reposition again throughout the session without much prompting by the facilitator. closing the session it is important to close the session formally so students can summarize what they have learnt. the facilitator can do this by asking the students to exhibit their insights to the rest of the class; repositioning and verbally explaining their current situation, followed by their bm strategy.figure 5: repositioning animal figures to model a new business journal of business models (2019), vol. 7, no. 3 pp. 119-130 126 key insights in classroom settings, i have observed the tool to be helpful in the achievement of several learning outcomes: 1. sensemaking the current business ecosystem 2. identifying customers based upon adoption 3. awareness of issues involved in new venture creation: chasm, resource allocation, competitor positions, etc. 4. business modelling using a network perspective 5. considering staged implementation strategies and their feasibility (cf. wirtz & daiser, 2018) 6. scenario planning the first significant challenge with the tool is also one of its key strengths; namely its materiality. the tool was costly to produce (making the landscape, purchasing the animals models, etc.) and bulky to transport. one solution we developed was to create a printed version of the landscape that could be easily transported and cheaper to replicate (which is useful when running multiple sessions simultaneously; see figure 5). a more frugal option is drawing a simple landscape on an a0 sheet of paper. the animal models could be replaced with cheaper alternatives, including lego or chess pieces. second, students can be reluctant at the start of the session to handle the animals and resource tokens, talking over the canvas rather than interacting with it. to tackle this issue, we monitored the icebreaker sessions carefully and reminded students to move the pieces whenever we noticed them trying to solve the problem verbally. a catchphrase we oft repeated was ‘don’t tell me, show me’. any reluctance eventually dissipated during the main strategy session. third, the tool is constantly in flux. students continuously position, question, and reposition stakeholders. therefore, movements are not automatically logged. we overcame this issue by asking students to take photos at key moments and label them appropriately (e.g., ‘scenario 3’). however, such images would not be readily understandable to others not present at the session without supplementary explanation. whilst the tool is useful at facilitating discussion in situ, it is less able to convey meaning outside of a workshop. videoing the sessions could also be useful. i got permission to film students interacting with the tool during one session (available at https://vimeo. com/306352237). the students in the video are developing a new e-book business and are using the tool to identify a neglected customer group (represented as a chimpanzee) by querying its relationship to amazon (represented as a hippo), whom they interpret as a main competitor. they then devise a strategy to cocreate with this customer, expressed by repositioning the chimpanzee model inside the firm. fourth, although most teams understood what they were expected to do, one of the smaller teams needed further coaching to guide them through the process. in classroom settings, there are often multiple groups using canvases for different business ideas simultaneously, and it may not be possible to assign a permanent facilitator to each group. students’ response some days after using the model, students anonymously rated their perceived usefulness of the tool from one (very unuseful) to five (very useful). 54% rated it very useful, 31% useful, and 15% undecided, resulting in a 4.4 average. no student rated it unuseful nor very unuseful. students rated the tool more much more highly than other entrepreneurial activities, such as creating a group charter (3.3 average). the perceived value of the model went beyond the assigned workshop. when one of the groups acquired a new team member, they asked to borrow the tool again in order to explain their bm to them. afterwards, i received this email: “i tried to do it the same way we did during the actual workshop, first laying out where all of our customers are today in relation to [our business idea] and where we want them to be in the future. unlike the workshop though i was the one putting out all the animals to show [the new team member] how i am thinking about our customers and explaining each customer as i put them on the mat. thank you for letting us borrow the game, it helped me order some of my own thoughts regarding our customers!” journal of business models (2019), vol. 7, no. 3 pp. 119-130 127 conclusion the startup jungle is an attempt to apply best practices from modelling in other domains to business modelling by adapting the sand table concept to metaphorically represent a business ecosystem. the method described above captures how the tool can be applied in classroom settings, but it is also being used by entrepreneurs and incumbent organisations as a new way of interpreting, business modelling, and strategizing. practically, the startup jungle requires much more preparation than alternative business modelling tools. however, the overall positive response from the students and their claims that it helped them identify and plan for contingencies they had not considered before should be enough to convince some educators that four-dimensional modelling is a worthwhile investment. journal of business models (2019), vol. 7, no. 3 pp. 119-130 128 references alban, m. w. & kelley, c. m. (2013), embodiment meets metamemory: weight as a cue for metacognitive judgments, journal of experimental psychology: learning, memory, and cognition, vol. 39, no. 5, pp. 1628-1634. coughlan, s. (2018), “surgery students ’losing dexterity to stich patients’”, available at: http://www.bbc.com/news/ education-46019429 (accessed 05 novermber 2018). demil, b. & lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 43, no. 2-3, pp. 227-246. fritscher, b. & pigneur, y. (2009), “supporting business model modelling: a compromise between creativity and constraints”, in england, d., palanque, p. & vanderdonckt, j., & wild, p. j. (ed.), international workshop on task models and diagrams for user interface design in brussels, 2009, springer-verlag, berlin, heidelberg, pp. 28-43. gioia, d. a. & chittipeddi, k. (1991), sensemaking and sensegiving in strategic change initiation, strategic management journal, vol. 12, no. 6, pp. 433-448. jostmann, n. b., lakens, d. & schubert, t. w. (2009), weight as an embodiment of importance, psychological science, vol. 20, no. 9, pp. 1169-1174. kringelum, l. & gjerding, a. n. (2018), identifying contexts of business model innovation for exploration and exploitation across value networks, journal of business models, vol. 6, no. 3, pp. 45-62. miller, l. j. (2005), “frances glessner lee: brief life of a forensic miniaturist: 1878-1962”, harvard magazine, september-october, available at: https://harvardmagazine.com/2005/09/frances-glessner-lee-html (accessed on 05 november 2018) moore, g. a. (2014), crossing the chasm (third edition). harpercollins publishers inc., new york. moore, j. f. (1996), the death of competition: leadership & strategy in the age of business ecosystems, harperbusiness, new york. morgan, m. s. (2012), the world in the model: how economists work and think, cambridge university press, new york. normann, r. & ramirez, r. (1993), from value chain to value constellation: designing interactive strategy, harvard business review, vol. 71, no. 4, pp. 65-77. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, hoboken, nj. rogers, e. m. (2003). diffusion of innovations (fifth edition), free press, new york. rumble, r. & mangematin, v. (2015), business model implementation: the antecedents of multi-sidedness, in baden-fuller, c. & mangematin, v. (ed.), business models and modelling (advances in strategic management), vol. 33, emerald group publishing limited, pp. 97-131. rumble, r. & minto, n. a. (2017), how to use analogies for creative business modelling, journal of business strategy, vol. 38, no. 2, pp. 76-82. journal of business models (2019), vol. 7, no. 3 pp. 119-130 129 smith, r. (2010), the long history of gaming in military training, simulation & gaming, vol. 41, no. 1, pp. 6-19. thibodeau, p. h. & boroditsky, l. (2011), metaphors we think with: the role of metaphor in reasoning, plos one, vol. 6, no. 2, p. e16782. wadin, j. & ahlgren, k. (2019), business models for sustainability—change in dynamic environments, journal of business models, vol. 7, no. 1, pp. 13-38. weick, k. e., sutcliffe, k. m. & obstfeld, d. (2005), organizing and the process of sensemaking, organization science, vol. 16, no. 4, pp. 409-421. weiner, m. (1959), “an introduction to war games”, rand corporation, available at: http://www.rand.org/pubs/ papers/p1773/ (accessed 05 novermber 2019) wirtz, b. & daiser, p. (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, pp. 40-58. wouters, p., van nimwegen, c., van oostendorp, h. & van der spek, e. d. (2013), a meta-analysis of the cognitive and motivational effects of serious games, journal of educational psychology, vol. 105, no. 2, pp. 249-265. journal of business models (2019), vol. 7, no. 3 pp. 119-130 130 ryan rumble is a senior lecturer at the institute of innovation and entrepreneurship at the university of gothenburg, sweden. his research interests include academic entrepreneurship, set-theoretic methods, and phronesis in knowledge-intensive entrepreneurship ecosystems. he currently teaches masters courses in theoretical and practical entrepreneurship. his doctoral thesis explored business-modelling practices from a critical realist perspective. ryan is also interested in experimenting with new methods in entrepreneurship education, including serious games, video methodologies, and exercises designed to nurture ‘practical wisdom’ in prospective entrepreneurs. about the authors journal of business models (2016), vol. 4, no. 1, pp. 63-83 63 purpose: the purpose of the paper is to analyse founders’ perceptions of initial configurations and business models in new technology-based firms (ntbfs). design: case studies were performed using semi-structured interviews and interactive techniques involving open questions and activity cards to capture perceptions of activities that form the firms’ business models. findings: the business model template, commonly referred to as the business model canvas, is frequently used among these companies and seemed to have shaped the business model discourse in our case companies. our findings also indicate that founders of ntbfs perceive their customer value proposition as the most valuable element of their business model. we also recognized signs of the influence of financial partners on the founders’ perceptions of the initial business models. furthermore, findings show that some ntbfs create parallel business models within their firms to ensure survival in the start-up phase. originality / value: the paper adds value to business model research by describing how ntbfs’ structure their initial business activities and the elements of their initial business models perceived to be as more crucial during the early years as well as how these perceptions change. initial configurations and business models in new technologybased firms abstract please cite this paper as: rydehell & isaksson (2016), initial configurations and business models in new technology-based firms, journal of business models, vol. 4, no. 1, pp. 63-83 keywords: business models; initial configurations; new technology-based firms, founder perception 1 technology management and economics, chalmers university of technology, sweden; hanna.rydehell@chalmers.se 2 chalmers university of technology, sweden; anders.isaksson@chalmers.se hanna rydehell 1 and anders isaksson 2 journal of business models (2016), vol. 4, no. 1, pp. 63-83 64 introduction new technology-based firms (ntbfs) are important for the long-term development and growth of an economy (storey & tether, 1998; spencer & kirchhoff, 2006) through employment, research and development, and innovation (bollinger et al., 1983). yet, many of these firms do not succeed in the market during the first years of start-up. in order to better understand why some firms succeed and remain in the market while others fail, researchers have studied the impact of founding conditions on firm growth including, for example, social capital and knowledge acquisition of the founding team, resource management, and the business environment (e.g., yli-renko et al., 2001; löfsten & lindelöf, 2003; brinckmann et al., 2011; clarysse et al., 2011). research has demonstrated that a firm’s future prospects for development are affected by decisions made initially by founders and that configurations established in the early start-up phase are difficult to change later on (boeker, 1989). hence, understanding the initial configuration and structure of business activities becomes important to recognize the consequences that these decisions may have in the future. one way to capture the initial business configurations made by founders is to investigate their initial business models. the business model of a firm is a way of structuring business activities to achieve corporate objectives (e.g., amit & zott, 2001; chesbrough & rosenbloom, 2002; magretta, 2002; teece, 2010; zott et al., 2011) and is a simplified depiction of how the elements of the business work together (dasilva & trkman, 2014). the benefit of a good business model is that it delineates how all parts of the firm will work together to deliver an important advantage (margetta, 2002), specifically, by capturing value from innovation (chesbrough & rosenbloom, 2002; teece, 2010). chesbrough and rosenbloom (2002) showed that technology-based spin-offs capture economic value through evolving their business models and unlocking cognitive dimensions from previous and old business models. in this sense, the business model constitutes an important element for (new) technology-based ventures. furthermore, the business model has been recognized as a cognitive instrument for founders and managers (baden-fuller & mangematin, 2013) to use in order to configure their businesses and to understand how the firm can create, deliver, and capture value. the cognitive approach highlights that advantages of the business model lie not only in how it is developed, but also how founders are able to change it. extant business model literature has demonstrated the importance of this for business model innovation (chesbrough, 2010; achtenhagen et al., 2013) and for the establishment of firms and start-ups. experimentation and adaptation of early business models enhance the chances of business success (morris et al., 2005; andries & debackere, 2007). andries and debackere (2007) studied ntbfs and the relationship between business model adaptation and firm performance. they found that adaptation is valuable and reduces the frequency of failure in industries that are developing, rapidly changing, and capitally intensive, which are often the characteristics of industries with ntbfs. concerning business model adaptation, founders need to perceive and recognize changes in the market to be able to adapt properly. early perceptions that influence founders’ decisions are important to emphasise in order to understand connections between the business model and firm success. however, we still do not know enough about founders’ perceptions. how founders perceive their initial business models during start-up and how they configure and structure their business activities (what they focus on) have not been fully addressed by existing research, making it unclear how these perceptions might influence the success of ntbfs. this study aims to address this research gap on initial business models. the main purpose of this study is to analyse founders’ perceptions of initial configurations and business models in ntbfs. the study is based on a case studies of swedish ntbfs in the early years of their start-up, analysing founders’ perceptions of their businesses and their configurations. the study contributes to the business model literature by exploring how founders perceive their businesses in the start-up phase and describing their focus in their initial business models. moreover, the study gives input to and suggestions for future research on quantitative measurements of initial business models, journal of business models (2016), vol. 4, no. 1, pp. 63-83 65 which might contribute to clarifying the consequences of these initial configurations. the remainder of the article is organized as follows. section 2 presents a brief summary of the literature on the business model concept and how it has been studied within the entrepreneurial process. section 3 describes the research methodology for the study and section 4 presents the results and analysis. this is followed by a concluding discussion of the findings and recommendations for future research. theoretical framework a business model is an outline of the configuration of business activities, depicting how the value delivered to the customer can be converted into an economic value for the company (chesbrough & rosenbloom, 2002; magretta, 2002; baden-fuller & morgan, 2010). such activities include: providing offers to customer segments; identifying how to reach customers and which distribution channels to use; structuring what resources are available internally and what is needed externally; and, understanding the company’s costs (e.g., chesbrough & rosenbloom, 2002; dubosson-torbay et al., 2002; magretta, 2002; george & bock, 2011). in general, business models are defined through how firms create, deliver, and capture value (chesbrough & rosenbloom, 2002; teece, 2010; richardson, 2008; zott et al., 2011). thus, a business model is a current picture of how the different dimensions of a firm interact to create business value (dasilva & trkman, 2014). accordingly, a business model can be viewed as the underlying architecture of the firm. this view of the business model provides a description of how firms are structured depending on their business environment (i.e., the context). from that perspective, the business model is more like a road map or plan of how different elements and linkages between them interact to create a customer offer (product or service) and how value is captured through payment. approaching the business model as merely the architecture of the firm, consisting of the configuration and structure of different elements and the linkage between them, has engendered the development of several frameworks (see, e.g., hedman & kalling, 2003; morris et al., 2005; shafer et al., 2005). however, although most frameworks consist of similar elements, they also differ by including different aspects such as competitive strategy (chesbrough & rosenbloom, 2002; morris et al., 2005). table 1 presents a selection of business model elements in extant literature. however, inclusion of a competitive strategy as an element of the business model has led to confusion about the terminology of the business model concept. thus, while there is a consensus about the relevance of the business model in capturing value from a customer offering, “there is no universal consensus of what a business model actually is” (lambert & davidson, 2013, p. 669). hence, researchers have used the concept of a business model for different purposes, referring to differing aspects of a business such as its strategy and revenue (morris et al., 2005). in terms of strategy, the business model comprises strategic elements such as how the firm will make money. however, this does not mean that a business model is the same as a strategy (magretta, 2002; morris et al., 2005; shafer et al., 2005; george & bock, 2011). the business model can be seen as a way of communicating a firm’s strategic choices (shafer et al., 2005; richardson, 2008), focused on its opportunities, whereas its strategy aims to address how it will handle competition (magretta, 2002; george and bock, 2011). however, as the strategy deals with competition, the business model should fit with the strategy in order for the firm to perform well (zott & amit, 2008). the business model can be described as a reflection of what the firm is currently, while the strategy addresses what the firm wants to become (dasilva & trkman, 2014). the strategy is the way a firm positions itself in the market and where and how it decides to compete, whereas the business model seeks opportunities to exploit in its markets and how to achieve its strategy (casadesusmasanell & ricart, 2010). actually, as argued by george and bock (2011), the business model only exists when there is a business opportunity to exploit. moreover, the business model is not the same as a revenue model, although they are complementary as described by amit and zott (2001): ‘a business model refers primarily to value creation whereas a revenue model is primarily concerned with value appropriation’ (p. 515). simply put, the revenue model can be seen as a sub-concept of the business model. the revenue model journal of business models (2016), vol. 4, no. 1, pp. 63-83 66 can be defined as the way the firm gets compensated for what it delivers and it consists of revenue streams describing how the firm is being paid. the confusion that exists around interchangeable terms used for the business model concept could be argued to be the result of the different perceptions of founders and managers about what the business model is. hence, the business model can be seen as not merely an architecture of the firm but as the configuration of the business in the mind of the founder; thus, emphasizing the business model as a cognitive instrument (see, e.g., tikkanen et al., 2005; baden-fuller & mangematin, 2013). a cognitive perspective of the business model emphasizes that founders use the business model to make sense of their business within the business environment (vargas & mccarthy, 2010). this perspective of business models further highlights the linkage between the business model and technology development and transfer (baden-fuller & haefliger, 2013), which is of specific interest in the context of ntbfs since they build their businesses around commercializing a technology. the technology development is, thus, dependent on the decisions and focus within the business model based on the perspective of the founder. moreover, for ntbf founders especially, the business model represents an on-going, changeable tool to use table 1: business model elements author (year) business model elements amit & zott (2001) content of transactions, structure of transactions, governance of transactions, and value creation design chesbrough & rosenbloom (2002) value proposition, market segment, value chain structure, cost structure and profit potential, value network, and competitive strategy morris et al. (2005) offering (value proposition), market, internal capability, competitive strategy, economy (cost, profit), and growth/exit osterwalder et al. (2005) value proposition, target customer, distribution channel, relationship, value configuration, capability and core competences, partnership (partner network), cost structure, revenue model tikkanen et al. (2005) strategy and structure, network, operations, finance and accounting, reputa-tional rankings, industry recipe, boundary beliefs, products richardson (2008) value proposition (offering, target customer, competitive advantage), value creation and delivery system (resources and capabilities, value chain, value network), and value capture (revenues, costs) teece (2010) value proposition, market segment, revenue streams, cost structure, strategic engagement, ‘isolating mechanism’, resources/dynamic capabilities, value chain and value delivery baden-fuller & mangematin (2013) identifying the customer, customer engagement, monetization, and value chain and linkage journal of business models (2016), vol. 4, no. 1, pp. 63-83 67 to structure their businesses to target perceived opportunities and achieve competitive advantage (strategy) over the long run. further, cognition guides what founders perceive and believe to be an appropriate business model (tripsas & gavetti, 2000), influencing their decisions and the business activities that are focused on. thus, this paper draws on the research regarding business models as the cognitive instruments of founders, facilitating the structure of business activities to create, deliver, and capture value. although business modelling is regarded as the cognitive process of founders in this paper, frameworks providing elements of the business model, such as the business model canvas (osterwalder & pigneur, 2010) or the entrepreneur’s business model (morris et al., 2005), are still useful in understanding how entrepreneurs configure and form the underlying architecture of their firms to exploit opportunities in the market. thus, using such frameworks could facilitate an understanding of where practitioners draw the line between strategy and the opportunity-centred business model (george & bock, 2011), which might facilitate finding the answers to questions about how founders’ perceptions of initial configurations and business models influence how they structure their business activities. business models and the entrepreneurial process examining the business model as a cognitive instrument, it appears that the development of the business model will change during the start-up phase as founders understand their business environment better and what and how they can create value. experimenting with business models during start-up has been recognized as important for new firms in adapting their businesses to changes in the environment, thus influencing the success of their firms (e.g., morris et al., 2005; andries & debackere, 2007; chesbrough, 2010; andries et al., 2013). andries et al. (2013) demonstrate that simultaneous experimentations are important for technology-based ventures to cope with uncertainty and for long-term survival. they also show that experimentation implies a heuristic logic and involves several business models that firms experiment with before settling on one. hence, during the start-up phase, firms may not focus solely on one business, thus experimenting with the initial business model could result in parallel business models (clausen & rasmussen, 2013; nenonen & storbacka, 2010). parallel business models would further facilitate founder experimentation with different options and enhance their competitiveness in the market. as argued by markides and charitou (2004), several business models can be used in the same market to adapt to changes and to introduce innovations creating a competitive advantage for the firm. introducing new business models is a further way to handle changes created by competitors’ innovations (markides & oyon, 2010). however, regarding technology-based ventures, which are usually outsiders disrupting established markets and creating new niches, elaborating on parallel business models is more of a way for founders to understand their businesses better – what value to create, how to create it, and for whom. additionally, it is important to recognize that new ventures are experimenting and changing their business models in different ways compared to established firms (ahokangas & myllykoski, 2014; iivari, 2015). moreover, several business models offer different emphasis on the business activities, thus different perceptions of the initial business might affect the configuration of the start-up in different ways. with a cognitive approach to business models, decisions made when founders better understand their business and business environment could be studied through a different focus within the business model and changes within it could be detected as well as any changes that include experimentation with parallel business models. the focus during the entrepreneurial process of a new firm may further change depending on external influences, thus suggesting that the external environment or external people (stakeholders) involved could impact the founder’s perception and the focus in the business model. research has stressed the importance of focusing on customer development and relationships for firm success and the fit of firms’ value propositions with customer needs (blank & dorf, 2012; osterwalder et al., 2005; osterwalder et al., 2014). although several tools have been developed for entrepreneurs to use to configure business activities and develop their own business models, new firms still struggle to survive during journal of business models (2016), vol. 4, no. 1, pp. 63-83 68 the early years of start-up. apparently, the value proposition and customer needs are not always the focus of founders. george and bock (2011) studied how practitioners perceived a business model and how to use it, demonstrating a divided view on the concept with different understandings of the word. thus, there are still gaps to be filled when it comes to founders’ perceptions of their initial business models and how that influences how they structure their businesses during start-up. further, with more knowledge about initial business model structures, researchers might be able to address unanswered questions about the early activities of start-ups such as ‘are unique business model characteristics correlated with improved survival or performance?’ (george & bock, 2011, p. 106). methodology the study empirically investigates perceptions of initial configurations and business models in ntbfs in the first years of start-up. the topic is theoretically limited, but since the business model literature has been developed over the years, theory will be used for studying the initial configurations and the business models of ntbfs, for example, in understanding what questions to ask and in developing the interview guide. to dig deeper into the perceptions and initial business configurations a case study approach is appropriate. the case study approach makes it easier to analyse and compare data within and between cases, and is appropriate when the context is of a complex nature (eisenhardt & graebner, 2007). the later applies to the business model context (baden-fuller & morgan, 2010). selection of cases this study is interested in ntbfs due to their potential for long-term development and economic impact, as stated in the introduction. however, since ntbfs are highly technology-based they compete in highly uncertain environments (brinckmann et al., 2011). additionally these firms are based on assets such as technological knowledge (vargas & mccarthy, 2010), may lack resources, and are dependent on interactions with stakeholders within their business environment. thus, founders of these firms need to consider the configuration of their firms to be able to survive in the market, which implies adaptation of their initial business models (andries & debackere, 2007). in that sense, these founders are more likely to reflect on the development of their business models. the selection of each case was based on three criteria: industry classification, age, and location. initially, we used the retriever business database as a filtering tool to provide a list of potential ntbfs. retriever business is a database containing financial and legal information on all swedish companies (retriever business, 2016). based on the criteria, a search in the retriever business database filtered out firms that did not meet the criteria. first, for industry classification the statistical classification of economic activities in the european community (nace) codes (eurostat, n.d.) were used to select firms that operate in high-tech and medium high-tech manufacturing or knowledge intensive industries. nace codes have been used to classify high-tech firms such as ntbfs (see, e.g. wennberg et al., 2012) and cover industries used in previous research (see, e.g., yli-renko et al., 2001). second, the age of the firms was used in order to identify firms that could be perceived as ‘new’ and in their early start-up phase. firms selected for the study were founded and registered between the years 2010 to 2013. in our initial contact with the firms, we confirmed that the firms were newly established and not re-registered enterprises that existed for several years. third, to provide easy access to the case companies, firms were also selected based on their location in the gothenburg region. the gothenburg region is also an industry dense area with many technology-based start-ups related to both the university hospital (sahlgrenska) and chalmers university of technology. final selection was then made using convenience sampling, where firms were called and asked if they would consider participating in the study; if they said yes, the firm was included in the research. table 2 presents the final eight firms selected for the study. journal of business models (2016), vol. 4, no. 1, pp. 63-83 69 data construction the study was based on semi-structured interviews (bryman & bell, 2011) to let the respondents explore the topics and explain their thoughts and business focus. the interviews were recorded for later transcription of the data. to ensure that each interview captured the focus of the ntbfs’ business models, an interactive interview guide was developed including both semi-structured questions as well as ‘assignments’ where respondents were asked to think about and consider the business activities they completed during start-up. as already discussed, the business model concept is not a crystal clear concept (george & bock, 2011; lambert & davidson, 2013; dasilva & trkman, 2014). thus, only using interviews might make it difficult to capture the perceptions of the founders (silverman, 2007) and the focus of their business models. further, using the term ‘business model’ might be perceived as asking the firms to reveal their unique strategies and competitive advantage; meaning, this could be seen as a ‘threat’ to the respondent. therefore, the term ‘business model’ was left out of the first part of the interview guide. later it was used to let the respondents offer their own definitions of a business model. hence, this enabled a better understanding as to how the founders perceived and defined the concept of a business model and how they talk about it when relating it to their own businesses. table 2: presentation of selected cases case founders interviewed description of nace code year of founding empirical (quantitative) a 1 engineering, technical testing and analysis 2012 develops dental disposable saliva absorption under the tongue b 2 computer program-ming 2013 develops software to streamline production: software that can manage production planning c 1 information services 2010 develops software for companies to take advantage of online products. in the area of “internet of things” d 1 video and television program production 2011 films and broadcasts live performances and concerts in movie theaters e 1 computer program-ming 2012 helps photographer to make improvements by offering and developing an internet-based community for social learning f 1 video and television program production 2010 post production where services are provided to create products that customers can make money g 1 engineering, technical testing and analysis 2011 develops computer-based simulator for training and maintenance of intubation skills h 1 advertising and mar-ket research 2013 develops a terminal to easily collect customer feedback. helps service industry to become better at customer satisfaction and customer service journal of business models (2016), vol. 4, no. 1, pp. 63-83 70 the interviews could be seen as instrumental dialogues (kvale, 2006) that provide descriptions and explanations of what we want to understand. however, when conducting case studies some bias in the results is unavoidable as this kind of research design is somewhat subjective. this concern is especially true in the interview situation where the researcher has to decide which questions to ask in a semi-structured interview as well as the way respondents’ answers are interpreted. to avoid creating too much bias during the interview, and to ensure the respondents expressed their business in their own words, the interview guide started by asking the respondents open questions about their business; what they do; and, how far they have come. subsequently, the respondents were given a sheet with a timeline and asked to fill in important activities during start-up and through today. during the timeline activity, questions were also asked about any difficulties in the process, what other actors had been involved, and if examples could be given explaining some activities in more detail. the timeline provided an understanding of the founders’ perception of their business and also enabled the respondents to talk more openly about their business models without the words ‘business model’ being mentioned. after filling in and talking about the timeline, the word ‘business model’ was mentioned for the first time, asking respondents about their perceptions of a business model. to proceed to the topic of the firm’s specific business model, cards depicting different activities were used (see figure 1). these activities build on the business model canvas (osterwalder & pigneur, 2010) and to some extent the work of morris et al. (2005). the business model canvas was especially useful as it gives a clear visualisation of important business activities. the cards were presented as different business activities that could form different business models, and the respondents were asked to review and think about them and then rank them according to what they spent most time and focus on during the start-up process. this procedure enabled the respondents to describe what they perceived as most important in the startup phase and describe the mistakes they made in the beginning. after the first round of ranking the cards, questions were asked about what had been most time figure 1: business model activity cards used in interviews journal of business models (2016), vol. 4, no. 1, pp. 63-83 71 consuming and difficult; if other actors had been involved during the different activities; and, what they did differently from their competitors (i.e., the uniqueness of their business models). the card ranking was photographed for later analysis. the interviews ended with questions about the founders’ expectations for their business progress in the next three years (the future), and closing questions about what they would have done differently if they could start over. the final questions aimed at getting more examples of early mistakes (some already mentioned) from new angles. in general, the average interview time was about 45 minutes. coding and analysis when analysing the empirical data, the first step focused on transcribing the recorded interviews. since parts of the interviews were focused on the timeline and the activity cards, the transcribing needed to include statements of what the respondents had written and how they structured the activity cards. the transcribing resulted in 67 pages of text, including statements from timelines and activity cards. after transcribing the interviews, it was coded based on thematic coding (flick, 2009; braun & clarke, 2006). thematic coding is used to identify patterns (i.e., themes) in the data and can be based on the purpose of a study or theory (braun & clarke, 2006). specifically, thematic coding facilitates the comparison of people’s perceptions and experiences (flick, 2009) as well as a comparison between theory and practice. based on the purpose of this paper and the theoretical assumptions of a business model being a cognitive instrument of the founders, themes were identified with this in mind. thus, one theme identified was based on the cognitive perspective of the founders’ perceptions of their business models. this included how words or concepts were used to describe their business, how they defined it, and if they were able to reflect on the value-creating and value-capturing process that constituted a business model. furthermore, cognition guides decisions made about the configuration of business activities and founders’ focus in the business model (baden-fuller & mangematin, 2013), such as customer relationships (blank & dorf, 2012; osterwalder et al., 2014), which could provide inputs to aspects of success. in addition, the focus may change due to founders experimenting with their business models and learning from mistakes, which appear as patterns identified using thematic coding. hence, themes captured were ‘early focus in the business model’, ‘activities not focused on’, and ‘changes in the initial business model’. during the process of thematic coding, patterns occurred around if and how the firms were selling their initial products; this pointed to the existence of parallel business models within the firms that supported other revenue generation. thus, the theme ‘parallel business models’ was included in the coding and analysis of the data. after identifying the relevant themes, coding and analysis were completed in two steps. first, within-case analysis (eisenhardt, 1989) was conducted. each interview transcript was read thoroughly and coded based on the themes in order to obtain a familiarity with it. to reduce the risk of missing important details in the data, the authors tried to keep an open mind during coding. when structuring the data into a table the different interviews were reviewed to examine if the labels occurred in several cases, and if these were related to any of the themes based on theory. second, the themes along with each interview were ordered in a table and the results from the cases within each theme were presented using pure descriptions, providing a rich overview of each case and facilitating the search for cross-case patterns (eisenhardt, 1989). results and analysis analysing the data resulted in five general themes. table 3 gives an overview of the five themes used for structuring the analysis. emphasising a cognitive perspective of a business model includes the founders’ perceptions of their initial business model, which implies how they define it and how they reflect on the value-creating process that constitutes the business model. thus, when analysing perceptions it seems that perceptions, in some cases, include discussions and definitions of the business model canvas, which are analysed and detailed more thoroughly under the ‘perceptions of the business journal of business models (2016), vol. 4, no. 1, pp. 63-83 72 ta b le 3 : d at a an al ys is o f ca se s tu d ie s t h em es c as e a c as e b c as e c c as e d c as e e c as e f c as e g c as e h p er ce p ti on of b u si n es s m od el co n ce p t w ay s to a p p ro ac h t h e m ar ke t an d h ow t o se ll b u si n es s m od el ca n va s h ow c u st om er s p ay fo r th e p ro d u ct p ay m en t p er io d ic it y an im p or ta n t co m p on en t b u si n es s m od el ca n va s b u si n es s p la n p ro vi d e se rv ic es th at b ot h w e an d ou r cu st om er s ca n m ak e m on ey o n h ow t o m ak e m on ey on t h e p ro d u ct a n d w h at t h e p ro d u ct is , kn ow in g w h at t h e cu st om er w an ts b u si n es s m od el ca n va s e ar ly f oc u s d is tr ib u ti on c h an n el s, va lu e p ro p os it io n , c u sto m er s eg m en ts a n d cu st om er r el at io n sh ip s cu st om er s eg m en ts an d c u st om er r el ati on sh ip s id en ti fy c u st om er se g m en ts a n d cr ea te c u st om er re la ti on sh ip s an d cu st om er p ar tn er sh ip s. c os ts w er e d ec is iv e. id en ti fy t h e n ee d (m os t im p or ta n tl y) , th en fi n d c u st om er s/ cu st om er se g m en ts , c re at e re la ti on sh ip s an d d is tr ib u ti on c h an n el s id en ti fy n ee d s, fi n d cu st om er s, d is tr ib u ti on c h an n el s, c re at e cu st om er r el at io n sh ip s, c re at e ac ce ss to r es ou rc es (fi n an ci al ) an d fi n d in g p ar tn er s (i n ve st or s) c re at e re la ti on sh ip s w it h c u st om er s, th en fi n d p ar tn er s to w or k w it h , re ve n u e st re am s an d r es ou rc es ( h u m an an d fi n an ci al ca p it al ) id en ti fy c u st om er n ee d s an d c re at e cu st om er r el at io n sh ip s id en ti fy c u st om er n ee d s, id en ti fy c u sto m er s eg m en ts a n d cr ea te r el at io n sh ip s w it h c u st om er s, d is tr ib u ti on c h an n el s a ct iv it ie s n ot f oc u se d on p ar tn er s (i n ve st or s) ar e n ot im p or ta n t f in an ci al p ar tn er s (i n ve st or s) , a ls o re ve n u e st re am s an d d is tr ib u ti on c h an n el s p ar tn er s (i n ve st or s) r ev en u e st re am s co st s an d r ev en u e st re am s id en ti fy c u st om er se g m en ts a n d id en ti fy h ow t o re ac h ou t to t h em (d is tr ib u ti on c h an n el s) f in an ci n g ( re so u rc es ) an d p ar tn er s (i n ve st or s) f in an ci n g ( re so u rc es ) an d p ar tn er s (i n ve sto rs ) c h an ge s in th e in it ia l bu si n es s m od el m or e fo cu s on c u sto m er in vo lv em en t an d sa le s, a n d r el at io n sh ip s w it h d is tr ib u to rs (p ar tn er s in t h e va lu e ch ai n ) it er at io n w it h h ow to in vo lv e th e cu sto m er . m or e fo cu s on r ev en u e so u rc es an d d is tr ib u ti on ch an n el s s ti ll fo cu s on c u sto m er r el at io n sh ip s fo cu s on m ar ke ti n g an d p ro d u ct io n , a n d h ow t o m ak e m on ey . t h at m ea n s m or e fo cu s on r es ou rc es (p ar tn er s) , b u t al l g oe s b ac k to t h e cu st om er ’s p re fe ren ce s m or e fo cu s on m on et iz at io n m od el s (r ev en u e st re am s) , an d o n c u st om er in vo lv em en t m or e in te rn al p ro d u ct io n a n d h u m an re so u rc es m or e in vo lv em en t of t h e cu st om er in th e d ev el op m en t p ro ce ss . m or e fo cu s on s al es a n d m ar ke tin g a n d s ta rt lo ok in g fo r in ve st or s m or e fo cu s on fi n d in g p ar tn er s w h o ca n p ro vi d e re so u rc es (fi n an ci al , h u m an a n d so ci al ly ). f oc u s on re ve n u e st re am s p ar al le l bu si n es s m od el h av in g p ar al le l b u si n es s m od el w it h in t h e sa m e fi rm : s h ar es o f th e re ve n u es c om e fr om o th er a ct iv it ie s (e .g . c on su lt an cy ) h av in g p ar al le l b u si n es s m od el w it h in t h e sa m e fi rm : s h ar es o f th e re ve n u es c om e fr om ot h er a ct iv it ie s (e .g . co n su lt an cy ) h av in g p ar al le l b u si n es s m od el w it h in t h e sa m e fi rm : s h ar es o f th e re ve n u es c om e fr om ot h er a ct iv it ie s (e .g . co n su lt an cy ) n o n o n o h av in g p ar al le l b u si n es s m od el w it h in t h e sa m e fi rm : s h ar es o f th e re ve n u es c om e fr om ot h er a ct iv it ie s h av in g p ar al le l b u si n es s m od el w it h in t h e sa m e fi rm : s h ar es o f th e re ve n u es c om e fr om ot h er a ct iv it ie s (e .g . co n su lt an cy ) journal of business models (2016), vol. 4, no. 1, pp. 63-83 73 model concept’. further, since decisions about how to configure the business are based on founders’ better understanding, activities that are (or are not) focused on within the business model could be analysed based on how founders reflect on and describe their business model. additionally, changes made within the business model, specifically analysed from the timeline, could be used to understand how different elements and activities in the initial business model are changed to adapt to the founder’s learning process and changed perception of the business. thus, these could provide indications of relations between the initial business model and firm performance and survival. related to model changes is the phenomenon of a parallel business model. these are analysed to provide an understanding of how founders handle uncertainty, which could relate to the success and survival of the ntbfs. perceptions of the business model concept viewing the business model as a cognitive instrument for founders to use to better understand their business environment and their overall business (baden-fuller & mangematin, 2013), their perceptions represent important input regarding how they understand their business and accordingly, configure their business activities. hence, the perception of their initial business model during the start-up phase would influence its structure. when asking founders to describe their business activities during the early years of start-up, many of them defined a business model as the business model canvas developed by osterwalder and pigneur (2010). founders also described how they learned about the business model canvas from business coaches at incubators and science parks; only one (case f) out of the eight founders interviewed had not been in contact with incubators. the study can, therefore, recognize the business model canvas as commonly used by incubators and science parks as a useful tool to describe business models. however, that is not to say that it is the same as the founder’s perception of the concept, but since part of the coding of perception included definitions of business models, the business model canvas could still partially reflect how business models are generally perceived. moreover, in some cases it was obvious that external investors had a huge influence on the founder’s perception of a business model. founder e viewed business models as out-dated based on his discussions with venture capitalists in financing the business. this [business models] is something that is very outdated in our line of business […] what they ask for is metrics, demographics, data, where users come from, how many do you have, how many are active, percent, percent, percent. that is what they are interested in. the vision, the team rather than a document on what you believe. founder e (referring to external investors) thus, one perception of the business model is that it is an instrument to be used to communicate with financial partners. however, founder e referenced parts of the value-creating elements of the firm, such as customers, relationships, and target segments, and further mentions that a physical document is not what builds the business model. hence, this implies that a business model is more of a cognitive picture that exists in the mind of the founder but still needs to be communicated to partners and stakeholders. furthermore, perceptions about the business model also involved perceptions about business modelling, and how different business model components and their activities are perceived by the founders. george and bock (2011) argue that practitioners have different perceptions of business models and they demonstrate this through the different words used to describe them. analysing the perceptions of the founders of ntbfs of their business models, the contact with external people and organizations, such as incubators, indicates influences on their cognition and the use of visualising tools for business modelling. thus, such influences could have an effect on the focus within the business model. early focus of the business model drawing on the cognitive approach to understand what a business model is could possibly provide diversity in the perception of the elements that constitute it. in the empirical study here, this was demonstrated in various cases: first, concerning perceptions of customers and the value proposition, and second, concerning partners. journal of business models (2016), vol. 4, no. 1, pp. 63-83 74 customers and the value proposition when describing their views on their business models during start-up, customer relationships and how to reach customers were pointed to as important aspects of the business model as well as how to receive payments for the products/services. the latter is especially interesting since almost none of the firms actually focused on this activity early on. this indicates that the revenue model is an important part of consideration in the business model, as often referenced in business model literature (see, e.g., dubosson-torbay et al., 2002; morris et al., 2005). however, although research has explained the differences between the business model and the revenue model (amit & zott, 2001; morris et al., 2005; zott et al., 2011), considering the ways the founders spoke to this, practitioners seem to still perceive these as equivalent. extant literature on business models have emphasised that early focus in the business model should be on customers and establishing relationships with customers in order to match value propositions to their needs (see, e.g., blank and dorf, 2012; osterwalder et al., 2014). the involvement of customers in the valuecreating process has been emphasised as important for firm success, which includes openness to the surrounding environment and highlighting the customer’s role in innovation and technology development (nenonen & storbacka, 2010; baden-fuller & haefliger, 2013). however, based on the beliefs of the founders, their business models and the focus within them may differ depending on their perceptions influencing the models (tripsas & gavetti, 2000; baden-fuller & haefliger, 2013). in line with the extant research on the importance of customers, the empirical study shows that the majority of the founders described that initial attention was paid to the offering (value proposition) and identifying and creating relationships with key customers. furthermore, the value proposition was the most valuable part of the firm’s business model, which is consistent with extant research on customer relationship theory (e.g., blank & dorf, 2012; osterwalder et al., 2014). moreover, in relation to extant research, the study provide insights as to how a focus on customers includes, to some extent, close involvement with the offers, ultimately resulting in more customised business models. the following quotations demonstrate how the customer offer was developed together with potential customers to provide a more customised product: [...] we built on it [the product] with some specific functionality to the customer in 2013 and early 2014, [...] then we started to build new modules to make it a little bigger, and to solve all customer problems. founder b we developed the product very much after their [customer’s] needs. founder c as most of the founders frequently referred to their offerings when talking about customers’ needs and the relationships with customers, this shows the close relation between the needs of customers and the offerings of the firms (see, e.g., chesbrough & rosenbloom, 2002; magretta, 2002; osterwalder et al., 2005; blank & dorf, 2012). thus, the relation between these elements of a business model could be important to consider when developing questions for the quantitative study of business models. for example, structuring questions that measure the involvement of customers in the development of a product or service and the early focus on customer needs. partners concerning partners in the initial business model, founders had different opinions about what this referred to. for the founder in case a, the partners were perceived as investors or venture capitalists and it was obvious that this founder perceived such partners as a way to access financial capital. in that sense, these partners were perceived as not necessarily relevant for the business model: partners [investors] are not that important. no, i cannot say that we have many partners. founder a however, when it came to other partners in the value chain of the initial business model such as distributors, manufacturers, and other stakeholders providing necessary competence for the firms’ operations, several of the founders expressed that they were involved in the early start-up phase. however, these firms were not regarded as partners but more as collaborators, and arjournal of business models (2016), vol. 4, no. 1, pp. 63-83 75 gued to be important to compete in the market: in order to reach that [a strong market position], i believe in collaborations and it is much the way it works in our business; we help each other and share the risk. founder d following the differing perceptions of partners, it can still be argued that external people and organizations (stakeholders) are important for business modelling as they are part of important business functions for creating competitive advantage and for integrating different elements of the business model. nevertheless, how partners are perceived reflect the different perceptions that founders have about their businesses (and how to model their business), indicating their cognitive perspectives. activities not focused on early focus was frequently stated to be on business model activities identifying how customers would get products (distribution channels), and identifying and creating access to resources needed to run the business. the latter was, however, expressed as focus on human rather than financial capital in the initial stages of the firms. this also relates to attention, unpaid initially, on identifying and finding key partners; thus, the reference to investors and venture capital firms described through founders’ perceptions of business models and their elements. only one of the cases (case e) described an early focus on finding investors for access to financial resources, but it was not expressed as the most important activity initially performed. otherwise, this activity was not clearly mentioned as important to the firms. one founder even expressed decisions about how to finance the business without investors: [...] we took the surplus income and reinvested it. we took low wages and reinvested. we built with common sense, you could say, up to a certain point. it took maybe two years before we realized that you can do so but then we will never reach the goal. then, we took the funding of certain parts of the equipment, which are the slightly more expensive pieces of equipment. […] we have just taken the financing from the bank. founder f although partners (financial) and the revenue stream were not mentioned as a focus early on during start-up, some founders expressed that external funding might have helped: we have not taken any external funding and one can consider whether it was right or not. it might have enabled more. founder h changes in the business model in looking back, several founders indicated that they should have devoted more attention to the revenue stream and some have since started to look for venture capitalists. as revenues are necessary for firm survival, this stream has an effect on the success of new ventures. there is a correlation between creating relationships with customers and identifying their needs, and the revenue of firms (see, e.g., chesbrough & rosenbloom, 2002; dubosson-torbay et al., 2002; osterwalder et al., 2005). however, this correlation is not always evident in the first years of new ventures. this can be due to a lack of resources and legitimacy (brinckmann et al., 2011) and the business stage before trust is created within a larger customer segment. nevertheless, focus in the business model might change due to experimentation and adaptation representing the process of business modelling during the start-up phase (morris et al., 2005; andries & debackere, 2007). in line with extant research demonstrating the importance of change and innovation in business models (chesbrough, 2010), the analysis of the empirical data revealed indications of on-going changes and iterations of the initial business models of the ntbfs. coding for changes in the business models provided insights into the changes in the founders’ focus and in the iterations of the initial business models. several of the founders changed their focus on, merely, establishing relationships with customers in order to understand their needs, to focus more on involving customers in the development process for co-creation. this further demonstrates a change in the perceptions of founders as to what elements and activities are important for the development and commercialisation of their technology; in that sense, providing input for the cognitive perspective of business models as better understanding of the changing business environment (badenfuller & haefliger, 2013; baden-fuller & mangematin, journal of business models (2016), vol. 4, no. 1, pp. 63-83 76 2013). in one case (case e), the founder expressed that not focusing enough on customers and involving them initially was clearly a mistake that made the business model too broad and unstructured in his mind. this is also in line with nenonen and storbacka (2010) who argue for co-creation as essential for creating value and to enable the business model to fit with the surrounding environment. moreover, changes in the initial business model indicate a clearer focus on revenue streams and establishing partnerships with stakeholders providing both financial and human capital resources. in examining research investigating the lack of resources, established relationships, and legitimacy of ntbfs (e.g., yli-renko et al., 2001; brinckmann et al., 2011), revenue streams seem to fall into place when firms have established relationships with customers and have developed the technology into value propositions related to customer needs. parallel business models when changing the initial business models, founders (entrepreneurs) often experiment with parallel business models (andries et al., 2013; clausen & rasmussen, 2013). consistent with the discussion on resource scarcity at technology-based ventures (yli-renko et al., 2001; brinckmann et al., 2011; vargas & mccarthy, 2010) and the uncertainty that these firms need to handle, experimenting with parallel business models have been argued as helping founders handle ambiguity and identify temporary revenue streams (andries et al., 2013). experimenting with several business models further facilitates the ability to identify paths to transfer and commercialise technology in the market, hence, influencing the success of the firms (clausen & rasmussen, 2013). analysing the empirical data of the eight ntbfs revealed changes within the business models, however, not specifically any experimentation with parallel business models. instead, the changes demonstrated the changing focus of the founders caused by changes in the way they understood their business and learned from customers and partners as well as their own mistakes. however, in describing their businesses, all the founders stated that they were still selling their initial main products or services. only one, however, was actually making a living from it. several of the founders indicated that they were unable to make a profit from their main product or service thus far, and needed to work outside the firm’s main activities or create a consultancy business within the firm: [...] when we started the company we knew that it will take time so we registered it so that he [one of the founders] could work with consulting in the firm and in that way bring in money. we cannot live on the product yet, but we can live off the company. founder a we have to do consultancy work alongside to survive. founder b the fact that several firms had other revenue generating businesses within their firms indicates that they were employing parallel business models in the startup phase to ensure their survival. in terms of parallel business models, markides and charitou (2004) argue that maintaining parallel business models may create or destroy value for the firm, depending on whether or not the new business model surpasses the existing one. however, this argument is based on the firm already being established with a specific target segment that is trying to innovate using parallel business models. the changes to the business models of start-ups, such as ntbfs, are argued to be different from the changing process at established firms (ahokangas & myllykoski, 2014; iivari, 2015). in that sense, for ntbfs, the problems mentioned by markides and charitou (2004) are not the same since they have not yet established a first business model but are rather experimenting with several business models to configure the business and make sense of the business environment by establishing relations with customers and partners to identify what value they can create. hence, the analysis of the empirical data identifying if and how ntbfs utilise parallel business models reveals that founders often have parallel business models within the firm in order to ensure enough financial resources for the survival of the firm during the first years of start-up. journal of business models (2016), vol. 4, no. 1, pp. 63-83 77 concluding discussion the paper contributes to the research on business models and new ventures in high tech industries, providing a clearer description of how founders of ntbfs perceive the business model concept, their initial business models and the elements that receive the most attention, and what changes over time. consistent with previous research arguing that business models are cognitive tools for managers and founders (e.g., tikkanen et al., 2005; baden-fuller & mangematin, 2013), this research demonstrates that the configuration and change of the initial business models are guided by the changed perceptions and preferences of the founders. moreover, the research adds to the extant research on the perception of business models including the roles of stakeholders in these models. thus, building on the business model literature, the research is able to provide insights as to how founders configure and structure their initial business models. further, insights from the empirical study reveal that tools for visualizing business models, such as the business model canvas (osterwalder & pigneur, 2010), are common and often used to define a business model, ultimately affecting the discourse of the founders towards a clearer understanding of the concept of business modelling. thus, conceptualisations of business models in the form of the business model canvas or the entrepreneurs’ business model (morris et al., 2005) facilitate the ability of founders to express their business models. accordingly, even though business models are a representation of founders’ perceptions and understanding of their businesses and the environment, these tools are needed to communicate the architecture of the firm, and facilitate structuring the business in the mind of the founder. furthermore, in analysing how founders perceive their initial configurations and business models, it becomes clear that the perceptions of what a business model is differs as demonstrated by george and bock (2011). the interactive method used in the study created an opportunity to understand the founders’ way of talking about their businesses, which activities they implemented and gave attention to initially, and, in looking back, what they would have done differently. thus, the study provided insights from a different angle, not using the word ‘business model’ in the interviews but rather referring to activities within a business model. this approach made it easier for the respondents to express what they focused on. as several of the founders referred to the business model canvas (osterwalder & pigneur, 2010), using business activities within the model created some familiarity for the respondents, reducing the risk of misunderstanding. for future quantitative research on business models of new ventures, it will be essential to clearly state the business activities of business model elements rather than use the word ‘business model’ as it may be misinterpreted by company founders. further, the early activities given most attention by the founders during start-up, such as the focus on customers and customer needs to create greater opportunities for success (blank & dorf, 2012; osterwalder & pigneur, 2014), indicate that these might have an impact on the survival of ntbfs. however, all the parts of a business model are important to create and capture value for firms (see, e.g., chesbrough & rosenbloom, 2002; dubosson-torbay et al., 2002; magretta, 2002). nevertheless, the study demonstrates what new ventures in high-tech industries perceive as important for their business initially, hence, showing that not all parts are included in their initial business model. in some cases, founders expressed that they should have paid more attention earlier to activities such as how to generate revenues including finding partners (investors) to create access to financial resources. however, experimentation with (chesbrough, 2010) and adaptation of initial business models are an essential part of the start-up process (andries & debackere, 2007) and several of the founders changed focus during the start-up phase to address financial needs. yet, how this early focus may have influenced the firms’ future success could be an interesting topic to examine in future studies. in terms of resources, the founders do mention these, but they have different meanings dependent on the context of the discussion. when they describe important resources that are the focus at the time of firm registration, they are referring to human capital such journal of business models (2016), vol. 4, no. 1, pp. 63-83 78 as know-how, their own previous experiences, and talent. however, in describing what was not the centre of attention initially, references are to financial capital, including investors as partners, and how to create revenue streams. further, when structuring questions for future quantitative research to measure the effects of initial business models, it will be important to divide question areas dependent on the activities of different parts of the business model. for example, the questions on resources of the business model should be divided into human resources and financial resources; and, financial resources should include financial partners, financial capital, and costs and revenue streams as financial parts of the business model. even though the firms struggled with similar issues due to facing problems that occur in initial phases of start-up, there were some differences between firms in different industry sectors. the differences are mostly dependent on the business environment, and thus need to be taken into consideration when studying these firms. firms operating in the it-sector were usually more eager to find investors (albeit not the initial focus) than firms operating in the medical technology industry, which might impact the difference in their growth rates during start-up; this correlates with different average growth rates of start-ups in different industries. thus, it is important to remember this when examining the growth and survival of ntbfs. moreover, the study identifies the need for and existence of parallel business models during start-up in order to create enough profits for the firm to continue working on its main offering. thus, making it important to ask questions that clearly distinguish which business model the founders are referencing when describing their business. otherwise, bias may occur about how the initial business model, referring to the firm’s main offering, influences firm survival. this paper provides interesting insights into the perceptions of founders of ntbfs and how they structure their business activities and develop their initial business models. from this, the paper provides input for supporting future quantitative research on business models that might further examine how this focus in the early start-up phase influences the success of these high-tech firms. journal of business models (2016), vol. 4, no. 1, pp. 63-83 79 reference list achtenhagen, l., melin, l., & naldi, l. (2013). dynamics of business models – strategizing, critical capabilities and activities for sustained value creation. long range planning, vol. 46, no. 6, pp. 427-442. ahokangas, p., & myllykoski, j. (2014). the practice of creating and transforming a business model. journal of business models, vol. 2, no. 1, pp. 6-18. amit, r., & zott, c. (2001). value creation in e-business. strategic management journal, vol. 22, no. 6-7, pp. 493-520. andries, p., & debackere, k. (2007). adaptation and performance in new businesses: understanding the moderating effects of independence and industry. small business economics, vol. 29, no.1-2, pp. 81-99. andries, p., debackere, k., & looy, b. (2013). simultaneous experimentation as a learning strategy: business model development under uncertainty. strategic entrepreneurship journal, vol. 7, no. 4, pp. 288-310. baden-fuller, c., & haefliger, s. (2013). business models and technological innovation. long range planning, vol. 46, no. 6, pp.419-426. baden-fuller, c., & mangematin, v. (2013). business models: a challenging agenda. strategic organization, vol. 11, no. 4, pp. 418-427. baden-fuller, c., & morgan, m. s. (2010). business models vs models. long range planning, vol. 43, no. 2-3, pp. 156-171. blank, s., & dorf, b. (2012). the startup owner’s manual. pescadero: k&s ranch, inc. boeker, w. (1989). strategic change: the effects of founding and history. the academy of management journal, vol. 32, no. 3, pp. 489-515. bollinger, l., hope , k., & utterback, j. m. (1983). a review of literature and hypotheses on new technology-based firms. research policy, vol. 12, pp. 1-14. braun, v., & clarke, v. (2006). using thematic analysis in psychology. qualitative research in psychology, vol. 3, no. 2, pp. 77-101. brinckmann, j., salomo, s., & gemuenden, h. (2011). financial management competence of founding teams and growth of new technology-based firms. entrepreneurship theory and practice, vol. 35, no. 2, pp., 217-243. bryman, a., & bell, e. (2011). business research methods. new york: oxford university press. casadesus-masanell , r., & ricart, j. e. (2010). from strategy to business models and onto tactics. long range planning, vol. 43, no. 2-3, pp. 195-215. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2-3, pp. 354-363. chesbrough, h., & rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial corporate change, vol. 11, no. 3, pp. journal of business models (2016), vol. 4, no. 1, pp. 63-83 80 529-555. clarysse, b., bruneel, j., & wright, m. (2011). explaining growth paths of young technology-based firms: structuring resource portfolios in different competitive environments. strategic entrepreneurship journal, vol. 5, no. 2, pp. 137157. clausen, t. h., & rasmussen, e. (2013). parallel business models and the innovativeness of research-based spin-off ventures. the journal of technology transfer, vol. 38, no. 6, pp. 836–849. dasilva, c. m., & trkman, p. (2014). business model: what it is and what it is not. long range planning, vol. 47, no. 6, pp. 379-389. dubosson-torbay, m., osterwalder , a., & pigneur, y. (2002). e-business model design, classification, and measurements. thunderbird international business review, vol. 44, no. 1, pp. 5-23. eisenhardt, k. m. (1989). building theories from case study research. academy of management review, vol. 14, no. 4, pp. 532-550. eisenhardt, k. m., & graebner, m. e. (2007). theory building from cases: opportunities and challenges. academy of management journal, vol. 50, no. 1, pp. 25-32. eurostat. (n.d.), high-tech industry and knowledge-intensive services (htec), available at: http://ec.europa.eu/eurostat/cache/metadata/en/htec_esms.htm (accessed 2.6.2015). flick, u. (2009). an introduction to qualitative research. london: sage publications ltd. george, g., & bock, a. j. (2011). the business model in practice and its implications for entrepreneurship research. entrepreneurship theory and practice, vol. 35, no. 1, pp. 83-111. hedman, j., & kalling, t. (2003). the business model concept: theoretical underpinnings and empirical illustrations. european journal of information systems, vol. 12, no. 1, pp. 49-59. iivari, m. m. (2015). dynamics of openness in smes: a business model and innovation strategy perspective. journal of business models, vol. 3, no. 2, pp. 30-50. kvale , s. (2006). dominance through interviews and dialogues. qualitative inquiry, vol. 12, no. 3, pp. 480-500. lambert, s. c., & davidson, r. a. (2013). applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. european management journal, vol. 31, no. 6, pp. 668-681. löfsten, h., & lindelöf, p. (2003). determinants for an entrepreneurial milieu: science parks and business policy in growing firms. technovation, vol. 23, pp. 51-64. magretta, j. (2002). why business models matter. harvard business review, vol. 80, no. 5, pp. 86-92. markides, c., & charitou, c. d. (2004). competing with dual business models: a contingency approach. academy of management executive, vol. 18, pp. 22-36. journal of business models (2016), vol. 4, no. 1, pp. 63-83 81 markides, c., & oyon, d. (2010). what to do against disruptive business models (when and how to play two games at once). mit sloan management review, vol. 51, no. 4, pp. 25-32. morris, m., schindehutte, m., & allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research, vol. 58, no. 6, pp. 726-735. nenonen, s., & storbacka, k. (2010). business model design: conceptualizing networked value co-creation. international journal of quality and service sciences, vol. 2, no. 1, pp. 43-59. osterwalder, a., & pigneur, y. (2010). business model generation. new jersey: john wiley & sons. osterwalder, a., pigneur, y., & tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of the association for information systems, vol. 16, pp. 1-25. retrieved from http://aisel. aisnet.org/cais/vol16/iss1/1 osterwalder, a., pigneur, y., bernarda, g., & smith, a. (2014). value proposition design: how to create products and services customers want. new jersey: john wiley & sons, inc. retriever business, 2016, retriever business, available at: http://business.retriever.se/tjaenster/retriever-business (accessed 4. 3. 2016). richardson, j. (2008). the business model: an integrative framework for strategy execution. strategic change, vol. 17, no. 5-6, pp. 133-144. shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, vol. 48, pp. 199207. silverman, d. (2007). a very short, fairly interesting and reasonable cheap book about qualitative research. london: sage publications ltd. spencer, a. s., & kirchhoff, b. a. (2006). schumpeter and new technology based firms: towards a framework for how ntbfs cause creative destruction. international entrepreneurship and management journal, vol. 2, no. 2, pp. 145-156. storey , d. j., & tether , b. s. (1998). new technology-based firms in the european union: an introduction. research policy, vol. 26, pp. 933-946. teece, d. j. (2010). business models, business strategy and innovation. long range planning, vol. 43, no. 2-3, 172194. tikkanen, h., lamberg , j.-a., parvinen, p., & kallunki, j.-p. (2005). managerial cognition, action and the business model of the firm. management decision, vol. 43, no. 6, pp. 789-809. tripsas, m., & gavetti, g. (2000). capabilities, cognition, and inertia: evidence from digital imaging. strategic management journal, vol. 21, no. 10-11, pp. 1147-1161. vargas, r. a., & mccarthy, i. (2010). business models in technology-based firms: a cognitive approach to regional differences. in technology management for global economic growth (picmet), 2010 (july) proceedings of picmet’10: journal of business models (2016), vol. 4, no. 1, pp. 63-83 82 (pp. 1-10). ieee. wennberg, k., delmar, f., & hellerstedt, k. (2012). teknikintensivt nyföretagande och tillväxt i branscher och företag. ekonomisk debatt, vol. 40, no. 6, pp. 36-49. yli-renko, h., autio, e., & sapienza, h. j. (2001). social capital, knowledge acquisition, and knowledge exploitation in young technology-based firms. strategic management journal, vol. 22, no. 6-7, pp. 587-613. zott , c., & amit, r. (2008). the fit between product market strategy and business model: implications for firm performance. strategic management journal, vol. 29, no. 1, pp. 1-26. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2016), vol. 4, no. 1, pp. 63-83 83 hanna rydehell is a doctoral candidate at the department of technology management and economics at chalmers university of technology, sweden. her research is focused on business models in technology-based start-ups, emphasising entrepreneurs’ business model and stakeholder involvement. hanna holds a master’s degree in design and product development, and a master’s degree in industrial engineering and management – both from linköping university. anders isaksson is a senior lecturer at chalmers university of technology. his research is mainly focusing on small business finance, with a special emphasis on the venture capital process and the relationship between venture capital firms and entrepreneurs. he also has a professional experience in the area as a special advisor on venture capital issues for the swedish ministry of industry. other areas of research have been firm growth, initial public offerings, corporate governance and ex-dividend stock price behaviour. anders’s previous work has been published in venture capital, international journal of entrepreneurship and small business, asian journal of finance & accounting, australasian accounting business and finance journal among others. about the authors journal of business models (2017), vol. 5, no. 1, pp. 51-73 51 business model disclosures in corporate reports jan michalak 1, gunnar rimmel 2, peter beusch 3, and kristina jonäll 3 abstract purpose: in this paper, we investigate the development, the current state, and the potential of business model disclosures to illustrate where, why and how organizations might want to disclose their business models to their stakeholders. the description of the business model may be relevant to stakeholders if it helps them to comprehend the company ‘story’ and increase understanding of other provided data (i.e. financial statements, risk exposure, sustainability of operations). it can also aid stakeholders in the assessment of sustainability of business models and the whole company. to realize these goals, business model descriptions should fulfil requirements of users suggested by various guidelines. design/methodology/approach: first, we review and analyse literature on business model disclosure and some of its antecedents, including voluntary disclosure of intellectual capital. we also discuss business model reporting incentives from the viewpoint of shareholders, stakeholders and legitimacy theory. second, we compare and discuss reporting guidelines on strategic reports, intellectual capital reports, and integrated reports through the lens of their requirements for business model disclosure and the consequences of their use for corporate report users. third, we present, analyse and compare examples of good corporate practices in business model reporting. findings: in the examined reporting guidelines, we find similarities, e.g. mostly structural but also qualitative attributes, in their presented information: materiality, completeness, connectivity, future orientation and conciseness. we also identify important differences between their frameworks concerning the target audience of the reports, business model definitions and business model disclosure requirements. discontinuation of intellectual capital reporting conforming to dati guidelines provides important warnings for the proponents of voluntary disclosure – especially for international integrated reporting council guidelines. still, because relatively few studies have examined the preparation and use of business model disclosures, we suggest areas for further research. originality/value: this paper is the first that investigates, analyses, and compares the three most common reporting frameworks that contain business model reporting and disclosures. please cite this paper as: michalak et al. (2017), business model disclosures in corporate reports, vol. 5, no. 1, pp. 51-73 keywords: business model, disclosure guidelines, intellectual capital reports, strategic reports, integrated reports 1 department of accounting at the management faculty, lodz university, jmichal@uni.lodz.pl 2 department of business informatics, systems and accounting at henley business school, university of reading. 3 department of business administration at school of business, economics and law, university of gothenburg. journal of business models (2017), vol. 5, no. 1, pp. 51-73 52 introduction financial information has long been integral to corporate reporting. globalization, however, has led to more complex business structures in a setting where companies must comply with a wider range of reporting standards and increasingly demanding reporting environments surrounding capital markets. reporting deficiencies of traditional corporate annual reporting (eccles and krzus, 2010; frc, 2011; acca, 2012), most likely in combination with increased fines and more lawsuits, stronger pressure from stakeholders resulting in reputational hits, and fuller disclosure by competitors, seem to have motivated companies worldwide to develop and improve the information in their periodic reports to investors and other stakeholders. today, to respond to new stakeholder demands, companies are moving beyond not only the financial figures but also regulatory compliance (frc, 2009, 2011; iirc, 2011a and b; cohen, holder-webb, nath and wood, 2012; acca, 2013). in an ernst and young survey of global financial executives (wollmert, 2014), nine out of ten believed that they, within the next three years, were going to have focus more on ‘non-financial reporting themes around strategy, sustainability and risk management, since this is information that will give them an edge over their competitors when attracting investors’ (wollmert, 2014, p. 2). in the report, wollmert (2014) refers to this as connected reporting: ‘connected reporting is an approach to develop an organization’s current reporting to bridge the gap between the different information requirements of internal and external audiences’. chief financial officers see connected reporting as a tool worth utilizing because it will ‘support investor confidence and provide firms with the better ability to link external drivers with strategy and forecasts’ (ibid). one of the contemporary responses is the argument that reporting should revolve around a firm’s business model (bukh, 2003; nielsen and roslender, 2015), because essentially all competitive advantage is based on business models (morris, 2014). although business models lack a unified definition (jensen, 2014), there are currently multiple frameworks from which to analyse and describe (fielt, 2014), develop (lund and nielsen, 2014) and improve them (schüle et al., 2016). business models can be theorized at varying levels of abstraction (lambert, 2015; nielsen et al., 2017). according to tweedie et al. (2017), these levels of abstraction make it difficult to analyse business model taxonomies (groth and nielsen, 2015; lüttgens and diener, 2016) in standard frameworks because the value-creating components of a given business model will vary across models (sachsenhofer, 2016). responding to changes in corporate reporting where business models are an intricate part of increasing visibility for stakeholders (haslam et al., 2015), this paper focuses on business models and whether, as well as why, how, when and where to disclose information about them to various stakeholders. we have selected the three most influential frameworks, namely reporting guidelines on a) intellectual capital, b) strategy and c) an integration of financial performance, strategy, governance and context. a recent framework of the iirc expresses the need to look more closely at business models (iirc, 2013). moreover, some accounting research has shown that certain non-financial variables, many of them related to strategy and business models, affect stock prices and, thus, relate to value creation (rimmel et al., 2009, baboukardos & rimmel, 2016). an increasing number of accounting regulators (e.g. frc, 2014; eu 2014; sasb, 2016) attest to the narrative power of the business model concept, stressing the role of forward-looking information and its relevance to financial reporting. this paper, therefore, describes the development and current state of business model disclosure and outlines further research opportunities. the paper proceeds as follows. section two reviews research on corporate reporting of aspects of their business models. this research focuses largely, although not exclusively, on the context of business model reporting from different theoretical and empirical areas within the accounting domain. section three highlights how companies have made business model disclosures within intellectual capital reports, in annual reports, and especially in strategic reports, and integrated reports.1 section four examines the requirements for business 1 an integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term.’ (iirc, 2013c) journal of business models (2017), vol. 5, no. 1, pp. 51-73 53 model disclose in the guidelines for preparing strategic reports, intellectual capital reports, and integrated reports. the paper concludes with a discussion of recent developments, particularly within integrated reporting and in disclosure demands. finally, suggestions are made for future research opportunities when studying business model disclosures. antecedents of business model disclosure research hopwood argued some 20 years ago that annual reports have been transformed from ‘minimalist legal documents to flamboyant documents exhibiting creative use of text and visual images’ (hopwood, 1996, p. 55). simultaneously, the jenkins report (aicpa, 1994) presented business model disclosures as part of a broader business reporting solution (see nielsen and roslender, 2015). since then, the use of narrative reporting has grown even faster. in fact, the narrative parts of annual reports (and other nonfinancial disclosures including corporate social responsibility reports) have evolved faster than the traditional financial statements; accountant users have more of a challenge figuring out what is most important. in the areas of disclosure and reporting, different terms and concepts can have the same but also different meaning. for example, in this paper, we use narrative reporting and voluntary reporting rather interchangeably. yet, in european research traditions, narrative reporting refers to the descriptive or textual form of reporting in contrast to financial or numerical information (beattie 2014, p. 112). in north american research traditions, however, voluntary reporting is the opposite of mandatory reporting (beattie 2014, p. 112). today, there are still no universal standards how to distinguish between reporting and disclosure, which is the reason why semantics differ to quite some extent. given the limited scope and purpose of this paper, we, therefore, make no distinction between, or elaborate on, the similarities and differences between these two word-pairs. similarly, in this paper, we use the terms ‘disclosure’ and ‘reporting’ somewhat interchangeably, although dumay (2016) differentiates them as follows: disclosure is ‘the revelation of information that was previously secret or unknown’ while reporting is a ‘detailed periodic account of a company’s activities, financial condition, and prospects that is made available to shareholders and investors.’ (p. 178). furthermore, disclosure can be seen as more strategic information from the company while reporting is more operational (see also nielsen et al., 2017). studies of narrative reporting are significant antecedents to narrower studies of business model disclosure because narrative reporting has had two main objectives, namely 1) to provide context and meaning to quantitative (financial) disclosure, and 2) to enable the communication of factors and resources that cannot easily be quantified and valuated, such as intellectual capital, social and environmental performance, strategy and the business model (iasb, 2010). narrative reporting and voluntary disclosure research dates back to the 1970s and 1980s; however, some antecedents including readability of annual reports were published even earlier (see for instance, soper and dolphin, 1964; smith and smith, 1971). the main research in narrative reporting covers social and environmental disclosure, intellectual capital reporting, and readability of communication with stockholders, impression management and disclosure choices. we can explain the recent emergence and diffusion of narrative reporting and voluntary disclosure, including information on business models, through several theoretical lenses. according to shareholder theory, principal–agent theory, and transaction-cost economics (tce) theory, voluntary disclosure decreases the principal or investor’s information risks, which reduces uncertainty agency costs (hossain et al., 1995; healy and palepu, 2001). in turn, reduced uncertainty and agency costs lead to lower cost of capital, an increased share price, and increased liquidity (verrecchia, 2001; richardson and welker, 2001; lundholm and van winkle, 2006). revealing additional information may signal to potential investors about entity capabilities and strengths, resulting in more accurate company valuations (deeds, decarolis, and coombs, 1997). legitimacy theory, on the other hand, argues that companies disclose information to appear legitimate in the eyes of society (deegan, 2002, 2006). legitimacy is ‘a condition or status which exists when an entity’s journal of business models (2017), vol. 5, no. 1, pp. 51-73 54 value system is congruent with the value system of the larger social system which the entity is the part’ (lindblom 1994, p. 2). thus, voluntary disclosure then facilitates monitoring of a corporation by a broader range of stakeholders and allows societal control. companies tend to disclose more information if they are threatened with costs arising from non-legitimacy, such as product boycotts or difficulties in hiring talented people (hogner 1982; patten 1992; deegan 2002). stakeholder theory then argues that voluntary disclosure aims to satisfy a broader group of information users, not only shareholders but also customers, employees, governmental agencies, and local societies (gray, meek and roberts, 1995). voluntary disclosure facilitates a company’s ongoing success as it allows it to get support from diverse interested parties. this theory highlights the significance of balancing the interests of various stakeholders (donaldson and preston 1995). however, attaining an information needs equilibrium may appear difficult, as revealing too much information may be costly and lead to the loss of a competitive advantage, which in turn might be harmful to shareholders (darrough and stoughton, 1990; elliott and jacobson 1994; hanley and hoberg, 2010). thus, different theoretical lenses have focused on particular characteristics and often a particular receiver of more voluntary disclosure/narrative reporting. we have categorized these theories into three groups. the first two groups have the same main receiver of disclosure, namely the shareholder. in the first group, we have the theories that, from a mostly rational/financial viewpoint, calculate for reduced risks, reduced costs, and reduced uncertainties. the second group illustrates more positive aspects of the firm (certain potentials, capabilities and strengths) in order to achieve the opposite (a higher value and thus a higher share price). the third group, however, is more interested in societal issues and demands of a larger group of stakeholders. here, we are talking in terms of legitimacy and ‘value creation’ for a larger group than only for shareholders. in recent years, the increased focus on the value creation story follows a witnessed trend within accounting in general and reporting in particular that has been called a ‘narrative turn’, where ‘large-scale linguistic studies have entered the mainstream positivist north american literature supported by computerized natural language processing’ (beattie, 2014, p. 111). ‘the value creation story’ is what holland (2005) as well as the uk financial reporting review panel (frrp, now called the conduct committee), see as being the central core of voluntary disclosure. hence, a good annual report should then contain ‘a single story”’ showing ‘how the money is made” and this in “a consistent, clear and uncluttered manner’ (frc, 2012b). financial analysts (fund managers) should be able to understand this value creation story and gain confidence so that these stories can contribute to the valuation of the company. to gain confidence, the account users apply objective and subjective evidence to test company stories and to check promises. the process of effective business model persuasion should help testing hypotheses on which the business model holds. business model persuasion is in many cases a difficult task, as one manager interviewed by holland stated: there is some resistance in the financial markets to our story. they see this as a bit of black art. they are sceptical of the alliance between the creative element of our market end people and the technical knowledge of the chemists. will we find the new kind of chanel or new fragrance for the year 2005? (holland, 2005, p. 257) some companies also tend to withhold information about new business models (holland, 2005). in many cases, they are not sure whether the business model will succeed. moreover, companies decide to keep contingency reserves as more information is needed by stakeholders at some turning points. this includes if the unexpected bad news is arising from unanticipated events, or if the information is needed for extra financing issues or in cases of attempts of a hostile takeover. business model disclosures in most countries, corporations do not have the obligation to disclose their business models. the united kingdom is one of the few countries with a mandatory disclosure requirement, as companies act (see section 3.2) requires corporations to present business models in their strategic report. however, companies describe their business models, using various types of journal of business models (2017), vol. 5, no. 1, pp. 51-73 55 corporate communications: in strategic reports within annual reports, in intellectual capital reports, in integrated reporting, in corporate social responsibility (csr) reports, in ceo letters, in initial public offerings (ipo) prospectuses and on corporate websites. in the next section, we will focus on the first three forms of communication (intellectual capital reports, strategic reports, and integrated reports) as they are most widely discussed within academia and also by accounting professional bodies. business model disclosure in intellectual capital reports during the past twenty years, the concept of intellectual capital (ic) has become a much-discussed topic among company managers, accounting practitioners, and management researchers. in the corporate world, ic refers to the knowledge, skills and experience of a company’s employees as well as a company’s r&d activities, routines, procedures, systems, intellectual property, and external relationships (meritum, 2002; kaufmann and schneider, 2004; ricardis, 2006). it is the unique combination of these different elements that determines a company’s profitability and competitive advantage (wallman, 1996, 1997; guthrie and petty, 2000; lev, 2001; beattie and pratt, 2002; boedker et al., 2008). in the mid-1990s, some companies in scandinavia started to publish ic reports as supplements to their corporate annual reports (bukh et al., 2001; johanson et al., 2001a, b; mouritsen et al., 2001; bukh and johanson, 2003; bukh et al., 2005). the swedish insurance company, skandia, established itself as the leader of this ic disclosure movement when it published its 1998 prototype ic statement in early 1999 (rimmel, 2003). denmark was the first country to create a guideline, prepared by the danish agency for trade and industry, for reporting ic by companies (dati, 2001). the danish ministry of science, technology and innovation supported a joint project in which accounting researchers and companies created new guidelines for reporting ic by companies (dmsti, 2003b). the dati guidelines do not use the concept of the business model explicitly. however, it uses the concept of a business excellence model that ‘shows the relation between strategic management decisions, allocation of resources, the implementing of manufacturing processes, the degree of satisfaction of employees, customers and society.’ (dati, 2001, p. 51). both the business model and business excellence model seem to be quite close in meaning. bukh (2003) called for more research into how company management ‘perceive the company’s business model and communication on strategy and value creation’. at the same time, since measuring and reporting performance promotes accountability, some danish public agencies and companies begun voluntarily to prepare ic statements both for internal management purposes and for external reporting purposes (mouritsen et al., 2004, 2005; nielsen and bukh, 2011). in the area of the intellectual capital, voluntary disclosure embraces mainly type, amount and use of the various intellectual capital categories and their impact on company performance and prospects. the disclosure of a business model is the newest notion in narrative ic reporting. in recent years, there has been a decline in governmental and company interest in ic guidelines. however, a number of companies preparing intellectual capital statements have incorporated some parts of these into annual reports and csr reports (nielsen et al., 2016). it is also observable that new strategic frameworks and models for such reporting are gradually emerging and gaining momentum, e.g. the sustainability reporting guidelines (gri, 2011), and the integrated reporting framework (iirc, 2011a). these new frameworks require business model disclosures as they aim to improve the reporting of value creation to stakeholders, as did the danish ic statements guidelines issued more than a decade ago. a growing interest in business model disclosure, especially through the lens of the integrated reporting framework, has revitalized interest in intellectual capital (see section 3.3). in this framework, ic is one of the six types of capital in the integrated reporting framework, and how a combination of all capital types is used to ‘create value’ is at the core of this new way of intellectual capital disclosure and performance evaluation (abeysekera, 2013). beattie and smith (2013) believe that the business model concept will be able to offer a powerful overarching concept within which to refocus the intellectual capital reporting debate. they point out that the business model concept is holistic, multi-level, journal of business models (2017), vol. 5, no. 1, pp. 51-73 56 boundary-spanning and dynamic in comparison to the fragmented and static measurement and reporting of intellectual capital elements. business model disclosure in annual reports the term business model started to be used by influential financial reporting regulators, annual report preparers associations and consulting companies as they mentioned the term in some of their documents. for example, the term business model appeared twice in the international accounting standards board (iasb) discussion paper on management commentary issued in autumn 2005 in association with a description of the ‘nature of the business (pp. 38 and 77), but without definition. the authors of the exposure draft of practice statement management commentary (2009, p. 13) replaced ‘business model’ with ‘by the entity’s structure and its economic model’2 and in the final version of the practice statement (2010, p. 12) with ‘the entity’s structure and how it creates value’, which at that time was a short descriptive definition of the concept “business model”. in 2009, the accounting standards board (asb, 2009) concluded that the latest financial crisis (starting in 2008) drew shareholder attention to the importance of companies articulating business models in a clear and understandable way. the asb also stated that business models cannot be conveyed by the numbers alone. hence, the narrative part of the report should be used to ‘tell the story of what a company does to generate cash’ (asb, 2009, p. 10). the institute of chartered accountants in england and wales (icaew) indicated that business model reporting may appear challenging (icaew, 2009). the report underlined that problems could result from the choice of the amount of presented information ranging from high-level descriptions through qualitative explanations of what makes the business successful to representations of the impact of change. moreover, icaew signified that increased detail in business model descriptions could lead to a rise of associated proprietary costs. 2 economic model disclosure was required by the asb reporting statement operating and financial review (2006). in 2010, despite the concerns of icaew, the financial reporting council (frc) implemented a requirement in the uk corporate governance code to include an explanation of corporate business models in annual reports (frc, 2010). this requirement is today mandatory for companies listed under uk stock exchange rules. ‘the directors should include in the annual report an explanation of the basis on which the company generates or preserves value over the longer term (the business model) and the strategy for delivering the objectives of the company’ (frc, 2010, c.1.2). furthermore, the department for business innovation and skills (bis) developed narrative reporting regulations in the form of a strategic report, which was amended into the uk companies act and became effective on september 30th, 2013. neither the uk corporate governance code nor the companies act provides much guidance on how to present the business model. frc suggested the use of the accounting standard board’s reporting statement: operating and financial review (asb 2006). later, in 2014, frc issued a ‘guidance on strategic report’ (frc 2014). this new guidance clarifies how companies should present the business model in their annual reports – essentially in the part called ‘strategic report’. accordingly, the strategic report should have three main objectives, which determine its content: (a) to provide insight into the entity’s business model and its main strategy and objectives; (b) to describe the principal risks the entity faces and how they might affect its future prospects; (c) to provide an analysis of the entity’s past performance. (frc, 2014, p. 10). further, the guidance on strategic report suggests that the description of the entity’s business model in the annual report should include a description of the value generation and preservation over the longer term. important aspects that should be included in the strategic report are how the company captures value and how the business model of the entity differs from its competitors. the frc (2014) stresses that companies often create value through their activities at several different journal of business models (2017), vol. 5, no. 1, pp. 51-73 57 parts of their business process. in such situations, the description of the business model should not cover all processes but focus on those parts that are most important to the generation, preservation and capture of value. the frc (2014) indicates close interrelation between the concepts of business model and the strategy, both in theory and practical applications. when providing such information, the strategic report should enable shareholders to evaluate how directors have performed their obligation to foster the success of the company. the guidance states that the description of the business model should provide shareholders with a broad understanding of the business model, hence, this description should be neither overly detailed nor complicated. so far, there are only a few papers presenting empirical research on the business model disclosure in annual reports. for example, giunta, bambagiotti-alberti and verrucchi (2014) investigated voluntary business model disclosures of italian companies from star3 and blue chip4 segments of the italian stock exchange. they analysed four main elements (which they called areas of the business model: value proposition, processes, offering, and relations). they found differences between those two segments, as star companies revealed more information on their value proposition, while blue chip companies reported more information on the relations element of their business models. further, by applying a content analysis of business model presentations in annual reports from 60 hightech companies listed on the london stock exchange (ftse-techmark), michalak (2015) found that the business model disclosure in researched companies in most cases is concise (two pages long on average) and focuses on presentation of: the value creation process, markets, resources and the business activities. furthermore, the visualization methods used in annual reports facilitate a better understanding of the business models. melloni et al. (2016) analysed 54 business 3 at the milan stock exchange (borsa italiana) the star (segment for high requirement shares) market is within the mta and includes companies capitalised from 40 million to 100 million euros that are already listed and traded in more-traditional sectors. 4 a blue chip is a stock in a corporation with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times. model disclosures in the integrated reports included in the iirc database. they found that the dominant elements of the business model disclosure are outcomes and less information is disclosed on inputs, business activities and outputs. most presented information appeared to be non-forward looking and non-quantitative. they also observed the dominance of a positive tone in business model disclosure. they concluded that companies seem to adopt impression management strategies in business model disclosures in their integrated reports. robertson and samy (2015), who analysed ftse 100 integrated reports and conducted a series of interviews with senior management on integrated reporting diffusion, suggested mandatory strategic reports may pave the way for the real diffusion of voluntary integrated reports in the united kingdom. in the area of business model disclosure in strategic reports, we can identify some good practices. an example of such practices in the uk is british land5 (http://www.britishland.com/investors/reports/ reports-archive/2015). the description of the british land business model is concise, as in many other strategic reports since it is two pages long. it clearly presents the value creation logic/flow by stating: we create (1) … by focusing on (2) … which ensures (3) … and delivers (4) … creating value (5). (1) value proposition basis – places people prefer; (2) main resources and capabilities – right places, customer orientation, capital efficiency, expert people; (3) main sources of sustainable competitive advantage – enduring demand from occupiers and investors in property, optimal capital structure; (4) financial performance measured by three main key performance indicators (kpis) – growth in net assets, income from dividends, total accounting return; (5) outcomes/positive impact in three main areas – economic, social and environment – clearly stating the stakeholders influenced by british land business model. 5 http://www.britishland.com/investors/reports/reports-archive/2015 journal of business models (2017), vol. 5, no. 1, pp. 51-73 58 we consider the business model in the annual report of british land as good practice for five reasons. first, it visually presents the value-creation story in a concise way, providing shareholders with a broad understanding of the business model. second, it states what makes the company different from its competitors (places that people prefer) delivered by a bundle of key resources and competencies. third, it works as a roadmap for the other parts of the strategic reports, as it is linked to them (directs to pages with more detailed information). fourth, it presents efficiency of the business model using three financial kpis. fifth, it shows how value is created from an economic, social and environmental perspective, highlighting the positive influence on various stakeholders: investors, customers (occupiers, people who work, shop or live in their buildings), suppliers, local communities, and employees. the british land strategic report presents most of the elements required by frc guidelines, especially markets and the way that the entity engages with those markets including a detailed description of services and buildings portfolio. however, the strategic report lacks a presentation of the structure of the entity and its key business processes. business model disclosure in integrated reports the information provided by global companies listed on stock exchanges seems to have increased enormously during the last decade, which we can see in the extensive reports published. however, the iirc criticizes this kind of reporting by stating ‘the connections need to be made clear and the clutter needs to be removed’ (iirc, 2011a, p. 4). the iirc’s (2011a) intention is to create, in cooperation with a network of corporations, investors and academics, a framework for integrated reporting that meets the needs of the 21st-century stakeholders and to reduce information asymmetry. the development of integrated reporting is an ongoing process, where most countries’ requirements on reporting are funded on a voluntary basis. south africa is the leader in integrated reporting, the first country to implement mandatory requirements of integrated reports for listed companies. integrated reporting aims to generate information about an organization’s strategy, governance, performance and how it generates value in its economic, social and environmental context (iirc, 2011a). according to the iirc (2011b), integrated reporting should be the primary source for communicating with shareholders as well as stakeholders, and make all other reports redundant. definitions have emerged in the advancement of integrated reporting, defining it as‘a holistic and integrated representation of the company’s performance in terms of both its finance and its sustainability’ (iodsa, 2009, p. 54). as stated by the iirc, the aim of integrated reporting is to support value creation and to keep the value sustained within a company. the iirc’s definition of “business model” within its integrated reporting framework is: an organization’s business model is its system of transforming inputs, through its business activities, into outputs and outcomes that aims to fulfil the organization’s strategic purposes and create value over the short, medium and long term, designed (iirc, 2013c, p. 25). the iirc framework highlights a company’s business model as being the essence of an organization that is reflecting the value creation process of six different types of capital, namely financial, manufactured, intellectual, human, social/relationship, and natural capital. the inputs of these six types of capital are converted through the organization’s business activities into outputs (e.g. products, services, waste), which have effects on the capital as outcomes. the iirc framework outlines four building blocks of the business model: inputs, business activities, outputs and outcomes. according to the iirc (2013b), the differentiation between outputs and outcomes is a special characteristic of the business model description, as outputs refers to key products or services that an organization produces. interacting components of a business model should create a company’s value chain. all businesses are dependent on one or more resources that generate inputs to a company’s business model (iirc, 2013b). integrated reports should focus on the significant inputs that are important for a business model and affect a company’s value creation in the short, medium and long term (iirc, 2013b). according to the iirc framework, a business model also clarifies a company’s business activities, which include the planning, designing and manufacturing of products, journal of business models (2017), vol. 5, no. 1, pp. 51-73 59 or the exchange of knowledge in the provision of services. furthermore, a business model explains how a company, through its business activities, differentiates itself in the market, how the possible need for innovation is managed and how a business model is designed to handle any market changes. the iirc framework aims to enable clear and concise communication of value creation. integrated reporting should facilitate investors in evaluating how a combination of the six types of capital that an organization uses are creating value. a common misperception is that the iirc framework is about trying to monetize everything. integrated reporting is not about monetization, but trying to ensure that investors have the information they need to assess the ability of an organization to create value over time. therefore, the business model plays a central role in the iirc framework. in integrated reporting, connectivity6 rests on three aspects: establishing the big picture, connecting time horizons, and developing a consistent message. fragmented disclosures should be tied together in order to show a holistic picture about how an organization creates value over time by utilizing these different capital. furthermore, an integrated report should describe an organization’s value creation from the past to the future. connectivity is incurred as a consistent message from an organization’s inside to the outside world. the iirc has provided instructions how companies should identify the business model’s main components. the integrated report ought to contain simple charts or visual images that illustrate the business model and its essential components. graphs should feature clear explanations regarding relevance of the components to the organization. the integrated report should provide the reader with insight into the company ’s primary stakeholder relations (iirc, 2013b). as a consequence, the iirc framework has suggested many disclosure items regarding business models. 6 ‘an integrated report should show a holistic picture of the combination, inter-relatedness and dependencies between the factors that affect the organisation’s ability to create value over time’ (iirc 2013). with the iirc framework in place, the reporting practice is currently developing, and a number of companies today work on the layout and form of disclosing their business model, as, for instance, the japanese company lawson7. in an ‘at-a-glance’ format, lawson addresses a great deal of key information regarding their business model in a double-page spread. in addition, the section flows nicely, illustrating how five capitals as inputs for return-on-investment (roi)-based capital allocation are parts of the value-creation process of the lawson business model with the strategy of customer orientation in focus. the business model transforms the five inputs into five outputs: (1) investment determined according to capital discipline to meet the expectations of the equity market, (2) leveraging the full supply chain to develop products that meet local community needs, (3) nurturing human resources who are ‘self-motivated and innovative’ to satisfy local community needs appropriately, (4) cultivation of innovation based on prompt perception of changes in local communities, and (5) contributing to communities as social infrastructure with careful consideration of society and the environment. the outcomes of this process will generate the value provision for lawson’s multiple stakeholders. lawson illustrates how companies can communicate a complex business in a concise and accessible way. comparison of business model disclosures in various reporting frameworks the strategic report (as part of the annual report), the intellectual capital report, and the integrated report frameworks both have similarities and unique characteristics concerning business model disclosure. below, in table 1 we compare the three reporting frameworks according to the main objective, the users of the report, structure of the report, qualitative attributes of presented information, business model definition, business model elements and business model description requirements. 7 http://lawson.jp/en/ir/library/pdf/annual_report/ar_2015_e.pdf journal of business models (2017), vol. 5, no. 1, pp. 51-73 60 intellectual capital report guidelines strategic report guidelines integrated report guidelines main objective communicate parts of the company’s knowledge management to world at large, show resources and attract new employees, customers and suppliers. provide information necessary for shareholders to assess the entity’s performance, business model and strategy for making resource allocation decisions and assessing director stewardship. explain to providers of financial capital how organization creates value over time. users those who want to read the statement give the external intellectual capital statement a perspective, including: analysts, employees and customers. shareholders and other user needs may be met on condition that information is material to shareholders. providers of financial capital and other stakeholders interested in an organization’s ability to create value including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers. structure of report – content elements 1. the establishment of the need for knowledge management 2. set of initiatives to improve knowledge management 3. set of indicators to define measures 4. following up initiatives 1. strategic management including strategy and business model 2. business environment 3. business performance 1. organizational overview and external environment 2. governance 3. business model 4. risks and opportunities 5. strategy and resource allocation 6. performance 7. outlook 8. basis of presentation qualitative attributes of information materiality completeness substance gross measurements neutrality comparability material fair, balanced and understandable comprehensive but concise forward-looking oriented entity-specific explaining linkages between pieces of information presented within the strategic report and in the annual report strategic focus and future orientation connectivity of information stakeholder relationships orientation materiality conciseness reliability and completeness consistency and comparability business model definition not explicitly stated business excellence model a model enabling management to ensure the achievement of the company’s strategic goals. the model shows the relation between strategic management decisions, allocation of resources, the implementing of manufacturing processes, the degree of satisfaction of employees, customers and society. the basis on which the company generates or preserves value over the longer term system of transforming inputs, through its business activities, into outputs and outcomes that aims at fulfilling the organization’s strategic purposes and creates value over the short, medium and long term. business model elements not explicitly stated not explicitly stated inputs business activities outputs outcomes table 1: comparison of business model disclosure frameworks journal of business models (2017), vol. 5, no. 1, pp. 51-73 61 intellectual capital report guidelines strategic report guidelines integrated report guidelines business model description requirements central questions: what happens? what is done? what is created? bm description elements: the knowledge narrative: communicates company’s intention to increase value users receive from company’s goods or services. a set of mgmt. challenges: deals with the issue of either developing knowledge resources internally or outsourcing them externally. a set of initiatives: deals with actions that are required in order to tackle management challenges. a set of indicators: deals with actions taken on the initiatives and the successes with the management challenges. other requirements three evaluation criteria – effects, activities and resources – were added to clarify companies’ responses to the three questions posed about a company’s knowledge management. central questions: what the entity does and why it does it. what makes it different from, or the basis on which it competes with, its peers? bm description elements: the entity’s structure, the markets in which the entity operates, the way in which the entity engages with those markets including: which part of the value chain it operates in, its main products, services, customers its distribution methods, the business process other requirements the bm description should provide shareholders with a broad understanding of the nature of the relationships, resources and other inputs necessary for the success of the business. central question: what is the organization’s bm? bm description elements: inputs how key inputs relate to capitals, or that provide a source of differentiation and help understand robustness and resilience of the bm business activities – those that enable to differentiate in the market, to generate revenue after initial point of sales, innovation and bm adaptation outputs – key products and services including by-products, waste and emissions outcomes – internal and external, positive and negative other requirements identification of critical stakeholders and other (e.g. raw material) dependencies and important factors affecting the external environment connection to information covered by other content elements, such as strategy, risks and opportunities, and performance (including kpis and financial considerations, like cost containment and revenues). table 1: comparison of business model disclosure frameworks (continued) the first main difference among the three frameworks is indicated by the users of the report. the intellectual capital reporting framework lists analysts, customers, suppliers, and employees as its target audience. contrastingly, the strategic report guidelines specify shareholders as its target audience. in turn, the integrated report guidelines indicate the widest target audience – all stakeholders interested in an organization’s ability to create value over time. the iirc enumerates eight classes of stakeholders: employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers. the stakeholder orientation approach in the case of the iirc is strengthened by one of a qualitative feature of information (stakeholder relationships orientation). listing so many stakeholders creates a significant challenge to prepare journal of business models (2017), vol. 5, no. 1, pp. 51-73 62 integrated reports, since different groups of users may have conflicting information needs. there also exist substantial differences in business model definitions among the analysed guidelines. the intellectual capital framework lacks an explicit definition of the business model. however, it presents a business excellence model that has traits both common to and distinctive from other business models. the frc definition focuses on value generation and preservation, while the iirc focal points are value generation and transformation of inputs through the firm’s business activities into outputs and outcomes. the third main area of dissimilarities are business model disclosure requirements. the ic framework requires listing management challenges and knowledge resources. the frc framework demands a general description of what the entity does and how it differs from peers in the context of its markets, products, and value chain. the iirc requires disclosure of inputs, business activities, outputs and outcomes of the six types of capital, which is unique to this guideline. we observe similarities among the frameworks in the structures of the reports. all three require disclosure of the context (environment in which the entity operates), the process of value creation and performance measures, including financial and non-financial indicators. in the frc and iirc guidelines, performance should include economic, environmental, and social outcomes. other common traits are some qualitative features of information provided in reports. all three guidelines demand materiality and completeness/comprehensiveness of reported information. moreover, both frc and iirc guidelines require connectivity, future (forwardlooking) orientation and conciseness of the presented information. connectivity of information means that the various elements of disclosed information should be clearly linked to each other. for example, the ic report guidelines make connections among challenges, knowledge resources, initiatives, and indicators; the strategic and integrated reports connect environment, business model, strategy, performance and risks. comparability is a quality of information required by dati and iirc guidelines. in contrast, the frc calls for entity-specific representation of business models. commonalities of the frameworks lead us to conclude that especially the most recent ones – the iirc framework and frc guidelines – converge on many elements. hence, guideline preparers appear to agree on many of the requirements they set down for holistic corporate reporting. business model disclosure plays a central role in such reporting. contrastingly, the differences in the main disclosure requirements of the guidelines – ‘what makes the company different from, or the basis on which it competes with, its peers’ (frc guidelines, 2014) and the description of inputs, business activities, outputs and outcomes may lead to quite distinct business model reporting in strategic reports and integrated reports. how companies (especially in the uk) try to accommodate both frameworks is worth further study. we see several possibilities. first, as robertson and samy (2015) suggest, mandatory strategic reporting might facilitate diffusion of voluntary integrated reports in the united kingdom. second, companies might try to reconcile both by presenting the description inputs, business activities, outputs and outcomes suitable for both frameworks. third, and perhaps least probable, companies might present business models differently in both reports. the possible relations between these two frameworks depend on the development and popularity of integrated reporting. concluding discussion and thoughts on future research throughout the last decade, expectations for companies to provide clear information about their way of doing business have increased. more than ever, external stakeholders, including the media and public bodies, are demanding answers to how company business models relate to their value creation, their corporate social, environmental, and human responsibility, their business context, and their financial figures (acca, 2013; frc, 2009, 2011; iirc, 2011a, b, 2013a, b, c). demands for corporate reporting have also changed in structure and content in order to address issues related to company business models (cohen, holder-webb, nath and wood, 2012). the idea to disclose non-financial information, supplementing the financial information, has proliferated during the first decade of the twenty-first century (iirc, 2011b). the informativeness of financial information journal of business models (2017), vol. 5, no. 1, pp. 51-73 63 has been criticized (kaplan and norton, 1996; low and siesfeld, 1998) as a aicpa 1994, lagging indicator, neither providing a realistic picture of the company nor predicting its future performance. while financial information has been criticized by management, non-financial information was positively perceived by them, providing insights of the company’s business model and future performance (kaplan and norton, 1996; beattie and smith, 2013). one of the biggest challenges of external corporate reporting is to convey a complete picture of the company to investors so that they can accurately evaluate the business (holland, 1998). the business model is central to the framework for integrated reporting, since a clear articulation of the business model can help users to identify redundant information (beattie and smith, 2013). however, according to tweedie et al. (2017), the use of business models in integrated reporting is problematic, due to inconsistencies in the perspectives taken by the iirc. the core of business model reporting should clarify the company’s resources, strengths, dynamic performance, business environment and organizational capacity for change (beattie and smith, 2013), and one way of achieving this is to use the notions of business model taxonomies (lambert, 2015) that are explicated in taran et al. (2016). further, we discussed how companies tend to keep information secret, including information on business models (holland, 2005). we partially linked this secrecy to a company’s desire to avoid negative media attention around unanticipated events. in almost all countries, no laws for disclosure of business models exist. south africa is a pioneer in integrated reporting and the only nation so far with mandatory requirements for such reports. the adopters of integrated reporting ought to present the interaction between financial and non-financial aspects of the six types of capital in order to make the information understandable and clear in their communication with stakeholders. companies should link stakeholder information needs with information systems and data collection processes, making integrated reporting an evolving mechanism. moreover, the iirc can study and share the successes and setbacks of south africa’s integrated reporting (acca, 2012). throughout the past decades, different reporting frameworks have emerged that have both similarities with each other and unique characteristics concerning business model disclosure. for instance, between the the intellectual capital guidelines, guidelines on strategic reporting and the recent integrated reporting framework, we observed major similarities in the structures of the reporting frameworks. all three frameworks require a presentation of context (environment in which the entity operates) and the process of value creation and performance measures, including financial and non-financial indicators. other common traits are qualitative features of information: materiality, completeness (shared by all the guidelines), connectivity, future (forward-looking) orientation and conciseness (required by frc and iirc frameworks). because of the relative novelty of business model disclosures in corporate reports and other media, this phenomenon is utterly underexplored and open for many future research avenues, as noted by tweedie et al. (2017). probably the most intriguing research question is how users of strategic reports and integrated reports actually use the information about business models for the decision-making process. is such information used for valuation, risk identification or other purposes? how do users of strategic reports and integrated reports cope with processing graphical presentations of business models? how do preparers cope with the trade-offs between materiality, completeness, and conciseness of business model presentations? are there any differences in internal and external presentations of business models? other possible, vital research questions can be quite general or very specific, e.g.: how are business models presented both in mandatory (uk, south africa) reports and in voluntary disclosures (this can be approached by including different countries but also different types of media)? do companies in the uk present the business models in the same manner in strategic reports and mandatory report? are iirc and frc guidelines perceived by preparers and uses as complementary or substitutive frameworks? what explains observed practices in business model reporting? examples to include in such studies could be processes of sharing best practices, organizational mimicry or fads and fashions, and firm-specific characteristics – size, journal of business models (2017), vol. 5, no. 1, pp. 51-73 64 sector, and financial results. are business model presentations readable and relevant for various groups of stakeholders and if yes, how and for what purpose? when and why do companies keep information about their ‘real’ business model information secret? is business model disclosure used for gaining legitimacy or for impression management? how is the feature of ‘connectivity’ attained in business model presentations in strategic reports and/or integrated reports and how does our latest knowledge about business model configurations on a taxonomy level assist these analyses? finally, whereas this paper has focused on public disclosure of business models, in line with nielsen et al. (2017), private disclosure of business models and the factors affecting the guardianship of information about business models also seems to be an interesting avenue for future research as well. journal of business models (2017), vol. 5, no. 1, pp. 51-73 65 references abeysekera, i. (2013). a template for integrated reporting, journal of intellectual capital, vol. 14, no. 2, pp. 227-245. accounting standards board (asb) (2006). reporting statement 1: operating and financial review. www.frc.org.uk/ images/uploaded/ documents/reporting%20statements%20ofr%20web.pdf. (accessed 10 september 2016). accounting standards board (asb) (2009). rising to the challenge. https://www.frc.org.uk/our-work/publications/ asb/rising-to-the-challenge/rising-to-the-challenge.aspx. (accessed 10 september 2016). aicpa. 1994. improving business reporting – a customer focus: meeting the information needs of investors and creditors; and comprehensive report of the special committee on financial reporting. new york: american institute of certified public accountants. association of chartered certified accountants (acca) (2012). re-assessing the value of corporate reporting. http://www.accaglobal.com/content/dam/acca/global/pdf-technical/financial-reporting/reassessing-value.pdf. (accessed 17 september 2016). association of chartered certified accountants (acca) (2013). understanding investors: directions for corporate reporting. http://www.accaglobal.com/content/dam/acca/global/pdf-technical/financial-reporting/pol-afb-ui02. pdf. (accessed 10 october 2016). baboukardos, d. & rimmel, g. (2016). relevance of accounting information under an integrated reporting approach: a research note, journal of accounting and public policy, vol. 35, no. 4, pp. 437-452. beattie, v. (2014). accounting narratives and the narrative turn in accounting research: issues, theory, methodology, methods and a research framework. the british accounting review, vol. 46, no. 2, pp. 111-134. beattie, v. and pratt, k. (2002). voluntary annual report disclosures: what users want, institute of chartered accountants of scotland, glasgow. beattie, v. and smith, s. (2013). value creation and business models: refocusing the intellectual capital debate. the british accounting review, vol. 45, no. 4, pp. 243-254. boedker, c., mouritsen, j. and guthrie, j. (2008). enhanced business reporting: international trends and possible policy directions. journal of human resource costing and accounting, vol. 12, no. 1, pp. 14-25. british land (2015). british land annual reports and accounts 2015, http://www.britishland.com/investors/reports/ reports-archive/2015. (accessed 20 october 2016). bukh, n. p., johansson, u. (2003). research and knowledge interaction: guidelines for intellectual capital reporting. journal of intellectual capital, vol. 4, no. 4, pp. 576-587. bukh, p.n. (2003). the relevance of intellectual capital disclosure: a paradox? accounting, auditing and accountability journal, vol. 16, no. 1, pp. 49-56. bukh, p.n., larsen, h.t. and mouritsen, j. (2001). constructing intellectual capital statements. scandinavian journal of management, vol. 17, no. 1, pp. 87-108. journal of business models (2017), vol. 5, no. 1, pp. 51-73 66 bukh, p.n., nielsen, c., mouritsen, j. and gormsen, p. (2005). disclosure of information on intellectual capital indicators in danish ipo prospectuses. accounting, auditing and accountability journal, vol. 18, no. 6, pp. 713-732. cohen, j., l. l. holder-webb, l. nath and d. wood (2012). corporate reporting on non-financial leading indicators of economic performance and sustainability. accounting horizons, vol. 26, no. 1, pp. 65-90. darrough, m. n., & stoughton, n. m. (1990). financial disclosure policy in an entry game. journal of accounting and economics, vol. 12, no. 1, pp. 219-243. dati (2001). a guideline for intellectual capital statements – a key to knowledge management, danish agency for trade and industry, copenhagen. deeds, d. l., decarolis, d., & coombs, j. e. (1997). the impact of firm-specific capabilities on the amount of capital raised in an initial public offering: evidence from the biotechnology industry. journal of business venturing, vol. 12, no. 1, pp. 31-46. deegan, c. (2002). introduction: the legitimising effect of social and environmental disclosures-a theoretical foundation. accounting, auditing and accountability journal, vol. 15, no. 3, pp. 282-311. deegan, c. (2006). legitimacy theory.  methodological issues in accounting research: theories and methods, pp. 161-182. dmsti (2003). intellectual capital statements – the new guideline, danish ministry of science, technology and innovation, copenhagen. donaldson, t., & preston, l. e. (1995). the stakeholder theory of the corporation: concepts, evidence, and implications. academy of management review, vol. 20, no. 1, pp. 65-91. dumay, j. (2016). a critical reflection on the future of intellectual capital: from reporting to disclosure. journal of intellectual capital, vol. 17, no. 1, pp. 168-184. eccles, r., & krzus, m. (2010). one report; integrated reporting for a sustainable strategy. new jersey: john wiley & sons, inc. elliott, r. k., & jacobson, p. d. (1994). costs and benefits of business information. accounting horizons, vol. 8, no. 4, pp. 80-96. european union (eu) (2014). directive 2014/95/eu – non-financial reporting. fielt, e. (2014). conceptualising business models: definitions, frameworks and classifications. journal of business models, vol. 1, no. 1, pp. 85-105. financial reporting council (frc) (2009). louder than words: principles and actions for making corporate reports less complex and more relevant. http://frc.org.uk/getattachment/7d952925-74ea-4deb-b659-e9242b09f2fa/ louder-than-words.aspx. (accessed 20 september 2016). financial reporting council (frc) (2010). the uk corporate governance code, https://www.frc.org.uk/our-work/ publications/corporate-governance/the-uk-corporate-governance-code.aspx. (accessed 20 september 2016). journal of business models (2017), vol. 5, no. 1, pp. 51-73 67 financial reporting council (frc) (2011). cutting clutter. combating clutter in annual reports. http://www.frc .org.uk/our-work/publications/frc-board/cutting-clutter-combating-clutter-in-annual-report.aspx. (accessed 21 september 2016). financial reporting council (frc) (2012a). the uk corporate governance code, https://www.frc.org.uk/our-work/ public ations/corporate-governance/uk-corporate-governance-code-september-2012.aspx. (accessed 21 september 2016). financial reporting council (frc) (2012b). financial reporting review panel annual report 2012, from https://www. frc.org.uk/our-work/conduct/corporate-reporting-review/annual-activity-reports.aspx. (accessed 20 september 2016). financial reporting council (frc) (2014). “guidance on strategic report”. retrieved on november 3, 2016, from www .frc.org.uk/our-work/publications/accounting-and-reporting-policy/guidance-on-the-strategic-report.pdf. giunta, f., bambagiotti-alberti, l., & verrucchi, f. (2014). business model disclosure: evidence from annual reports of italian listed companies. an international journal of business and economics, vol. 8, no. 1, pp. 27-39. gray, s. j., meek, g. k. & roberts, c. b. (1995). international capital market pressures and voluntary annual report disclosures by u.s. and u.k. multinationals, journal of international financial management and accounting. vol. 6, no. 1, pp. 43-68. gri (2011). g3.1 sustainability reporting guidelines incl. technical protocol, https://www.globalreporting.org/ resourcelibrary/g3.1-guidelines-incl-technical-protocol.pdf groth, p. & c. nielsen (2015), business model taxonomies: using statistical tools to generate valid and reliable business model taxonomies, journal of business models, vol. 3, no. 1, pp. 4-21. guthrie, j. and petty, r. (2000). intellectual capital: australian annual reporting evidence. journal of intellectual capital, vol. 1, no. 3, pp. 241-521. hanley, k. w., & hoberg, g. (2010). the information content of ipo prospectuses. review of financial studies, vol. 23, no. 7, pp. 2821-2864. haslam, c., tsitsianis, n., andersson, t., & gleadle, p. (2015). accounting for business models: increasing the visibility of stakeholders. journal of business models, vol. 3, no. 1, pp. 62-80. healy, p. m. and palepu, k. p. (2001). information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. journal of accounting and economics, vol. 31, no. 3, pp. 405-440. hogner, r. h. (1982). corporate social reporting: eight decades of development at us steel. research in corporate performance and policy, vol. 4, no.1, pp. 243-250. holland, j. (1998). private disclosure and financial reporting. accounting and business research, vol. 28, no.4, pp. 255–269. holland, j. (2005). a grounded theory of corporate disclosure. accounting and business research, vol. 35, no.3, pp. 249–267. journal of business models (2017), vol. 5, no. 1, pp. 51-73 68 hopwood, a. g. (1996). introduction. accounting, organizations and society, vol. 21, no. 1, pp. 55-56. hossain, m., perera, m. h. b. and rahman, a. r. (1995). voluntary disclosure in the annual reports of new zealand companies. journal of international financial management and accounting, vol. 6, no.1, pp. 69–87. icaew. (2009). developments in new reporting models. london: institute of chartered accountants in england and wales. international accounting standards board (iasb) (2005). discussion paper on management commentary; http:// www.ifrs.org/current-projects/iasb-projects/management-commentary/dp05/pages/dp.aspx. (accessed 10 september 2016). international accounting standards board (iasb) (2009). exposure draft of practice statement management commentary; http://www.ifrs.org/current-projects/iasb-projects/management-commentary/ed09/pages/ed09. aspx. (accessed 10 september 2016). international accounting standards board (iasb) (2010). practice statement management commentary; http:// www.ifrs.org/current-projects/iasb-projects/management-commentary/ifrs-practice-statement/pages/ifrspractice-statement.aspx. (accessed 10 september 2016). international integrated reporting committee iirc (2011a). towards integrated reporting: communicating value in the 21st century. http://www.discussionpaper2011.theiirc.org. (accessed 10 september 2016). international integrated reporting committee iirc (2011b). the need for <ir>. http://www.theiirc.org/about/ aboutwhy-do-we-need-the-iirc. (accessed 10 september 2016). international integrated reporting council (iirc) (2013b). basis for conclusion. http://www.theiirc.org/wp-content/ uploads/2013/12/13-12-08-basis-for-conclusions-ir.pdf. (accessed 12 september 2016). international integrated reporting council (iirc) (2013c). the international ir framework. http://www.theiirc.org/ wp-content/uploads/2013/12/13-12-08-the-inter.national-ir-framework-2-1.pdf. (accessed 15 september 2016). international integrated reporting council iirc (2013a). pilot programme, http://www.theiirc.org/companies-andinvestors (accessed 25 october 2016). jensen, a. b. (2014). do we need one business model definition?. journal of business models, vol. 1, no.1, pp. 61-84. kaplan, r. s., & norton, d. p. (1996). the balanced scorecard: translating strategy into action. harvard business press, boston. kaufmann, l. and schneider, y. (2004). intangibles: a synthesis of current research, journal of intellectual capital, vol. 5, no. 3, pp. 366-88. lambert, s. (2015). the importance of classification to business model research. journal of business models, vol. 3, no.1, pp. 49-61. lawson (2015). integrated report for year 2015. http://lawson.jp/en/ir/library/pdf/annual_report/ar_2015_e.pdf. (accessed 20 septemeber 2016) journal of business models (2017), vol. 5, no. 1, pp. 51-73 69 lev, b. (2001). intangibles: management, measurement and reporting, brookings institute press, washington, dc. lindblom, c. k. (1994). “the implications of organizational legitimacy for corporate social performance and disclosure”. in critical perspectives on accounting conference, new york (june, vol. 120). low, j., & siesfeld, t. (1998). measures that matter: non-financial performance.  strategy and leadership, vol. 26, no. 2, pp. 24-38. lund, m., & nielsen, c. (2014). the evolution of network-based business models illustrated through the case study of an entrepreneurship project, journal of business models, vol. 2, no. 1., pp. 105-121. lundholm, r., & van winkle, m. (2006). motives for disclosure and non-disclosure: a framework and review of the evidence. accounting and business research, vol. 36 no. 1, pp. 43-48. lüttgens, d., & diener, k. (2016). business model patterns used as a tool for creating (new) innovative business models. journal of business models, vol. 4, no. 3, pp. 19-36. melloni, g., stacchezzini, r., lai, a. (2016). the tone of business model disclosure: an impression management analysis of the integrated reports, journal of management and governance, vol. 20, no. 2, pp. 295-320. meritum (2002). measuring intangibles to understand and improve innovation management, target socio-economic research, european commission, brussels. michalak j. (2015). business model disclosure of high-tech companies listed on lse, studia ekonomiczne. zeszyty naukowe uniwersytetu ekonomicznego w katowicach. vol. 245, pp. 152-161. morris, l. (2014). business model warfare: the strategy of business breakthroughs. journal of business models, vol. 1, no. 1, pp. 13-37. mouritsen, j., larsen, h. t., & bukh, p. n. d. (2001). intellectual capital and the ‘capable firm’: narrating, visualising and numbering for managing knowledge. accounting, organizations and society, vol. 26, no. 7, pp. 735-762. mouritsen, j., thorbjørnsen, s., bukh, p.n. and johansen, m.r. (2004). intellectual capital and new public management: reintroducing enterprise!. the learning organization, vol. 11, no. 4, pp. 380-392. mouritsen, j., thorbjørnsen, s., bukh, p.n. and johansen, m.r. (2005). intellectual capital and the discourses of love and entrepreneurship in new public management. financial accountability and management, vol. 21, no. 3, pp. 279-290. nielsen, c. and bukh, p.n. (2011). what constitutes a business model: the perception of financial analysts”. international journal of learning and intellectual capital, vol. 8, no. 3, pp. 256-271. nielsen, c., & r. roslender, (2015). enhancing financial reporting: the contribution of business models, british accounting review, vol. 47, no. 3, pp. 262-274. nielsen, c., roslender, r., & s. schaper (2016). continuities in the use of the intellectual capital statement approach: elements of an institutional theory analysis. accounting forum, vol. 40, no. 1, pp. 16-28. journal of business models (2017), vol. 5, no. 1, pp. 51-73 70 nielsen, c., m. lund & p. thomsen (2017), killing the balanced scorecard to improve internal disclosure, journal of intellectual capital, vol. 18, no. 1, pp. 45-62.  patten, d. m. (1992). exposure, legitimacy, and social disclosure. journal of accounting and public policy, vol. 10, no. 4, pp. 297-308. ricardis (2006). reporting intellectual capital to augment research, development and innovation in smes, report to the commission of the high level expert group on ricardis, directorate-general for research, eur 22095 en. richardson, a. j., & welker, m. (2001). social disclosure, financial disclosure and the cost of equity capital. accounting, organizations and society, vol. 26, no. 7, pp. 597-616. rimmel, g. (2003). human resource disclosures – a comparative study of annual reporting practice about information, providers and users in two corporations, bas publishing house, göteborg. rimmel, g., jonäll, k. and baboukardos, d. (2013). value relevance of integrated reporting – a comparison of listed south african companies for the years 2009 and 2011. gari conference 21st century corporate governance: fit for purpose? henley, uk. rimmel, g., nielsen, c. and yosano, t. (2009). “intellectual capital in japanese ipo prospectuses”, journal of human resource costing and accounting, vol. 13, no. 4, pp. 316-337. robertson, f. a. and samy, m. (2015). factors affecting the diffusion of integrated reporting – a uk ftse 100 perspective. sustainability accounting, management and policy journal, vol. 6, no. 2, pp. 190-223. sachsenhofer, w. (2016). leveraging business model components as drivers of business model portfolios. journal of business models, vol. 4 , no. 3, pp. 37-47. sasb (2016). sustainability accounting standards board, implementation guided for companies, http://using.sasb. org/wp-content/uploads/2016/02/sasb_implementationguide-web-020115.pdf?submissionguid=69aa324e0ca8-4f66-9fd5-93b9fab0ede9. (accessed 20 may 2017) schüle, s., schubert, m., hoyer, c., & dressel, k. m. (2016). development of an assessment tool to evaluate and improve sme business models. journal of business models, vol. 4, no. 3, pp. 5-18. smith, j. e., & smith, n. p. (1971). readability: a measure of the performance of the communication function of financial reporting. the accounting review, vol. 46, no. 3, pp. 552-561. soper, f. j., & dolphin, r., jr. (1964). readability and corporate annual reports. the accounting review, vol. 39, no. 4, pp. 358-362. taran, y., nielsen, c., thomsen, p., montemari, m., and paolone, f. (2016), “business model configurations: a five-v framework to map out potential innovation routes”, european journal of innovation management, vol. 19, no. 4, pp. 492-527. tweedie, d., c. nielsen & n. martinov-bennie (2017), evolution or abandonment? contextualising the business model in integrated reporting, accepted and forthcoming in australian accounting review. journal of business models (2017), vol. 5, no. 1, pp. 51-73 71 verrecchia, r. e. (2001). essays on disclosure. journal of accounting and economics, vol. 32, no. 1-3, pp. 97-180. wallman, s.m.h. (1996). the future of accounting and financial reporting part ii: the colorized approach, accounting horizons, vol. 10, no. 2, pp. 138-48. wallman, s.m.h. (1997). the future of accounting and financial reporting part iv: ”access” accounting.. accounting horizons, vol. 11, no. 2, pp. 103-16. wollmert, p. (2014). connected reporting, responding to complexity and rising stakeholder demands. http://www.ey.com/ publication/vwluassets/ey-assurance-faas-connected-reporting/$file/ey-assurance-faas-connected-reporting.pdf, (accessed 13 may 2017). journal of business models (2017), vol. 5, no. 1, pp. 51-73 72 jan michalak is as an adjunct (assistant professor) at łódź university (poland), faculty of management, department of accounting. he is a researcher, educator and a consultant, with more than fifteen years of experience. his research interest focuses on performance measurement and management in both the private and public sector, business models, intellectual capital and disclosure quality. jan michalak is the author of more than 50 articles and author or co-author of six books, mainly on performance measurement, business models and intellectual capital. he has managed and participated in several eu financed research projects concerning among other communities’ performance and smes business model ratings. gunnar rimmel is full professor and holds a chair in accounting at henley business school, university of reading, uk. he previously worked in sweden as a professor in accounting at jönköping international business school and gothenburg research institute at the university of gothenburg. he has published in a variety of international peer-reviewed journals, including accounting, auditing & accountability journal, accounting forum, journal of accounting and public policy, journal of human resource costing & accounting as well as in japanese in kokuminkeizai zasshi (journal of economics & business administration). he has contributed with more than 20 chapters to international books and he edited the swedish textbook “accounting theories – important concepts and theoretical perspectives”. his research and teaching interests include accounting communication, human resource accounting, international financial accounting as well as social and environmental reporting, specifically integrated reporting. during the past years his research program “accounting for sustainability communication through integrated reporting” has been externally funded by the handelsbanken research foundations. he had also received grants from the nasdaq omx nordic foundation. about the authors journal of business models (2017), vol. 5, no. 1, pp. 51-73 73 peter beusch is an assistant professor in the department of business administration at the university of gothenburg where he has been a faculty member since 2008 and today also a member of the department council. his research interest focuses on: management accounting, integrated reporting, accounting and sustainable development, pragmatic constructivism and accountants, accounting education. he is collaborating actively with researchers from the usa and denmark and within diverse academic areas. peter has published in several peer-reviewed international journals and books, presented papers at over 20 conferences and has served on several conference and workshop program committees. kristina jonäll is an assistant professor in the department of business administration at the university of gothenburg where she holds a position of assistant head of department. her main research interests are in accounting communication, corporate social responsibility and integrated reporting. kristina has published in per-reviewed international journals, she is editor, author or co-author of several books. journal of business models (2019), vol. 7, no. 4, pp. 34-38 34 the new media business model: when customer controls the data olga novikova hanken school of economics, finland abstract the eu general data protection regulation (gdpr) is the first step in the process of transferring data ownership back to the customers. this regulation brings major changes for any organization working with consumers and their data, or processing data about individuals in the context of selling goods or services to the citizens. this paper considers the case of a media company offering online content and discusses what are the implications of the data ownership by the customers for the media company’s business model. please cite this paper as: novikova, d. (2019), the new media business model: when customer controls the data, vol. 7, no. 4, pp. 34-38 keywords: media, business model, data ownership introduction on may 25 2018 the eu general data protection regulation (gdpr) has been implemented. its primary goals are to harmonize data privacy laws across europe, to guard all eu citizens data privacy and protect them from privacy and data breaches and to change the way institutions operating in eu address data privacy (gdpr, 2018). this regulation brings major changes for any organization working with consumers and their data, or processing data about individuals in the context of selling goods or services to the citizens. major changes affect increased territorial scope (with extraterritorial applicability) of the regulation, penalties for non-compliance and requirement towards consent. this new regulation brings both challenges and opportunities for the established and upcoming ventures. as noted by acquisti (2010), economic trade-offs associated with consumer’s data sharing and protection, journal of business models (2019), vol. 7, no. 4, pp. 34-38 35 exist for both consumers and organizations. the new data protection regulation enables consumers to obtain more power over their own data (ng, 2018), hence changing the dynamics of the relationships between a consumer and a firm. however, currently only little research has examined the implications of the new data protection regulation, specifically, what consequences does it carry for organization’s business models (kemppainen et al., 2018). this paper addresses the topic of changing business models in the context of online content services. the paper is structured as follows. first it discusses the concept of a business model and provides an overview of research on business models in online content services. further, it presents a case of a new online content service provider. then it considers the implications of the new rules on data ownership on business models of the firms in the online content field. finally, it discusses implications, limitations and further research directions. approach any enterprise either implicitly or explicitly employs a business model that articulates its logic and demonstrates how it creates and delivers value to its customers (teece, 2010). the emergence of business model concept and the use of it since the mid-1990s was driven by several factors: the advent of internet (amit & zott, 2001), rapid growth in emerging markets and interest in “bottom-of the pyramid” issues (prahalad & hart, 2002), the expansion of postindustrial organizations (perkmann & spicer, 2010), and interest in entrepreneurship development (morris et al, 2005). at a general level, the business model has been referred to as, for example, a framework (afuah, 2004), a conceptual tool (osterwalder et al, 2005), a statement (stewart & zhao, 2000), a representation (morris et al, 2005), a pattern (brousseau & penard, 2006), a set (seelos & mair, 2007), or a story (magretta, 2002). the variety of definitions provides possibility for multitude of interpretations on what actually represents or constitutes a business model (wirtz et al., 2016). largely business model defines a system of interdependent activities that transcends the focal firm and spans its boundaries (zott and amit, 2010). at its core, a business model performs two important functions: value creation and value capture (amit and zott, 2001; zott and amit, 2010). the business model of online content service providers can be considered to some extent resembling those of the platform operators offering diverse video content to the consumers. the examples range from free to use advertising-based youtube to subscription-based netflix, or pay-per-view itunes. as kemppainen et al. (2018) put it, platform operators can provide convenient and user-friendly access to content on their platform and generate revenue through advertising rents from advertisers, subscription and pay-per-use (wirtz et al., 2010). in advertising and subscription-based revenue models, the key revenue drivers are the number of users and their propensity to pay. for personal data platform operators, kemppainen et al. (2018) have identified two propositions as the foundation of creating revenue models, i.e. “no advertising” and “free for users” models. with regard to media business models, some authors (e.g. anderson, 2009) have long argued for the end of paid content models, citing shift towards free access, changes in supply and demand, loss of physical form in content, ease of access, and shift to ad-supported content as major drivers of change. indeed, as macnamara (2010) notes, contemporary media users are unlikely to pay for content, which poises challenges for both incumbents as well as newcomers to media space. he also suggests several possible components of business models for the media firms in the new economy. one of them is based on targeted advertising, whereby three factors can increase the performance of targeted ads, namely trust, control over experience and justification of the personal data tracking for ad-related purposes (john et al., 2018). another business model is associated with co-called attention economy that points at monetizing people’s attention in the age of information overload. according to macnamara (2010), in the latter model – which also could be called relevancy advertising advertisers would pay a proportion of advertising fees – directly in cash or in credit points to media users for their attention. media users would also have an option to opt in or out of advertising and to select what categories of advertising that they would receive. although some (lichfield, 2018) have argued that attention economy journal of business models (2019), vol. 7, no. 4, pp. 34-38 36 is currently on its tipping point and in the nearest future media space will experience proliferation of subscription-based or pay-per-view services, the new regulation on data ownership which essentially enables customers to control and monetize their personal data, may challenge this view. the paper is structured as a single case study where is explores the business model of an online media company and discusses how the new regulations on data ownership affect the company’s business model. key insights 1. current and future business models of the online media companies will position the customer in the center of their activities. 2. with new regulations regarding the data ownership, processing and storage, the customers will have a possibility to gain access to and ownership over their online data and thus through the emerging monetization applications will be presented with the opportunity to monetize their data in a variety of ways, which will have affect on media space company’s business model. 3. monetization of the data will transfer from corporations towards users or it will be more justly distributed. corporations will still continue monetize packaged and anonymized data. 4. with the establishment of digital identity own data monetization becomes possible and trackable, whereby distributed ledger technology based identity solutions are likely to prevail. 5. online media business model based on targeted advertising or sponsored content will shift towards enabling the users to exchange their data for online streaming services. discussion and conclusions this paper presents a case of a new online content service provider. it considers how the new rules on data protection and ownership impact the business models of the firms in the online content field. the case company is a newcomer on the online content market offering online content to the users for free with targeted advertising or prevailing sponsored content revenue model. with new data protection regulations giving users access and control over their data, users get an opportunity to exchange their anonymized packaged data for free content. an important issue that arises with the new data protection regulation concerns data ethics (hand, 2018). the nature of data, the meaning of data ownership, trustworthiness of data and matters of privacy and confidentiality are at the core of the issue. with respect to ethics, the european data protection supervisor considers that “better respect for, and the safeguarding of, human dignity could be the counterweight to the pervasive surveillance and asymmetry of power which now confronts the individual.  it should be at the heart of a new digital ethics” (edps, 2015: 12). the implementation of rules and procedures with respect to digital data ethics shall become an integral part of a new media company business model. journal of business models (2019), vol. 7, no. 4, pp. 34-38 37 references acquisti, a. (2010), the economics of personal data and the economics of privacy. background paper n. 3, the economics of personal data and privacy: 30 years after the oecd privacy guidelines. afuah, a. (2004), business models: a strategic management approach. new york: irwin/mcgraw-hill. amit, r., & zott, c. (2001), value creation in e-business. strategic management journal, 22: 493-520. anderson, c. (2009), free. how today’s smartest businesses profit by giving something for nothing, random house business books, london. brousseau, e., & penard, t. (2006), the economics of digital business models: a framework for analyzing the economics of platforms. review of network economics, 6(2): 81-110. edps – european data protection supervisor (2015), towards a new digital ethics. data, dignity and technology, available at: https://edps.europa.eu/sites/edp/files/publication/15-09-11_data_ethics_en.pdf (accessed 20 june 2019). gdpr – general data protection regulation: overview (2018), available at: https://www.eugdpr.org/eugdpr.org. html (accessed 15 march 2018). john, l., kim, t., and barasz, k. (2018), ads that don’t overstep, harvard business review, available at: https://hbr. org/2018/01/ads-that-dont-overstep (accessed 15 february 2019). hand, d.j. (2018), aspects of data ethics in a changing world: where are we now? big data 6(3): 176–190, doi: 10.1089/ big.2018.0083 kemppainen l., koivumäki, t., pikkarainen, m., & poikola, a. (2018), emerging revenue models for personal data platform operators: when individuals are in control of their data, journal of business models, 6 (3): 79-105. lichfield, g. (2018), goodbye attention economy, we’ll miss you. niemanlab, available at: http://www.niemanlab. org/2018/12/goodbye-attention-economy-well-miss-you/ (accessed 01 march 2019). macnamara, j. (2010), remodelling media: the urgent search for new media business models, media international australia, 137: 2035. magretta, j. (2002), why business models matter. harvard business review, 80(5): 86-92. morris, m., schindehutte, m., & allen, j. (2005), the entrepreneur’s business model: toward a unified perspective. journal of business research, 58: 726-35 ng, i. (2018), from gdpr to blockchain, we’re getting more power over our data. wired. accessed 10 march 2018: http://www.wired.co.uk/article/gdpr-personal-data-private-data-accounts osterwalder, a., pigneur, y., & tucci, c. l. (2005), clarifying business models: origins, present and future of the concept. communications of the association for information science, 16: 1-25. journal of business models (2019), vol. 7, no. 4, pp. 34-38 38 perkmann, m., & spicer, a. (2010), what are business models? developing a theory of performative representation. in m. lounsbury (ed.), technology and organization: essays in honour of joan woodward (research in the sociology of organizations, vol. 29: 265-275). bingley, uk: emerald group. prahalad, c. k., & hart, s. (2002), the fortune at the bottom of the pyramid. strategy and business, 26: 2-14. seelos, c., & mair, j. (2007), profitable business models and market creation in the context of deep poverty: a strategic view. academy of management perspectives, 21: 49-63. stewart, d. w., & zhao, q. (2000), internet marketing, business models and public policy. journal of public policy and marketing, 19: 287-296. teece, d. j. (2010), business models, business strategy and innovation. long range planning, 43: 172-194. wirtz, b. w., schilke, o. & ullrich, s. (2010), strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43: 272-290. wirtz, b., pistoia, a., ullrich, s., & göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, 49: 36-54. zott, c., & amit, r. (2010), business model design: an activity system perspective, long range planning, 43: 216-226. journal of business models (2019), vol. 7, no. 4, pp. 6-12 6 business model innovation: a multi-level routinebased conceptualization carlos m. dasilva1 oleksiy osiyevskyy2 1heg school of management fribourg / hes-so // university of applied sciences western switzerland 2haskayne school of business, university of calgary, canada abstract building upon the theoretical insights of the literature on organizational routines and ‘activity system’ perspectives on business models, we propose a multi-level theory of business model innovation that explains business model dynamics within established firms, integrating the processes happening at the individual (micro-), collective (meso-) and organizational (macro-) levels. please cite this paper as: dasilva, c. m. and osiyevskyy, o. (2019), business model innovation: a multi-level routine-based conceptualization, vol. 7, no. 4, pp. 6-12 keywords: business model, routine cluster, multi-level theory introduction in recent years, researchers have used business model innovation (bmi) to explain diverse and complex organizational phenomena (foss & saebi, 2017; massa et al., 2017; zott et al., 2011). despite the construct’s growing use, the study of bmi remains difficult due to the ambiguity and diversity of its possible meanings, components, antecedents, and outcomes (foss & saebi, 2017). such ambiguity prevents further progress in understanding bmi through cumulative theorizing and consistent empirical investigations (foss & saebi, 2018). motivated by this gap in conceptualization of bmi, we concentrate on the following research questions: (1) what is the nature, components and underlying mechanisms of business model innovation; (2) what are the crucial antecedents and consequences of business model innovation? we address these questions by developing a new, multi-level theory of bmi grounded in the combination of the ‘activity system’ perspective on business models (zott & amit, 2010) with theoretical insights from the organizational journal of business models (2019), vol. 7, no. 4, pp. 6-12 7 routines literature, particularly the construct of the cluster of routines (kremser & schreyögg, 2016). specifically, we suggest that interrelated activities within an established business model are repetitive and, as such, become embedded in the cluster of complementary organizational routines that collectively serve the task of value creation and capture. consequently, bmi in established firms is a process of changing the cluster of routines underlying the original (pre-existing) business model. the proposed framework connects the existing single-level bmi frameworks, namely (a) the micro/individual level view of business model innovation as the search for new mental models or schemata representing future possible models and (b) the macro/organizational level view of bmi as organizational actions to change the current business model. for establishing this cross-level connection, we introduce and conceptualize the bmi mechanisms taking place at the intermanagerial (meso-) level, related to assimilation of information among a firm’s managers about the discrepancies between the current routinized business model and the aspired, potential business model schemata emerging at the individual level. the basic premise of the proposed framework is that the reflective, team cognition processes happening at inter-managerial level translate the potential bmi (individual-level schemata) to realized bmi (organization-level change through reconfiguration of routine cluster underpinning the business model). business model construct: a routine-based conceptualization the bmi construct can only be properly conceptualized after understanding what constitutes the primary concept of a business model, the definition of which has remained in contention in the literature for over a decade (massa et al., 2017; zott et al., 2011). yet, most current studies focusing on the business model construct are increasingly converging, implicitly or explicitly, on zott & amit’s (2010) ‘activity system’ view of a business model. in this definition, the business model construct represents a “system of interdependent activities that transcends the focal firm and spans its boundaries” (zott & amit, 2010: 216), with the key objective of this system being to create value for the stakeholders and appropriate (capture) part of this value to increase the shareholders’ wealth. within the business model, individual activity embodies “the engagement of human, physical and/or capital resources…to serve a specific purpose toward the fulfillment of the overall objective” (zott & amit, 2010: 217). individual activities form a firm-centric activity system based on the interdependencies among them manifested in links (transactions) (zott & amit, 2013; santos et al., 2009). the key factor in the activity system is the complementarity between individual activities (foss & saebi, 2018), implying consistency between each individual activity and the firm’s strategy, mutual reinforcement through complementarity, and systemlevel global optimization (zott & amit, 2013). we extend this business model conceptualization by emphasizing the recurrent nature of the activities in business models, rather than one-off, non-repeating projects. a firm has an established business model only to the extent it has a regular behavioral pattern of value creation and capture (osiyevskyy & zargarzadeh, 2015). in other words, we argue the ‘activity system’ theoretical view on business models must be extended by an explicit emphasis on the cyclical, repeatable nature of activities within the said models. while some firms might create and capture value on an ad-hoc basis (e.g., a small enterprise trying to provide any service to anyone in order to become cash-flow positive), they do not yet have an established recurring business model. moreover, approaches to ‘innovating’ a firm’s business model only apply when the activities within the business model are repetitive. the emphasis on the recurring nature of activities in a business model implies these activities become embedded in organizational routines (biloshapka & osiyevskyy, 2018; doz & kosonen, 2010). in essence, routines are “repetitive, recognizable patterns of interdependent organizational actions carried out by multiple actors” (feldman & pentland, 2003: 95; feldman et al., 2016). routinized behaviors (actions) are “learned, highly patterned, repetitious, or quasi-repetitious, founded in part in tacit knowledge” (winter, 2003: 991). winter’s (2003: journal of business models (2019), vol. 7, no. 4, pp. 6-12 8 991) succinct statement that a “brilliant improvisation is not a routine” also directly applies to any activity in a business model. taken together, the organizational routines underpinning the business model store the engrained managerial skills and organizational process knowledge about the firm’s unique mechanisms of value creation and capture (lepak et al., 2007). in order to achieve the common task of value creation and capture, routines underlying a firm’s business model are closely interrelated. this interrelatedness of routines reflects the interaction of activities through the links (transactions) in the conventional ‘activity system’ view on business models (zott & amit, 2010). the set of interrelated routines composing a firm’s business model forms a distinct unit, acknowledged in the literature as a cluster of routines (kremser & schreyögg, 2016). introducing the cluster level of analysis of organizational routines, kremser and schreyögg (2016: 698) suggest that a “cluster consists of multiple, complementary routines, each contributing a partial result to the accomplishment of a common task”. whereas early studies emphasized the stability of organizational routines (nelson & winter, 1982), more recent perspectives stress their dynamics and change driven by the logic of reflective action (feldman et al., 2016; feldman, 2000; pentland et al., 2012). importantly, even though an individual routine may change substantively over time, the complementarities among routines within the cluster largely restrict the scope of possible changes to the whole cluster (kremser & schreyögg, 2016), which gradually evolves in a constrained emergent trajectory. the dynamics of the routine cluster are hence much more limited than the dynamics of individual routines; this difference explains how a firm’s business model (embedded within a routine cluster) can develop a misfit with the changing environmental conditions, even though their core building blocks (routines) are individually flexible. conceptual development: business model innovation given the fast-paced business environment in which companies operate, existing business models can quickly be rendered obsolete (sosna et al., 2010). regular static behavioral patterns for value creation and capture must make way for novel ones in order for firms to remain competitive in dynamic environments (teece, 2010). hence, a static view of a business model as an activity system embedded in a cluster of routines for value creation and capture only tells half the story; the other critical half is the dynamic, transformational view that leads to a business model’s evolution (demil & lecocq, 2010). yet, many studies of business model innovation use this construct without any clear explicit definition, or use divergent definitions (foss & saebi, 2017): researchers have explored this concept using a range of different conceptualizations, at various levels of analysis, and by employing diverse measures. despite their variation, these conceptualizations can be broadly classified in one of two groups: (1) the “cognitive” view of bmi (the search for new mental models or schemas representing future possible models, e.g., teece (2010), casadesus-masanell & zhu (2013)), versus the (2) objective “organizational change” view of bmi (organizational actions to change the current business model, e.g., gambardella & mcgahan, 2010; visnjic et al., 2016). the distinction between the two views lies at the ontological level, at the subjective versus objective representation of the future business model (doz & kosonen, 2010). the “cognitive” conceptualization of bmi emphasizes the change in managerial schemas representing the models (martins et al., 2015; doz & kosonen, 2010), while the objective “change” view concentrates on actual alteration of the firm’s activity system (zott & amit, 2010; 2013). incorporating both “cognitive” and “organizational change” perspectives within the definitional landscape of bmi, coupled with the insight that a business model is embedded in a cluster of organizational routines, allows a generalized definition of bmi to be developed. we define bmi in established firms as a process by which management conceives of a new future business model for the firm and produces the corresponding changes in the cluster of routines underlying the original business model. routines within a cluster are closely coupled with each other via the logic of complementarity – each routine is fine-tuned to effectively interact with the others journal of business models (2019), vol. 7, no. 4, pp. 6-12 9 (kremser & schreyögg, 2016). this logic of complementarity requires that any newly introduced routines or altered existing ones demonstrate a substantive fit with the remaining routines within the cluster and, as such, restricts the scope of possible changes. whereas each individual routine demonstrates a tendency for continuous variation with every iteration (feldman, 2000; pentland et al., 2012), the integration of routines within a cluster establishes the boundaries of the extent of deviation. as a result of the need to integrate the routines with each other, the cluster of routines has a natural tendency to change along with the emergent trajectory (kremser & schreyögg, 2016) and restricts any changes that disrupt this natural evolutionary path. this path-dependency of the cluster of routines serves as the causal mechanism underlying the ‘evolutionary view’ of business models (martins et al., 2015). this view emphasizes a local search in response to problems and opportunities arising with every iteration of routines underpinning a firm’s business model, resulting in incremental strategic change driven by trial and error and experimentation (gavetti & rivkin, 2007). from the evolutionary perspective, business model development happens “as an initial experiment followed by constant fine-tuning based on trial-and-error learning” (sosna et al., 2010: 384), rather than a “wholesale system overhaul” (martins et al., 2015). yet, although crucially important in explaining the substantive part of changes in firms’ business models, the evolutionary mechanisms do not explain the diversity of innovations. managers’ efforts to change the firm’s business model can overcome restrictions that hinge on inherent rigidities by breaking away from the emergent trajectory of the evolution of the cluster of routines underlying the firm’s business model. however, overcoming the misfit between the new/changed and the remaining routines usually comes at a considerable cost. as such, an essential characteristic of a firm’s business model innovation is its radicalness, which corresponds to the degree of deviation of the new business model from the discussed before established natural trajectory of evolution of the underlying cluster of routines. from this perspective, we can distinguish between incremental bmis (progressive refinement of existing model within the established trajectory of the cluster of routines) and radical bmis (major shift in one or more routines, their linkages or governance, breaking from the natural evolutionary trajectory of the routine cluster). business model innovation process: a multi-level view of routine transformation the proposed in this study framework takes a multi-level approach. we contend that bmis involve multiple levels of analysis (micro-, meso-, and macro-), and that greater theoretical clarity about the relationship among these levels is needed. our resulting multi-level approach (figure 1) moves the locus of business model innovation away from an exclusive focus on either the individual cognitive level or the objective organizational level. by introducing a meso-level link between routines reconfiguration and the individual cognitive process that leads to those routines, our model explains: (a) how bmis originate from a perceived misfit between the firm and its environment felt by individual managers within an organization (i.e., at the micro level), allowing them to form a cognitive schemata of how the business could potentially operate (lower part of figure 1); (b) how individual-level schemata are exposed to a collective managerial process of assimilation, thereby manifesting a higher-level, collective social phenomenon where individual`s representations of how the firm should operate are debated among managers for possible fit or complementarity with established routines via the process of assimilation (i.e., at the meso level) (middle part of figure 1); and (c) how the multiple, firm-specific combinations of individual-level cognitive representations and collective-level assimilation produce a consensus (top part of figure 1) capable of triggering routine cluster reconfiguration, and which in turn affects the value creation and capture (at the macro level). journal of business models (2019), vol. 7, no. 4, pp. 6-12 10 figure 1: business model innovation: a conceptual multi-level model journal of business models (2019), vol. 7, no. 4, pp. 6-12 11 references biloshapka, v., & osiyevskyy, o. 2018. value creation mechanisms of business models: proposition, targeting, appropriation, and delivery. the international journal of entrepreneurship and innovation, 19(3), 166-176. casadesus-masanell, r., & zhu, f. 2013. business model innovation and competitive imitation: the case of sponsorbased business models. strategic management journal, 34: 464–482. demil, b., & lecocq, x. 2010. business model evolution: in search of dynamic consistency. long range planning, 43: 227–246. doz, y. l., & kosonen, m. 2010. embedding strategic agility: a leadership agenda for accelerating business model renewal. long range planning, 43: 370-382. feldman, m. s. 2000. organizational routines as a source of continuous change. organization science, 11: 611-629. feldman, m. s., & pentland, b. t. 2003. reconceptualizing organizational routines as a source of flexibility and change. administrative science quarterly, 48: 94-118. feldman, m.s., pentland b.t., d’adderio, l. & lazaric, n. 2016. beyond routines as things: introduction to the special issue on routine dynamics. organization science 27:505-513. foss, n. j., & saebi, t. 2017. fifteen years of research on business model innovation how far have we come, and where should we go? journal of management, 43: 200-227. foss, n. j., & saebi, t. 2018. business models and business model innovation: between wicked and paradigmatic problems. long range planning, 51(1): 9-21. gambardella, a., & mcgahan, a. m. 2010. business-model innovation: general purpose technologies and their implications for industry structure. long range planning, 43: 2–3, 262–271. gavetti, g., & rivkin, j. w. 2007. on the origin of strategy: action and cognition over time. organization science, 18: 420-439. kremser, w., & schreyögg, g. 2016. the dynamics of interrelated routines: introducing the cluster level. organization science, 27: 698-721. lepak, d. p., smith, k. g., & taylor, m. s. 2007. value creation and value capture: a multilevel perspective. academy of management review, 32: 180–194. martins, l. l., rindova, v. p., & greenbaum, b. e. 2015. unlocking the hidden value of concepts: a cognitive approach to business model innovation. strategic entrepreneurship journal, 9: 99–117. massa, l., tucci, c. l., & afuah, a. 2017. a critical assessment of business model research. academy of management annals, 11(1), 73-104. nelson, r. r., & winter, s. g. 1982. an evolutionary theory of economic change. belknap, cambridge, ma osiyevskyy, o., & zargarzadeh, m. a. 2015. business model design and innovation in the process of the expansion and growth of global enterprises. in global enterprise management pp. 115-133. palgrave macmillan us. journal of business models (2019), vol. 7, no. 4, pp. 6-12 12 pentland, b. t., feldman, m. s., becker, m. c., & liu, p. 2012. dynamics of organizational routines: a generative model. journal of management studies, 49: 1484-1508. sosna, m., trevinyo-rodríguez, r. n., & velamuri, s. r. 2010. business model innovation through trial-and-error learning: the naturhouse case. long range planning, 43: 383–407. teece, d. j. 2010. business models, business strategy and innovation. long range planning, 43: 172-194. visnjic, i., wiengarten, f., & neely, a. 2016. only the brave: product innovation, service business model innovation, and their impact on performance. journal of product innovation management, 33: 36-52. winter, s. g. 2003. understanding dynamic capabilities. strategic management journal, 24: 991-995. zott, c., & amit, r. 2010. business model design: an activity system perspective. long range planning, 43: 216-226. zott, c., & amit, r. 2013. the business model: a theoretically anchored robust construct for strategic analysis. strategic organization, 11: 403-411. zott, c., amit, r., & massa, l. 2011. the business model: recent developments and future research. journal of management, 37: 1019-1042. journal of business models (2019), vol. 7, no. 4, pp. 20-26 20 hybrid business models and the public science-private industry interface andrew earle1 dante leyva de la hiz2 yusi turell3 1peter t. paul college of business and economics, university of new hampshire, durham, usa 2montpelier business school, montpelier, france 3graduate school, university of new hampshire durham, usa abstract: we draw on recent research in business models and hybrid organizations to propose a novel model for bridging the logics that often conflict as science-based technologies are commercialized. the key insight from this model is adopting a broader conceptualization of value creation may enhance technology commercialization efforts and outcomes. please cite this paper as: earle et al. (2019), hybrid business models and the public science-private industry interface, vol. 7, no. 4, pp. 20-26 keywords: technology commercialization, hybrid organizations, value creation acknowledgments: we would like to thank the organizers and attendees at the 3rd business model conference for their feedback and insights on this paper. introduction despite the clear benefits from commercializing science-based innovations for numerous stakeholders, past research indicates it can be challenging to transition scientific discoveries to marketable products (markman et al., 2004). at the heart of this difficulty is the commercialization of such discoveries is an inherently complex process often involving organizations with differing, missions, incentives, and “logics” more generally (sauermann & stephan, 2013). past research features numerous efforts to help cross this divide, such as technology transfer offices (siegel, et al., 2003), university-generated spinoffs (lockett, et al., 2005) and policy changes (such as the “bayh-dole” act in the us) (mowery, et al., 2001); however, these have all met with limited success (markman et al., 2004). the literature on technology commercialization and university entrepreneurship offers widespread recognition that this “valley of death” phenomenon leaves many potentially value-creating scientific discoveries trapped in journal of business models (2019), vol. 7, no. 4, pp. 20-26 21 universities (and other basic research focused organizations) worldwide (figure 1) (auerswald & branscomb, 2003). this recognition of the limited success of current models, paired with renewed urgency for introducing and scaling new technologies in areas such as carbonfree energy, has motivated calls for updated models for technology commercialization (bozeman et al., 2015) approach as a complement to calls for funding “translational” research and changing universities to be more entrepreneurial (etzkowitz, et al., 2000; butler, 2008), we propose that organizations with hybrid business models (i.e., organizations that combine the value creation processes of science and industry) may also aid in the commercialization of scientific discoveries. specifically, our model suggests that hybrids may more effectively interface with both universities and firms than these organizations will with one another, because hybrid organizations are specifically designed to cope with (and integrate) the very sorts of conflicting logics that bedevil technology commercialization (markman et al., 2004; pache & santos, 2013). furthermore, we propose that the multifaceted mission of hybrid organizations will help increase inventor involvement in the commercialization process, something that past research has shown to be a strong predictor of successful commercialization (thursby et al., 2001). this portion of our model draws on the sociology of science literature (e.g. merton, 1973) to help address a fundamental paradox at the science – industry interface, namely that the very financial incentives featured in many prescriptions for commercialization are not particularly well aligned with values common amongst scientists (colyvas et al., 2002) and can even be detrimental to fostering entrepreneurial activity (markman et al., 2004). hybrid organizing refers to the activities, structures, processes, and meanings by which organizations make sense of and combine aspects of multiple organizational forms (battilana & lee, 2014). our model builds on hybrids capabilities to combine multiple institutional logics, which manifest in both an organization’s material means, such as practices, governance figure 1: the valley of death in technology commercialization (adapted from barr et al., 2009) journal of business models (2019), vol. 7, no. 4, pp. 20-26 22 arrangements, and organizational forms, as well as its symbolic elements, such as shared beliefs, interests, preferences, and goals (thornton & ocasio, 2008). in the technology commercialization process, organizations that are built on hybrid logics of science and industry combine the traditional ‘science’ logic of academic discovery and scientific value creation and the traditional ‘industry’ logic of commerce and financial value creation (gulbrandsen, 2011). similarly, hybridization of commerce and social welfare logics in “social enterprise” models are designed for both social impact and financial sustainability, for examples in microfinance (battilana & dorado, 2010) and wind energy (york et al., 2016). key insights recent research has shown that the logic of science includes not only scientific value creation (value through publications, conferences, and other knowledge artifacts) but also increasingly public value creation (value through implementation and positive social/environmental outcomes) (bozeman et al., 2015). in parallel, a broader conceptualization of value is a promising, yet an under-investigated, area of business model research (nielson et al., 2018; see seelos & mair, 2005 for a notable exception). as a result, we propose that hybrid organizations may be uniquely suited to developing business models that provide value to scientists based on their explicit social objectives (aligned with traditional scientific values) and to firms based on their embrace of commercial objectives (aligned with traditional firm values). furthermore, our analysis suggests that hybrid organizations capabilities to manage, balance, and perhaps even leverage, tensions at the science-industry interface through strategic partnerships with universities and firms, may contribute to their own financial sustainability. past research has identified a wide variety of hybrid organizations (battilana & lee, 2014), but we focus on “born-hybrids” in particular that are “inherently driven by dual commercial and social logics” (newth & woods 2014). this is an important distinction as other approaches to technology commercialization may also be hybrid organizations, but they are much closer the “header-modifier” type of hybrids in which one logic dominates the other (gulbrandsen, 2011; wry, et al. 2014). for example, technology commercialization offices are designed to bridge science and commercial; logics; however, the vast majority of these organizations are not self-sustaining being financially subsidized by, and reporting directly to, their associated university (thursby, et al., 2001). in contrast, in a born-hybrid model, “the hybrid logic of [an] innovation will be less foreign; therefore, resistance to it will be limited to its anticipated ability to achieve [its hybrid goals], not the legitimacy of trying to do both simultaneously” (newth & woods, 2014). a further implication of a born-hybrid model is that individual organizations are likely more suited to combine logics than are multiorganization partnerships in this context. specifically, these partnerships, however tightly conceived and structured, necessarily have conflicting logics from their component organizations. for example, in their examination of public-private research centers in scandinavia, gulbrandsen and colleagues (2015) found that “the centres, despite stakeholder boards and demands for harmonization of agendas and activities, are still made up of people whose main activities are found in their ‘home’ organizations with other incentives and obligations” (376). by integrating the notion of a born-hybrid model with the valley of death, we present a stylized model of technology commercialization where hybrids act as bridges between organizations engaged in basic scientific research and those engaged in commercialization (figure 2). the immediate consequences of this model are that both types of organizations extend resources further into the valley of death. the motivation for universities to do this is rather than licensing technologies to firm interested in strictly private-value creation they can help fulfill their public-value creation missions. we do not propose universities will underwrite these hybrids, only that engaging with such organizations will both better fit with their mission and engender less resistance from their stakeholders (e.g. that they are “giving away” publicly-funded technologies to private firms). additionally, private firms will have stronger incentives to develop a given technology earlier on because of the increased certainty created by the university’s continued involvement in a technology’s development. furthermore, the inventors of technologies would have stronger incentives to assist in journal of business models (2019), vol. 7, no. 4, pp. 20-26 23 this development since the dual logic of hybrid organizations can accommodate the desire to create public value common among scientists, as well as the private value creation of traditional commercialization vehicles such as licensing agreements and startup companies. using born-hybrid organizations to help bridge this gap also allows for additional flexibility as technologies are developed. for example, a hybrid organization could focus on public value creation (both scientific and social) early in this process and then later switch to focusing on private value creation as technologies are further developed. alternatively, it could develop specific applications of a given technology that feature strong social, but marginal private, value creation profiles (e.g. a cure for an “orphan disease” where its rarity makes for too small of a market for traditional firms to invest in seeking a cure), while licensing the technology for use in applications with stronger private value creation profiles to traditional firms. this arrangement would allow for specialization as well as the application of a new business model (with related specialized human capital) explicitly designed with the flexibility needed to create value for all stakeholders in the process of technology commercialization. discussion and conclusions we view this model as having two main contributions. first, we developed a novel solution to one of the core problems identified in past technology commercialization research – integrating the conflicting logics of public value creation of science with private value creation of firms. although we applaud efforts to provide translational research funding, increase entrepreneurial training for scientists, and otherwise integrate scientific and commercial logics, we show the possibility of using business model design as a complementary approach to help bridge the technological valley of death. this design approach is unique in that it does not require radical changes to the culture, values, and overarching logics of organizations engaged in scientific discoveries or the firms reliant on these discoveries. instead, we suggest leveraging the ability of hybrid organizations to integrated public and private value creation can create more robust interfaces with both universities and private firms. as our second contribution, we show a domain in which organizations pursuing hybrid business models are not merely different, but in fact may be better than either nonprofit or strictly for-profit models. in contrast to figure 2: valley of death with hybrid organization as bridge journal of business models (2019), vol. 7, no. 4, pp. 20-26 24 past research, which examines, for example how customers may view hybrid organizations more favorably (dean & mcmullen, 2007), the model we developed here shows that hybrid organizations may be inherently better to address situations where public and private value are intimately linked and integrating these two types of value is critical for the success of the organization. as a result, our findings contribute to the broader conversation on the theoretical underpinnings of hybrid organizations’ possible sources of competitive advantages. in addition, our model sheds some light on whether or not hybrids, nonprofits, and for-profits are substitutes or complements and furthermore, which situation-specific factors helped shape relationships between these types of organizations. journal of business models (2019), vol. 7, no. 4, pp. 20-26 25 references auerswald, p. e., & branscomb, l. m. (2003). valleys of death and darwinian seas: financing the invention to innovation transition in the united states. the journal of technology transfer, 28(3), 227-239. barr, s. h., baker, t. e. d., markham, s. k., & kingon, a. i. (2009). bridging the valley of death: lessons learned from 14 years of commercialization of technology education. academy of management learning & education, 8(3), 370-388. battilana, j., & dorado, s. (2010). building sustainable hybrid organizations: the case of commercial microfinance organizations. academy of management journal, 53(6), 1419-1440. battilana, j., & lee, m. (2014). advancing research on hybrid organizing–insights from the study of social enterprises. the academy of management annals, 8(1), 397-441. bozeman, b., rimes, h., & youtie, j. (2015). the evolving state-of-the-art in technology transfer research: revisiting the contingent effectiveness model. research policy, 44(1), 34-49. butler, d. (2008). crossing the valley of death. nature, 453(7197), 840. colyvas, j., crow, m., gelijns, a., mazzoleni, r., nelson, r. r., rosenberg, n., & sampat, b. n. (2002). how do university inventions get into practice?. management science, 48(1), 61-72. dean, t. j., & mcmullen, j. s. (2007). toward a theory of sustainable entrepreneurship: reducing environmental degradation through entrepreneurial action. journal of business venturing, 22(1), 50-76. etzkowitz, h., webster, a., gebhardt, c., & terra, b. r. c. (2000). the future of the university and the university of the future: evolution of ivory tower to entrepreneurial paradigm. research policy, 29(2), 313-330. gulbrandsen, m. (2011). research institutes as hybrid organizations: central challenges to their legitimacy.  policy sciences, 44(3), 215-230. gulbrandsen, m., thune, t., borlaug, s. b., & hanson, j. (2015). emerging hybrid practices in public–private research centres. public administration, 93(2), 363-379. lockett, a., siegel, d., wright, m., & ensley, m. d. (2005). the creation of spin-off firms at public research institutions: managerial and policy implications. research policy, 34(7), 981-993. markman, g. d., gianiodis, p. t., phan, p. h., & balkin, d. b. (2004). entrepreneurship from the ivory tower: do incentive systems matter?. the journal of technology transfer, 29(3), 353-364. merton, r. k. (1973). the sociology of science: theoretical and empirical investigations. university of chicago press. mowery, d. c., nelson, r. r., sampat, b. n., & ziedonis, a. a. (2001). the growth of patenting and licensing by us universities: an assessment of the effects of the bayh–dole act of 1980. research policy, 30(1), 99-119. newth, j., & woods, c. (2014). resistance to social entrepreneurship: how context shapes innovation.  journal of social entrepreneurship, 5(2), 192-213 nielsen, c., lund, m., montemari, m., paolone, f., massaro, m., & dumay, j. (2018). business models: a research overview. routledge. journal of business models (2019), vol. 7, no. 4, pp. 20-26 26 pache, a. c., & santos, f. (2013). inside the hybrid organization: selective coupling as a response to competing institutional logics. academy of management journal, 56(4), 972-1001 sauermann, h., & stephan, p. (2013). conflicting logics? a multidimensional view of industrial and academic science. organization science, 24(3), 889-909. seelos, c., & mair, j. (2005). social entrepreneurship: creating new business models to serve the poor. business horizons, 48(3), 241-246. siegel, d. s., waldman, d., & link, a. (2003). assessing the impact of organizational practices on the relative productivity of university technology transfer offices: an exploratory study. research policy, 32(1), 27-48. thornton, p.h. & ocasio, w. (2008). institutional logics. in r. greenwood, c. oliver, k. sahlin & r. suddaby (eds.), the sage handbook of organizational institutionalism (pp. 99-129). sage publications. thursby, j. g., jensen, r., & thursby, m. c. (2001). objectives, characteristics and outcomes of university licensing: a survey of major us universities. the journal of technology transfer, 26(1-2), 59-72. wry, t., lounsbury, m., & jennings, p. d. (2014). hybrid vigor: securing venture capital by spanning categories in nanotechnology. academy of management journal, 57(5), 1309-1333. york, j. g., hargrave, t. j., & pacheco, d. f. (2016). converging winds: logic hybridization in the colorado wind energy field. academy of management journal, 59(2), 579-610. journal of business models (2019), vol. 7, no. 4, pp. 66-72 66 business logic–the missing link between strategy, business model and business process? ph.d. jon williamsson ph.d. anders sandoff ph.d. gabriela schaad gothenburg university, school of business, economics and law . abstract like military strategists, business professionals orient themselves in the world supported by an overarching, yet by researchers unlabeled, understanding of how different organizational levels develop and interact. researchers may understand this phenomenon by utilizing the idea of military doctrine and introducing a similar concept tentatively called business logic. please cite this paper as: williamsson et al. (2019), business logic–the missing link between strategy, business model and business process?, vol. 7, no. 4, pp. 66-72 keywords: business model, military doctrine, business logic. introduction during the last two decades, the business model concept has grown into a widely acknowledged analytical concept within the field of business administration (cf. zott, amit, & massa, 2011). used to holistically analyze the value creation and capture of a single business entity within a specific business context, the business model filled a conceptual gap between business strategy and business processes (osterwalder & pigneur, 2005). business strategy and business model appear now to be the two main constructs that both managers and researchers rely on when exploring the past, present and future of business. however, if we are to accept the description of the firm as the nexus of a network of stakeholder relationships (cf. freeman, 1984) and managerial knowledge as being based on practical wisdom (nonaka & toyama, 2007), it appears that the vocabulary used to explore managerial decision-making on business model development and strategy lacks a concept that addresses the interrelated and contextually anchored sensemaking (weick, sutcliffe, & obstfeld, 2005) that occurs among those sharing a business context. journal of business models (2019), vol. 7, no. 4, pp. 66-72 67 dominant logic has been identified as an important factor in relation to the manager’s ability to impact an organization’s trajectory (prahalad & bettis, 1986). this insight has been introduced in both strategy and business model research, and is used to stress the importance of paying heed to managerial cognition when, for example, discussing the role of cross-industry pollination of innovative ideas about value creation (chesbrough, 2010; tikkanen, lamberg, parvinen, & kallunki, 2005). despite being a ubiquitous phenomenon, the implementation of the dominant logic concept seems to be centered on the organizational anchoring of the manager´s sensemaking, and subsequent research has overlooked the collective learning that goes on in the relationship between stakeholders and corporate representatives (cf. calton & payne, 2003; svendsen & laberge, 2014). firms frequently engage with trade organizations, collectively sponsor research, and work with governmental bodies to influence perceptions of their industry. thus, there appears to be knowledge of business models and strategy that transcends the organizational and accumulates at an industry level, rather than merely within the individual organization. this type of knowledge helps managers and external stakeholders, such as policymakers, when they try to estimate the impact of business-related issues on individual organizations. it also appears that this type of knowledge is used for business model innovation in unrelated industries (cf. enkel & mezger, 2013). in this paper, we suggest that the phenomenon discussed above can be described as the construction of a “business logic”, i.e. a general understanding of the history and trajectory of an industry, or category of similar business models (e.g. platform-based business models), on issues such as resource utilization, value creation and capture, regulation and stakeholder relationships. what follows is an explanation of what researchers would gain by introducing such a concept, as well as a suggested definition based on the relationship between key analytical units used within the field of business administration research. approach this paper is the result of a comparative literature study of research on business strategy, business models and military strategy. the analogy between business and military terminology is based on the history of conceptual association that has existed between the two domains, as well as an underlying assumption that collective sensemaking plays a major part in decision making within these domains. key insights at a glance, it becomes apparent that key vocabulary used within business administration research has a military heritage. reviews of strategy research indicate that there has been influence from military thinking on several levels, and that this influence has taken both direct and indirect form (mintzberg, ahlstrand, & lampel, 1998 p. 90 ff). business strategy and business tactics (e.g. casadesus-masanell & ricart, 2010) are examples of terminology with clear military connotations, while business logistics is a less apparent instance of this habitual adaptation of military thought (rutner, aviles, & cox, 2012). historical documents such as sun tzu´s the art of war or miyamoto musashi´s the book of five rings, regularly appear on recommended reading lists, and military sources are used as inspiration when considering concepts such as competition, stakeholder management and organizational development (mintzberg et al., 1998). military activity is often conceptualized as taking place on three levels: tactical, operational, and strategic (evans, 2003). with the introduction of the business model, the concepts of business process, business model and business strategy match, both superficially and conceptually, with the three levels. military tactics is seen as the most basic level of planning and implementation (nato, 2017) in much the same way as business processes are considered as the fundamental building block of value creation and capture (cf. osterwalder & pigneur, 2005). the operational level is “[t] he level at which campaigns and major operations are planned, conducted and sustained to accomplish strategic objectives within theatres or areas of operations.” (nato, 2017 lexicon p. 7), which matches the idea of the business model as a blueprint of the processes, resources and logic that support the fulfilment of a business strategy. the concept of strategy is in military jargon considered as the level at which “activities, battles and engagements are planned and executed” journal of business models (2019), vol. 7, no. 4, pp. 66-72 68 (nato, 2017 lexicon, p. 8) and is a conceptualization of the external orientation of an organization that has been adopted in business literature (cf. mintzberg et al., 1998). however, the three military concepts function in relation to a fourth concept, termed military doctrine (høiback, 2011). this concept has no equivalence in business research yet introducing a similar concept would support our understanding of organizations and complement the toolbox available to researchers. the word doctrine may convey a sense of rigidity. however, research on military use of the term explains that military doctrine is set apart from the religious origin of the word by being dynamic, educational and iterative in nature, rather than static and dogmatic (grint & jackson, 2010; høiback, 2011). nato defines military doctrine as “[f]undamental principles by which the military forces guide their actions in support of objectives. it is authoritative but requires judgement in application.” (nato, 2017 lexicon p. 5). a review of how military doctrine evolved indicates that it early on was conceptualized as something that is a guide to action, rather than a constraint on thinking (davies & gustafson, 2019). hence, instead of a set of definitions of what to do or think, military doctrine should be thought of as ”an authoritative theory of war that allows for cultural idiosyncrasies” (høiback, 2011). this definition builds on the tripart foundation of cultural maxims, acceptance of authority, and a theory of how the world functions (høiback, 2011). military doctrine ”links theory, history, experimentation, and practice” (grint & jackson, 2010 p. 352) together to provide a common frame of reference for different branches of military that helps them answer four key questions: what the service perceives itself to be (“who are we?”); what its mission is (“what do we do?”); how the mission is to be carried out (“how do we do that?”); how the mission has been carried out in history (“how did we do that in the past?”). (grint & jackson, 2010 p. 352) by marrying together these temporally oriented aspects of decision making, military doctrine formalizes and enacts something that is action oriented, while being supportive of both organizational and individual sensemaking (cf. weick et al., 2005). comparing the vocabulary used in strategy research to military conceptualization of organizational and individual action (french, 2009), especially in response to changing circumstances and the need to infuse a common motivation to act based on shared values rather than monetary rewards (freeman, 1984 p. 90), business administration research appears to lack a concept that matches military doctrine. we argue that there could be substantial gains from introducing a concept like military doctrine. however, it is not necessary to cling to the term doctrine when developing business administration research. it could be argued that it is desirable to put some distance between an equivalent concept introduced in business administration and the original concept of military doctrine. from an ethical standpoint, moving away from the militaristic heritage would probably be preferable. additionally, the concept of doctrine has such negative connotations that rebranding it into “business doctrine” would probably not help its use, even if the concept was idiosyncratically understood within the field of business administration. instead, we argue that it would be preferable to insert the knowledge gained from studying the concept of military doctrine into business administration research by introducing the concept of business logic as a conceptual match. the phrase business logic is already used in business research, but it does not appear to be nearly as popular as other terms. a search with the words “business logic” on google scholar garners 67  400 hits (search conducted 2019-02-27) which is low when compared to “business model” (724  000 hits) and “business strategy” (1  090  000 hits). using web of science searching for scientific papers with the term “business logic” nets only 325 articles with most of those published in areas linked to computer science (233 hits). only 70 articles, or 21,5 per cent, came from the fields of management and business. looking at how the phrase is used in those 70 articles, it appears that the words business and logic are used together with no specific compound function (e.g. hoffman, 2005). hence, it does not appear to be an open compound word, such as business model has become. a review of the more well cited papers within the fields of management and business reveals that the word combination ‘business logic’ is linked to set phrases such as ‘service business logic’ and to the debate about how and why service is included in business operations (e.g. grönroos & ravald, journal of business models (2019), vol. 7, no. 4, pp. 66-72 69 2011; wikström, hellström, artto, kujala, & kujala, 2009). the combination also appears in business model literature. here the words refer to the logic behind the business and are used to explain what a business model is: “[the business model] outlines the business logic required to earn a profit” (teece, 2010 p. 75). they also refer to how the business model should be conceptualized in relation to its use: “business models help to capture, visualize, understand, communicate and share the business logic.” (osterwalder & pigneur, 2005 p.11). it appears that researchers sometimes also use business logic as a synonym for business model. such usage lends variation to the text, but in cases where the exact definition of a concept needs clarification, the use of synonyms may create confusion. in some instances, the phrase ‘business logic’ even appears to be a catch phrase for researchers wanting to avoid the use of terms such as strategy or business model. this is understandable since those terms can have negative connotations in certain fields and carry conceptual baggage that makes them difficult to introduce in certain contexts (cf. teece, 2010). consequently, we draw the conclusion that the open compound ‘business logic’ is available for researchers to claim and define. based on our review of military doctrine, we suggest that business logic should be defined as a dominant theory of business management that incorporates the cultural peculiarities evolved out of collective sensemaking around technology, regulation and stakeholder interaction. in this definition, theory is conceptualized as the managerial conceptualization of how the world works, and culture as the managerial or corporate behavior within that world. in figure 1, we conceptualize business logic as encompassing the three levels of business analysis and functioning as a communicating vessel between those levels. conclusion by putting together detailed information from different conceptual levels of the organization, decision-makers compile a foundation of knowledge, based on which they assess actual and potential changes to the business environment. however, current literature lacks a term that describes this type of knowledge. there is no commonly accepted analytical concept that provides a basis for discussing sensemaking around the often complex and interrelated facets of management that, from a scholarly perspective, take place on multiple, but interrelated, analytical levels. neither is there, in the professional realm, a concept that helps managers to orient themselves in the way military doctrine is assumed to support decision-makers in the armed forces. based on an understanding of military doctrine as the integration of theory, history, experimentation and practice, the analogously defined business logic concept may fill this gap. as we define it, business logic establishes the contours within which a manager expects business models and strategy to develop. the business logic concept thus represents a general logic for change in relation to both concepts, a function similar to that of dominant logic, yet with broader implications. in terms of direct application, we suggest that the business logic may support, or hinder, action on issues such as value creation and capture, regulation, and stakeholder relationships. hence, the concept can be a starting point when characterizing the conditions necessary for changing an incumbent business model, m ilitary doctrine  strategy  operations  tactics  business logic  business strategy  business model  business processes  military doctrine ties  together and  influences the layers  of military work.   business logic builds  on the collective  sensemaking about  history, theory,  experimentation and  practice in ways that  connect industry‐ based strategies and  processes with  business models.  figure 1: comparing military doctrine and business logic journal of business models (2019), vol. 7, no. 4, pp. 66-72 70 or the logic against which a new venture needs to be benchmarked when launched within an established industry. finally, it is our conviction that the introduction of a concept that builds on the understanding of decision-making encapsulated in the military doctrine, whether it is called business logic or something else, will support researchers when studying managerial sensemaking. journal of business models (2019), vol. 7, no. 4, pp. 66-72 71 references calton, j. m., & payne, s. l. (2003). coping with paradox. business & society (vol. 42). casadesus-masanell, r., & ricart, j. e. (2010). from strategy to business models and onto tactics. long range planning, 43(2–3), 195–215. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2–3), 354–363. davies, p. h. j., & gustafson, k. (2019). intelligence and military doctrine: paradox or oxymoron? defence studies, 19(1), 19–36. enkel, e., & mezger, f. (2013). imitation processes and their application for business model innovation: an explorative study, 17(1). evans, m. (2003). from kadesh to kandahar: military theory and the future of war. naval war college review, 56(3), 132–150. freeman, r. e. (1984). strategic management: a stakeholder approach. cambridge: cambridge university press. french, s. (2009). critiquing the language of strategic management. journal of management development, 28(1), 6–17. grint, k., & jackson, b. (2010). toward “socially constructive” social constructions of leadership. management communication quarterly, 24(2), 348–355. grönroos, c., & ravald, a. (2011). service as business logic: implications for value creation and marketing. journal of service management, 22(1), 5–22. hoffman, a. j. (2005). climate change strategy: the business logic behind voluntary greenhouse gas reductions. california management review, 47(3), 21–46. høiback, h. (2011). what is doctrine? journal of strategic studies, 34(6), 879–900. mintzberg, h., ahlstrand, b., & lampel, j. (1998). strategy safari: the complete guide through the wilds of strategic management. glasgow: pearson education limited. nato. (2017). allied joint doctrine (ajp-01 ). nonaka, i., & toyama, r. (2007). strategic management as distributed practical wisdom (phronesis). industrial and corporate change, 16(3), 371–394. osterwalder, a., & pigneur, y. (2005). clarifying business models : origins , present , and future of the concept clarifying business models : origins , present , and future of the concept. communications of the association for information systems, 15(may), 1–125. prahalad, c. k., & bettis, r. . (1986). the dominant logic : a new linkage between diversity and performance. strategic management journal, 7(6), 485–501. rutner, s. m., aviles, m., & cox, s. (2012). logistics evolution: a comparison of military and commercial logistics thought. international journal of logistics management, 23(1), 96–118. journal of business models (2019), vol. 7, no. 4, pp. 66-72 72 svendsen, a. c., & laberge, m. (2014). convening stakeholder networks. journal of corporate citizenship, 2005(19), 91–104. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2–3), 172–194. tikkanen, h., lamberg, j.-a., parvinen, p., & kallunki, j.-p. (2005). managerial cognition, action and the business model of the firm. management decision, 43(6), 789–809. weick, k. e., sutcliffe, k. m., & obstfeld, d. (2005). organization science and the process of sensemaking. organization science, 16(4), 409–421. wikström, k., hellström, m., artto, k., kujala, j., & kujala, s. (2009). services in project-based firms four types of business logic. international journal of project management, 27(2), 113–122. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. journal of business models (2019), vol. 7, no. 4, pp. 27-33 27 ecosystemic business model scenarios for connected health julius francis gomes, laura kemppainen minna pikkarainen, timo koivumäki petri ahokangas martti ahtisaari institute of global business & economics, oulu business school, university of oulu, finland. abstract business ecosystems are evolutionary business environments that go through various life-cycle stages. ecosystemic business models are rather complex in emergence and evolution in comparison to incumbent organizations’ business models. ecosystemic business models are needed especially in the area of connected health (i.e., for the efficient utilization of heterogeneous data and efficient improvement of service delivery to support timely decision making) where there is an urgent need to overcome boundaries between the different actors in public-private partner ecosystems. this empirical research portrays four scenarios for ecosystemic business modeling for connected health. the study adopts a qualitative case study approach. acknowledgements: this research is supported by a grant from business finland as part of the icory project intelligent customer-driven solutions for orthopaedic and pediatric surgery care. please cite this paper as: gomes et al. (2019), ecosystemic business model scenarios for connected health, vol. 7, no. 4, pp. 27-33 keywords: ecosystemic business model, business ecosystem, connected health. introduction as more non-digital aspects of human society become intertwined with digital interventions (turber & smiela, 2014), prevalent bricks and mortar industries are adopting characteristics common in ict domains, i.e., systems of distributed innovation, or “business ecosystems” (baldwin, 2012). the healthcare sector is continuously being transformed by multiple waves of digitalization (gomes & moqaddemerad, 2016). baldwin (2012) suggests that past are those days when innovation took place solely within the boundaries of single organizations in all industries. thus, one challenge is how to efficiently manage the shared or distributed forms of innovation that takes place in modern business ecosystems. journal of business models (2019), vol. 7, no. 4, pp. 27-33 28 connected health is a relatively new conceptual model that overarches prevalent health digitalization models and is inherently multi-stakeholder oriented (iglehart, 2014). the focus of connected health interventions are on efficiently utilizing collected data, efficiency improvement in service delivery, supporting timely decision making, and activating feedback loops between stakeholders (agboola, ball, kvedar, & jethwani, 2013; dowd et al., 2018). as a multistakeholder and ict driven business environment, connected health displays the characteristics of a business ecosystem. moore (1993) identified business ecosystems to be evolutionary environments that go through four phases during their life-cycle: birth, expansion, leadership, and self-renewal or death. jansson, ahokangas, iivari, peälä-heape, & salo (2014) defined business ecosystems as networks of business models where incumbent stakeholders interact through their business models by connecting and collaborating with the business ecosystem. the business model literature focusing on business ecosystems is still nascent and emerging (demil, lecocq, & warnier, 2018; iivari, 2016). in this research we adopt and extend zott & amit’s (2010) definition of a business model to the ecosystem. we perceive an ecosystemic business model to be a system of interdependent activities that transcends organizations in the ecosystem and spans their boundaries. the activity system enables organizations, in concert with their partners, to create value and to appropriate a share of that value with other stakeholders. business ecosystems are complex in nature and comprise blurred boundaries; this makes designing the ecosystemic business model more complex in practice. although the ecosystemic business model continuously evolves in each phase of the business ecosystem lifecycle, the practical aspect of implementing the business model depends on the negotiations and interactions with the stakeholders through the choice or design of the business model (demil et al., 2018). gomes, iivari, pikkarainen, & ahokangas (2018) identified three broad properties of business models that trigger negotiations and interaction between stakeholders in a business ecosystem. these are: 1) opportunity exploration and exploitation (oee), 2) value creation and capture (vcc), and 3) advantage exploration and exploitation (aee). in this empirical paper, we study the above-mentioned aspects of business models to facilitate identifying an ecosystemic business model for an emerging connected health business ecosystem by developing four (4) alternative integral scenarios. approach this empirical paper adopts a qualitative case study approach to develop alternative integral scenarios (amer, daim, & jetter, 2013; provo, ruona, lynham, & miller, 1998; yin, 1981). among the various applications of case study methodology, stake (1978) points out that in social and human sciences it helps to describe phenomena that are complex, holistic, and which involve countless not well-isolated variables. the research data was collected in eight (8) semi-structured interviews with industrial experts in december 2018 (appendix 1). all of the participants in the interviews represented individual industrial partners of an emerging connected health business ecosystem. each of the interviews was recorded with the permission of the interviewees, transcribed and qualitatively analyzed. besides the interviews, each of the industrial partners was invited to complete an individual exercise concerning their existing business model and their business model for the ecosystem. for this exercise, we adapted to use the business model wheel (ahokangas et al. 2014) that is used for ecosystemic and future-oriented contexts. the studied emerging business ecosystem consists of eight (8) industrial partners, two (2) university hospitals, and three (3) research organizations (appendix 2). the objective of the emerging business ecosystem for connected health is to iteratively co-design and accumulate data-driven and patient-centric solution/s for orthopedic and pediatric surgery care. in practice, the ecosystem aims to deliver a coherent data-driven solution that will facilitate the patient journey for orthopedic (children and adults) patients, pediatric patients, and healthcare professionals. the intended solution is being co-developed by the participating stakeholders of the business ecosystem. although each of the participating stakeholders have their own business models for their own services, an ecosystemic business journal of business models (2019), vol. 7, no. 4, pp. 27-33 29 model in the business ecosystem is required to create a coherent and scalable solution. this research facilitates the empirical need by developing alternative integral scenarios for ecosystemic business models. key insights in practical examples of business ecosystems, large corporations are usually observed to lead business ecosystems as keystones, e.g., apple, google, airbus, sony (playstation), etc. although the studied emerging business ecosystem comprises eight (8) industrial partners, six (6) of them are comparatively small or medium-sized. however, unlike other business ecosystems, one of the smaller industry partners seems to act as the keystone of the business ecosystem as an industry partner. this is because the value that the organization delivers is deemed to be a good productmarket fit by the potential clients of the solution: the hospitals. this unusual phenomenon, on one hand, might lead to discomfort between other stakeholders, and on the other hand, it provides confidence for organization offering in the business ecosystem interview date interview duration ceo sme 1 digitize care pathways for surgery patients (home-hospital-home) through a platform 21.11.2018 2 hours 10 mins ceo sme 2 gamifying physiological rehabilitation 28.11.2018 44 mins sale director sme 3 software-as-a-service, quality registers 12.11.2018 2 hours 10 mins ceo sme 4 remote, video appointment system 10.12.2018 1 hour 24 mins ceo sme 5 gamifying physiotherapy 27.11.2018 1 hour 15 mins ceo sme 6 gamifying psychological wellbeing, dashboard for physicians 27.11.2018 1 hour 28 mins program manager, lead architect corporation 1 artificial intelligence, machine learning, robotics in surgery journey 29.11.2018 1 hour 17 mins business partner manager -corporation 2 technology provider (device, software, storage, etc.) 28.11.2018 1 hour 29 mins appendix 1: summary of data collection appendix 2: map of the connected health business ecosystem journal of business models (2019), vol. 7, no. 4, pp. 27-33 30 young organizations concerning their value and contribution to the business ecosystem. however, since the ecosystem is still emerging and is in its birth phase, the number of participating stakeholders are relatively small, leading to a state of non-competition between the stakeholders for the time being. furthermore, in the interviews, it was revealed that a business ecosystem addressing the needs of hospital organizations need not stick to any single service as a platform, which could lead to the business proliferation of only one industry partner. this, in turn, could hamper the shared goals of the business ecosystem and service creation for a broader customer. in such a case, the business ecosystem could consider a modular approach by accumulating different connected health interventions in a portfolio that will be available for the customer to choose and purchase. based on the collected data, we designed four alternative integral scenarios for an ecosystemic business model. the ability to implement business models in business ecosystems depends on the negotiations and interactions between the incumbent stakeholders (demil et al., 2018). we observed that the business model properties of oee, vcc, aee (opportunity exploration & exploitation, value creation & capture, advantage exploration & exploitation) triggered negotiations and interaction in the studied business ecosystem. so, for developing alternative integral scenarios, we plotted these oee, vcc, aee properties of the business model in a four-quadrant scenario matrix (figure 1). the vertical axis comprises opportunity exploration (oe1), value creation (vc1), and advantage exploration (ae1) perspectives. we plotted the marketing types (oe1), platform types (vc1), and innovation strategy types (ae1) on opposite ends of this axis. the horizontal axis comprises opportunity exploitation (oe2), value capture (vc2), and advantage exploitation (ae2). the opposite ends of this axis are selling types (oe2), pricing strategy types (vc2), and ipr strategy types (ae2). while the alternative business model scenarios presented in this paper show four distinct business models, figure 1: alternative integral ecosystemic business model scenarios. journal of business models (2019), vol. 7, no. 4, pp. 27-33 31 the stakeholders in the emerging business ecosystems negotiated and interacted to choose and deploy the business model. the studied emerging business ecosystem did not need to adopt either one of the four alternatives presented here as a final ecosystemic business model. preferably, the two axes can be considered as continuums and the stakeholders can interact and negotiate to identify the ecosystemic business model that will benefit all collaborating stakeholders while serving the customer value with competitive prices. in designing the scenarios, this research considered the common opportunity that the ecosystem addressed, the value propositions of the stakeholders, the supply side of the ecosystem (e.g., sales and marketing, resources, and ipr issues) and the demand side (e.g., the customer group and innovation types) of the ecosystem. the studied ecosystemic business model aims to bring together all of the collaborating stakeholders. an additional outcome of the emergence of this business ecosystem is that each of the stakeholders identified potential for new shared business models with the partnering stakeholders. besides, in the emerging business ecosystem, three (3) industrial partners operated in the same field of operation: health gamification. however, because all of three industrial partners were small in size and young in age their product focus was very specific, and the portfolio was not very broad. for this reason, although they were all operating in the same field, due to their different target customer segments they were not competing against each other, instead, they are considering future collaboration. discussion and conclusions identifying and designing an ecosystemic business model is more complex compared to designing an incumbent stakeholder business model. the aim of this paper is to show how to facilitate ecosystemic business modelling within a methodological approach. the practical implications of this research are twofold. first, the four alternative integral ecosystemic business model scenarios presented here can be used as a baseline for conceptualizing potential ecosystemic business models for emerging business ecosystems, especially in the connected health domain. second, the framework utilized for developing the scenarios by bringing together opportunity the dimensions of exploration and exploitation, value creation and capture, and advantage exploration and exploitation will allow ecosystem stakeholders to create additional scenarios by focusing on different elements compared to those we have used in this paper (selling/marketing, platform/pricing, innovation/ipr). the relationship between business models and business ecosystems is well-established in the business model literature (gomes, pikkarainen, ahokangas, & niemelä, 2017; jansson et al., 2014; xu, ahokangas, & reuter, 2018). however, there are unanswered questions relating to the business model of business ecosystems, business models in the business ecosystem, and even whether the business ecosystem has its own business model. according to our findings, business ecosystems that aim to bring together stakeholders to solve specific problems with an ecosystemic solution will need ecosystemic business models. these ecosystemic business models are evolving and dependent on the business models of the stakeholders in the ecosystem (demil et al., 2018). further, opportunity-centric business models of the incumbent stakeholders (e.g., using the business model wheel tool) are seen as a proper starting point to initiate the discussion and negotiation for designing the ecosystemic business model (ahokangas, juntunen, & myllykoski, 2014). this case study has shown that participating stakeholders in a business ecosystem can find potential collaboration points for their business models by identifying the complementarities and non-complementarities of the business models. while complementarities in business models help strengthen future collaboration, non-complementarities help to address and reduce the possibility of direct future competition. the limitation of this research is that the studied case is in its early phase of emergence or birth (moore, 1993); thus, the focal elements for ecosystemic business model scenarios will be different for business ecosystems in phases further along in their lifecycle. there is a need for longitudinal research that explores deployment of the ecosystemic business model in the connected health context in the long run. moreover, it would be essential to understand what level of fidelity (i.e., the degree to which the solution is implemented as intended by its developers) and performance impact the ecosystemic business model and the participating actors have in connected health ecosystems. journal of business models (2019), vol. 7, no. 4, pp. 27-33 32 references agboola, s. o., ball, m., kvedar, j. c., & jethwani, k. (2013). the future of connected health in preventive medicine. qjm, 106(9), 791–794. https://doi.org/10.1093/qjmed/hct088 ahokangas, p., juntunen, m., & myllykoski, j. (2014). cloud computing and transformation of international e-business models. research in competence-based management, 7, 3–28. amer, m., daim, t. u., & jetter, a. (2013). a review of scenario planning. futures, 46, 23–40. https://doi.org/10.1016/j. futures.2012.10.003 baldwin, c. y. (2012). organization design for business ecosystems. journal of organization design, 1(1), 20–23. https://doi.org/10.7146/jod.6334 demil, b., lecocq, x., & warnier, v. (2018). “ business model thinking ”, business ecosystems and platforms : the new perspective on the environment of the organization, 21(4), 1213–1228. dowd, w. n., cowell, a. j., regan, d., moran, k., slevin, p., doyle, g., & bray, j. w. (2018). an exploratory cost-effectiveness analysis of the connected health intervention to improve care for people with dementia: a simulation analysis. health services and outcomes research methodology, 18(1), 47–62. https://doi.org/10.1007/s10742-017-0175-y gomes, j. f., iivari, m., pikkarainen, m., & ahokangas, p. (2018). business models as enablers of ecosystemic interaction: a dynamic capability perspective. international journal of social ecology and sustainable development, 9(3). https://doi.org/10.4018/ijsesd.2018070101 gomes, j. f., & moqaddemerad, s. (2016). futures business models for an iot enabled healthcare sector: a causal layered analysis perspective. journal of business models, 4(2), 60–80. retrieved from http://journalofbusinessmodels.com/vol-4-no-2-2016/vol-4-no-2-pp-60-80/ gomes, j. f., pikkarainen, m., ahokangas, p., & niemelä, r. (2017). towards business ecosystems for connected health. finnish journal of ehealth and ewelfare, 9(2), 3–95. https://doi.org/10.23996/fjhw.61004 iglehart, j. k. (2014). connected health: emerging disruptive technologies. health affairs, 33(2), 190. https://doi. org/10.1377/hlthaff.2014.0042 iivari, m. (2016). exploring business models in ecosystemic contexts. acta universitatis ouluensis. jansson, n., ahokangas, p., iivari, m., peälä-heape, m., & salo, s. (2014). the competitive advantage of an ecosystemic business model: the case of ouluhealth. interdisciplinary studies journal, 3(4), 282–295. moore, j. f. (1993). predators and prey: a new ecology of competition. harvard business review, (september), 73–88. https://doi.org/10.1097/mpg.0000000000001280 provo, j., ruona, w., lynham, s., & miller, r. (1998). scenario building: an integral methodology for learning, decisionmaking, and human resource development. human resources development international, 1(3), 327–340. https:// doi.org/https://doi.org/10.1080/13678869800000041 stake, r. (1978). the case study method in social inquiry. educational researcher, 7(2), 5–8. journal of business models (2019), vol. 7, no. 4, pp. 27-33 33 turber, s., & smiela, c. (2014). a business model type for the internet of things. twenty second european conference on information systems, tel aviv. retrieved from http://ecis2014.eu/e-poster/files/0670-file1.pdf xu, y., ahokangas, p., & reuter, e. (2018). eaas: electricity as a service? journal of business models, 6(3), 1–23. retrieved from http://journalofbusinessmodels.com/vol-6-no-3-2018/vol-6-no-3-pp-1-23/ yin, r. k. (1981). the case study crisis : some answers. administrative science quarterly, 26(1), 58–65. zott, c., & amit, r. (2010). business model design: an activity system perspective. long range planning, 43(2–3), 216–226. https://doi.org/10.1016/j.lrp.2009.07.004 journal of business models (2019), vol. 7, no. 2, pp. 53-63 53 exploring potential changes in the business model: the impacts of using human-centered personal data as a resource tero huhtala1*, minna pikkarainen2, and saila saraniemi3 abstract purpose: services are evolving from generic to personalized, and the reverse use of customer data has been discussed in both academia and industry for the past few years. the aim of this study is to understand the potential changes in the business model when adopting a human-centered personal data management approach. design/methodology/approach: the primary data was gathered over the time in recorded and transcripted workshops, in which future personal data -based services were conceptualized by analyzing future scenarios from a business perspective. findings: the results have implications to theory and practice, indicating that adopting personal data management principles causes changes in the business model, which, if successfully managed, may provide access to more resources, potential to offer better value, and a larger business environment. research limitations/implications: being a single case study imposes restrictions to the generalizability of the results. employing a value creation perspective, and expanding the scope of this study to include actors from different sectors would improve the validity of the research. social implications: the study views the future business landscape with human-centered personal data management lenses. the exploration of the effects of an approach that benefits both people and businesses provides a positive societal aspect. originality/value: while a few studies have examined the linkage between business models and personal data usage, no empirical studies have looked at how a company’s business model may change due to adopting a novel personal data management approach. this paper shows one way to think about this issue. please cite this paper as: huhtala, t., pikkarainen, m., and saraniemi, s. (2019), exploring potential changes in the business model: the impacts of using human-centered personal data as a resource vol. 7, no. 2, pp. 51-70 keywords: business model, personal data, preventive healthcare, personal data management, human-centered 1-3 oulu business school, university of oulu *corresponding author journal of business models (2019), vol. 7, no. 2, pp. 53-63 54 introduction the health care sector is slowly making progress towards preventive, predictive, personalized and participatory care and wellbeing (hood & flores, 2012; baldwin, 2010; collins & varmus, 2015; porter & lee, 2013). especially in preventive activities in healthcare, information is an essential factor, and personal data are invaluable in understanding what makes a person healthy or ill (beirão, et al., 2017; pinho, et al., 2014), and are the key to preventive healthcare (ratia, et al., 2018; hood & flores, 2012). however, utilizing data is not an easy task. the increasing worries about data privacy are frequently in the news and the ethics on the uses of personal data are topical. mydata is an approach on personal data management which has emerged in europe to address needs of companies to access data while simultaneously fulfilling digital human rights (mydata alliance, 2017; koivumäki, et al., 2017; kemppainen, et al., 2016). the target of this human-centered personal data management (i.e. mydata) approach is to enable decentralized management of personal data from different sectors improving interoperability and make it easier for companies to comply with tightening data protection regulations, while also allowing individuals to change service providers without proprietary data lockins (poikola, et al., 2014). for this target to become reality, companies aspiring to use human-centered data to advance their services need to consider the impacts of this approach on their business model. organizations aiming to benefit from the increasing volumes of personal data often lack consistent business models and need external resources to create and capture new value (frankenberger, et al., 2014). while the need to change or adapt the business model to achieve sustained value creation is acknowledged (achtenhagen, et al., 2013), there is a research gap in the literature concerning business models in this field (kemppainen, et al., 2016). while a few studies have examined the linkage between business models and personal data usage (redman, 2015; wang, 2012; brownlow, et al., 2015), we are aware of no empirical studies having explored the potential impacts on the business model by the implementation of humancentered personal data management principles. in this study, our purpose is to understand how business model is perceived to be impacted when human-centered personal data management is used as an enabler for data accessibility, and when the data is used as a resource. we study this in the context of a preventive occupational healthcare service. this study uses a case study approach with two case companies sharing a goal of understanding the potential changes in business model due to adoption of personal data management approach as an enabler, and due to using personal data as a resource. the results are of practical relevance for companies navigating in changing competitive environments. understanding business model change is incremental to seize new business opportunities and to act as an approach to mitigate the risk of inertia to change (achtenhagen, et al., 2013). background business models technological innovations have disrupted all sectors of business, and the pervasiveness and growing volume of data is perhaps the most impactful phenomenon of this advancement. consequently, the capability to utilize the available data is an increasingly important competitive advantage for all businesses (huhtala, 2018; brownlow, et al., 2015). keen and qureshi (2006) argue that a company aiming to become a new entrant or create new business opportunities needs a business model to articulate the changes it needs or wants to make. traditionally, value exchange between actors, service, and the customer is seen as the flow of money, other benefits, resources and activities (palo & tähtinen, 2011). in addition of being descriptions of these key elements of business, business models have been approached as stories explaining how business works (magretta, 2002); boundary objects made of narratives and calculations (doganova & eyquem-renault, 2009); framing devices that influence and shape actions of business partners (mason & palo, 2012), as well as market devices that act in ways that enable companies and entrepreneurs to innovate markets (doganova & eyquem-renault, 2009). while there are many definitions for ‘business model’ in the current literature (baden-fuller & morgan, 2010; chesbrough, 2007; kindström, 2010), experts agree that they help companies of all sizes understand how to journal of business models (2019), vol. 7, no. 2, pp. 53-63 55 convert resources and technological potential into economic value (chesbrough, 2006). the business model is important to any organization because it provides means to understand, analyze, communicate and manage strategic choices (al-debei & avison, 2010; shafer, et al., 2005; otjacques, et al., 2007). a convincing logic of value creation is imperative to succeed, and business models serve as conceptualizations to describe and implement that logic (ghaziani & ventresca, 2005; willemstein, et al., 2007). indeed, business models are constantly evolving in line with strategic decision making, mirroring this ongoing and iterative process (magretta, 2002). in addition to being developed, business models must also be managed, which is an inherently risky business. commercializing an idea or technology is unsuccessful most of the times, and even when successful, it may create powerful inertia inside the company which makes it even harder to change their business model. (chesbrough, 2006). theoretical investigations on business models go into specific components of the business model and how they help explain the business logic of companies. one of the most famous illustrations of the business model and its components is the osterwalder business model canvas (osterwalder & pigneur, 2010), a conceptual tool that makes expressing the business logic of a specific organization easier (al-debei & avison, 2010). the components of the canvas are key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams. there are more extensive interpretations of the business model components, as well. for example, onetti et al. (2010) provided an analysis based on 70 different definitions published from 1996 to 2009. the work of onetti et al. (2010) was inspired by shafer et al. (2005), providing a reduced list of 26 components of business models. despite being semantically slightly different, both interpretations represent same objective being not just depictions of reality, but also instrumental tools which can answer the same questions regarding the prospective future of the company (doganova & eyquem-renault, 2009). doganova and eyquem-renault (2009) suggest that one of the most impressive feature of business models is that they are circulated among and presented for various stakeholders of the company, at the same time building the network for the company. zott and amit (2010) refer to this idea as “business models in action”. we adopt the approach in this study as the case companies are cooperatively developing a business model. however, we opt to use the osterwalder business model canvas as an analytical tool to capture the changes in the business model due to novel personal data management approach. personal data personal data is important currency for companies and society. the eu general data protection regulation defines personal data as any information relating to an identified or identifiable person. (european commission, 2016). personal data has long been collected for various benefits. aggregating customer activity and history to understand the customer better and target marketing efforts more efficiently is a part of virtually every business. gaining insight, efficiency and competitive advantage are the main reasons for collecting personal data (ericsson, 2013). utilizing vast amounts of personal data can bring business opportunities for service providers, helping them to cater to the needs of the individual consumers. however, customer data is often seen as competitive advantage which cannot be shared with other organizations (ctrl-shift, 2014). this is the current situation in which personal data is abundant but resides in silos. the mydata initiative strives to release the data from their silos, for the good of the businesses and the individual people. there is an increasing interest among researchers and practitioners to investigate the value and various uses of personal data (saarijärvi, et al., 2014). mobile devices and wearable sensors are perpetually adding information to the vast repositories of personal data (li, et al., 2011). within health and wellness domain, the motivation to use this kind of data is typically found in selfreflection and the help it provides in lifestyle changes (carver & scheier, 2001). however, this data is currently benefitting mainly those who are already active – not those who would benefit the most; e.g. people with chronic diseases and poor eating and activity habits. the legality in the use and sharing of personal data depends on the context in which it is used (otjacques, et al., 2007). as the volume of personal data rapidly increases, so does the importance privacy and ethical journal of business models (2019), vol. 7, no. 2, pp. 53-63 56 use of data. data ethics draw foundations from computer and information ethics but refines the level of abstraction of enquiries from being informationfocused to being data-focused. the extensive use of personal data, and algorithms to analyze them for decision support, coupled with the reduction of human involvement and oversight of automated processes, raise issues concerning the fairness, responsibility and respect of human rights. (floridi & taddeo, 2016). these concerns are reflected in recent regulations. for business organizations, the implementation of these regulations can increase the overall costs of harvesting personal data (ctrl-shift, 2014), but some see the regulations as good and fair frameworks allowing smoother operation in the business networks for all actors (huhtala, 2018). whichever actors do use personal data, must process it with sensitivity, since privacy issues and data protection can be challenging, especially in the healthcare domain. there are many initiatives emerging around the globe with the aim of resolving these ethical issues. mydata is one of these human-centered data management approaches which aim to simplify data flow and open new opportunities for businesses to develop innovative personal data -based services while preserving privacy (kemppainen, et al., 2016; koivumäki, et al., 2017). the aim of the mydata approach is to provide individuals with the practical means to access, obtain, and use datasets containing their personal information. it is a novel approach in personal data management and processing, aiming to transform the current organization-centric system into a human-centered system, and regarding personal data as a resource the individual can access and control (poikola, et al., 2014). the mydata principles state that personal data should be technically easy to access and use (principle no 1: usable data), individuals should have the right and practical means to manage their data and privacy (principle no 2: human centered services), and that personal data should be managed in a decentralized way to prevent any data lock-in situations (principle no 3: open business environment) (poikola, et al., 2014). business models and personal data the economic value of a technology remains unclear until it is commercialized in some way via a business model. moreover, technology should have value for the individuals, i.e., customers for succeeding. (chesbrough, 2007). the reason why companies are interested in access to personal data is the potential value that the added information might have for their services (huhtala, 2018). in fact, many companies that fail to utilize data in their business are risking losing the competitive advantage in the market (brownlow, et al., 2015). however, data is not a valuable resource for a company or customers, if it is legally inaccessible or cannot be commercialized through a business model. woerner and wixom (2015) argue that companies can change their business model by using data, analytics, and algorithms to explore new revenue streams, create or enter new markets, and novel sources of competitive advantage via data monetization and digital transformation. data privacy has been a vibrant topic for individual customers and companies for recently. as the worries of the ethical use of data increases, new models and new ways of deriving value from human-centered personal data are sought. typically companies are using transformation process that is related to the firm ability to change their business models based on the external business environment (aspara, et al., 2011). open business environment, the third principle of the mydata approach, means that personal data should be managed in a de-centralized way for value to be distributed accordingly. this kind of data sharing from different sectors can be approached with open business models. originally the open business models were used by chesbrough (2007) when describing value creation in an open innovation context. this is an approach in which an organization draws its ideas from openness such as free software, open source, as well as open content and standards (frankenberger, et al., 2014). open business models have been a frequently found concept in literature since 2006 when chesbrough (2007) published his seminal book on the topic. there is a lack of studies that would focus on business model change and on the evolutionary business model changes (aspara, et al., 2011). additionally, there is a lack of consensus in the definition and understanding of the concept, which has led “open business model” to stand for two different kinds of openness. one stream of literature links it to a firm’s research and development activities while other researchers understand the open business model more broadly, i.e., not focusing journal of business models (2019), vol. 7, no. 2, pp. 53-63 57 on r&d activities (frankenberger, et al., 2014). in this study we understand the open business model in the latter way, broadly. the aim of this study is to understand the changes in the business model when novel personal data management approach is used as an enabler to gain access to a new resource – personal data. we use the components of the osterwalder business model canvas to reflect the data-impacted business logic of an occupational healthcare provider through mydata principles. we believe this approach to be fruitful in understanding the effects of personal data usage from a business model change perspective. research design despite its advantages and many examples resulting in sound theories, case studies are a debated methodology, and may require detailed justification as to why case study method has been chosen instead of any other method (dul & hak, 2008; gerring, 2004). the qualitative case study methodology provides the authors the opportunity to explore this single case intensively and describe the studied phenomenon in context using various data sources (baxter & jack, 2008; yin, 2009) with the aim to generalize into wider contexts (gerring, 2004). this study can be classified as an instrumental single case study (stake, 1995) wherein the case itself is of secondary interest, and the focus is rather on the investigated phenomenon, which in this study are the impacts on the business model due to access to a new driving data resource. the research process was three staged, containing the following: 1. the pre-understanding stage consisted of literature review on business models, selecting the case companies, and planning the research methodology 2. the data collection stage wherein goal was to collect primary and secondary data for the case study 3. in the interpretation stage theoretical and managerial conclusions are explored during the first stage, the authors conducted a literature review on business models and personal data to have a deep understanding of the phenomenon. further, the authors identified two service providers who were willing to develop personalized preventive healthcare services using mydata principles, and pilot the value of personal data as part of personal wellness services. in the second stage the authors prepared for the workshops. the use of multiple data sources is a paramount in case study research (baxter & jack, 2008). thus, the primary data was gathered from four recorded and transcribed workshops in which the researchers and the case companies (represented by the two interviewees, respectively) conceptualized future oriented service scenario from a business perspective. in addition, secondary data included several more informal meetings, company information, the case company websites, ceo presentations and articles on the context of occupational and preventive health care. the authors interviewed 1) the ceo of an occupational health care provider who had a mission to persuade people to start caring for their own wellbeing for the sake of both themselves and their employer, and 2) the cto of a large business intelligence and enterprise information management solutions provider. both companies have ambitions in the healthcare and wellbeing business. in this study, the occupational healthcare company will be referred as health co., and the business intelligence and enterprise information management solutions provider as data co. the two companies have identified a market gap in the healthcare domain in creating a new service that offers an analytical tool for burnout prevention. both companies jointly explore the hurdles of developing this new service, referred to in this study as the wellness engine. the service is in its planning stage, without clear understanding what the stakes and roles of each company will be. the case companies agree that the service will initially most likely be a separate, coowned company. however, both companies identify that a service like this would provide considerable value to all relevant stakeholders. the purpose of the wellness engine is to identify burnout risk factors, and with data, identify the individuals or groups of people with a burnout risk as early as possible to anticipate and intervene before burnout has manifested and fatigue starts to affect their ability to work. burnout is a unique type of stress syndrome journal of business models (2019), vol. 7, no. 2, pp. 53-63 58 and is characterized by the loss of mental resources and diminished personal accomplishment (cordes & dougherty, 1993; peeters, et al., 2005). the effectiveness of measures to prevent workforce burnout critically depends on managers’ understanding of the burnout phenomenon and of the subtle indications of its emergence (cordes & dougherty, 1993). although the means of preventive health care are in their infancy, they represent a huge business potential. the wellness engine is envisioned as a holistic service, in the form of a wellbeing-coaching application which could also provide summaries of employees’ overall well-being in the organization anonymously, and help answer what factors make an individual employee, or group of employees, effective and valuable. this study explores the business model from the perspective of the wellness engine service. to limit the effects of a monotonous interpretation, the data collection for this case study consisted of four workshops, in which both interviewees attended, along with researchers from the digital health revolution -research project. however, not all researchers attended in every workshop. the workshop method consisted of several phases, each warranting a dedicated workshop. these phases were i) introduction to personal data, ii) understanding the customer perspective, iii) end-user and business value analysis, as well as iv) technical and regulatory analysis. both the individual user and the business network are fundamental to the mydata approach; thus, the case was examined through the processes of personas (cooper, 1999) and customer journey (lemon & verhoef, 2016) to increase the individuals’ point-of-view, and through value network analysis (allee, 2008) to gain insight into the business network level. value network describes agents, typically suppliers and customers, who conduct actual value-creating transactions with the company (ryall, 2013). the purpose of the first workshop was to increase the case companies’ understanding about mydata personal data management principles, and the authors’ understanding about the plans and ambitions related to the new service they plan to jointly create. in the second workshop, the goal was to identify the key aspects to consider in the proposed service from a customer perspective. in the third workshop the target was to explore the business landscape and value network for the new service from human-centered personal data management perspective. to gain an in-depth understanding of the case, end users were profiled, potential customers and key roles were identified, and value analysis was done from both end-user and business perspectives. the fourth workshop focused on technical and regulatory analysis in which the goal was to understand what technical and regulatory aspects can hinder the adoption of human centered personal data management principles. finally, in the third stage, we explored the research output and extended the literature review based on the results and reached theoretical and managerial conclusions. the analysis process was iterative and abductive, as is often the case in qualitative inquiry, with continuous interaction of empirical data and theory (dubois & gadde, 2002). the data set was first thoroughly reviewed and then analyzed using thematic analysis, one of the most common techniques in qualitative research (guest, 2012). in this study, the authors reflected on the convergent aspects of mydata principles and business model components as the theoretical framework. these were approached through a case “wellness engine”, a potential joint service of the two studied companies. a coding matrix was constructed that enabled the systematic analysis of the data (robson, 2002), first from the perspective of business model components while reflecting on the mydata principles, both perspectives explored in the continuum of short and long-term future. the research process is illustrated in figure 1. • literature review • planning of the research methodology • selecting the case companies stage 1: preunderstanding • preparation of workshops • workshops 1, 2, 3, and 4 stage 2: data collection • exploring the workshop output • extending the literature review based on the results • theoretical and managerial conclusions stage 3: interpretation figure 1: the research process of the study journal of business models (2019), vol. 7, no. 2, pp. 53-63 59 results in this section, the business model components (osterwalder & pigneur, 2010) of the proposed joint service called wellness engine are discussed reflecting the mydata approach (poikola, et al., 2014) from the perspectives of short-term -and long-term future. table 1 illustrates the structure of the results chapter and summarizes the potential changes to business model components caused by the adoption of mydata approach and access to wide-ranging personal data. however, the table is necessarily a simplification, and as such, it is important to point out that some of the components discussed could be interpreted to fall under more than one mydata principle. usable data according to mydata approach, personal data should be an important reusable resource that can be easily accessed and used. companies that can first create and offer services that help individuals manage their lives can create novel business models and boost the economy. however, personal information as such is not easily capitalized. as far as utilization of personal data goes, there are two levels: individual personal data and the aggregated anonymized or pseudonymized data. before an open business environment has taken hold and data-related regulations are carefully considered, this aggregate-level data is the asset that is worthwhile for industry players. health co. and data co. plan to use aggregated anonymized data to build the first version of the wellness engine data analyzing algorithm. they view personal data as a resource which helps differentiate their service. it is a resource which is not valuable by itself and can thus be shared without losing competitive advantage, and they can use customer data perpetually to improve their value proposition. the legality in data use depends on the context (otjacques, et al., 2007). because of data protection regulations especially regarding sensitive medical data, the capabilities to ensure data privacy will be of utmost importance in the plans to utilize individual personal data. this is an aspect that need to be emphasized, because personalization of services which the use of personal data enables – is one of the most valuable strategic benefits of using data to advance service (lim, et al., 2017), and crucially so in the healthcare industry (hood & flores, 2012; ratia, et al., 2018). next, the specific business model components related most closely to the usable data principle are discussed. key resources because of the role of data as an essential resource in preventive healthcare, health co.’s and data co.’s first goal is to identify the relevant data for the development of the wellness engine solution. the main data source on which the wellness engine will be built upon is data from health co. customers. however, only pseudonymized or anonymized personal data will be collected for developing the algorithm for the wellness engine. sensitive personal information will not be collected at all, because of tight regulations which could hamper the development of the service’s data analyzing algorithm. “we are building it (the wellness engine) using the data from healthy people using occupational health care services as reference datasets… (we will not use personal data) …not in any circumstance, only mass data.” –ceo health co. health co.’s customer companies could provide added value to the wellness engine by agreeing to share data, such as standing and sitting metrics and work time statistics on an aggregated and anonymized level. however, the most valuable data would come from a variety of consented personal data. “-(the wellness engine) …can gain more than monetary value if companies could share work time statistics and other such data which is valuable in the development of the model (algorithm). --if we got data from children, pensioners, and the marginalized citizens, that would really blow up to the pot. –cto, data co. data can be used to generate useful information in many ways. extant studies on using data for services reflect that useful data may come from the service provider (e.g. human resources, work time, etc.) or customers (e.g. activity, behavior), and may be useful to either or both (lim, et al., 2018). as human-centered personal data management approach become more journal of business models (2019), vol. 7, no. 2, pp. 53-63 60 table 1: impacts of human-centered personal data management (here mydata) principles on business model components on short and long-term. short-term future long-term future mydata principle usable data human-centered services open business environment usable data human-centered services open business environment potential changes in business model components key partners n/a n/a data co. statistics, application and measurement device providers n/a n/a data management companies, insurance companies, platform operators, private hospitals, decision support system providers, international partners new key partners key activities n/a n/a service development, ongoing business and regulatory environment analysis n/a activities to improve value proposition by using data to personalize service developing interfaces to open business architecture for easy data access and sharing new activity enabled by personal data as a resource new activities required to use personal data as a resource: key resources aggregatelevel personal data, activity data n/a domain expertise all authorized personal data data protection (required by regulations) and data storage data-analysis (from data co.) domain expertise wider source of personal data new resources required to use personal data value proposition n/a occupational preventive healthcare augmented by data-analytics n/a n/a personalized and meaningful analysis and recommendations on the users’ wellbeing based on various data sources n/a improved value proposition customer relationships n/a n/a direct clients in occupational healthcare n/a n/a insurance companies, decision support system providers, individual users, foreign employer organizations new customer relationships and roles enabled by open business environment channels n/a n/a customer companies n/a n/a health care operators, insurance companies new channels enabled by open business environment customer segments n/a n/a employer organizations as customers n/a n/a public healthcare, foreign companies new customer segments revenue streams n/a n/a revenues from selling more services to existing segments n/a using aggregated data to further personalize value proposition or create new value proposition selling services to new customer segments new sources of revenues new services enabled by personal data as a resource business model component journal of business models (2019), vol. 7, no. 2, pp. 53-63 53 widely accepted and adopted in the business environment, the integration of data becomes considerably easier. in the long run, authorized personal data from all relevant actors of the network are considered the driving resource for business. “---the mydata concept is a big thing here: (public data) it’s public and in some sense a very open system, and if people would go for this and give their information. --it’s a great vision and societally impactful.” -ceo, data co. human centered services the second mydata principle has to do with the role of the human customer in services. according to poikola et al., (2014) individuals should be empowered to have the right and means to manage their own data and privacy. the case companies are researching into how users could manage their own data. from the individual perspective, the aggregation and sharing of large amounts of personal data for the use of companies can raise anxiety. a common fear rising out of such data collection is whether the quality of data security is sufficiently robust, in addition to the fear of misuse of personal data (weber, 2015). the companies are exploring the possibilities of linking their service to the finnish national health and wellness database omakanta. managing data storage and data protection with an external partner is a valid option, allowing focus on core competencies (huhtala, 2018). in the following, specific business model components most closely relating to the human-centered services principle are discussed. key activities a widespread adoption of the mydata approach would open data sharing between health co. and data co. and third players, enabling human-centered services. it would be possible to use different types of information such as the customer data accumulated by retail chains, banks and biobanks to give more comprehensive and holistic guidelines and advice. other organizations could contribute in the development of wellness engine by, for example, providing work timeand other kinds of statistics. early development of mydata architecture could offer a strategic benefit in the form of differentiation from their competitors for a short amount of time. the open business environment made possible by the mydata architecture will enable health co. and data co. to get access to a wider base of various data sets that enables the creation of new breakthrough service innovations before anyone else in the market. essentially, there will be new activities enabled by personal data as a resource and new activities required to use personal data as a resource. key resources when the wellness engine service can process and analyze individual personal data, there will also be a need for the capability to protect, anonymize or pseudonymize aggregated data, so no one can make any personal conclusions based on it. this need is driven by the legal and regulatory considerations regarding personal data in both national-, eu-, and global level. in summary, there will be change towards wider sources of personal data and new resources required to use personal data. value propositions the short-term value proposition offered by health co. and data co. is a burn-out tracker service for working age population and an analytics machine that summarizes the data and then returns it back to the individual, but also to the company management and occupational healthcare players when needed. the long-term value proposition for the wellness engine service is personalized and meaningful analysis and recommendations on the users’ wellbeing based on various data sources for occupational healthcare. the idea is that soon health co. could offer tools that can provide a big picture of the wellbeing of the workforce based on aggregated personal data. “…we can offer sophisticated tools and aggregated status information for hr management. --i think it would be really useful if we could view a sales organization and its relevant energy levels: we could explore the levels of sleep, activity, and at what days the sales manager is most energetic, and if those pieces of information correlate. --these are the kinds of information i’d love to see. -ceo, health co. when there is a high burnout risk, the system will raise a red flag and provide guidelines for the person to slow down. when there are several red flags in the same journal of business models (2019), vol. 7, no. 2, pp. 53-63 53 team or the same organization, the management will get information about it and some guidelines on how to improve the wellbeing of their employees in the workplace. if there are many red flags related to the same person, the information will be sent to the occupational healthcare provider that will then discreetly suggest to the person in question a visit to the doctor. with the wellness engine, health co. can offer their individual customers more efficient care based on continuous data analysis. in practice, employer organizations sign a contract with a service provider (i.e. health co.), and the management level of the employer organizations can use the analyzed data as basis for decision-making. there is also a possibility that decision support via the wellness engine could be offered to companies that are not direct customers of health co. …health co. offers them (customers) occupational healthcare services, and the data analyses are included, but the wellness engine service can be sold to any company as a tool. the services can be sold directly to companies.” –ceo, health co. from the mydata point of view, it is important to consider what happens to the employee’s data after they resign or retire. according to mydata approach, the individuals should be able to take their own data with them without fear of a data lock-in. as part of the value proposition, the data could be stored against a fee, or upon request, the individual could be entitled to receive their respective raw data file. “we don’t have a solution for this currently. it could be that if there won’t be any public database in which to preserve that (personal data), then it could be a paid service. so that we’ll preserve the individual’s data, but it’d cost some small amount. –cto, data co. finland has recently opened a national personal health record omakanta where people have basic tools to manage their respective wellness-related data. omakanta works in tandem with another database, kanta, which contains sensitive medical data for professional use. (kansaneläkelaitos, 2019). at the time of our case study, the case companies were investigating the finnish national personal health record and occupational healthcare links. all in all, the improved value propositions were expected to follow between the network actors from adopting mydata appproach. open business environment the third mydata principle addresses the business environment. a widespread adoption of mydata approach leads to an open business environment, which enables “decentralized management of personal data, improves interoperability, makes it easier for companies to comply with tightening data protection regulations, and allows individuals to change service providers without proprietary data lock-ins” (poikola, et al., 2014). in this study, most changes we identified in business model components, originate from the domain of the third mydata approach: open business environment. this insinuates that the role of the network, or the service ecosystem (see e.g. vargo and lusch, 2004; 2008), is increasingly important in the data-saturated modern world. health co. has activity trackers partners etc. and has partnered with data co. do co-develop the wellness engine service. in the long run, collaboration with other stakeholders is sought for with the aim of gaining access to, for example, consented public health data and data from other private service providers, as well as the individual customers. however, many obstacles are in the way. data protection regulations enforces strict codes of conduct for the use of personal data, but it also provides a common and predictable framework in which to operate. this alone is not enough for a truly open business environment and requires a systematic adoption open business models for all stakeholders in the business network. this, in turn, requires that the benefits of doing so trumps the costs related to it. next, specific business model components relating most closely to the open business environment principle are explored. key partners health co. has an external health and activity data aggregation service, which they use primarily to offer their customers a simple solution to accumulate activity, sleep, pain, and nutrition data. in this service, a person can identify and select the subset of relevant metrics to be tracked. the sleep information comes via activity-trackers, authorized through user interface. sleep duration and depth, and daily journal of business models (2019), vol. 7, no. 2, pp. 53-63 54 activity, or steps are the most important datasets for the functionality of the wellness engine. health co. has an ongoing collaboration  with the employer organization, and permission to collect the specified personal data from individuals it is providing its service for. however, if the used data is collected from other players in the business network, the individual’s consent is required. further, if health co. wants to offer the data to a third party, it must have the individual’s consent and it needs to clearly indicate these purposes in its service terms. health co. can already get consented information about the people’s status through their activity and sleep data aggregation service partner. the possibilities to acquire data for service development are vast, and it is conceivable that the wellness engine service could be co-created in collaboration with several other actors in their business network. “when it becomes clear what data we want in the near future, and when the business case is confirmed and validated, it’s not out-of-the-question that other companies might be involved in the joint service in one way or another, considering they bring in some distinct added value.” cto, data co. current key partners in the health co. value network are companies that work on time statistics as well as other identified application and measurement device providers. toward the future, it is important to search for new partners that enable the information flow between the services, like data management organizations, and other companies with relevant data, such as insurance companies, platform operators, private hospitals, decision support system providers, and international partners. because of the varying nature of the occupational healthcare field in different countries, nordic cooperation is considered important to model where the possibilities and problems are, and to see where pseudonymized data, data authorization, etc. fits into the business of both health co. the collaboration with public sector will happen later in the anticipated life cycle of wellness engine, when the open data business environment makes it possible for third parties to send and receive relevant data. data co. is an essential partner in developing the wellness engine service as the source of expertise on developing the data analyzing algorithm. it is widely acknowledged that analytics can create new business opportunities and disrupt all industries (ratia, et al., 2018; woerner & wixom, 2015). when reflecting this partnership through the open innovation research, health co. is innovating its business model with a codevelopment partnership (chesbrough & schwartz, 2007). chesbrough and schwartz (2007) argue that codevelopment partnerships are an increasingly potent way of developing the business model to improve innovation effectiveness. key activities initial key activities and processes in the business plan of health co. and data co. is to co-develop the first version of the wellness engine service, and make sure it will be legally sustainable regarding the use of personal data. later, the role of open business architecture development for easy data access and sharing will be an increasingly topical activity. “so, our first case now is to build that burn out -indicator…overall, it (regulatory analysis) would be pretty useful for us, so we won’t build anything that’s not legally possible.” –ceo, health co. analytics processes will be essential to transform data into useful information for customers (george, et al., 2014). when the algorithm is ready, the wellness engine will need personal data from the users for testing. at first, the target is to get anonymized data, e.g., electronic health checks and an occupational health satisfaction survey on a monthly or so basis. often people may give answers more honestly to an external occupational healthcare provider than to their employer organizations. however, health co. does not have direct access to the customer organization’s employee data but can receive raw data upon consent. key resources at the first phase, the key resources relating to open business environment are the customer contacts and preventive health care expertise of health co. and technical expertise coming from data co. in the long run, the resource base will widen as new data sources will become available. the respective domain expertise of the case companies remain important. journal of business models (2019), vol. 7, no. 2, pp. 53-63 55 customer relationships, customer segments, and channels the aim of the case companies is to create a preventive occupational healthcare service solution, wherein data analytics and available personal data enables the services which can be sold to both public and private sectors, such as pension insurance companies and other public and private healthcare players and work organizations. insurance companies will also become important channels in the future open business environment because they can offer personalized ways to motivate people to improve their daily lifestyle, offering more competitive insurance fees in exchange for healthier habits. in addition, pension insurance companies are important stakeholders even now, as they subsidize the cost of occupational healthcare services for companies. however, the current business model in preventive occupational healthcare is troublesome, because the regulations regarding preventive healthcare hinders its development. for example, the finnish occupational healthcare laws date back to the 1970s; although the finnish centre for pensions now subsidizes for occupational health e-services, it will not compensate for preventive occupational healthcare. this brings challenges in the current business model of health co. “insurance companies and pension insurance companies pay directly to the companies for the services our customer organizations buy from us. that’s how the money flows. --i would like for the companies to pay (for our services) without subsidies. i think we have like a dozen clarifications going on with the finnish centre for pensions regarding our client companies’ subsidies…” –ceo, health co. one possible option to sell the wellness engine solution is approaching the employer organizations abroad. it is a tempting direction of growth because, for example in germany, the business models in occupational health care are different than in finland: insurance companies could become direct clients of occupational healthcare services. “if we would go to german markets, there these insurance companies are the direct customers (of occupational health care), so it’s a whole other business model.” –ceo, health co. potentially, open business environment would enable new customer relationships and roles, new channels and consequently new customer segments. revenue streams the motivation to utilize personal data is widely accepted and the benefits are immense especially in the healthcare sector (hood & flores, 2012; beirão, et al., 2017; ratia, et al., 2018). chesbrough (2007) argues that technologies and data can be commercialized in many ways, which leads to many types of business value. the value of the wellness engine service, for example, means different business value for each of the respective case companies. in the business landscape of the future, in which the data flow will be continuous with the consent of individuals, new types of revenue fees from different players will be important to analyze. initially, the target is to get service fees through direct occupational healthcare service contracts, mainly with work organizations and state enterprises. in the long run, the customer potential is predicted to be in the multi-sided platforms of the personal data -utilizing actors. the value potential of the wellness engine will increase when there will be more end users, and thus, more data sources. when the wellness engine is completed, it could be licensed as a service for other companies’ use, generating even more anonymized raw data, which would make analyses more accurate and valuable. aside from employer organizations and the finnish centre for pensions, the planned revenue for the wellness engine would come from subscription fees or service payments from individual users and private companies. for data co., being the other developer of the wellness engine, it is imperative to discover additional business to be made aside from a steady revenue stream via health co. ”---if you think about data co.’s interests, health co. is a rather small actor. so, if we are to build this wellness engine together, i must think about finding additional business benefits, aside from health co. paying for the use of wellness engine for services. -cto, data co. “in fact, health co. customers’ fees are health co. revenues, but the algorithms and analyzing services of the wellness engine can be used by other journal of business models (2019), vol. 7, no. 2, pp. 53-63 56 organizations aside from health co. customer organizations.” -ceo, health co. of the business model components specifically for revenue streams, potential changes appearing would be new sources of revenues and new services enabled by personal data as a resource. discussion and conclusions the purpose of this study was to explore the potential changes in the business model caused by adopting the mydata approach to gain human-centered personal data as a resource. the results revealed from our analysis are summarized in table 1. the contributions of our paper are two-fold. first: we are contributing to service science (see e.g. spohrer and maglio, 2008; vargo and lusch, 2004; lim, et al., 2017) by discovering and describing the increasingly vital role of the business network, or ecosystem, in using and sharing data. secondly: to the research on open business models, by providing an analysis on the changes the companies articulate in an open business environment (wirtz, et al., 2016; chesbrough, 2006; voelpel, et al., 2004). perhaps the most prominent underlying reason for most changes in the business model components is the importance of the role of the business network, or ecosystem, in the future. this seems to accentuate the convergence of different industries, since in this business network, the healthcare industry, insurance industry and ict are becoming increasingly involved, each providing valuable data to each other with the consent of the individual, in the hopes of creating mutual value. the human-centered personal data management approach is seen as an enabler to create value from various and different sources of data. more importantly, the adoption of mydata approach may help companies comply with regulations and gain new business opportunities via new resources. however, data alone does not bring any value if it is not integrated with customer value through the business model. further still, our study suggests that open business models may be helpful in capturing that value by making it possible to attain resources that are otherwise unavailable. using open source software and data (open business model) and exercising business model in action by presenting the business model to various stakeholders to maximize network-level understanding of the business logic can result in the highest potential value for different stakeholders (saebi & foss, 2015). the earlier discussed industry convergence encourages open business models through technology convergence and through the power of new market entrants, requiring wider business model adjustments. thus, open business models can be used to understand the business opportunities the companies and their business network actors can gain over time by accessing personal data from different sectors. w e found that a co-development partnership (chesbrough & schwartz, 2007) can be an essential building block in a business model because the partnership may provide crucial resources required to utilize personal data: data analysis and management. the aim of business models is to exploit a business opportunity by creating value for parties involved. the re-evaluation of the business model enables the companies and managers to reimagine the limits and potential of data as a resource in their value creation. this is in line with amit and han (2017) who argue that digitalization expands the resources that the companies can use in value creation. our study shows that the use of data as a resource might help involved companies to build value propositions that enable differentiation in their business models. particularly, the results indicate that rich data from different sectors will open new opportunities for companies to create more personalized value propositions. in addition, our study posits that “data begets data”, meaning that personal data used to provide useful information to the customer via data analysis may produce more available data to use further in data analysis, or in further refining value proposition. these data may come from various stakeholders and may benefit all respectively. some authors (casadesus-masarell & ricart, 2010) argue that business models are a set of relations and feedback loops between variables and their consequences, and it is in developing these cycles managers need to focus on. the capability that enables integration of business model among network actors is the ability of the company to establish new technologies as a basis for the innovation. this is a way journal of business models (2019), vol. 7, no. 2, pp. 53-63 57 for the company to attract other companies in the service network to invest resources to the common service creation (chesbrough, 2007). an extensive research is still needed to explore the success factors and barriers of using data to advance service, and the logic of business must be clarified. in addition to adopting the notion of open business models for better data accessibility, companies need to consider the legal and regulatory framework. in fact, from the managerial viewpoint, a crucial issue is the extent in which the two of the company managers can take responsibility of the practical actions required for reacting to the impacts to the business model. the main challenge is that the accessibility and sharing of personal data is mainly dependent of the actions and decisions made by policy makers. as such, institutional collaboration and influencing are important: there are legacy regulations regarding occupational healthcare in finland which hamper the business logic of occupation healthcare services, such as the fact that the finnish centre for pensions does not compensate for preventive occupational healthcare. the study’s methodical strength is in detailed recorded discussions that were done together with the case companies. nonetheless, this single case study is relying on a limited amount of data that was used to explore the potential changes in the business model caused by adopting a human-centered personal data management approach. it is argued that business models cannot be fully anticipated and that they are eventually learned over time through experimentation and trialand-error learning (mcgrath, 2010; sosna, et al., 2010), much like the way business model in action is described to act. while it is inconceivable to anticipate everything regarding the changes in the business model in a rapidly changing technological context, our scenariodriven methodology is rationalistic in its exploration of “optimal” or evolutionary” strategy (van der heijden, 2005). further research, including data from different sectors, e.g., the financial sector, and research focused on the value creation aspect of using data to advance service could strengthen the constructs that have been empirically fleshed out by using the case study. acknowledgment this study was a part of a tekes (finnish funding agency for innovation)-funded digital health revolution (dhr) project, which made collaboration with the case companies possible, allowing us to collect data with several methods such as meetings and workshops. sincere thanks to the active case companies and all the other colleagues from our dhr project. journal of business models (2019), vol. 7, no. 2, pp. 53-63 58 references achtenhagen, l., melin, l. & naldi, l., 2013. dynamics of business models–strategizing, critical capabilities andactivities for sustained value creation. long range planning, 46(-), pp. 427-442. adner, r. & kapoor, r., 2010. value creation in innovation ecosystems: how the structure of technological interdependence affects firm performance in new technology generations. strategic management journal, 31(3), pp. 306-333. al-debei, m. m. & avison, d., 2010. developing a unified framework of the business model concept. european journal of information management systems, 19(3), pp. 359-376. allee, v., 2008. value network analysis and value conversion of tangible and intangible assets. journal of intellectual capital, 9(1), pp. 5-24. amit, r. & han, x., 2017. value creation through novel resource configurations in a digitally enabled world. strategic entrepreneurship journal, 11(3), pp. 228-242. amit, r. & zott, c., 2001. value creation in e-business. strategic management journal, 22(6-7), pp. 493-520. aspara, j., lamberg, j., laukia, a. & tikkanen, h., 2011. strategic management of business model transformation: lessons from nokia. management decision, 49(4), pp. 622-647. baden-fuller, c. & morgan, m., 2010. business models as models. long range planning, volume 43, pp. 156-171. baldwin, g., 2010. consumer-directed health care? yes. consumer-connected? maybe. health data management, 18(6), p. 28. baxter, p. & jack, s., 2008. qualitative case study methodology: study design and methodology for novice researchers. the qualitative report, 13(4), pp. 544-559. beirão, g., patrício, l. & fisk, r. p., 2017. value cocreation in service ecosystems: investigating health care at the micro,meso, and macro levels. journal of service management, 28(2), pp. 227-249. brownlow, j., zaki, m., neely, a. & urmetzer, f., 2015. data-driven business models: a blueprint for innovation, s.l.: s.n. carver, c. & scheier, m., 2001. on the self-regulation of behavior. s.l.:cambridge university press. casadesus-masarell, r. & ricart, j., 2010. from strategy to business models and onto tactics. long range planning, 43(-), pp. 195-215. chesbrough, h., 2006. open business models: how to thrive in the new innovation landscape. london: harvard business school press. chesbrough, h., 2007. business model innovation: it’s not just about technology anymore. strategy and leadership, 35(6), pp. 12-17. chesbrough, h. & schwartz, k., 2007. innovating business models with co-development partnerships. research technology management, 50(1), pp. 55-59. journal of business models (2019), vol. 7, no. 2, pp. 53-63 59 collins, f. s. & varmus, h., 2015. a new initiative on precision medicine. the new england journal of medicine, 26 february.372(9). cooper, a., 1999. the inmates are running the asylum. berichte des german chapter of the acm software-ergonomie, p. 17–17. cordes, c. & dougherty, t., 1993. a review and an integration of research on job burnout. the academy of management review, 18(4), p. 621. ctrl-shift, 2014. personal information management services: an analysis of an emerging market, london, uk: ctrl-shift. doganova, l. & eyquem-renault, m., 2009. what do business models do? innovation devices in technology entrepreneurship. research policy, 38(10), pp. 1559-1570. dubois, a. & gadde, l.-e., 2002. systematic combining: an abductive approach to case research. journal of business research, volume 55, pp. 553-560. dul, j. & hak, t., 2008. case study methodology in business research. amsterdam: butterworth-heinemann. ericsson, 2013. personal information economy: consumers and the evolution of commercial relationships. an ericsson consumer insight summary report, s.l.: s.n. eu information commissioner’s office, 2017a. big data, artificial intelligence, machine learning and data protection, s.l.: ico information commissioner’s office. eu information commissioner’s office, 2017b. preparing for the general data protection regulation (gdpr): 12 steps to take now, s.l.: ico information commissioner’s office. european commission, 2016. the eu data protection reform and big data factsheet 2016. [online] available at: http://ec.europa.eu/justice/data-protection/files/data-protection-big-data_factsheet_web_en.pdf facebook, 2014. facebook annual report 2014. [online] available at: https://s21.q4cdn.com/399680738/files/doc_ financials/annual_reports/fb2014ar.pdf floridi, l. & taddeo, m., 2016. what is data ethics?. phil. trans. r. soc. a, 374(2083), pp. -. frankenberger, k., weiblen, t. & gassmann, o., 2014. the antecedents of open business models: an exploratory study of incumbent firms. r&d manage r&d management, 44(2), p. 173–188. galvagno, m. & dalli, d., 2014. theory of value co-creation: a systematic literature review. managing service quality, 24(6), pp. 643-683. george, g., haas, m. r. & pentland, a., 2014. big data and management. academy of management journal, 57(2), p. 321–326. gerring, j., 2004. what is a case study and what is it good for?. american political science review, 98(2). ghaziani, a. & ventresca, m., 2005. keywords and cultural change: frame analysis of business model public talk, 1975–2000. sociological forum, 20(4), p. 523–559. journal of business models (2019), vol. 7, no. 2, pp. 53-63 60 grönroos, c., 2017. on value and value creation in service: a management pespective. journal of creating value, 3(2), pp. 1-17. grönroos, c. & gummerus, j., 2014. the service revolution and its marketing implications: service logic vs servicedominant logic. managing service quality, 24(3), pp. 206-229. grönroos, c. & voima, p., 2013. critical service logic: making sense of value creation and co-creation. academy of marketing science, volume 41, pp. 133-150. guest, g., 2012. applied thematic analysis. thousand oaks, california: sage. hood, l. & flores, m., 2012. a personal view on systems medicine and the emergence of proactive p4 medicine: predictive, preventive, personalized and participatory. new biotechnology, 29(6), p. 613–624. huhtala, t., 2018. using personal data to advance prevetive healthcare services. journal of service science research, 10(1), pp. 77-115. iivari, m. et al., 2016. toward ecosystemic business models in the context of industrial internet. journal of business models, 4(2), pp. 42-59. kansaneläkelaitos, 2019. omakanta. [online] available at: https://www.kanta.fi/omakanta[accessed 27 5 2019]. keen, p. & qureshi, s., 2006. organizational transformation through business models: a framework for business model design. hawaii, us., proceedings of the 39th hawaii international conference on information sciences. kemppainen, l., koivumäki, t. & saraniemi, s., 2016. human-centered business models for platform operators in personal data management. poznan, poland, 32nd imp-conference. kindström, d., 2010. towards a service-based business model key aspects for future competitive advantage. european management journal, volume 28, pp. 479-490. kish, l. & topol, r., 2015. unpatients –why patients should own their medical data. nature biotechnology, issue 33, pp. 921-924. koivumäki, t. et al., 2017. consumer acceptance of future mydata based preventive ehealth services: an acceptance model and a survey study. journal of medical internet research (forthcoming). lemon, k. n. & verhoef, p. c., 2016. understanding customer experience throughout the customer journey. journal of marketing: ama/msi special issue, 80(nov), p. 69–96. li, i., dey, a. k. & forlizzi, j., 2011. understanding my data, myself: supporting self-reflection with ubicomp technologies. beijing, china, acm new york, ny, usa, pp. 405-414. lim, c. et al., 2017. using data to advance service: managerial issues and theoretical implications from action research. journal of service theory and practice. lim, c. et al., 2018. customer process management: a framework for using customer-related data to create customer value. journal of service management. journal of business models (2019), vol. 7, no. 2, pp. 53-63 61 magretta, j., 2002. why business models matter?. harvard business review, p. 86–92. mason, k. & palo, t., 2012. innovating markets by putting business models to work. rome, proceedings of 28th industrial marketing and purchasing conference.. mcgrath, r., 2010. business model: a discovery driven approach. long range planning, 43(-), pp. 247-261. muegge, s., 2011. business ecosystems as institutions of participation: a systems perspective on community-developed platforms. technology innovation management review, 1(2). mydata alliance, 2017. mydata. [online] available at: https://mydatafi.wordpress.com/ onetti, a., zucchella, a., jones, m. & mcdougall-covin, p., 2010. internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management and governance, 16(3), p. 337–368. osterwalder, a. & pigneur, y., 2010. business model generation. new jersey: john wiley & sons, inc.. otjacques, b., hitzelberger, p. & feltz, f., 2007. interoperability of e-government information systems: issues of identification and data sharing. journal of management information systems, pp. 1557-928x. palo, t. & tähtinen, j., 2011. “a network perspective on business models for emerging technology-based services. journal of business and industrial marketing, 26(5), p. 377–388. peeters, m., montgomery, a., bakker, a. & schaufeli, w., 2005. balancing work and home: how job and home demands are related to burnout. international journal of stress management, 12(1), p. 43–61. pinho, n., beirão, g. & patrício, l., 2014. understanding value co-creation in complex services with many actors. journal of service management, 25(4), pp. 470-493. poikola, a., kuikkaniemi, k. & honko, h., 2014. mydata – a nordic model for human-centered personal data management and processing, helsinki, finland: finnish ministry of transport and communications. porter, m. e. & lee, t. h., 2013. the strategy that will fix health care. harvard business review, october. ratia, m., myllärniemi, j. & helander, n., 2018. the new era of business intelligence: big data potential in the private health care value creation. meditari accountancy research, 26(3), pp. 531-546. redman, t., 2015. information and technology: 4 business models for the data age. [online] available at: https:// hbr.org/2015/05/4-business-models-for-the-data-age robson, c., 2002. real world research: a resource for social scientists and practitioner-researchers (2nd ed.). oxford: blackwell publishing. ryall, m., 2013. the new dynamics of the competition. harvard business review, june. saarijärvi, h., grönroos, c. & kuusela, h., 2014. reverse use of customer data: implications for service-based business models. journal of services marketing, 28(7), pp. 529-537. saebi, t. & foss, n. j., 2015. business models for open innovation: matching heterogeneous open innovation strategies with business model dimensions. european management journal, 33(-), pp. 201-213. journal of business models (2019), vol. 7, no. 2, pp. 53-63 62 shafer, s., smith, h. & linder, j., 2005. the power of business models. business horizons, 48(3), p. 199–207. sosna, m., trevinjo-rodrígues, r. & velamuri, s., 2010. business model innovation through trial-and-error learning: the naturhouse case. long range planning, 43(-), pp. 383-407. spohrer, j. & maglio, p. p., 2008. the emergence of service science: toward systematic service innovations to accelerate co-creation of value. production and operations management, 17(3), pp. 1-9. stake, r., 1995. data gathering. in: the art of case study research. thousand oaks, ca: sage, pp. 49-68. the world health organization, 2008. world health report, s.l.: s.n. u.s. department of commerce, 2017. privacy shield framework. [online] available at: https://www.privacyshield. gov/program-overview[accessed 5 12 2017]. van der heijden, k., 2005. scenarios: the art of strategic conversation. 2nd ed. chichester: john wiley. wang, r., 2012. what a big-data business model looks like. [online] available at: https://hbr.org/2012/12/ what-a-big-data-business-model vargo, s. & lusch, r., 2004. evolving to a new dominant logic for marketing. journal of marketing, 68(1), pp. 1-17. vargo, s., maglio, p. & akaka, m., 2008. on value and value co-creation: a service systems and service logic perspective. european management journal, 26(-), p. 145– 152. weber, r., 2015. the digital future a challenge for privacy?. computer law and security review, volume 31, pp. 234-242. willemstein, l., van der valk, t. & meeus, m., 2007. dynamics in business models: an empirical analysis of medical biotechnology firms in the netherlands. technovation, volume 27, pp. 221-232. wirtz, b., göttel, v. & daiser, p., 2016. business model innovation: development, concept and future research directions. journal of business models, 4(1), pp. 1-28. voelpel, s., leibold, m. & tekie, e., 2004. the wheel of business model reinvention how to reshape your business model to leapfrog competitors. journal of change, 4(3), pp. 259-276. woerner, s. l. & wixom, b. h., 2015. big data: extending the business strategy toolbox. journal of information technology, 30(1), pp. 60-62. yin, r. k., 2009. case study research. s.l.:sage publications, inc.. zott, c. & amit, r., 2010. business model design: an activity system perspective. long range planning, volume 43, pp. 216-226. journal of business models (2019), vol. 7, no. 2, pp. 53-63 63 tero huhtala (corresponding author), oulu business school, university of oulu, tero. huhtala@oulu.fi. tero huhtala is a doctoral student at the oulu business school, university of oulu, finland. his current research interests reside in the study of digitally enabled services and especially in the use of data in advancing services. minna pikkarainen, oulu business school, faculty of medicine, university of oulu; vtt technical research centre of finland. joint professor of connected health in vtt technical research centre of finland and university of oulu / oulu business school, martti ahtisaari institute and faculty of medicine. currently minna is focusing on her research in the data driven service co-creation, innovation orchestration and business models in health and wellbeing sectors. before she was a professor, minna’s research focused on the areas of software development, agile development and service innovation. saila saraniemi, oulu business school, university of oulu. dr. saila saraniemi is a senior lecturer of marketing at oulu business school, university of oulu, finland. her research interests include digitalization and value creation logics of services; corporate, service and place branding and business networks. she has published, among others, in european journal of marketing, industrial marketing management, journal of product and brand management and marketing intelligence and planning. about the authors journal of business models (2019), vol. 7, no. 4, pp. 41-48 45 business model performance: paving the road for comparable data on business models peter thomsen, phd fellow at business design center, aalborg university abstract since the millennium, 14 of the 19 entrants into the fortune 500 owe their success to business model innovations that either transformed existing industries or created new ones (christensen & johnson, 2009). today, and with a good reason, the concept of business models are discussed like never before, while both researchers and practitioners hold the believe that mastering this aspect give way for effective competitive advantages. in line with fielt (2011), we argue however that business models will never advance from concept to actual theory, while definitions and frameworks will remain “early stage” without any feed from more comprehensive and saturated empirical data. through this research we attempt to close the gap of missing available quantitative data on business models, in order to advance from concept to theory and thereby best-pratice. please cite this paper as: thomsen, p. (2019), business model performance: paving the road for comparable data on business models, vol. 7, no. 4, pp. 45-52 keywords: business models, performance measurement introduction business managers might have very different ideas of what truly drives their business. however, a general increased attendance towards the business model as a prominent factor seem to be the case (christensen & johnson, 2009). the basic term business model has a fairly murky past, while historically being associated with various aspects of business management and therefore not leaving a clear definition behind. nonetheless, the recent 20 years of research in business models has helped us to specify and, perhaps more journal of business models (2019), vol. 7, no. 4, pp. 41-48 46 importantly, see the significance when it comes to overall business development and performance. evolving from an indistinct academic notion in the wakes of the dot.com era, the variety of business models today has expanded, and over the past years the term has surged into the strategic management and strategy vocabulary, while spreading across virtually every industry (shafer, smith, & linder, 2005). since the millennium, 14 of the 19 entrants into the fortune 500 owe their success to business model innovations that either transformed existing industries or created new ones (christensen & johnson, 2009). indications therefore point towards business models as being valuable when it comes to business performance and therefore important for companies to understand and measure (montemari and nielsen, 2013; teece, 2010). the field of business models is at the present characterized by a series of concepts, techniques and frameworks for analyzing, communicating, innovating and internationalizing companies and the way they create value (cf. osterwalder & pigneur, 2010; chesbrough 2003; amit & zott 2012; magretta 2002) the popularity of the business model concept seems to be increasing, despite we still seem know so little about them. so far, the majority of research efforts have been directed towards definitions and frameworks while some-what neglecting empirical data. according to fielt (2014) business models cannot yet be perceived as an actual theory due to the vital lack of empirical data. fielt (2014) further refers to the empirical notion of business model archetypes and how these complement the definition and elements by providing a more concrete and realistic understanding of the business model concept. during the early stages of business model research, several researchers attempted to build typologies of business model archetypes based on existing successful businesses e.g. linder and cantrell (2000); rappa (2000); timmer (1998). considering that the majority of these archetypes date back to the early stages of business model research, they still hold a great value today when it comes to understanding and developing business models (fielt, 2014). however, many of the of the appertaining typologies appear some-what inconsistent and fragmented. perhaps this is no surprise, considering when these where originally derived. in recent years a few researchers such as gassman et al. (2014) og taran et al. (2016) have attempted to restructure and build upon these early works on business model archetypes and typologies. while these constitute great improvements in terms of structure and content, they do not provide much detail on frameworks, components and linkages between the individual archetypes. overall, most research on business model archetypes so far appears less systematic and seems to be based on a few selected case examples supporting the narrative of obvious successful business models (fielt 2014; taran et al., 2016). from a hermeneutic standpoint and in line with fielt (2011), we argue that business models will never advance from concept to actual theory, while definitions and frameworks will remain “early stage” without any feed from more comprehensive and saturated empirical data. as a further result, business models will fail to gain ground within general business management, while lacking essential normative properties. this research will attempt to tackle the above-mentioned notions by developing a relational database of business model configurations (archetypes). we intent to develop this on the basis of existing literature and hereby formulate the following research objective: describe and represent business models configurations in a software-based structure in order to build the foundation for subsequent concepts and tools to assess, develop and manage business models. approach when designing a relational database, we gravitate towards information systems. such structures are often associated with high levels of complexity concerning prototyping and testing in consecutive iterations. as a consequence, we decide to lean towards design science and the appertaining methodological considerations. in line with the works of osterwalder (2005), we base this research on the design science research framework provided march and smith (1995) (see figure 1.) journal of business models (2019), vol. 7, no. 4, pp. 41-48 47 march and smith (1995) distinguish between two primary dimensions: research activities and research output. the latter comprises: constructs, models, methods, and instantiation. constructs constitute a conceptualization used to describe problems within the domain and to specify their solutions. a model is a set of propositions or statements expressing relationships among constructs. in design activities, models represent situations as problem and solution statements. to a broad extent, models can be perceived as a description, that is, a representation of how things are. a method is a set of steps (an algorithm or guideline) used to perform a task. methods are based on a set of underlying constructs (language) and a representation (model) of the solution space (nolan, 1973). lastly, an instantiation can be described as the realization of an artefact. when accounting for the research activities, march and smith (1995) highlight build and evaluate as the two main issues in design science. build refers to the construction of the artefact and thereby demonstrating that such an artefact can be constructed. evaluate refers to the development of criteria and the assessment of artefact performance. march and smith (1995) describes how research activities in natural science are parallel: theorize (discover) and justify. theorize refers to the construction of theories that explain how or why something happens, meanwhile justify refers to theory proving. this research will be based on build and evaluate, cf. the objective to describe and represent business models configurations in a software-based structure. we propose a series of steps in order to investigate the research question. it will be necessary to apply a series of different research methods, to study the fields of business model configurations and the individual components of these. this research will therefore adopt a mixed-methods approach, applying both quantitative and qualitative methods. as a consequence, this article must include discussions of the potential problems of mixed-methods research. according to morgan & smircich (1980), the prevailing dichotomy between quantitative and qualitative methods is a rough and oversimplified one. rather, they argue for a more nuanced perspective towards this discussion and conclude that aspects such as the underlying perception of the nature of knowledge, ontological assumptions and assumptions about human nature must be taken into consideration. sale et al. (2002) argue that the paradigms upon which quantitative and qualitative methods respectively are based have different perspectives of reality (cf. burrell & morgan 1979) and therefore constitute different views of the phenomenon under study quantitative and qualitative methods cannot be combined for crossvalidation or triangulation purposes. they do however acknowledge that they can be combined for complementary purposes. the key issues in the quantitative-qualitative debate are ontological and epistemological. quantitative researchers perceive truth as something which describes an objective reality, separate from the observer and waiting figure 1: design science research framework (march and smith, 1995) journal of business models (2019), vol. 7, no. 4, pp. 41-48 48 to be discovered. qualitative researchers are concerned with the changing nature of reality created through people’s experiences – an evolving reality in which the researcher and researched are mutually interactive and inseparable (phillips, 1988). ultimately we argue that at mixed methods approach is best suited for this research, while multiple steps of various purposes will need to be conducted: 1. desk research we apply desk research for analyzing the value drivers (components) of the 71 identified business model configurations identified by taran et al. (2016). based on this, an ontological classification scheme is defined. this enables us to build a relational database containing all 71 configurations and 251 value drivers 2. survey methodology in addition to the database, the intention is to construct a mapping tool, which is essentially a questionnairebased module build to capture company characteristics and match these with the collection of business model configurations. 3. qualitative validation the mapping tool will be continuously developed over multiple iterations by testing and validation through key respondents and focus groups. 4. advanced statistics using the data points from the relational database, statistical techniques such as structural equation modelling, cluster analysis, latent class analysis and systems dynamics are explored for the sake of building inductive empirically based theories of business model configurations and their related performance measures. 5. data collection and testing to test the accuracy and fidelity of the mapping tool we use a mixture of primary sources (e.g. respondent input and interviews) and secondary sources (e.g. annual report, company website, or articles) figure 2. below illustrates the overall system design of what we refer to as the bm quant system, which ultimately allows us to conduct business model assessments by the derivation of business model configuration, value drivers, and other benchmarks. v  figure 2: the bm quant system design journal of business models (2019), vol. 7, no. 4, pp. 41-48 49 key insights, discussion and conclusions contribution to theories of business models it is the ambition, through data collection, to create a comprehensive database of business model configuration mappings. although this potentially paves the road for future concepts and tools, we initially believe the long-term outcome will be a software capable of serving as a platform for generating state-of-the-art contribution to theorizing business models and business model innovation. over time it will be possible to assess how corporations change their business models, how certain business model configurations start to drift to new industries and thereby also whether there are certain business model innovation routes for companies (in certain industries) to take. finally, this knowledge will enable us to create a true business model taxonomy and business model archetypes as called for by groth & nielsen (2015). the concept of business models has not yet been able to establish theoretical grounding in economics or in business and teece (2010) argues that economic theory generally neglects business models because they solve real world problems. the research proposed here shares this perception and believes that the gateway to overcome these challenges is found through a study of reallife business models business model configurations. this can also be perceived as an extensive attempt to quantify business models and thereby develop new associated performance measures. some of the important aspects are the validation and quality of each data point as well as the validation of the financial information, as this helps to insure that benchmarks become as precise and valuable as possible. this function can be supported financially by the parties most interested, like e.g. banks, industryorganisations and government. perhaps companies should even be paid to upload their data? one final, and long-term, vision for the research undertaken here is that it may turn out to become a business model innovation support system for corporate managers. further, the empirical data may even warrant a redefinition of the business model canvas as well as becoming an internationally renowned example of how to use software for business model benchmarking purposes. contribution to theories of benchmarking and performance measurement based on the understanding of value creation from the concept of business models, benchmarking of corporate performance is proposed strengthened through a big data perspective and the use of statistical techniques to generate validated business model configurations and related kpis. the research outlined above also addresses prevailing weaknesses of creating meaningful benchmarking around corporate performance. at this point in time no validated or reliable theory of corporate benchmarking exists, and the idea and conceptualization of benchmarking is therefore left in the hands of the potential user, be it an analyst, a manager or a controller. despite a lack of theory, benchmarking also sometimes denoted as evaluations, assessments or comparative data (behn 2012). in the public sector, behn (2003) has problematized performance benchmarking while benchmarking in the private sector is often related to the beyond budgeting movement (hope and fraser, 2003) and a cluster of literature around budgeting and incentives management. however, the relation to performance often varies and is dependent upon the intentions behind a particular benchmarking exercise (tillema, 2010). the benchmarking literature emphasizes the use of performance measures as an important and continuous source of information for evaluation of services against the best competitors or peers thus providing motivational and managerial effects (behn, 2012). the only problem with this is that, as we have learnt from the business model literature, today there are multiple value creation configurations and business models even in the same industries. therefore, benchmarking with a peer group needs to be controlled for the applied business model configurations in order for anything meaningful to come out of such a comparative exercise. another objective of this research is also to offer a timely critique of the balanced scorecard era multidimensional performance measurement concepts developed over the last 25 years. leading on from this journal of business models (2019), vol. 7, no. 4, pp. 41-48 50 critique, we offer a new way forward for performance measurement identification, validation and benchmarking by expanding upon the bm quant system. this could provide the opportunity for a value driver platform with related clusters of kpis connected to each business model configuration as a starting point for managements choice of kpis, analysis, benchmarking and performance management. a further contribution will be the utilization of software technology and statistically validated algorithms for identifying corporate performance measures. this has long been acknowledged by robert kaplan, one of the founders of the balanced scorecard. the use of advanced statistical methods like systems dynamics, structural equation modelling and latent class analysis together with a database of mapped corporations will make a major contribution to this work (groth & nielsen, 2015). journal of business models (2019), vol. 7, no. 4, pp. 41-48 51 references amit, r. and zott, c. (2012), “creating value through business model innovation”, sloan management review, vol.53 no. 3, pp. 41-49. behn, r. d. (2003), why measure performance? different purposes require different measures. public administration review, 63: 586–606. doi: 10.1111/1540-6210.00322 behn, r. d. (2012). motivating and steering with comparative data. international public management review, 13(1), 21-37. burrell, g. & g. morgan. 1979. sociological paradigms and organizational analysis. heinemann educational books. chesbrough, h.w. (2003), “the era of open innovation”, sloan management review, vol. 44, no. 3, pp. 35-41 christensen, c. m & johnson, m. w. (2009), what are business models, and how are they built, harvard business school module, note 610-019 fielt, e. (2011). understanding business models. business serviece management , 03. fielt, e. (2014), “conceptualising business models: definitions, frameworks and classifications”, journal of business models, vol. 1, no. 1, pp. 85-105. gassmann, o., k. frankenberger, and m. csik. (2014). „the business model navigator”. harlow: pearson. groth, p. & c. nielsen (2015), business model taxonomies: using statistical tools to generate valid and reliable business model taxonomies, journal of business models, vol. 3, no. 1, pp. 4-21. linder, j., & cantrell, s. (2000, may 24). changing business models: surveying the landscape . a working paper from the accenture surveying the landscape . magretta, j. (2002), “why business models matter”, harvard business review, vol. 80, no. 5 may, pp. 86-92. march , s. t. and g. f. smith (1995). “design and natural science research on information technology.” decision support systems 15 (4): 251-266 montemari, m., & nielsen, c. (2013). the role of causal maps in intellectual capital measurement and management. journal of intellectual capital, vol. 14, no. 4, pp. 522-546. morgan, g., & l. smircich. 1980. the case for qualitative research, academy of management review, vol. 5, pp. 491-500. nolan, r. i., managing the computer resources: a stage hypothesis, communications of the acm, vol. 16, no 7, july 1973, pp 399-405 phillips, j.r. 1988. research blenders, nursing science quarterly, vol. 1, pp. 4–5. rappa, m. (2000). www.digitalenterprise.org. retrieved may 15, 2013 from http://digitalenterprise.org/models/ models.html journal of business models (2019), vol. 7, no. 4, pp. 41-48 52 osterwalder, a. (2005). “the business model ontology: a proposition in a design science approach”. university de lausanne. osterwalder, a. and pigneur, y. (2010), “business model generation: a handbook for visionaries, game changers, and challengers”, john wiley & sons sale, j.e.m., l.h. lohfeld & k. brazil. 2002. revisiting the quantitative-qualitative debate: implications for mixedmethods research, quality & quantity, vol. 36, pp. 43–53. shafer, s. m., smith, h. j., & linder, j. c. (2005) “the power of business models”. business horizons, vol. 48, no. 3, pp. 199-207. taran, y., c. nielsen, m. montemari, p. thomsen, and f. paolone. 2016. business model configurations: a five-v framework to map out potential innovation routes. european journal of innovation management 19(4): 492–527. teece, d. j. (2010). business models, business strategy and innovation. i long range planning (årg. 43, s. 172-194). tillema, s. (2010), “public sector benchmarking and performance improvement: what is the link and can it be improved?, public money & management, vol. 30, no. 1, pp. 69–75. timmers, p. (1998). business models for electronic markets. electronic markets , 3-8. journal of business models (2019), vol. 7, no. 3, pp. 12-23 12 online courses on business model innovation for practitioners in smes mark de reuver1, martijn cligge2, and timber haaker3 abstract we develop and evaluate five online courses (moocs) on business model innovation, tailored to small and medium sized enterprises (smes). six design principles are found for such courses: regarding type and form of learning contents; time investments from participants; practical examples and tools; integration with daily practice; and participative learning. please cite this paper as: de reuver, m., cligge, m., and haaker, t. (2019), online courses on business model innovation for practitioners in smes, vol. 7, no. 3, pp. 12-23 keywords: business model innovation; online learning; massive open online courseware 1 delft university of technology 2 it consultant 3 saxion university of applied science acknowledgements: this publication was developed within the project `regeling open en online hoger onderwijs’ of the dutch ministry of education, culture and science, guided by surf (www.surf.nl). the course development received part of its funding from the european community’s horizon 2020 program (2014–2020) under grant agreement 645791. the content herein reflects only the authors’ view. the european commission is not responsible for any use that may be made of the information it contains. we thank the other course team members harry bouwman, gudo reekers, stephan kool, thea dullemans and johannetta gordijn for invaluable contributions to the courses. we also thank our colleagues from the h2020 envision project. an earlier version of this paper was presented to open education global conference 2018, and we thank the reviewers and audience for helpful comments. journal of business models (2019), vol. 7, no. 3, pp. 12-23 13 introduction while knowledge on business model innovation is finding its way from academia to practice, small and medium sized enterprises (smes) are still lagging behind (kesting & günzel-jensen, 2015). for large corporations and high-tech start-ups, business model innovation and tools are becoming a mainstream practice (e.g. luttgens & diener, 2016). this is largely thanks to practical tools that are emerging on the intersection of academia and practice, which make more elaborate ontologies and meta-models accessible (e.g. strategyzer; businessmakeover.eu). yet, small and medium sized businesses (smes) hardly change their business model, and if they do, they hardly follow any structured approaches or methods to do so (bouwman, nikou, molina-castillo & de reuver, 2018). educating smes on business model innovation poses major challenges (see de reuver, athanasopoulou, haaker, roelfsema, riedl & breitfuss, 2016). smes are highly heterogeneous, ranging from start-ups to family firms. education levels, learning styles, abilities and goals of sme owners and managers differ greatly as well. low-tech smes typically have no direct ties to universities and would not look at university training to improve their business. especially small business owners often lack time to study, and are generally happy to survive everyday problems rather than spending time on abstract business models. the aim of this paper is to evaluate whether massive open online courses (moocs) can be a teaching method for bringing business model innovation to sme managers and owners. the main research question is: how to design an accessible mooc on business model innovation for smes with heterogeneous (educational) backgrounds? the paper is based on a large project carried out by the authors in creating five moocs on business model innovation, provided via online learning platform edx (www.edx.org). the moocs aim at understanding, designing, implementing and testing business models in an sme context. the courses provide a background on core concepts, explanation and illustration of tools for business model innovation through real-life cases, and application of learnings to the daily practice of the sme participant. in total, over 70,000 participants adopted the courses over the past two years worldwide, making our project, to the best of our knowledge, the most encompassing and most widely adopted online training focused on business model innovation. our primary contribution is showing how online courses can be a teaching method for business model innovation. we take a design science research approach, which aims to provide prescriptive knowledge on how to design artefacts in order to realize a goal (gregor, 2006). as such, our study provides a set of tested design principles on how to create online learning on business model innovation. a secondary contribution is to open education, as our approach is unique in bringing education that is normally restricted to learners with higher education backgrounds, to practitioners with diverse backgrounds. in this paper, we describe how we developed the courses based on design principles derived from literature review on moocs and smes (section 2.1). next, we illustrate the setup and materials of the course (section 2.2). after that, we use qualitative and quantitative evaluation data to assess the validity of the design principles (section 3). finally, we summarize the lessons learned, generalizations and next steps (section 4). approach design principles underlying the course design to construct our artefact (i.e. 5 moocs on business model innovation), we develop and apply design principles. design principles are testable prescriptive statements on how to do something in order to achieve a goal (gregor, 2006). after constructing the online courses and evaluating the results, we reflect on the validity and utility of the design principles as a means to generalize towards new knowledge (see section 3). moocs in general have been developed since around 2008. hence, we draw upon literature on online learning and moocs in general to derive our design guidelines. in addition, we draw upon exploratory interviews with smes and sme advisers on the specific topic of business model innovation (de reuver et al, 2016). combined, these lead to six design principles, see table 1. design of the online courses the series of moocs consist of five instructor led courses, which were later transformed into self-paced courses. in principle, the courses can be taken in any journal of business models (2019), vol. 7, no. 3, pp. 12-23 14 random order. the series started with a relatively short and simple course, where the main topics of business model innovation were introduced. in subsequent courses the level of difficulty increased by discussing more advanced business model topics and tools1. 1 courses are available via edx, but here we provide the permanent links to the archived courses: https://ocw.tudelft.nl/courses/value-business-models/ https://ocw.tudelft.nl/courses/design-successful-business-model/ https://ocw.tudelft.nl/courses/business-model-testing/ https://ocw.tudelft.nl/courses/business-model-implementation/ https://ocw.tudelft.nl/courses/business-model-metrics advanced-tools/ course 1: the value of business models. an introduction to business model innovation, and for instance the relation between business models and strategy. using a simple card game, participants learn to rethink their business model in a playful way. the course also lays the basis for the follow-up courses. course 2: how to design a successful business model starting from a design thinking approach to business models, participants learn the major ontologies for business model innovation (i.e. canvas, stof, visor) in order to design their business models. in the second part of the course, participants focus on specific issues design principle justification source (1) simplify the material such that business owners with secondary education can comprehend it; since the courses are especially designed for a wide range of different types of smes (including business owners with secondary education) the course should also meet the level of secondary education. adapted from (yousef, chatti, schroeder, & wosnitza, 2014) (2) limit the time to be spent on business model innovation course to 2-4 hours per week so that business owners with a limited amount of available time can still keep up with the course; business owners or other business-oriented stakeholders generally have a limited amount of available time. therefore, the course should consist of small “chunks” which fit within the limited amount of available time. adapted from (moon, birchall, williams, & vrasidas, 2005) (3) provide inspiring examples and intuitive tooling to make the assignments more relatable to the practical own context of business owners. inspiring examples help show what lessons are learned and how more theoretical concepts could be applied in the own context. by having a practical perspective, it becomes easier to refer to the participant’s own workplace and experience. adapted from (margaryan, bianco, & littlejohn, 2015; moon et al., 2005; yousef et al., 2014) (4) use video and images rather than text in order to ensure the understandability of the content for business owners with secondary education; the mooc should offer learners a variety of rich-media to capture their attention. also, it is argued that business owners with secondary education can relate easier to videos and images then comprehensive (scientific) textual articles adapted from (guàrdia, maina, & sangrà, 2013) (5) have the learner apply the tools directly on his/her own business in order to provide immediate value and relevance; learning is promoted when learners apply their newly acquired skill to solve practical problems. it is argued that learning is further promoted when the newly acquired knowledge is applied to solve problems from the own context. furthermore, this will directly show the value of the newly acquired knowledge. adapted from (margaryan et al., 2015; moon et al., 2005) (6) facilitate collaborative learning and sharing of best practices through forum discussions and peer reviews in order to promote learning amongst the business owners. learning involves more than information provision; it requires practice, feedback, and guidance. furthermore, research on collaborative learning states that learning is promoted when learners collaborate, provide and receive feedback on their performance and contribute to collaborative knowledge. adapted from (guàrdia et al., 2013; margaryan et al., 2015; yousef et al., 2014) table 1: design principles for the design of the moocs journal of business models (2019), vol. 7, no. 3, pp. 12-23 15 such as partner involvement and value networks, as well as multi-sided business models course 3: business model testing participants learn to evaluate their business model, for instance in the view of future environmental changes. tools include business model stress-testing (haaker et al 2017) and more generic business case calculations. course 4: business model implementation this course is about moving from a design for a new business model to actually implementing it in practice. for this, students learn tools such as business model roadmapping (de reuver et al 2013). course 5: business model metrics and advanced tools this is the most advanced course, especially suitable for medium-sized firms. topics include the integration of a new business model into the business and enterprise architecture of a firm, as well as agile working and the operating model. also, attention is given to metrics that make explicit the performance of a business model. the courses were bundled in a so-called xseries, see figure 1. structure within each course every course had the same structure; 3-5 main blocks which sorted the main subjects of that particular course, see figure 2. each block contains around 5 sub blocks, comparable to lessons. sub blocks could be an instruction, a case study or an assignment. each sub block consisted of several units. units could be in the form of an introduction video (discussing core concepts and examples), additional knowledge video (e.g. explaining a certain tool for business model innovation), a case video (in which a business owner explained their business and the application of certain tools), an assignment video (example answers of assignments were shown and discussed by the course team), a feedback video (where frequently asked questions of the learners where answered by the course team), explanation or introduction text, case questions, a quiz or a test (assignment). the sequence of units within a sub block usually started with an introduction video and related quiz, and was followed by a case video plus corresponding case assignment, own company assignment and finally a feedback video. assessments ranged from self-assessment to peer review. participants could ask questions and interact via a discussion forum. teaching assistants monitored the discussion forum. videos were recorded in a professional studio. video clips were typically less than 6 minutes. all videos and cases were provided in english and subtitled. subtitles were translated into german, spanish, italian and french, assuming that smes would appreciate the figure 1: xseries program as it was advertised. figure 2: structure of a typical course journal of business models (2019), vol. 7, no. 3, pp. 12-23 16 contents in their own language. a screenshot of a video is provided in figure 3. during the first year of giving the courses, three webinars were provided as well. the webinars were live discussions in a professional studio with the lecturers and with business owners. through the webinars, tools were explained, and questions from participants were answered in a livestream. key insights in this paper, we base the evaluation on the first three of the five courses. in the time between launching the first course (fall-2016) and now (fall-2018), the three courses attracted 20,000, 24,000 and 10,000 participants respectively. promotion was created through the existing edx channels (e.g. newsletters). a professional youtube trailer was created. in addition, we went through over 30 sme organizations across europe (e.g. chambers of commerce, business associations) giving those flyers and promotional messages. participants were also attracted through an ongoing european project in which the tools were being developed, led by an external partner specialized in communication. one method particularly successful were facebook campaigns tied to the webinars, with some promoted messages receiving over 1,000 likes. around 1-2% of all participants purchase a certificate upon completion of the course. these figures are similar to other online courses provided through the edx platform. evaluation approach two data sources were used to collect evaluation data of the course. a first source of data collection were the standard surveys as developed by the learning centre of the tu delft (these surveys are available on request). at the beginning, in the middle and at the end of each course, respectively a pre-, midand post-evaluation survey was sent to the learners. these extensive surveys collected data on the background of each learner, and asked the learners a set of open and closed questions on several aspects such as their comprehension of the course, the workload of the course and the clarity of instruction texts and videos. learners were not obliged to fill in the surveys, nor were they obliged to answer every question of each survey. therefore, the number of respondents differs per survey and per question of each survey. in total, over 103 respondents have filled in the surveys. some learners provided their opinion on the course on the forum, figure 3: screenshot of online learning video journal of business models (2019), vol. 7, no. 3, pp. 12-23 17 while others spontaneously sent e-mails to the course team, in which they provided and explained their opinion of the course. therefore, a second source for data collection was the forum discussions and e-mails the course team received from the learners. the combination of the results of openand closed evaluation questions were used to assess whether the previously discussed design principles were fulfilled. qualitative analysis was used to structure and summarize the answers to the open questions of the surveys, while quantitative analysis was used to analyse the answers to the closed questions, where often a likert scale was used to collect the answers. for the qualitative analysis, three-level coding was used, where the higher-order levelone codes comprised of the main open-question. the level-two codes comprised overarching themes (such as several different quotes on the videos of the course) and the level-three codes comprised of more detailed quotes (such as comments on the quality of the videos of the course). an example of a coding network for the mid-survey for an openquestion of the first course can be seen in figure 4. after the coding process was completed, relevant codes (i.e. codes that could be linked to the previously discussed design principles) were sorted on the design principles. for example, codes comprising of quotes on the comprehension of the videos, assignments quizzes etc. were assigned to the first design principle, which states that the course should also be understandable for business owners with secondary education. after the codes were sorted on the design principles, for each design principle, quotes were selected which could be used as evidence if a certain design principle was fulfilled or not. evaluation results design principle 1 most learners state that the courses are simple to follow and that the course material is clear and understandable. less than 10% of participants found the courses too difficult. “the combination of videos, quizzes and assignments make the course dynamic and enjoyable” some learners state that the course is too easy compared to other courses on the edx platform. in contrast, some learners acknowledge that the course is relatively simple and basic, but that this is not a problem; it is just a mooc that facilitates basic knowledge on business model innovation. several learners asked for more challenge and materials: “the content was just a short overview. i hoped for some more insights. background lessons were short [...] i was looking for some more instructions – how and why does it work.” figure 4: example of coding network for qualitative evaluation data journal of business models (2019), vol. 7, no. 3, pp. 12-23 18 for every course 35%-40% of the participants have a bachelor’s degree and 30%-35% a master’s degree, whereas 15% has only secondary education. these figures make it difficult to determine which type of learners was able to follow the courses easily. if around 60%-70% of the learners were able to follow the course easily (and sometimes even stating that the course was too easy) but had higher education, design principle one is not or only partly met. nonetheless, the percentage of students that felt that the courses were too difficult is for all courses lower than 10%. as suggestion for improvement, some learners state that the course also should include quizzes and assignments that are especially developed for more advanced learners. it might be a solution to still include some assignments with a more scientific perspective for learners who want to dive deeper into the concepts of business model innovation. based on these findings, we slightly adapt the design principle: design principle 1a: simplify the material such that business owners with secondary education can comprehend it design principle 1b: offer additional materials as an optional add-on such that advanced learners find sufficient depth in the course design principle 2 evaluation results show that, by splitting up the courses in small chunks, learners are still able to finish the courses in their limited amount of available time. generally, there are not many learners that indicated they did not have enough time to finish the course. learners on average felt that they had more hours available than they were expected to use in the course. in other words, learners that felt that the course was about right in terms of workload and duration. while most learners are nonetheless still able to finish the courses, they tend to neglect to participate in the forum discussions when they do not have enough time. there are some leaners who acknowledge the benefit of the increased flexibility of following an online course, however, other learners complain about the strict deadlines of the assignments and quizzes. they state that the strict deadlines do not fit in their daily agendas due to for example unexpected changes of available time, which is something that occurs regularly as a business owner. this is illustrated by the following quotes. “i missed out a deadline due to an unplanned business travel. it is totally understandable that the assignment is closed [...] however, for working people it would helpful to get a second chance.” future moocs that are developed for sme’s could allow for a one-time postponement of the deadlines to meet the dynamic agendas of business owners. in addition, a notification or reminder system should help remember busy business owners to finish assignments in time. based on these findings, we slightly adapt our design principle design principle 2a: limit the time to be spent on business model innovation course to 2-4 hours per week so that business owners with a limited amount of available time can still keep up with the course design principle 2b: make deadlines flexible such that business owners with an unpredictable time schedule can keep up with the course design principle 3 evaluation shows that practical tools and case examples that fit sme’s own context help learners to perceive the value of newly acquired knowledge. the tools, case studies and real-life examples are much appreciated by most learners. according to the learners, the combination of theory explanation and theory application through quizzes, assignments and interviews with real-life business owners in the case studies results in set of courses that has a very practical approach to learning. the tools participants like most are both creative brainstorming tools (i.e. business model card game, thinking hats) and quantitative tools (i.e. business model metrics). some learners state that they will use the tools in their daily work from now on. the tools and frameworks of the course support this practical approach, by making it easier to apply the business model innovation concepts from theory to practice and the own context. “i like to reflect my learning against practice. actually working tools and frameworks are a really useful addition for this!” journal of business models (2019), vol. 7, no. 3, pp. 12-23 19 no concrete suggestions were provided by the learners to improve the design of the moocs on this aspect. again, a finding is that in the evaluation surveys, participants ask for more: more cases and more tools, even though each mooc contained between 3 and 5 cases, and between 3 and 6 unique tools. based on this supporting evidence, we retain our design principle: design principle 3: provide inspiring examples and intuitive tooling to make the assignments more relatable to the practical own context of business owners. design principle 4 videos and images make it easier for learners to acquire knowledge in a rather short period of time. learners with a secondary education can relate well with visual formats. besides some specific complaints on the audio or video quality of some video lectures, the videos lectures are generally evaluated positively by the learners. the videos are perceived as short and concise. learners appreciate the instruction and assignment videos, stating that it is easy to follow and helps them understand the concepts of business model innovation. “the instruction videos are very clear, which is important to help us understand the concepts of business models and how to apply it to our own company.” one specific group of learners state that merely video and images do not meet their demands. therefore, future moocs for sme’s can include additional (scientific) readings to meet these demands. as suggestion for improvement learners state that more visuals (i.e. images or diagrams) could be incorporated in the videos. also, a different setting for video recordings is suggested, such as video recordings on location of the interview for the case study videos. (in later stages of the course, some videos were recorded at the location of the interview). based on these findings, we adapt our design principle: design principle 4a: use video and images rather than text in order to ensure the understandability of the content for business owners with secondary education; design principle 4b: provide additional learning resources in the form of (scientific) readings to meet the needs of advanced learners design principle 5 learners frequently mention the applicability of the course material to the own context. they state that the tools and frameworks force them to think about their own business models, and that it gives them new insights into how they could improve their business model. the tools from the businessovermaker.eu platform give learners possibilities to reflect on their current business model and to highlight important areas for improvement. this demonstrates them how they could use these tools in practice, which should show the immediate value and relevance of the newly acquired knowledge. “it really stimulated to work on my own business model” some learners acknowledge the immediate value and state that they might use the available tools in their daily job from now on. in light of the supporting evidence found, we retain our design principle: design principle 5: have the learner apply the tools directly on his/her own business in order to provide immediate value and relevance; design principle 6 learners often positively mention the value of reflective learning from peers through the peer assessments assignments. whereas we were first hesitant to ask practitioners to share their business model ideas due to confidentiality concerns, in practice most participants are willing to do so. in addition to this, the forum discussions allow them to have discussions with peers on the topics as discussed in the lectures. “the peer review is an excellent idea and helpful to see/ read how others view my business idea” as first suggestion for improvement, most learners state that for the peer assignments a quality control system should be implemented. this quality control system should guarantee more sufficient and detailed feedback from peers, while this is currently lacking in some cases. this system could give for example additional points to peer reviewers who give detailed and comprehensive feedback to their peers. second, learners state that the forum discussions are sometimes difficult to follow, due to a lack of form structure and journal of business models (2019), vol. 7, no. 3, pp. 12-23 20 organization. based on the largely supporting evidence, we retain our design principle: design principle 6: facilitate collaborative learning and sharing of best practices through forum discussions and peer reviews in order to promote learning amongst the business owners. discussion and conclusion this paper demonstrated how open online courses can contribute in transferring academic knowledge on business model innovation to practitioners. we developed, tested and refined six design principles for business model innovation courses. we found that the initial design principles were useful in creating courses that are overall well appreciated by participants, and that are especially well accessible to sme managers and owners on diverse education levels. our evaluation results do point out that there is also a need to offer more advanced, academic learning materials for those learners that are more advanced or looking for more challenge. in terms of generalization, we must reflect on the enabling conditions that we had while developing online courses on this scale. the development took place within a larger research program on business model innovation, funded by the eu, through which access to tools and cases was abundant. we also had access to an existing mooc delivery platform (i.e. edx) with an existing base of users looking for online courses. further, having a professional studio and video production process is a prerequisite. even having these conditions, considerable efforts were needed. we had a course team comprising three lecturers, four teaching assistants and one educational advisor. over the course of 15 months, around 1000 hours by the three lecturers have been invested in designing and creating the courses, and likely another 1000-1500 hours by teaching assistants in preparing materials and running the online course. these figures do not even include the resources for translating subtitles in four different languages, which were outsourced to a professional agency. a tight project management approach is needed to produce and deliver course materials in time and with a consistent quality. in our project, next steps are currently ongoing. the mooc environment has been archived, and a new version of the online learning courses has been created, in a so-called professional certificate program (pcp). as the contents of the pcp courses are largely the same, this is a textbook example of the business model pattern `versioning’. the value proposition of a pcp is, besides online learning, that this will boost the career of the participant. main changes are that (1) the price of a certificate is increased to 99 euros per course; (2) recommendations from businesses have been added on the course homepage to showcase the impact of participating in the course on career in business; (3) grading and giving feedback for a selection of the assignments by the course team. another opportunity we are exploring is how to use the online courseware in a research program on business model innovation and tooling. for this, we are experimenting with having online course participants use one of the tools being developed in a phd project, including a formal preand post-questionnaire to measure the impact of the tool on understanding of business models and idea generation. methodological issues are still to be explored, especially as, compared to a controlled experiment, the researcher has little influence on who uses the tool in what context. journal of business models (2019), vol. 7, no. 3, pp. 12-23 21 references bouwman, h., nikou, s., molina-castillo, f. j., & de reuver, m. (2018). the impact of digitalization on business models. digital policy, regulation and governance, 20(2), 105-124. de reuver, m., bouwman, h., & haaker, t. (2013). business model roadmapping: a practical approach to come from an existing to a desired business model, international journal of innovation management 17(01), 1340006. de reuver, m., athanasopoulou, a., haaker, t., roelfsema, m., riedl, a., & breitfuss, g. (2016). designing an ict tooling platform to support sme business model innovation: results of a first design cycle. in proceedings of the bled econference, bled slovenia. haaker, t. bouwman, h., janssen, w., & de reuver, m. (2017). business model stress testing: a practical approach to test the robustness of a business model, futures 89 (2017) 14–25. daradoumis, t., bassi, r., xhafa, f., & caballé, s. (2013). a review on massive e-learning (mooc) design, delivery and assessment. paper presented at the p2p, parallel, grid, cloud and internet computing (3pgcic), 2013 eighth international conference on. gregor, s. (2006). the nature of theory in information systems. mis quarterly, 611-642. guàrdia, l., maina, m., & sangrà, a. (2013). mooc design principles: a pedagogical approach from the learner’s perspective. elearning papers(33). kesting, p., & günzel-jensen, f. (2015). smes and new ventures need business model sophistication. business horizons, 58(3), 285-293. lüttgens, d., & diener, k. (2016). business model patterns used as a tool for creating (new) innovative business models. journal of business models, 4(3). margaryan, a., bianco, m., & littlejohn, a. (2015). instructional quality of massive open online courses (moocs). computers & education, 80, 77-83. moon, s., birchall, d., williams, s., & vrasidas, c. (2005). developing design principles for an e-learning programme for sme managers to support accelerated learning at the workplace. journal of workplace learning, 17(5/6), 370-384. siemens, g. (2013). massive open online courses: innovation in education. open educational resources: innovation, research and practice, 5, 5-15. yousef, a. m. f., chatti, m. a., schroeder, u., & wosnitza, m. (2014). what drives a successful mooc? an empirical examination of criteria to assure design quality of moocs. paper presented at the advanced learning technologies (icalt), 2014 ieee 14th international conference on. journal of business models (2019), vol. 7, no. 3, pp. 12-23 22 dr ir mark de reuver is associate professor at delft university of technology, department engineering systems and services. his research focuses on digital platforms, ecosystems and business models. he has been co-coordinator for the h2020 project envision (www.businessmakeover.eu) aimed at developing online tooling for business model innovation by smes. he is associate editor for electronic markets and telematics & informatics, and published in journals including journal of information technology, journal of business research, technological forecasting and social change, and information & management. martijn cligge was a student at the delft university of technology, where he received his master’s degree in systems engineering, policy analysis and management with a focus on it. he was part of the business model innovation team as a student assistant. next to that, he wrote his master  thesis on business model innovation and implementation in networked enterprises. currently, he is an it consultant, involved in large scale erp (it) implementation projects. about the authors journal of business models (2019), vol. 7, no. 3, pp. 12-23 23 dr.ir. timber haaker is a professor of business models in the school of finance and accounting at saxion university of applied science in the netherlands, where he leads the research group business models. he holds a phd in applied mathematics. he has about 20 years experience in researching, teaching and applying business models, both in industry and academia, and published extensively in books and papers. his current research interests include new business models, i.e. digital business models, data driven business models and sustainable business models, and developing practical yet grounded methods and tools to support business model innovation. he is co-developer of a series of moocs on business model innovation for smes (https://bit.ly/2kf5srw). about the authors journal of business models (2019), vol. 7, no. 4, pp. 59-65 59 anthropological interpretation of the business model: myth, institutionalization and sharing thierry verstraete1 estèle jouison2 1full professor, iae bordeaux, university school of management – bordeaux university entrepreneurship research team irgo (institut de recherche en gestion des organisations) – director of the grp lab (social innovation center) from the idex bordeaux university http://grp-lab.com/ thierry.verstraete@u-bordeaux.fr 2professor, iut bordeaux – département techniques de commercialization – bordeaux university member of the entrepreneurship research team, irgo estele.jouison-laffitte@u-bordeaux.fr abstract using an anthropological interpretation, this essay presents the business model as a myth that has been institutionalized by a collective group of stakeholders. the myth allows them to become coordinated, especially when their number increases. what brings them all together is shared values and/or value-sharing. please cite this paper as: verstraete, t. and jouison, e. (2019), anthropological interpretation of the business model: myth, institutionalization and sharing, vol. 7, no. 4, pp. 59-65 keywords: business model, anthropology, value sharing introduction this essay offers an anthropological interpretation of the business model (bm) in the context of business creation. by referring to resource-based approaches (penrose, 1959; pfeffer and salancik, 1978; wernerfelt, 1984...) and stakeholder approaches (barnard, 1938; freeman, 1984; ...) within the paradigm of organizational emergence in entrepreneurship (gartner, 1995; verstraete, 2005; ...), business creation can be seen as the crystallization of both tangible and intangible resources provided by stakeholders, who expect compensation for their contribution to a dynamic launched by an entrepreneur (or several individuals who form an entrepreneurial team). the resulting coordination between them requires two prerequisites for the enterprise to become institutionalized: intelligibility and belief. journal of business models (2019), vol. 7, no. 4, pp. 59-65 60 intelligibility is essential for organization to emerge because it is most unlikely that potential partners will put up the necessary resources for a project if they do not understand it. the concept of bm appeared in the context of internet start-ups, when partners demanded intelligibility from entrepreneurs. the novelty of the media, the related narrative and the profile of the creators justified the demand. this demanding approach from potential partners shows that the intelligibility of any project is nurtured by discussion in which the entrepreneur is the mediator, the spokesman and one could even say the conductor of an act that is sometimes partly improvised. belief derives from intelligibility in the sense that if the project is properly understood, one must believe in it to commit to it. in fact, since a project is constructed collectively, intelligibility and belief combine to produce a conviction about an artifact, the bm, which is the myth by which representations are constructed and shared. in order to make these business representations accessible, the bm must be able to be understood as an icon, particularly in terms of its components (verstraete and jouison, 2009, 2011; osterwalder and pigneur, 2010; demil and lecocq, 2010). the bm can thus be understood through an anthropological interpretation that throws light on how a group of stakeholders get together and commit to a project. for believers who do not necessarily know each other, the project is led by an entrepreneur who embodies the myth of the bm and who communicates the myth through a rite of passage: the pitch. the pitch takes on a sort of messianic dimension that consists in proposing a more or less new order (or innovation if novelty is the key element). in most modern societies, this movement must be institutionalized, including in the legal sense of the word, so that responsibilities and ownership are recognized, with an increasing requirement for the sharing of the value created or the shared values. approach the business model: a myth for coordinating a set of resources and partners to create the business project harari’s best-seller (2011) posits that the grouping together of a large number of individuals is a human specificity that led sapiens to dominate other species. within imagination, myths combine beliefs in a natural order, they shape desires that arise from the meeting of two ideologies (romantic and consumerist) to create a “market of experiences” and myths create inter-subjectivity that makes coordination all the more durable as the network comprises many individuals. myths are fundamentally linked to a belief that conveys a message. they may be distinguished from legends (that have a historical dimension) and tales (that involve fictional content). all three constitute pure types whose variations are the subject of debate (pottier, 2012). in fact, finding a definition that covers all types and functions of myths is rather elusive (eliade, 1963). according to levi-strauss (cf. the mythologiques tetralogy: 1964, 1966, 1968, 1971), a myth recounts an origin, a present and a future by bringing together in a global narrative the answers to the singular problems of the space concerned, and sometimes goes beyond it when it is the prism through which everything is observed. in structuralist or even systemic thinking, myths allow speculation so that the order of the whole is maintained despite the difficulties that might be encountered more locally. a myth is a story that a community believes in regarding the origin, (here, the origin of the project), explaining things as they are and as they will evolve by implementing an expected strategy. we will limit ourselves to this conception, notwithstanding the fact that myths also present differences (cf. pottier, 2012) according to whether they concern an ultimate future (eschatological myths), include a political dimension whereby the current order is challenged (messianic myths) or legitimized (dynastic myths), or establish a social contract (philosophical myths). if the bm is a myth, then stakeholders may be seen as believers, including scholars who have understood the project, followers who are prone to mimicry, grailseekers (sometimes “unicorn”-seekers), and opportunists, etc. they are brought together by a message whose intelligibility concerns both to the project itself (its origin, its present and the conjecture that the myth allows) and the meaning of their sphere of action. the latter restricts their representation, in that their frame of reference allows them to see the elements that legitimize or prohibit the narrative. this frame of reference is part conventions that influence their behavior, particularly in situations of uncertainty, where their journal of business models (2019), vol. 7, no. 4, pp. 59-65 61 action is influenced by their idea of how another individual in their community would behave if placed in the same situation. the institutionalization of the myth through the emergence of a convention the conventionalist perspective is based on an institutionalist theory that takes its source in a 1989 special issue of the “revue economique”. although it was mainly developed by economists and sociologists, it has philosophical underpinnings. for example, dupréel (1925) claims the following: “the convention establishes a correspondence between its authors, creates agreement, ensures that the combination of their conduct, instead of being a sum of disparate elements, constitutes an organized whole, in fact a unified activity. this is the essence of the convention: it coordinates a series of activities, involving material facts and psychological conditions, into a single common rule that also determines the conduct or attitude of the participants. “(p. 285 and 286). however, the latter must know what to do in a situation of uncertainty, as in the case of an ex-nihilo company creation. to this end, “within each social space (a sports club, a company, etc.), there are perceptible criteria that allow a newcomer to understand it and behave in accordance with the systems on which this particular social universe is based.” (verstraete, jouison and néraudau, 2018, p.97). the conventionalist perspective can shed light on the institutionalization of the myth insofar as it applies a symbolic structure to a rational void. according to gomez and jones (2000) it thus corresponds to levi-strauss’ definition of structure. starting from an idea, i.e. the original concept, the bm is built from the entrepreneur’s interactions with the owners of the resources necessary to the project. it is therefore essential to create value for the protagonists in exchange for the value they bring. in ethical entrepreneurship, this initial exchange becomes a form of sharing when the project is sufficiently rewarded/remunerated by a market, whether this is expressed by customers or by beneficiaries in the case of a non-profit project. key insights sharing value remuneration by the market is a form of reward for the value provided to it. it may be seen in quantitative terms (e.g. a company’s turnover) but also qualitatively, e.g. user satisfaction, quality of relationships, memberships, etc. this also applies to entrepreneurial projects in the associative sector, in social economy and, more generally, social entrepreneurship, where most projects do not have shareholder governance. value goes beyond the archetype of the entrepreneurial phenomenon, i.e. company creation, as it also concerns intrapreneurial projects, company takeovers, etc. value sharing thus consists first and foremost in optimizing relationships with partners by sharing both quantitative and qualitative gains/benefits. (a question arises when there is a deficit or a loss. since they have taken greater risks, the answers provided often serve as arguments for the initiators of the project to reap greater reward in case of success.) the genesis of the stakeholder theory is part of an ethical approach (freeman, 1984) warning about the vagaries of capitalism that may occur when the management of a company is driven solely by the quest for financial benefit on the invested capital. the idea here is not to give in to a political ideology on how to distribute wealth, but to consider that sharing the created value is the core of the relationships that a company should strive to maintain with its partners in order to be sustainable and profitable. this perspective is in line with the concept of corporate social responsibility, which directly questions value-sharing (porter and kramer, 2011), particularly when a company wishes to correct any negative influences it may have on society. societal issues affect companies because they are responsible for certain social ills. the aim is thus to eliminate these negative influences whenever they occur. corporate governance tends to reject the shareholder perspective and proposes “a definition and measurement of the created value, in line with the firm’s pluralist vision, allowing a better understanding of the mechanisms for creating and sharing value in relation to corporate governance theory” (charreaux and desbrières, 1998, p. 73). this “value-sharing” dimension is explicitly included in certain bm concepts, for example when it is defined as follows: “a convention for the generation, the remuneration and the sharing of value” (verstraete, jouison-laffitte, 2011b, p.42). within the sharing of value dimension, the authors identify three components (like the other two dimensions of their model): stakeholders, conventions and the ecosystem, each participating journal of business models (2019), vol. 7, no. 4, pp. 59-65 62 in the emergence of the myth of which the bm is held to be a representation (cf. appendix 1). from the interweaving of myths to the rite of passage of the start-upper: the pitch a venture capitalist draws on the conventional register of his profession to define his attitude towards the start-up, but he also learns as it progresses. using the benchmarks he is familiar with, he evaluates the entrepreneur (his behavior, narrative, track record, etc.) and weighs up the financial forecasts (the method used to estimate turnover, the ability to produce it, the compliance with accounting standards, etc.). conventions that are specific to the venture capital business are part of the bm, since ignoring them could lead the partner to abandon the project1. this integration of partners’ conventions to the project is not only a sign of empathy but also a sign of respect for the customs and practices of the stakeholders. it allows the subject to be fully understood by the other party and contributes to the interweaving of myths, whether in written 1 while this applies to projects involving venture capital, the principle applies to all project partners to a differing degree depending on the power of the stakeholder. or oral form. it is also multiform, because the purpose varies according to the audience and the moment in time (tétu, 2015). the myth is apparent in both the oral form that conveys it and the written form that gives it its initial substance. in addition to its theoretical, analytical and referential underpinnings, the myth comprises content that the layman studies, judges and eventually supports by demonstrating his understanding of and belief in the project. only then is he likely to provide the tangible or intangible resources that are requested of him. as a written support, the business plan plays this very role. the pitch has become the oral “rite of passage”. rituals are “incarnate devices, whose performative nature creates communities and allows them to resolve their conflicts. through ritual action, institutions demonstrate their objectives, values and social norms. practical ritual knowledge is thus created and constitutes a presupposition of the performativity of the ritual action. this knowledge indicates how to behave appropriately within institutions... insofar as they are staged and body representations, rituals generally carry more weight than simple speeches.” (wulf, gabriel, 2005, p.11). therefore, the pitch may be seen as an incarnate utterance offered to observers, i.e. possible appendix 1 : the 3 dimensions and 9 components of the bm grp journal of business models (2019), vol. 7, no. 4, pp. 59-65 63 stakeholders. through rituals, “the human being showcases himself, sets the scene for his relationship with others and creates social interaction.” (ibid. p. 12). the pitch is a rite of value sharing or, rather, of sharing values (hatchuel, 2005). discussion and conclusions: value is the grail it is on this note that we conclude this essay, because the intelligibility, belief and institutionalization of a project take on their full meaning in the mythical dimension of the bm and, during its ritual presentation, in the promise to share value(s) with stakeholders who come from various ecosystems and who are used to multiple conventions (inherent to their profession, the territory of the project, etc.). stakeholders who have become coordinated will doubtlessly be more or less respectful of the “text”, i.e. their commitment in return for the promise made to them. the term ‘value’ with all its different meanings (object of exchange, desire, tendencies, reference... comte-sponville, 1998) is the cornerstone of many definitions of the bm (amit and zott, 2001; chesbrough and rosembloom, 2002; magretta, 2002; betz, 2002; voelpel et al. 2001; verstraete and jouison-laffitte, 2009; demil and lecocq, 2010; baden-fuller and morgan, 2010...). the sharing of value(s) does not simply consist in taking the profits made by a company and sharing them among stakeholders. when it makes profit, a company can of course distribute dividends to shareholders and bonuses or salary increases to its employees. our idea is not to exclude these possibilities from the notion of valuesharing, but to incorporate the notion of the rewards expected by the other partners (customers, suppliers, etc...) and more generally by the ecosystem in which the project goes hand in hand with (symbiosis). these rewards are expressed in quantitative and/or qualitative terms and may include emotional dimensions. this is often the case when a bm is conceived for a project whose purpose is not financial, e.g. in the context of a non-profit association or a public service. while our experience shows that the bm is useful for this type of project, it should be noted that the very presence of the word “business” in the expression is an issue for some actors of these projects. our contention is that the bm is in fact a model of creation, remuneration and sharing of value or even shared values. this refers to a more ecological conception of entrepreneurship, an issue discussed elsewhere (refs). the myth can be seen as the narrative of what becomes convention. this convention institutionalizes the myth by inscribing it in normative registers overhanging the behavior of the actors of a social space. this inscription is done as and when, the convention being modified by the exchanges established with the parties met. on this basis, here, in reference to the levels proposed by massa and tucci (2014), the bm is a narrative, whose pitch is a rite of passage leading to its formulation and dissemination, this narration can be based on iconic representations (cf. bm grp of verstraete and jouison, 2009, 2011; cf. bm canvas of osterwalder and pigneur, 2010). those representations link this first level (narrative) to another called the specified graphical framework. it will be interesting to take some famous bm to submit them to the anthropological reading proposed in this essay. journal of business models (2019), vol. 7, no. 4, pp. 59-65 64 references amit, r., zott, c. (2001). value creation in e-business, strategic management journal, 22(6-7), p.493-520 baden-fuller c., morgan, m. s. (2010). business models as models. long range planning, 43(2-3), 156-171 betz f. (2002). strategic business models. engineering management journal, 14(1), p.21-27. chesbrough h., rosenbloom r. s. (2002). the role of business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change, 11(3), p.529-555 comte-sponville, a. (1998). philosophie de la valeur. actes des xivèmes journées nationales des i.a.e. nantes, 15-26 demil b., lecocq x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, 43(2-3), p.227-246. eliade m. (1963), aspects du mythe, paris, gallimard harari y.n. (2011). sapiens – a brief history of humankind, harvill secker, random house, london gartner w.b. (1995). “aspects of organizational emergence”, in bull, i ; tomas, h ; willard g. (dir.), entrepreneurship : perspectives on theory building. new york, pergamon, p.67-89 gomez p.-y., jones b.c. (2000), conventions: an interpretation of deep structure in organizations, organization science, 11(6), p.696-708 hatchel f. (2005), rituels d’enseignement et d’apprentissage, dans wulf, c. ; gabriel, n. (2005), rituels. performativité et dynamique des pratiques sociales, hermès, la revue, 43(3), cnrs editions p.93-100 levi-strauss c. mythologiques, paris, plon mythologiques i : le cru et le cuit (1964) mythologiques ii : du miel aux cendres (1966) mythologiques iii : l’origine des manières de la table (1968) mythologiques iv : l’homme nu (1971) penrose e. (1959). the theory of the growth of the firm, oxford: basil blackwell pfeffer j., salancik g.r. (1978). the external control of organizations: a resource dependence perspective, new york, ny, harper and row. magretta j. (2002). why business models matter ». harvard business review, 80(5), p.86-92 massa l., tucci c. (2014). “business model innovation”, in the oxford handbook of innovation management, dodgson, m., gann, d., & phillips, n. (eds.), oxford university press (p.420-441) porter m.e., kramer m.r. (2011). creating shared value, harvard business review, 89(1/2), p62-77 pottier r. (2012). 1. le mythe d’origine, in pottier, r. anthropologie du mythe 2. ancêtres et fondateurs de dynastie dans la mythologie lao, paris, editions kimé, anthropologie, p.9-23 journal of business models (2019), vol. 7, no. 4, pp. 59-65 65 tétu j.-f. (2015). jack goody, mythe, rite et oralité note de lecture », questions de communication, 28, p.311-314 verstraete t. (2005). proposal for a theorical framework for research in entrepreneurship, les editions de l’adreg verstraete t., jouison-laffitte e. (2011a). a conventionalist theory of the business model in the context of business creation for understanding organizational impetus, management international, 15(2), p.109-124 verstraete t., jouison-laffitte e. (2011b). business model for entrepreneurship, edward elgar (traduction de verstraete, t. ; jouison-laffitte, e. (2009). business model pour entreprendre, de boeck) voelpel s.c., leibold m., tekie e.b. (2004). the wheel of business modelreinvention: how to reshapeyour business model toleapfrog competitors ». journal of change management, 4(3), p.259-276 wernerfelt b. (1984). a resource-based view of the firm, strategic management journal, vol.5, n°2, 171-180 wulf c., gabriel n. (2005), rituels. performativité et dynamique des pratiques sociales, hermès, la revue, 43(3), cnrs editions p.9-20 journal of business models (2021), vol. 9, no. 3, pp. 8-16 8 on the back of a beer coaster – simple estimates for costs and revenues in business modelling christian lehmann1 christina m. bidmon2 1 department of economics and informatics, hanover university of applied sciences, hanover, germany, christian.lehmann@hs-hannover.de 2 copernicus institute of sustainable development, utrecht university, c.m.bidmon@uu.nl abstract validating the profit formula of a business idea is a difficult task for students and entrepreneurs alike. with the “business coaster” we present a simple and playful tool that helps students to get in touch with numbers and design the value capture side of a business model. please cite this paper as: lehmann, c. and bidmon, c. m. (2021), on the back of a beer coaster – simple estimates for costs and revenues in business modelling, vol. 9, no. 3, pp. 9-16 acknowledgements: we would like to thank two anonymous reviewers for their excellent comments and suggestions. keywords: business model, financial planning, teaching entrepreneurship “a few measures that are directly related to the basic business model are better than a plethora of measures that produce a lack of focus and confusion about what is important and what is not” (pfeffer and sutton, 1999: 260). introduction how a firm monetises the value it creates is one of the essential questions a business model needs to answer (baden-fuller and mangematin, 2013: 419). yet questions about the “profit formula” (johnson et al., 2008:  62) behind a business idea are often the hardest to answer for students and entrepreneurs alike. alongside value creation and value delivery, value capture constitutes a key element in most business model definitions (e.g., teece, 2010: 173; baden-fuller and mangematin, 2013: 421). accordingly, frameworks and canvases that aim at depicting the underlying value architecture of a business model often require information on costs and revenues (trimi and doi: https://doi.org/10.5278/jbm.v9i3.2801 issn 2246-2465 mailto:christian.lehmann@hs-hannover.de https://doi.org/10.5278/jbm.v9i3.2801 journal of business models (2021), vol. 9, no. 3, pp. 8-16 9 berbegal-mirabent, 2012). for example, in the widely used business model canvas (bmc) “cost structure” and “revenue streams” are two of the nine building blocks (osterwalder and pigneur, 2009: 14). yet when teaching business models, the focus often lies on ideating the value proposition or brainstorming about potential customer groups, not on financial planning. in our classes, we have found that students can find the transition from the “upper part” of the bmc to the “bottom part” with costs and revenues quite challenging. bound to the semantic structures of the canvas, they struggle with the switch from qualitative to quantitative blocks. often, they fill in a few words on revenue and cost items, but hesitate to quantify them. if they put numbers, these numbers differ substantially in their quality, address different units, or refer to different points in time. thus, the financial viability of the new or improved business model often remains unclear. whereas tools such as the bmc or the lean canvas arguably do not aim to develop fully-fledged business cases, a neglect of the financial part of teaching business models is problematic for several reasons. first, the profit formula is one of the central elements of validating any business idea. alongside desirability (customer pain point) and feasibility (technology-market-fit), the validation of the financial viability is essential and of primary concern to stakeholders. second, students taking a class on business modelling often expect that they will not only learn how to develop new business ideas, but also how to commercialise and monetise them. in fact, any student leaving the classroom without an idea of how to take the next steps to assess the financial viability of a business model is at risk of judging business modelling to be a “tiger without teeth”, i.e. a helpful tool for the ideation stage only. for teachers, the dilemma lies in finding a compromise between a meaningful, fast introduction to the financial part of a business model and integrating a comprehensive lecture on entrepreneurial finance. existing tools such as the bmc, or extensions of the bmc with a financial focus (for an example based on 15 kpis cf. jackson et al., 2015) mainly offer templates to quickly establish the major costs and revenues underlying a business model. at the other end of the spectrum are comprehensive tools for running calculations such as profit-loss-statements (p&l), cash-flow analyses, and business plans. what is missing is something in between: a tool with the same level of abstraction and playfulness as the bmc that still allows some basic estimates of major cost and revenue drivers to be carried out. to fill this gap, we developed a simplified profit and loss estimation, the business coaster. it can literally be put on the back of a beer coaster (hence the name) and constitutes an easy, engaging way for students to validate the financial viability of their business idea. in the following, we explain the pedagogic rationale behind the business coaster, illustrate its application, and give some practical advice for teachers on how to use it. introducing the business coaster pedagogic rationale the idea of the business coaster emerged from three, interrelated challenges we observed while teaching business modelling and entrepreneurship to undergraduates in engineering and economics for more than five years. first, students lack orientation on how to start generating estimates on costs and revenues. usually, they have no prior experience in setting prices, negotiating commissions, or employing people. loose guiding questions such as “what are the major cost drivers of the business?” provided by frameworks such as the bmc are of only limited help and do not provide an explicit link between revenues and costs that allows their interaction to be assessed (jackson et al., 2015: 103). as a result, even students with some background in entrepreneurial finance can have a hard time figuring out how to start validating the financial viability of their idea. second, the switch to numbers can lead to anxiety and stress in students. being asked to form hypotheses and make assumptions can create the sensation of having to make choices in spite of the many uncertainties about other variables in the business model. such decisional conflict can be uncomfortable, especially when facing time constraints, (e.g. pratt and huettel, 2008). in our classes, we often observed defensive avoidance (“i cannot fill that in.”) or procrastination (“i cannot fill that in yet”) when students were tasked to start working on the bottom part of the bmc. third, we observed that it is hard for students to grasp what level of detail is necessary for initial calculations. journal of business models (2021), vol. 9, no. 3, pp. 8-16 10 often, they lack pragmatism and do not dare to make a few informed assumptions on core variables. obviously, it is an overwhelming task to generate forecasts on future financing and cash flow requirements, long-term profit prospects, demands of operating lead times, marketing expenses, and pricing. but to come up with a very first validation of a business case most of this is not needed. a few point estimates are sufficient to get an initial feeling for the financial viability of an idea. the pedagogic rationale behind developing the business coaster was to counteract this triple challenge of working with numbers, and find a simple and even engaging way to validate the profit formula of a business model. specifically, the tool was developed to provide students with (i) a simple starting point for how to proceed with validating costs and revenues, (ii) a playful, non-threatening way to work with numbers, and (iii) orientation on the essential first estimates to be included. in the following, we introduce the business coaster’s structure and illustrate its application with an example. the business coaster financially, every business idea has to answer two questions. the first is about profitability: “is this idea worth pursuing?” a new idea should only be realised if the supposed revenues exceed the planned costs. a profit formula (johnson et al., 2008: 62) contains a revenue model including pricing, the cost structure of the business, and the margin. the second question is: “can i afford to realise the idea?” this question addresses the issue of investment needs and liquidity. an idea might be profitable but one might run out of cash before enjoying its profits due to high upfront investments or running costs before break-even. profitability clearly is a necessary condition for a start-up, liquidity is a sufficient condition. therefore, initial calculations on the viability of an idea should focus on profitability. the most well-established instrument to illustrate profitability is a profit-loss statement (or p&l). a p&l presents the revenues and costs incurred during a specific period. we reduced the traditional p&l to 11 lines representing the core values of a business. to display this reduced p&l, we wanted to find a simple and playful format that fostered creativity and facilitated “leaving the comfort of the usual” (van der meij et al., 2017: 58). we also wanted to avoid the impression that initial calculations require a lot of effort and extensive excel spreadsheets. ultimately, we decided to put the reduced p&l on a beer coaster, indicating that first calculations can literally be run on the back of a coaster. the “business coaster” is depicted in figure 1. the simplified p&l includes eleven items, ranging from minimum sales (#11) at the top to profits (#1) at the bottom. it asks students to provide numbers on a monthly basis and includes a column for comments, in which they are encouraged to note down the assumptions that underlie their estimates. the three icons at the very bottom represent the average price of a product, the number of customers needed, and the necessary amount of working time. they allow an initial and intuitive judgement of a business case’s financial viability to be made. calculations on the business coaster can be approached either top-down, working from sales to profits, or bottom-up, working from profits to sales. in class, we experienced that students were often overwhelmed when starting a p&l from the top by estimating sales. reverse planning proved to be more effective. the business coaster works best as discovery-driven planning: “instead of starting with estimates of revenues figure 1: the business coaster journal of business models (2021), vol. 9, no. 3, pp. 8-16 11 and working down the income statement to derive profits, you start at the bottom line with profits […]. you then work your plan up to what the necessary revenues are” (mcgrath and macmillan, 1999: 5). we urge students to start their calculation with an average month in the second business year. a monthly base is chosen instead of an annual perspective because it is closer to real life and corresponds with estimates that students perform in their personal life. the application of an average month further helps to reduce seasonality effects. the second year is chosen, because high expenditures to manage market entry and lower initial income may blur the financials of the first year. in the following, we explain the business coaster with the help of a one-product start-up. application example: the colibry case cristina, an italian beauty expert, invented the colibry, a small and hand-driven hair-removal device. it uses the ancient technique of threading and makes it applicable for everybody through a safe and ergonomic design. when accurately applied, threading is far more effective than other techniques and causes only little harm to the skin. a typical customer for the colibry is a woman in her mid-twenties, who cares about both her appearance and health. cristina, who works as aesthetician, will get help from two friends, nadja (ba in economics) and peter (experienced mechanic). cristina found a producer nearby. she assumes to purchase an initial set of 1  000 pieces. cristina and her friends will assemble the final product in their studio by adding threads and packaging it nicely. cristina forecasts that the purchasing costs for the colibry, the threads, a lovely bag, and a printed manual will be 20.00 euros (net) per unit. this is half of the selling price of 48.00 euros (40.00 euros net with vat of 20 percent). cristina also assumes that the easiest way to start a business is to sell directly to customers via an own website (colibry.it). customers pay upfront. cristina does the invoicing and organises the logistics. for each order, 30 minutes will be required for assembling and order processing. to start the business, a website is needed, a trademark has to be registered, and a designer will have to provide a prototype and a cad file for the producer. overall, cristina plans an investment of 24 000 euros prior to starting the business. she also assumes that the average working life of the investment is four years. the money comes from cristina and her grandmother. external funding is not needed. cristina applies the business coaster to calculate the needed minimum sales assuming regular running expenses and a profit sufficient to cover her living costs. because she calculates as an entrepreneur, every number is stated net, without vat. figure 2 depicts a possible calculation for the colibry case. starting with line #1 cristina takes a profit of zero (break-even point). eventually, she adds her own costs of living (2 000 euros) and the expected expenses for social security (1 000 euros). the resulting 3 000 euros in line #1 represents the (needed) profit after taxes. to calculate taxes in line #2, the assumed tax ratio of 33% is added to the profit after taxes, resulting in income taxes of 1  500 euros. the value for the depreciation (or amortisation in case of intangible goods) in line #3 is calculated by dividing the upfront investments of 24  000 euros by their average working life of four years (48 months). cristina does not pay any interest (line #4). the three most important overheads (personnel, marketing, and rent) are added in lines #5, #6, and #7. cristina plans to rent a small studio (rent and service charges of 2 000 euros per month). marketing expenditures are about 2  500 euros per month, mainly for online advertising. as nadja and peter will be employed full-time, cristina has negotiated a wage of 2  500 euros for each of them, adding the employer’s cost of 3 000       living expenses and social security 1 500       tax ratio of 33% 500          investments/ø working life 0        savings rent marketing personnel 2 000        studio, office, stock 2 500        ads, social media 7 500        wages and social security (2 pers.) 4 000       33% of (5+6+7) 21 000      sum of everything below  (50%) 21 000      parts, packaging, logistics  42 000      sales to reach needed profit 40.00 (net) 42/day 21h/day figure 2: solution for the colibry case journal of business models (2021), vol. 9, no. 3, pp. 8-16 12 social security of 50%. all other overheads (line #8) are stated as a percentage of the three most important fixed costs (e.g. communication or insurance). cristina assumes this to be 33 percent. eventually, this allows for calculating the gross margin in line #9. it comes to 21 000 euros per month (net). next, cristina needs to calculate her variable costs in line #10. these might be external costs of production and/or cost of sales. as the colibry is sold directly via her own website, there are no sales commissions but costs of production are assumed to be 20.00 euros for each colibry (device, threads, bag, and manual). to obtain the gross margin (in percent), the variable costs are divided by the net selling price. with a gross profit margin of 50 percent and the gross margin of 21  000 euros in line #9 cristina eventually calculates her minimum sales (line #11). a monthly turnover of 42  000 euros (net) is needed to cover all operational costs and to yield a profit to finance cristina’s living expenses. with average sales of 42  000 euros per month (net), cristina gets an initial indication of the financial viability of her idea. she can now take this viability check further. assuming 25 working days per month, she will have to sell 42 colibries per working day. to sell those 42 pieces, cristina and her friends have a workload of 21 hours or 7h per person and working day. assuming that order processing realistically only accounts for one part of the entire workload and the team also has to spend time on marketing and administration, cristina and her friends would probably have to work far more than eight hours per day. the business coaster ultimately does not judge the financial viability of the colibry case, but it helps cristina to get initial insights about it and pose questions to verify her assumptions such as (1) “is it realistic to sell 42 colibries per day in the nearer future?”, or (2) “is it feasible to spend significantly more than eight hours every working day?” if cristina responds positively to those questions, she might proceed. key insights and discussion we see the core benefit of the business coaster in the fact that students get a better and more realistic idea of the financial viability of a business model. the simplified p&l statement helps students to make implicit assumptions explicit, and to assess their consequences. in class, we experienced that even novices in entrepreneurship instantly became curious and were not afraid to perform initial calculations on daily sales and the workload needed. of course, there are also limitations to the business coaster. in the following, we reflect on when to use it and how to deal with some pitfalls and challenges inherent in business modelling. when to use the business coaster business modelling proceeds in various stages. canvases are instruments for the first iterations, business plans evolve prior to market engagement. as we judge the business coaster to be a good companion of a canvas, it serves best for the first or early iterations of a business model. at that stage, it makes most sense to apply it in its simplest form: no profit (break-even), no taxes and no investment. in other words, the lines on taxes, depreciation and interest (#2-4) may be ignored at first. lines #5-11 keep the focus on the operational profitability (or earnings before interest, taxes, depreciation, and amortisation, short: ebitda). they yield the numbers that are essential for initial presentations of the business model to outside parties. how to deal with iterations and changing assumptions the development of a business model is an iterative trial-and-error process (chesbrough, 2010; sosna et al., 2010). cristina may figure out that the variable costs increase when she sells via amazon. she will get a better access to the market, but she has to pay for it (for example, as of 2019, amazon charges 15 percent per sale in western europe). insights on customers’ willingness to pay may lead to changes in the sales price of the colibry. or cristina might decide to outsource the assembly of the colibry to the producer, paying more whilst being relieved from time-consuming and low-skilled work. in short, there are many scenarios that would change the initial calculation on the business coaster. rather than a drawback, we consider it an enormous advantage that students can use the business coaster to ascertain the financial consequences of different assumptions based on an initial calculation. in class, we urge students to document the most critical assumptions they make. mostly, those are (1) prices related to minimum sales, (2)  variable costs, journal of business models (2021), vol. 9, no. 3, pp. 8-16 13 notably purchase prices and sales commissions; and (3) wages or marketing costs. students should then verify their assumptions and adjust them, if need be. table 1 depicts some rules of thumb we developed during our practice with the business coaster, which might be helpful for teachers and facilitators. if the curriculum allows it, the introduction of the business coaster can also be coupled to some more explanations on how to generate estimates. for example, we found it helpful to introduce students to top-down and bottom-up ways of estimating (from a population to a sample, or vice versa), combining different estimates via weighted averages, or creating simple rating systems that allow qualitative information to be transferred into quantitative information (e.g., “strong increase”=50%, and so on). how to deal with complex business models the colibry case is an example for a “simple” business model since it is a one-product business with direct sales and the product is not very complex. other business models might be more sophisticated. for example, cristina might sell a slightly different product for men. she might also begin to generate revenues from ads on her website or start to sell via wholesalers. complex business models with different revenue streams are harder to map out on the business coaster. to consider a second product or a second sales channel, students might use the second column, normally reserved for comments. generally, we recommend students to initially focus on the central mechanism to capture value. the first version of the business coaster should depict the core profit formula. subsequently, one or two extensions such as a second revenue stream, another sales channel, or different product categories can be considered. for businesses with a wider range of products such as stores or restaurants, prices might be aggregated and stated as average expenditure per customer or as customer value (per month). customer value may also replace the price for consumables or repurchased goods. in a business to business-context with much higher volumes per customer and order (e.g. 1, 000 colibries per drugstore) the average price per order should be stated. for platform businesses, one may state the different streams of income (e.g. subscription fees and advertising revenues) in different columns. limits of applying the business coaster the business coaster helps to answer the first question about a business model’s profitability: “is my idea worth pursuing?” but a profitable business idea is not necessarily a good one. if upfront investments demand high funding, an idea may be too costly to be realised. the issue of liquidity clearly is the second major point in assessing a venture’s financial viability. the coaster is not suited to do this; it only provides insights about profitability. the business coaster also does not replace a complete p&l statement or a more comprehensive calculation of expenses and costs such as claims or liabilities. furthermore, the monthly view as a point in time calculation does not allow the mapping of changes over time, such as the development of stocks or seasonal effects. to encounter all expenditures and their changes over time, a more complex spreadsheet is needed. it may also be misleading to apply the coaster to businesses seeking to become standard in their niche. those businesses (e. g. amazon for online shopping or uber for individual transportation) are not profitable in the shortand mid-term, but aim to increase their customer base and market share in the long run. line variable value rule of thumb 10 cost of sales 0%-5% 15% 50% take up to 5% for digital products you sell by yourself. take 15 % as sales commission if a third party brings you a client. take 50% for products when you do not know yet how much production will cost. also take 50% when you sell in another party’s store. 8 others (overhead) 33% take 33% of additional overheads (e.g. insurance, maintenance, communication). 4 interest 10% start-ups are risky, so plan for a 10% interest rate. 2 taxes 33% calculate 33% of your profit for income taxes. table 1: rules of thumb for different variables on the business coaster journal of business models (2021), vol. 9, no. 3, pp. 8-16 14 conclusion we conceive entrepreneurship to be the ability to turn financially viable ideas into action. the business model is at the heart of this process. it describes the process of value creation, delivery, and capture. canvases provide immense help in early stages of the business modelling process, but they have a structural problem with numbers due to their descriptive rather than analytical nature (knott, 2006). integrating simplified elements of financial planning, such as the business coaster, in business model teaching enables students to check the financial viability of their idea. combined with discovery-driven planning (or bottom-up planning) the simplified p&l statement focuses on a few, but meaningful numbers (e.g. sales per day). in a playful manner, a tool like the business coaster helps students to better understand the profit formula and the financial mechanisms behind a business model. easily combined with common frameworks such as the bmc, the business coaster is a powerful tool to facilitate the switch from words to numbers. it provides data for early pitch decks and helps students to take the first steps in the direction of a more comprehensive business plan. overall, we found that the business coaster is very useful to calculate operating profits for business model ideas at different points in time (or development stages). its shape and symbolic simplicity demonstrably help students in entrepreneurship classes to get an initial sense of the financial viability of their ideas. furthermore, the process of generating estimates for the eleven items on the business coaster sensitises them to the critical assumptions and potential scenarios of capturing value from a business model. journal of business models (2021), vol. 9, no. 3, pp. 8-16 15 references baden-fuller, c., & mangematin, v. (2013), business models: a challenging agenda, strategic organization, vol. 11, no. 4, pp. 418-427. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, no. 2-3, pp. 354–363. jackson, w. t., scott, d. j., & schwagler, n. (2015), using the business model canvas as a methods approach to teaching entrepreneurial finance, journal of entrepreneurship education, vol. 18, no. 2, pp. 99 -111. johnson, m., christensen, c., & kagermann, h. (2008), reinventing your business model, harvard business review, vol. 86, no. 12, pp. 57-68. knott, p. (2006), a typology of strategy tool applications, management decision, vol. 44, no. 8, pp. 1090-1105. mcgrath, r., & macmillan i. c. (1999), discovery driven planning: turning conventional planning on its head, deepcanyon, available at: https://www.fast-bridge.net/wp-content/uploads/resources/discovery_driven_planning.pdf (accessed 2019-11-08). osterwalder, a., & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, hoboken, nj. pfeffer, j., & sutton, r. i. (1999), the knowing-doing gap: how smart companies turn knowledge into action, harvard business press, boston, ma. pratt, m. l., & huettel, s. a. (2008), risky business: the neuroeconomics of decision making under uncertainty, nature neuroscience, vol. 11, no. 4, pp. 398-403. sosna, m., trevinyo-rodríguez, r.n., & velamuri, s.r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, no. 2-3, pp. 383-407. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2-3, pp.172-194. trimi, s., & berbegal-mirabent, j. (2012), business model innovation in entrepreneurship, international entrepreneurship and management journal, vol. 8, no. 4, pp. 449-465. van der meij, m., broerse, j. e. w. & kupper, f. (2017), conceptualizing playfulness for reflection processes in responsible research and innovation contexts: a narrative literature review, journal of responsible innovation, vol. 4, no. 1, pp. 43-63. https://www.fast-bridge.net/wp-content/uploads/resources/discovery_driven_planning.pdf journal of business models (2021), vol. 9, no. 3, pp. 8-16 16 christian lehmann is associate professor for entrepreneurship at hanover university of applied sciences. he also manages nexster, the entrepreneurship centre of his university. after graduating from free university of berlin he worked in some start-ups and as consultant. he holds a phd from the university of bayreuth. christian’s research interests are business model innovation, teaching entrepreneurship, and social businesses. christina m. bidmon is a postdoctoral researcher at católica lisbon school of business and economics, where she works in the business model design lab. her research interests include the emergence of novelty in incumbent organizations, sustainabilitydriven innovation, and business modelling. christina holds a phd from aarhus school of business and social sciences, denmark. about the authors journal of business models (2019), vol. 7, no. 4, pp. 13-19 13 development of new business models: introducing the cultural elasticity model anders drejer* christian byrge* danielle bjerre lyndgaard** hanne merete lassen** *department of business and management, aalborg university post@christianbyrge.com, drejer@business.aau.dk **confederation of danish industry (di) haml@di.dk, dbl@di.dk abstract the paper presents the cultural elasticity model as a new perspective on how existing companies may better perform continuous organic development of business models. it suggests three organisational pillars for the development of an organisation with strong cultural elasticity and therefore the ability to better innovate new business models. please cite this paper as: drejer et al. (2019), development of new business models: introducing the cultural elasticity model, vol. 7, no. 4, pp. 13-19 keywords: business model innovation, organisational culture, organisational learning introduction organic business development and its importance business model innovation is not solely for start-ups, entrepreneurs and innovators (markides, 2008). established organisations also need to develop new business models to maintain and expand current strategic positions (flamholtz and randle, 2014). the seminal research of clayton christensen on the effects of disruption on market leaders and entire industries (christensen, 1998) clearly shows both the needs and challenges of established organisations in this respect. when the market and circumstances changes, core competencies become core rigidities, the established organisation loses sight of the market and its corporate culture becomes a liability (leonard-barton, 1995; sull, 1999). clearly, there is a need to look at how established journal of business models (2019), vol. 7, no. 4, pp. 13-19 14 organisations can become better at business model innovation. this paper looks at organic development of new business models, which refers to the natural advancement of existing business through a dynamic process marked by the continuous invention and implementation of new business models. this excludes mergers, acquisitions, spin-offs, spin-ins as well as setting up new business units in parallel to the existing organisation. organic development requires that the existing organisation is able to continuously unlearn patterns from fading business models and quickly learn new patterns related to emerging business models. organic development of new business models may affect the value proposition, value creation and deliver, value capture elements, interrelations between the elements, and the value network. hereby, it may lead to an increase in the existing organisation’s resilience and reaction towards industrial changes and may lead to competitive advantages (mitchel and coles 2004; schlegelmilch et al, 2003). in continuation of the research of clayton christensen, and many before him, it seems easier to develop a new business as a green field development or start-up than it is to change the business model of an established organisation (drejer, 2019). indeed, there is ample empirical evidence for the downfall of established players and even market leaders in the face of disruptive changes of markets and technologies (christensen, 1998). christensen calls this for “innovators’ dilemma” and links this to managerial and organisational blindness towards external changes. sull (1999) introduced the concept of “active inertia” to describe the process of an organisation’s downfall where the organisational blindness leads to the transformation of a proactive, vibrant and learning culture to a conservative, reactive and rigid culture, eventually leading to the demise of the organisation in changing market conditions (drejer, 2019). these, and many other, contributions point towards the importance of the concept of corporate culture in this respect, as illustrated by the famous, yet questionable, quote from peter drucker – culture eats strategy for breakfast – showing us that the existing organisational culture often acts as the biggest obstacle for new business development. cultural elasticity development speed in existing organisations is influenced by a variety of internal factors (pisano, 1997) of which we will focus on capability and organisational culture. capability is the ability of an organisation to apply relevant competences in order to transform ideas into something new of value (drejer, 2019; leonard-barton, 1995). culture is the shared values and behaviours that makes up the social and psychological environment in an organisation (schein, 1986). capability and culture heavily influence the way employees are capable of and perform action, interaction, idea production, evaluation as well as knowledge creation and sharing in an organisation (miller and wedelsborg, 2015). hereby, culture sets the barrier for how employees may resist or work towards new ideas, changes and opportunities. the authors define cultural elasticity as the ability to quickly change the shared values and behaviours in the organisation so that they fit emerging business models. it facilitates the continuous learning of new ideas, visions, values, norms, language, assumptions, beliefs and habits related to emerging business models. this process includes the unlearning of patterns from fading business models. failing this facilitation may results in some employees being stuck in old cultural patterns from previous (maybe failed) business models. it may also affect how employees identify with an organisation. as a result, important employees may choose to leave the organisation (schrodt, 2002) resulting in a potential lack of qualified competent personnel. figure 1 represents a relation between the development capability and the cultural elasticity. organisations that are evaluated as high on both dimensions have the ability to constantly organically innovate their business models. organisations high on development capability and low on cultural elasticity may have difficulties implementing new business models into their current organisation and may experience resistance from current employees. organisations high on cultural elasticity and low on development capability may experience a fluid development where attempts to innovate rarely succeed. organisations that score low on cultural journal of business models (2019), vol. 7, no. 4, pp. 13-19 15 elasticity and low on development capability will rarely experience innovative activity. so, for organisations that seeks organic development of new business models it seems crucial to consider the organisational cultural elasticity as a complement to the traditional strong focus on development capability.   c u l t u r a l a l e l a s t ic it y development capability constant innovative rarely innovative figure 1: relation between cultural elasticity and development capability. pursuing an organisational cultural elasticity may require a new perception on what organisational culture constitutes. apart from the traditional view of culture from schein, culture can be understood as a corporate personality (flamholtz and randle, 2014). personalities are relatively stable over time and hard to change. therefore, it seems easy to conclude that organisational elasticity in itself is a contradicting concept. in order to understand how organisational culture and elasticity complements each other it may be a good idea to look a learning organisations (drejer, 2004). organisations with high cultural elasticity quickly learn and transform this new learning into new ideas, visions, values, norms, language, assumptions, beliefs and habits. cultural elasticity therefore involves rapid learning and smooth transformation of learning into culture. the danish manufacturer of micro satellites, gomspace is an organisation that is growing rapidly fuelled by cash injection from an expectant stock market. the growth also means that the organisation must radically transform its core competencies and, indeed, corporate culture. the ceo of gomspace recently revealed that the organisation must change significantly in its organisational maturity as measured by capability maturity modeling (cmm) going from cmm level 1 to cmm level 2 over less than two years (drejer, 2019). for everyone with experience with cmm, it is well known that such a move corresponds to a significant change in corporate culture from an entrepreneurial mindset to a professional and process driven culture. the ceo also revealed that he does not subscribe to the view that corporate cultures are impossible to change – due the growth of gomspace, the average duration of employment at gomspace is currently at one year and one month. the ceo defined their organisational culture like this: “we have no corporate culture”. from the perspective of the cultural elasticity model gomspace would be a case of a highly elastic culture. this is helped by the fact that the growth of the company is followed by the hiring of many new employees – many of which are hired from danish project organisations that are at cmm levels 4 and 5. and also that employees from the entrepreneurial stage are leaving the company. gom, as it is, stands for grumpy old men, the nick name for the three founders of the company all of whom have left the organisation today. their approach seems to be to nurture several alternative cultures within the same organisation in order to keep the cultural elasticity high. this illustrative case gives an (extreme) example of high cultural elasticity. approach this paper is the result of a collaboration between industry advisors from the confederation of danish industry (di), a private organisation, funded, owned and managed entirely by approximately 10,000 companies within the manufacturing, trade and service industries, and researchers from aalborg university. through their work at di, the advisors have developed a model for cultural elasticity in an action learning process that has taken place over a period of 3 years. after the action learning results began to converge at results with a certain degree of predictability and similarity across different organisations, it was decided to involve the university researchers in a joint reflection journal of business models (2019), vol. 7, no. 4, pp. 13-19 16 and concept formulation process with this paper as its first, preliminary, result. the research process involved reflecting on the action learning processes and their results by means of stateof-the-art literature as well as conceptualising the notion of cultural elasticity. key insights the cultural elasticity model provides three key focus points for leaders to consider when making their organisation better at organically developing new business models. the authors denote these focal areas as pillars that need to be build and sustained in order to develop cultural elasticity in an organisation. mutual trust the first pillar of cultural elasticity is mutual trust. trust is important between leaders and employees, leader colleagues, among the employees and last, but absolutely not least, trust between the organisations and its suppliers and customers. by creating an environment based on mutual trust, leaders enable the organisation to be more courageous and more open in terms of letting knowledge and ideas flow fluently. the authors look at mutual trust as trust between employees as well as trust between employees and leaders of the organisation. mutual trust is important in order to support and make legitimate the formulation and exchange of new ideas in the organisation. an elastic culture is a culture, where its members are not afraid of repercussions if they venture ideas that are against the cultural gradient or the logic of their leaders, their company or the industry. additionally, successful development of innovative ideas seems to be more of a teamwork than a one-man effort (miller and wedelwedelsborg, 2015). hence, collaboration is important for trying out new ideas and for developing new ideas. and collaboration is supported by mutual trust. trust emerges over time and cannot be forced or imposed. trust is created by spending time and talking together, solving projects and tasks, getting to know each other and have positive experiences when doing that. trust emerges in relations, where we respect, appreciate and understand each other. also – and especially – when we do not agree. to expand the cultural elasticity of the organisation and making the organisation more innovative as a whole, leaders need to support a culture, where disagreements and failing is regarded as an important part of innovative processes. organisations rarely succeed being innovative completely on their own. therefore, mutual trust also includes relations to suppliers and customers, and even competitors in some situations. only by engaging in relations with these stakeholders, is it possible to obtain the necessary knowledge and inspiration for innovation to be relevant and useful. creativity the second pillar of cultural elasticity is creativity. creativity brings about novel valuable ideas and makes it easy to quickly adopt to new realities (byrge and hansen, 2014). employees increase the level of cultural elasticity if they are flexible in changing perception on problems and situations as well as are able to produce lots of ideas. hereby employees will be able to see their organisation and tasks from new perspectives and produce new ideas on how to make them better. also, employees should be open minded, curios, playful, task-focused and intrinsically motivated. this will help them elaborate and follow new ideas, visions and business models in times of rapid changes and structural uncertainty. leaders increase the level of cultural elasticity if they continuously challenge fundamental notions, think up original new ideas and have a strong creative self-efficacy. this will help them be free from pattern thinking and be confident that they can be creative in their efforts to develop and implement new business model elements on a daily basis. they should visualise future scenarios, identify novel and valuable ideas as well as use imagination without the normal limits of causal thinking. hereby, employees will be able to make quick evaluations and decisions on ideas for the organisation to focus on. unfocused creative organisations risks wasting much time and spreading their resources over too many different directions of development. unfocused creativity may therefore lead to little effectiveness in the development of new business models. the creativity needs to be focused and the leaders has the journal of business models (2019), vol. 7, no. 4, pp. 13-19 17 key role in continuously making ambitious visionary decisions on which ideas to focus on. engagement the third pillar of cultural elasticity is that of engagement. engagement is about being willing to spend your time and energy on something in which you believe. often engagement is expressed in a willingness to ‘go the extra mile’ or as being committed to the idea, the organisation, the project or the team. this commitment creates better chances of success with business model innovation. a culture with a high degree of engagement will be better at getting things done than a culture with a low degree of engagement. thus, it is important that – once an idea or a direction is chosen – the members of the organisation pursue the idea with maximum engagement. leaders must know their employees’ competencies – both personal and professional – and make sure that everyone gets the opportunity to contribute with their strengths in the best way possible. they should set the expectations appropriately high, but not so high that they cannot be met. leaders should also follow up and provide feedback in order to create continuous development. focus among leaders should also be on developing themselves, the employees, the processes and the organisation in order to ensure the relevant capabilities and cultural elasticity, so that everyone are able to and have the necessary space to take any action needed. leaders who wish to develop the engagement among the employees, should focus on creating meaningful understandings in the organisation. they should regard themselves as sense-makers in order to set direction and clear expectations in a meaningful way, thus providing the organisation with a clear ‘why’ – a purpose to set the direction for all the innovative projects and processes emerging in the organisation. as a result, leaders should also have great persuasive powers. leaders supporting creative ideas without persuasive powers are often considered “crazy”, “wild” or “irrational” when they attempt to make the organisation comply and follow these new ideas. leaders should, therefore, be able to make convincing arguments for and orchestrated presentations of their new ideas in particular when it comes to creating engagement for novel ideas.   m u t u a l t r u s t c u l t u r a l e l a s t i c i t y c r e a t iv it y e n g a g e m e n t figure 2: cultural elasticity model discussion and conclusions this paper is directed at leaders and scholars interesting in how established organisations can pursue organic business development. it challenges the perspective that entrepreneurship is the sole source of innovation and new business development and, hence, a contribution to the old schumperterian debate about the source of innovation. also, pragmatically, there are quite a lot of established organisations out there with the desire to keep existing. one of the greatest barriers to innovation in established organisations is that of the corporate culture. this is perhaps not surprising given the seminal definition by h. edgar schein (1986), who views organisational culture as the sum of practices that in the past have been proved to work. as a polar opposite we have the development of new business models including, often, entirely new practices, technologies and/or customer segments. so, ironically it seems that new business development is impossible for established organisations, a conclusion that is supported by a rich literature of empirical evidence (e.g. christensen, 1998; drejer, 2019). journal of business models (2019), vol. 7, no. 4, pp. 13-19 18 however, some organisations do succeed with organic business development – even of the radically innovative kind. this suggest that some organisational cultures are more elastic than others. this has served as the starting-point for the research underlying this paper and the model for cultural elasticity presented has served as a focal point for action-learning research on the subject. the results of the action-learning processes undertaken by two of the authors suggest that the cultural elasticity model can be a useful mean for creating a dialogue within management teams/organisations on cultural elasticity. furthermore, the three pillars of the model provide a useful starting point for identifying possible courses of action towards improving the cultural elasticity of an organisation. in the future, the authors will strive towards a number of research objectives related to the cultural elasticity model. firstly, the model in itself need to be further scientifically tested. this needs to be done both in relation to empirical use, e.g. where is the model useful/ not useful, what are the contingency factors for use of the model, as well as in relation to literature. secondly, it is necessary to develop metrics for the model in order to provide a location of organisations in the model. thirdly, the use of the tested model needs to be placed inside the framework of models and tools in the realm of business (model) generation. the cultural elasticity model is a new model that brings new perspectives on how to advance the organic development of new business models in existing organisations. given the complexity of management of innovation and development it is clear that more variables may be involved in the processes that lead to the development and implementation of new business models. the authors hope that others will join in on studying and testing this new perspective on how existing organisations may better organically develop and implement new business models in their companies and markets. journal of business models (2019), vol. 7, no. 4, pp. 13-19 19 references byrge, c. & hansen, s. (2014). enhancing creativity for individuals, groups and organizations: creativity as the unlimited application of knowledge, frydenlund academic. chesbrough, h. & rosenbloom, r.s., (2002). the role of business model in capturing value from innovation, industrial and corporate change, vol. 11, no. 3, pp. 529-555. christensen, c. m., raynir, m.e. and mcdonald, r. (2015). what is disruptive innovation, harvard business journal. christensen, c. (1998). the innovator’s dilemma, harvard business school press. d’aveni r.a., dagnino, g.b. and smith, k.g. (2010). the age of temporary advantage, strategic management journal, vol. 31, no. 13, pp. 1371-1385. drejer, a. (2019). strategi på kanten, djøfs forlag. flamholtz, e. & randle, y. (2014). implications of organizational life cycles for corporate culture and climate in schneider, b. & barbera, k.m. (eds.), the oxford handbook of organizational climate and culture, oxford university press, oxford, pp. 247-256. geuys, a. (1997). the living company, the free press. leonard-barton, d. (1995). wellsprings of knowledge, harvard business school press. markides, c. (2008). game-changing strategies: how to create new market space in established industries by breaking the rules, jossey-bass. mitchell, d.w., & coles, c.b. (2004). business model innovation breakthrough moves, journal of business strategy, vol. 25, no. 1, pp. 16–26. miller, p. & wedel-wedelsborg, t. (2015) innovation as usual, harvard business school press. pisano, g. (1997). the development factory, harvard business school press. schein, h.e. (1986). organisational culture and leadership, harvard business school press. schrodt, p. (2002). the relationship between organizational identification and organizational culture: employee perceptions of culture and identification in a retail sales organization, communication studies, vol. 53, no. 2, pp. 189–202. schlegelmilch, b.b., diamantapoulos, a. and kreuz, p. (2003). strategic innovation: the construct, its drivers and its strategic outcomes, journal of strategic marketing, vol. 11, no. 2, pp. 117–132. sull, d. (1999). why good companies go bad, harvard business review, july-august issue, 1999. zott c.c. & amit, r. (2010). business model design: an activity system perspective, long range planning, vol. 43, no. pp. 216-226.zott, c., & amit, r. 2008. the fit between product market strategy and business model: implications for firm performance. strategic management journal, 29(1): 1-26. journal of business models (2019), vol. 7, no. 2, pp. 31-36 31 performative research in the business model field: exploring the underpinnings of studying business models in action robin roslender1 christian nielsen2 1university of dundee school of business 2aalborg university abstract the adoption of a performative approach promises to enrich research enquiries pursued in the business model field. such an approach has demonstrated its purchase in other business and management disciplines, including accounting, and has contributed to the wider exploration of social science methodology by their respective research communities. please cite this paper as: roslender, r., & nielsen, c. (2019), performative research in the business model field: exploring the underpinnings of studying business models in action, vol. 7, no. 2, pp. 31-34 keywords: performative research approach; ‘accounting in action’; social science methodology. introduction the special issue of papers from last year’s conference published in the journal of business models also included a contribution in which a number of researchers associated with the business design centre at aalborg university identified and briefly discussed a potentially rich research program for the business model field (nielsen, et al., 2018). they identified the program as enacting “a performative research agenda”, which they argued constituted the fourth stage of business model research. the three previous stages are identified as being concerned with definitions and concepts; business model innovation; and identifying frameworks and theories for describing and analysing business models respectively. the authors are at pains to affirm that none of the four phases should be regarded as more important than the others, and that their continued co-existence indicates a field that is rapidly maturing. the authors are enthused by this additional phase of research activity and in the final section of the paper briefly identify several constituents of the prospective research program, the pursuit of which promises to contribute to the further development of the broader business model field. journal of business models (2019), vol. 7, no. 2, pp. 31-36 32 the purpose of the present paper is to explore in further detail the underpinnings of the performative research approach in an attempt to increase its accessibility for business model researchers and thereby enhance the insightfulness of the business model field. approach the initial task entails setting out what a performative approach to research entails and how it is related to the various approaches with which business model researchers are more familiar. in doing so, the paper draws on how performative and kindred approaches have enriched research in the accounting discipline over the past two generations. having established the intellectual status and substance of performative research, attention switches to some of the ways of seeing that are associated with it, and how they are related to but differ from each other in matters of detail. the paper concludes by identifying a number of challenge that engaging with performative research presents. key insights the term performative is widely understood to form one part of the performative-ostensive couple. perhaps the simplest way to understand this couple is in the context of definitions. an ostensive definition is one that you would find in a dictionary, with the implication that what is on offer is an instructive guide to the meaning of a particular term. different dictionaries commonly offer different definitions, although in the great majority of cases these tend to only differ in detail. for the most part the definitions of a business model that we find advanced in the existing literature are of a similar genre, although the extent of difference can be significant. nevertheless the definition offered by an individual researcher would be how s/he wishes to portray a business model. a performative definition is rather different, however. it is a characterisation informed by observing and interpreting practice, one that rejects the implied attribute of stability that underpins an ostensive definition. whereas an ostensive definition conveys a sense of fixedness about what it refers to, inter alia a business model, a performative definition of the same is focused on how what we understand as a business model is enacted or ‘performed’. implicit here is the attribute of process understood to signify that a business model is always evolving, i.e., is a much more open-ended entity than is implied in the case of an ostensive business model definition. what a business model is is determined by the act of business modelling. the idea of performative definitions is consistent with postmodern thinking, the genre of thought that has come increasingly to the fore since the middle 1960s and has had the consequence of challenging the taken for granted axioms of modernist thinking on which our knowledge and understanding have been based in modern times. the performative approach to research is usually identified with the work of the french sociologist bruno latour, and is one component of his contribution to contemporary sociology that dates back to the late 1970s (latour, 1986 ; boedker, 2010). performative research seeks to understand or make sense of aspects of social reality through studying the detail of that reality. in the case of performative research on business models the researcher engages with one or maybe a couple or possibly a small number of extant business models to learn how they are enacted. this incorporates exploring their perceived objectives as well as the outcomes of their performance. the generic objective of such a research program is to develop a stock of knowledge and understanding of business model (practice) that complements the more familiar stock of normative or prescriptive knowledge and understanding that both practitioners and researchers draw from. there is no explicit intention to evaluate specific business model practice via performative research, although this is not proscribed. what is eschewed, however, is the commonplace paradigm of predicting such practices as in conventional management scientific research. anyone with a familiarity with the performative research approach is likely to be aware that on occasion the alternative of a practice-based research approach is invoked. such an approach is generally associated with a second french sociologist, the late pierre bourdieu (bourdieu, 1977). the notion of ‘strategy-as-practice’ has become increasingly visible in the strategic management literature as academics and practitioners recognise the futility of seeking to identify the definition of strategy and instead focus their resources in exploring journal of business models (2019), vol. 7, no. 2, pp. 31-36 33 the processes associated with practice, thereby amassing a body of knowledge and understanding of what strategy might encompass (whittington, 2005). the parallel notion of ‘business model as practice’ should now make more sense. both of these approaches are well-known within contemporary accounting research, as well as in several other management disciplines, and are widely subscribed within the interdisciplinary and critical accounting research community. within the latter tradition they can be seen as successors to one of its founding foci. in his editorial to the first issue of the journal accounting, organizations and society, anthony hopwood indicated that the accounting research community had to date only devoted a small part of its attention to assembling a knowledge and understanding to the non-technical aspects of its practices (hopwood, 1976). hopwood proposed that it was now time to begin to explore accounting “in action”, while committing the new journal to serve as a vehicle for publishing such research, something it continues to do to date. for the majority of accounting academics and practitioners of that time what constitutes accounting (practice) can be readily identified in the pages of textbooks and manuals. this knowledge and understanding is eminently prescriptive. this is how the practitioner is expected to proceed when enacting accounting, the right to do so being increasingly reserved for those who have passed the necessary tests of competence, i.e., become qualified. hopwood did not seek to belittle the efforts of the successive generations of accounting practitioners and academics who had assembled this extant stock of knowledge and understanding. however, he argued that it is now time to broaden out the research agenda, by exploring how accounting is accomplished in action (or practice). a neat way to think about the then new research program is the exploration of how accounting is enacted as a complement to how accounting is portrayed and commended ‘in textbooks’. implicitly hopwood and those colleagues who shared his ambition, believed that accounting and those who practised it would benefit from an exposure to such knowledge and understanding, and do so in a variety of ways. the fabrication of a ‘better’ accounting practice was not necessarily the only nor the most important of these ways. the study of accounting in action is widely recognised to have resulted in the establishment of an interpretive research tradition within accounting, where interpretivism provides an alternative methodology to the more familiar positivist methodology. positivism should be understood to provide the default methodology for rigorous scientific enquiry and as such is how we would characterise such endeavours. the physical sciences, and experimental physics in particular, provide the ‘purest’ exemplars of positivistic scientific enquiry. by contrast the biological and behavioural sciences can be viewed to be less pure for the most part, although still seeking to partially emulate the physical sciences. management science would seem to fall within the behavioural science categorisation, although superficially at least many of its practitioners embrace and manifest the attributes of the physical sciences in their work. much mainstream accounting research is of a similar nature, including those empirical contributions that utilise research designs incorporating larger sized (‘scientific’) samples, questionnaires or highly structured interview surveys. the turn to interpretive accounting research approaches necessitated researchers becoming competent in pursuing research based in case and field study research designs. by definition these are the means to gain knowledge and understanding of how accountants and their colleagues ‘do’ accounting in the organisational environment, whether this be practice, business, the public sector, etc. in addition to learning how to conduct such explorations, which is itself quite daunting, gaining access, arranging interviews, travelling, maintaining full records, analysing transcriptions, discussing with co-researchers (and possibly participants), etc., are all accompanied by their own challenges. qualitative research of this sort was recognised to be time consuming, resource intensive, consistently precarious and arguably inefficient when compared with hypothesis formulation and testing, which for for many at that time was more familiar territory. one way to conceptualise the situation is to say comparatively modest investment of time and resources in positivistic enquiries is repaid with shallower insights, although more of them an interesting (and provocative) way to characterise quantitative research perhaps. in parallel, the vanguard of interpretive accounting researchers also had to become acquainted with a journal of business models (2019), vol. 7, no. 2, pp. 31-36 34 number of theoretical perspectives that cohered with qualitative research. as noted earlier this required them to engage with sociology, albeit not only sociology. this in turn meant they had to understand the relationship between two generic types of sociological theory. the first type of theory might be designated substantive theory, or as it has recently been designated domain theory lukka and vinnari, 2014; baxter and chua, 2006). such theory would encompass knowledge and understanding of some phenomenon, say, adolescent deviance or accounting (system) change, built up over time, refined, amended, etc. by contrast with the second type of theory, method theory is more difficult to comprehend. method or framing theory names those theoretical perspectives, or ways of seeing, that are available to observe or frame enquiries. the idea that it was possible to see things differently depending on what framing theory you decide to use is initially a difficult one, as is the complementary observation that a way of seeing is also a way of not seeing. a number of framing theories were available to the pioneering interpretive accounting researchers including symbolic interactionism, the action frame of reference and ethnomethodology (cf burrell and morgan, 1979). by the end of the 1980s accounting researchers had generated a corpus of valuable insights on how accounting is accomplished in action, most of which bear scrutiny to the present day, e.g. berry, capps, cooper, ferguson, hopper and lowe (1985). by this time the dominant framing theories within interdisciplinary and critical accounting research were of a more politically radical nature, and widely informed by marxist theory (roslender, 2017). consistent with the philosophy of praxis that underpins such framing theories, its purveyors were not simply documenting accounting in action. they were committed to identifying its negative attributes as a basis for rethinking accounting as a positive, progressive force. instead to seeking to use the insights gained from their enquiries to fashion ‘better’ accounting, which like the methodology of positivism was the default mainstream position, radical (critical) accounting researchers envisaged the creation of a ‘better’ society in which accounting theory and practice played an important role. thirty years later this critical tradition continues to attract younger accounting researchers although it is no longer the dominant force that it was in the 1980s and 1990s. a similar arrangement also exists in several other management disciplines. the performative approach, together with the practice approach to accounting research, and that sometimes designated foucauldian research, are components of a generic postcritical turn that originates in the mid1980s and has dominated accounting research since the turn of the century. the term ‘postcritical’ is fiercely contested by many scholars who would claim that they are part of a progressive movement that necessarily differs from its critical counterpart. less contentiously it is possible to recognise in performative and similar postcritical approaches a return to an interpretivist methodology realised via case studies and field studies that make extensive use of qualitative research methods and techniques to provide the rich detailed knowledge and understanding that defines such endeavours. discussion and conclusions a decision to engage in performative research on business models has the consequence of propelling many researchers into a new habitat largely alien to them. performative research is research in the tradition of social science, one that places greater emphasis on explanation and understanding than on prediction and hypothesis testing. it is research that results in the provision of partial knowledges that deny closure, thereby giving rise to what many would recognise as disorganised and frequently internally contradictory knowledge and understanding. although there is no ban on attempts to organise or codify this knowledge and understanding, such exercises can never be considered to be final. the next piece of research has the capacity to fundamentally challenge what we know and understand. for those with a traditional intellectual formation, in which the arrangements associated with the physical sciences predominate, this can be an uncomfortable place. performative research, together with parallel research that enrols alternative framing theory-based enquiries, is not to be understood to be work designed to contribute to the stock of managerialist or normative knowledge, in the first instance at least. the latter sort of knowledge is widely prized by practitioners, especially managers, providing them with answers or solutions journal of business models (2019), vol. 7, no. 2, pp. 31-36 35 (prescriptions). performative research approaches and techniques might be conceptualised to form one element of the toolbox for business model (in action) enquiries, as opposed to a chapter(s) in the cookbook for such enquiries. this does not mean that we have two separate stocks of knowledge and understanding that do not come together. performative research has the capacity to enhance cookbook knowledges, often by the act of contesting that knowledge, by being more focused on posing questions rather than seeking (correct) answers. a final observation is arguably the most challenging of all. borrowing ideas from a different discipline to inform and underpin research enquiries in a field such as business models is a demanding exercise. engaging with a performative research approach is not actually something that can be done in isolation. as noted earlier in the paper, any way of seeing is at the same time a way not seeing. it is therefore important that a researcher choosing to research business models from a performative perspective is aware of why s/he has identified it as the preferred option. this inevitably necessitates an investment of time and resources, in addition to those invested in actually pursuing and concluding the research. it is also important to avoid combining different approaches in an uninformed way, thereby potentially undermining the rigour demanded of social scientific enquiries. arguably the greatest temptation of all lies in borrowing the terminology or discourse of a particular framing theory (ies) and liberally peppering the resultant narrative with concepts that may be valued for their currency rather than insights they afford. journal of business models (2019), vol. 7, no. 2, pp. 31-36 36 references baxter, j. and w.f. chua. (2006). “reframing management accounting practice: a diversity of perspectives”, in a. bhimani (ed): contemporary issues in management accounting, oxford: oxford university press. berry, a., capps, t., cooper, d.j., ferguson, p., hopper, t. and e.a. lowe (1985). “management control in an area of the ncb: rationales of accounting practices in a public enterprise”, accounting, organizations and society, 10(1): 3-28. boedker, c. (2010). “ostensive vs performative approaches for theorising accounting-strategy research”, accountiong, auditing and accountability journal, 23(5): 595-625. bourdieu, p. (1977). outline of a theory of practice, cambridge university press. burrell, g. and g. morgan. (1979). sociological paradigms and organisational analysis, london: heinemann educational books. hopwood, a. (1976). “editorial”, accounting, organizations and society, 1(1):1-4. latour, b. (1986). “the powers of association”, in j. law (ed): power, actions and belief: a new sociology of knowledge, london: routledge and kegan paul. lukka, k. and e. vinnari, (2014). “domain theory and method theory in management accounting research”, accounting, auditing and accountability journal, 27(8): 1308-1337. nielsen, c, et al. (2018). “depicting a performative research agenda: the 4th stage of business model research, journal of business models, 6(2): 59-64. roslender, r. (2017). “structural marxism”, in r. roslender (ed): the routledge companion to critical accounting, london: routledge. whittington, r. (2005). “strategy as practice”, long range planning, 29(5): 731-735. journal of business models (2020), vol. 8, no. 1, pp. 1-6 1 radical resource productivity as an inspiration for business model innovation: the case of foodchain dror etzion associate professor, strategy and organizationarea, desautels faculty of management abstract radical resource productivity (rrp) is a design and engineering approach to manufacturing that can potentially yield dramatic improvements in energy and material efficiency, and thus contribute to sustainability. this study explores whether the rrp can also be a source of business model innovation in the service sector. an application of rrp in a restaurant in montreal is presented, and analyzed by means of an activity map. the case suggests that activity maps can be employed to design business models that promote sustainability through pursuit of radical resource productivity. please cite this paper as: etzion, d. (2020), radical resource productivity as an inspiration for business model innovation: the case of foodchain, vol. 8, no. 1, pp. 1-6 keywords: radical resource productivity, business model innovation, service sector, restaurant, activity map, sustainability introduction of the many business model templates devised to promote sustainability, one group focuses on principles of eco-design, in particular efforts to “maximize material productivity and energy efficiency ’’ (lüdekefreund et al., 2018: 153). this objective is appealing and uncontroversial because less waste contributes to sustainability while at the same time reducing costs and thereby improving profitability. efficiency efforts are part and parcel of the quotidian work of designers and engineers, and can easily generate incremental improvements throughout value chains. but, in some instances, concerted, systemic efforts to maximize efficiency can yield ten-fold improvements in material and energy productivity (robèrt, et al., 2002), aligned with the levels of decarbonisation and dematerialization required to attain the sustainable development goals. journal of business models (2020), vol. 8, no. 1, pp. 1-6 2 the promise of radical resource productivity (rrp) as a trigger for breakthroughs in design and production was a cornerstone of the book natural capitalism (hawken et al., 2000), an influential tract on sustainability, design, engineering and the economy. perhaps the most elegant example provided in the book detailing how such a breakthrough can be attained is the “hypercar”, a dramatic departure from the dominant design of automobiles. the key insight behind the hypercar was the decision to make it extremely lightweight. the hypercar was built of carbon fiber, rather than steel. this initial weight reduction made possible further weight reduction, because the suspension and other support mechanisms required for a heavy car were either eliminated or minimized. as the car became lighter, entire systems could be jettisoned entirely, such as electric steering and power brakes, further reducing the weight. with a lighter car, the original engine size became unnecessary, and the traditional internal combustion engine made way for small electric engines placed near the wheels. together, these choices, which cascaded from the initial decision to build a car from carbon fiber, led to a profoundly different, much more sustainable car design. to date, examples of rrp demonstrate its potential in material and energy-intensive production processes in manufacturing, and in buildings. whether rrp can yield high-impact improvements at smaller organizations, or in the service sector, is unknown. this paper examines whether the precepts of radical resource productivity can inspire business model innovation in nonmanufacturing contexts. approach the food system is widely recognised as critical to planetary sustainability (foley, et al., 2011). it is characterized by widespread inefficiencies and waste, throughout the value chain (gustavsson, cederberg, & sonesson, 2011). in developed countries, food waste is of particular concern in the later stages of the value chain, and in particular at consumer households, the retail sector, and the hospitality industry. in some markets, public awareness of food unsustainability is increasing, and restaurateurs both respond to and stoke demand for responsibly sourced, healthy, fresh fare, conveniently provided, with little to no associated waste. as they engage with these trends, restaurateurs pursue different competitive positions and business models to signal that they engage seriously with environmental responsibility (salmivaara, & lankoski, 2019). foodchain (https://eatfoodchain.com/en) is one such restaurant. it is a fast-casual restaurant, founded in 2018 by an experienced, award-winning executive team consisting of two chefs, a boulanger, a designer and a management consultant. foodchain’s primary business is to serve uncooked, vegetable-based meals – salads – to people in the dense downtown core of montreal. the restaurant is vegetarian, but does not explicitly declare itself “sustainable”, nor does it attempt to pursue a differentiation strategy based on organic fare. foodchain was initially studied with the purpose of preparing a teaching case (etzion, in press). the protagonist of the case is the co-founder and managing partner of foodchain, who oversees strategy and is responsible for day-to-day operations. the managing partner was interviewed three times, and he presented the company’s strategy and business model twice in classroom settings. field observations at the restaurant were conducted at an average rate of once a week for three months, at different times of day. during these visits, employees were observed and interviewed as they performed their tasks, and the managing partner provided additional clarification about specific operational points. foodchain provided access to internal company documents outlining marketing, strategy and financials, as well as a confidential pitch deck for investors. a draft of the teaching case was submitted to foodchain for verification, and was reviewed by the managing partner, his direct reports, and a shareholder. after corrections, the draft was reviewed once again by the managing partner, and authorized. for this paper, the teaching case data were used as reference material, and re-analysed with an intent to understand foodchain’s business model through an rrp lens. this analysis mainly makes use of data about foodchain’s efforts to tackle waste in its supply chain, in its operations, and in the choices and actions of its customers. the objective is to understand the effects that these waste-minimization efforts had on the business model that emerged. as will be elaborated below, foodchain did not devise a new business https://eatfoodchain.com/en journal of business models (2020), vol. 8, no. 1, pp. 1-6 3 model template (lüdeke-freund et al., 2018), yet, implementing rrp has generated substantial operational efficiencies, and has also shaped the manner in which foodchain engages with its suppliers, customers, and employees, thereby yielding business model innovation within an existing template. key insights the initial rrp design choice which drove subsequent components of foodchain’s business model is a piece of machinery called a robot-coupe. robot-coupes are industrial-grade food processing machines often found in large kitchens and major food preparation centres to quickly slice large amounts of raw materials. it is rare to see more than one in a kitchen. foodchain has eight: one for each salad on the menu. this means that foodchain can produce food very quickly. the machines are simply loaded with all the vegetables required for each serving of a specific salad and processed in one batch. the ingredients for each batch are washed, peeled, weighed and portioned previously, ready for processing in one bowl kept in refrigeration. because each machine is dedicated to only one salad, there is no need to wash the machines between servings, and the bowl that holds the uncut vegetables is used to collect the sliced ingredients as they exit the robot-coupe. slicing occurs only after an order is placed, so that a salad is prepared and served extremely fresh, under 90 seconds from when it was ordered. the decision cascade triggered by the initial choice of the robot-coupe is described in table 1. however, other important aspects of the business model do not cascade from this choice. for example, cash is not accepted. all purchases are transacted with either credit or debit cards. this makes the transaction process faster and the restaurant more secure, because there is no cash on the premises, but does require robust fallback procedures in case payment systems go down. other waste-elimination efforts occur in the postconsumer phase. foodchain recognizes that individuals often err in sorting waste into separate streams for waste, recycling and trash. therefore, except for glass beverage bottles, all containers and utensils are made of fully compostable materials. thus, there are only two streams of waste: bottles and everything else. choice rationale and implications no meat meat cannot be chopped in the same machine as vegetables because of food safety concerns, and also because its texture is unsuitable; it cannot be sliced effectively. foodchain’s positioning as vegetarian derived automatically. no cooking if there is no meat in the restaurant and it is vegetarian, there is a possibility to not cook at all. and in fact, raw food and especially firm fruits and vegetables such as cauliflower, mushrooms, apples and cucumbers are the most suitable ingredients for the machine. if there is no cooking, there is no need for exhaust piping and ventilation systems to be installed and maintained. in terms of future expansion, any commercial space can potentially be a foodchain site, whereas other restaurants must consider building specifications and ventilation feasibility. minimalist menu to minimize food preparation times, washing of the machines between servings is unfeasible. each salad therefore requires a dedicated machine, meaning that the menu has to be small. this simplifies kitchen operations vastly. to ensure streamlining, the restaurant enforces a no modifications policy; customers cannot ask for any changes to how a menu item is prepared. overall, equipment and staff in the restaurant are always ready to prepare each menu item with no lead time, leading to very few delays in the busy lunch hour. table 1: activities directly deriving from the choice to employ robot-coupe machines. figure 1 presents foodchain’s discreet design choices in an activity map (porter, 1996). the robot-coupe choice is highlighted. major choices are presented in dark blue. the activity map depicts the extent to which the choices are interconnected and comprise a compelling business model pattern (cf. joyce & paquin, 2016). at the same time, the diagram makes apparent the cascade of choices made possible through rrp. notably, the “no cash” choice is only weakly linked to the other main nodes. the “no waste” choice is linked to journal of business models (2020), vol. 8, no. 1, pp. 1-6 4 the choice of using a robot-coupe because it reduces cleaning, but this is a relatively minor linkage. the managing partner at foodchain, a former management consultant, emphasizes that running a restaurant is challenging because it is essentially “just-in-time manufacturing with a retail front using perishable items with very fluctuating demand”. figure 1 reveals that the nodes that represent manufacturing (i.e. food preparation) – no meat, no cooking, minimalist menu – are more interconnected and cascade directly from the robot-coupe initial design choice. by contrast, the nodes that represent the post-manufacturing phase of the value chain – no waste, no cash – are less linked to the robot-coupe, and less densely interlinked overall. discussion and conclusions the foodchain business model suggests that applying the principles of rrp to small businesses can promote sustainability through business model innovation. not unexpectedly, the benefits of this approach are more apparent in the earlier, manufacturing-like stages of the value chain in a restaurant, and less so in the postproduction phase. intuitively, it indeed seems more difficult for rrp to yield the same gains in aspects of the business that are farther removed from the operational core. retail has many more “degrees of freedom” than manufacturing. both rrp and strategy are built on the notion that it is the connection between choices that determines success: not just the choices independently, but more importantly the tightness of the linkages between them and their density. as demonstrated in this paper, activity maps, an important component of the strategy toolkit, can help distill the essence of a business models, and uncover potential inconsistencies. future research can further investigate the use of activity maps as a visualization tool (täuscher, & abdelkafi, 2017) for designing impactful business models for sustainability. currently, they seem to stand apart from the tools typically employed for business model generation (e.g. osterwalder & pigneur, 2010).                 figure 1: foodchain activity map. journal of business models (2020), vol. 8, no. 1, pp. 1-6 5 another desirable next step would be the development of a practical tool for sustainability-oriented managers (vladimirova, 2019) that can help them work through the choices they need to make to create tight linkages between activity map nodes in a way that optimizes rrp. an even more ambitious goal is to develop a tool to rigorously assess the compatibility between nodes and quantify the strengths of linkages between them. it may be possible to employ simple scores, even a likert scale, to assess the meaningfulness of each link in an activity map, and then employ measures from network theory to quantify the productivity gains that can ensue for the business model in its entirety. journal of business models (2020), vol. 8, no. 1, pp. 1-6 6 references etzion, d. (in press). foodchain: the power of lean. sage business cases. foley, j. a., ramankutty, n., brauman, k. a., cassidy, e. s., gerber, j. s., johnston, m., mueller, n. d., o’connell, c., ray, d. k., & west, p. c. 2011. solutions for a cultivated planet. nature, 478, 337-342. gustavsson, j., cederberg, c., & sonesson, u. 2011. global food losses and food waste: food and agriculture organization of the united nations. hawken, p., lovins, a. & lovins, l. h. 2000. natural capitalism: creating the next industrial revolution, new york, ny, back bay. joyce, a., & paquin, r. l. 2016. the triple layered business model canvas: a tool to design more sustainable business models. journal of cleaner production, 135, 1474-1486. lovins, a. 2013. reinventing fire: bold business solutions for the new energy era, chelsea green publishing. lüdeke-freund, f., carroux, s., joyce, a., massa, l. & breuer, h. 2018. the sustainable business model pattern taxonomy—45 patterns to support sustainability-oriented business model innovation. sustainable production and consumption, 15, 145-162. osterwalder, a., & pigneur, y. 2010. business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons. porter, m. e. 1996. what is strategy? harvard business review, 74, 61-78. robèrt, k.-h., schmidt-bleek, b., de larderel, j. a., basile, g., jansen, j. l., kuehr, r., thomas, p. p., suzuki, m., hawken, p., & wackernagel, m. 2002. strategic sustainable development—selection, design and synergies of applied tools. journal of cleaner production, 10, 197-214. salmivaara, l., & lankoski, l. 2019. promoting sustainable consumer behaviour through the activation of injunctive social norms: a field experiment in 19 workplace restaurants. organization & environment. täuscher, k., & abdelkafi, n. 2017. visual tools for business model innovation: recommendations from a cognitive perspective. creativity and innovation management, 26, 160-174. vladimirova, d. 2019. building sustainable value propositions for multiple stakeholders: a practical tool. journal of business models, 7(1): 1-8. journal of business models (2021), vol. 9, no. 3, pp. 25-38 25 teaching business models through student consulting projects philippe massiera1 abstract purpose: this article aims to share practical insights regarding the changes implemented between 2016 and 2018 in a consulting programme implemented in a french business school that involves 200 to 250 bachelor’s students on a yearly basis. for five weeks, students work as consultants assisting up to 40 local entrepreneurs with the objective to strengthen the coherence and value of their business model. design/methodology/approach: single case study findings: experiential approaches to teaching business models remain very demanding in terms of organization and follow-up. based on our experience, we provide reflections about the pedagogical curriculum, useful tips for the enrolment of entrepreneurs and details about the evaluation process. we also highlight how the introduction of a business model development tool dramatically improved the overall consistency of the consulting project from both the pedagogical and managerial perspectives. originality/value: existing literature on consulting programmes predominantly focuses on consulting projects involving small businesses. when implemented with entrepreneurs, such out-of-the-classroom teaching approach is a fruitful but demanding avenue. by sharing our experiences, we expect to document helpful recommendations which could contribute to widen its adoption. please cite this paper as: massiera, p. (2021), teaching business models through student consulting projects, vol. 9, no. 3, pp. 25-38 keywords: entrepreneurship education, business model, student consulting projects, business model development tool. acknowledgement: the author would like to thank the two anonymous reviewers as well as the editorial team for their helpful comments and suggestions. 1 université du québec à montréal doi: https://doi.org/10.5278/jbm.v9i3.2580 issn 2246-2465 https://doi.org/10.5278/jbm.v9i3.2580 journal of business models (2021), vol. 9, no. 3, pp. 25-38 26 introduction in the field of entrepreneurship education, the increasing use of experiential assignments highlights the development of a “learning by doing” pedagogy (kuratko et al., 2015). in contrast to pedagogies dedicated to “learning to become an entrepreneur” (e.g., business plan design exercises, simulations or creative projects), which are acknowledged for fostering the acquisition of business-model skills (gedeon, 2014; morris, 2014), business model consulting projects are dedicated to raising entrepreneurial attitudes among students (bechard and gregoire, 2005; kenworthyu’ren et al., 2006). this out-of-the-classroom teaching approach is a fruitful but demanding avenue that requires better documentation. the existing literature predominantly focuses on consulting projects involving small businesses (pittaway et al., 2007, winke et al., 2013), which may explain why this innovative pedagogy is still not more widely implemented with entrepreneurs (morris, 2014). to contribute to the literature, this article aims to share practical insights regarding the changes implemented between 2016 and 2018 in a consulting programme implemented in a french business school that involves 200 to 250 bachelor’s students and up to 40 local entrepreneurs yearly. the paper is organized as follows. we start by presenting the objectives and specificities of the reproductive pedagogical approach, followed by the selection process and the organization of the consulting project. finally, we share some reflections regarding its application and describe the main pitfalls, learning outcomes and avenues for improvement. pedagogical approach context and objectives regularly ranked among the best french business schools in entrepreneurship, edc paris has nurtured a unique entrepreneurial dna as evidence by 15 to 20% of the students creating their own companies (or taking over a family business) before or immediately after completing their master’s degree. if the school primarily targets potential entrepreneurs and future managers (kirby, 2004), the pedagogical curriculum is distinguished by the importance given to experiential learning and the emphasis given to the entrepreneurial phenomena. the highlight of this entrepreneurial culture is the implementation of a business model consulting project (bechard and gregoire, 2005; kenworthy-u’ren et al., 2006). once a year, for five weeks at the end of their second year of the undergraduate programme (bsc/ba), 200 to 250 students work as consultants assisting local entrepreneurs with the objective to strengthen the coherence and value of their business model (fletcher, 2018). implemented pro bono, these consulting projects can be defined as a “service-learning” oriented pedagogy (samwel mwasalwiba, 2010) as they aim to respond “to communityidentified needs and opportunities” (kenworthy-u’ren et al., 2006, p. 121). from a pedagogical perspective, this experiential assignment is primarily dedicated to raising an entrepreneurial attitude among the students and allowing the students to use their knowledge and skills related to the business model concept in real cases. scope of the consulting project during the consulting project, students are placed in a situation in which they compare their ideas, thoughts and analyses with those of local entrepreneurs without the need to be involved in the entrepreneurial process. the knowledge and skills acquired by the undergraduate students can be valuable as they provide a more structured and academic approach to business problems than entrepreneurs (heriot et al., 2008). the consulting projects specifically target entrepreneurs during the “integration phase” of their creation process (frankenberger et al., 2013). this period effectively offers a perfect match between the entrepreneurs’ expectations and the pedagogical objective, which is to allow students to use the knowledge, methods and tools they learned in their first two years of school. on the one hand, entrepreneurs must develop a business model that specifies all relevant aspects of their project in a holistic way to communicate and analyse the coherence of the strategic choices and economic sustainability of their projects. however, many entrepreneurs tend to underestimate the problems associated with the need for completeness and coherence, which frequently entails the overall legitimacy of the entrepreneurial project (kuratko et al., 2017; malmström, 2017; shafer et al., 2005). on the other hand, students assist local entrepreneurs by identifying and addressing possible missing information or flawed assumptions that could undermine the overall credibility of the entrepreneurial project. however, the consulting project is not journal of business models (2021), vol. 9, no. 3, pp. 25-38 27 tailored to addressing the needs of entrepreneurs during the ideation phase or the later stage of the integration phase (described in the table below). the “learning by practice” approach adopted by the consulting project has limited value and interest during the ideation phase when entrepreneurs are still in a reflexive state attempting to identify a business opportunity by sorting through the multitude of ideas and projects they have contemplated. consequently, students face original problems that are not defined a priori, leading to an endless display of options. at the opposite end of the continuum, the project does not target entrepreneurs who are already very advanced in the creation process because their expectations can often lead to a level of expertise that exceeds the knowledge and skills of undergraduate students at the end of their two-year programme. preliminary knowledge and business model development tool prior to the consulting project, students must complete a mandatory business model course. after being sensitized to the context of venture creation, the students are familiarized with the different stages of the entrepreneurial process and the individual specificities of an entrepreneur (e.g., profile, entrepreneurial orientation, entrepreneurial expertise and effectuation) before learning about the basic strategic and financial skills necessary to be able to properly design and assess a business model (morris and liguori, 2016). the curriculum was revamped in 2016 to improve the coordination between the strategic and financial contents. using the business model “integrated framework” (morrish et al., 2005), the learning goals and curriculum content were framed within two separate overlapping modules taught by two different teachers (see table 2 below). the business model curriculum is designed to prepare students to assume the role of an expert as they will have to manage the entrepreneur through skills and technique transference (sadler 1998). however, considering the relative youthfulness and lack of consulting expertise of the students, a possible gap may arise between the expectations of the client and the work carried out by the students. considering that the elaboration and validation of a business model represent a complex cognitive and rational process by nature, an online business model development software was introduced in 2016 to increase the ability of the students to reproduce and apply the knowledge and methods acquired during the business model course. after performing a comparative study, the choice was made to use the cci business builder platform (see annexe b). as illustrated in the figure below, this ready-to-use online tool provides many useful options related to the integration phase of the entrepreneurial process within a unique logical flow as follows: • several individual self-assessment grids related to the evaluation of an entrepreneur’s attitude and intention, • two business model visualization tools for the analysis of the lean canva (maurya, 2012) and the business model canva (osterwalder and pigneur, entrepreneurial process ideation phase integration phase consulting project audience out of scope scope of consulting project out of scope main objectives generating and selecting creative ideas regarding how to innovate the current business model developing a complete and consistent business model that holistically specifies all relevant aspects detailed formalization of the business plan entrepreneurs’ main interests facilitation of the emergence of the idea selection of a business opportunity validation of the overall coherence of the business model validation of the overall viability of the project formalization of the industrial, marketing or financing strategy validation of the tax strategy table 1: scope of the consulting project journal of business models (2021), vol. 9, no. 3, pp. 25-38 28 2010) (see szopinski et al., 2019 and täuscher et al., 2017 for further information regarding the business model development and visualization tools), and • a business plan management tool that includes several writing pads and computation modules that ease the presentation of the strategic and financial core components of a business plan. organization of the consulting process the student consulting project minimally includes the following three key stages: the initiation phase involving the enrolment of entrepreneurs, the execution phase of the consulting mission and, finally, the evaluation phase (heriot et al., 2008, lycko and galanakis, 2019). enrolment of entrepreneurs similar to all service-learning-oriented pedagogies, the quality of students’ consulting projects depends on the motivation and willingness of all parties to collaborate, and a major challenge from the quantitative and qualitative perspectives is the enrolment of entrepreneurs, i.e., “the clients” (heriot et al., 2008). to ensure enough time for the identification and recruitment of up to 40 projects, the selection starts five months in advance. this prospecting phase is most often carried out through direct and indirect promotional actions (e.g., through participation in entrepreneur fairs in paris) and by establishing close relationships with local community partners likely to support entrepreneurs (e.g., accelerators and incubators). to ensure that their expectations match the scope of the business model consulting projects, a self-evaluation grid modules learning goals curriculum content strategic module ability to assess the time, scope and size ambitions of the project strategy of the firm value, vision and mission of the firm identity and culture of the firm ability to assess the demand and identify a specific clientele customer information and interface customer segmentation and potential ability to assess the competitive advantage market structure and competitor analysis differentiation strategy value proposition and customer benefits ability to identify the source of the competitive advantage tangible resources/assets capabilities/competencies brands portfolio and firm reputation customer relationship ability to define how value is created process/activity organization information flows product/service flows value network (suppliers) financial module ability to demonstrate how the business makes money sales forecasting revenue/pricing strategy design of the revenue stream break-even analysis and cost forecasting income statement start-up capitalization and cash flow projection initial balance sheet investment plan table 2: business model course: modules, learning goals and curriculum content journal of business models (2021), vol. 9, no. 3, pp. 25-38 29 was specifically developed for the staff in charge of contacting potential clients (see appendix b). first, entrepreneurs are invited to complete an application form in which they describe their projects and expectations regarding the coherence and viability of the project. second, these applications are reviewed, and the applicants are personally contacted by the programme coordinator. the main issue is to ensure that the expectations of both parties are compatible, particularly regarding the difficult balance between the expectations of the entrepreneurs in terms of advice and deliverables and the educational expectations. if an agreement is found, the entrepreneurs receive a contract proposal which explains in detail the objectives, figure 1: screenshot of the cci business builder development tool journal of business models (2021), vol. 9, no. 3, pp. 25-38 30 timeframes and nature of the deliverables, obligations of the school in terms of confidentiality, etc. in return, the entrepreneur commits to sharing necessary information, including financial information, and dedicating enough time to the students. two weeks before the start of the mission, all selected entrepreneurs are invited to attend a two-hour presentation delivered by the programme coordinator during which the objectives and schedule of the mission are presented and discussed (see cook et al., 2005 for further guidance regarding this aspect). implementation of the consulting project as described in table 3, the consulting project process can be defined as a “micro-one” as it is performed within a relatively narrow timeframe (heriot et al., 2008, lycko and galanakis, 2019). the first week is dedicated to establishing a trusting relationship with the entrepreneur and developing a good understanding of the project. the week starts with a formal meeting between the entrepreneurs and the assigned team. the composition of the teams of 4 to 6 individuals is generally left to the free discretion of the students but cannot be changed once established. within each team, one student is appointed as a coordinator to serve as the interface between the entrepreneur and the team and between the team and the school. once this contact has been made, the teams are free to determine the frequency of meetings and their working method at their convenience. to foster their project management abilities, at the end of the week, each team must submit a report presenting the main issues to be addressed and the different milestones and deliverables scheduled for the remaining five weeks (1). during weeks 2 and 4, two follow-up one-hour tutoring sessions are organized under the supervision of two faculty instructors paired in complementarity to follow the progress of the project and assist the students with their strategic and financial assessment. as detailed by cook et al. (2005), the instructor acts as a facilitator who helps the teams structure their analysis and eventually assists them in recalling the conceptual and methodological fundamentals discussed in class. the first session is dedicated to the identification of flawed assumptions regarding the strategic and marketing core dimensions of the business model and the time, scope and size ambitions of the project. the second session is dedicated to the identification of flawed assumptions related to the financial projections and assessment of the financial viability of the project. at the beginning of each tutoring session, the teams must electronically submit a working document summarizing (i) the progress of the work carried out to date, (ii) a work schedule describing the main steps to be taken, and (iii) a list of the questions to be addressed during the tutoring sessions (2, 3). during the entire consulting project, the teams are invited to use the business model development tool. as previously described, the platform provides many tools that are particularly relevant for project analysis, especially during the incubation phase. through the platform, the teams and clients share a common repository to save information online. like a checklist, the step-by-step analytical framework follows a logical sequence that eases the generation, dissemination and analysis of the information and co-production process of the final deliverables. for each core section of the business model/business plan analysis, the teams and clients can also access various videos and online tutorials. week 1 initiation and reading week 2 tutoring session 1 week 3 project analysis week 4 tutoring session 2 week 5 conclusion initial meeting with entrepreneurs gathering and analysing information defining the problem  1  2 strategic assessment: competition market acceptance sales scenarios key success factors operating cost key partnership and resources  3 financial assessment: breakeven analysis funding requirements  4 oral presentation table 3: timeline of the students’ consulting projects journal of business models (2021), vol. 9, no. 3, pp. 25-38 31 project completion at the end of the five-week mission, each team must submit a final written report of approximately sixty pages in length (4) and present a final one-hour oral presentation. the students present their conclusions and recommendations for 20 minutes. subsequently, 20 minutes are allocated for a q&a session, 10 minutes are allocated for a jury deliberation (held behind closed doors) and 10 minutes are allocated for a final discussion during which the jury deliberations are presented. the jury comprises academic and non-academic representatives as follows: two teachers, including the instructor in charge of monitoring the strategic aspects, and at least one representative from the private sector. these representatives must have an entrepreneurial background and are most often enrolled among the alumni community. this bond of trust facilitates both the recruitment and confidentiality of the discussions. however, to avoid any conflicts of interest, the representatives must be recruited from a different industrial sector. our experience demonstrates that their presence contributes to emphasizing managerial expectations in terms of content and presentation. evaluation the final grading of the assignment, which represents the equivalent of approximately one hundred hours of personal work, is computed by summing four scores weighted as follows: 20% for the strategic and financial tutoring sessions (10% each), 10% for the final written report, 50% for the final oral presentation and 20% for the client’s final evaluation. formal rating grids were developed to standardize the evaluation process to the greatest extent possible. after each tutoring session, the faculty instructor assesses the progress and quality of the consulting project and the attitude and behaviour of the students based on the following criteria: • quality of the summary sheet • listening skills • consistency of the analysis • project progress • relevance of the questions asked • compliance with the methodology • mastery of knowledge • team cohesion if the evaluation of the final oral presentation is completed straightaway by the jury, the final written report is evaluated by the programme coordinator within two weeks. in both cases, particular attention is paid to the quality of the writing in terms of spelling and clarity, and the formal evaluation considers the following criteria: • robustness of the academic knowledge • ability to collect, synthesize and exploit information • project understanding and presentation (market and company) • consistency of the analyses • relevance of the recommendations considering the specificities and importance of the oral presentation, a specific grid was developed to evaluate the quality of the communication skills based on the following criteria: • timing compliance • listening and communication skills • team cohesion • verbal expression, conviction and argumentation while the students are evaluated collectively, we agree with the recommendations by teckchandani and khanin (2014), who suggest using individual assessments. in our case, this individual evaluation occurs at the end of the final presentation. the students have the opportunity to suggest to the jury that additional points should be awarded to a specific member of the team in recognition of specific contributions. regarding the evaluation provided by the client, we strive to maintain a clear demarcation with respect to the academic evaluation. prior to the presentation, the clients must provide their own specific rating form, which includes details regarding the following criteria: attitude and behaviour: • communication abilities • involvement and motivation • compliance with instructions • team spirit • organizational skills journal of business models (2021), vol. 9, no. 3, pp. 25-38 32 attitude: • analytical skills • synthesis capabilities • initiative curiosity • responsiveness and adaptability • project understanding the entrepreneurs who attend the presentation are required to not interfere and remain neutral until this very last moment during which they are invited to conclude by giving an opinion and viewpoint of the work carried out by the students. this delimitation and the relative weight given to the client’s assessment are the result of two intentions. first, the weight of the academic evaluations recalls that the consulting mission has a pedagogical purpose, and the quality of the consulting activities represent a secondary objective. considering the various challenges involved in student consultancy projects, the intent was also to protect the students from the risk of an arbitrary assessment (cook et al., 2005, lycko and galanakis, 2019). discussion pitfalls this pedagogical approach to teaching business models offers students the opportunity to better understand what it means to start a business through a real case but remains very demanding in terms of organization and follow-up. despite all efforts, from the pedagogical and organizational perspectives, it remains difficult to ensure that each entrepreneur experiences a certain level of satisfaction given the number of projects to be supervised, their heterogeneity in terms of maturity and industry specificities and non-rational and affective dimensions, which are intrinsic to the entrepreneurial orientation. as previously described, the volume of projects is important, and the standard deviation within the same cohort of projects can be significant regarding the maturation of the entrepreneurial process or the willingness of the entrepreneur to invest enough time and effort to work in cooperation with the students. sometimes, the gap between the students’ skills and industrial knowledge required and the heterogeneity within student teams in terms of understanding, abilities and behaviour make it difficult for students at this level of study to fully address the entrepreneur’s expectations. second, an important commitment in terms of time and effort is required from all constituencies, including the school, faculty instructors, students and especially the entrepreneurs (cook et al., 2005). in this context, the competences and implications of the faculty instructors who are in charge of the tutoring sessions remain among the most important key success factors. ensuring access to this very specific resource is even more difficult since in addition to the relative scarcity of entrepreneurship professors, the individual in charge of the tutoring session must be able to reconcile theory and practice and provide advice and recommendations without directly interfering with the relationships between the students and the entrepreneurs (cook et al., 2005). lessons learned despite all these challenges, our experience demonstrates that the changes applied in 2016 contributed to achieving a better alignment between theory and practice and increased the overall consistency of the consulting project. first, the evolution of the business model curriculum has demonstrated that the selection and structuring of the subjects to be taught were important success factors (samwel mwasalwiba, 2010). our experience particularly demonstrates that the use of the business model “integrative framework” proposed by morrish et al., (2005) helped clarify the articulation between the strategic and financial modules. the structuring of the learning goals based on the six core components described in table 2 greatly facilitated the learning process of the knowledge necessary for being able to assess the coherence of the project, particularly during the integration stage of the entrepreneurial process (malmström, 2017; shafer et al., 2005). second, we found that the introduction of a business model development tool dramatically improved the overall consistency of the consulting project from both the pedagogical and managerial perspectives. from the academic perspective, our experience demonstrates that the use of a digital representation of the lean canva and the business model canva fostered the adoption of a systemic thinking perspective (olofsson and farr, 2006) and helped the students approach the issues holistically (heriot et al., 2008). we also noticed that the structuring of the analytic flow into a logical order and the possibility of deepening the details of each sub-section of journal of business models (2021), vol. 9, no. 3, pp. 25-38 33 the core components of the business model (malmström, 2017) allowed a faster and better alignment between the pedagogical objectives and the managerial expectations and a greater homogeneity among the deliveries. the implementation of the platform greatly eased intelligence generation and the collaboration and sharing of knowledge related to the core elements of a business model. considering the challenges related to the generation of knowledge that is hetero-finalized jointly by the students and the entrepreneur (bayad et al., 2010), the normative dimension of the platform facilitated the overall co-construction process between the teams and their clients and between the teams and the faculty instructor. the check-list approach helped the students uncover missing information or flawed assumptions prior to the tutoring sessions (ebel et al., 2016; szopinski et al., 2019) and facilitated the identification and explanation of the strategic inconsistencies prior to the two tutoring sessions. by homogenizing the reports and dissemination of information, the use of a common platform considerably helped the professors conducting the tutoring sessions follow up progress and take corrective action and the programme coordinator in the assessment of the final report. from the managerial perspective, the step-by-step analytical framework dramatically contributed to limiting the space for inventive and entrepreneurial approaches and limiting the tensions between the pedagogical objectives and managerial expectations. we discovered that the use of a business model development tool contributed to allowing a faster and better alignment between the pedagogical approach, which is “data rich, rational and linear”, and the pragmatism of the entrepreneurial orientation, which is more “iterative, creative, actionfocused data poor and even emotional” (morris, 2014, p. 8). consistent with several authors who recalled the challenges related to the implementation of student team consulting projects (cook et al., 2008, heriot et al., 2008, lycko and galanakis, 2019), our experience suggests that the attention paid to the initial setup and the supervision through the use of a business model online tool are both crucial best practices. limitations our experience shows that at the end of the consulting project, the students have generally strengthened their skills in many areas. however, the assessment approach suffers from two main limitations. first, the assessment is performed collectively and does not assess the development of specific individual knowledge and competencies (tardif, 2006). a proper evaluation of individual skills and competencies would involve a much more structured approach, including the ability to address the measurement process at an individual level before and after the consulting mission (walia in manimala et coll. 2017). second, a deeper examination of the formal evaluation grids reveals a stronger focus on soft skills at the expense of hard skills. indeed, most criteria aim to reflect the overall implication of the team and the following individual soft skills considered important in the entrepreneurial context: leadership and social skills, time management skills, critical thinking skills, assessment skills, problem-solving skills and communication skills, especially persuasion. in contrast, regarding hard skills, it appears that the evaluation process adopts a much broader perspective in an attempt to assess how students succeeded in adopting a rational perspective to properly assess the strategic and economic validity of the entrepreneurial project. the criteria used for the evaluation of the tutoring sessions and the formal grid used by the jury to assess the final presentation express judgements regarding the coherence and credibility of the deliveries and, to a lesser extent, the quality of the consultancy. conclusion teaching business models using a consulting-based pedagogical approach is a fruitful and demanding avenue in entrepreneurship education. the reflections of the pitfalls and limitations highlight the difficulties associated with such an approach and perhaps explain why it is still not widely used (morris, 2014). however, such experiential pedagogy provides a very appropriate perspective for the diffusion of “business model thinking” (hogan and warrenfeltz, 2003) and contributes globally to decreasing the “knowing–doing gap” (pfeffer and sutton, 2000; williams middleton and donnellon, 2014), and we humbly hope that this feedback of experience could help to widen its adoption. journal of business models (2021), vol. 9, no. 3, pp. 25-38 34 appendix a: choice criteria and comparison of popular business model visualization tools name reference bm viz. tools financial assess. tools languages web based free reference cci business builder chambre de commerce et d’industrie de paris.   french   https://business-builder.cci.fr montpellier business plan montpellier méditerranée metropole (france).  french  http://www.montpellier business-plan.com strategizer a. osterwalder (2010).  english   https://strategyzer.com grp story teller t. verstraete (2010).  french   https://storyteller.grp-lab.com detoolbox b. aulet (2013). english  https://www.detoolbox.com appendix b: selection grid i would like to have an external perspective to be able to decide between several ideas a i would like to have a recommendation of the type of tax package to be implemented e i wish to detail and validate the assumptions and figures used to demonstrate the economic viability of my project d i would like to start a business, but i do not have a clear and precise idea a i would like to identify suppliers and write a cache of charges e i want to ensure that my business model is solid c i would like to ensure that i anticipated the resources needed to carry out my project c i would like to better understand the needs and expectations of the market c i would like to obtain a list of potential customers and take advantage of the mission to start prospecting e i would like to be helped in defining what i do, my job, and my market c i want students to suggest ideas and enjoy their creativity a i would like the students to help me write the entire business model d i would like to carry out and price my communication plan e i would like to validate my financing plan and prepare my file d i would like to validate that my selling price is accepted by my target customers e i want to check that my project is solid, have a fresh perspective, and check if the students derive the same conclusions as me b i would like to have a questionnaire made to validate the interest of customers for my product and/or the acceptance of the proposed selling price e i would like to better understand my competitors and their strengths/weaknesses c i have a project but many questions as follows: which product? for whom? through which means? for which profitability? c my project has a level of confidentiality and/or expertise that is not accessible to students b analysis: • majority of “a” => the entrepreneur is in the pre-incubation phase. • majority of “b” => the entrepreneur is in a position of mistrust towards students. • majority of “c” => the entrepreneur is in the incubation phase level 3. • majority of “d” => the entrepreneur is in the incubation phase level 4. • majority of “e” => the particular expertise required by the entrepreneur does not match the objectives of the bm consulting project assignment. journal of business models (2021), vol. 9, no. 3, pp. 25-38 35 references aulet, b. (2013), disciplined entrepreneurship: 24 steps to a successful startup, john wiley & sons, new jersey. bayad, m., gallais, m., marlin, x. and schmitt, c. (2010), “entrepreneuriat et tpe: la problématique de l’accompagnement”, management & avenir, vol. 40 no. 10, pp. 119–140. bechard, j.-p. and gregoire, d. (2005), “entrepreneurship education research revisited: the case of higher education.”, academy of management learning & education, academy of management, vol. 4 no. 1, pp. 22–43. cook, r. g., and belliveau, p. (2005), “the experiential student team consulting process”. dog ear publishing, indianapolis. demil, b. and lecocq, x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, elsevier ltd, vol. 43 no. 2-3, pp. 227–246. ebel, p., bretschneider, u. and leimeister, j.m. (2016), “leveraging virtual business model innovation: a framework for designing business model development tools”, edited by hedman, j., sarker, s. and veit, d.information systems journal, vol. 26 no. 5, pp. 519–550. fletcher, d. (2018), “prologue: looking to the future: how can we further develop critical pedagogies in entrepreneurship education?” in berglund, k. and verduyn, k. (eds.), revitalizing entrepreneurship education, routledge, pp. xvii–xxiv. frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013), “the 4i-framework of business model innovation: a structured view on process phases and challenges”, international journal of product development, vol. 18 no. 3/4, pp. 249–22. gedeon, s.a. (2014), “application of best practices in university entrepreneurship education”, european journal of training and development, vol. 38 no. 3, pp. 231–253. gilbert, p. and lancestre, a. (2008), le conseil en management : analyses et études de cas, dunod, paris. heriot, k. c., cook, r. g., simpson, l., and parker, r. (2008), “the use of micro student consulting projects as an alternative to traditional field-based student consulting projects: an exploratory study”, journal of entrepreneurship education, vol. 11 no 59, pp. 59-74. hogan, r. and warrenfeltz, r. (2003), “educating the modern manager”, academy of management learning & education, academy of management briarcliff manor, ny 10510, vol. 2 no. 1, pp. 74–84. kenworthy-u’ren, a., petri, a. and taylor, m.l. (2006), “components of successful service-learning programs: notes from barbara holland, director of the u.s. national service-learning clearinghouse”, international journal of case method research application, vol. 18 no. 2, pp. 120–129. kirby, d.a. (2004), “entrepreneurship education: can business schools meet the challenge?”, education + training, vol. 46 no. 8/9, pp. 510–519. kuratko, d. f., morris, m. h., and schindehutte, m. (2015), “understanding the dynamics of entrepreneurship through framework approaches”, small business economics, vol. 45 no 1, pp. 1-13. journal of business models (2021), vol. 9, no. 3, pp. 25-38 36 kuratko, d.f., fisher, g., bloodgood, j.m. and hornsby, j.s. (2017), “the paradox of new venture legitimation within an entrepreneurial ecosystem”, small business economics, springer us, vol. 49 no. 1, pp. 119–140. lycko, m., and galanakis, k. (2019), “student consultancy projects playbook: learning outcomes and a framework for teaching practice in an international entrepreneurial context”, the international journal of management education, 100285 (in press, corrected proof). malmström, m. (2017), “practicing business model management in new ventures”, journal of business models, vol. 5 no. 1, pp. 1–13. manimala, m.j. and thomas, p. (2017), entrepreneurship education: experiments with curriculum, pedagogy and target groups, springer nature singapore pte ltd., singapore. maurya, a. (2012), running lean, o’reilly media, inc. morris, m.h. (2014), annals of entrepreneurship education and pedagogy 2014, edward elgar publishing limited, cheltenham, uk • northampton, ma, usa. morris, m.h. and liguori, e. (2016), annals of entrepreneurship education and pedagogy 2016, edward elgar publishing limited, cheltenham, uk • northampton, ma, usa. morrish, s.c., schindehutte, m. and allen, j. (2005), “the entrepreneur’s business model: toward a unified perspective”, journal of business research, vol. 58 no. 6, pp. 726–735. olofsson, l. and farr, r. (2006), “business model tools and definition a literature review”. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, inc., hoboken, new jersey. pittaway, l., cope, j. (2007), “entrepreneurship education: a systematic review of the evidence”, international small business journal vol. 25 no 5, pp. 479-510. pfeffer, j. and sutton, r.i. (2000), the knowing-doing gap: how smart companies turn knowledge into action, harvard business school press, boston, massachusetts, united states. priem, r.l., wenzel, m. and koch, j. (2018), “demand-side strategy and business models: putting value creation for consumers center stage”, long range planning, pergamon, vol. 51 no. 1, pp. 22–31. sadler, p. (1998), management consultancy: a handbook of best practice, 1st ed., kogan page limited, london, uk. samwel mwasalwiba, e. (2010), “entrepreneurship education: a review of its objectives, teaching methods, and impact indicators”, education + training, vol. 52 no. 1, pp. 20–47. shafer, s.m., smith, h.j. and linder, j.c. (2005), “the power of business models”, business horizons, vol. 48 no. 3, pp. 199–207. szopinski, d., schoormann, t., john, t., knackstedt, r. and kundisch, d. (2019), “software tools for business model innovation: current state and future challenges”, electronic markets, pp.1–26. journal of business models (2021), vol. 9, no. 3, pp. 25-38 37 tardif, j. (2006), l’évaluation des compétences, les éditions de la chenelière, montréal, québec, canada. täuscher, k. and abdelkafi, n. (2017), “visual tools for business model innovation: recommendations from a cognitive perspective”, creativity and innovation management, vol. 26 no. 2, pp. 160–174. teckchandani, a., and khanin, d. (2014), “the instructor’s role in the student consulting process: working with the student team”, small business institute® journal, vol. 10 no 1, pp. 11-24. williams middleton, k. and donnellon, a. (2014), “personalizing entrepreneurial learning: a pedagogy for facilitating the know why”, entrepreneurship research journal, de gruyter, vol. 4 no. 2, pp. 167–204. winkel, d., vanevenhoven, j., drago, w. a., and clements, c. (2013), “the structure and scope of entrepreneurship programs in higher education around the world”, journal of entrepreneurship education, vol. 16 no 15. pp. 15-29. journal of business models (2021), vol. 9, no. 3, pp. 25-38 38 philippe massiera after an initial managerial experience of about ten years, philippe massiera became professor of marketing and entrepreneurship in 2010. holder of an mba and a master of marketing, he graduated from panthéon-sorbonne university with a phd in management. in 2015 and was appointed head of the entrepreneurship department at edcparis, in charge of redesigning the master’s degree in entrepreneurship and innovation within the grande école program. in 2018, he moved in canada. associate professor at the école supérieure de la gestion of the université du québec à montréal he teaches strategic marketing and entrepreneurial marketing. about the authors journal of business models (2016), vol. 4, no. 1, pp. 1-28 1 purpose: although business model innovation (bmi) has gained substantial importance in recent years, there is still a limited understanding of this phenomenon. yet, the corresponding scholarly literature has previously been characterized by a heterogeneous comprehension of the concept. this situation demands an analysis that synthesizes current scientific knowledge, uncovers research gaps and underdeveloped areas, and establishes a solid foundation for future research. design: the study applies an extensive quantitative and qualitative analysis of extant bmi literature, making the concept more transparent and manageable for science and management. findings: the study presents a set of yielding definitions of the extant bmi literature and an integrated definition to promote a common understanding of bmi. in addition, it classifies the field into six particular research areas. given the identified dominance of exploratory research designs, future research should put more emphasis on well-founded conceptual articles that stabilize and consolidate basic research as well as confirmatory quantitative empirical investigations. research limitations / implictions: given the database-centered, eclectic nature of the analytical approach, it is unlikely that every available and applicable scientific publication is included in the analysis. furthermore, the classification of the studies according to certain criteria leads to a loss of information and sometimes cannot be conducted free of doubt since studies occasionally touch multiple criteria. originality / value: against the background of the study’s focus on bmi, its comparably broad literature basis, and its quantitative and qualitative analysis approach, which provides straightforward recommendations for future research, the study caters an original contribution to the field. business model innovation: development, concept and future research directions abstract please cite this paper as: wirtz et al. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1-28 keywords: literature review, meta-study, business model research, business model innovation 1 german university of administrative sciences speyer, ls-wirtz@uni-speyer.de 2 german university of administrative sciences speyer, goettel@uni-speyer.de 3 german university of administrative sciences speyer, daiser@uni-speyer.de bernd w. wirtz 1, vincent göttel 2 and peter daiser 3 journal of business models (2016), vol. 4, no. 1, pp. 1-28 2 introduction since the beginning of the 21st century, business models have increasingly been discussed in both scientific research (casadesus-masanell and ricart, 2010; osterwalder et al., 2010; wirtz et al., 2016) and management practice (kpmg, 2006; mckinsey, 2008). this increasing significance is not least related to intensified competitive conditions in the last two decades. if companies want to remain successful in globalized and increasingly digitalized markets, they have to be able to continually adjust to varying market conditions and to cope with a highly dynamic and competitive business environment (johnson et al., 2008; desyllas and sako, 2013; kastalli and van looy, 2013). here, innovation is considered as an effective way to face these challenges (bojoaga and petrisor, 2013). against this background, business model innovation (bmi) has established itself as a cornerstone of innovation—next to product, service, and process innovation (cf. shelton, 2009; sinfield et al., 2011; fichman et al., 2014; wang et al., 2015). consequently, business model innovation (bmi) has gained its importance in the recent past, especially since successful implementation is associated with sustainable competitive advantage (mitchell and coles, 2003; casadesus-masanell and zhu, 2013; massa and tucci, 2014). best practice companies like google, which has consistently outperformed its competition, serve as good example of this association, when referring to their consistent and diversified bmi efforts (cf. google, 2015). in light of such success stories, a variety of consulting firms have already focused on conducting empirical studies to generate findings and insights for management practice (e.g., deloitte, 2002; bcg, 2009; ibm, 2009). yet, regarding advice for companies’ successful implementation of bmi, scientific research should also seek to provide a homogeneous and consistent understanding of the concept, its development and process, as well as related success factors. unfortunately, the extant literature on bmi draws a quite heterogeneous picture, which lacks conceptual clarity and clear-cut practical advice. this is underlined by casadesus-masanell and zhu (2013) and spieth et al. (2014), who state that bmi still is a difficult-to-grasp topic since there are inconsistencies in its conceptual framework. similarly günzel and holm (2013) mention a lack of a common understanding concerning the bmi phenomenon and carayannis et al. (2015) see room for improvement since the associated literature appears to be not well developed and “a sound theoretical foundation is still missing” (carayannis et al., 2014, p. 440). accordingly, empirical research including surveys with scientific experts agree that bmi is still a hot topic for upcoming studies, thus, stating the related research potential (wirtz et al., 2016). considering the aforementioned shortcomings with respect to the bmi concept, understanding, and research heterogeneity, as well as the recently increasing amount of published bmi research (zott et al., 2011; pynnönen et al., 2012), it becomes apparent that there is a need for a comprehensive bmi literature review that creates a firm foundation for theory development and advances scientific knowledge by closing wellinvestigated research areas and detecting areas that need further insights (cf. webster and watson, 2002; pautasso and bourne, 2013). based on this finding, we conducted an extensive literature analysis and identified four literature reviews that at first sight provide an overview of bmi that fulfills these characteristics (cf. boons and lüdeke-freund, 2013; schneider and spieth, 2013; massa and tucci, 2014; spieth et al., 2014). although the identified investigations are well-developed studies, they either pursue distinct research objectives, possess a different research scope, or the amount of literature is already outdated due to the recent increase in bmi studies, limiting their applicability for solving the matter in question. boons and lüdekefreund (2013) as well as massa and tucci (2014), for instance, rather conduct a systematic review that focuses on business models in the context of sustainability and innovation situations. schneider and spieth (2013) systematically reviewed 35 scientific publications to identify bmi characteristics and to develop a theoretical bmi framework. in their special issue introduction, spieth et al. (2014) head towards a role-based approach to present an overview of bmi research and to structure the content of this particular special issue. therefore, they cluster a set of 74 articles into three roles: explaining the business, running the business, and developing the business. given the aim and scope of their introductory article and the fact that high-quality scientific bmi research has meanwhile more than doubled, journal of business models (2016), vol. 4, no. 1, pp. 1-28 3 we believe that it is time for a current, comprehensive bmi literature review that provides a quantitative and a qualitative analysis of extant scientific knowledge to establish a firm foundation of the status quo, to bring out existing opinions, tensions and differences, and to deduce clear directions that help to guide future bmi research. to achieve this, we scrutinized 178 english-language, peer-reviewed bmi publications. this dataset formed the starting point for the performed literature analysis that served as the basis for identifying future research challenges and opportunities. for this purpose, the paper continues as follows: after discussing different bmi definitions, we present the methodological proceedings of the investigation. the next section outlines the development of bmi literature, which hands over to the literature analysis that presents the results of the quantitative and qualitative analyses. finally, the findings and implications are summarized in the discussion and conclusion section. business model innovation – a comparative definition there are various scientific peer-reviewed articles that offer a definition of bmi as an add-on in the text but only few in which defining the concept is central. not least, this may also be a reason for the so far heterogeneous understanding of bmi in the literature. the first identified explanation of the bmi phenomenon comes from malhotra’s (2000) characterization of bmi as a paradigm shift, which involves a fundamental rethinking of the respective company instead of only changing the business process and workflow level. similarly, other definition developments describe bmi as the complete replacement of the existing business model by a novel one (mitchell and coles, 2003), or the reinvention of a business model by means of identifying an entirely new customer value proposition (johnson et al., 2008). this comprehension is, in turn, also in line with the notion of gambardella and mcgahan (2010, p. 263) who state that “business-model innovation occurs when a firm adopts a novel approach to commercializing its underlying assets”. regarding this commercialization and the related newly developed value creation and proposition logics, casadesus-masanell and zhu (2013) further define bmi as providing the basis for a resulting sustainable competitive advantage or business success. massa and tucci (2014, p. 2), in turn, represent a process perspective and define bmi “as the activity of designing—i.e., creating, implementing and validating— a new bm and suggest that the process of bmi differs if an existing bm is already in place vis-à-vis when it is not.” altogether, considering the different approaches introduced for defining bmi, the heterogeneity of the term’s use in the literature becomes once more apparent. therefore, it stands to reason to analyze the existing definitions of the bmi field with regard to content and thus provide an overview of their most important and recurring elements. to this effect, concerning the subject of bmi, we state that existing definitions for the most part point to an involved change in the structure of the current business model. yet, hereby it is controversial which innovation degree justifies the term bmi. while certain definitions already consider relevant the innovation of single elements or components (e.g., markides, 2006; johnson et al., 2008; bucherer et al., 2012), others acknowledge only a comprehensive change of the business model as bmi (e.g., voelpel et al., 2004; schindehutte et al., 2008; schneider and spieth, 2013). nevertheless, the literature largely agrees on the crucial transformation of the existing value proposition and/or constellation as an essential subject of bmi (johnson et al., 2008; casadesus-masanell and zhu, 2013). in addition, concerning the function of bmi and thus a teleological orientation of the definitions, we assert that authors of the field mainly describe bmi as a means for creating new business models or service offers respectively—irrespective if a an existing business model is in place or not (cf. massa and tucci, 2014). thus, bmi may occur in any stage of a company’s lifecycle. lastly, the predominant goal of bmi, as identified in existing definitions, seems to be the generation or conservation of a sustainable competitive advantage. against this background and to establish a better understanding for the remainder of this article, we define bmi following wirtz (2016, p. 189): “business model innovation describes the design process for giving birth to a fairly new business model on the market, which is accompanied by an adjustment of the value proposition and/or the value constellation and aims at generating journal of business models (2016), vol. 4, no. 1, pp. 1-28 4 or securing a sustainable competitive advantage.” methodology we conducted a systematic query via ebscohost using three leading scientific databases (academic search complete, business source complete, econlit with full text) in january 2016. this analysis was restricted to publications in peer-reviewed english-language academic journals because these are high-standard, upto-date research sources that play a key role in disseminating scientific research knowledge (webster and watson, 2002; arduini and zanfei, 2014). after multiple test queries and result verifications, we conducted a title and abstract search with the following key words “business model innovation“, “business model dynamics”, “business model evolution”, “business model reinvention”, and ”business model development”. thus, the query identified any article that contains any of these search terms in the title and/or abstract, which should ensure to capture a meaningful census of the extant academic knowledge on bmi. this analysis led to a total of 215 search results. these articles were screened to identify those publications that address issues relating to bmi, leading to a final set of 178 scientific bmi publications, covering the period from 2000 to 2015. a key challenge of any literature review is to classify articles according to common criteria. on the one hand, this approach usually requires several repetitions of allocating, denominating, and aggregating article characteristics and—by its very nature—leads to a loss of information. on the other hand, the final classification provides a transparent picture of an otherwise unmanageable amount of knowledge, which—given the purpose of a literature review—compensates for the potential deficiencies. the definition of the thematic classification started with category input from the business model books of osterwalder et al. (2010) and wirtz (2011) since both provide a widespread classification of the business model phenomenon. several categories could be used and adapted for an initial bmi categorization, which were aggregated and filtered in various runs, while constantly challenging them against the identified set of articles. having reached a point of saturation, meaning that a good balance between solidarity within the studies of the categories and demarcation between the studies of different categories had been achieved, six categories remained, which we used for thematically structuring the identified set of articles into bmi research areas: definition & types, design & process, drivers & barriers, frameworks, implementation & operation, and performance & controlling. furthermore, we classified all 178 articles according to the class of research (conceptual or empirical and qualitative or quantitative), the applied statistical method, and the method used for data collection. summarizing, the established data set provides a solid starting point for a fine-grained analysis of the extant scientific bmi literature. development and current state of bmi research regarding the extant bmi literature, a heterogeneous field of studies has developed over the years. this is also comparable to the superior field of literature about business models in general, which comes along in separate research silos across different disciplines (zott et al., 2011; schneider and spieth, 2013; wirtz et al., 2016). in light of this heterogeneity, we initially illustrate the development of the bmi concept in the course of time, presenting a literature synopsis of the bmi research field and illustrate the related main patterns, contents and methods across different streams and development phases. furthermore, we identify the particular existing research areas about bmi and their respective allocation in the research field which paves the way for their closer inspection in the further course of the article. just like with the business model concept itself, the internet hype has led to an increased significance of bmi in both corporate practice and scientific research. one can identify different research streams corresponding to corporate strategy, innovation and technology management, as well as entrepreneurship in the bmi literature (schneider and spieth, 2013; spieth et al., 2014). figure 1 presents an overview of selected bmi publications in the different research streams over time. this overview provides benefit by visualizing the bmi concept’s particular development phases as well as the research streams of different importance within them. since the early development phase of bmi, we can initially state a consistent strategic orientation in the reljournal of business models (2016), vol. 4, no. 1, pp. 1-28 5 evant literature to date. this connection to corporate strategy definitely stands to reason when thinking of the notion that “a business model is the direct result of strategy” (casadesus-masanell and ricart, 2010, p. 212) and transferring this thought to bmi. in more detail, if business models result from the formulation of strategy, bmi will be related to either the reformulation of incumbent firms’ corporate strategy or the novel creation of new market entrants’ strategy. however, the viewpoint of innovation and technology management likewise plays a significant role in the bmi research field. this development is also plausible since—once bmi is strategically developed and pushed— the respective businesses are concerned with achieving a proper implementation and hence the management of related according business operations (kastalli and van looy, 2013). yet, in comparison to the other two research streams in the literature, only in more recent years have the logics of entrepreneurship gained in importance for bmi. accordingly, the entrepreneurial perspective has so far been lacking sufficient treatment when compared to the other two currents in the literature and thus seems to offer the greatest potential for additional research (cf. spieth et al., 2014). regarding the development of previous literature, authors of the early phase initially try to establish the connection between business models and innovation (e.g., chesbrough and rosenbloom, 2002), predominantly dealing with the conceptual development of bmi definitions and frameworks (e.g., voelpel et al., 2004) but also already mentioning the potential of bmi for achieving competitive advantage (e.g., mitchell and coles, 2003). subsequently, within the following formation phase of overall concepts, on the one hand, researchers further emphasize the need for bmi instead of a mere technology innovation (chesbrough, 2007) or, more frankly, point out that “business model innovation matters” (pohle and chapman, 2006, p. 34). on the other hand, authors focus on further conceptually enhancing bmi by presenting more elaborate guidelines and handbooks for practitioners (e.g., johnson et al., 2008) and start using case studies to exemplify bmi in more detail from all of the three mentioned research perspectives (e.g., onetti and capobianco, 2005; sosna et al., 2010). furthermore, while in the still lasting consolidation and differentiation phase, which likewise includes all of the research streams, authors have indeed made an effort to consolidate certain previously identified aspects of figure 1: literature synopsis of bmi research innovation & technology management corporate strategy entrepreneurship early phase formation phase of overall concepts consolidation and differentiation phase 2000 – 2004 2005 – 2010 2011 – 2015 • chesbrough/rosenbloom 2002 • mitchell/coles 2003 • mitchell/bruckner coles 2004 • malhotra 2000 • voelpel/leibold/ tekie 2004 • zott/amit 2007 • sosna/trevinyo-rodríguez/velamuri 2010 • trimi/berbegal-mirabent 2012 • schneider/spieth 2013 • denicolai/ramirez/tidd 2014 • bohnsack/pinske/kolk 2015 • francis/bessant 2005 • chesbrough/ schwartz 2007 • shelton 2009 • chesbrough 2010 • gambardella/ mcgahan 2010 • koen/bertels/ elsum 2011 • pynnönen/hallikas/ ritala 2012 • evans/johnson 2013 • kastalli/ van looy 2013 • fichman/dos santos/ zheng 2014 • onetti/capobianco 2005 • pohle/chapman 2006 • chesbrough 2007 • johnson/christensen/k agermann 2008 • aspara et al. 2010 • sanchez/ricart 2010 • teece 2010 • amit/zott 2012 • bock et al. 2012 • casadesusmasanell/zhu 2013 • desyllas/sako 2013 • carayannis/sindakis/w alter 2015 • taran/boer/lindgren 2015 journal of business models (2016), vol. 4, no. 1, pp. 1-28 6 the bmi concept: new ideas and other empirical methods are added to the picture, leading to an anew concept differentiation. in this connection, kastalli and van looy (2013), for instance, investigate servitization or service bmi as a specific case or subcategory of bmi by applying econometric models. thus, a homogenization of the bmi concept in the literature is not yet to be expected in the near future, but even more desirable as a further phase of the literature and concept development. quantitative analysis of the identified article set to gain further insight into advances in conceptual and empirical research into the bmi topic, an extensive quantitative analysis of the extant literature was conducted. figure 2 illustrates the publications of the article set in number of publications over time and according to their respective type of research. bmi began to gain popularity in scientific research after the millennium and soared after 2010 with up to 40 publications in 2013 and 2014. this development more or less parallels the increasing prominence of the business model concept. considering the bmi literature development then further with specific regard to previous research types, we identified 45 conceptual, 74 qualitative empirical, and 30 quantitative empirical studies, as well as 29 miscellaneous articles (e.g., reviews, editorial notes, etc.). the following analyses focus on the conceptual (45) and empirical studies (104) since the miscellaneous articles cannot be allocated to a particular research are and/or do not provide a new factual contribution. comparing the number of conceptual studies with the number of empirical studies, there is a ratio of 30:70. breaking down the field of empirical studies according to the primary method of data collection applied, six distinctive methods can be identified: case study, secondary database analysis, interview, figure 2: number of publications over time and type of research number of publications in academic peer-reviewed english-language journals 0 5 10 15 20 25 30 35 40 45 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 conceptual 45 qualitative empirical 74 quantitative empirical; 30 miscellaneous 29 journal of business models (2016), vol. 4, no. 1, pp. 1-28 7 questionnaire, observation, and meta-analysis. the results of the quantitative literature analysis in terms of research orientation and primary method of empirical data collection are summarized in figure 3. the vast majority of the empirical studies (88%) use primary data sources (case study, interview, questionnaire, and observation). with the exception of the questionnaire-based studies, which are partly exploratory (finding structures) or confirmatory (hypothesestesting), these empirical studies generally follow an exploratory research objective (cf. lei and wu, 2007; hancock and mueller, 2010). the largest data collection category is case study, representing 61.5% of the total number of empirical studies identified. the next largest data collection categories are secondary database data (12.5%), interview (11.5%), questionnaire (10.6%), observation (2.9%), and meta-analysis (1.0%). breaking down the quantitative empirical studies according to the statistical method used for elaborating the key results of the studies identified delivers a more finegrained picture. figure 4 illustrates the corresponding analysis results. empirical data collection publications* in % case study 64 61.5% secondary database analysis 13 12.5% interview 12 11.5% questionnaire 11 10.6% observation 3 2.9% meta-analysis 1 1.0% total 104 100.0% * number of publications in academic peer-reviewed english language journals 45 conceptual studies (30%) 104 empirical studies (70%) figure 3: research approach and primary methods of empirical data collection number of publications in academic peerreviewed english-language journals 74 qualitative empirical studies (71%) 30 quantitative empirical studies (29%) 9 6 4 4 4 2 1 descriptive statistics simple & multiple regression analysis of variance & covariance content analysis sem & confirmatory factor analysis factor & cluster analysis simulation figure 4: statistical method used for the key results of the studies identified journal of business models (2016), vol. 4, no. 1, pp. 1-28 8 since data collection and statistical method show certain linkages, the results of the data collection breakdown are also reflected in the examination of the applied statistical methods. of the identified studies, nine apply descriptive statistics, six simple & multiple regression, four analysis of variance & covariance, four content analysis, four structural equation modeling & confirmatory factor analysis, two factor & cluster analysis, and one study uses a simulation technique. when comparing the research design of these studies, we identified 18 exploratory and 12 confirmatory approaches. given the total number of 149 conceptual and empirical studies, it can be stated—as expected for an emerging field—that the vast majority of bmi research follows an exploratory research design, showing a potential need for confirmatory quantitative empirical approaches. having presented the development of the bmi research field, we continue by pointing out in more detail the field’s particular research areas. table 1 shows the allocation of existing articles to the respective areas as well as their absolute and relative share in the total bmi research field. while in this regard there may be articles that are also tangent to another research area, we focus on the prevailing salient connection to one specific area to guarantee an allocation without any overlaps (cf. wirtz et al., 2016). furthermore, for every area we also present a corresponding differentiation regarding the applied scientific research approach. by means of the conducted analysis of the research field, we identify six substantial research foci, of which the first three bmi research fields (definition & types (15.4%), design & process (24.8%), drivers & barriers (13.4%)) rather cover theoretical and conceptual issues, while the following three deal with implementing and running bmi (frameworks (20.1%), implementation & operation (16.8%), and performance & controlling (9.4%)). when looking at the share of the individual research table 1: allocation of the analyzed articles for the bmi state of research key content conceptual empirical (qualitative) empirical (quantitative) total definition & types • basic definition of bmi concept and differentiation from existing concepts • differentiation of certain bmi types 10 (43.5%) 10 (43.5%) 3 (13.0%) 23 (15.4%) design & process • ex-ante bmi development • steps and phases of bmi 12 (32.4%) 19 (51.4%) 6 (16.2%) 37 (24.8%) drivers & barriers • drivers of bmi • barriers of bmi 7 (35.0%) 13 (65.0%) 0 (0.0%) 20 (13.4%) frameworks • unbundling of bmi concept • categorization of concrete parameters 12 (40.0%) 13 (43.3%) 5 (16.7%) 30 (20.1%) implementation & operation • arrangements for bmi implementation • running bmi business operations 3 (12.0%) 16 (64.0%) 6 (24.0%) 25 (16.8%) performance & controlling • ex-post measurement of bmi feasibility, profitability, and sustainability 1 (7.1%) 3 (21.4%) 10 (71.4%) 14 (9.4%) total 45 (30.2%) 74 (49.7%) 30 (20.1%) 149 (100.0%) journal of business models (2016), vol. 4, no. 1, pp. 1-28 9 foci, this distribution makes sense when thinking about how crucial it is to cautiously design or develop an innovative business model ex-ante instead of imprudently designing and implementing it in parallel. moreover, having a stepwise illustration of the course of action can helpfully serve as instructions or at least guidelines for practitioners. therefore, researchers may also dedicate the largest amount of articles to this research area. similarly, research that deals with bmi frameworks appears to be of particular interest since these studies unbundle the bmi concept and try to provide readers with concrete bmi parameters. also the research interest in definitions & types seems plausible, given the importance of a clearly defined bmi concept. moreover, the differentiation between different bmi types is salient in the literature, which adequately serves practitioners’ need to determine which type of bmi is relevant for their particular business. having defined the theoretical and conceptual foundations of a bmi endeavor, the next step concerns the arrangements for bmi implementation and operations. further, also authors’ interest in the research area drivers & barriers stands to reason when considering this subject’s significance and examination across a broad range of research fields and the related simple but important questions about what fuels and what impedes bmi. lastly, also the research interest in performance & controlling of bmi is plausible given that the ex-post measurement of bmi feasibility, profitability, and sustainability seems crucial for ensuring long-term competitive advantage. to further illustrate this circumstance by means of the previously applied research approaches in the literature, table 1 also shows that there is a solid but not excessive base of conceptual work (30.2%) and a predominant position of qualitative empirical research (49.7%), whereas the quantitative empirical research (20.1%) shows a deficit, indicating a research potential. yet, the described methodical apportionment explains itself since bmi still represents a comparably new research field (see figures 1 and 2), which usually lends itself first to conceptual work that generates a theoretical foundation, followed by more explorative empirical research that includes case studies or interviews, for instance. not until having established an appropriate knowledge base in this regard, confirmatory empirical work including quantitative multivariate analyses can start to develop and accordingly test the previously derived knowledge (cf. wirtz et al., 2016). to enrich the quantitative part of the literature analysis with further meaningful estimates, we collected the google scholar citations (gsc) of the articles. this metric is expected to provide additional insights concerning the scientific influence of the particular research areas since the gsc score, which counts the number of articles that have cited the respective publication, allows to draw conclusions on the visibility and impact of articles in the scientific literature (cf. google, 2016). table 2 presents an overview of the google scholar citation results. table 2: google scholar citation research area analysis research area sum of average gsc per year* sum of average gsc per year in % number of publications number of publications in % average gsc per year / number of publications definition & types 808.0 36.3% 23 15.4% 35.1 design & process 275.2 12.4% 37 24.8% 7.4 drivers & barriers 301.8 13.5% 20 13.4% 15.1 frameworks 551.1 24.7% 30 20.1% 18.4 journal of business models (2016), vol. 4, no. 1, pp. 1-28 10 this analysis is based on average gsc scores to reduce the distortion effect that results from varying publication periods. therefore, we divided the total gsc score, which represents the number of citations over the entire publication period, by the number of years past since the publishing of the article. comparing the different research areas based on the average gsc scores, definition & types is the main field, representing 36.3% of the total average gsc. the next largest research areas are frameworks (24.7%), drivers & barriers (13.5%), and design & process (12.4%), which are followed by implementation & operation (7.5) and performance & controlling (5.5%). this view shows a different emphasis than the evaluation based on the number of publications. while definition & types, for example, represents 15.4% of the publications, it accounts for 36.3% of the total citations. looking at design & process as well as implementation & operation provides a contrary picture. here, the average gsc score indicates less scientific attention than the number of publications. given the average gsc per year divided by the number of publications, definition & types (35.1), frameworks (18.4), and drivers & barriers (15.1) seem to be the research areas with the highest scientific impact. this result appears reasonable since these areas provide fundamental conceptual contributions. however, one has to keep in mind that there are a couple of highly cited elementary studies and journal issues that have a considerable impact on the gsc score distribution. this can—to a large extent—be visualized when plotting the average gsc score and the number of publications over time (see figure 5). implementation & operation 168.1 7.5% 25 16.8% 6.7 performance & controlling 123.4 5.5% 14 9.4% 8.8 total 2,228 100% 149 100% 15.0 figure 5: comparison of average google scholar citations and number of publications over time average gsc per year (date of google scholar citation collection: 14th of january 2016) number of publications in academic peer-reviewed english-language journals n um be r o f pu bl ic at io ns in a ca de m ic p ee rre vi ew ed e ng lis hla ng ua ge jo ur na ls a ve ra ge g sc p er y ea r 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 year 0 5 10 15 20 25 30 35 40 45 50 0 100 200 300 400 500 600 700 800 900 1.000 journal of business models (2016), vol. 4, no. 1, pp. 1-28 11 in particular, the years 2002, 2008, 2010, 2013, and 2014 are interesting. while 2002 and 2008 are largely driven by individual highly cited bmi research studies (e.g., chesbrough and rosenbloom in 2002 with a gsc total score of 2,764 and johnson et al. (2008) with 1,411), the high gsc score of 2010, 2013, and 2014 can mainly be attributed to special issues on business models and bmi (e.g., 2010: long range planning, 2013: international journal of innovation management, international journal of product development, 2014: international journal of entrepreneurship and innovation management, r&d management). summing up, bmi research still is a concentrated field that experiences substantial impact from highly cited individual publications and special issues. in combination with the quantitative analysis of the identified bmi literature, it also stands to reason to conduct a qualitative analysis of the research field, to complement the structural findings with contentrelated issues and observations. qualitative literature analysis while the quantitative analysis of the bmi literature rather provides a macro perspective concerning the field’s development, knowledge distribution, and applied methodologies, the subsequent qualitative analysis of the research areas shall complement these findings with additional insights that reflect the inherent tensions and differences of the specific research areas. thus, this section describes the similarities of the distinctive research areas, differences and tensions, as well as identified future research indications. definition & types within the research area ‘definition & types’, the authors agree that bmi is a complex, time-consuming process that requires particular skills and an appropriate attitude to be successfully conducted (markides, 2006; e.g., chesbrough, 2007; gebauer and saul, 2014). this is underlined by schneider and spieth (2014), who state that dynamic capabilities are a crucial factor that companies should possess to achieve the desired targets with the bmi. in this context, koen et al. (2011) claim that bmi can be a significant opportunity for established firms but also a major challenge. a key reason for this circumstance is that bmi cannot be assessed in an abstract manner. usually experimenting is necessary until a company reaches its goals, increasing risk, cost, and time-to-stabilization (chesbrough and schwartz, 2007; teece, 2010; lambert and davidson, 2013). however, bmi is generally seen as a substantial source of value creation (sánchez and ricart, 2010; lambert and davidson, 2013). although this field shows many similar opinions, there are tensions and disagreements concerning various points. an ongoing discussion is concerned with the bmi concept itself and how the relationship between bmi and strategy is going to take place. while markides (2006) rather sees bmi from a strategic innovation perspective, teece (2010) claims that bmi and strategy are two different things. this is supported by dasilva and trkman (2014), who also point out that bmi needs to take into account the overall company strategy, and abraham (2013), who emphasizes that bmi has its limitations and thus a company needs both a business model and a strategy. a further discrepancy is concerned with the role of bmi. while for chesbrough and rosenbloom (2002) the ultimate role of bmi is to ensure that an innovation delivers value to the customer, other authors emphasize a bmi’s role for adapting to internal and external dynamics (byerly, 2014; schneider and spieth, 2014; e.g., bereznoi, 2015). given the situational component of these two directions, bmi may possess several roles depending on the particular circumstances. apart from that, bmi generally assumes a reciprocal nature of value propositions in business relationships. here, simmons et al. (2013, p. 746) try to take a new direction by suggesting to “focus on communication practice integrating exchange activities, relationship development and knowledge renewal”. and while some authors proclaim a path-dependent behavior (chesbrough and rosenbloom, 2002; e.g., bohnsack et al., 2014), gebauer and saul (2014) hope that research moves away from a simple outcome-based perspective on how to capture value and rather investigate bmi from a process-based perspective. speaking about bmi research, the current state of understanding is regarded highly context dependent and underdeveloped (teece, 2010; taran et al., 2015). dasilva and trkman (2014) recommend that researchers should first clarify the term bmi. this approach clearly pushes forward to answer the questions that are related to the still fuzzy bmi term and concept. in journal of business models (2016), vol. 4, no. 1, pp. 1-28 12 contrast, spieth et al. (2014) argue that the roles and functions of bmi should be in the center of attention to provide further insights. bocken et al. (2014) come from a bmi type perspective. they claim that research should first establish mainstream bmi types to harmonize and structure the currently disparate silos. since available bmi classifications and categorizations are built on past examples, they also see the problem of a past orientation. however, the advantage of having a common structure should be greater than the disadvantages. design & process from a conceptual perspective, the studies of the bmi research area ‘design & process’ see bmi as an additional method for innovation, next to product, service, and process innovation (sinfield et al., 2011; e.g., fichman et al., 2014; wang et al., 2015). in this context, the bmi design provides a simplified representation of a firm’s business logic that shows how it makes money on an abstract level (buur et al., 2013; enkel and mezger, 2013). using a business model perspective helps managers and entrepreneurs to look beyond their company’s existing system and encourages systematic and holistic thinking (amit and zott, 2012). against this background, bmi design is an effective tool to innovate a company’s activities (zott and amit, 2007; amit and zott, 2012), set boundaries of the business, and define the product and service offer (trimi and berbegal-mirabent, 2012). nevertheless, designing new business models is a challenging managerial and entrepreneurial task (eppler and hoffmann, 2012; eurich et al., 2014; gobble, 2014) that requires profound organization and governance competencies (carayannis et al., 2014). nevertheless, company leaders have to rise to this challenge since the increasingly complex and dynamic business environment obligates organizations to continually rethink and enhance their business models (giesen et al., 2010; huarng, 2013). from a resource perspective, bmi design is rather seen as a group and collaboration process than an individual task (eppler et al., 2011; eppler and hoffmann, 2012; buur et al., 2013). and for this process, artifacts, such as templates and sketches, are considered to be helpful tools to structure the phases of creativity and idea generation (eppler and hoffmann, 2012). despite the research area’s general commonness, it also shows dissimilar opinions, especially concerning the bmi design procedure. we determined four distinct approaches: (1) linear approaches that follow a sequential step-by-step procedure, (2) semi-structured approaches that proclaim the necessity for a basic systematic structure, but explicitly mention the need for inspiring, creative process steps, (3) mixed approaches that liberally combine procedures from linear and semistructured approaches, and (4) method-oriented approaches that emphasize the methods and techniques applied instead of focusing on a processual perspective. although the studies that suggest a systematic, linear process share common grounds concerning their general procedural development, which is subdivided into steps or phases, the individual steps or phases show disparities (trimi and berbegal-mirabent, 2012; e.g., enkel and mezger, 2013; girotra and netessine, 2013; eurich et al., 2014). while eurich et al. (2014), for instance, recommend a six-step approach, girotra and netessine (2013) suggest four phases, and enkel and mezger (2013) propose three stages. the authors that proclaim a semi-structured approach also see a need for a basic structure that guides the bmi design process, but they put a stronger emphasis on its creative aspects (e.g., giesen et al., 2010; sinfield et al., 2011; tuulenmäki and välikangas, 2011; hoveskog et al., 2015). these semi-structured approaches apply questioning techniques and usually imply experimental trial-and-error loops. hoveskog et al. (2015), for example, suggest to use the nine business model canvas elements as an experimenting structure, while tuulenmäki and välikangas (2011, p. 33) recommend early prototype building to get reactions and—based on this feedback—“change the business process and see what happens”. sinfield et al. (2011) define clear target questions that are supposed to guide the bmi design process and suggest business model experimenting to come up with new, creative ideas. günzel and holm (2013) propose a different approach, which we call mixed-approach. they divide bmi in frontend (externally-oriented) and back-end (internally-oriented) innovation and suggest to use an experimental trial-and-error approach for front-end innovation and a linear, structured process for back-end innovation. finally, we identified a set of studies that primarily investigate creative methods and techniques for systematic journal of business models (2016), vol. 4, no. 1, pp. 1-28 13 idea generation and bmi (eppler et al., 2011; eppler and hoffmann, 2012; e.g., buur et al., 2013; seidenstricker and linder, 2014). in particular, these different perspectives on the processual design of bmi provide various directions for future research. are bmi design processes, for instance, rather linear or organic, iterative approaches? are there particular circumstances or conditions that favor one approach over the other? how can different approaches (e.g., front-end and back-end innovation) be managed and coordinated? trimi and berbegal-mirabent (2012) see future research potential concerning the connection between firm performance and business model design and how business model design can increase marketplace impact, especially for start-up companies. in this context, an analysis of the interrelation between a technology shift and the chronological sequence (before, during, and after) of bmi design (tongur and engwall, 2014) as well as exploring the integration possibilities of technology transfer knowledge into bmi design and processes seem interesting (carayannis et al., 2014). similarly, further insights on the relation and interaction between product, service, process, and business model innovation appear helpful to clarify the differences and similarities of these concepts (wang et al., 2015). drivers & barriers as in research across a broad variety of scientific thematic contexts, the examination of drivers and barriers has also been an important part of the extant bmi literature. more specifically, different researchers have tried to answer the related questions about what fuels and what impedes bmi. the studies identified head in a similar direction since they share a rather uniform view on the following opinions: although bmi is of great importance, it is very difficult to implement since powerful barriers exist that hinder its realization. overcoming these barriers requires knowledge sharing, organizational learning, and comprehensive thinking and acting. on the other hand, there are particular drivers that foster bmi (chesbrough, 2010; koen et al., 2010; sosna et al., 2010; e.g., berglund and sandström, 2013; eichen et al., 2015). apart from these generally acknowledged assumptions, the field shows a heterogeneous picture that leads to different conceptions and perspectives. while some studies follow an industry-independent approach (e.g., chesbrough, 2010; koen et al., 2010; laukkanen and patala, 2014), many authors investigate bmi related drivers and barriers from different perspectives and industry backgrounds, such as aviation (schneider et al., 2013), food (roaldsen, 2014), telecommunication (anderson and kupp, 2008), solar photovoltaic (richter, 2013b), and print media (wikström and ellonen, 2012). similarly, the investigated drivers and barriers are still rather heterogeneous and go in different directions. anderson and kupp (2008), for instance, identify value chain reconfiguration, collaboration with non-traditional partners, and the building of local capacity as influential factors for successful bmi but also stress competition in itself to be a significant driver. roaldsen (2014) focuses on dynamic capabilities as drivers of bmi and, in particular, identifies intra-management cooperation routines, collective learning, advantage-seeking capability, trust-advancing capability and operational process planning. chesbrough (2010) in comparison regards experimentation, effectuation, and organizational leadership as bmi fostering opportunities and laukkanen and patala (2014) suggest entrepreneurial activities, knowledge development, knowledge diffusion through networks, guidance of search, market formation, and mobilization of resources and creation of legitimacy as measures for overcoming bmi barriers. concerning impediments or barriers of bmi, koen et al. (2010), for instance, mention paradoxical leadership in terms of managerial deficiency, organizational complexity, conventionally inflexible innovation management processes, financial uncertainty, and biased team members acting only on their prior knowledge. richter (2013b) identifies lack of products and services, lack of customer demand, lack of competencies, and lack of profitability. eichen et al. (2015) elaborated conceptual categories, namely awareness-related, search-related, system-related, logic-related, and culture-related barriers. here, laukkanen and patala (2014) take a more comprehensive approach by introducing a broad range of barriers across technologically, socially and organizationally oriented sustainable bmis and summarize these barriers under the umbrella terms of regulatory barriers, market and financial barriers, as well as behavioral and social barriers. journal of business models (2016), vol. 4, no. 1, pp. 1-28 14 the variety and diversity of the mentioned industries, drivers, and barriers is a good illustration of the heterogeneity of this research area. here, we see a great chance for future research. for example, establishing a particular set of drivers and barriers and comparing these within different industries as well as between young start-ups and long established companies. in addition, investigating the questions of what are the competencies and capabilities that companies need to overcome specific barriers and how management and leadership styles affect bmi seem to be fruitful approaches. frameworks developing bmi frameworks has been an important element of the extant research. in summary, the studies of this research field agree that business models are strategic management tools that visualize a company’s key activities, resources, competencies, processes, and structure in a simplified manner, and thus provide a holistic picture of how the company creates value and delivers it to the customer (cf. johnson et al., 2008; teece, 2010; zott et al., 2011). bmi is considered as an effective countermeasure to react to shorter innovation cycles and increasing dynamism and uncertainty of the business environment, and as a key source for competitive advantage (lindgren et al., 2010; yunus et al., 2010; frankenberger et al., 2013; matzler et al., 2013; carayannis et al., 2014). in this context, bmi frameworks are seen as a structured trial-and-error process that needs to be managed and developed over time to anticipate and react to external and internal changes and to use it as a potential source of market opportunities (demil and lecocq, 2010; bucherer et al., 2012; schneider and spieth, 2013). when scrutinizing the framework-related articles we also came across distinctive perspectives and approaches. as onetti et al. (2012) already mentioned, some authors investigated bmi in particular industries (e.g., hwang and christensen, 2008; hsiang et al., 2011; wu et al., 2013), while others followed a more generic approach (e.g., malhotra, 2000; johnson et al., 2008; yang et al., 2014). in addition, available frameworks mainly consider two perspectives: the resource perspective (customer, product, service, organization, infrastructure) and the value perspective (value proposition, value creation, value delivery, value capture, value network, value communication) (e.g., voelpel et al., 2004; habtay, 2012; abdelkafi et al., 2013; matzler et al., 2013; carayannis et al., 2014). although these two perspectives are not contradictory since they rather use different terms and approaches to explain similar opinions and circumstances, they illustrate an ongoing weakness of the field, which leads to several disagreements and tensions: heterogeneity of the bmi concept. the term bmi remains largely unspecified in the scientific literature (richter, 2013a), a generally accepted definition is missing, and the related literature is still considered to be fragmented (onetti et al., 2012; frankenberger et al., 2013). moreover, it is surprising that despite the importance of the customer and the customer value (lee and ho, 2010; habtay, 2012; johnson et al., 2013), we did not encounter any study in the article set that—aside from processual concepts (e.g., pynnönen et al., 2012; frankenberger et al., 2013)—explicitly presents an integrated customer-driven bmi framework. demil and lecocq (2010) identified two views on the business model concept: a static approach that, for example, supports the description and classification of bmi and a dynamic view that addresses change and transformation. although they argue that these views fulfill different functions, which makes both of them useful, most of the extant research has so far focused on the static view (frankenberger et al., 2013). apart from that, there are different opinions concerning the intensity of the bmi. while some authors argue that a new business model must be a game-changing, radical innovation (e.g., markides, 2006; johnson et al., 2008; bucherer et al., 2012), others agree that an evolutionary approach and a gradual development alongside the traditional business may also be a successful strategy (e.g., voelpel et al., 2004; schindehutte et al., 2008; schneider and spieth, 2013). so far, mainly two sources of inspiration have been used for investigating bmi frameworks: organizational learning and innovation research. while the former is rather applied in evolutionary approaches, the latter is used to analyze radical change (richter, 2013a). however, there is still no consensus. here, demil and lecocq (2010, p. 243) headed in a similar direction when stating that they see the concept “as suffering from an under-theorized approach, or from a fragmented theorization”. journal of business models (2016), vol. 4, no. 1, pp. 1-28 15 with regard to future research in the bmi framework area, frankenberger et al. (2013) identified a general lack of comprehensive frameworks that support managers in bmi. concerning the importance of the customer for bmi, we were surprised that we could not encounter any particular customer-driven bmi frameworks. this has also been noted by pynnönen et al. (2012, p. 5), mentioning that “despite the many good attempts to define business models, there are a limited number of frameworks that are capable of taking customer-driven change into account”. given the widely used static approach to bmi, it seems reasonable to extend bmi research from a dynamic perspective. in this context, research should also consider the suggestion of schneider and spieth (2013) and investigate drivers, enablers, and success factors that have an impact on bmi frameworks. furthermore, bucherer et al. (2012) encourage researchers to conduct quantitative empirical research with large samples that allow statistical generalization and that serve as a basis for normative statements. implementation & operation when implementing bmi, a company usually “adopts a novel approach to commercializing its underlying assets” (gambardella and mcgahan, 2010, p. 263). as charming as this sounds, bmi usually demands significant reconfigurations of the value chain, the organizational structure, and the resource base of a firm (mezger, 2014). against this background, bmi implementation is a complex activity that carries various difficulties that firms can experience and that is fraught with risk (moingeon and lehmann-ortega, 2010; evans and johnson, 2013; euchner and ganguly, 2014). however, if successful, the reward is worth the risk. success from bmi provides the ground to outperform the competition and is expected to last longer than product, service, and process innovations since these can quickly be copied (mitchell and coles, 2003). likewise, bmi “plays a key role in survival and growth of enterprises” (francis and bessant, 2005, p. 171). the studies dealing with bmi implementation and operation in general agree that this competence is a crucial strategic issue that requires particular capabilities that allow business model design as well as strategy formulation and execution (francis and bessant, 2005; evans and johnson, 2013). bmi can also mean to acquire new skills and competencies (ferrucci and picciotti, 2012). apart from that, many studies provide a stepwise approach to bmi (e.g., mitchell and coles, 2003; mitchell and bruckner coles, 2004; euchner and ganguly, 2014). many follow a sequential process, starting with identifying the potential for value creation and ending with implementation (euchner and ganguly, 2014). however, these processes show substantial differences, ranging from implementation concepts that follow a linear sequence (design and implement new business model) to dynamic, iterative implementation processes (dmitriev et al., 2014). while euchner and ganguly (2014) suggest a six-step approach (demonstrate value creation, generate business model options, identify risks for each option, prioritize risk, reduce risks through experiments, organize for incubation), mezger (2014) presents a rather abstract, capability-based approach that passes through the phases sensing, seizing, and reconfiguring. although the implementation approaches differ with regard to their design and arrangement, most of them show an experimental component since bmi implementation and operation is generally believed to be a process that is based on experimentation and learning (e.g., moingeon and lehmann-ortega, 2010; andries and debackere, 2013). however, khanagha et al. (2014, p. 337) also note that in “cases of transition to nondisruptive and less radical business models, it may prove to be easier to form a strategic intent toward the new business model and to implement it”. furthermore, bmi that results in a temporary or lasting co-existence of two or more business models is a matter of debate. while authors like moingeon and lehmann-ortega (2010) describe a successful case study that applies spatial separation through the ceo, which is in accordance with other previous results, the findings of khanagha et al. (2014) indicate that spatial separation should only be used in certain situations. in this context, moingeon and lehmann-ortega (2010) as well as khanagha et al. (2014) propose further research to better understand the phenomenon of maintaining multiple business models. concerning the various approaches to bmi, a study that analyzes and synthesizes the associated extant knowledge would be a helpful guidance to academics and practitioners. similarly, studies that investigate the required skills journal of business models (2016), vol. 4, no. 1, pp. 1-28 16 and competencies for successful bmi seem reasonable. in addition, investigating measurement of bmi readiness (evans and johnson, 2013), links between structural change during bmi and firm performance (bock et al., 2012), as well as differences between small startup enterprises and incumbent businesses (massa and testa, 2011) seem to be fruitful approaches. performance & controlling increasing global competition and faster innovation cycles are constant threats to incumbent companies (kastalli et al., 2013). here, innovation is considered as an effective way by which companies can face the resulting challenges and create competitive advantage (bojoaga and petrisor, 2013). in particular bmi is seen as an instrument that creates value and allows rather quick delivery of results (pohle and chapman, 2006; desyllas and sako, 2013; kastalli and van looy, 2013). moreover, bustinza et al. (2013) suggest to rather exploit bmi than traditional business strategy to deal with market uncertainty and to use bmi to recover lost customers. despite these expected benefits, firms face serious bmi implementation issues that require them to use performance and cost management systems that take into account innovation activities (huang et al., 2012; kastalli et al., 2013; kastalli and van looy, 2013; nair et al., 2013). although the field generally suggests a positive bmi impact on firm performance, this topic remains an open issue since there are only few empirical studies and conclusive empirical evidence is sparse (aspara et al., 2010; desyllas and sako, 2013; denicolai et al., 2014). this claim is particularly important against the background that aspara et al. (2010) empirically identified situations in which bmi did not lead to superior performance. according to their study, superior performance of large firms may rather come from business model replication than innovation and large incumbent firms may even experience lower financial performance if they rely on bmi. in contrast, there are studies that identified a positive relationship between bmi and firm performance (pohle and chapman, 2006; e.g., huang et al., 2012). while cucculelli and bettinelli (2015, p. 346) also noted a generally positive relationship, they restricted their findings by stating that a “winning bm [business model] does not exist and that changing bm is not necessarily a winning strategy if this is not accompanied by innovation and by complementary activities that help the firm to differentiate itself in the market.” in addition, desyllas and sako (2013) propose that bmi by itself is not enough. they recommend to protect constituent components of new business models through formal intellectual property protection—if possible in the respective country. this way, firms increase bmi protection and may extend the duration of the associated competitive advantage. concerning the prevalent tensions and differences with regard to the relationship between bmi and performance and the mentioned lack of confirmatory empirical studies, additional research is needed. this view is underlined by several authors who also hope for further empirical research in this field that examines, for example, the particular source of the value creation and investigates if it is really bmi or if there are other circumstances, such as internal and external characteristics, customer relation, economies of scale, and/or learning effects (camisón and villar-lópez, 2010; kastalli and van looy, 2013). furthermore, it is interesting if there are further options to deliver and capture value (denicolai et al., 2014). apart from that, big data and longitudinal studies about bmi and performance as well as influencing factors (aspara et al., 2010; camisón and villar-lópez, 2010) and how business opportunities may be explored in real-time (bøe-lillegraven, 2014) are regarded as fruitful research opportunities. discussion and conclusions the starting point of this study has been the increasing relevance of bmi in both management and scientific research against the background of the given shortcomings with respect to the bmi concept, understanding, and research heterogeneity. in approaching a comparable research endeavor, this article initially presents a set of yielding definitions of the extant literature as well as an integrated definition of bmi to establish a common understanding of bmi in this study. while this definition has a comprehensive character, there may certainly be more detailed or specialized definitions. in the synopsis of the literature and concept development that adapts research stream categories of schneider and spieth (2013) and spieth et al. (2014), the study yields the existence of the three different research streams: corporate strategy, innovation and technology management as well as entrepreneurship. journal of business models (2016), vol. 4, no. 1, pp. 1-28 17 the latter constitutes the so far least applied research stream and thus seems initially appealing for upcoming research. moreover, by chronologically dividing the bmi literature development into certain phases, we state that the literature resides simultaneously in both a consolidation and differentiation phase, which has prevented a homogenization of the bmi concept so far. we encountered a very heterogeneous field that offers plenty of varying definitions, concepts, and approaches. thus, an according subsequent phase focusing on this homogenization would be desirable in the future since without an accepted paradigm that guides research, knowledge generation becomes blurry and flawed as there is no tacit agreement that governs researchers to focus on particular research problems, building on the work of others to achieve a systematic, continuous, accumulating knowledge generation process (crane, 1972; price, 1986; eisend, 2015). in addition, researchers should look at well-established related fields, such as innovation management and strategic management, to make use of potential transfer knowledge and to systematically generate insights from these areas, which may also provide transferable guidance for specific bmi phenomena. the core of the study is the extensive quantitative and qualitative literature analysis concerning scientific peer-reviewed english-language publications that essentially deal with bmi. given the early stage of the bmi research field, the first finding that arrested our attention was the comparably high amount of empirical studies. usually young research fields are characterized by a dominance of conceptual articles that mark the field and provide a solid theoretical foundation. when looking at the number of case study-driven approaches (64) that makes up 43% of the conceptual and empirical studies, this indicates that bmi is a research field with a strong practical focus. for the most part, case studies follow an exploratory research aim describing rather unique characteristics of a particular case. however, they are normally not suitable to produce generalizable results and conduct theory-confirming studies. this may be a reason that the concept still appears heterogeneous despite the meanwhile achieved number of scientific research investigations. this tendency towards exploratory research also pertains to quantitative empirical studies, in which only 12 of the 30 studies identified followed a confirmatory research aim. the vast amount of exploratory research that is, to a large extent, based on selective empirical cases and the lack of confirmatory work leads to a blurring and splintering of the field. thus, future research on bmi should reduce its efforts to produce further case study-based investigations and rather head towards well-founded conceptual articles that stabilize and consolidate basic research as well as confirmatory quantitative empirical investigations, especially large-scale quantitative multivariate methods that allow generalization and disconfirmation of misleading concepts and conclusions to rationally test theoretical knowledge according to critical rationalism (cf. popper, 2002). further interesting findings result from the analysis of the google scholar citations as well as their comparison with the number of publications over time. there are only a few highly cited articles that have a massive influence on the field and the majority of studies experience only little notice. apart from that, we could identify several trigger points (2002, 2008, 2010, 2013, and 2014) that produced a couple of highly influential bmi research studies. in 2002 and 2008 this effect can be attributed to particular articles (e.g., chesbrough and rosenbloom (2002) and johnson et al. (2008)), while in 2010, 2013, and 2014, several special issues (e.g., 2010: long range planning, 2013: international journal of innovation management, international journal of product development, 2014: international journal of entrepreneurship and innovation management, r&d management) have received substantial attention and provided an important contribution to pave the way for further bmi research. in light of this situation, bmi research is still a highly concentrated field of reference. apart from that, the article continues by analyzing the previously occupied research areas of bmi, namely definition & types, design & process, drivers & barriers, frameworks, implementation & operation, and performance & controlling, from a content perspective. the studies of the area definition & types emphasize that the complexity and dynamism of bmi should not be underestimated. bmi requires particular skills and an appropriate culture and attitude. moreover, experimenting is seen as an indispensable component. therefore, bmi is seen as a major opportunity and a major challenge at the same time. concerning the fundamental journal of business models (2016), vol. 4, no. 1, pp. 1-28 18 character of the definition & types research area, it seems reasonable that future research tries to identify a common basis and follow the field’s upcoming tendency towards a homogenization of the bmi phenomenon to create a common understanding of bmi and its potential impact. furthermore, future research may investigate whether there are universal bmi types that can be adapted to the specific situation and industry. from the design & process area perspective, bmi reflects an additional method for innovation, next to product, service, and process innovation. although the bmi perspective helps managers and entrepreneurs to think about their business in a systematic and holistic way, creating new business models is a challenging task. despite the common consent on the general direction of the research area, there are several questions that could not have been sufficiently answered yet: what is the difference between bmi and other forms of innovation? what are the relationships and interactions between product, service, process, and business model innovation? is bmi more important or valuable than other forms of innovation? what is particularly new about bmi? what makes bmi particularly special and value driving? and where does bmi end—can we think of entirely new business models that change the way business has been conducted so far? apart from that, there are manifold unanswered issues concerning the variety of bmi design processes (e.g., linear, organic, iterative). are there universal approaches to bmi design? are there particular circumstances or conditions that favor one approach over the other? how can different approaches (e.g., front-end and back-end innovation) be managed and coordinated? and finally, is there a significant relationship between bmi design and performance? in the research area of drivers & barriers we have identified a broad variety of drivers and barriers in the literature, ranging from drivers like experimentation and trial-and-error-learning to product and service integration as well as regulatory, market, financial, behavioral, social barriers, and many more. while our approach of consulting scientific peer-reviewed publications already offers a comprehensive overview of bmi drivers and barriers, especially in this research area the consultation of more practice-oriented studies may be of further value in the future. research objectives could be to establish particular sets of drivers and barriers and comparing these within different industries or between young start-ups and long established companies, as well as investigating required competencies and capabilities that companies need to overcome specific barriers and how management and leadership styles affect bmi. in addition, several scientific authors of the extant relevant literature regard bmi drivers and barriers in a generic context, whereas others refer to particular industries in doing so. thus, a further research direction for bmi could also lie in exploring if an according differentiation is necessary in bmi research or if authors should rather follow the generic approach. furthermore, there exists little knowledge about the drivers of bmi. gaining further insights into the drivers of bmi seems to be of particular importance since these may provide manifold opportunities for valueadded innovation. from the frameworks research perspective, bmi is considered as an effective countermeasure to face shorter innovation cycles as well as increasing uncertainty and environmental dynamism. moreover, bmi is generally seen as a key source of competitive advantage and the bmi frameworks serve as a kind of guided trial-and-error process to anticipate and react to external and internal changes and use bmi as potential source of market opportunities. however, there is a great heterogeneity concerning the peculiarities, directions, and manifestations of bmi frameworks. furthermore, there is a general lack of bmi frameworks that specifically take into account the customer. these are key issues that should be addressed by future research. bmi implementation and operation is seen as a dynamic, complex, and risky activity that carries various difficulties. nevertheless, effective bmi brings along considerable advantages. firms that successfully conduct bmi are expected to outperform their competitors. in addition, bmi is expected to last longer than product, service, and process innovations since these can quickly be copied. but innovating an existing business model usually leads to the situation of managing two or more business models at the same time—at least temporarily. this phenomenon is primarily investigated from an ambidextrous organization perspective. however, we could not identify conclusive results or approaches in this context, and thus see considerable future research potential in this research area. does bmi, for instance, journal of business models (2016), vol. 4, no. 1, pp. 1-28 19 force companies to manage multiple business models in particular situations? what are the management strategies that companies can apply in these situations? what are the risks (e.g., cannibalization, lack of business focus) that result from organizational ambidexterity in a bmi context? furthermore, studies that analyze and synthesize the variety of bmi implementation and operation approaches as well as the required skills and competencies for effective bmi management are regarded fruitful. some authors (e.g., bock et al., 2012; evans and johnson, 2013) also address the unsolved issues of how to measure bmi and bmi readiness as well as the relationship between successful bmi implementation and operation and firm performance. last, we also dedicated one section to the research area of bmi performance and controlling, which with further progress of bmi’s importance for practitioners can only become more meaningful in the future. concerning this matter, in the literature we again identify the difference between either considering bmi benefits in general, measured by certain key performance indicators, or certain bmi constraints regarding particular industries, which further supports the aforementioned research recommendation for the future. although the field generally assumes a positive relationship between bmi and firm performance, this topic remains an open issue since there are only a few empirical studies and conclusive empirical evidence is sparse. so, is it really bmi that provides a competitive advantage or are there other circumstances, such as internal and external characteristics, customer relations, economies of scale, and/or learning effects? overall, this literature review includes particular insights on the extant bmi knowledge and “closes areas where a plethora of research exists, and uncovers areas where research is needed” (webster and watson, 2002, p. 8), making the concept of bmi more transparent, comprehensible, and manageable for both scientists and practitioners, creating a firm foundation for future research and thus contributing significant added value for the topic’s conceptual progress. moreover, given the literature’s previous lack of conceptual unambiguity, our analysis is supposed to guide practitioners who so far may have had problems in appropriately grasping a clear meaning of the bmi concept. despite its manifold insights for scientists and practitioners, this study also has its limitations. given the database-centered, eclectic nature of the analytical approach, it is unlikely that every available and applicable scientific publication was included in the analysis. in particular since the query was limited to peer-reviewed english-language publications, excluding studies in other languages. apart from that, it is possible that other relevant publications exist that do not mention any of the search terms. given the size and quality of the article set compared to previous studies and the systematic search approach, the sample should nevertheless provide a meaningful census of the extant bmi literature and provide a solid foundation to advance bmi knowledge. furthermore, the classification process of the studies according to certain criteria leads to a loss of information and sometimes cannot be conducted free of doubt since studies occasionally touch multiple criteria. these constraints are common obstacles when conducting a literature analysis. concerning the primary aim of a literature review (create transparency in a complex field), these are generally accepted since the reward outweighs the restrictions. considering that the authors were conscious of these limitations and that the study has built the classification system based on established categories from scientific literature, the associated degree of risk should be acceptable. journal of business models (2016), vol. 4, no. 1, pp. 1-28 20 reference list abdelkafi, n., makhotin, s. and posselt, t. (2013), “business model innovations for electric mobility—what can be learned from existing business model patterns?”, international journal of innovation management, vol. 17, no. 1 abraham, s. (2013), “will business model innovation replace strategic analysis?”, strategy & leadership, vol. 41, no. 2, pp. 31–38. amit, r. and zott, c. (2012), “creating value through business model innovation”, mit sloan management review, vol. 53, no. 3, pp. 40–50. anderson, j. and kupp, m. (2008), “serving the poor: drivers of business model innovation in mobile”, info, vol. 10, no. 1, pp. 5–12. andries, p. and debackere, k. (2013), “business model innovation: propositions on the appropriateness of different learning approaches”, creativity and innovation management, vol. 22, no. 4, pp. 337–358. arduini, d. and zanfei, a. (2014), “an overview of scholarly research on public e-services? a meta-analysis of the literature”, telecommunications policy, vol. 38, no. 5, pp. 476–495. aspara, j., hietanen, j. and tikkanen, h. (2010), “business model innovation vs replication: financial performance implications of strategic emphases”, journal of strategic marketing, vol. 18, no. 1, pp. 39–56. bcg (2009), “business model innovation. when the game gets tough, change the game”, pp. 1–8. bereznoi, a. (2015), “business model innovation in corporate competitive strategy”, problems of economic transition, vol. 57, no. 8, pp. 14–33. berglund, h. and sandström, c. (2013), “business model innovation from an open systems perspective: structural challenges and managerial solutions”, international journal of product development, vol. 18, no. 3-4, pp. 274–285. bock, a.j., opsahl, t., george, g. and gann, d.m. (2012), “the effects of culture and structure on strategic flexibility during business model innovation”, journal of management studies, vol. 49, no. 2, pp. 279–305. bocken, n.m., short, s.w., rana, p. and evans, s. (2014), “a literature and practice review to d evelop sustainable business model archetypes”, journal of cleaner production, vol. 65, pp. 42–56. bøe-lillegraven, t. (2014), “untangling the ambidexterity dilemma through big data analytics”, journal of organization design, vol. 3, no. 3, pp. 27–37. bohnsack, r., pinkse, j. and kolk, a. (2014), “business models for sustainable technologies: exploring business model evolution in the case of electric vehicles”, research policy, vol. 43, no. 2, pp. 284–300. bojoaga, a. and petrisor, i. (2013), “the effects of business model innovation: an exploratory research”, managerial challenges of the contemporary society. proceedings, vol. 5, pp. 38–43. boons, f. and lüdeke-freund, f. (2013), “business models for sustainable innovation. state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. journal of business models (2016), vol. 4, no. 1, pp. 1-28 21 bucherer, e., eisert, u. and gassmann, o. (2012), “towards systematic business model innovation: lessons from product innovation management”, creativity and innovation management, vol. 21, no. 2, pp. 183–198. bustinza, o.f., vendrell-herrero, f., parry, g. and myrthianos, v. (2013), “music business models and piracy”, industrial management & data systems, vol. 113, no. 1, pp. 4–22. buur, j., ankenbrand, b. and mitchell, r. (2013), “participatory business modelling”, codesign, vol. 9, no. 1, pp. 55–71. byerly, r.t. (2014), “the social contract, social enterprise, and business model innovation”, social business, vol. 4, no. 4, pp. 325–343. camisón, c. and villar-lópez, a. (2010), “business models in spanish industry: a taxonomy-based efficacy analysis”, m@n@gement, vol. 13, no. 4, pp. 298–317. carayannis, e.g., grigoroudis, e., sindakis, s. and walter, c. (2014), “business model innovation as antecedent of sustainable enterprise excellence and resilience”, journal of the knowledge economy, vol. 5, no. 3, pp. 440–463. carayannis, e.g., sindakis, s. and walter, c. (2015), “business model innovation as lever of organizational sustainability”, the journal of technology transfer, vol. 40, no. 1, pp. 85–104. casadesus-masanell, r. and ricart, j.e. (2010), “from strategy to business models and onto tactics”, long range planning, vol. 43, no. 2-3, pp. 195–215. casadesus-masanell, r. and zhu, f. (2013), “business model innovation and competitive imitation. the case of sponsor-based business models”, strategic management journal, vol. 34, no. 4, pp. 464–482. chesbrough, h. (2007), “business model innovation. it’s not just about technology anymore”, strategy & leadership, vol. 35, no. 6, pp. 12–17. chesbrough, h. (2010), “business model innovation. opportunities and barriers”, long range planning, vol. 43, no. 2-3, pp. 354–363. chesbrough, h. and rosenbloom, r.s. (2002), “the role of the business model in capturing value from innovation. evidence from xerox corporation’s technology spin-off companies”, industrial and corporate change, vol. 11, no. 3, pp. 529–555. chesbrough, h. and schwartz, k. (2007), “innovating business models with co-development partnerships”, research-technology management, january-february, pp. 55–59. crane, d. (1972), invisible colleges: diffusion o f knowledgein scientific communities, university of chicago press, chicago. cucculelli, m. and bettinelli, c. (2015), “business models, intangibles and firm performance: evidence on corporate entrepreneurship from italian manufacturing smes”, small business economics, vol. 45, no. 2, pp. 329–350. dasilva, c.m. and trkman, p. (2014), “business model. what it is and what it is not”, long range planning, vol. 47, no. 6, pp. 379–389. journal of business models (2016), vol. 4, no. 1, pp. 1-28 22 deloitte (2002), “deconstructing the formula for business model innovation: uncovering value-creating opportunities in familiar places. a competitive strategy study by deloitte consulting and deloitte & touche”, pp. 1–24. demil, b. and lecocq, x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, vol. 43, no. 2, pp. 227–246. denicolai, s., ramirez, m. and tidd, j. (2014), “creating and capturing value from external knowledge: the moderating role of knowledge intensity”, r&d management, vol. 44, no. 3, pp. 248–264. desyllas, p. and sako, m. (2013), “profiting from business model innovation: evidence from pay-as-you-drive auto insurance”, research policy, vol. 42, no. 1, pp. 101–116. dmitriev, v., simmons, g., truong, y., palmer, m. and schneckenberg, d. (2014), “an exploration of business model development in the commercialization of technology innovations”, r&d management, vol. 44, no. 3, pp. 306–321. eichen, s.f.v.d., freiling, j. and matzler, k. (2015), “why business model innovations fail”, journal of business strategy, vol. 36, no. 6, pp. 29–38. eisend, m. (2015), “have we progressed marketing knowledge? a meta-meta-analysis of effect sizes in marketing research”, journal of marketing, vol. 79, no. 3, pp. 23–40. enkel, e. and mezger, f. (2013), “imitation processes and their application for business model innovation. an explorative study”, international journal of innovation management, vol. 17, no. 1, 1340005-1–34. eppler, m.j. and hoffmann, f. (2012), “does method matter? an experiment on collaborative business model idea generation in teams”, innovation, vol. 14, no. 3, pp. 388–403. eppler, m.j., hoffmann, f. and bresciani, s. (2011), “new business models through collaborative idea generation”, international journal of innovation management, vol. 15, no. 6, pp. 1323–1341. euchner, j. and ganguly, a. (2014), “business model innovation in practice”, research technology management, vol. 57, no. 6, p. 33. eurich, m., weiblen, t. and breitenmoser, p. (2014), “a six-step approach to business model innovation”, international journal of entrepreneurship and innovation management, vol. 18, no. 4, pp. 330–348. evans, j.d. and johnson, r.o. (2013), “tools for managing early-stage business model innovation”, research-technology management, vol. 56, no. 5, pp. 52–56. ferrucci, l. and picciotti, a. (2012), “innovative business model in the parquet industry. an italian leading company: margaritelli spa and its brand listone giordano”, international journal of management cases, vol. 14, no. 4, pp. 269–281. fichman, r.g., dos santos, b.l. and zheng, z. (2014), “digital innovation as a fundamental and powerful concept in the information systems curriculum”, mis quarterly, vol. 38, no. 2, pp. 329–353. francis, d. and bessant, j. (2005), “targeting innovation and implications for capability development”, technovation, vol. 25, no. 3, pp. 171–183. journal of business models (2016), vol. 4, no. 1, pp. 1-28 23 frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013), “the 4i-framework of business model innovation: a structured view on process phases and challenges”, international journal of product development, vol. 18, no. 3-4, pp. 249–273. gambardella, a. and mcgahan, a.m. (2010), “business-model innovation. general purpose technologies and their implications for industry structure”, long range planning, vol. 43, no. 2-3, pp. 262–271. gebauer, h. and saul, c.j. (2014), “business model innovation in the water sector in developing countries”, science of the total environment, vol. 488, pp. 512–520. giesen, e., riddleberger, e., christner, r. and bell, r. (2010), “when and how to innovate your business model”, strategy & leadership, vol. 38, no. 4, pp. 17–26. girotra, k. and netessine, s. (2013), “business model innovation for sustainability”, manufacturing & service operations management, vol. 15, no. 4, pp. 537–544. gobble, m.m. (2014), “business model innovation”, research-technology management, vol. 57, no. 6, p. 58. google (2015), “about the company”, available at: https://www.google.com/about/company/ (accessed 9 december 2015). google (2016), “google scholar metrics”, available at: https://scholar.google.com/intl/en/scholar/metrics.html (accessed 3 february 2016). günzel, f. and holm, a.b. (2013), “one size does not fit all. understanding the front-end and back-end of business model innovation”, international journal of innovation management, vol. 17, no. 01, 1340002-1–34. habtay, s.r. (2012), “a firm-level analysis on the relative difference between technology-driven and market-driven disruptive business model innovations”, creativity and innovation management, vol. 2, no. 3, pp. 290–303. hancock, g.r. and mueller, r.o. (2010), the reviewer’s guide to quantitative methods in the social sciences, routledge, new york. hoveskog, m., halila, f. and danilovic, m. (2015), “early phases of business model innovation: an ideation experience workshop in the classroom”, decision sciences journal of innovative education, vol. 13, no. 2, pp. 177–195. hsiang, c.h., chen, r.s., chen, y.c. and chen, c. (2011), “a framework of collaborative commerce and internet organisation business model innovation in the tourism industry. the case study of the veterans affairs commission in taiwan”, international journal of information technology and management, vol. 10, no. 2/3/4, p. 167. huang, h., lai, m., kao, m. and chen, y. (2012), “target costing, business model innovation, and firm performance: an empirical analysis of chinese firms”, canadian journal of administrative sciences/revue canadienne des sciences de l’administration, vol. 29, no. 4, pp. 322–335. huarng, k.-h. (2013), “a two-tier business model and its realization for entrepreneurship”, journal of business research, vol. 66, no. 10, pp. 2102–2105. hwang, j. and christensen, c.m. (2008), “disruptive innovation in health care delivery: a framework for businessmodel innovation”, health affairs, vol. 27, no. 5, pp. 1329–1335. journal of business models (2016), vol. 4, no. 1, pp. 1-28 24 ibm (2009), “paths to success: three ways to innovate your business model”, available at: http://www-935.ibm. com/services/us/gbs/bus/pdf/qr_gbe03170-usen_pathsuccess.pdf (accessed 7 july 2015). johnson, d., wrigley, c., straker, k. and bucolo, s. (2013), “designing innovative business models: five emerging meta-models”, shenzhen, china. johnson, m.w., christensen, c.m. and kagermann, h. (2008), “reinventing your business model”, harvard business review, december, pp. 51–59. kastalli, i.v. and van looy, b. (2013), “servitization. disentangling the impact of service business model innovation on manufacturing firm performance”, journal of operations management, vol. 31, no. 4, pp. 169–180. kastalli, v.i., van looy, b. and neely, a. (2013), “steering manufacturing firms towards service business model innovation: embracing indicators that reflect market performance”, california management review, vol. 56, no. 1, pp. 100–123. khanagha, s., volberda, h. and oshri, i. (2014), “business model renewal and ambidexterity: structural alteration and strategy formation process during transition to a cloud business model”, r&d management, vol. 44, no. 3, pp. 322–340. koen, p.a., bertels, h., elsum, i.r., orroth, m. and tollett, b.l. (2010), “breakthrough innovation dilemmas”, research-technology management, vol. 53, no. 6, p. 48. koen, p.a., bertels, h.m.j. and elsum, i.r. (2011), “the three faces of business model innovation: challenges for established firms”, research-technology management, vol. 54, no. 3, pp. 52–59. kpmg (2006), “rethinking the business model”, pp. 1–71. lambert, s.c. and davidson, r.a. (2013), “applications of the business model in studies of enterprise success, innovation and classification. an analysis of empirical research from 1996 to 2010”, european management journal, vol. 31, no. 6, pp. 668–681. laukkanen, m. and patala, s. (2014), “analysing barriers to sustainable business model innovations: innovation systems approach”, international journal of innovation management, vol. 18, no. 06, p. 1440010. lee, c.-s. and ho, j.c. (2010), “a framework for analyzing business model innovation in mobile commerce”, journal of international technology and information management, vol. 19, no. 4, p. 37. lei, p. and wu, q. (2007), “introduction to structural equation modeling: issues and practical considerations”, educational measurement: issues and practice, vol. 26, no. 3, pp. 33–43. lindgren, p., taran, y. and boer, h. (2010), “from single firm to network-based business model innovation”, international journal of entrepreneurship and innovation management, vol. 12, no. 2, pp. 122–137. malhotra, y. (2000), “knowledge management and new organization forms: a framework for business model innovation”, information resources management journal, vol. 13, no. 1, pp. 5–14. markides, c. (2006), “disruptive innovation: in need of better theory”, journal of product innovation management, journal of business models (2016), vol. 4, no. 1, pp. 1-28 25 vol. 23, no. 1, pp. 19–25. massa, l. and tucci, c.l. (2014), “business model innovation”, in dogdson, m., gann, d., & nelson, p. (ed.), the oxford handbook of innovation management, oxford university press, oxford, uk, pp. 420–441. massa, s. and testa, s. (2011), “beyond the conventional-specialty dichotomy in food retailing business models: an italian case study”, journal of retailing and consumer services, vol. 18, no. 5, pp. 476–482. matzler, k., bailom, f., friedrich von den eichen, stephan and kohler, t. (2013), “business model innovation: coffee triumphs for nespresso”, journal of business strategy, vol. 34, no. 2, pp. 30–37. mckinsey (2008), “google’s view on the future of business: an interview with ceo eric schmidt”, pp. 1–8. mezger, f. (2014), “toward a capability‐based conceptualization of business model innovation: insights from an explorative study”, r&d management, vol. 44, no. 5, pp. 429–449. mitchell, d. and coles, c. (2003), “the ultimate competitive advantage of continuing business model innovation”, journal of business strategy, vol. 24, no. 5, pp. 15–21. mitchell, d.w. and bruckner coles, c. (2004), “establishing a continuing business model innovation process”, journal of business strategy, vol. 25, no. 3, pp. 39–49. moingeon, b. and lehmann-ortega, l. (2010), “creation and implementation of a new business model: a disarming case study”, management, vol. 13, no. 4, pp. 266–297. nair, s., paulose, h., palacios, m. and tafur, j. (2013), “service orientation: effectuating business model innovation”, the service industries journal, vol. 33, no. 9-10, pp. 958–975. onetti, a. and capobianco, f. (2005), “open source and business model innovation. the funambol case”, genova. onetti, a., zucchella, a., jones, m.v. and mcdougall-covin, p.p. (2012), “internationalization, innovation and entrepreneurship: business models for new technology-based firms”, journal of management & governance, vol. 16, no. 3, pp. 337–368. osterwalder, a., pigneur, y. and clark, t. (2010), business model generation: a handbook for visionaries, game changers, and challengers, alexander osterwalder & yves pigneur, amsterdam. pautasso, m. and bourne, p.e. (2013), “ten simple rules for writing a literature review”, plos computational biology, vol. 9, no. 7, pp. 1–4. pohle, g. and chapman, m. (2006), “ibm’s global ceo report 2006: business model innovation matters”, strategy & leadership, vol. 34, no. 5, pp. 34–40. popper, k.r. (2002), the logic of scientific discovery, routledge classics, london. price, d.d.s. (1986), little science, big science … and beyond, 2nd ed., columbia university press, new york. pynnönen, m., hallikas, j. and ritala, p. (2012), “managing customer-driven business model innovation”, internajournal of business models (2016), vol. 4, no. 1, pp. 1-28 26 tional journal of innovation management, vol. 16, no. 4, 1250022-1–18. richter, m. (2013a), “business model innovation for sustainable energy: german utilities and renewable energy”, energy policy, vol. 62, pp. 1226–1237. richter, m. (2013b), “german utilities and distributed pv: how to overcome barriers to business model innovation”, renewable energy, vol. 55, no. july, pp. 456–466. roaldsen, i. (2014), “dynamic capabilities as drivers of business model innovation–from the perspective of smes in mature industries”, international journal of entrepreneurship and innovation management, vol. 18, no. 4, pp. 349–364. sánchez, p. and ricart, j.e. (2010), “business model innovation and sources of value creation in low-income markets”, european management review, vol. 7, no. 3, pp. 138–154. schindehutte, m., morris, m.h. and kocak, a. (2008), “understanding market‐driving behavior: the role of entrepreneurship”, journal of small business management, vol. 46, no. 1, pp. 4–26. schneider, s. and spieth, p. (2013), “business model innovation. towards an integrated future research agenda”, international journal of innovation management, vol. 17, no. 1, 134000-1–34. schneider, s. and spieth, p. (2014), “business model innovation and strategic flexibility: insights from an experimental research design”, international journal of innovation management, vol. 18, no. 6, 1440009-1–1440009-21. schneider, s., spieth, p. and clauss, t. (2013), “business model innovation in the aviation industry”, international journal of product development, vol. 18, no. 3-4, pp. 286–310. seidenstricker, s. and linder, c. (2014), “a morphological analysis-based creativity approach to identify and develop ideas for bmi: a case study of a high-tech manufacturing company”, international journal of entrepreneurship and innovation management, vol. 18, no. 5-6, pp. 409–424. shelton, r. (2009), “integrating product and service innovation”, research-technology management, vol. 52, no. 3, pp. 38–44. simmons, g., palmer, m. and truong, y. (2013), “inscribing value on business model innovations: insights from industrial projects commercializing disruptive digital innovations”, industrial marketing management, vol. 42, no. 5, pp. 744–754. sinfield, j.v., calder, e., mcconnell, b. and colson, s. (2011), “how to identify new business models”, mit sloan management review, vol. 53, no. 2, pp. 85–90. sosna, m., trevinyo-rodríguez, r.n. and velamuri, s.r. (2010), “business model innovation through trial-and-error learning: the naturhouse case”, long range planning, vol. 43, no. 2/3, pp. 383–407. spieth, p., schneckenberg, d. and ricart, j.e. (2014), “business model innovation–state of the art and future challenges for the field”, r&d management, vol. 44, no. 3, pp. 237–247. taran, y., boer, h. and lindgren, p. (2015), “a business model innovation typology”, decision sciences, vol. 46, no. 2, journal of business models (2016), vol. 4, no. 1, pp. 1-28 27 pp. 301–331. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43, no. 2-3, pp. 172–194. tongur, s. and engwall, m. (2014), “the business model dilemma of technology shifts”, technovation, vol. 34, no. 9, pp. 525–535. trimi, s. and berbegal-mirabent, j. (2012), “business model innovation in entrepreneurship”, international entrepreneurship and management journal, vol. 8, no. 4, pp. 449–465. tuulenmäki, a. and välikangas, l. (2011), “the art of rapid, hands-on execution innovation”, strategy & leadership, vol. 39, no. 2, pp. 28–35. voelpel, s.c., leibold, m. and tekie, e.b. (2004), “the wheel of business model reinvention. how to reshape your business model to leapfrog competitors”, journal of change management, vol. 4, no. 3, pp. 259–276. wang, q., voss, c., zhao, x. and wang, z. (2015), “modes of service innovation: a typology”, industrial management & data systems, vol. 115, no. 7, pp. 1358–1382. webster, j. and watson, r.t. (2002), “analyzing the past to prepare for the future: writing a literature review”, mis quarterly, vol. 26, no. 2, pp. xiii–xxiii. wikström, p. and ellonen, h.-k. (2012), “the impact of social media features on print media firms’ online business models”, journal of media business studies, vol. 9, no. 3, pp. 63–80. wirtz, b.w. (2011), business model management: design instruments success factors, gabler, wiesbaden. wirtz, b.w. (2016), business model management: design process instruments, textbook for the digital society, 2nd ed., speyer. wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016) “business models: origin, development and future research perspectives.” long range planning, vol. 49, no. 1, pp. 36-54. wu, j., guo, b. and shi, y. (2013), “customer knowledge management and it-enabled business model innovation: a conceptual framework and a case study from china”, european management journal, vol. 31, no. 4, pp. 359–372. yang, d.-h., you, y.-y. and kwon, h.-j. (2014), “a framework for business model innovation using market, component and innovation tool”, international journal of applied engineering research, vol. 9, no. 21, pp. 9235–9248. yunus, m., moingeon, b. and lehmann-ortega, l. (2010), “building social business models: lessons from the grameen experience”, long range planning, vol. 43, no. 2, pp. 308–325. zott, c. and amit, r. (2007), “business model design and the performance of entrepreneurial firms”, organization science, vol. 18, no. 2, pp. 181–199. zott, c., amit, r. and massa, l. (2011), “the business model. recent developments and future research”, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2016), vol. 4, no. 1, pp. 1-28 28 about the authors professor bernd w. wirtz holds the chair for information and communication management at the german university of administrative sciences speyer. he has published widely on issues pertaining to business models, electronic business, strategic management, media management, and marketing. vincent göttel is a doctoral student at the german university of administrative sciences speyer. peter daiser is a doctoral student and research assistant at the german university of administrative sciences speyer. before that, he worked as a manager at pwc. journal of business models (2018), vol. 6, no. 1, pp. 59-71 59 business models and complexity lorenzo massa1, gianluigi viscusi2, and christopher tucci3 abstract purpose: to offer a -necessarily non-exhaustiveanalysis of the meaning and significance of the notion of a complex system for research on the business model (bm). design/methodology/approach: conceptual paper findings: drawing from early research in complexity and debates that have inspired work in general system theory, system thinking and cybernetics, we identify four insights, notably i) modeling of complex systems, ii) interdependencies, iii) nested hierarchies and iv) information processing that, we contend, have the potential to shed light on novel possibilities for understanding bms. we offer an analysis. research limitations/implications: limitation: exclusive focus on early interpretation of the notion of complexity as referring to a characteristic of a system. the paper does not explore the implications of the more modern understanding of complexity as referring to the ‘behavior’ of a system (complex system vs. complex behavior) practical implications: we may be attempting to represent a system which is very complex, the bm and the organization behind it, at the level of the anatomy, only reflecting its main components. this is subject to inherent limitations. originality/value: to show that, within the line of inquiry understanding the business model (bm) as some reality existing at the level of the firm, a bm may resemble what students of complexity refer to as a complex system. to explore the meaning and significance of the notion of complexity and of a complex system for research on the bm. please cite this paper as: massa, l., viscusi, g., and tucci, c. (2018), business models and complexity, journal of business models, vol. 6, no. 1, pp. 70-82 keywords: business models, complexity, complex systems 1–3 école polytechnique fédérale de lausanne (epfl), epfl-cdm-mtei-csi, station 5, ch-1015 lausanne (switzerland), tel. +41 21 693 0121, e-mail: lorenzo.massa@epfl.ch (corresponding author), gianluigi.viscusi@epfl.ch, christopher.tucci@epfl.ch journal of business models (2018), vol. 6, no. 1, pp. 59-71 60 introduction the business model (bm) has captivated scholars and managers for over twenty years. part of its mystery may be the difficulty organizations exhibit in communicating and adopting business models. in this article, we suggest that these difficulties may partially be due to the fact that a bm can have characteristics shared with what scholars interested in complexity refer to as a complex system (e.g., see anderson, 1999). generally speaking, and oversimplifying to some degree, a complex system can be defined as a system comprising a large number of parts characterized by non-linear interdependencies (simon, 1996; forrester, 1961; sterman, 1994; casti, 1986), together creating a whole that is more than the mere sum of its parts.59 we contend that both the notions of complexity and of complex systems bear important insights for research on bms that may have not been fully acknowledged. in this brief and necessarily non-exhaustive contribution, we examine some of them. we build on the line of inquiry understanding the business model as a reality existing at the level of the firm and affecting its performance in markets (cf. amit & zott, 2001, zott & amit, 2008; massa, tucci & afuah, 2017). we proceed as follows. first, we offer some reasons supporting the view of bms as complex systems. second, building on that literature, we offer a short excursus into the notion of complexity applied to systems and a classification of systems into classes of increasing complexity. this allows elucidating why we contend that bms may rank high in a hierarchy of systems complexity. third, we identify some insights emerging from this recognition of bms as complex systems, namely modeling of complex systems, interdependencies, nested hierarchies and information processing, and comment on their meaning and significance for research on bms. 59 recall the aristotelian argument on unity that “the whole is something besides the parts” (aristotle, metaphysics h6, 1045a8–10) and the insights of gestalt psychology: “the whole is more than the sum of its parts. it is more correct to say that the whole is something else than the sum of its parts, because summing up is a meaningless procedure, whereas the whole-part relationship is meaningful” (koffka, 1935, p. 176). business models as complex systems despite the well known ongoing debate, scholars tend to agree, at least at a general level and within the interpretation of bms as referring to something real at the level of an organization (cf. massa et al., 2017), that a bm is a system level concept (zott and amit, 2007; casadesus-masanell & ricart, 2010; teece, 2010), centered on activities (e.g., see zott and amit, 2010), spanning the boundaries of a focal organization to include exchanges with a network of partners (amit & zott, 2001), and overall trying to describe how that organization functions in achieving its goals. the goals are typically conceptualized as creating, delivering and capturing value (teece, 2010). a system level concept means that the business model focuses on the functioning of an organization as a whole (and not on isolated parts) (cf. zott, amit & massa, 2011). boundary-spanning activity systems conveys the idea of a focus on activities and exchanges (including the rules governing those exchanges) within the organization as well as between the organization and its network (zott & amit, 2008). overall and at a general level, these considerations intuitively suggest that behind a bm is some (broadly defined) system, comprising the focal firm and its network of exchange partners, and that such system is a complex one, by virtue of the organization being a complex system (cf. anderson, 1999). system complexity a system can be broadly defined as a set of interacting or interdependent components forming an integrated whole. according to the oxford dictionary, a system is “a set of things working together as parts of a mechanism or an interconnecting network; a complex whole.” under this general definition, things as different as a house, a train, a computer, but also a cell, an organ, a team, or a community could be all conceptualized as systems. what strikes immediately, however, is that there are inherently important differences among these systems. among other things, these systems differ in their complexity, with some systems intuitively appearing simpler than others (e.g., a house vs. an organ vs. an organization) (see kast & rosenzweig, 1972 for a discussion of general concepts in systems). journal of business models (2018), vol. 6, no. 1, pp. 59-71 61 the idea that systems differ in their complexity has strong roots in system thinking, general system theory (gst: forrester, 1961; von bertalanffy, 1968), cybernetics and, more recently, in complexity science (see anderson, 1999 for a review of the evolution of thinking in complexity in relationship to organization theory). overall, these various facets of approaches to the study of systems found their common denominator in some very basic, yet important, considerations: (1) systems differ in their complexity, implying that it is theoretically possible to build a hierarchy of systems; (2) reductionist approaches, which may work relatively unambiguously with simple systems, have strong limitations in supporting understanding of systems of increasing complexity; and (3) different levels of theoretical model building (explained later) are needed to understand systems of increasing complexity. a hierarchy of system complexity the notion that systems, broadly defined, differ in terms of complexity, and the corollary that understanding systems with increasing complexity may require different levels of theoretical understanding has been a central concern for system theorists (e.g., boulding, 1956; forrester, 1961; buckley, 1968; von bertalanffy, 1968; kast & rosenzweigh, 1972). a synthesis and reelaboration of major themes within this line of inquiry led us to propose figure 1 and table 1. the figure illustrates the idiosyncratic characteristics of different classes of systems (i.e., characteristics of that specific class of systems and that are not possessed by systems in a class of lower degree of complexity). for example, self-awareness and self-consciousness are characteristics that are idiosyncratic to human beings as psychic systems (luhmann 1995), participating in social systems they enforce; nevertheless, these characteristics are not possessed by systems at lower levels of complexity (for example, animals). thus, systems of higher levels of complexity possess the characteristics of systems of lower levels of complexity (e.g., a human being is also a biological system), but not the opposite. the figure distinguishes between mechanical, biological, and social systems (fontana & ballati, 1999). the distinction between the first and the second classes of systems is that one of life/nonlife. the distinction between the second and third classes of systems is that one of intentionality, self-consciousness and purposefulness which characterize individual beings and communities, including organizations, markets and, more broadly, society. mechanical systems are divided into subclasses of systems (boulding, 1956). at the lowest level of complexity are so-called mechanical non-retroactive systems, such as a chair or a building (static structures incapable of dynamics). at the next level are systems with predetermined, necessary motion (e.g., a lever, a pulley, steam engines, dynamos). the third level is the control mechanism or cybernetic system in which the transmission and codification of information is an essential part of the system. moving from mechanical to biological systems, we move from non-living towards living systems (with the introduction of properties such as permeable boundaries, ability of the system to “reproduce” and “maintain” itself, metabolism, energy exchanges, increased mobility, teleological behaviors and the like). figure 1: hierarchy of systems complexity journal of business models (2018), vol. 6, no. 1, pp. 59-71 62 at the nexus between biological systems and social systems are human beings, characterized by self-awareness and self-consciousness (which is, individuals know they know and can engage in partly deliberate acts). collectivities of human beings form social systems. by comparison with the natural sciences, historically there has been relatively little work on complexity applied to social systems. the notable exceptions are the work of luhmann on autopoiesis, arthur, durlauf and lane (1997) in economics, and the work on strategy by lane & maxfield (1997), parker & stacey (1994) and stacey (1995, 1996, 2000, 2001). however, social systems may have specific characteristics making them different from other complex systems. while biological systems are primarily energy and material bounded, social systems are fundamentally information bounded. as pointed out by seidl (2004), communication is not considered by luhmann to be an asymmetrical process of transferring meaning or information from a sender to a receiver, but as selection or distinction. thus, communication leads to three basic types of autopoietic social systems: (1) interactions, (2) organizations, and (3) society as a whole made up of different subsystems such as the economy, politics, law, science, the mass media, education and religion (luhmann, 1995; mingers, 2002; schoeneborn, 2011; seidl & becker, 2006). among the three types of social systems identified by luhmann, business models are particularly concerned by organizations, distinguishing themselves within society from society and reproducing themselves on the basis of decisions (communications) as distinct from other communications (seidl & becker, 2006). the key message of figure 1 (and table 1) is that the more we move toward systems of increased complexity, the more we need to account for aspects such as the role of information flows and interpretation, purposefulness and intentionality, and, in general, complex interdependencies, if we are to understand how such systems ultimately work. as we propose below, these aspects have largely been ignored within the literature on the bm. systems types mechanical systems biological systems social systems systems sub-types static mechanical non retroactive systems system with predetermined dynamics systems with control mechanisms self maintaining structures purposeful systems examples crane table building pendulum crank internal combustion engine thermostat aircraft nuclear power station cells plants animals human interactions, organizations markets society core properties of the system (cumulative) • static structures • modularity (subsystems or components) • closed systems • rigid – well defined boundaries. • static mechanics • mechanics of inorganic materials • simple dynamics (motion equations) • predetermined motion • stochastic equilibrium • could be viewed as transformation models or inputtransformationoutput models (e.g. ice) • feedback loops • regulation mechanisms • autopoiesis • open system exchange of material, energy and information with the environment principles of conservation of mass and energy laws of thermodynamics metabolism • information exchange within the system and between the system and the environment • negative entropy • hierarchy • division of labor and specialization • (e.g., among cells, organs, etc.) • increased mobility • teleological behavior • adaptation (evolution) • equifinality • emergence • communication • operatively closure • functional differentiation • structural couplings • interaction communications • decisions communications • understanding • learning • sense making – interpretation – purposefulness • agents with schemata • self organized networks sustained by importing energy • co-evolution at the edge of chaos • recombination and system evolution table 1: a hierarchy of systems complexity journal of business models (2018), vol. 6, no. 1, pp. 59-71 63 putting emphasis on them has the potential to offer fresh insights into research on the bm. 1. modeling complex systems both scientists and individuals reduce a complex description of a system by engaging in the activity of modeling. modeling is the “activity of formally describing some aspects of the physical and social world around us for the purposes of understanding and communication” (mylopoulos, 1992, p. 2). to model is to simplify, to abstract what is unnecessary or minor, with the goal of improving tractability. one advantage of presenting a hierarchy of systems on the basis of their complexity (figure 1, table 1) is that it gives some ideas of the appropriateness of different theoretical levels of model building that are required in order to shed light and theorize on the functioning of the system. mechanical systems can be more or less comprehensively described (and, partly, understood) at the level of their anatomy, or what boulding (1956) originally referred to as the level of the framework. since no dynamics are involved, a representation of the fundamental elements (components) comprising the static structure, offers an already quite accurate description of the system. the more we move from simpler to more complex system, the less the level of the static framework is sufficient in providing a comprehensive picture that would allow understanding the system. this is not to say that such a description is not useful. rather it is to say that it represents a necessary—perhaps not sufficient—step in theorizing and understanding the system. in the words of boulding (1956), “the accurate description [at the level of the framework] is the beginning of organized theoretical knowledge in almost any field, for without accuracy in this description of static relationships no accurate functional or dynamic theory is possible” (p. 202). at this stage, scholars of the bm may have already noted one of the issues with early research on the bm. such a literature is fundamentally characterized by efforts to make sense of a system, organizations and their bms, which is high in the hierarchy of complexity by focusing at the level of the static framework. early attempts to make sense of bms by enumerating the fundamental components of a bm have been fundamentally concerned with the anatomy of bms (zott, et al., 2011), ignoring many other aspects, such as dynamics, nested hierarchies, flows of information, and the like. while, by definition, “all models are wrong” (sterman, 2002), received formal models of the bm may be very wrong. we believe that such a situation is partly responsible for the lack of agreement on what a bm is and how it could be represented (e.g., see massa et al., 2017). symmetrically, this suggests that a promising avenue for future research may be one concerned with looking more closely at what it entails to create formal models of bms. 2. interdependencies a key feature of complex systems is the importance of interdependencies among components. among other things, a system is complex by virtue of the architecture of interdependencies among its components. interdependencies are at the core of two aspects of complex systems: emergent properties and system behavior (with the possibility that system behavior is an emergent property itself). emergent properties are properties that cannot be reduced to the properties of the system’s components. rather they are a function of the properties of the components and of the interdependencies among the components. in other words, it may not be sufficient to understand the behavior of individual components to understand the behavior of the system as a whole. in the context of research on the bm, this means that shedding light onto how certain bms result in certain outputs, for example, efficiency or novelty (zott & amit, 2010), may benefit from more explicitly focusing on the role played by the interdependencies among bm components and their internal fit—including self-reinforcing mechanisms—in addition to looking at the properties of specific components (siggelkov, 2002). the structure of interdependencies is also critical to explain the behavior and evolution of the system. consider business model reconfiguration, which is an organization’s second (or subsequent) business model (massa & tucci, 2014). as noted by chesbrough (2010), structural barriers, i.e., conflicts with existing configuration of assets, represent journal of business models (2018), vol. 6, no. 1, pp. 59-71 64 one impediment to such a type of innovation (the other one being represented by cognitive barriers). looking at interdependencies more closely may offer insights into how to better substantiate this high level insight. for example, consider the reconfiguration of a business model that requires changing one component of the business model, for example, the revenue model currently adopted or some other activities (or bundles of activities). how strong are conflicts with existing configuration of assets? one way to think about it is to consider that in a web of complex interdependencies, some components may be more central (which is more interdependent with others and as such more difficult to change) and others more peripheral (which is less linked and as such easier to change). this aspect may have important implications for bm innovation in that innovation that targets central, highly interdependent components may backfire if the changes in the rest of the bm are not appropriately accounted for. a look into interdependencies may help develop hypotheses, operationalize measures, and conduct empirical tests. another way to think about our suggested question is to reason in terms of the type of linkages (e.g., being linear unidirectional, non-linear, involving a dyad, multiple connections, etc.) as well as the nature of linkages, for example the extent to which two or several components are interlinked by virtue of processes and activities, strategic complementarities (e.g., see brandenburger and stuart, 1996), information flows, or simply political interests and power of coalitions within the organizations (mintzberg, 1985). for example, one component may be peripheral when interdependencies are understood as processes of activities. which is, from an operations or process standpoint, conflicts with other components may be limited. however, the same component may be very central (and, as such, more difficult to change without unintended consequences) when interdependencies are understood from the point of view of sustaining the interest of powerful coalitions in the organization or from the point of view of information processing. these examples are speculative, and would require a serious research program. however, we contend they illustrate some ways in which a closer look to interdependencies can advance bm research. overall, we believe that appropriate accounting of bms may require going beyond the sub-systems or components to also include an account of the interdependencies among them. to our knowledge, the perspective offered by casadesus-masanell and ricart (2010) which examines the bm as a system of choices and their consequences (and the interdependencies among choices by virtue of the consequences they engender) is one of the few attempts to model interdependencies within the fields of strategy and strategic corporate entrepreneurship (is and computer science have devoted effort to develop modeling languages which, however, have not main inroads in more mainstream business model research). we believe that much is to be gained by moving beyond a discussion of bms that focuses on its static representation and rather starting to theorize on the interdependencies. the complexity lens, and in slightly more advanced effort, insights from from system dynamics (sd) and complex adaptive systems (cas) models coupled with agent based models (abm) may offer a language to do that. 3. nested hierarchies and the organization behind a bm another important aspect of complex systems is that they are organized as hierarchies as briefly discussed above. looking at bms as realworld phenomena, a parallel could be drawn with respect to hierarchies in a bm. at the lowest level there are individual workers performing activities being organized into teams, into departments, into divisions, into a firm. these activities can be described at different levels of abstraction (massa & tucci, 2014). a first consequence of this consideration may be that understanding how bms function dynamically may require opening the black box of the organizational model behind a bm, an aspect which to date has often been neglected. bms may be functioning in certain ways because of non-obvious organizational practices behind them, some of which may also be occurring at the level of the informal organization (cf. ferriani, gernsey, lorenzoni, & massa, 2015). journal of business models (2018), vol. 6, no. 1, pp. 59-71 65 shedding light on how bms are managed and run may require a more explicit emphasis on organizational practices, routines, capabilities, and other organization-level concepts that have often been overlooked by students of the bm. in addition, this hierarchical structure may also require assessing the extent to which it is appropriate to refer to a single bm as a collection of hierarchically nested models together comprising one bm. a bm may be a higher order system comprising lower order systems, each functioning with localized logics (or models), such as a marketing logic, the logic of revenues, the logic of customer relationship management, etc., in other words, embracing the notion of nested hierarchies suggests questioning the conditions under which it is meaningful to refer to a firm’s bm as a monolithic entity, or as a system resulting from several, perhaps different and yet related, subsystems operating at lower levels of granularity. 4. bms and information systems as we have seen above, information and computation are two core concepts and constructs in complexity studies (mitchell, 2009) and play a key role in social systems (luhmann, 1995). social systems are fundamentally interpretive systems, being information bounded (garajedaghi, 2011), in addition to energy and material bounded (as in biological systems). information and computation have been specifically investigated in the field of research focusing on information systems (is). such a line of inquiry offers some opportunities for better understanding bms. examining the definitions provided throughout its history (hirschheim & klein, 2012), is emerges as having several characteristics commonly represented in a bm. nevertheless, the information system of an organization is usually not explicitly considered a key element in representations of bms, at least in the domains of strategy, technology and innovation management, strategic entrepreneurship, and sustainability. one of the arguments for the gap seems to be that is is not a key issue to be designed coherently in a value proposition. in other words, is design is often considered to be a consequence of the design of the main components of a bm and the implementation of the supporting technological infrastructure. however, this stance seems to imply a narrow perspective on is as comprising only its technological aspects. on the contrary, most of the components of an is are actually considered in traditional bms conceptualizations (e.g., the system perspective by zott & amit, 2010) and most bm representations have been produced in is-related areas (osterwalder, pigneur, & tucci, 2005). in addition, bm representations as a result of business modeling have been investigated to provide a tactical and strategic perspective to requirements engineering and business process management (andersson et al., 2006; gordijn, akkermans, & van vliet, 2000; osterwalder, parent, & pigneur, 2004; pigneur, 2002). taking these issues into account, and accepting the argument that bms are also models (baden-fuller & morgan, 2010), leads one to question the relationship between a wide perspective on information systems and bm representations. even if bm innovation may occur without technological innovation (as in the case of “just in time” production (baden-fuller & haefliger, 2013)), management of information flows and exchanges have a relevant role there as well as in bms seen from an activity system perspective (casadesus-masanell & ricart, 2010; zott & amit, 2010). however, at the state of the art management scholars seem not to consider the above mentioned is related perspectives. this gap may be a consequence of the double bind nature of business model, intersecting business strategy and a company ’s operations, business processes, and the information and communication technology (ict) infrastructure, namely a company is (al-debei & avison, 2010). nevertheless, the is field is flourishing in terms of contributions to the research on bm. as summarized by the analysis done by al-debei & avison (2010, pp. 371-372) most of them point out, on the one hand, the relevance of bms as ”conceptual tool of alignment” or ”interceding framework”  between the design and development technological artifacts and the implementation of strategic goals; on the other hand, bm is often considered as a ”strategic-oriented knowledge capital” showing how business rules and practices used to perform the business activities. therefore, considering bms as complex social systems journal of business models (2018), vol. 6, no. 1, pp. 59-71 66 would lead to considering not only (1) the organization behind them, and their nested hierarchies, but also (2) the information system that characterizes interdependencies in terms of information flows and decision communications, thus improving the capacity to face the challenges of modeling bms. as pointed out by merali (2006), the vocabulary of complexity has been used to articulate the different facets of the network economy and the consequent networked world, and the actual information networkin-use can be viewed from an is perspective as the informational representation of the interactions of agents situated in a social, economic, political, informational, and technological context. consequently, the informational complexity of networks is determined by variable connectivity over time, the diverse and multifaceted information transmitted, the heterogeneity of nodes; whereas the actual network is shaped by the feedback cycles generated by its nodes as well as by path dependencies related to their history and learning dynamics (merali, 2006, p. 217). relating this to bms, the decisions and activities within an organization depend on the bounded and limited knowledge of the state of the network at a given time and the information they can gather on and from the network itself. overall, we think that to the extent that managers attempt to make sense of bms from a complex social system perspective, the more attention should be paid to the role of information and communication. conclusion complexity has been a central construct in the language of organization scientists for several decades. yet, and perhaps surprisingly, scholars interested in the business model seem to have only implicitly drawn from the notion of complexity and of complex system to better understand business models. while part of the reason may be disagreement on what business models are, we contend that within the boundaries of a view of the business model as an organizational level construct referring to some property of real firms there is an opportunity in referring to complexity science and relative insights. complexity science is a broad domain. this very humble contribution suggests that rich insights can be derived from better appreciating the characteristics of complex systems (vis-à-vis noncomplex ones) and how such characteristics determine the appropriateness of different levels of theoretical model building to advance knowledge creation. in this early contribution we offer some preliminary and necessarily non-exhaustive insights. we believe that this is just a first step in a longer and hopefully insightful journey, and hope this short article offers an opportunity for scholars to better reflect on this possibility. journal of business models (2018), vol. 6, no. 1, pp. 59-71 67 references al-debei, m. m., & avison, d. (2010). developing a unified framework of the business model concept. european journal of information systems, 19, 359–376. doi:10.1057/ejis.2010.21 amit, r., & zott, c. (2001). value creation in e-business. strategic management journal, 22(6-7), 493–520. anderson, p. (1999). complexity theory and organization science. organization science, 10(3), 216–232. doi:10.2307/2640328 andersson, b., bergholtz, m., edirisuriya, a., ilayperuma, t., johannesson, p., gordijn, j., grégoire, b., schmitt, m., dubois, e., abels, s., hahn, a., wangler, b., weigand, hans (2006). towards a reference ontology for business models. in d. w. embley, a. olivé, & s. ram (eds.), conceptual modeling er 2006 (pp. 482–496). springer. retrieved from http://dx.doi.org/10.1007/11901181_36 arthur, w. b., durlauf, s. n., & lane, d. a. (1997). the economy as an evolving complex system ii (vol. 28). addisonwesley reading, ma. baden-fuller, c., & haefliger, s. (2013). business models and technological innovation. long range planning, 46(6), 419–426. doi:http://dx.doi.org/10.1016/j.lrp.2013.08.023 baden-fuller, c., & morgan, m. s. (2010). business models as models. long range planning, 43, 156–171. boulding, k. e. (1956). general systems theory-the skeleton of science. management science, 2(3), 197–208. brandenburger, adam m., and harborne w. stuart jr. ”value-based business strategy.” journal of economics & management strategy 5.1 (1996): 5-24. buckley, w. f. (1968). modern systems research for the behavioral scientist; a sourcebook. aldine transaction. casadesus-masanell, r., & ricart, j. (2010). from strategy to business models and onto tactics. long range planning, 43(2-3), 1–25. retrieved from http://www.sciencedirect.com/science/article/pii/s0024630110000051 casti, j. (1986). on system complexity: identification, measurement, and management. in j. casti & a. karlqvist (eds.), complexity, language, and life: mathematical approaches se  6 (vol. 16, pp. 146–173). springer berlin heidelberg. doi:10.1007/978-3-642-70953-1_6 chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2-3), 354-363. ferriani, s., garnsey, e., lorenzoni, g. & massa, l. 2015. the intellectual property business model (ip-bm): lessons from arm plc. cambridge centre for technology management working paper series n2. issn 2058-8887 available at http://www.ifm.eng.cam.ac.uk/uploads/research/ctm/working_paper/2015-02-ferriani-garnsey-lorenzonimassa.pdf fontana, w., & ballati, s. (1999). complexity. complexity, 4(3), 14–16. doi:10.1002/ (sici)1099-0526(199901/02)4:3<14::aid-cplx3>3.0.co;2-o forrester, j. w. (1961). industrial dynamics. mit press. journal of business models (2018), vol. 6, no. 1, pp. 59-71 68 gharajedaghi, j. (2011). systems thinking: managing chaos and complexity: a platform for designing business architecture. elsevier. gordijn, j., akkermans, h., & van vliet, h. (2000). business modelling is not process modelling. er (workshops), 1921, 40–51. hirschheim, r., & klein, h. k. (2012). a glorious and not-so-short history of the information systems field. journal of the association for information systems, 13, 188–235. kast, f. e., & rosenzweig, j. e. (1972). general systems theory: applications for organization and management. academy of management journal, 15(4), 447–465. koffka, k. (1935). principles of gestalt psychology. international library of psychology. routledge. doi:10.1037/ h0052629 lane, da and r maxfield (1997), foresight, complexity and strategy, in arthur, durlauf and lane (eds.), the economy as a complex evolving system 2, addison-wesley. luhmann, n. (1995). social systems (english ed.). stanford ca: stanford univ. press. massa, l., & tucci, c. l. (2014). business model innovation. in m. dodgson, d. m. gann, & n. phillips (eds.), the oxford handbook of innovation management. oxford univ. press. doi:0.1093/oxfordhb/9780199694945.013.00 massa, l., tucci, c. l., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73-104. merali, y. (2006). complexity and information systems: the emergent domain. journal of information technology, 21, 216–228. mingers, j. (2002). can social systems be autopoietic? assessing luhmann’s social theory. sociological review, 50(2), 278–299+311. mintzberg, henry. (1985) ”the organization as political arena.” journal of management studies 22.2: 133-154. mitchell, m. (2009). complexity. a guided tour. oxford university press. mylopoulos, j. (1992). conceptual modelling and telos.  conceptual modelling, databases, and case: an integrated view of information system development, new york: john wiley & sons, 49-68. osterwalder, a., parent, c., & pigneur, y. (2004). setting up an ontology of business models. in j. grundspenkis & m. kirikova (eds.), caise’04 workshops in connection with the 16th conference on advanced information systems engineering, riga, latvia, 7-11 june, 2004, knowledge and model driven information systems engineering for networked organisations, proceedings, vol. 3 (pp. 319–324). faculty of computer science and information technology, riga technical university, riga, latvia. osterwalder, a., pigneur, y., & tucci, c. (2005). clarifying business models: origins, present, and future of the concept. communications of the ais, 16. parker, d., & stacey, r. (1994). chaos, management and economics: the implications of nonlinear thinking. london, uk: institute of economic affairs. journal of business models (2018), vol. 6, no. 1, pp. 59-71 69 pigneur, y. (2002). an ontology for m-business models. in s. spaccapietra, s. t. march, & y. kambayashi (eds.), conceptual modeling {er} 2002, 21st international conference on conceptual modeling, tampere, finland, october 7-11, 2002, proceedings (vol. 2503, pp. 3–6). schoeneborn, d. (2011). organization as communication: a luhmannian perspective. management communication quarterly . doi:10.1177/0893318911405622 seidl, d. (2004). luhmann’ s theory of autopoietic social systems. munich business research paper, 1–28. seidl, d., & becker, k. h. (2006). organizations as distinction generating and processing systems: niklas luhmann’s contribution to organization studies. organization , 13 (1 ), 9–35. doi:10.1177/1350508406059635 siggelkow, n. (2002). evolution toward fit. administrative science quarterly, 47(1), 125-159. simon, h. a. (1996). the sciences of the artificial (3rd ed.). cambridge (mass.): the mit press. stacey, r. (1995). the science of complexity: an alternative perspective for strategic change processes. strategic management journal, 16(6), 477-495. stacey, r. (1996). emerging strategies for a chaotic environment. long range planning, 29(2), 182-189. stacey, r. (2000). the emergence of knowledge in organisations. emergence, 2(4), 23-39. stacey, r. (2001). complex responsive processes in organizations:: learning and knowledge creation. routledge. sterman, j. d. (1994). learning in and about complex systems. system dynamics review, 10(2-3), 291–330. sterman, j. d. (2002). all models are wrong: reflections on becoming a systems scientist. system dynamics review: the journal of the system dynamics society, 18(4), 501-531. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2-3), 172-194. von bertalanffy, l. (1956). general system theory. general systems, 1(1), 11-17. zott, c., & amit, r. (2007). business model design and the performance of entrepreneurial firms. organization science, 18(2), 181-199 zott, c., & amit, r. (2008). exploring the fit between business strategy and business model: implications for firm performance. strategic management journal, 29(1), 1–26. zott, c., & amit, r. (2010). business model design: an activity system perspective. long range planning, 43(2-3), 216–226. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. journal of business models (2018), vol. 6, no. 1, pp. 59-71 70 about the authors lorenzo massa is faculty at the emba of école polytechnique fédérale de lausanne (epfl), lausanne (switzerland) and adjunct professor at university of bologna, department of management and at the bologna business school (bbs). he has been scientist at the college du managament (cdm) of epfl, visiting scholar at the wharton school, university of pennsylvania, philadelphia (usa), visiting researcher at mit sloan school of management, boston (usa) and assistant professor at vienna university of economics (wu), vienna (austria). his research lies at the intersection between strategy, innovation and sustainability and has been published on outlets such as the academy of management annals, the journal of management and the oxford handbook of innovation management among others. he has an interest in business models. his latest research explores the intersection between cognitive foundations of business models, conceptual modeling, and strategic decision making related to innovation. he is author of several teaching case studies on business model innovation and sustainability (iese publishing). he completed his master and ph.d. in management at iese business school, focusing on innovation for sustainability. during his ph.d. he has been a researcher fellow at the rocky mountain institute (boulder, colorado, us) working on business model design for the diffusion of renewable energies. he holds graduate degrees, both with distinction, in mechanical engineering from the dublin institute of technology (b.eng.) and the university of genoa (m.sc. eng.). journal of business models (2018), vol. 6, no. 1, pp. 59-71 71 gianluigi viscusi (phd) is research fellow at the chair of corporate strategy and innovation (csi) of the epfl, switzerland. his areas of expertise include information systems strategy and planning, e-government, information quality and value, social study of information systems. nowadays, his research focus is on three research streams concerning digital economy and society: crowd-driven innovation; science and innovation valuation through digital platforms; digital governance in public sector. his research has been published in a range of books, conference proceedings, and journals such as, e.g., government information quarterly and the data base for advances in information system (acm sigmis). in 2010 he has co authored with carlo batini and massimo mecella the book information systems for egovernment: a quality of service perspective (springer) and in 2018 he as coedited with christopher tucci and allan afuah the book creating and capturing value through crowdsourcing (oxford university press). christopher l. tucci is professor of management of technology at the ecole polytechnique fédérale de lausanne (epfl), where he holds the chair in corporate strategy & innovation. he received the degrees of ph.d. in management from the sloan school of management, mit; sm (technology & policy) from mit; and bs (mathematical sciences), ab (music), and ms (computer science) from stanford university. he was an industrial computer scientist involved in developing internet protocols and applying artificial intelligence tools. professor tucci joined epfl in 2003 where he teaches courses in design thinking, digital strategy, and innovation management. his primary area of interest is in how firms make transitions to new business models, technologies, and organizational forms. he also studies crowdsourcing, internetworking, and digital innovations. he has published articles in, among others, academy of management review (amr), smj, management science, research policy, communications of the acm, sej, academy of management annals, and jpim. his article with allan afuah, “crowdsourcing as solution to distant search,” won the best paper of 2012 for amr. he is currently an associate editor of academy of management discoveries. he has served in leadership positions in the academy of management (aom) and the strategic management society. journal of business models (2019), vol. 7, no. 3, pp. 89-99 89 squaring the circle: business model teaching in large classroom settings daniel szopinski1 abstract business model innovation is typically taught in small seminars at universities. teaching this intrinsically task-oriented subject to a large number of students is a challenge. in this paper we address this challenge by proposing an experiential and interactive approach to teaching business models in a large classroom setting. please cite this paper as: szopinski, d. (2019), squaring the circle: business model teaching in large classroom settings, vol. 7, no. 3, pp. 89-99 keywords: business model teaching, peer assessment, experiential learning 1 paderborn university, germany, daniel.szopinski@wiwi.uni-paderborn.de acknowledgements: the teaching approach presented in this article was jointly developed by thomas john and daniel szopinski. we thank the organizers and participants of the teaching forum at the business model conference 2018 in florence, italy, for their valuable feedback on our teaching approach. furthermore, this work was partially supported by the german research foundation (dfg) within the collaborative research center “on-the-fly computing” (crc 901, project number 160364472sfb901). journal of business models (2019), vol. 7, no. 3, pp. 89-99 90 introduction the business model concept has garnered great interest not only in research and practice (massa et al., 2017) but recently also in education and, as such, forms an integral part of university curricula. business model innovation (bmi) courses at universities are typically delivered in the form of small seminars, which provide a learning environment more suitable to student participation and the interactive teaching required for the development of business models. indeed, business model development is seen as a highly creative as well as a collaborative task (eppler et al., 2011). teaching bmi should therefore not only convey the business model concept itself, but also how to think and act as an entrepreneur. creativity forms an important prerequisite for this (hamidi et al., 2008). to teach bmi in large classroom settings can therefore present a challenge due to the high number of students (e.g., courses with more than 200 students). specifically, the following three challenges arise for university lecturers while teaching bmi in a large classroom setting: challenge 1: how to develop and implement a university course on bmi in a large classroom setting? to recreate an interactive, collaborative, and experience-driven learning environment in a large classroom setting is inherently difficult, at least if approached with traditional teaching methods. we were determined, however, to tackle this challenge as we did not want to restrict the number of students able to enroll on that course. challenge 2: how to enable students in large classroom settings to apply bmi methods? for students it is important to experience the challenges posed by bmi. hence, incorporating experiential knowledge (bojovic et al., 2018) and learning, by enabling students to apply bmi methods, was one of the main objectives for developing this teaching approach. challenge 3: how can students in large classroom settings present their business models and receive concrete feedback? receiving feedback early and often is essential for validating business models. another key objective for the teaching approach was therefore to enable students to give and receive constructive feedback on each other’s business models. this paper describes a teaching approach developed to address these challenges and which has been successfully piloted in a large classroom setting. in addition to traditional lectures, the newly developed didactic approach comprises an innovative video-based peer feedback approach which draws on experiential learning (kolb 1984). students work collaboratively in small teams, with each team independently undertaking three consecutive assignments, involving the development of business models. by providing an opportunity “learning by doing” (hogan and warrenfeltz, 2003) this teaching approach seeks to close the so-called knowing-doing gap (pfeffer and sutton, 2008). here, knowing refers to the knowledge that students acquire in the lectures about bmi, and doing to the application of that knowledge in different, consecutive assignments. altogether more than 500 students in 170 teams have experienced this teaching approach. this paper shows that business model teaching is feasible in a large classroom setting and describes the potential for it being taught – at least partly – in an interactive way. as peter drucker once said about entrepreneurship education: “the entrepreneurial mystique? it’s not magic, it’s not mysterious, and it has nothing to do with the genes. it’s a discipline. and, like any discipline, it can be learned” (drucker, 1985, p. 18). it is in this spirit that this paper seeks to contribute a novel approach to business model teaching to help embed the still comparatively young concept of business models in university education. a business model teaching approach in large class room settings learning objectives and outcomes the purpose of the developed teaching approach is to enable students to systematically analyze and innovate business models. therefore, the teaching approach aims to impart knowledge at mainly three different levels: (1) factual and conceptual knowledge (i.e., students’ knowledge of bmi), (2) procedural knowledge (i.e., students can apply methods for bmi), and (3) transferable knowledge (i.e., students can generalize journal of business models (2019), vol. 7, no. 3, pp. 89-99 91 from context-specific knowledge and apply this to new contexts). particularly (1) and (2) are levels of knowledge which originate in education research and are found to be conducive to developing learning objectives of strategy courses (grant and baden-fuller, 2018). in addition to the three main different levels of knowledge, the teaching approach partly includes further levels of knowledge, albeit to a much lesser extent. for example, it imparts metacognitive knowledge by training students to not become too attached to their first business model idea, and affective knowledge by providing guidelines for giving and receiving feedback on business models that is not emotion-led or emotionally charged. the implementation of these learning objectives for students “is much more than knowing the theories and the analytical tools of the strategy theorists” (grant and baden-fuller, 2018, p. 332) and also applies to business model competency and its teaching. grant and baden-fuller (2018) identify five core skills required for strategy-making: judgment, insight, intuition, creativity, and social skills. bearing in mind that this teaching approach is designed for an undergraduate course, the following skills are complementary to the learning objectives described above and at a level that is appropriate for an undergraduate course. this means that, applied to this particular context, students should be empowered to develop the following skills: to evaluate business models (judgment), to gain a deep understanding of the potential customers’ pains and gains; to identify the underlying forces that drive the viability of a business model (insight); to retrieve experiences (for example from previous assignments) to be able to assess which parts of a business model did or did not work (intuition); to generate innovative business models (creativity); and to communicate a business model to others, as well as listen to and understand someone else’s business model (social skills). our teaching approach seeks to create a basis for students to acquire these skills, bearing in mind their different levels of knowledge. the proposed teaching approach aims to enable the following learning outcomes based on the previously defined learning objectives: students will be able to (1.1) explain what the business model concept is, and why and when it is needed, (1.2) explain why hypotheses/discovery-driven planning is often more effective than a capital value-based approach in the development of innovative business models, (2.1) apply the methods for bmi taught in the course, individually and in a team, (2.2) decide in a given case which of the methods taught in the course should be applied, and in which order, (3.1) confidently present the central characteristics and limitations of a business model they developed, and (3.2) present their own assessment of the quality of a business model in a discussion. experiential learning and peer feedback the teaching approach developed in response to these challenges implements the aforementioned learning objectives. the learning outcomes are facilitated by means of a didactic approach that involves experiential learning and peer feedback. experiential learning is “the process whereby knowledge is created through the transformation of experience” (kolb, 1984, p. 41) and entails four distinct, consecutive and recursive steps: experiencing, reflecting, generalising, and applying. in a nutshell, and oversimplifying a bit, experiential learning emphasizes process over outcomes, continuous (re)creation of learning over one-time learning, includes both objective and subjective learning experiences, and understands learning as a prerequisite to understanding the nature of knowledge (and vice versa) (kolb, 1984; kolb and kolb, 2005). by using elements of experiential learning, the teaching approach aims to impart to students how to cope with uncertainty and changing environments (hogan and warrenfeltz, 2003; kolb and kolb, 2005) – just like managers who have to learn primarily through trial and error (hogan and warrenfeltz, 2003; bojovic et al., 2018) – and respond to new information and feedback effectively (hogan and warrenfeltz, 2003; fust et al., 2018). to recreate a dynamic learning environment, the teaching approach also draws on the concept of peer feedback which is defined as “a communication process through which learners enter into dialogues related to performance and standards” (liu and carless, 2006, p. 280). the approach explicitly leverages peer feedback among learners in the form of detailed comments by peers (liu and carless, 2006). peer feedback thus offers greater potential for learning journal of business models (2019), vol. 7, no. 3, pp. 89-99 92 by enabling students to (1) actively manage their own learnings, (2) reflect on their learning through giving and receiving internal and external feedback, (3) improve their self-assessment, (4) engage in the process of understanding the subject matter, (5) get more feedback from different people in a short time, and (6) extend their learning by being encouraged to communicate to others what they know or understand (liu and carless, 2006). in order to contextualize experiential learning and peer feedback for bmi, the developed teaching approach consists of weekly lectures and three different, consecutive assignments (see figure 1). 3x in three different, consecutive assignments experiencing reflectinggeneralising applying assignment feedback feedback on feedback figure 1: experiential learning for business model teaching (based on kolb, 1984). weekly lectures weekly lectures form the basis of the teaching content and consist of seven chapters delivered in eleven lectures, imparting factual, conceptual as well as procedural knowledge on bmi. at the beginning of each lecture students are provided with a recap from the previous lecture and with the goals of the current lecture. afterwards the content is presented (for an overview see table 1). at the end of each lecture students are given a summary and a list of mandatory and optional readings. the weekly lectures are supplemented by guest lectures that allow students to consider bmi in practice from three different perspectives: start-ups, established firms, and consultancies. the guest lectures are intended in response to the issue of “academia vs. business incongruence” describing the need for a direct dialogue between students and experienced entrepreneurs who face challenges and endure failures as part of their daily professional life (kolb and kolb, 2005). chapter students will know… 1 introduction ...what this lecture is about 2 description 2.1 business models 2.2 value propositions ...what a business model is and how to describe it 3 ideation ...how to generate ideas for innovative business models 4 evaluation and refinement 4.1 lean innovation processes 4.2 online experiments 4.3 prototyping and usability 4.4 crowdsourcing ...how to evaluate ideas and how to refine them for market entry 5 communication ...how to convincingly communicate ideas to decision makers 6 implementation ...how to manage software projects for implementing your ideas 7 management ...how to manage a business model after successful market entry guest lectures from the relevant perspectives in business practice: start-ups, established firms, and consultancies table 1: course outline overview. assignments with video-based feedback from peers in addition to the weekly lectures, experiential learning and peer feedback are combined in three different consecutive assignments (for a semester schedule see figure 2). in these assignments students apply the methods for bmi introduced in the weekly lectures. each assignment consists of a development phase (lasting two weeks) during which students work on their assignments (which corresponds to experiencing and applying in experiential learning), and an evaluation phase (lasting two weeks) during which students provide and receive feedback (which corresponds to reflecting and generalizing in experiential learning). in case of shorter teaching terms and depending on the general workload of students during the semester, we were able to shorten the duration of the evaluation phase (e.g., three days for feedback and two days for feedback on the feedback) without any drawbacks. the course is generally attended by students from diverse disciplinary backgrounds. thus, students are able to journal of business models (2019), vol. 7, no. 3, pp. 89-99 93 review, summarize, clarify, provide feedback, diagnose errors, and identify knowledge about or deviations from business model concepts from a wide range of disciplinary lenses. through these social interactions they can build, extend and refine their business model knowledge (lin et al., 2001). passing all three assignments is a prerequisite for exam participation and thus, students who fail to submit one or more assignments/ feedback are not admitted to the exam. students work on the assignments in teams of two or three. in the development phase students work on assignments to learn to analyze existing and new (self-developed) business models. the concrete tasks within the three assignments differ, but always include visual and shorthand textual descriptions of a business model and a presentation given by all members of the team. students are tasked to present their business model in about 5-10 minutes and to video record the presentation. in all three assignments the students learn how to use the business model canvas (osterwalder and pigneur, 2010) and the value proposition canvas (osterwalder et al., 2014) for the idea generation, documentation, communication and analysis of business models. in assignment 1, the teams select and analyze an existing real-world business model of their choice. this business model should be digital, meaning that a digital component enables the implementation of the business model, for example through a website such as the airbnb platform, or a mobile app such as whatsapp messenger. in assignment 2, the teams innovate that particular business model (i.e., revise the business model through new, creative business models). in this way, students generate business models with different approaches (e.g., business model patterns by gassmann et al. (2014)). afterwards, each team selects its best idea for which they identify and prioritize the ten most crucial business hypotheses. in assignment 3, the teams revise their innovated business model again and additionally develop a clickable prototype. without coding an entire mobile app or website, students can simulate the digital component of their business model with a clickable prototype using, customizing, and linking predefined sketches and mockups. clickable prototypes allow to understand the most important functions and demonstrate the general look and feel of a mobile app or website. this makes it possible to test business models (e.g., through customer interviews) and reduce the time needed to build, measure, and learn something about business models (blank, 2013; ries, 2011). the evaluation of the assignments consists of two steps. whereas in step one students mutually provide feedback on the assignments of other teams, in step two, teams who have received that feedback provide feedback on that feedback (for an overview of the assignment procedure see figure 3). for each peer feedback the teaching approach is implemented in a formative, anonymous (strictly speaking single-blind, as the video presentation reveals the student’s faces, but not their names or study programs), and asynchronous way which allows the students to take on multiple roles (i.e., that of receiving and providing feedback) in addition to their conventional role as learner (lin et al., 2001). providing feedback requires students to reflect on their individual as well as their collective contribution and at the same time gives each individual student – as well as the whole cohort of students – a certain degree of responsibility. figure 2: semester schedule. assignment 1 assignment 2 assignment 3 task: select and analyze an existing real-world business model innovate a business model and develop 10 business hypotheses innovate a business model and provide a clickable prototype sequence: phase: development evaluation evaluation development evaluation evaluation development evaluation evaluation duration: 2 weeks 1 week 1 week 2 weeks 1 week 1 week 2 weeks 1 week 1 week fbfb3fbfb2fbfb1 weekly lectures assignment (a) feedback (fb) feedback on feedback (fbfb) fb3fb2fb1 a3a2a1 journal of business models (2019), vol. 7, no. 3, pp. 89-99 94 this reflection allows for deeper student learning to take place (vanschenkhof et al., 2018). modelled on the procedure of academic conferences and journals, students are randomly assigned to the teams they have to evaluate (lin et al., 2001). in a first evaluation step students provide and receive feedback to increase their knowledge of, and competence in assessing, three different aspects: (1) content (e.g., is the business model understandable?), (2) method (e.g., is the business model canvas applied correctly?), and (3) presentation style (e.g., is the language clear and the slides are not just read out?). in this way, students learn to evaluate business models along criteria such as creativity (i.e., novelty and usefulness), potential popularity, feasibility, customer’s purchase interest of the value proposition, validity of business hypotheses and the quality of how teams convey their business model and make it tangible (e.g., through visualizations and clickable prototypes). students are given best practice guidelines and examples of high and low-quality feedback. for each of the three different levels the teams are rated numerically and with a shorthand textual comment. moreover, to encourage students to provide constructive feedback, those who are among the 25% best rated teams receive a bonus in form of an extra point for the exam (lin et al., 2001). the feedback is sent back to the teams who can use the feedback to learn what worked well and what did not work well and use it to revise the team’s business models in the next assignment. in a second evaluation step, students provide and receive feedback on the feedback they have provided to assess how effective and helpful their feedback was. this is done with an overall rating of the feedback, consisting of a mandatory numerical rating and an optional shorthand textual comment. this allows students to learn how to provide and receive feedback and generally learn about the nature of feedback. in principle, peer feedback is suitable for different types of feedback, such as corrective feedback, reinforcing feedback, didactic feedback, and suggestive feedback (tseng and tsai, 2007). introducing peer feedback takes time, as students need to adjust to the non-teacher-centered elements of the teaching approach and switch roles. furthermore, students’ perception of learning outcomes is usually contingent on the traditional role allocation of learner and teacher (garnjost and brown, 2018). the structure of the development and evaluation phase should therefore help students to get used to these didactic concepts. in addition to a detailed introduction on how to provide helpful feedback, the university lecturers intervene figure 3: the process of an assignment which is processed three times. journal of business models (2019), vol. 7, no. 3, pp. 89-99 95 when outliers are identified, based on the feedback to the feedback as well as a review of randomly selected feedbacks. after each evaluation step, the university lecturers verify a sample of the feedback given and select examples of high and low quality that are anonymized before they are presented and discussed in the lecture. digital tools digital tools1 are necessary for the implementation and scalability of the teaching approach and student support. the digital tools are intended to meet the “technology challenge” which refers to the need for recognizing and applying digital tools in entrepreneurship education (kuratko, 2005). to make it easier to visualize their business models and the collaboration within the teams, each team is given its own working space in a digital whiteboard application called “realtimeboard”2. this is a marked-leading digital whiteboard application currently used by over 2 million users worldwide in small and large companies (e.g., netflix and cisco). to record their presentations, teams use powerpoint as part of microsoft’s “office 365 education”, which is a user-friendly feature to video record presentations, and usually available for free to universities. powerpoint-templates have proven to be useful and are made available to students for their assignments. they provide a rough structure and ensure that all presentations remain comprehensible for undergraduates. it is important to clearly explain to students that the task is not about producing a professional video with fancy camera angles and effects, but aimed at delivering a short and concise presentation to help them effectively communicate their business models. furthermore, the prototyping application “marvel”3 is used to support students in assignment  3 to quickly and efficiently develop a clickable prototype. here, clear statements about the scope (e.g., number of screens) of the prototype have proven to be useful. otherwise, 1 for an overview of software-based business model development tools see szopinski et al. (2019). 2 the software provider of “realtimeboard” grants free licenses for educational institutions at https://realtimeboard.com/education/. 3 the software provider of “marvel” offers a free version, the functionality of which is sufficient for the development of a clickable prototype at https://marvelapp.com/. some students may lose themselves in the technical implementation. it is important to explain to students that it is not about creating a perfect prototype, but one with which they can test their business models. finally, communication with the students is implemented via a university elearningplatform on which students can access guidelines and constantly updated faqs for each digital tool. the elearningplatform also provides lecture slides, task descriptions for the assignments, a glossary, the course schedule as well as a “question box” for students to ask questions to university lecturers outside of contact time. discussion and conclusion the main conclusion was that we were able to successfully meet all the challenges set out at the beginning. although the number of students is unusual for a bmi course (more than 200 per course), students developed creative as well as widely differing business models and worked on them with great interest (for examples see figure 4). also, students really took their role as feedback providers, giving detailed and constructive feedback on the presentations. another advantage is that, apart from the ideas they developed themselves, students assessed at least six completely different business models developed by other teams. furthermore, both the digital whiteboard application and the development of the clickable prototype were experienced as helpful, including by students from study programs with little or no it-focus. to enable us to reflect on the application and derive tips for further improving business model teaching, we collected feedback from the course evaluation. this included students pointing out that they find it difficult to evaluate business models given that there is not one ideal business model. this not only applies to bmi courses, but also to courses in entrepreneurship (kuratko, 2005) and strategy (grant and baden-fuller, 2018) more generally. crucially, for this kind of course and when linked with the video-based peer feedback, being able to cultivate a non-threatening course climate and a collaborative atmosphere (lin et al., 2001; liu and carless, 2006) is perceived as an important prerequisite by students so they can critically and openly discuss business models amongst each other. another feedback from the course evaluation concerns the journal of business models (2019), vol. 7, no. 3, pp. 89-99 96 allocation of students into teams. in the first year, in order to foster interdisciplinary collaboration within the teams, students were randomly allocated to teams. this was changed in the second year, when one third of the students were asked to randomly assign themselves to a team, and the others formed and registered teams of their own. furthermore, especially at the beginning of the first assignment, students often doubt that other students – as opposed to teachers – can provide valuable feedback. here it helps to describe the feedback process in full and to take the students’ concerns seriously (vanschenkhof et al., 2018). with this experience report we aim to make a contribution to business model teaching, in particular where bmi is to be taught in a large classroom setting. we would also like to demonstrate that the assignments and the video-based peer feedback are experiential in that they allow students to directly apply methods for bmi and provide them with concrete feedback on their own business models. with our teaching approach we seek to document and share our experience and thereby promote the teaching of bmi in universities. this teaching approach could be further (and continuously) developed in the following ways: it could be evaluated through higher education didactic research, and extended by introducing new insights from bmi research. for example, university lecturers may extend the teaching approach through self-regulated learning. this didactic concept would enable students to make conscious, informed, and independent decisions about their personal learning objectives and outcomes. this is suitable for university lecturers who have students with a high affinity for entrepreneurship and prefer to monitor, adjust, and control their learning activities themselves (e.g., fust et al., 2018). additionally, university lecturers may refine the video-based peer feedback, for example, through social video annotation as is commonly used in teacher training (e.g., rich and hannafin, 2008). here different students can provide feedback on the same video presentation and relate to each other’s feedback. furthermore, videos are not evaluated as a whole, rather, different students can select multiple portions of a video presentation and formulate feedback to these portions in written or spoken form. finally, given the rate of progress of business model research, the question arises which new insights to integrate into university curricula, and the timeliness and manner of their integration. our teaching approach makes a contribution to bmi education in universities, thus giving a growing number of students the opportunity to learn about and experience bmi. figure 4: examples from the video presentations. journal of business models (2019), vol. 7, no. 3, pp. 89-99 97 references blank, s. (2013), “why the lean start-up changes everything”, harvard business review, vol. 91, no. 5, pp. 63–72. bojovic, n., genet, c. and sabatier, v. (2018), “learning, signaling, and convincing. the role of experimentation in the business modeling process”, long range planning, vol. 51, no. 1, pp. 141–157. drucker, p.f. (1985), innovation and entrepreneurship, harper & row, new york, new york, usa. eppler, m.j., hoffmann, f. and bresciani, s. (2011), “new business models through collaborative idea generation”, international journal of innovation management, vol. 15, no. 6, pp. 1323–1341. fust, a.p., jenert, t. and winkler, c. (2018), “experiential or self-regulated learning. a critical reflection of entrepreneurial learning processes”, entrepreneurship research journal, vol. 8, no. 2, p. 399. garnjost, p. and brown, s.m. (2018), “undergraduate business students’ perceptions of learning outcomes in problem based and faculty centered courses”, international journal of management education, vol. 16, no. 1, pp. 121–130. gassmann, o., frankenberger, k. and csik, m. (2014), the business model navigator: 55 models that will revolutionise your business, pearson, harlow, united kingdom. grant, r.m. and baden-fuller, c. (2018), “how to develop strategic management competency. reconsidering the learning goals and knowledge requirements of the core strategy course”, academy of management learning & education, vol. 17, no. 3, pp. 322–338. hamidi, d.y., wennberg, k. and berglund, h. (2008), “creativity in entrepreneurship education”, journal of small business and enterprise development, vol. 15, no. 2, pp. 304–320. hogan, r. and warrenfeltz, r. (2003), “educating the modern manager”, academy of management learning & education, vol. 2, no. 1, pp. 74–84. kolb, a.y. and kolb, d.a. (2005), “learning styles and learning spaces. enhancing experiential learning in higher education”, academy of management learning & education, vol. 4, no. 2, pp. 193–212. kolb, d.a. (1984), experiential learning, prentice-hall, englewood cliffs, new jersey, usa. kuratko, d.f. (2005), “the emergence of entrepreneurship education. development, trends, and challenges”, entrepreneurship theory and practice, vol. 29, no. 5, pp. 577–598. lin, s.s.j., liu, e.z.f. and yuan, s.m. (2001), “web-based peer assessment. feedback for students with various thinking-styles”, journal of computer assisted learning, vol. 17, no. 4, pp. 420–432. liu, n.-f. and carless, d. (2006), “peer feedback. the learning element of peer assessment”, teaching in higher education, vol. 11, no. 3, pp. 279–290. massa, l., tucci, c.l. and afuah, a. (2017), “a critical assessment of business model research”, academy of management annals, vol. 11, no. 1, 73-104. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, wiley, hoboken, new jersey, usa. journal of business models (2019), vol. 7, no. 3, pp. 89-99 98 osterwalder, a., pigneur, y., bernarda, g. and smith, a. (2014), value proposition design: how to create products and services customers want, strategyzer series, wiley, wiley, hoboken, new jersey, usa. pfeffer, j. and sutton, r.i. (2008), the knowing-doing gap: how smart companies turn knowledge into action, harvard business school press, boston, massachusetts, usa. rich, p.j. and hannafin, m. (2008), “video annotation tools. technologies to scaffold, structure, and transform teacher reflection”, journal of teacher education, vol. 60, no. 1, pp. 52–67. ries, e. (2011), the lean startup: how today’s entrepreneurs use continuous innovation to create radically successful businesses, crown business, new york, new york, usa. szopinski, d., schoormann, t., john, t., knackstedt, r. and kundisch, d. (2019), “software tools for business model innovation. current state and future challenges”, electronic markets to appear. tseng, s.-c. and tsai, c.-c. (2007), “on-line peer assessment and the role of the peer feedback. a study of high school computer course”, computers & education, vol. 49, no. 4, pp. 1161–1174. vanschenkhof, m., houseworth, m., mccord, m. and lannin, j. (2018), “peer evaluations within experiential pedagogy. fairness, objectivity, retaliation safeguarding, constructive feedback, and experiential learning as part of peer assessment”, international journal of management education, vol. 16, no. 1, pp. 92–104. journal of business models (2019), vol. 7, no. 3, pp. 89-99 99 daniel szopinski is a phd candidate with a master’s degree in management information systems. he is research and teaching assistant at the chair of business information systems, esp. digital markets at paderborn university. his research focuses on business model innovation, modeling languages for business models and software tools for business model development. from a methodological point of view he focuses on controlled experiments and participatory observations. about the authors journal of business models (2019), vol. 7, no. 3 pp. 57-66 57 insights from teaching sustainable business models using a mooc and a hackathon jan jonker and niels faber abstract we provide two teaching approaches, developed to teach sustainable business modeling to bachelor and master students. first, we present a mooc on developing ”new business models” focusing on practitioners in society. second, we describe an approach in which students develop sustainable business models using a hackathon as the teaching format. please cite this paper as: jonker, j. and faber, n. (2019), insights from teaching sustainable business models using a mooc and a hackathon, vol. 7, no. 3, pp. 57-66 keywords: sustainable business models, circular economy, social inclusivity, mooc, hackathon. 1 institute for management research 2 nijmegen school of management 3 radboud university nijmegen acknowledgements: the ideas and educational practices we present in this paper would not have been possible without an array of sponsors, volunteers, and students. to name a few: the toulouse business school (france), the mooc-platform iversity (germany), ned-vang (dutch national waste management agency), numerous specialists, volunteers and researchers providing cases and teaching material and last but not least, our numerous students (an approximation of 10.000 from different countries, schools, programs and electives over the last five years). without them creating these approaches would not have been possible. journal of business models (2019), vol. 7, no. 3 pp. 57-66 58 introduction this contribution reports on two courses concerning teaching sustainable business modeling (e.g., boons and laasch, 2019; raith and siebold, 2018) each crafted around a specific didactical approach. the first course, ‘new business models working together on value creation,’ concerns a massive open online course (mooc; mazoue, 2013) at master level that enables the provisioning of teaching on a global scale and thus reaching out to a broad audience. the second, ‘sustainable entrepreneurship,’ is a bachelor level course shaped around the hackathon model (cobham et al., 2017), which focuses on intensive learning with a limited audience, over a short period. both courses are driven by the desire to strengthen the impact of our teaching efforts regarding the vital topic of business modeling for sustainability transitions. the mooc is designed in an instructional mode, inviting learners to translate the teachings into their ideas and practices. the hackathon emphasizes active groupbased learning and demands learners to apply the taught material in the products they create. the mooc focuses on helping practitioner-learners to develop a community-based business model. we will provide a brief description of the history of this course, highlight the design, and provide figures about its use since its launch in may 2016. the second course on sustainable business modeling aims to educate third-year bachelor students from across academic disciplines how to develop a sustainable business model within seven weeks. in recent years, we have experimented with a variety of classical didactical models. now we have made the transition to a combination of lectures and tutorials, leading to a 24-hour teaching hackathon. in both courses, we use three types of sustainable business models (bms), namely: (1) platform (tukker & tischner, 2006), (2) community-based (jonker, 2014), and (3) circular (jonker et al., 2018). platform bms are using the surplus capacity of assets (e.g., cars standing still 80-90% of the time, or self-generated energy wasted). community-based bms take shape around communities engaging in collective value-creation (e.g., neighbors starting energy, mobility or food cooperative). circular bms organize value-preservation when closing material loops. from our research since 2013, we state that these three bms cover around 80% of the archetypical business models concerning sustainability. in the following sections, we provide insights into these two courses at hand. the next section subsequently presents the courses and, per course, we will discuss (1) its history, (2) the course design, (3) what parameters have been used to give shape to the selected didactical approaches, (4) the effects of the chosen approaches on teacher-learner interactions, (5) the learning effects we have obtained and, finally, (6) a discussion on points for improvement. we will finally provide some critical insights from our experiences, followed by conclusions and discussion. course 1: business models for the circular economy mooc approach course organization in this course, students systematically explore and build their own new business model. key is creating a community around a value-proposition. regularly, a community-based business model is based on five building blocks. these building blocks are: (a) principles, (b) design structure, (c) offer, (d) community and finally (e) created values. together, they constitute the clover leaf business model (jonker, 2015) that guides students through the development of their own viable and valuable business model. based on the clover leaf business model, six design steps have been formulated that help the student through the mooc (mazoue, 2013; see figure 1 for the landing page of the mooc). these steps are: (1) introduction to the course, (2) the concept of the weconomy (jonker and faber, 2015), (3) the business model design using the clover leaf model, (4) principles and the value proposition, (5) community-building, and (6) assessing the value that is created. these six steps are explicated in a course book and illustrated in a series of youtube clips. for each step, a systematic elaboration in five to seven steps is provided in these clips. besides, a wide range of publicly available material (text and visual) to each of the design steps is added. journal of business models (2019), vol. 7, no. 3 pp. 57-66 59 didactical design parameters the course builds on the principles of peer learning (boud et al., 2014). students enrolled in the same course utilize each other’s know-how and experience. this materializes in the various assignments that are handed out throughout the course. to progress, students are required to provide feedback on each other’s work. the mooc platform facilitates this through discussion forums and a digital workspace. peer learning enables the students to gain insight into what others are doing regarding the same assignments and to receive feedback on their work in progress. step by step, participants build and test their model, leading to a mature result that can instantly put into practice. to demonstrate this applicability, students need to make a short youtube video clip of their final result. teacher-student interactions the basic design of this mooc is such that it can run in a stand-alone mode. this design parameter has been selected since the mooc intends to reach out to a global audience. given this context, direct interaction between student and teacher is a costly and complicated feature. in the design stage of the mooc, the idea of a weekly, interactive webinar has been explored. eventually, this function was eliminated because it was rendered infeasible to gather a global audience at the same time. furthermore, because the mooc is self-paced, students are at different levels of their learning journey and consequently face a variety of challenges at the same time. instead, we implemented a weekly mailbox that students may use to submit questions about their specific issues. additionally, the mooc offers a continuous, mixed stream of information consisting of new videos, weblinks, written material, et cetera. this additional material aims to be proactive to the questions they might raise. thus far, 8,500 students have started the mooc for three years. in developing the course, we had hoped to reach out to 10,000 students in the first year, based on estimations provided by the mooc platform provider. the result of reaching ‘just’ 8,500 students for three years is somewhat disappointing. to our knowledge, the enrollment has not yet led to any drop-outs due to lack of interaction or information. as far as we know, approximately ten percent has completed the entire mooc. also, this was below expectations. we had hoped to be able to issue a more significant number of certificates to participants. these figures provide little insight into the way participants use the mooc. key-insights when we began to design the mooc, we were naively optimistic due to a lack of understanding of the complexity and integration of this entails. practically, this meant that designing on various levels (videos, content, assignments, linguistics, illustrations, additional materials, et cetera) and continuously going back and forth in order to encompass the entirety of this instrument of teaching has been challenging and time-consuming. in hindsight, it would have been more efficient to design the basic layout of the mooc with experienced people. such collaboration would have brought in the necessary knowledge and skills early in the process and would have resulted in framing this design process ‘through the eyes of mooc-design requirements.’ figure 1: screenshot landing page mooc journal of business models (2019), vol. 7, no. 3 pp. 57-66 60 a second observation has been that we experienced a steep learning curve regarding the translation of the written text to videos and visuals such as schemes and animations. considering the average length of a video clip of 90 to 120 seconds, messages must be brought back to their bare essence in order to be comprehensible. the same applies to animations. while a plethora of software applications are available to create animations, it is not immediately clear which style best suits the messages we aim to bring to the intended audience. the further the process of mooc realization advances, the more prominent the entanglement of videos, animations, and other sources of information become. this demands the constant checking of coherence between all parts of the mooc. videos and other materials that have been produced at an early stage may need to be remade when progressing further. third, we deliberately designed the mooc to operate independently of face to face teaching efforts. the consequence is that teacher-student interaction has been reduced to the absolute minimum. while this leads to an efficient process of using the mooc itself, the live interaction with users is lost. as a consequence, the feeling of how students engage with the teaching material is missing even though they are regularly asked to provide feedback. this implies that it becomes nearly impossible to realize what the learning effects are for the participants and how they ultimately use the results. points for improvement the positive experiences thus far with designing and executing this mooc also show that using a specific technology quickly leads to the phenomenon of the ‘elephant in the room.’ in this case, the elephant is the technology that is very demanding on the cognitive, educational, and creative efforts of both the teacher-designer as well as the students. the technology continually stimulates the drive to add features, materials, side-steps, et cetera to the core for the learning experience. in retrospect, a piece of valuable advice is to keep the design simple. the current mooc consists of almost 40 videos and animations, all of which are aligned towards the goal of designing your own, sustainable business model. to go through all of this material in a relatively short period, answering all of the questions, and fulfilling the complete series of assignments is demanding. despite this, a mooc should be supplemented with national or local webinars, lectures, and workshops. furthermore, a gathering of people that have completed the course at a given moment in time would be an exciting feature. last but not least, digital connectedness of people and the potential this brings to learning experiences have not been explored. participation to the mooc creates a dedicated global network of which the richness has not been utilized. reflecting on the development and use of the mooc, we cannot deny it all started naively and intuitively. the efforts in making a professional mooc are substantial. still, we have reached a substantial number of students, globally, in a relatively short period. our advice is to design a mooc in parallel to regular teaching and build in cross-connections between these. this takes away some of the instructional parts of teaching. these then may be replaced by workshops in which students are invited into in-depth debates on their work in the mooc, emphasizing more active and engaged teaching. course 2: hackathon sustainable business modelling approach course organization the course ‘sustainable entrepreneurship’ consists of two stages, (1) preparation and (2) execution in which students work in teams. the preparation stage consists of a series of lectures and tutorials that run for six weeks. these provide students with all theoretical, conceptual, and practical information they require in order to develop a sustainable business model around a practical case. for every year, a variety of organizations is invited to provide live challenges on which students may work during the course. the practical case concerns a challenge that is provided by one or more sponsors. the case of 2018 came from a waste management organization, which provided a challenge on a specific fraction of dry household waste non-biotic, consumer waste stream. sponsors are invited into the classroom to host guest lectures on the practical and organizational specificities of the case at hand. in this preparatory stage of the course, journal of business models (2019), vol. 7, no. 3 pp. 57-66 61 students already make initial choices regarding their final business model. the execution stage is a 24-hour hackathon (cobham et al., 2017). in this limited time frame, students develop their business model, using a predefined format (see figure 2). support was offered by a group of external experts covering a variety of domains relevant to the case at hand, and the involved teachers during the whole of the hackathon. teaching assistants provided operational support (e.g., student administration, ushering the hackathon venue, logistics of food and beverages), during both preparation and execution stage. the product student teams deliver consists of (1) the actual sustainable business model design shaped according to the provided business model template, and (2) a document in which they elaborate their choices and how these are aligned. the two combined are labeled the ‘learning portfolio.’ background this course builds on a long teaching experience on the subject of sustainable business modeling. it began in 2011 and has been developed further in three stages. during the first stage, the course was set up as a conventional weekly design. it was provided as an elective in which third-year bachelor students were introduced to sustainability concepts from a management and business perspective. students from all faculties of radboud university nijmegen (the netherlands) were able to enroll without having any prior knowledge of these subjects. after four years, during which popularity had been moderate, we made the first course-design changes. this led to a course in which students were invited to develop their sustainable business models in pairs for seven weeks. every week, students attended thematic lectures followed by a tutorial in which they applied this theme in their business model the next day. students were allowed to choose any business model as long as they were able to argue how this contributed to various aspects of sustainability. the exam consisted of a report on the developed business model using a strict format accompanied by a 90-second video clip explaining the content of the business model to a broad audience. this helped students to understand the notion of dissemination. these video clips were peer assessed in-class during a beauty contest. students were invited to cast their votes on the various videos leading to a top three. this change of didactics quickly led to the affluence of students compared to the previous setup. the last and third redesign has been realized most recently during 2018. we kept a compressed and iterative structure of lectures and tutorials while keeping the primary assignment of developing a sustainable business model. we added the 24-hour hackathon at an off-grounds location at the end of this series. the offground location allows us to offer a dedicated teaching environment from which students cannot ‘escape’ and continuously are in the vicinity of their fellow students figure 2: business model template journal of business models (2019), vol. 7, no. 3 pp. 57-66 62 and teachers. at the location, we arranged for digital infrastructure, around the clock catering, and took considerate care of health and safety aspects. during the hackathon, students were not only supported by the involved teachers but also by a pool of specialists from various disciplines related to the case at hand. a digital, visual, and physical structure was created to enable teams to raise issues. the structure enabled allocation to the appropriate specialist and ensured being able to address these issues as quickly as possible to keep the momentum of the development process. this was reinforced by using a giant time clock ticking away the seconds and minutes of the 24-hour adventure. the expected outcomes of each of the teams of the hackathon were explicitly stipulated. the end of the hackathon was announced with the sound of a horn, forcing students to cease all activities. a jury of five independent specialists was brought in to assess each of the team results. a rubrics template was used to make an assessment in which the outcomes were announced in a festive plenary meeting. the top three winners received an award. the hackathon and, thus, the course was officially closed with a festive dinner. the costs involved in this setup require substantial additional sponsoring. this last redesign was made such that the study-load matched the number of credits and teaching hours. didactical design parameters from the beginning of the course, students worked in teams of four to five persons to create their sustainable business models. the creation of those teams has explicitly been part of the didactical approach of the course. students needed to choose team members, a team captain, a name, and a mascot. the team captain was made responsible for internal team coordination and communication. the challenge for the individual team members was to take upon themselves a role outside of their comfort zone. each team had to design and provide a presentation of the developed business model using the bmt and supported by a 90-second video clip. the team decided how to present the results to the jury. the presentation was strictly limited to a ten-minute time frame. regarding the contents of the course, instead of allowing any business model to be accommodated, a central theme (and material) was determined upon which students had to elaborate a business model. three different archetypes of sustainable business models were allowed: (1) platform, (2) community, and (3) circular. for each of these types, ample documentation and teaching were provided. to guide the process of developing a sustainable business model, the bmt, was developed, including elaborate instructions. also, the elements of this bmt were systematically addressed in the various lectures followed by several previous assignments. during the actual hackathon, the bmt served as the guiding framework for developing the sustainable business model. at an earlier stage, students received precise written and oral instructions on the bmt and were offered the chance to experiment with its various building blocks. we consider the hackathon based on teams of students working with the bmt as a didactical instrument that was put to use to enable the smooth design of a sustainable business model. crucial in the process leading towards the hackathon was the creation of a collective, level playing field based on shared knowledge, teaching, and experiences. this and the choice for a specific constrained each team to develop a focus on one of the specific sustainable business model archetypes. furthermore, this offered students a natural pathway to in-depth and content-wise elaboration on the challenge they faced. as a result, all sorts of possible side steps could not be avoided (this was even encouraged by the teachers); however, students quickly realized when they were approaching an impasse. teacher-student interactions in contrast to the earlier described mooc, this elective relies strongly on intensive teacher-student interactions inside and outside (i.e., during the hackathon) of the classroom. during the six weeks of teaching, students develop a variety of relationships (a) amongst each other, (b) with the core teachers, and (c) with the specialists during the hackathon. to maintain independence, the jury was not part of the teaching corps. dedicated software was used (i.e., slack) in addition to conventional teaching software (i.e., brightspace) to facilitate communication within teams and between teams and specialists. this was provided in addition to regular teacher-student interactions during classes and was supplemented with dedicated consulting-hours. journal of business models (2019), vol. 7, no. 3 pp. 57-66 63 key-insights the hackathon model has shown itself as a powerful didactical approach. specifically, when applied to a design challenge, it fosters creativity while a clear focus is developed step-by-step. furthermore, students are guided by an increasing set of rules, conceptual models, time frames, social pressures (especially between-team competition), and the growing collective ambition to win. two to three weeks into the teaching process, these competitive and social dynamics visibly come into play. students begin to understand that the offered approach is a different concept compared to traditional teaching. second, collaborating with an external, non-profit organization brought in-depth knowledge about specific practices and the actual case into the classroom. this led to practitioners teaching in the classroom and sharing their experiential knowledge. the core-team helped the practitioners prepare their contributions and sort out their references. the latter is explicitly needed since this is not commonplace for practitioners. this amalgamation of core-teachers and practitioners resulted in a coherent set of assignments that became tangible to students. in this way, they experienced how theory and practice are intertwined in a current, reallife case. third, although ample instructions on the bmt had been provided, and students were offered the possibility to practice, it was realized that this was insufficient. when the results were presented at the end of the hackathon, and more in particular when they handed in their final assignments, it became apparent that the aligned use of the different bmt building blocks did not meet expectations. the bmt consists of a set of building blocks that only make sense when they are used coherently. we observed that certain elements of the bmt, in particular compatibility (i.e., the connection to existing arrangements in practice), impact analysis (i.e., the expected impact of the business model in environmental, social, and economic senses) , and the use of a hybrid revenue model (i.e., the simultaneous use of a various values), were difficult for the students to grasp. hence, there was little coherence on the elaboration of these specific building blocks. as a result, most assignments were in this respect, incomplete. points for improvement the teaching we describe covers eight years. during these eight years, we changed the entire course design twice. from traditional teaching via pairwise business model development to a structured team-based approach framed by a business model template. during this process, we moved from a more descriptive approach towards an (inter)active design approach. we also moved from frontal classroom teaching to an amalgamation of teamwork, frontal teaching, consulting hours, workshop, and learning through making a video clip. this led to a reorientation of the teaching model and the adjoining assignments. compared to a conventional approach, the teaching systematically began to serve as stepping-stones towards the pressure cooker model brought about in the hackathon. the experiences thus far provide ample justification to continue with this approach. the elaborate evaluation among students generally demonstrates keen appreciation for the offered elective. students indicate that, despite their various backgrounds, they are facilitated in developing a sustainable business model to the best of their abilities. the period of seven weeks is perceived as an appropriate time frame (although not all students agree on this). in retrospect, we have five observations. first, we have witnessed an unbalanced use of the provided resources (with a slight preference for sources used during lectures). second, more time and effort need to be invested in not just explaining the bmt but also gaining experience with its different building blocks. this implies we will use the time allotted to the workshops to systematically discuss and practice the various building blocks of the bmt and their alignment. for example, we introduce the idea of hybrid revenues, provide examples, and then have the students exercise the design of their hybrid revenue model and pinpoint the alignment with the remainder of the bmt. third, the screening of specialists involved in the hackathon is crucial for the value of the information offered to students and, as such, the success of this part of the course. fourth, the communication devices that were used correctly for public interaction with specialists need to be embedded in the entire course design. fifth and finally, despite the practical and financial implications, a site-visit to an operational business model would aid students to grasp what is at stake. journal of business models (2019), vol. 7, no. 3 pp. 57-66 64 conclusions, recommendations, and discussion looking back, a first observation is that our adventures of teaching sustainable bms and (re)designing our courses was initiated in 2013. in the beginning, the gist of the courses was not in the didactics but the contents. more, in particular, it started in an ill-defined, if not obscure, need to redefine existing bm logics. the bms we focus on contributing to a transition of the economy towards more sustainability, circularity, and inclusivity. we consider this important not only as academics but moreover as engaged citizens who want to educate young thinkers and workers. this is crucial since it is this logic that drives our research and, consequently, our teaching. our experiences with the mooc and the hackathon are that the use of both models is heavily sponsor-dependent. additional funds are required to initiate and continue such didactics. we conclude that it takes considerable time, effort, and creativity to design and test a course on a topic that defies mainstream economic and bm thinking until it is more or less stable. even when workable-ready, continuous work is needed. implementing this course in existing teaching contexts is not warmly received by colleagues. second, designing a mooc that is not physically institute-bound has resulted in a stream of criticism from the existing institutional order. accepted revenue models and didactical approaches insufficiently fit the mooc teaching model. it deviates from a controlled classroom situation in which the ‘talking head’ has full control of the educational content and program. in contrast, a mooc requires trust, stimulates extensive collaboration between participants, and operates from the premise that ‘stealing knowledge’ is a good thing. as a result, a massive number of people participate freely in a type of ‘action learning’ (e.g., argyris and schön, 1978; vail, 1996). a third conclusion that we draw regarding the teaching is that introductory lectures and workshops are a prerequisite for the success of the hackathon. students are systematically confronted with the content that is core to it. the developed business model template plays a crucial role that guides students through the content. four, sponsorships offer the possibility to bring in real life cases represented by people with names and faces. real actors enter into the classroom; students intuitively sense the authenticity of the matter at hand. our fifth and conclusion are that, in both cases, we have witnessed that learning in collaboration is not the only key in our didactical approach but also has a lasting impact on their way of thinking and acting in their daily, professional lives. in the near future, we would be pleased if the link to the world outside of the classroom is reinforced. new societal concepts that are rooted in the community of practice (cop; wenger, 1998) such as urban living labs, innovation work centers, regional hubs, et cetera foster this collaborative learning process. as a result, we suggest the diminishing of classical, classroom teachings and instead favor the reinforcement of situated learning based on theory while addressing the complexities of practice. in hindsight, we conclude that a mooc can stimulate learning on a global scale, while the hackathon allows for the intensification of face-toface learning. the choice between these depends on (1) available means, (2) educational setting, (3) resources available, (4) envisaged outreach, and (5) skills and capacities of the educational team. a clear-cut checklist cannot be provided in this respect. journal of business models (2019), vol. 7, no. 3 pp. 57-66 65 references argyris, c., and schön, d. a. (1978). organisational learning: a theory of action perspective, addisson-wesley, reading, ma. boons, f., and laasch, o. (2019). business models for sustainable development: a process perspective. journal of business models, vol. 7, no. 1, pp. 9-12. boud, d., cohen, r., and sampson, j. (2013). peer learning in higher education: learning from & with each other, routledge, london. cobham, d., gowen, c., hargrave, b., jacques, k., laurel, j., and ringham, s. (2017, march). “from hackathon to student enterprise: an evaluation of creating successful and sustainable student entrepreneurial activity initiated by a university hackathon”, in edulearn17 proceedings, iated, barcelona, pp. 789–796. faber, n., and jonker, j. (2018). at your service: how can blockchain be used to address societal challenges, treiblmaier, h. & beck, r., business transformation through blockchain, palgrave-macmillan, london, pp. 209-232. jonker, j. (eds.) (2014). new business models. creating value together, st ocf 2.0, doetinchem. jonker, j., and faber, n. (2015). “framing the weconomy: exploring seven socio-economic trends that enable shaping a transition towards sustainability”, working paper. institute for management research, radboud university nijmegen, nijmegen, summer 2015. jonker, j., kothman, i., faber, n., and montenegro navarro, n. (2018). organizing for the circular economy: a workbook for developing circular business models, ocf2.0, doetinchem. jonker, j. (2016). “new business models – working together on value creation”, available at https://iversity.org/en/ courses/new-business-models-working-together-on-value-creation (accessed 11 november, 2018). mazoue, j. g. (2013). “the mooc model: challenging traditional education”, educause review online, 28 january, available at https://er.educause.edu/articles/2013/1/the-mooc-model-challenging-traditional-education (accessed 15 may, 2019). raith, m. g., and siebold, n. (2018). building business models around sustainable development goals, journal of business models, vol. 6, no. 2, pp. 71-77. tukker, a., and tischner, u. (2006). product-services as a research field: past, present and future: reflections from a decade of research, journal of cleaner production, vol. 14, no. 17, pp. 1552-1556. vail, p. (1996). learning as a way of being: strategies for survival in a world of permanent white water, jossey-bass, hoboken (nj). journal of business models (2019), vol. 7, no. 3 pp. 57-66 66 jan jonker is professor of sustainable enterprise at radboud university. besides, he has held the chaire d’excellence pierre de fermat at toulouse business school (fr.) and the emile francqui chair at the free university in brussels (b.). his work focuses on three related themes: the emergence of the weconomy, the development of new business models, and transaction systems with more than money alone or ’hybrid banking.’ niels faber is a researcher at radboud university nijmegen and a lecturer at hanze university of applied sciences in groningen. his research focuses on the organizational aspects of sustainability. this is translated into themes such as new forms of the organization focusing on the circular economy, in particular, the transition this entails, and measuring the progress made in it. he has written over 60 publications and, together with jan jonker, he is the co-author of a series of online columns on the circular economy and sustainable societal transition, supervised mt students and phds. together they have been writing a growing number of publications over the past five years. about the authors journal of business models (2018), vol. 6, no. 3, pp. 106-129 106 extending the business-to-business (b2b) model towards a business-to-consumer (b2c) model for telemonitoring patients with chronic heart failure (chf) andrija s. grustam 1, hubertus j.m. vrijhoef 2, ron koymans 3, vasilis poulikidis 4, and johan l. severens 5 abstract purpose: the purpose of this paper is to describe an alternative approach to telemonitoring patients suffe­ ring from chronic heart failure (chf), i.e. the business­to­consumer model (b2c), by extending the current business­to­business model (b2b). the b2c model is the one where the customer, in this case the patient, is the payer for the services consumed. we describe and perform an initial evaluation of the extension of the b2b to the b2c model for telemonitoring patients with chf. design/methodology/approach: we explored the problems in implementation of telemonitoring via the b2b model by means of a root cause analysis, including the 5-whys method to help us understand the shortco­ mings of the b2b approach, and then the 5w1h method to explore whether the b2c is a better strategy. the extension of the model was executed in the business model generation framework. by using qualitative con­ tent analysis techniques we supported our argumentation with findings from other studies. findings: the b2c model is based on the interplay of four agents – healthcare provider, equipment manufac­ turer, payer/regulator and distributor/promotor – all working together to improve health related outcomes in a jurisdiction. the success of the extended model in telemonitoring chf hinges on telemonitoring center and telehealth nurses being repositioned in the out­of­the hospital setting. social implications: we believe that penetration of mobile telehealth via the b2c model will allow for greater availability, access and equity in healthcare for patients with chf. originality/value: we introduced a fourth pillar to the existing b2b model, i.e. distributors and/or promotors. the b2c model we propose does not exist currently but might allow for scalability, generalizability and trans­ ferability of telemonitoring currently unattained with the b2b model. please cite this paper as: grustam et al. (2017), business model disclosures in corporate reports, vol. 5, no. 1, pp. 74­97 keywords: telemonitoring; chronic heart failure; business model; b2b; b2c; 1 erasmus school of health policy and management, erasmus university rotterdam; professional healthcare services & solutions, philips research, grustam@eshpm.eur.nl 2 department of patient & care, maastricht umc, the netherlands; department of family medicine and chronic care, vrije universiteit brussels, belgium; panaxea b.v., amsterdam, the netherlands, b.vrijhoef@mumc.nl 3 professional healthcare services & solutions, philips research, ron.koymans@philips.com 4 rotterdam school of management, erasmus university rotterdam, v.poulikidis@gmail.com 5 erasmus school of health policy and management, erasmus university rotterdam; imta, institute of medical technology assessment, erasmus university rotterdam, severens@eshpm.eur.nl journal of business models (2018), vol. 6, no. 3, pp. 106-129 107 introduction population aging is no longer a rich­country pheno­ menon. in high­income, as well as in middle and low­ income countries the populations are getting older, the healthcare workforce is becoming scarce and the cost of care is accounting for an increasing proportion of the gross domestic product (bodenheimer, 2005; lee et al., 2010). at the same time, healthcare delivery is frag­ mented, uncoordinated and not value­based (porter, 2009; gomes and moqaddamerad, 2016). the greatest burden of disease globally is attributed to chronic diseases, which are expected to continue to contribute the most disability­adjusted life­years (dalys) through 2020 (krum et al., 2005). mathers and loncar (2006) further investigated the global burden of disease in the years 2020­2030 and found that there will be no change in rank from the first global burden of disease study (murray and lopez, 1997), with ischemic heart disease topping the list of the leading causes of death in high­, middle­ and low­income countries (15.8%, 14.4% and 13.4% of total deaths, respectively). ischemic heart disease is “the principal etiology of heart failure in the western world” (remme, 2000). many patients suffering from chronic diseases are not sufficiently empowered to manage their own disease, they rarely have means to track the disease progres­ sion and their understanding of the disease is vague (krumholz et al., 2002). moreover, the majority of chronic patients are suffering from multimorbidity, i.e. two or more chronic diseases (barnett et al., 2012; oostrom et al., 2014; ornstein et al., 2013). telemonitoring has the potential to support timely detection and slower disease progression in chronic heart failure (chaudhry et al., 2007). inglis (2010) defined telemonitoring as “the transmission of physio­ logic data, such as an electrocardiogram (ecg), blood pressure, weight, respiratory rate, and other informa­ tion, such as self­care, education, lifestyle modification and medicine administration, using… technology like broadband, satellite, wireless or bluetooth”. today, telemonitoring is mostly implemented via a business­to­business model (b2b), usually involving cooperation between a healthcare organization and an equipment manufacturer (herzlinger et al., 2014). a business model describes “the rationale of how an organization creates, delivers and captures value” (osterwalder and pigneur, 2010). the b2b model in electronic communication has its advantages: 24/7 availability, breaking geographical barriers, selling in batches, organization­wide implementation and elimi­ nation of the ‘middleman’ (botha et al., 2008). how­ ever, the key challenges of the current model are well documented too: staffing, project management, provi­ sion of support, technology, partnerships, funding and strategy (joseph et al., 2011). it has been difficult for telemonitoring introduced via a b2b model to become mainstream, as it seems not to flourish after the pilot testing phase (willemse et al., 2014). a broad deployment of patient­centric solutions is hampered by barriers, both external, like market forces, and internal, like the medical technology com­ panies’ impotencies (erhard et al., 2013). the success­ ful model of implementation will have to satisfy the triple aim criteria: 1) improve the experience of care, 2) improve the health of patients, and 3) reduce costs (berwick et al., 2008). our analysis concerns patients with chronic heart fail­ ure (chf) because of the severity of the disease and its universality. based on the framingham heart study, 30­day mortality for these patients is around 10%, 1­year mortality is 20­30%, and 5­year mortality is 45­60% (levy et al., 2002). in 1928 the new york heart association (nyha) established a chronic heart fail­ ure classification that is now used worldwide (dolgin, 1994), and has divided the patients into four groups according to the severity of the disease expressed in physical limitations and shortness of breath. as chf is a highly lethal disease, patients need help and encou­ ragement to adhere to the medical regime (hanyu et al., 1999; who, 2011). our objective is to describe a new model for the imple­ mentation of telemonitoring, i.e. the business­to­ consumer model (b2c), by extending the current b2b model. b2c model in healthcare is enabled by digital technologies, and the advent of internet, where the customer (i.e. the patient) is the payer for the services consumed. we are keen on exploring whether exten­ ding the b2b model to b2c can “support citizens’ and patients’ health and well­being in the home and on the journal of business models (2018), vol. 6, no. 3, pp. 106-129 108 move ... and enable a virtual healthcare continuum” on an unprecedented scale (schug, 2014), and if there is a difference to be expected in the speed and scale of implementation of telemonitoring for chf patients via the extended business model. methods extending the business­to­business model (b2b) in telemonitoring of patients with chronic heart failure took three steps: 1) a root cause analysis of problems in implementation of telemonitoring via b2b, 2) pos­ sible improvements via the b2c approach, and 3) the creation of the extended business model. in the root cause analysis section (williams, 2001) we first applied the 5-whys method in order to understand the shortcomings of the b2b model in telemonitoring of patients with chronic heart failure, and then the 5-whys-1-how (5w1h) method for exploring whether the b2c might be a better strategy. the 5-whys tech­ nique is used to explore the cause and effect relation­ ship (asian development bank, 2009) while the 5w1h technique is used to understand the context of the problem, and is called the kipling method because those six questions – who?, what?, where?, when?, why? and how? – have been immortalized in a rudyard kipling poem published in “just so stories” in 1902 (kipling, 2013). we selected and consulted scientific li terature, brainstormed on these questions, and took a devil’s advocate perspective to each of the five answers. the model itself was crafted according to the business model generation framework (osterwalder and pigneur, 2010; d’souza, 2015). we employed this methodology as a proven one in various companies for generating innova­ tive business models (ahokangas and myllykoski, 2014). it consists of nine building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. we supported our analysis with papers published in peer reviewed journals, covering multiple coun­ tries, and where possible in the form of reviews and meta­analyses. we searched for publications in eng­ lish, since 2000, and in some exceptional cases from the 1990s. in addition, we used online resources of business literature from the same period (including ideas and concepts from various consultancies, com­ panies, and magazines). as we are presenting a view­ point ar ticle, we tried to support our argumentation with fin dings from other authors. we opted for a con­ venience sample (given, 2008) of papers instead of a more systematic selection. convenience sampling is a non­probability technique that uses sources because of their accessibility, which introduces bias. we looked for papers that support and oppose our perspective and included both, if found. we used qualitative content analysis techniques for systematization of ideas from other authors, in order to allow for categorization and quantification of presented concepts (mayring, 2000). we worked with prior formulated, theoretically derived cate gories of 5-whys and 5w1h methods, where the qualitative step of the analysis consisted of a methodi­ cally “controlled assignment of the category to a pas­ sage of text” (mayring, 2000). results root cause analysis shortcomings of the b2b approach here we list the barriers of the b2b model to the imple­ mentation of telemonitoring. we start from the fin­ ding that the prevailing business model is not optimal for telemonitoring of chf patients (coye et al., 2009) and investigate further the barriers reported in the literature. the biggest trial in telehealth to date, the whole sys­ tem demonstrator (wsd), which was carried out in three regions in the uk, lists the following barriers to participation and adoption of telemonitoring: “require­ ments for technical competence and operation of equip­ ment; threats to identity, independence and self­care; expectations and experiences of disruption to services” (sanders et al., 2012). if the business model is based on the telemedicine service where equipment is being paid for, which was the case in the wsd, the problems obviously relate to technical and privacy issues. willemse et al. (2014) list the following three barriers for telemedicine in belgium: 1) financial constraints, 2) incomplete transmural coordination, cooperation and digital communication and 3) telemonitoring not being integrated in routine care. on the financial constraint journal of business models (2018), vol. 6, no. 3, pp. 106-129 109 side, the authors postulate lack of equipment (devices were not provided after the pilot phase) and no financial remuneration foreseen for the follow up of telemoni­ toring. in terms of coordination, cooperation and com­ munication problems they list issues such as industrial partners offering different platforms for data storage; follow­up and coordination only performed in the own organization; no integration of telemonitoring data in patient records; transmural data sharing was not car­ ried out; regular healthcare providers often did not participate. in terms of integration with routine care, telemonitoring was considered to require an additional effort in the pilot projects (willemse et al., 2014). coye et al. (2009) examined in greater depth the over­ view of barriers to the implementation of remote patient telemonitoring. on financial constraints they state that “financial models and assumptions needed to calculate costs and return on investment do not exist” (p. 129). without detailed calculations of direct and indirect costs, be it healthcare or non­healthcare, no sustainable inno­ vation can be successfully introduced. they continue: “perhaps most difficult of all – there are few models of implementation by individual physicians, large medical groups, or healthcare delivery systems to draw upon” (coye et al., 2009). continuing to ask why? will even­ tually lead us to the “principal barriers” to innovation in chronic care: the (poor) effects of benefit design and reimbursement mechanisms (baron and cassel, 2008; bodenheimer, 2008; boult et al. ,1999). medicare/medicaid, a us national social insurance, “reimburses for telehealth services when the origina­ ting site (where the patient is) is in a health profes­ sional shortage area (hpsa) or in a county that is outside of any metropolitan statistical area (msa), defined by hrsa and the census bureau, respectively” (hrsa, 2015). medicare will reimburse for face­to­ face interactions, store­and­forward applications (e.g. remote ecg application) but there is no single accepted reimbursement standard for private payers. the ame­ rican telemedicine association conducted a national online survey of private payer reimbursement in 2012 and found “that private payers have administrative rules regarding telehealth reimbursement that are bar­ riers to services and reimbursement, and that some providers would benefit from being better informed about billing and coding for telehealth services and how to advocate for telehealth services reimbursement” (antoniotti et al., 2014). in conclusion, antoniotti et al. (2014) list the major reasons for not billing for services delivered via telemedicine: no medicaid reimbursement (33%), major payers do not pay (32.4%), practice in urban area (19.3%), services are bundled through con­ tracts (17.4%), could not get support from my organiza­ tion (4.7%), too risky for penalties for fraud and abuse (4.7%), and other (43.9%). improvements via the b2c approach extending the b2b model towards the b2c model con­ cerns the improvements in the following aspects: cost­ effectiveness (i.e. health for money), modus and timing of introduction, education and self­management. one of the impediments to wider uptake of tele­ monitoring is its business model (acheampong and vimarlund, 2014) while the other is its cost­effective­ ness (grustam et al., 2014). the evidence that tele­ monitoring saves costs while improving outcomes is still debated in the literature (blum and gottlieb, 2014; klersy et al., 2011; upatising et al., 2015), while the opti­ mal business model is yet to be found. telemonito­ ring is currently introduced via the not easily scalable b2b approach, and literature does not examine other modalities of implementation or their cost­effective­ ness (acheampong and vimarlund, 2014; dijkstra et al., 2006; griffioen, 2012). addressing the cost­effective­ ness barriers as well as market and consumer barriers (regulations, ease of use, technology, access and cove­ rage, promotion etc.) can lead to scalability. telemonitoring of chronic/multimorbid patients today is a time­bound activity. patients usually stay with the b2b telemonitoring service anywhere from one to eighteen months (maric et al., 2009), whereas they could continue to use the b2c model for the duration of the disease (i.e. lifetime, as they are paying for the ser­ vice themselves). an inability to properly manage chf usually lands those patients in the emergency room (er) and this significantly shortens their life pros­ pects (sanghavi et al., 2014). having access to the tele­ monitoring service at all times can be highly beneficial to chf patients as telemonitoring has been shown to reduce mortality, hospital readmission and bed occu­ pancy, even at short intervention and follow­up inter­ vals (louis et al., 2003). journal of business models (2018), vol. 6, no. 3, pp. 106-129 110 chf patients should ideally be approached after an adverse health event (e.g. heart failure, mild infarct, stroke). that is a time when patients are most aware of their health problems and need to actively partici­ pate in the hospital discharge process (hesselink et al., 2014). currently patients are recruited to clinical stu­ dies involving b2b telemedicine systems months after the onset of the disease. in the b2c model patients can be informed about the existence of the service at the point of departure from the healthcare system, or via public health channels (e.g. mass media campaigns). the b2c telemonitoring service should be available at all times to patients in a given jurisdiction. patient education is of importance to guarantee adhe­ rence. the self­management component of chf pro­ grams (physical activity, drug adherence, diet, etc.) has “a positive effect, although not always significant, on reduction of numbers of all­cause hospital readmit­ ted patients … decrease in mortality and increasing quality of life” (ditewig et al., 2010). the educational component of the system allows for empowerment of patients, while the monitoring component helps with early detection of disease worsening. in most b2b cases the education is offered by a nurse – in person or via the telephone and rarely via the device (maric et al., 2009). this prevents patients from revisiting the mes­ sage and impedes learning. in the b2c model education is always at hand, which should promote learning and behavioral change. one of the main problems in telemonitoring is scal­ ability (zhang et al., 2014), which comes with regula­ tory issues. the european commission has indicated in the e­commerce directive that “for business­to­ business (professional­to­professional) telemedicine services,  such as teleradiology, the country of origin principle applies: the service offered by the profes­ sional must comply with the rules of the member state of establishment. in the case of business­to­consumer activities (which might be relevant to telemonitoring services) the contractual obligations are exempted from the country of origin principle: the service might need to comply with the rules of the recipient’s coun­ try” (commission of the european communities, 2008). this indicates that the telemonitoring provider should be based in the eu jurisdiction most favorable to ehealth and provide services to other member states via the internal market clause (vollebregt, 2012). using mass media to reach consumers, combined with refer­ rals by physicians and pharmacists, might be a way to enroll patients in their thousands without establishing a physical presence in the jurisdiction (as is necessary with b2b today). thus business­to­consumer (b2c) telemonitoring might pave the way to population­wide health monitoring either within or between countries. the b2c telemonitoring service can be introduced ini­ tially as an increment of the b2b model. the b2b model is currently used by technology providers to implement their products in high­income countries. in the us, for example, after the adoption of the “meaningful use of it in healthcare” initiative, congress invested bil­ lions of dollars in infrastructure building to support three goals: improve quality of care, reduce costs, and increase access and coverage (buntin et al., 2010). pre­ vious investments in b2b telemonitoring can help with the transition to b2c as systems have been deployed already, and the research findings are available too (weinstein et al., 2014). the rapid evolution of mobile health apps will be the promotor of b2c telemonitoring and will encourage patients to “accept greater respon­ sibility for their own healthcare either individually or with their healthcare navigators” (dorsey et al., 2013; weinstein et al., 2014, p. 185). paré et al. (2007) found out that: “home telemoni­ toring of chronic diseases seems to be a promising patient management approach that produces accurate and reliable data, empowers patients, influences their attitudes and behaviors, and potentially improves their medical conditions” (p. 274). however, there is inconclusive evidence of the clinical effectiveness and cost­effectiveness of telemonitoring for chf patients (clark et al., 2007; grustam et al., 2014; wootton, 2012). while business model and cost­effectiveness are considered to be major barriers to further imple­ mentation of telemonitoring in chronic disease mana­ gement, the enablers are to be found in duration of the intervention, modus and timing of introduction, education, and self­management (table 1). extending the b2b model towards b2c might be a way to tackle all those major deficiencies in the telemonitoring ser­ vice today. journal of business models (2018), vol. 6, no. 3, pp. 106-129 111 b2b barriers b2c enablers 1) technical requirements for technical competence and operation of equipment, 2) personal threats to identity, independence and self-care, 3) organizational incomplete transmural coordination, cooperation and digital communication, and 4) financial poor effects of benefit design and reimbursement mechanisms. 1) effectiveness – addressing regulations, ease of use, technology, access and coverage, promotion, etc. can lead to scalability, 2) modus and timing the service is available at all times, for a lifetime, 3) education always at hand, which should promote learning and behavioral change, 4) self-management better health outcomes. table 1: summary table of the barriers and enablers in chf telemonitoring business model generation next, we describe in detail the business­to­con­ sumer (b2c) model. we believe that its success hinges on two entities – the telemonitoring center and telehealth nurses – being repositioned in the out­of­the hospital setting. we depict the position of the two in the business model canvas (anon, 2014a). the canvas allows for improved clarity and understanding of this value proposition. figure 1 presents the extended business model based on the findings generated by the 2 preceding steps ­ a root cause analysis of problems in implementation of telemonitoring via b2b, and possible improvements via the b2c approach. key partners monitoring & wellness 1) strategic alliance between payer/regulator and distributor/promotor, 2) cooperation between healthcare provider and equipment manufacturer, 3) joint venture between equipment manufacturer and distributor/promotor, and 4) buyer-supplier relationship between insurer/regulator and healthcare provider key activities monitoring 1) production – creating the mobile app. 2) problem solving – care coordination and bidirectional communication, and 3) platform/network 24/7 unobtrusive telemonitoring wellness 1) production – creating the mobile app, 2) problem solving – wellness tracking and support value propositions monitoring 24/7 unobtrusive personalized telemonitoring (disease monitoring, education, serious games and communities) with biweekly calls from a personal care coordinator (telehealth nurse) wellness wellness tracking (disease tracking, education, serious games and communities) customer relationships monitoring 1) dedicated personal assistance, 2) automated alerts and messages, and 3) communities wellness 1) automated alerts and messages, and 2) communities customer segments monitoring 1) chf patient after an adverse event, 2) tech savvy with smartphone and mobile internet, and 3) able to pay for the service wellness 1) older than 55 years and at cardiovascular risk, 2) tech savvy with smartphone and mobile internet, and 3) able to use the service key resources monitoring 1) physical telemonitoring center, 2) financial initial investment in the venture, 3) intellectual ip and algorithms, and 4) human telehealth nurses wellness 1) physical telemonitoring center, 2) financial initial investment in the venture, 3) intellectual ip and algorithms channels monitoring & wellness 1) distribution of the app/ service via the established app stores, 2) communication with patients via telecom operators cost structure monitoring 1) telemonitoring equipment 2) telecommunication charges 3) salaries 4) overhead wellness 1) backend charges 2) telecommunication charges revenue stream(s) monitoring subscription based (premium model) wellness free (freemium model) adapted from business model generation (osterwalder & pigneur, 2010) figure 1: the b2c model of telemonitoring chf expressed in the business model canvas journal of business models (2018), vol. 6, no. 3, pp. 106-129 112 customer segments at the very beginning of the business model generation, we need to understand for whom is the value created, to: mass market, niche market, segmented, diversified or multi­sided platform (osterwalder and pigneur, 2010). cambridge university press (2015) explains that “pro­ duct … designed for the mass market is intended to be bought by as many people as possible, not just by peo­ ple with a lot of money or a special interest”, and market segment is defined as “a group of possible customers who are similar in their needs, age, education, etc.”. this model concerns chf patients, as chf contributes the most to mortality from chronic diseases in the world (who, 2011), making this a segmented market. the newly crafted business model caters for the specific customer segment, i.e. chf patients with a certain seve­ rity of the disease expressed in the new york heart asso­ ciation (nyha) framework (dolgin, 1994). it is too early to say which class of patients – nyha class i to iv – can benefit the most from b2c telemonitoring, or whether it is a cost­effective intervention. for the time­being we will consider all nyha class patients as possible custo­ mers. the criteria for the customer are: 1) chf patient after an adverse event such as a heart attack or stroke for the monitoring track, and/or older than 55 years for the wellness track, 2) tech savvy with smartphone and mobile internet, and 3) able to pay for the service. in the us 17% of the daily mobile internet users older than 55 years pur­ chased a service or a product via smartphone, and have on average 5.7 paid apps on their devices (google, 2013). thus the value proposition, distribution channels, and customer relationships need to be tailored to the specific requirements of this customer segment. value proposition(s) a value proposition “creates value for a customer seg­ ment through a distinct mix of elements catering to that segment’s needs” (osterwalder and pigneur, 2010). the same authors define values as quantitative (e.g. price, speed of service) and qualitative (e.g. design, customer experience). what value can be delivered to the identi­ fied customers via the b2c model? several, from the following categories: newness, performance, customi­ zation, getting the job done, design, brand/status, cost reduction, risk reduction, accessibility and conveni­ ence/usability (osterwalder and pigneur, 2010). the key success factors, in terms of customer needs – effectiveness, costs, accessibility, ease of use, cre­ dibility – correspond to the value­added characteris­ tics of the b2c model. the duration of intervention, the modus and time of introduction, education and self­management, the effectiveness in terms of better healthcare outcomes, are all important improvement points for b2b, and at the same time value proposi­ tions for b2c telemonitoring. the b2c value proposi­ tion is inspired by triple aim (berwick et al., 2008) and specified for telemonitoring of patients with chf from a consumer’s perspective. as such, the key success fac­ tors of the b2c model address different aims: care (e.g. accessibility, ease of use, credibility), health, and costs (e.g. cost reduction, effectiveness, scalability). an example of the b2c telemonitoring service that we will use in this business model generation exer­ cise concerns: 1) a 24/7 unobtrusive personalized tele­ monitoring service (monitoring, education, games, and communities) with biweekly calls from personal care coordination, or for a wider audience of 55+ years, 2) a wellness tracking app (disease tracking, education, games, and communities). personalized monitoring entails algorithm pushing nudges, content, education, and scripted interactions to the patient according to the signal reads from the monitoring devices. personal care coordinator is a dedicated telenurse that monitors the patient via a dashboard, and acts as the “health coach” (supports the patients throughout their patient journey). the personalization on the patient side is driven by the severity of the disease , therapy adhe­ rence, willingness to pay, motivation, etc. in the event of an emergency, or during the night when the patient is not supervised by a real person, the clever algorithm flags the situation and logs an automatic call with an emergency service on behalf of the patient (leijdekkers and gay, 2008). the telemonitoring ser­ vice should not be mistaken for an emergency service. currently, telemonitoring can be provided via several platforms (e.g. smart and mobile devices, tv, tele­ phone) but is executed in a one-size-fits-all fashion. each patient is unique, and the customization of the service is a crucial part of the value proposition in the b2c approach. this can be done via smart algorithms using educational content, surveys, information journal of business models (2018), vol. 6, no. 3, pp. 106-129 113 provision, games, etc. – all personal and engaging. patients a are happy when care is tailored to them per­ sonally and/or to their individual needs (minvielle et al., 2014). the brand power is crucial to service uptake. aaker (1991) provided a framework for assessing brand equity with four dimensions: brand’s perceived quality, brand awareness, brand associations, and brand loyalty. patients might not be comfortable with it companies monitoring their health, nor allow “one’s biometric indi­ cators [to] be constantly measured, analyzed and dis­ played publicly on facebook or twitter” (lupton, 2012), but the recently introduced researchkit from apple proves that things are beginning to change – smart­ phones will track one’s health status, and even one’s genetic information – and thousands of people have signed up for this already (regalado, 2015). an estab­ lished player in the healthcare domain with a strong brand has a fair shot at monitoring wider populations. in this way, the adoption of a new technology can be accelerated (jin and li, 2012). b2c value proposition features cost reduction, risk reduction, accessibility and convenience/usability. it has a similar proposition to b2b, where customers essentially buy “peace of mind”, but with more con­ venience as the service runs on a personal device and is considered “device­agnostic”. it also reduces costs for the customer, as there is no need to install the equip­ ment or to run updates. there is no “downtime risk” as the service is hosted in the cloud – the top 10 cloud services have downtime of less than 99.86% (gagnaire et al., 2012). convenience is assured by unobtrusive telemonitoring, via third party devices, and seamless connection via a backend, over mobile internet. this value proposition allows accessibility to a first­class healthcare service, which is assured even in the areas where such medical service was previously unheard of. according to the international telecommunication union (2014) there are almost 3 billion internet users, two­thirds of them in the developing world, and the number of mobile­broadband subscriptions reached 2.3 billion globally. smartphones and mobile internet are prerequisites for enjoying 24/7 coverage and medi­ cal service via the b2c telemonitoring model. with accessibility comes scalability, a necessary but not suf­ ficient condition. channels channels are crucial in reaching a designated customer segment. osterwalder and pigneur (2010) distinguish between direct channels (e.g. sales force, web sales) and indirect channels (e.g. own stores, partner stores, whole­ saler), as well as between owned channels and partner channels. finding the right mix is important for success­ fully bringing the value proposition to the market. the focus of the b2c model lies on locking­in the cus­ tomers with a superb value proposition, by establishing a relationship with the personal health coach (i.e. tel­ ehealth nurse) rather than on owning the channels for marketing or distribution. the b2c model in telemoni­ toring should rely on distribution of the app/service via the established (app)stores, while the communication with patients should be executed in a secure and con­ trolled manner via telecom operators (deutsche tele­ kom, 2015; frost & sullivan, 2015). this is a departure from the historical channel for telemonitoring, i.e. hospitals. several factors that hamper wider deployment of telemonitoring if exe­ cuted within the hospital setting, i.e. lack of funding, motivation and cooperation between the hospital and the gp (willemse et al., 2014), can be eradicated by new ways of healthcare delivery. b2c utilizes new channels and customer relationships in order to raise awareness of and extend the reach of telemonitoring. customer relationships osterwalder and pigneur (2010) distinguish between several categories of customer relationships, which may coexist in a provider’s relationship with a particu­ lar customer segment: personal assistance, dedicated personal assistance, self­service, automated services, communities, and/or co­creation. chf patients can establish three types of relationships via the b2c model: dedicated, automated and com­ munity­based, depending on the choice of the service model, premium monitoring service or freemium well­ ness service. patients who pay, or are sponsored to enroll in the telemonitoring service, can receive dedicated personal assistance from a telehealth nurse (i.e. bimonthly calls and check­ups). suter et al. (2011) find that “during journal of business models (2018), vol. 6, no. 3, pp. 106-129 114 ... assessment calls, telehealth nurses often provide education regarding cause and effect relationships between personal health behaviors and obtained physiological results, serving to reinforce prior teaching regarding disease self­monitoring and self­manage­ ment” (p. 87),  thus unequivocally supporting the cru­ cial role played by telehealth nurses in telemonitoring. patients/customers who download the app for free, and are on the wellness track can have automated ser­ vices (e.g. education, games, and reminders). both seg­ ments should enjoy communities, i.e. online forums for exchange of experiences and information in a similar fashion to patientslikeme (wicks et al., 2010). revenue streams revenue streams represent the cash a company gene­ rates for each customer segment (osterwalder and pigneur, 2010). we believe that the strongest moti­ vation for patients with chronic diseases, the value proposition one is willing to pay for, is “peace of mind” – knowing that someone is looking after you at all times. bradford et al. (2005) investigated the willingness to pay for telemedicine and found that 30­50% of hyper­ tensive patients are willing to pay at least $20 per month, while for the chf patient this number was even higher. qureshi et al. (2006) found that “the majority of those choosing telemedicine (95%) were also willing to pay a median of $25 (5 to 500 dollars) out of pocket”, while seto (2008) found that 55% of heart failure patients were willing to pay $20, and 19% were willing to pay $40. in a more recent poll of 2019 customers, the result showed that the majority (62%) thinks that a telehealth visit should cost less than an in­person visit, which currently costs $82 for first­time patients (american well, 2015). these payments can be a part of two different types of revenue streams: transactional revenues, i.e. one­off payments, and/or recurring revenues. the b2c approach for telemonitoring chronic diseases revolves around subscription. the app/service can be free for the wellness track (freemium service with vi deos, education, and tracking of disease progression) and subscription based for the monitoring track (pre­ mium service consisting of telemonitoring, coaching, contact with telehealth nurses, and coordination of care). key resources resources allow an enterprise to create and offer a value proposition, reach markets, maintain relation­ ships with customer segments, and earn revenues (osterwalder and pigneur, 2010). key resources in this venture are physical (telemonitoring center), finan­ cial (initial investment in the venture), intellectual (ip and algorithms) and human (telehealth nurses). we will explore the crucial two, without which it would be impossible to extend the b2b model towards b2c. tele­ health centers are a new organization of healthcare ser­ vices for the digital age, ready to handle the complexity of the care­coordination process in tele monitoring, while telehealth nurses are specially trained providers of those services. telehealth nurses telehealth nurses are seen as “health­quarterbacks” in charge of organizing and implementing care protocols for chronic/multimorbid patients (monroe, 2014). their role is in care­coordination between the patient, the physician, the pharmacist, and the informal caregiver. it should be noted that a proper relationship between the patient and the telehealth nurse should be estab­ lished and maintained, to prevent confusion for the patient about who is in charge of their wellbeing in the complexity of healthcare (span, 2015). effective chronic care management is based on interaction between the healthcare professionals and the patient’s social sup­ port network (klasnja and pratt, 2012). the patient allows and introduces one or more informal caregivers into the care­coordination chain, while the telehealth nurse manages the stakeholders. this is all possible with the current state of technology. the telehealth nurse provides a personalized care to patients enrolled in the telemonitoring service. on ave­ rage, he/she contacts the patient every two weeks, for a 10­minute check­up. this is adequate time for a quick conversation, as patients usually get only 10­15 minutes with their physician once every three months (kaplan et al., 1995; oxtoby, 2010). this allows one nurse to moni­ tor and communicate with approximately 50 patients a day, or a maximum of 500 patients per month (with one monthly contact one nurse would be able to monitor almost 1000 patients). this is somewhat similar to the existing telemonitoring service in hull, uk, where one telemonitoring nurse oversees 200­400 chf patients journal of business models (2018), vol. 6, no. 3, pp. 106-129 115 (anon, 2014b). telehealth nurses could be trained in order to reach the efficiency level needed to maintain the cost­effectiveness of the b2c model. telemonitoring center the b2c model introduces another entity to healthcare – a telemonitoring center – in order to provide 24/7 digital monitoring on smartphones (or a mobile device of the user’s choice). the telemonitoring center is a physical entity that hosts telehealth nurses and the equipment, and performs two functions: telemonitoring and com­ munication with patients. the monitoring part is auto­ matic/algorithmic and runs in the background, while the communication between the telehealth nurse, the patient and the care team occurs during working hours. the monitoring service proposed here should persona­ lize the experience for each patient. for patients that have an older set of measuring devices (e.g. weight scale, blood pressure cuff, ecg recorder, pulse oxime­ ter) the measurements should be entered into the app manually. this is usually tedious and error prone, but with the new automated equipment that connects via telephone or internet the transfer of the mea­ surements is automatic and unobtrusive (chaudhry et al., 2007). the b2c model is device­agnostic as not to restrict the telemonitoring service to device manufac­ turer silos, and because peripheral measuring devices might soon be commoditized (c.f., iivari et al., 2016). the communication system can be built on top of va rious unifying communication platforms, which allow for video calls, voice calls, instant messaging and presence (winters and hanna, 2012). this can be supplemented with email and an sms/mms service for sending pic­ tures and educational materials. the health insurance portability and accountability act of 1996 (us) demands that telemonitoring networks take precautions in order to prevent third parties from intercepting health­related data (pecina et al., 2011). there are many existing sys­ tems which are hipaa compliant (i.e. full support of privacy issues) and can be readily deployed around the globe to ensure secure communication with patients. key activities key activities are required in order to create and offer a value proposition, to reach markets, maintain customer relationships, and earn revenues (osterwalder and pigneur, 2010). key activities can be categorized into: production, problem solving and platform/network. the monitoring service can reuse the design, algo­ rithms and functions of the established b2b tele­ monitoring platforms (i.e. physical systems) but adapt them to the b2c context (i.e. cloud services), in order to achieve scale and reach. this represents a departure from a product­oriented to a service­oriented approach. by introducing electronic distributors/promotors into healthcare delivery, the problem of population­wide healthcare coverage for chronic/multimorbid patients can be solved at regional, community, and individual levels (kahn et al., 2010). recently one of the major insurers in the us, unitedhealth, widened telehealth coverage to millions of americans, finally removing one of the last obstacles to scale (forbes, 2015). evolving the b2b model to seize this opportunity means introducing a new “platform” into healthcare (i.e. the telemonitoring center) that performs key activities: 24/7 unobtrusive telemonitoring of patients with chronic diseases (chf in this case), bidirectional communication with patients, and care coordination by telehealth nurses. key partnerships the key partnerships describe the network of sup­ pliers and partners that make the business model work (osterwalder and pigneur, 2010). in order to take telemonitoring out of the hospital setting and into the telemonitoring center where customers can purchase a telemonitoring solution on their own, there needs to be governance and awareness, in addition to providers of healthcare and equipment manufacturers (figure 2). governments aim to improve the performance of their healthcare systems (smith et al., 2001) and rely on hospitals and national licensing authorities to provide services and to regulate the healthcare market. out of 58 counties in the world that currently have universal healthcare coverage (stuckler et al., 2010) there are developed countries where the government is the payer and the regulator (e.g. canada where the government pays for 70% of healthcare expenses) and countries where these roles are separated (e.g. the netherlands). governance, consisting of payers and regulators, is one of the four pillars that “hold” the b2c model. journal of business models (2018), vol. 6, no. 3, pp. 106-129 116 people are usually made aware of the existence and availability of the telemonitoring service by physicians or public health authorities, but here we are advocat­ ing a new route – informing customers directly via mass media. targeted mass media campaigns are often used to inform patients about specific health issues or to pro­ mote desired behavior – for instance, to increase the uptake of screening, vaccination or healthy nutrition (coulter and ellins, 2007), but rarely to inform these peo­ ple about the availability of certain healthcare services in a jurisdiction. the extension of the b2b model towards b2c mainly involves the introduction of mass media, as a new type of channel for delivering healthcare services. media, consisting of distributors and promotors, repre­ sents another important pillar of the b2c model. regarding partenrships, the new business model can create the strategic alliance between non­competitors – payer/regulator and distributor/promotor – working together to raise awareness and improve the manage­ ment of chronic diseases in their jurisdiction. it also can create a buyer­supplier relationship between healthcare provider and payer/regulator, as public bodies might want to procure telemonitoring for certain groups of citizens. on the other end, a joint venture between equipment manufacturer and distributor/promotor can be expected as the b2c model relies heavily on infor­ ming the customers/patients about the availability of the service in their jurisdiction. finally, cooperation – a strategic partnership between competitors – can be established between equipment manufacturer and healthcare provider as they both compete for the same customer/patient in the b2c model. with the introduction of the b2c model for telemoni­ toring chronic or multimorbid patients a new way of delivering healthcare services will be achieved. chronic patients will be “shared” between home telemonito­ ring (remote management) and traditional in­hospital services, while today accountable care organizations are trying to introduce nurse telephone support and tele monitoring in an attempt to avoid readmission penalties (burke et al., 2013). this will take place as a symbiosis between the four sectors: healthcare, indus­ try, government and media. figure 2 depicts the four building­blocks of the b2c model and their relationship figure 2: key partnerships in b2c telemonitoring of patients with chronic diseases in a healthcare system where government is the payer and the regulator journal of business models (2018), vol. 6, no. 3, pp. 106-129 117 with one another in a healthcare system where the payer and the regulator are the same body, i.e. the government. cost structure costing is particularly important in delivering this value proposition to chronic or multimorbid patients. creating and delivering value, maintaining customer relation­ ships, and generating revenue all incur costs (oster­ walder and pigneur, 2010). the costs can be fixed or variable, and the business can be cost­driven or value­ driven. we believe b2c telemonitoring is value driven because it focuses on value creation for chronic or mul­ timorbid patients, i.e. 24/7 unobtrusive monitoring, peace of mind, coordination of care, creation of com­ munities, education, and help with self­management. discussion the extension of the b2b business model into the b2c model for telemonitoring chf presented here proposes a synergy between equipment manufacturers, health­ care providers, payers and regulators, distributors and promotors in order to achieve population­wide telemoni­ toring. it calls for the establishment of a telemonitoring center in an out­of­hospital setting, staffed by telehealth nurses, for reasons of effectiveness and efficacy. in this way telemonitoring can enable care to be provided in vari­ ous settings (e.g. home, work, on the move), instead of ha ving patients seek care in hospitals and care organiza­ tions. the b2c model connects the business side with the consumer side of telemedicine, as shown in figure 2. it is our belief that extending the b2b model toward the b2c will increase the speed and scale of adoption of this tech­ nology in chronic disease management. we presented our analysis in the business model can­ vas by osterwalder and pigneur (2010) because of the methodological strength it embodies – a media­ tion between the idea and the customer (coes, 2014). the advantage of the canvas is in recognizing the key importance of the value proposition to the end cus­ tomer of the b2c model – the patient. the limitation is in absence of a strategy portrait, and the relationship of the business model with a possible strategy. teece (2010) theorized that the two are connected, where strategy follows business modelling. thus, we tried to present possible strategic partnerships in figure 2. coye et al. (2009) compiled an overview of the early business models for chronic disease management, finding that “all of the previous operations” were b2b and have proven unsuccessful in bringing telemonitor­ ing to the masses. in these organizations the patients, i.e. the consumers, were not able to procure the ser­ vice on their own. evidently, in the beginning scalabi­ lity, generalizability and transferability were trumped by implementation problems. as with most products and services in healthcare, the b2b model is designed with a primary focus on provi­ ders. however, the b2c model breaks away from the traditional consideration of providers as key buyers and shifts the attention to patients themselves, recogni­ zing their vital need for convenience, accessibility, and customized education. the b2c model capitalizes on the proliferation of smartphone devices, tablets and the rapid rise of the internet, and offers the solutions directly to patients, while breaking down the barriers created by intermediate functions. the b2c model bears similarities to the blue ocean strategy approach. challenging an industry’s conven­ tional wisdom about which buyer group to target can lead to value innovation  – i.e. the creation of innova­ tive value to unlock new demand (kim and mauborgne, 2005). according to kim and mauborgne (2005) one approach to create a new uncontested market and sat­ isfy demand from a previously overlooked set of bu yers is to look across buyer groups. since the b2c model shifts the perception in terms of the primary buyer group from providers to patients, and offers the latter group additional critical products/service attributes that unlock value, it bears many similarities to a blue ocean strategy. however, the concept of value is not without problem in healthcare. welfare economists still follow an influential concept by hersany (1982, p. 55) that “in deciding what is good and what is bad for a given individual, the ulti­ mate criterion can only be his own wants and his own prefe rences.” in healthcare value is not expressed only as a personal preference for an outcome, but more typi­ cally as a “triple aim” (berwick et al., 2008): health gain, improving patient’s satisfaction with care, and/or redu­ cing per capita cost of care. the b2c model would most journal of business models (2018), vol. 6, no. 3, pp. 106-129 118 likely not improve health, but deliver on other two types of value. the b2c approach might also solve the transferability and generalizability issues in telemonitoring, explored in the model for assessment of telemedicine (kidholm et al., 2010), by controlling for differences in demogra­ phy and disease (telemonitoring works in the same way for different age and disease­severity groups), avail­ ability of healthcare resources (telemonitoring is avail­ able in a whole jurisdiction, irrespective of geography), variation in clinical practice (telemonitoring introduces the same standards of care), alignment of incentives to healthcare professionals and institutions (telemonito­ ring centers are outside the hospital setting), unifor­ mity of costs and prices (the fee for a telemonitoring service is the same for everyone). three key characteristics of a good business model are alignment, self­reinforcement, and robustness (casadesus­masanell and ricart, 2011). the b2c model in telemonitoring of patients with chf is aligned with the goals of all four stakeholders and represents a middle ground between the business needs and the consumer needs. it is self­reinforcing because allowing patients to procure a telemonitoring service at their own request will help achieve the “triple aim” in healthcare (berwick et al., 2008) by improving the patient’s experience of care, improving the health of populations and reducing the per capita cost of care. it will increase revenues and innovation in industry, help governments to fight chronic diseases while controlling the budget, and allow media to educate and lock­in customers. this business model can sustain its effectiveness over a long period by fending off the threats of imitation, as it is difficult to replicate the established telemonitoring center in a jurisdiction, and holdup, as customers can­ not exercise their bargaining power due to the inter­ play of stakeholders. in addition, it helps to avoid slack, as organizational complacency is not to be expected, and substitution, as new products can reduce the cus­ tomer’s perceived value of this service, but the stake­ holders themselves can and should come up with new services (casadesus­masanell and ricart, 2011). our analysis is not without flaws or potential bias. we assessed theoretical strengths, the potential usefulness and the success of extending the b2b model in telemonitoring of chronic diseases. we based our analysis on the convenience sample of published arti­ cles (given, 2008). potential weaknesses of the b2c model still remain to be identified. as we are not aware of similar studies or business models, convergence va lidation has not been assessed (reis and judd, 2000). future research should provide an in­depth assess­ ment of the business model described, and a financial analysis of a fictitious venture that runs on the model presented here. business modeling, like economic evaluation, should indeed be iterative and maximize the efficiency of r&d in health technology assessment (sculpher et al., 1997). there needs to be, in a similar fashion to early health technology assessment (ijz­ erman and steuten, 2011), an “early business model assessment”. the telemonitoring domain is increasingly being democratized and the proliferation of health gadgets will bring a myriad of new telemonitoring apps and ser­ vices. the (who global observatory for ehealth, 2011) ascertains that “mhealth can revolutionize health out­ comes, providing virtually anyone with a mobile phone with medical expertise and knowledge in real­time” (p. 17). we recommend that decision makers, industry leaders, healthcare professionals, media moguls and patients consider new modalities of healthcare delivery via technology, at a distance. conclusion telemonitoring is nowadays ubiquitous and cheap, mainly due to the penetration of mobile devices, but the established business models are restricting the speed and scale of the adoption of telemonitoring. we looked into the evolution of the provider-oriented approach (b2b) into a service-oriented approach (b2c). the cornerstone of the strategy is the value innovation, i.e. the strategic move that creates value for the mar­ ket, while simultaneously reducing or eliminating fea­ tures or services that are less valued by the current or future market. the market for the b2b telemonitoring consists of hospitals, while in the b2c model it consists of patients themselves. journal of business models (2018), vol. 6, no. 3, pp. 106-129 119 in this paper we presented the extended model – b2c – for the telemonitoring of chronic heart failure, which takes into account the healthcare continuum and sup­ ports patients’ health and well­being at home and on the move. this is achieved by taking the telemonito­ ring service out of the hospital setting and into a new entity – the telemonitoring center – and by introdu cing a fourth pillar to the existing b2b model – distributors and/or promotors. hence, the patient becomes the customer of the telemonitoring service and the b2c model is born. with this maneuver a difference is to be expected in the speed and scale of implementation of telemonitoring for chronic/multimorbid patients. we believe that the b2c model, in combination with b2b, is key to population­wide telemonitoring in the 21st century. journal of business models (2018), vol. 6, no. 3, pp. 106-129 120 references aaker, d. a. (1991) managing brand equity, new york : toronto : new york, free press. acheampong, f. and vimarlund, v. (2014) business models for telemedicine services: a literature review, health systems, [online] available at: http://www.palgrave­journals.com/hs/journal/vaop/ncurrent/full/hs201420a.html (accessed 27 april 2017). ahokangas, p. & myllykoski j. (2014). the practice of creating and transforming a business model. journal of business models (2014), 2(1), pp. 6­18. american well (2015) american well® 2015 telehealth survey: 64% of consumers would see a doctor via video, american well, [online] available at: https://www.americanwell.com/press­release/american­well­2015­tele­ health­survey­64­of­consumers­would­see­a­doctor­via­video/ (accessed 27 april 2017). anon (2014a) business model canvas, business model foundry ag, [online] available at: http://www. businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf (accessed 27 april 2017). anon (2014b) city health care partnership, [online] available at: http://www.chcpcic.org.uk/ (accessed 27 april 2017). antoniotti, n. m., drude, k. p. and rowe, n. (2014) private payer telehealth reimbursement in the united states, telemedicine and e-health, 20(6), pp. 539–543. asian development bank (2009) the five whys technique, asian development bank, [online] available at: http:// www.adb.org/publications/five­whys­technique (accessed 27 april 2017). barnett, k., mercer, s. w., norbury, m., watt, g., wyke, s. and guthrie, b. (2012) epidemiology of multimorbidity and implications for health care, research, and medical education: a cross­sectional study, the lancet, 380(9836), pp. 37–43. baron, r. j. and cassel, c. k. (2008) 21st­century primary care: new physician roles need new payment models, jama, 299(13), pp. 1595–1597. berwick, d. m., nolan, t. w. and whittington, j. (2008) the triple aim: care, health, and cost, health affairs, 27(3), pp. 759–769. blum, k. and gottlieb, s. s. (2014) the effect of a randomized trial of home telemonitoring on medical costs, 30­day readmissions, mortality, and health­related quality of life in a cohort of community­dwelling heart fail­ ure patients, journal of cardiac failure, 20(7), pp. 513–521. bodenheimer, t. (2008) coordinating care­a perilous journey through the health care system, new england journal of medicine, 358(10), p. 1064. bodenheimer, t. (2005) high and rising health care costs. part 1: seeking an explanation, annals of internal medicine, 142(10), pp. 847–854. botha, j., bothma, c. h. and geldenhuys, p. (2008) managing e-commerce in business, juta and company ltd. boult, c., kane r.l., pacala j.t. and wagner e.h. (1999) innovative healthcare for chronically ill older persons: results of a national survey, the american journal of managed care, 5(9), pp. 1162–1172. journal of business models (2018), vol. 6, no. 3, pp. 106-129 121 bradford, w. d., kleit, a., krousel­wood, m. a. and re, r. m. (2005) comparing willingness to pay for telemedicine across a chronic heart failure and hypertension population, telemedicine journal & e-health, 11(4), pp. 430–438. buntin, m. b., jain, s. h. and blumenthal, d. (2010) health information technology: laying the infrastructure for national health reform, health affairs, 29(6), pp. 1214–1219. burke, r. e., kripalani, s., vasilevskis, e. e. and schnipper, j. l. (2013) moving beyond readmission penalties: creating an ideal process to improve transitional care, journal of hospital medicine : an official publication of the society of hospital medicine, 8(2), pp. 102–109. cambridge university press (2015) mass market noun definition, [online] available at: http://dictionary.cambridge. org/dictionary/british/mass­market_1 (accessed 27 april 2017). casadesus­masanell, r. and ricart, j. e. (2011) how to design a winning business model, [online] available at: http://www.hbs.edu/faculty/pages/item.aspx?num=38951 (accessed 27 april 2017). chaudhry, s. i., barton, b., mattera, j., spertus, j. and krumholz, h. m. (2007) randomized trial of telemonitoring to improve heart failure outcomes (tele­hf): study design, journal of cardiac failure, 13(9), pp. 709–714. chaudhry, s. i., phillips, c. o., stewart, s. s., riegel, b., mattera, j. a., jerant, a. f. and krumholz, h. m. (2007) telem­ onitoring for patients with chronic heart failure: a systematic review, journal of cardiac failure, 13(1), pp. 56–62. clark, r. a., inglis, s. c., mcalister, f. a., cleland, j. g. f. and stewart, s. (2007) telemonitoring or structured tel­ ephone support programmes for patients with chronic heart failure: systematic review and meta­analysis, bmj (clinical research ed.), 334(7600), p. 942. cleland, j., swedberg, k., follath, f., komajda, m., cohen­solal, a., aguilar, j., dietz, r., gavazzi, a., hobbs, r., kore­ wicki, j., madeira, h., moiseyev, v., preda, i., van gilst, w. and widimsky, j. (2003) the euroheart failure survey pro­ gramme—a survey on the quality of care among patients with heart failure in europe part 1: patient characteristics and diagnosis, european heart journal, 24(5), pp. 442–463. coes, d.h. (2014) critically assessing the strengths and limitations of the business model canvas. available at: http:// essay.utwente.nl/64749/1/coes_ma_mb.pdf (accessed 27 april 2017). commission of the european communities (2008) communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions on telemedicine for the benefit of patients, healthcare systems and society, [online] available at: http://eur­lex.europa.eu/legal­content/ en/txt/pdf/?uri=celex:52008dc0689&from=en. coulter, a. and ellins, j. (2007) effectiveness of strategies for informing, educating, and involving patients, bmj: british medical journal, 335(7609), p. 24. coye, m. j., haselkorn, a. and demello, s. (2009) remote patient management: technology­enabled innovation and evolving business models for chronic disease care, health affairs, 28(1), pp. 126–135. deutsche telekom (2015) deutsche telekom: telemonitoring for the chronically ill, [online] available at: https:// www.telekom.com/innovation/80576 (accessed 19 may 2015). journal of business models (2018), vol. 6, no. 3, pp. 106-129 122 dijkstra, s. j., jurriëns, j. a. and mei, r. d. van der (2006) a business model for telemonitoring services, in [online] available at: http://proceedings.utwente.nl/145/ (accessed 27 april 2017). ditewig, j. b., blok, h., havers, j. and van veenendaal, h. (2010) effectiveness of self­management interventions on mortality, hospital readmissions, chronic heart failure hospitalization rate and quality of life in patients with chronic heart failure: a systematic review, patient education and counseling, changing patient education, 78(3), pp. 297–315. dolgin, m. (1994) nomenclature and criteria for diagnosis of diseases of the heart and great vessels, little, brown. dorsey e., venkataraman v., grana m.j., bull m.t., george b.p., boyd c.m., beck c.a., rajan b., seidmann a. and biglan k.m. (2013) randomized controlled clinical trial of “virtual house calls” for parkinson disease, jama neurology, 70(5), pp. 565–570.d’souza, a., wortmann, h., huitema, g. and velthuijsen, h. (2015), a business model design framework for viability; a business ecosystem approach. journal of business models 3(2), pp. 1­27. erhard, a., ortolani, g., bres­riemslag, e. de, wintermantel, t. and anscombe, j. (2013) building value­based healthcare business models, [online] available at: https://www.atkearney.com/paper/­/asset_publisher/dvx­ v4hz2h8bs/content/building­value­based­healthcare­business­models/10192 (accessed 27 april 2017). forbes (2015) unitedhealth widens telehealth coverage to millions of americans, forbes, [online] available at: http://www.forbes.com/sites/brucejapsen/2015/05/05/unitedhealth­widens­telehealth­coverage­to­millions­of­ americans/ (accessed 27 april 2017). frost & sullivan (2015) frost & sullivan lauds orange­weinmann’s co­development of an integrated telemoni­ toring solution for sleep apnea patients, frost & sullivan, [online] available at: http://ww2.frost.com/news/ press­releases/frost­sullivan­lauds­orange­weinmanns­co­development­integrated­telemonitoring­solution­ sleep­apnea­patients/ (accessed 27 april 2017). gagnaire, m., diaz, f., coti, c., cerin, c., shiozaki, k., xu, y., delort, p., smets, j.­p., le lous, j. and lubiarz, s. (2012) downtime statistics of current cloud solutions, international working group on cloud computing resiliency, pp. 176–189, [online] available at: http://iwgcr.org/wp­content/uploads/2012/06/iwgcr­paris.ranking­002­en.pdf (accessed 27 april 2017). given, l. (2008) the sage encyclopedia of qualitative research methods, 2455 teller road,  thousand oaks, cali­ fornia  91320, united states, sage publications, inc., [online] available at: http://knowledge.sagepub.com/view/ research/sage.xml (accessed 27 april 2017). gomes, j. and moqaddamerad, s. (2016). futures business models for an iot enabled healthcare sector:a causal layered analysis perspective.journal of business models 4(2), pp. 60­80. google (2013) our mobile planet, [online] available at: https://think.withgoogle.com/mobileplanet/en/graph /?country=id&country=my&country=nl&country=sg&country=uk&country=us&category=details&topic=q00&sta t=q00_1&wave=2013&age=all&gender=all&chart_type=&active=country (accessed 12 december 2016). griffioen, e. (2012) business model design for the healthcare sector: sustainable business model design for heart failure home telemonitoring opportunities in western europe, tu delft, delft university of technology, [online] avail­ able at: http://repository.tudelft.nl/view/ir/uuid:167949c6­aa52­4608­89dd­148a6f5025ab/ (accessed 27 april 2017). journal of business models (2018), vol. 6, no. 3, pp. 106-129 123 grustam, a. s., severens, j. l., van nijnatten, j., koymans, r. and vrijhoef, h. j. m. (2014) cost­effectiveness of telehealth interventions for chronic heart failure patients: a literature review, international journal of technology assessment in health care, 30(1), pp. 59–68. hanyu ni, nauman d., burgess d., wise k., crispell k. and hershberger r.e. (1999) factors influencing knowledge of and adherence to self­care among patients with heart failure, archives of internal medicine, 159(14), pp. 1613–1619. harsanyi, j. c. (1982) morality and the theory of rational behaviour, in sen, amartya; williams, bernard, utilitarianism and beyond, cambridge: cambridge university press, pp. 39–62. herzlinger, r., kindred, n. and mckinley, s. (2014) philips­visicu.pdf, harvard business publishing, [online] available at: https://cb.hbsp.harvard.edu/cbmp/product/313015­pdf­eng. hesselink, g., zegers, m., vernooij­dassen, m., barach, p., kalkman, c., flink, m., ön, g., olsson, m., bergenbrant, s., orrego, c., suñol, r., toccafondi, g., venneri, f., dudzik­urbaniak, e., kutryba, b., schoonhoven, l. and wollersheim, h. (2014) improving patient discharge and reducing hospital readmissions by using intervention mapping, bmc health services research, 14(1), p. 389. hrsa (2015) what are the reimbursement issues for telehealth? [online] available at: http://www.hrsa.gov/heal­ thit/toolbox/ruralhealthittoolbox/telehealth/whatarethereimbursement.html (accessed 26 october 2016). iivari, m., ahokangas, p., komi, p., tihinen, m. & valtanen, k. (2016). toward ecosystemic business models in the context of industrial internet. journal of business models, 4(2), pp. 42­59. ijzerman, m. j. and steuten, l. m. g. (2011) early assessment of medical technologies to inform product develop­ ment and market access: a review of methods and applications, applied health economics and health policy, 9(5), pp. 331–347. inglis, s. (2010) structured telephone support or telemonitoring programmes for patients with chronic heart failure, journal of evidence-based medicine, 3(4), pp. 228–228. international telecommunication union (2014) itu releases 2014 ict figures, [online] available at: http://www.itu. int/net/pressoffice/press_releases/2014/23.aspx#.vl6dmivf9yw. jin, b.­h. and li, y.­m. (2012) analysis of emerging technology adoption for the digital content market, information technology and management, 13(3), pp. 149–165. joseph, v., west, r. m., shickle, d., keen, j. and clamp, s. (2011) key challenges in the development and implementa­ tion of telehealth projects, journal of telemedicine and telecare, 17(2), pp. 71–77. kahn, j. g., yang, j. s. and kahn, j. s. (2010) ‘mobile’ health needs and opportunities in developing countries, health affairs, 29(2), pp. 252–258. kaplan, s. h., gandek, b., greenfield, s., rogers, w. and ware, j. e. (1995) patient and visit characteristics related to physicians’ participatory decision­making style. results from the medical outcomes study, medical care, 33(12), pp. 1176–1187. kathy oxtoby (2010) consultation times, bmj careers, [online] available at: http://careers.bmj.com/careers/advice/ view­article.html?id=20001044# (accessed 27 april 2017). journal of business models (2018), vol. 6, no. 3, pp. 106-129 124 kidholm, k., bowes, a., dyrehauge, s., ekeland, a. g., flottorp, s. a. and kvistgaard, l. (2010) the mast man­ ual, mast­model for assessment of telemedicine, epractice editorial team (european dynamics sa) | bel­ gium, [online] available at: http://www.epractice.eu/files/the%20model%20for%20assessment%20of%20 telemedicine%20(mast)%20manual.pdf. (accessed 28 march 2017). kim, w. c. and mauborgne, r. (2005) blue ocean strategy: how to create uncontested market space and make competition irrelevant, harvard business press. kipling, r. (2013) just so stories, interactive media. klasnja, p. and pratt, w. (2012) healthcare in the pocket: mapping the space of mobile­phone health interventions, journal of biomedical informatics, 45(1), pp. 184–198. klersy, c., de silvestri, a., gabutti, g., raisaro, a., curti, m., regoli, f. and auricchio, a. (2011) economic impact of remote patient monitoring: an integrated economic model derived from a meta­analysis of randomized controlled trials in heart failure, european journal of heart failure, 13(4), pp. 450–459. krum, h., tonkin, a., zimmet, h., piterman, l. and yallop, j. (2005) chronic heart failure: optimising care in gen­ eral practice, [online] available at: http://search.informit.com.au/documentsummary;dn=367877419354797;res=ie lhea (accessed 27 april 2017). krumholz, h. m., amatruda, j., smith, g. l., mattera, j. a., roumanis, s. a., radford, m. j., crombie, p. and vaccarino, v. (2002) randomized trial of an education and support intervention to prevent readmission of patients with heart failure, journal of the american college of cardiology, 39(1), pp. 83–89. krumholz, h. m., merrill, a. r., schone, e. m., schreiner, g. c., chen, j., bradley, e. h., wang, y., wang, y., lin, z., straube, b. m., rapp, m. t., normand, s.­l. t. and drye, e. e. (2009) patterns of hospital performance in acute myocardial infarction and heart failure 30­day mortality and readmission, circulation: cardiovascular quality and outcomes, 2(5), pp. 407–413. lee, r., mason, a. and cotlear, d. (2010) some economic consequences of global aging: a discussion note for the world bank, [online] available at: https://www.wdronline.worldbank.org/handle/10986/13603 (accessed 27 april 2017). leijdekkers, p. and gay, v. (2008) a self­test to detect a heart attack using a mobile phone and wearable sensors, in computer-based medical systems, 2008. cbms’08. 21st ieee international symposium on, ieee, pp. 93–98, [online] available at: http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=4561963 (accessed 27 april 2017). levy, d., kenchaiah, s., larson, m. g., benjamin, e. j., kupka, m. j., ho, k. k. l., murabito, j. m. and vasan, r. s. (2002) long­term trends in the incidence of and survival with heart failure, new england journal of medicine, 347(18), pp. 1397–1402. louis, a. a., turner, t., gretton, m., baksh, a. and cleland, j. g. f. (2003) a systematic review of telemonitoring for the management of heart failure, european journal of heart failure, 5(5), pp. 583–590. lupton, d. (2012) m­health and health promotion: the digital cyborg and surveillance society, social theory & health, 10(3), pp. 229–244. maric, b., kaan, a., ignaszewski, a. and lear, s. a. (2009) a systematic review of telemonitoring technologies in heart failure, european journal of heart failure, 11(5), pp. 506–517. journal of business models (2018), vol. 6, no. 3, pp. 106-129 125 mathers, c. d. and loncar, d. (2006) projections of global mortality and burden of disease from 2002 to 2030, plos med, 3(11), p. e442. mayring, p. (2000) qualitative content analysis, forum qualitative sozialforschung / forum: qualitative social research, 1(2), [online] available at: http://www.qualitative­research.net/index.php/fqs/article/view/1089 (accessed 27 april 2017). minvielle, e., waelli, m., sicotte, c. and kimberly, j. r. (2014) managing customization in health care: a framework derived from the services sector literature, health policy, 117(2), pp. 216–227. monroe, j. (2014) five lessons from the super bowl for improving population health, [online] available at: http://iom.edu/global/perspectives/2014/~/media/files/perspectives­files/2014/discussion­papers/bph­ fivelessonspophealth.pdf (accessed 14 november 2014). murray, c. j. and lopez, a. d. (1997) alternative projections of mortality and disability by cause 1990–2020: global burden of disease study, the lancet, 349(9064), pp. 1498–1504. oostrom, s. h. van, picavet, h. s. j., bruin, s. r. de, stirbu, i., korevaar, j. c., schellevis, f. g. and baan, c. a. (2014) multimorbidity of chronic diseases and health care utilization in general practice, bmc family practice, 15(1), p. 61. ornstein, s. m., nietert, p. j., jenkins, r. g. and litvin, c. b. (2013) the prevalence of chronic diseases and multimor­ bidity in primary care practice: a pprnet report, the journal of the american board of family medicine, 26(5), pp. 518–524. osterwalder, a. and pigneur, y. (2010) business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons. paré, g., jaana, m. and sicotte, c. (2007) systematic review of home telemonitoring for chronic diseases: the evi­ dence base, journal of the american medical informatics association : jamia, 14(3), pp. 269–277. pecina, j. l., takahashi, p. y. and hanson, g. j. (2011) current status of home telemonitoring for older patients: a brief review for healthcare providers, clinical geriatrics, 19(3), pp. 31–34. porter, m. e. (2009) a strategy for health care reform — toward a value­based system, new england journal of medicine, 361(2), pp. 109–112. qureshi, a. a., brandling­bennett, h. a., wittenberg, e., chen, s. c., sober, a. j. and kvedar, j. c. (2006) willingness­ to­pay stated preferences for telemedicine versus in­person visits in patients with a history of psoriasis or mela­ noma, telemedicine and e-health, 12(6), pp. 639–643. regalado, a. (2015) exclusive: apple pursues dna data, mit technology review, [online] available at: http://www. technologyreview.com/news/537081/apple­has­plans­for­your­dna/ (accessed 27 april 2017). reis, h. t. and judd, c. m. (2000) handbook of research methods in social and personality psychology, cambridge university press. remme, w. j. (2000) overview of the relationship between ischemia and congestive heart failure, clinical cardiology, 23(s4), p. iv­4. journal of business models (2018), vol. 6, no. 3, pp. 106-129 126 sanders, c., rogers, a., bowen, r., bower, p., hirani, s., cartwright, m., fitzpatrick, r., knapp, m., barlow, j., hendy, j., chrysanthaki, t., bardsley, m. and newman, s. p. (2012) exploring barriers to participation and adoption of telehealth and telecare within the whole system demonstrator trial: a qualitative study, bmc health services research, 12(1), p. 220. sanghavi, d., george, m., bencic, s., bleiberg, s., alawa, n., shaljian, m. and mcclellan, m. b. (2014) treating conges­ tive heart failure and the role of payment reform, the brookings institution, [online] available at: http://www. brookings.edu/research/papers/2014/05/21­congestive­heart­failure­hospital­aco­case­study (accessed 27 april 2017). schug, s. (2014) widespread deployment of telemedicine services in europe, [online] available at: http://ec.europa. eu/information_society/newsroom/cf/dae/document.cfm?doc_id=5167. sculpher, m., drummond, m. and buxton, m. (1997) the iterative use of economic evaluation as part of the process of health technology assessment, journal of health services research, 2(1), pp. 26–30. seto, e. (2008) cost comparison between telemonitoring and usual care of heart failure: a systematic review, telemedicine and e-health, 14(7), pp. 679–686. smith, e., brugha, r. and zwi, a. (2001) working with private sector providers for better health care, [online] available at: http://cdrwww.who.int/entity/management/partnerships/private/privatesectorguide.pdf (accessed 27 april 2017). span, p. (2015) the tangle of coordinated health care, the new york times, 13th april, [online] available at: http:// www.nytimes.com/2015/04/14/health/the­tangle­of­coordinated­health­care.html (accessed 27 april 2017). stuckler, d., feigl, a. b., basu, s. and mckee, m. (2010) the political economy of universal health coverage, in background paper for the global symposium on health systems research. geneva: world health organization, [online] available at: http://www.pacifichealthsummit.org/downloads/uhc/the%20political%20economy%20of%20uhc. pdf (accessed 27 april 2017). suter, p., suter, w. n. and johnston, d. (2011) theory­based telehealth and patient empowerment, population health management, 14(2), pp. 87–92. teece, d. j. (2010) business models, business strategy and innovation. long range planning 43.2, pp. 172­194. upatising, b., wood, d. l., kremers, w. k., christ, s. l., yih, y., hanson, g. j. and takahashi, p. y. (2015) cost compari­ son between home telemonitoring and usual care of older adults: a randomized trial (tele­era), telemedicine and e-health, 21(1), pp. 3–8. vollebregt, e. (2012) consequences of the eu ker­optika case for e­commerce in physical medical devices and apps for ehealth services, ejbi, 8(2), pp. 34–39. weinstein, r. s., lopez, a. m., joseph, b. a., erps, k. a., holcomb, m., barker, g. p. and krupinski, e. a. (2014) telemedicine, telehealth, and mobile health applications that work: opportunities and barriers, the american journal of medicine, 127(3), pp. 183–187. who (2011) global status report on noncommunicable diseases: 2010, geneva, world health organization. journal of business models (2018), vol. 6, no. 3, pp. 106-129 127 who global observatory for ehealth (2011) mhealth: new horizons for health through mobile technologies, geneva, world health organization. wicks, p., massagli, m., frost, j., brownstein, c., okun, s., vaughan, t., bradley, r. and heywood, j. (2010) sharing health data for better outcomes on patientslikeme, journal of medical internet research, 12(2), [online] available at: http://www.ncbi.nlm.nih.gov/pmc/articles/pmc2956230/ (accessed 27 april 2017). willemse, e., adriaenssens, j., dilles, t. and remmen, r. (2014) do telemonitoring projects of heart failure fit the chronic care model?, international journal of integrated care, 14, [online] available at: http://www.ncbi.nlm.nih.gov/ pmc/articles/pmc4109584/ (accessed 27 april 2017). williams, p. m. (2001) techniques for root cause analysis, proceedings (baylor university. medical center), 14(2), pp. 154–157. winters, n. and hanna, k. (2012) mastering microsoft lync server 2010, john wiley & sons. wootton, r. (2012) twenty years of telemedicine in chronic disease management­­an evidence synthesis, journal of telemedicine and telecare, 18(4), pp. 211–220. zhang, w., thurow, k. and stoll, r. (2014) a knowledge­based telemonitoring platform for application in remote healthcare, international journal of computers communications & control, 9(5), pp. 644–654. journal of business models (2018), vol. 6, no. 3, pp. 106-129 128 andrija grustam is a medical doctor, scientist and entrepreneur. he received his medical degree with hon­ ors from university of belgrade, serbia, while simultane­ ously working in the media industry. he was a cofounder of a start­up which was creating multimedia content for the national broadcasting service, internet and cell phone companies. he holds three m.sc. degrees: in pub­ lic health from maastricht university in the netherlands, in healthcare policy from l’école des hautes études en sciences sociales in paris, france, and in healthcare management from universitat autònoma de barcelona, in spain. during the research presented here andrija was working on business innovation in telehealth in philips research, and on health technology assessment of telemonitoring for chronic heart failure patients at the erasmus school of health policy & management, eras­ mus university rotterdam in the netherlands. andrija is currently pursuing a ph.d., and is working as a medical director for ehealth and patient care in the oldest phar­ maceutical company in the world, merck kgaa. bert vrijhoef is an international renowned expert in innovating care for people with chronic diseases and elders. main themes in his work are: care coordination, e­health, task shifting and teamwork, self­manage­ ment support, and the advancement of applied health services and policy research. he leads multiple scien­ tific studies at tilburg university, maastricht univer­ sity medical center, vrije universiteit brussel, national university singapore, and national university health system in singapore. he has been/is a partner in vari­ ous large­scaled, international research partnerships, including dismeval (2009­2011), project integrate (2013­2016), and scirocco (2016­2019). his scien­ tific work is translated in 200+ publications in (inter) national journals, book chapters and key­note lectures. bert is the editor­in­chief of the international journal of care coordination and member of the editorial board of ict & health. he holds a master­degree in health policy and management from erasmus university (1996) and a ph.d.­degree in medical sociology from maastricht uni­ versity (2002). bert has received various awards for his work, including the commonwealth fund’s harkness fellowship in health care policy and practice (2008/9). about the authors journal of business models (2018), vol. 6, no. 3, pp. 106-129 129 vasilis poulikidis holds a b.sc. in business adminis­ tration and management from athens university of economics and business, and a m.sc. in strategic man­ agement from the rotterdam school of management, erasmus university rotterdam in the netherlands. he was a research analyst intern at philips research in eindhoven and a finance analyst intern at amazon in luxembourg. he is currently working for deloitte, in strategy and operations consulting in athens office. his research and business interests lay in firm’s ambidexter­ ity, strategic and business planning, and impact analysis. ron koymans received his m.sc. degree in mathemat­ ics from utrecht university in 1982 and his ph.d. degree in computer science from eindhoven university of tech­ nology in 1989. an updated version of his ph.d. thesis has been published as a monograph in the springer lec­ ture notes in computer science series (volume 651) in 1992. since 1989 he has been an employee of philips, currently in the position of principal architect within philips research. his research interests are service and business model innovation, health economics, and pop­ ulation health. hans severens is a professor of evaluation in health care at the institute of medical technology assessment, eras­ mus university rotterdam in the netherlands. he holds a m.sc. policy and management in health sciences from maastricht university, and a ph.d. from radboud univer­ sity nijmegen, the netherlands. from 2001 until 2009 he was appointed as professor of medical technology assess­ ment at maastricht university and co­head of the depart­ ment of clinical epidemiology and medical technology assessment of the university hospital maastricht. hans’ work is focused on economic evaluations of health care technologies, either as a part of clinical trials or independ­ ent modelling studies. since 2008 hans is a full member of the dutch national health council (gezondheidsraad), and for over 7 years member of the committee farma­ ceutische hulp (cfh) of the health care insurance board (cvz), for drug reimbursement advice. he is a former member of the board of directors of the international society of pharmacoeconomics and outcomes research (ispor) and was co­editor of the scientific journal of this society (value in health) for 10 years. hans is the immedi­ ate future dean of the erasmus school of health policy & management in the netherlands. journal of business models (2018), vol. 6, no. 3, pp. 79-105 79 emerging revenue models for personal data platform operators: when individuals are in control of their data laura kemppainen 1, timo koivumäki 2, minna pikkarainen 3 and antti poikola 4 abstract purpose: this paper identifies emerging revenue models for personal data platform operators that facilitate the exchange of resources between an individual and a service provider for their mutual benefit. context of this study is human-centered personal data management, which refers to individuals being able to control the use and access of their personal data for third-party services. design: this research is conducted by analysing qualitative questionnaire data from 27 organizations from 12 different countries that are considered as forerunners in creating services in this context. findings: our study shows that personal data platform operators capture value with transaction-, service-, connectionand membership fees from service providers, data sources and individuals using the platform. this study also reveals two propositions as the foundation of revenue model creation in the context of human-centered personal data management, namely a no-advertising and free-for-users model. our research findings show that monetising personal data with advertising is avoided by personal data platform operators. research limitations/implications: this study calls for further research about how does providing control over personal data to individuals influence on business models of platform operators and other service providers in the market. practical implications: for practitioners, this research offers new insights on revenue models that are being developed by the forerunners of human-centered personal data management approach in the european market. originality/value: revenue models for personal data platform operators when taking a human-centered approach to personal data management. propositions to consider when creating revenue models in this context. please cite this paper as: kemppainen et al. (2018), emerging revenue models for personal data platform operators: when individuals are in control of their data, vol. 6, no. 3, pp. 79-105 keywords: revenue model, personal data, platform operator, value capture, human-centered personal data management, multi-sided market acknowledgements: this research has been supported by a grant from tekes the finnish funding agency for innovation as part of digital health revolution programme. the multi-disciplinary programme is coordinated and managed by center for health and technology, university of oulu, finland. we also want to thank the european commission for their valuable support in the data collection. 1 martti ahtisaari institute of global business and economics at the aacsb accredited oulu business school, finland 2 martti ahtisaari institute, university of oulu business school. 3 vtt technical research centre of finland and university of oulu / oulu business school, martti ahtisaari institute and faculty of medicine 4 aalto university. journal of business models (2018), vol. 6, no. 3, pp. 79-105 80 introduction the increasing use of online and mobile services has enabled large technology companies to collect tremendous and growing amount of personal data (rehman et al., 2016; gandomi and haider, 2015). many companies offering digital platform services base their business models mainly on offering individuals with free services and in return collect personal data on the platforms (weber, 2015; muzellec et al., 2015). in other words, platform revenue models are relatively business-to-business oriented and the end-users are, in fact, argued to be part of the value proposition for business customers such as advertisers (muzellec et al,. 2015). at the same time, discussion and concerns about data privacy (vescovi et al., 2015, spiekermann and novotny, 2015) and proper use of data (roeber et al., 2015) are increasing. moreover, individuals are becoming increasingly concerned about the limited interoperability that decreases value for them (kshetri, 2014). also, when data is being locked in databases (de montjoye et al., 2012) the opportunities for gaining a holistic view of the data collected and exploiting the data can be limited (vescovi et al., 2015). in this study, a term personal data platform operator refers to a digitally enabled service platform that facilitates the exchange of resources (lusch and nambisan 2015). this type of a platform is multi-sided in nature (evans, 2003; rochet and tirole, 2003; evans and schmalensee, 2007; pagani, 2013; tan et al., 2015) and has designed its business model around the approach of human-centered personal data management (see pentland, 2012; wang and wang, 2014; vescovi et al., 2015; poikola et al., 2015). human-centered personal data management refers to individuals being provided with the means to control their personal data, which is an approach that has the potential to benefit the whole market and enable new business models (gnesi et al., 2014; vescovi et al., 2015; poikola et al., 2015; papadopoulou et al., 2015). a settled view in the academia is that a revenue model is a crucial component of a company’s business model (see osterwalder and pigneur, 2002; shafer et al., 2005; schweiger et al., 2016). a revenue model can be described as a plan for ensuring revenue generation for a company (mahadevan, 2000) or an innovation in how a company generates value (giesen et al., 2007). it can also serve as a measurement of the ability of the company to translate value created to money for itself (osterwalder and pigneur, 2002) or both for the company itself and its partners (amit and zott, 2012). in this study, a revenue model is seen as one fee or a combination of fees for different stakeholders, which is a perspective suggested in prior research in the context of multi-sided markets (c.f. brunn et al. 2002, kafentzis et al. 2004). so far, the academic discussion related to massive data collection and utilization has been rather technological and industry-oriented to date. (shin, 2016). research has mainly focused on privacy perspectives of data use (spiekermann and novotny, 2015; zissis and lekkas, 2012; weber, 2015) or describing the phenomenon of human-centered design (vescovi et al., 2015), excluding some endeavours on platform revenue models in the context of open data in the field of information and communications technology (c.f. janssen and zuiderwijk 2014; ferro and osella 2013). however, there is a gap in our understanding on suitable revenue models in the context of human-centered personal data management. because a business model can become comprehensive as a concept only in a business context (ahokangas and myllykoski 2014), this research contributes to platform business model research in filling the gap in the chosen context from revenue model perspective. despite the lack of research in the context of humancentered personal data management, studies can be found on revenue models in other multi-sided markets like social networks or ‘internet business’ (c.f. lumpkin and dess 2004; enders et al. 2008). in this paper, a literature review was conducted by reviewing research in multi-sided markets to gain a base understanding of revenue models for personal data platform operators. in this study, we describe how a personal data platform operator captures value. in other words, how does a personal data platform operator gain monetary benefits in exchange of value through the variety of revenue models (richardson, 2008; van putten and schief, 2012). this leads to forming our research question: how does a personal data platform operator capture value with revenue models? journal of business models (2018), vol. 6, no. 3, pp. 79-105 81 in the following section, we give a background for this study by describing the concept of a business model, discuss human-centered personal data management and give a literature review on revenue models in multi-sided markets. we then describe the methodology and present the results of this research. lastly, the implication of human-centered personal data management in personal data platform operator’s revenue models is discussed. background concept of a business model because a business model describes how a company conducts its business, it can help in answering to questions who is the customer, what does the customer value and how to capture value i.e. make money in this business? (shafer et al., 2005). often a business model is a story that is told to customers and finally transforming the story to revenue (magretta, 2002). today, the rapidly changing business environment is continuously creating space for new business models to emerge in addition of reinvention of existing ones. (voelpel et al., 2004) the companies that continuously evolve their business models gain competitive advantage which is necessary to survive in the dynamic business environments. (wirtz, et al., 2010) as an example, technology (including the data usage) plays a significant role in many organizations, working as a baseline for the new business model generation (voelpel, 2004). concept of a business model has been the focus of many research over the past few years (shafer et al., 2005; voelpel, 2004) and although there have been attempts to define a business model (see zott et al., 2011) no agreed-on definition or concept exists today. in their broad review of the business model literature, zott, amit and massa (2011) found that business models are many times used in seeking to explain how value is created and captured. similarly, shafer et al. (2005) identify four main business model elements i.e. creating value, capturing value, strategic choices and value network, of which value creation and value capture have been identified as core activities under the strategic choices companies need to make. it becomes clear that in addition to having a strong value proposition to stakeholders, it is critical for a company to have a model that produces revenue to cover the costs and captures the value (richardson, 2008). based on schweiger et al.’s (2016) literature review of 27 articles on platform operators’ business model components, revenue model was one of the most agreed elements along with value creation and value proposition. however, many times companies still tend to focus merely on actions that increase value up to the extent that capturing the value is ignored. eventually, this would lead to being unable to generate revenue from the beneficiaries (shafer et al., 2005.) to add to the challenge, value capture must be operationalized in such a way that it does not have a negative impact on other indirect stakeholders (frow and payne, 2011). today, as a result of companies shifting from product-based towards service-based ideology, revenue model is more and more about finding new ways for generating recurring returns for the company instead of only selling a product or service (iivari et al., 2016). business model and human-centered personal data management studies show that individuals would generally be willing to share their personal data with companies if the benefits and terms were sufficient for them (roeber et al., 2015). around this idea, personal data platform operators that offer personal cloud services are emerging to help individual in managing and sharing their personal data (spiekermann and novotny, 2015; vescovi et al., 2015). as an answer to the growing interest of academia and business towards human-centered personal data management, new frameworks and principles (see vescovi et al., 2015; poikola et al., 2015) are being developed to enable individuals to gain control over their personal data. the vision is that personal data should be technically accessible and usable so that individuals could share their data with stakeholders in the ecosystem in return of value. for example, ‘mydata principles’ state that individuals should be empowered by giving control over data to them. (poikola et al., 2015) mydata is one approach for human-centered personal data management, which, in a long run, could enable new type of data availability and therefore opportunities for creating new business models (poikola et al., 2015) for platform operators (kemppainen et al., 2016) and in the field of preventive healthcare (koivumäki et al., 2017) as examples. the shift towards human-centered personal data management and the new market of data has also been journal of business models (2018), vol. 6, no. 3, pp. 79-105 82 supported by legal means with the european general data protection regulation (european commission, 2016) and the european payment services directive (european union, 2017) that set rules for better data portability between platforms and increase individuals’ rights to control their personal data. we see that a personal data platform operator is one concrete example of the new role and business model that address to this need. revenue models for platform operators multi-sided market is a new type of market structure that has enabled the emergence of new services and revenue models (pagani, 2013) like facebook, airbnb and ebay have shown us. possible revenue and cost models have been studied in e.g. wang et al., (2014). they state that in a multi-sided market, the cost and revenue can be generated from all sides of the market. however, many times one side is subsidized, which leads to identifying two distinct sides: a money side and a subsidy side, who use the platform for free or may purchase some additional features. in platform business, the subsidy side is often used in attracting the other side like service providers and advertisers to the platform who cover the costs of free users on the other side of the market. (wang et al., 2014.) for example, in the case of ebay, sellers pay for using the platform and the buyers don’t, at least not directly (pagani, 2013). when individuals are on the ‘money-side’, a platform operator may charge them for interacting with the platform, both from access and usage (beyeler et al., 2012, pp. 316–317). slightly differing from wang et al.’s (2014) findings, muzellec et al. (2015) found out that in the case of platform start-ups, the initial focus of them is to generate revenue from individuals. however, the need for monetization may eventually shift the focus on business customers as the business growths. in this case, possible revenue models can be freemium for businesses, advertising and affiliation (wang et al., 2014; muzellec et al., 2015), which means that vendor pays an affiliate fee each time a user clicks through affiliate’s website and makes a purchase from vendor (lumpkin and dess, 2004). multi-sided markets can be divided into non-transaction and transaction markets. (filistrucchi et al., 2014) in a non-transaction market, there are no monetary transactions between the platform users (interactions may still occur) and a platform operator can generate revenue from people joining the platform. in a transaction market, a platform may generate revenue from people joining the platform as well as people using it, by taking a share of the monetary transactions (filistrucchi et al., 2014). in a transaction model, a personal data platform operator may generate revenue by enabling or executing a transaction between the users, for example, by selling third party or user-generated content or facilitating transaction (enders et al., 2008). transaction fee may also be generated from service providers or individuals when the service provider sells virtual or concrete products to the individual via or on the platform (wang et al., 2014). value can be captured for example based on the volume of transactions conducted over the platform (laudon and traver, 2007). platform operators can also provide convenient and user-friendly access to content on their platform and generate revenue through advertising costs from advertisers, subscription and pay-per-use or provide a cost-efficient exchange place for buyers and sellers in return of direct sales revenues and indirect commissions in exchange of connecting the users (lumpkin and dess, 2004; wirtz et al., 2010). alternative strategy is to focus on context (like google) and help users to search for information by increasing transparency and reduce complexity and generate revenue mostly from online advertising. finally, connection-oriented platform operators enable users to exchange information over the internet. possible revenue streams could be online advertising, subscription, time-based billing and volume-based billing (wirtz et al., 2010), of which time-based billing is argued to be less and less used in the future (enders et al., 2008). in advertising and subscription based revenue models, the key revenue drivers are the number of users and their willingness to pay. in a transaction based model trust towards data handling is the key, which can be ensured with a high level of privacy, for example by allowing users to determine which data they want to share with others. (enders et al., 2008.) other possible model is no free users (nf), meaning that all sides pay for the platform usage in some way. however, wang et al. (2014) argue that freemium model that generates revenue from only premium users and service providers is more profitable than the nf model from a platform operator point of view in a long run. to challenge the model of nf, a totally opposite journal of business models (2018), vol. 6, no. 3, pp. 79-105 83 model of ‘free for users’ is suggested (see muzellec et al. 2015). one example of the ‘free for users’ model is the america’s first e-billing system. (edelman, 2015) in this case the company offered individuals with free trials and they got used to the system. eventually when individuals were asked to pay for it, they did. at that point, when the company already had many paying customers, also companies wanted to partner with the e-billing system, which again attracted more paying individuals. (edelman, 2015.) our literature review resulted with 14 revenue models in multi-sided markets. the revenue models are summarized in table 1 from the most common ones (advertising) to the rare ones with only one reference, namely volume-based billing, no free users model, direct sales revenue and no advertising model. all in all, from a business model perspective, popularity of the advertising model suggests that revenue is mainly generated from advertisers and for individuals, providing free (or at least very low cost) content is a common value proposition. (yablonsky 2016). the source of competitive advantage in business models relying on advertising as the main source of revenue lies in platforms enabling better ways to gather and evaluate information related to purchases or providing personalized content to target audiences. (tucker, 2014). in general, what revenue model(s) companies end up choosing to adapt reflects their strategies in creating competitive advantage, through addressing the customers’ needs. (yablonsky, 2016). although the models are presented individually in the table, revenue models are meant to be and can be combined in different ways to achieve competitive advantage (lumpkin and dess, 2004). however, enders et al. (2008) argue that usually one primary source of revenue can be identified. a revenue model can also be changed over time. for example, stayfriends, germany’s biggest social networking platform offered its service for free but when the platform had attracted enough users on the platform, they introduced a subscription model. (enders et al., 2008.) in the following chapters, we will discuss about the research setting, data collection and analysis and then present the findings. we will finally compare and reflect the literature review with the findings in the discussion chapter. authors lumpkin & dess (2004) wang et al. (2014) wirtz et al. (2010) muzellec et al. (2015) enders et al. (2008) context / revenue model internet business models mobile social networks / two-sided markets internet business models two-sided internet platforms business models for social networking sites advertising x x x x x subscription x x x x commission x x freemium for individuals x x freemium for businesses x x pay-per-use x x time-based billing x x transaction based model x x free for users x x affiliation x x no advertising model x direct sales revenues x no free users x volume based billing x table 1: revenue models of platform operators in multi-sided markets. journal of business models (2018), vol. 6, no. 3, pp. 79-105 84 research design qualitative study is appropriate in this research, because it allows us to produce new insights and gaining more understanding about the topic in the specific context (yin, 2015, p. 9) of human-centered personal data management. however, in order to understand what kind of revenue models are suitable for a personal data platform operator, questions were asked not only from the personal data platform operators themselves but also from other companies that are active in developing the context of human-centered personal data management. unit of analysis of this study is an organisation that has identified a revenue model for a personal data platform operator. noteworthy is that since the human-centered approach is relatively new, all the personal data platform operators in this research are start-ups and in a phase of developing their business models. therefore, revenue models found in this research are not fully tested in the market but are the first attempts on creating business and capturing value in this context. research setting and data collection data was collected with open-ended questionnaires from 27 companies and organisations from 12 different countries from europe, the us and australia that develop, research or offer personal data management services or architectures in the european market. based on their answers concerning their offering and business model, we identified the following roles: 13 personal data platform operators, 6 ecosystem supporters, 1 public and 2 research organisations, 2 consultancies, 2 technology providers and 1 service provider. the respondents are listed in more detail in appendix 1. data collection was conducted by the european commission in november 2015 to gain a better understanding about the emerging market of human-centered personal data management in europe. the questionnaire was designed by a representative from the european commission with collaboration of an author of this paper who actively participated in the designing of the questions. the questionnaire was sent to companies and researchers that offer personal information management services in europe or in other way support the emergence of human-centered personal data management. the questionnaire covered questions about the business model, and explicitly about the revenue model as follows. question 2: “please describe as succinctly as possible your business model and the value proposition.”; “describe below (without reference to external document) the exact kind of service and possible linkages to other services, the benefits for the individual and for companies working with personal information and the revenue model.” question 6: “personal information is the key mode of compensation for a wide range of offerings through the internet offered at non-monetary charge (‘for free’) to the individual. personal information management architectures have a disruptive potential. also, they come with a cost. what is a convincing business model in order to obtain a return on investment and what are the chances that this business model will be sustainable? who should be the party financing the value chain (the organisations requiring personal information or the individual?)?” question 7: “roll-out of personal information management architectures face the problem of twosided markets (the uptake in the offer of personal information management services depends critically on the expected number of consumers whereas consumers are only likely to use – and pay for? – such services if the offering is convincing to them). how in your assessment will this problem be solved? what is your approach?” data analysis data was analysed using a coding method that has been found very suitable for conducting qualitative data analysis (see basit, 2003; saldaña, 2015). a code means a researcher-generated word or a short phrase that is evocative or capture the essence of the openended questionnaire responses (saldaña, 2015, p. 4). coding refers to selecting those parts of the questionnaire answers that contain information related to revenue models of personal data platform operators for further analysis. the selected parts of the texts are called quotations and all of them belong to one or multiple codes that are named according to the meaning of the text. quotations linking to the findings can be found in appendix 2. journal of business models (2018), vol. 6, no. 3, pp. 79-105 85 organisation type role in the market respondent key customers country code commercial company personal data platform operator cfo individuals, companies switzerland 1 commercial not-for-profit cooperative personal data platform operator president individuals switzerland 2 researcher/ a research organisation personal data platform operator not known individuals, companies us 3 commercial company personal data platform operator founder individuals, companies uk 4 commercial company ecosystem supporter ceo individuals, companies, business analytics companies belgium 5 representatives of an independent non-profit foundation personal data platform operator executive director the netherlands 6 community interest company, a social enterprise personal data platform operator co-founder individuals, companies, business analytics companies uk 7 public body public organisation strategic officer uk 8 commercial company ecosystem supporter ceo individuals, companies, business analytics companies uk 9 non-profit organisation personal data platform operator ceo individuals spain 10 commercial company personal data platform operator ceo individuals denmark 11 non-profit organisation ecosystem supporter director companies uk 12 commercial company consultancy strategy director uk 13 researcher/ a research organisation research organisation senior researcher uk 14 commercial company technology provider co-founder individuals, companies, business analytics companies france 15 commercial company personal data platform operator founder individuals, companies austria 16 commercial company service provider senior researcher individuals spain 17 researcher/ a research organisation ecosystem supporter researcher us 18 researcher/ a research organisation research organisation senior security architect denmark 19 non-profit think & do tank ecosystem supporter not known france 20 public body ecosystem supporter personal data and trust lead uk 21 a researcher/ a research organisation & a business consultancy company consultancy president individuals, companies, italy 22 commercial company personal data platform operator founder individuals, companies australia 23 commercial company personal data platform operator senior researcher individuals, companies italy 24 commercial company personal data platform operator founder otherwe build relationships australia 25 commercial company personal data platform operator co-founder companies, individuals belgium 26 commercial company technology provider vice president companies usa 27 appendix 1: respondents of the open-ended questionnaire. journal of business models (2018), vol. 6, no. 3, pp. 79-105 86 r ev en u e m o d el s (t h em es ) s h o rt e xp la n at io n e xa m p le ( co m p an y co d e af te r th e ci ta ti o n ) r ev en u e so u rc e c o d es u se d in t h e an al ys is tr an sa ct io n f ee 1) f ee f or d at a tr an sa ct io n 2) f ee f or d at a tr an sa cti on if a n in d iv id u al is p ai d t o or c h ar g ed 1) “ t h e co st s of o p er at in g th e p la tf or m n ee d t o be c ov er ed b y fe es f ro m p ar tn er s n ee d in g a co m p lia n t an d u se r ac ce p te d h ea lt h d at a st or ag e so lu ti on ; f ee s fr om f ac ili ta ti n g d at a ex ch an ge s” ( 1) 1) “ u se rs w h o ag re es t o sh ar e th ei r d at a fo r th e off er ed b en efi t/ re w ar d , s ig n -u p fo r th e re se ar ch p ro je ct . o n ce t h e to ta l n u m be r of r eq u ir ed p ar ti ci p an ts h av e si gn ed -u p a n d t h e ap p ro p ri at e d at a h as b ee n s h ar ed , t h e u se rs w ill r ec ei ve th e off er ed b en efi t/ re w ar d . [ th e co m p an y] r ec ei ve s a tr an sa ct io n f ee f ro m t h e re se ar ch er f or f ac ili ta ti n g th e ab ov e m en ti on ed in te ra ct io n a s w el l a s h an d lin g th e tr an sf er o f th e be n efi t.” ( 1) 1) “ if a u se r ag re es t o ex ch an ge d at a fo r va lu e (s er vi ce , c on ve n ie n ce o r re w ar d ) th en t h e bu si n es s p ay s a “p os ta l f ee ” to [ th e co m p an y] in t h e or d er o f $0 .1 0 . t h is p os ta l f ee is t h e st ra te gi c bu si n es s m od el a n d w h en in tr od u ce d w ill r es u lt in t h e ap p b ei n g 10 0 % f re e to u se rs .” (4 ) 2) “ o rg an is at io n s (. ..) if g en er at in g in co m e th ro u gh t h e p ro vi si on o f se rv ic es , sa le o r p u rc h as e of d at a p ay a s m al l t ra n sa ct io n f ee ” (7 ) s er vi ce p ro vi d er • 10 0 % fi n an ce d b y en d -c u st om er s • ad -fi n an ce d p la tf or m • an n u al s u p p or t fe e • b as ic f ea tu re s fo r fr ee • ch ar g e in d iv id u al s a fe e • ch ar g in g f or a n e n g ag em en t • ci ti ze n s to d et er m in e va lu ab le m od el s • co lle ct in g a n d s el lin g a n on ym iz ed d at a to c lin ic al s tu d ie s • co m b in at io n o f m od el s • co m m is si on m od el • b u si n es s m od el f or c om p et it iv e ec os ys te m • co n cr et e re ve n u e m od el s w it h in n et w or k • co n n ec ti on f ee • co op er at iv e m em b er sh ip s h ar e • cu ts f ro m a p p s to re li ke s ys te m • tr an sa ct io n f ee • d oc u m en ta ti on a va ila b le f re e of ch ar g e • en d o f ad -f u n d ed in te rn et a p p en d ix 2 : r ev en u e m o d el s, p ro p o si ti o n s b eh in d t h em a n d c it at io n s fr o m t h e d at a. journal of business models (2018), vol. 6, no. 3, pp. 79-105 87 r ev en u e m o d el s (t h em es ) s h o rt e xp la n at io n e xa m p le ( co m p an y co d e af te r th e ci ta ti o n ) r ev en u e so u rc e c o d es u se d in t h e an al ys is s er vi ce f ee 1) f re em iu m b as is 2) s er vi ce b u n d le 3) f ee b as ed o n t h e sa vin g s re al is ed b y th e in d iv id u al 1) “ p la tf or m s d ir ec tl y fi n an ce d b y th e u se rs : u se rs p ay f or t h e se rv ic es p ro vi d ed by t h e p la tf or m , i n t h e fo rm o f su bs cr ip ti on o r se rv ic e fe e. p la tf or m s ar e op er at ed b y p ri va te c om p an ie s (f or p ro fi t) .” (1 0 ) 1) “ t h e ot h er p ri m ar y en d -u se rs a re o f co u rs e th e h ea lt h ca re p ro vi d er s (h os p it al s, s p ec ia lis ts , g en er al p ra ct it io n er s) , w h o ca n b e at tr ac te d t h ro u gh a fr ee m iu m a p p ro ac h , i .e . b y p ro m p ti n g th em t o p ay f or u si n g sp ec ifi c fu n cti on al it ie s (l ik e ad va n ce d a n al yt ic s, s im ila ri ty s ea rc h , m od el -b as ed p at ie n tsp ec ifi c si m u la ti on a n d p re d ic ti on , e tc .) , w h ile b as ic f ea tu re s of t h e p la tf or m ca n b e ac ce ss ed f or f re e. ” (2 2) 1) “ t h e ba se o ff er is f re e fo r th e u se r an d a d d it io n al s er vi ce s w ou ld b e ch ar ge d (e n cr yp te d b ac ku p s, m or e d is c sp ac e, m or e in st an ce s, m or e ap p s si m u lt an eou sl y in st al le d , a d om ai n n am e … .) ” (1 5) 1) “ t h e ap p is d is tr ib u te d o n a f re em iu m b as is w it h a ll ba si c fe at u re s fr ee a n d p re m iu m f ea tu re s ch ar ge d ( fr om in d iv id u al s) a t $ 7 p er y ea r.” (4 ) 2) “ p im s c ou ld b e in cl u d ed in si d e an ot h er s er vi ce t h at c u st om er a re a lr ea d y p ay in g fo r (s u ch a s an in te rn et /m ob ile s u bs cr ip ti on )” ( 20 ) 3) “ w e w ill u lt im at el y ch ar ge c on su m er s a fe e, c or re sp on d in g to a f ra ct io n o f th e sa vi n gs r ea liz ed b y th e co n su m er s fr om u si n g ou r se rv ic e to h el p t h em m an ag e th ei r d at a to o bt ai n b et te r d ea ls .” (1 1)  in d iv id u al s er vi ce p ro vi d er • en h an ce m en ts f or f re e • fe es f ro m f ac ili ta ti n g d at a ex ch an g es • fe es f ro m m ic ro -t ra n sa ct io n s • fi n an ci al in ce n ti ve s fo r cu st om er s • fi n an ci n g b y co m m er ci al or g an is at io n s • fr ee • fr ee f or in d iv id u al s • fr ee m iu m m od el • fe es f ro m a p p/ se rv ic e d ev el op er s • fe es f ro m p ar tn er s • fu n d s fr om u se rs • g ra n t ac ce ss t o cu st om er s • h yb ri d m od el s • in d iv id u al p ay s • re ve n u e fr om in te g ra ti on f or b u si n es s p ar tn er s • in te n ti on b as ed e n g ag em en t • lic en si n g a rr an g em en ts • m ai n te n an ce f ee • m ic ro -p ay m en ts p er t ra n sa ct io n • n ot o n ly s in g le m od el • on eti m e fe e fo r m em b er sh ip a n d re g is tr at io n • on eti m e p u rc h as e • or g an is at io n p ay s • or g an is at io n s sh ou ld p ay t h e m os t a p p en d ix 2 : r ev en u e m o d el s, p ro p o si ti o n s b eh in d t h em a n d c it at io n s fr o m t h e d at a. journal of business models (2018), vol. 6, no. 3, pp. 79-105 88 r ev en u e m o d el s (t h em es ) s h o rt e xp la n at io n e xa m p le ( co m p an y co d e af te r th e ci ta ti o n ) r ev en u e so u rc e c o d es u se d in t h e an al ys is co n n ec ti on f ee 1) c on n ec ti on f ee f or a n or ga n is at io n o ff er in g se rv ic es o n t h e pl at fo rm 2) c on n ec ti on f ee f or an o rg an is at io n u si n g p er so n al d at a p la tf or m o p er at or ’s d at a m an ag em en t ou ts ou rc in g s er vi ce s 1) “ o rg an is at io n s p ay a o n e ti m e co n n ec ti on f ee p er s er vi ce t o th e (. ..) p la tf or m an d a o n et im e co n n ec ti on f ee p er in d iv id u al t h ey c on n ec t to u si n g p er so n al d at a se rv ic es , c on se n t m an ag em en t or id en ti ty s er vi ce s. t h ey o n ly p ay f or t h e in d iv id u al o n ce , r eg ar d le ss o f th e n u m be r of s er vi ce s th e in d iv id u al u se s of t h e or ga n is at io n c on n ec ti n g. ” (7 ) 2) “ t h ro u gh u se o f th e [c om p an y’ s] a p i l ay er , d at a ge n er at ed b y th e p ar tn er ’s p ro d u ct a n d /o r se rv ic e w ill b e st or ed in t h e u se r’ s (. ..) a cc ou n t. t h e p ar tn er s (w h o re qu ir e a tr u st ed a n d in d ep en d en t p ar tn er t o m an ag e th e p er so n al h ea lt h d at a ge n er at ed b y th ei r p ro d u ct s an d /o r se rv ic es ) p ay [ th e co m p an y] a p ro je ct f ee t o co ve r th e co st t o cr ea te t h e in te rf ac e be tw ee n [ th e co m p an y] an d t h e p ar tn er ’s p ro d u ct a n d /o r se rv ic e. o n ce li ve , t h e p ar tn er w ill p ay a m ai n te n an ce f ee b as ed o n n u m be r of u se rs o r qu an ti ty o f d at a p as se d t o th e [c om p an y’ s] in fr as tr u ct u re .” (1 ) s er vi ce p ro vi d er d at a so u rc e • p ay a s yo u g o • p ay -f or m od el • p ay -p er -u se • p er -d at afl ow b as is • p er ce n ta g e of c lie n t’ s re ve n u e • p im s in cl u d ed in to a n ot h er s er vi ce • p la tf or m a cc es s fe e • p re m iu m m od el • p ri m ar y fi n an ci n g b y se rv ic e p ro vi d er s • p ro je ct f ee • p ro vi si on o n d at a sa le s • p u sh /p u ll • re fe re n ci n g a n a p p o n t h e p la tf or m • re ve n u es b ac k to s oc ie ty • sc h em e fu n d ed b y in d u st ry m em b er sh ip f ee o rg an is at io n s an d in d iv id u al s p ay f or t h e m em b er sh ip o f th e p la tf or m a n n u al ly o r as a on eti m e b as is . o rg an is at io n p ay s: “ t h e m od el is a n a n n u al m em be rs h ip t h at in cl u d es in fr ast ru ct u re s u p p or t, t ru st m ar k lic en ce , a cc es s to d es ig n t oo ls a n d s h ar ed a cc es s to le ga l s u p p or t on g lo ba l c om p lia n ce . t h e an n u al f ee s d ec re as e w it h b u si n es s si ze a n d w ill r ed u ce a s m em be rs h ip g ro w s. ” (1 2) o rg an is at io n p ay s: “ o rg an is at io n t h er ea ft er p ay s an a n n u al s u p p or t fe e th at re p re se n ts 2 5% o f th e in it ia l c on n ec ti on f ee . t h ey p ay n ot h in g fo r d at a vo lu m es d el iv er ed o r co lle ct ed a cr os s th e p la tf or m .” (7 ) in d iv id u al p ay s: “ i b el ie ve it is ju st ifi ab le t o st ill c h ar ge in d iv id u al s a ba si c fe e fo r p ar ti ci p at in g in s u ch n ew s er vi ce s, h ow ev er t h is s h ou ld b e co n st an t an d n ot d ep en d o n t h e am ou n t of d at a th ey a re w ill in g to s h ar e. f or e xa m p le , i n t h e x d iba se d r es p ec t n et w or k ar ch it ec tu re , i n d iv id u al s p ai d a o n eti m e fe e fo r m em be rs h ip a n d r eg is tr at io n o f an id en ti fi er ( a “c lo u d n am e” ).” ( 16 ) in d iv id u al p ay s: “ u se rs o f th e p la tf or m c an e le ct t o be co m e m em be rs t h ro u gh th e p u rc h as e of 1 m em be rs h ip s h ar e ce rt ifi ca te a t a p ri ce o f c h f 10 0 ,.” (1 ) s er vi ce p ro vi d er d at a so u rc e -i n d iv id u al • se rv ic e fe e • fe es f ro m s er vi ce s to u se rs • sm ar t co n tr ac ts • sp on so rs h ip • su b sc ri p ti on • fi n an ci al m od el t ow ar d s u se r en g ag em en t • tr an sa ct io n f ee • tr an sp ar en t ta ri ff t ab le • tr u st n ec es sa ry • w ar o f ad b lo ck er s a p p en d ix 2 : r ev en u e m o d el s, p ro p o si ti o n s b eh in d t h em a n d c it at io n s fr o m t h e d at a. journal of business models (2018), vol. 6, no. 3, pp. 79-105 89 r ev en u e m o d el s (t h em es ) s h o rt e xp la n at io n e xa m p le ( co m p an y co d e af te r th e ci ta ti o n ) r ev en u e so u rc e c o d es u se d in t h e an al ys is p ro p os it io n s b eh in d t h e re ve n u e m od el s n o ad ve rt is in g m od el t h e re sp on d en ts a g re e th at a r ev en u e m od el sh ou ld b e b as ed o n o th er m od el s th an a d ve rt is in g . “a d -fi n an ce d p la tf or m s: t h e m od el t o av oi d if it d oe s n ot c om p ri se t h e ap p ro p ri at e p ri va cy f ra m ew or k. ” (1 0 ) “t h e ri si n g co st o f ad t ec h a n d t h e co n tr ol h el d b y a sm al l n u m be r of d at a co lle ct in g en ti ti es ( g oo gl e, f ac eb oo k) is n ow r ec og n is ed a s a m ar ke t th at is ch al le n ge d a n d b ec om in g in cr ea si n gl y in eff ec ti ve . c om bi n e th is w it h t h e gr ow in g se n ti m en t of in d iv id u al s to b lo ck d ig it al a d ve rt is in g an d s ee k m or e p er so n al ex p er ie n ce s an d c on n ec ti on s w it h t ru st ed b ra n d s an d t h er e is a n in cr ea si n g op p or tu n it y fo r n ew b u si n es s m od el s to e m er ge .” (2 3) “w e be lie ve t h at a w ar en es s is g ro w in g of t h e tr u e co st o f fr ee m iu m -t yp e se rvi ce s w h ic h a re p ro vi d ed f re e by o rg an is at io n s in r et u rn f or r ig h ts t o an al ys e th e in d iv id u al ’s b eh av io u r or s er ve u p a d ve rt is in g or s im p ly m on et is e th e va lu e of th ei r d at a. w h ils t th ey w ill r em ai n a t sc al e fo r so m e ti m e al on g w it h t h e cl os ed ec os ys te m s or ‘w al le d g ar d en s’ o f la rg e or ga n is at io n s w or ki n g th is w ay , t h ey w ill u lt im at el y d ec lin e as d is tr u st a n d s ig n ifi ca n t ri sk s ar e ex p os ed .” (7 ) f re e fo r in d iv id u al s in d iv id u al s p ay n ot h in g fo r th e se rv ic es o n t h e p la tf or m . “w e be lie ve t h at t h e se rv ic e to s to re , m an ag e an d s h ar e h ea lt h d at a sh ou ld b e fr ee t o th e u se rs .” (1 ) “c on su m er s ex p ec t se rv ic es t o be f re e an d w e d on ’t s ee t h at t h at n ee d s to ch an ge .“ (2 5) “t he c ha lle ng e is t o cr ea te s uffi ci en t sc al e by o ff er in g to c on su m er s, f re e of c ha rg e, on e or m or e ap pe al in g ap ps t ha t m ak e us e of t he [o rg an is at io n’ s] s ch em e. “ (6 ) “t h is p os ta l f ee is t h e st ra te gi c bu si n es s m od el a n d w h en in tr od u ce d w ill r es u lt in t h e ap p b ei n g 10 0 % f re e to u se rs .”( 4 ) “i n d iv id u al s ar e th e co m m u n it y w e se rv e as a c om m u n it y in te re st c om p an y. w e p ro vi d e al l s er vi ce s, t oo ls a n d u ti lit ie s to t h em f re e of c h ar ge .“ (7 ) “( ... ) at le as t p ar t of t h e se rv ic e w ill b e co m p le te ly f re e, n ot s u re if w e w ill n ee d to in tr od u ce p re m iu m s er vi ce s, t o en su re s u st ai n ab ili ty .” (1 0 ) a p p en d ix 2 : r ev en u e m o d el s, p ro p o si ti o n s b eh in d t h em a n d c it at io n s fr o m t h e d at a. journal of business models (2018), vol. 6, no. 3, pp. 79-105 90 in the data analysis, we follow abductive reasoning (tavory and timmermans, 2014), thus in the analysis process, we go back-and-forth between the conceptual framework and own observations from the data. the coding and analysis was conducted following thematic analysis (see braun and clarke, 2006; guest, 2012). first, two authors of this paper familiarised themselves with the data, thus went through all the questionnaire answers several times. second, the researchers started labelling and sorting the data and as a result, the researchers identified and created 67 codes that were used in the final analysis. (see appendix 2). the third step was to further analyse the codes and identify 6 higher order themes that create more understanding of the value capturing of personal data platform operators. following the data analysis process, we identified the following themes: a transaction fee, service fee, connection fee, membership fee, no-advertising model and free for individuals. in the next chapters, we will further discuss about the results of data analysis and the contribution to literature. results revenue models of personal data platform operators based on the qualitative thematic analysis of 27 organizations from 12 different countries, we identified three main stakeholders that are needed in order a personal data platform operator to capture value, namely 1) an individual using the platform service and giving consent to share personal data, 2) a data source that collects and stores data about the individual and 3) a data using organisation or in other words a service provider. companies can have both the role of a data source and a service provider. in the context of human-centered personal data management, personal data platform operators are firms that enable the facilitation of personal data among data sources and data using organizations with the consent and for the benefit of an individual. on a personal data platform, an individual can access to, use and share their personal data such as health, wellness, financial and social media data. two of the personal data platform operators focus on the facilitation of health and medical data, whereas the other personal data platform operators have ambitions in enabling larger variety of data integration and use via the platform. in our study, we found out that personal data platform operators may generate revenue from individuals, data sources and service providers by charging one or multiple fees. even if a primary source of revenue can be found, there usually is more than one fee. revenue is mainly generated from service providers that request for personal data from individuals on the platform, as shown in figure 1 below. as an example, a healthcare individual personal data platform operator data sourceservice provider service fee connection fee transaction fee membership fee service fee connection fee va lu e  ca pt ur e membership fee figure. 1 revenue models and the key stakeholders of a personal data platform  operator. figure 1: revenue models and the key stakeholders of a personal data platform operator. journal of business models (2018), vol. 6, no. 3, pp. 79-105 91 provider may want to have access to data from another clinic to provide the best service for the individual. in this case, data can be accessed via the platform by asking consent from the individual, and then with the consent, pulling a copy of the data from the data source for the use of the healthcare provider. in some cases, revenue can be generated from individuals and the data sources as well. in our analysis of personal data platform’s revenue models, we found that the revenue models consist of four different fees that together illustrate the revenue model of a personal data platform operator, thus how the company captures value. the fees are a service fee, connection fee, membership fee and transaction fee. the results of our data analysis propose that value capture is about either adopting one fee or using the combination of fees from various sources, combining fixed and pay-per-use models and therefore generating recurring and stable revenue. to create more understanding of the revenue models of personal data platform, we will next discuss about the different fees more profoundly. the fees can be divided into two categories, namely a transaction-based model that consists of a transaction fee and a service-based model that consists of a service fee, connection fee and membership fee. in a transaction-based model a personal data platform operator generates revenue by facilitating data transactions between the stakeholders. in a service-based model the personal data platform operator generates revenue by offering value-adding services on the platform or charging for the usage of the platform. the following table 2 illustrates how personal data platform operators can capture value in the context of humancentered personal data management. service fee is the most agreed on revenue model and it may take different forms. service fees are generated both from service providers and in some cases from individuals. the most popular model is freemium, which means that the personal data platform operator provides the basic platform service for free and any extra services or enhancements provided by revenue model description quotation example service fee (service-based) service providers and individuals pay for value-adding services on the platform. “the app is distributed on a freemium basis with all basic features free and premium features charged (from individuals)...” (4) membership fee (service based) service providers and individuals pay for the membership of the platform either annually or one-time basis. “the model is an annual membership that includes infrastructure support, trust mark licence, access to design tools and shared access to legal support on global compliance. the annual fees decrease with business size and will reduce as membership grows.” (12) transaction fee (transaction based) service providers pay for the data transaction from a data source. “the costs of operating the platform need to be covered by fees from partners needing a compliant and user accepted health data storage solution; fees from facilitating data exchanges” (1) connection fee (service-based) service providers pay for connecting their services to the platform and connecting with individuals on the platform. data sources pay for the creation of application interfaces when outsourcing personal data management to personal data platform operator. “organisations pay a one time connection fee per service to the (...) platform and a onetime connection fee per individual they connect to using personal data services, consent management or identity services. they only pay for the individual once, regardless of the number of services the individual uses of the organisation connecting.” (7) table 2: revenue models of personal data platform operators. journal of business models (2018), vol. 6, no. 3, pp. 79-105 92 the platform operator or a third party on the platform would be charged from the individual or the service provider. another model is to charge individuals with a fee based on the possible savings realised by the individual. we think that this is a model resulted from the transparency of the concept of enabling individuals to control their own personal data. the model is based on an idea that when individuals have transparency on how their data is used and they will get value in return, they would be willing to give a fraction of the perceived value or benefit to the personal data platform operator that made the transaction happen. this would benefit all sides of the platform and therefore increase the use of data in the market. for example, if an individual uses the platform to negotiate better deals with service providers based on personal data or if the individual gets personalised services based on the personal data shared via the platform, personal data platform operator would charge the individual with a fee. the cost of operating the platform could also be covered by including a fee into the existing services that individuals are already paying for. this could be the case if a company from other field like a bank or a telecom operator would start offering a personal platform for their existing customers. some of the respondents charge organisations and individuals for the membership of the platform either annually or as one-time basis. for a service provider, the membership fee can be a fixed sum or, for example, based on the size of the organisation or on the number of individuals using the services on the platform. for individuals, membership fee was fixed on every platform studied. after paying the membership fee, individuals can share as much data as they want and use any of the services for free. based on our findings, a membership fee is mostly used by cooperatives and non-profit personal data platform operators. platform operators may generate revenue on transaction-based by taking fees for facilitating data transactions between an individual and the service provider if the individual agrees to share his or her personal data with the organisation in return of value. a transaction fee is always charged from the organisation asking for data, not from the individual. instead, individuals may even be rewarded for sharing their data. furthermore, our research shows that most of the respondents that have a transaction-based model are commercial companies. alternative model adopted by one of the respondents is revenue sharing, thus the personal data platform operator offers organisations with free data transactions and charge them only when a service provider either pays an individual for the access to data or charges an individual a fee for its own service on the platform. in these cases, the personal data platform operator will charge the organisation a transaction fee of few percent of the value of the transaction. connection fee model was introduced by two personal data platform operators. connection fees are generated 1) from service providers that offer their services to individuals on the platform, thus connect with the individuals and 2) from data sources that need to connect to the platform to use data management outsourcing services provided by the platform operator. a personal data platform operator can charge a service provider a one-time connection fee for each service it offers and individuals that they connect with on the platform (number of the individuals using the platform). in the case of a data source, a personal data platform operator may charge for the creation of an application programming interface layer between the platform and the data source and thereafter charge for the data transferred from the data source to the individuals’ accounts on the platform. data sources do not offer their services on the operator’s platform but instead may want to outsource their personal data management to a trusted party, so that the data generated by the data source (sometimes as a side product) is managed properly according to the regulations, in a secure and human-centered and individuals are provided with a way to see, access and share their personal data, thus benefit from it. propositions behind the revenue models of personal data platform operators during the data analysis, we identified two propositions as the foundation of creating revenue models for personal data platform operators, namely “no-advertising” and “free for users” models. the “no-advertising” proposition means that none of the personal data platform operators use advertising as a source of revenue. in addition, three of the respondents explicitly stressed that they do not have an advertising-based model. the respondents agree that when applying journal of business models (2018), vol. 6, no. 3, pp. 79-105 93 human-centered approach to personal data management, a revenue model cannot be based on monetizing individuals’ data and selling it to advertiser, but other models must be developed to enable transparency for the individuals on how their data is used and increased value. the data analysis shows that a no-advertising model stands as the foundation and ideology for other revenue models to be built on and can be part of the platform value proposition for individuals. also, total of six respondents think that a platform service to store, manage and share personal data should be free for individuals. these personal data platform operators offer individuals with a free service and cover the costs of operating the platform by charging the organisations using the data, thus service providers. in this case, individuals do not pay anything for the services on the platform or for sharing data with companies or organisations. it seems that this model is suitable especially for personal data platform operators that have many individuals on their platform that share personal data. for example, one of the respondents shared that it is going to change its business model from a current membership-based model to ‘free for individuals’ as soon as they are technically able to provide individuals with a way to share their data with companies and research organisations. in this case, after the service becomes free for individuals, the personal data platform operator will generate revenue mainly from organisations paying for getting personal data via the platform with the consent of the individual. at the time answering to the questionnaire, this specific personal data operator generated revenue from premium individual customers that are paying for enhancements like personal data store on the platform. therefore, it seems that before the “free for individuals” model can be fully introduced, stable revenue sources from other stakeholders are needed. the lack of advertisement revenues and the need for money for getting the business up and running before the data sharing capability are reasons for introducing membership fees and service fees for individuals at the early stage of the platform service. discussion and conclusion research related to business model innovation has been conducted in many fields including innovation management, strategic management and entrepreneurship literature. in many cases, technology has been seen as an enabler for new business model innovation. (baden-fuller and haefliger, 2013.) our research investigated the personal data management point of the technology design and business model innovation emphasizing the optional revenue models that emerge due to the new type of personal data usage. implications to research digital technologies are changing the current business models and facilitate new business models that either have not existed before or are new in a specific firm or sector. with the support of the digital technologies, a firm can enhance existing activities, support new ways of conducting business or transform the way business is done (li, 2017). these trends and opportunities have not yet been fully understood and further research is needed (spieth et al. 2014). one of the significant trends in business model innovation is multi-sided market (li 2017), in which digital transactions can take place (doligalski, 2018), that has enabled the emergence of new services and revenue models (pagani, 2013) and that brings together two or more stakeholders (muzellec et al. 2015), to co-create value (breidbach and brodie, 2017). when opportunities for value creation exists in the market, it is critical to understand how a firm can develop its business model to improve its capability to capture the value (spieth et al. 2014, pp. 244). in prior research, platform revenue models have been studied in the context of e-marketplace (brunn et al., 2002) and social networks (enders et al., 2008; wang et al., 2014), as examples. however, many of the prevalent platform business models have been based on collecting and selling individual’s personal data (c.f. weber, 2015; muzellec et al., 2015). due to the data privacy regulations (c.f. european commission, 2016) and increasing awareness about data privacy among individuals (vescovi et al., 2015, spiekermann and novotny, 2015), there is a need for a human-centered approach in the use of personal data in business, and allowing individuals to be in control over the use and access of their personal data, such as health, social and financial data. (c.f. gnesi et al., 2014; vescovi et al., 2015). by studying 27 organizations in 12 countries, this qualitative research contributes to our understanding on platform business models in the context of humancentered personal data management. journal of business models (2018), vol. 6, no. 3, pp. 79-105 94 the contributions of this study are three-fold. first, we identify revenue models for personal data platform operators in the context of human-centered personal data management and discuss the relation to prior research. second, based on the findings, we argue that advertising as a fee is explicitly avoided by the personal data platform operators in this context, although in previous studies. advertising has been considered as a key part of a revenue model in other multi-sided markets (c.f. lumpkin and dess, 2004; wirtz et al., 2010). we argue that following a no-advertising proposition creates a need for a personal data platform operator to use other sources of revenue. in practice, our study shows that personal data platform operators capture value mainly from the service providers side and charging serviceand transaction-based fees. third, rising from the analysis, a new fee in the context of humancentered personal data management is suggested, namely a connection fee. next, we will discuss more about the three key findings and the contribution to platform business model research. first, based on our findings, in the context of humancentered personal data management, a personal data platform operator’s revenue model can either be one fee or be a combination of fees. the revenue models of a personal data platform operator are the service fee, membership fee, transaction fee and connection fee. in the context of human-centered personal data management, individuals are in control of the use, access and share of their personal data, and they can allow a data requesting organisation to use their data for the specific, defined and value creating purpose. we argue that the choices of personal data platform operators concerning their revenue model in this context tells about the aim for creating more transparent, human-centered and privacy-preserving business model in personal data business. charging for a service, membership, transaction and connection can be seen as an effort of personal data platform operators to bring greater deal of transparency and privacy over how revenue is generated in platform business, comparing to many prevalent business models where the platform service is provided for free and in return the personal data is collected and monetised with advertising. (tucker, 2014). in the context of human-centered personal data management, a personal data platform operator charges service providers for the data transactions and charges for service providers, data sources or individuals for the usage of the platform by offering value-adding services. however, according to our analysis, many of the studied platform operators choose to offer the platform as free for individuals. in line with prior studies on platform business models (c.f. wang et al., 2014), the individuals’ side is subsidized and revenue is generated from the other sides of the platform. in line with täuscher and laudien’s (2017) study in the context of start-up marketplace platforms, platform providers generate fees mainly from the service providers (or sellers) whereas individuals (or buyers) use the platform mostly for free. our findings indicate that business models for personal data platform operators in the context of human-centered personal data management are based on enabling individuals to manage their personal data and enabling service providers to access the data, and finally capture the value with different serviceand transactionbased fees. this model differs from current platform business models that are usually based on using the platform as a channel for service providers to sell and advertise their services (see wang et al., 2014; weber, 2015). these findings contribute to our understanding about the suitable business models in the digital era from revenue model perspective, thus how platform operators can capture value with revenue models while also considering individuals’ rights over their personal data and data privacy. personal data platform operator revenue model has also similarities with traditional platform revenue models. for example, similarly than apple itunes, uber and airbnb platforms generate revenue per tune played, per ride and per rental (iivari et al., 2016), a personal data platform operator can take a share per data transaction made via the platform. second, we show that advertising is not used and seems to be explicitly avoided among the personal data platform operators. this is surprising and can be seen as a contextual finding, because the literature review made in this study showed that advertisement is considered as one of the most used revenue models in multi-sided markets. (see table 1). our finding supports enders (2008) who identified a model of “no advertising” in the context of social networking sites and is adopted by only handful of companies today. we think that the “no advertising model” already reflects the changing attitudes towards personal data usage, individuals’ rights journal of business models (2018), vol. 6, no. 3, pp. 79-105 95 to privacy and companies’ need in finding alternative revenue models. enders found that one of the most well-known social networking platforms in europe that enables users to connect and share personal content has taken a no-advertising policy and charges users relatively high prices for the service (enders et al., 2008), covering the cost of having no advertisements on the platform, giving individuals more privacy and control. our research shows that when adopting human-centered approach to personal data management, noadvertising policy serves as the foundation of a revenue model and is applied by all the personal data platform operators studied. however, differing from enders’s findings, the costs are covered mainly by charging service providers and data using organisations, not the individuals. one reason for advertising being avoided in the emerging platform businesses could be the attempt to stand out as “human-centered” alternatives for the current platforms that have traditionally collected and sold individuals’ personal data and their attention to advertisers without individuals’ explicit consent. advertisers have been willing to pay for the individuals who see their advertisements and even more if they know who is watching (sabourin, 2016). although advertising-as-usual seems to be unsuitable revenue model in this context, a platform could probably be a place where individuals could share their intentions and data to service providers by giving their consent on the platform. based on the intention and need, these service providers could offer the individuals with discounts and personalised advertisements. this model would not only create value for individuals and increase revenue for service providers as increased sales but would enable personal data platform operators to create revenue streams from increased data transactions and increased use of the platform. in line with rayna et al. (2015), we believe that offering individuals with personalised data-using services instead of only showing them advertisements on the platform has a chance to result with even more revenues in the long run. the services can be provided by the personal data platform provider itself or a service provider, in which case the platform provider can charge transaction and connection fees. therefore, we argue that one of the implications of adopting a non-advertising model from platform business model perspective can be the creation of new data-based services that create value for individuals and for which the individuals are willing to pay for to cover the costs of platform business model. also, exclusion of advertising from the revenue model is one way for digital platform operators to differentiate themselves in the market. even though advertisements can provide revenue streams for the platform, they can also be perceived as nuisance by the individuals and therefore can result in fewer users on the platform (ghose and han, 2014). from this perspective, we think that being an advertisement-fee platform is not only about having an ideology of human-centered data management behind the business, but the choice of revenue models probably is part of a larger marketing and positioning strategy and value proposition of platform operators. in fact, positioning with a slightly different revenue model is one way to gain competitive advantage in the digital market, because the greater the level of competition with the same business model, the lower the changes for the firm to create value. (zott and amit 2007) in the gaming industry, it has already been shown that advertisement-free games generate more revenue than freemium games with advertisements. platforms with advertisements will need to create more value than the emerging addfree premium services in order to stay competitive and retain users in the future. (rietveld 2017) our findings support täuscher and laudien’s (2017) who found that in the sample of 100 digital platform start-ups, advertising was used as revenue model only in two percent of them. supporting our findings, they found that the most popular revenue models are taking a fix cut or a cut measured in percentage from a transaction and subscription. our findings, in line with täuscher and laudien’s (2017), show that there is a clear shift towards advertisement-free platforms whose main goal is to enable increased value opportunities for individuals and service providers who are willing to pay for the benefits of the platform. third, in this study, a new revenue model in the context of human-centered personal data management was identified, namely a connection fee that has not been recognised in previous studies on multi-sided markets. (see table 3). many times, new business models are not entirely new in the unprecedented sense, but they can be regarded as new for a firm or in the market or sector. (li, 2017). the idea of a connection fee itself is not new. as an example, in the field of telecommunication (gordijn & akkermans 2003; riquelme 2001) journal of business models (2018), vol. 6, no. 3, pp. 79-105 96 connection fees or bigger fees upfront are used as part of their revenue model. with the best knowledge of the authors, a connection fee is a new revenue model that has not been identified in prior research of multisided markets. the emergence of a connection fee in this context may be because sharing of data requires a secure and functional data framework. building such a framework is a great investment and it cannot realistically be the responsibility of a single company. before a personal data platform operator can charge for data transactions, membership or services, it must create a framework for stakeholders to share, store and manage personal data in a beneficial way. according to gomes and moqaddemerad (2016), one of the greatest challenges companies face when planning to expand their business is the firm’s and the market’s readiness regarding to network and connectivity standards. a connection fee introduced by two of the respondents could support the creation of a data sharing infrastructure, thus interfaces between services and databases, for the mutual benefit of stakeholders and new business opportunities. besides to the suitable revenue models, we found that to capture value in the context of individuals being in control of their personal data, personal data platform operators should enable stakeholders to integrate and share personal data and derive value from it. in fact, our research findings show that there is a clear need for not only business models for personal data platform operators but for every stakeholder to find mutually beneficial ways for sharing of data, using it and creating new business. in line with redman (2015), we see that access to data will change the strategies of every company. some of the personal data platform operators even showed interest in adopting an open business model, meaning that they would share the revenue generated from data transactions with the stakeholders in the ecosystem as an attempt to build a sustainable market of data sharing actors. our finding about personal data platform operators’ effort of finding suitable revenue models for all, not only for themselves, is in line with vargo and akaka (2012), who note that to be successful one needs to continuously be looking for new ways to create value for itself and others. accordingly, the critical factor of successful data integration and usage is the ability of an actor to survive and thrive in its context (vargo et al., 2008), thus its ability to capture value by first enabling value (co)creation for all sides of the platform. implications to practice we think that capturing of value is one of the main challenges that a platform operator faces when creating a business model, because there is no “one size fits all” model for revenue models (sabourin, 2016). revenue models of personal data platform operators revenue models found in the literature service fee freemium model (wang et al., 2014) free plus premium membership (enders et al., 2008) membership fee subscription model (enders et al., 2008) subscription (wirtz et al., 2010) transaction fee transaction model (enders et al., 2008) transaction market (filistrucchi et al., 2014) transaction-based model (wang et al., 2014) connection fee n/a propositions behind personal data platform operator’s revenue models propositions found in the literature free for individuals free for users (muzellec et al., 2015) service for free (enders et al., 2008) no advertising no-advertising policy (enders et al., 2008) table 3: comparison of personal data platform operator’s revenue models to revenue models in other multi-sided markets. journal of business models (2018), vol. 6, no. 3, pp. 79-105 97 moreover, revenue models should be combined and tailored for the specific company and context (lumpkin and dess, 2004). this study is useful for companies that are interested in developing new data-based services and business models that take human-centered approach to personal data management. however, the findings of this study have not been tested and therefore should be taken as suggestions. this study increases understanding about suitable revenue models for personal data platform operators. we also present propositions (no advertisements and free for individuals) that can be considered as the foundation of revenue model creation in this context. brownlow et al. (2015) argue that incorporating a data driven business model is critical for the success of a company. it was shown in our study that current personal data platform operators see several optional revenue models being deployed. we also described similarities and differences in revenue models of current operating platform operators and the emerging personal data platform operators. the comparison gives a clear idea of how adopting human-centered approach to personal data management can affect into how revenue is generated. in this study, in addition to creating new knowledge about revenue models for personal data platforms, it was realized that there is a movement from reactive healthcare focused model to proactive wellness-oriented model and it is supported by personal data platform operators. in wellness-oriented model the focus is on motivating and giving people the tools to take better care of their own health and to decrease the overall costs of our healthcare system. personal data platform operators that provide easy access to data on exercise, diet and ambient environment along with intelligent processing and presentation of the data, are important in supporting sustainable behaviour change. the most successful services should place the sensing and supporting technologies around the real needs of individuals in a manner that is highly personalized and supportive and evolves along with the individual and their needs. (mcgrath and scanaill, 2013.) limitations and future work the limitations of this paper are discussed in this chapter. the first limitation of this study is due to the lack of prior research on platform business models in the context of human-centered personal data management. the literature review was conducted by studying revenue models on a higher level, by looking at business models found suitable in other multi-sided markets. as a result, the revenue models found in the literature review provided us a good idea of how value is captured in multi-sided markets but could not be directly generalizable in the context of human-centered personal data management. this is mainly because many of the revenue models were based on organisation-centered approach, which takes a view of a platform owning its users (wang et al., 2014) as part of a value proposition and as a commodity that can be monetized (muzellec et al., 2015). second limitation is due to the data collection. the respondents gave long and diligent answers concerning revenue models. however, since the questionnaire was sent by the european commission, the respondents answered not only to provide information for research but also to influence on commission’s actions and support in this market. also, the respondents were informed about the publicity of the answers and therefore no business secrets were shared. therefore, it is possible that the respondents did not reveal all details of their revenue models because of the chosen data collection method or the sender. third, this study focused only on revenue models of all the identified business model “building blocks” (c.f. osterwalder and pigneur, 2010). we focused on identifying revenue models based on the data from 27 organisations. focusing on only revenue models is appropriate when studying emerging business, because there is a risk to get confused with the processes of value creation and value capture. although a firm can create value it may or may not be able to capture it in the long run. as an example, some of the value created by a personal data platform operator by enabling stakeholders to share and benefit from personal data may spread to the society as a whole, or alternatively the company may not be able to capture all the value created because of the lack of suitable revenue models. (lepak et al., 2007.) nevertheless, the definition of a revenue model as a description of the ways of gaining monetary benefits in exchange of value indicates that a company or other actors in the multi-sided market must create value to the personal data platform operator to capture it. therefore, research is needed about how different journal of business models (2018), vol. 6, no. 3, pp. 79-105 98 stakeholders perceive value, how personal data platform operators enable value (co)creation among stakeholders or propose value with value proposition. fourth, the market of personal data and business models are constantly developing. furthermore, the humancentered approach to personal data management is relatively new, and the studied personal data platform operators are in a phase of developing their business models. therefore, generalisation of this research is challenging if not possible based on one qualitative study and is not even the purpose of this study. this research provides a snapshot of the emerging revenue models and is one of the first attempts to gain more understanding about how personal data platform operators can capture value when data is being in control of the individuals. further qualitative and quantitative research is needed from both from value creation and value capture perspectives. we would especially like to see case studies that go deep into one or two cases and increase knowledge about business models and the benefits of personal data usage in the context of humancentered personal data management. further research could assess what is the role of context and maturity phase of platform operators in revenue model generation, as we found that our findings on platform revenue models have similarities to the ones of previous studies of platform operator start-ups in different context (c.f. täuscher and laudien 2017). the fifth limitation of this study lays on the external validity since the study is based on randomly selected sample population of 27 organizations only. as qualitative research typically (johnson 1997), the target of this research, however, is rather to document the key findings related to the revenue models of platform operators in the context of human-centered personal data management than to generalize the results across populations. lastly, deeper understanding of this phenomenon could be achieved by collecting more comprehensive data from personal data platform operators in longitudinal manner as the phenomenon of human-centred personal data management and the data platform business models mature. journal of business models (2018), vol. 6, no. 3, pp. 79-105 99 references ahokangas, p. & myllykoski, j. (2014). the practice of creating and transforming a business model. journal of business models, 2(1), 6-18. amit, r., & zott, c. (2012). creating value through business model innovation. mit sloan management review, 53(3), 41. baden-fuller, c. & haefliger, s. (2013). business models and technological innovation, long range planning, 46(6), 419-426. basit, t. (2003). manual or electronic? the role of coding in qualitative data analysis. educational research, 45(2), 143-154. beyeler, w. e., kelic, a., finley, p. d., aamir, m., outkin, a., conrad, s., mitchell m. d. & vargas, v. (2012). in: yang, s. j., greenberg, a. m. & endsley, m. (eds.) social computing, behavioral-cultural modeling and prediction. conference paper. berlin: springer berlin heidelberg: pp. 314-321. braun, v., & clarke, v. (2006). using thematic analysis in psychology. qualitative research in psychology, 3(2), 77-101. breidbach, c.f. & brodie, r.j. (2017). engagement platforms in the sharing economy: conceptual foundations and research directions. journal of service theory and practice, vol 27 no. 4. brownlow, j., zaki, m., neely, a. & urmetzer, f. (2015). data and analytics data-driven business models: a blueprint for innovation, working paper. brunn, p., jensen, m., & skovgaard, j. (2002). e-marketplaces:: crafting a winning strategy. european management journal, 20(3), 286-298. de montjoye, y-a., wang, s. s. & pentland, a. s. (2012). on the trusted use of large-scale personal data. ieee data eng. bull. 35(4), 5-8. doligalski, t. (2018). business models of internet companies and types of goods offered. journal of business models, 6(2), 32-36. edelman, b. (2015). how to launch your digital platform. harvard business review, 93(4), pp. 90-97. enders, a., hungenberg, h., denker, h-p. & mauch, s. (2008). the long tail of social networking. revenue models of social networking sites. european management journal, 26, 199–211. european commission. (2016). protection of personal data. http://ec.europa.eu/justice/data-protection/. accessed 27 january 2017. european union (2017). revised rules for payment services in the eu. http://eur-lex.europa.eu/legal-content/en/ lsu/?uri=celex:32015l2366. accessed 2 june 2017. evans, d. s. (2003). some empirical aspects of multi-sided platform industries. review of network economics, 2(3), 191-209. journal of business models (2018), vol. 6, no. 3, pp. 79-105 100 evans, d. s. & schmalensee, r. (2007). the industrial organization of markets with two-sided platforms, competition policy international, 3(1), 150-179. ferro, e., & osella, m. (2013). eight business model archetypes for psi re-use. paper presented at the ‘‘open data on the web’’ workshop, google campus, london. filistrucchi, l., geradin, d., van damme, e. & affeldt, p. (2014). market definition in two-sided markets: theory and practice. journal of competition law and economics, 10(2), 293-339. frow, p. & payne, a. (2011). a stakeholder perspective of the value proposition concept. european journal of marketing, 45(1/2), 223–240. gandomi, a. & haider, m. (2015). beyond the hype: big data concepts, methods, and analytics. international journal of information management, 35, 137–144. ghose, a. & han, s. p. (2014). estimating demand for mobile applications in the new economy. management science, 60(6), 1470-1488. giesen, e., berman, s. j., bell, r., & blitz, a. (2007). three ways to successfully innovate your business model. strategy & leadership, 35(6), 27-33. gnesi, s., matteucci, i., moiso, c., mori, p., petrocchi, m. & vescovi, m. (2014). my data, your data, our data: managing privacy preferences in multiple subjects personal data. lecture notes in computer science. 8450, 154-171. gomes, j. f. & moqaddamerad, s. (2016). futures business models for an iot enabled healthcare sector: a causal layered analysis perspective, journal of business models, 4(2), 60–80. gordijn, j., & akkermans, h. (2003, january). does e-business modeling really help?. in system sciences, 2003. proceedings of the 36th annual hawaii international conference on (pp. 10-pp). ieee. guest, g. (2012). applied thematic analysis. thousand oaks, california: sage. iivari, m. m., ahokangas, p., komi, m., tihinen, m., & valtanen, k. (2016). toward ecosystemic business models in the context of industrial internet. journal of business models, 4(2), 42-59. janssen, m., & zuiderwijk, a. (2014). infomediary business models for connecting open data providers and users. social science computer review, 32(5), 694-711. johnson, b.r. 1997 examining the validity structure of qualitative research, education, winter 1997, 118, 2, research library, pp. 828 kafentzis, k., mentzas, g., apostolou, d., & georgolios, p. (2004). knowledge marketplaces: strategic issues and business models. journal of knowledge management, 8(1), 130-146. kemppainen, l., koivumäki, t. & saraniemi, s. (2016). human-centered business models for platform operators in personal data management. the paper was published at the 32nd imp-conference in poznan, poland in 2016. journal of business models (2018), vol. 6, no. 3, pp. 79-105 101 koivumäki t, pekkarinen s, lappi m, väisänen j, juntunen j, pikkarainen m. consumer adoption of future mydata-based preventive ehealth services: an acceptance model and a survey study. j med internet res 2017 (forthcoming). doi:10.2196/jmir.7821. kshetri, n. (2014). big data’s impact on privacy, security and consumer welfare. telecommunications policy, 1134-1145. laudon, k. c. & traver, c. g. (2007). e-commerce: business, technology, society. pearson prentice hall, new jersey. lepak, d. p. & smith, k. g. & taylor, m. s. (2007). value creation and value capture: a multilevel perspective. academy of management review, 32(1), 180-194. li, f. (2017). the digital transformation of business models in the creative industries: a holistic framework and emerging trends. technovation. article in press. lumpkin, g. t. & dess, g. g. (2004). e-business strategies and internet business models: how the internet adds value. organizational dynamics, 33(2), 161–173. lusch, r.f. & nambisan, s. (2015). service innovation: a service-dominant logic perspective. mis quarterly, 39(1), 155–175. mcgrath, m. & scanaill c. (2013). sensor technologies, healthcare, wellness and environmental applications. magretta, j. (2002). why business models matter. harvard business review. 80(5), 86-92. mahadevan, b. (2000). business models for internet-based e-commerce: an anatomy. california management review, 42(4), 55-69. muzellec, l., ronteau, s. & lambkin, m. (2015). two-sided internet platforms: a business model lifecycle perspective. industrial marketing management. 45, 139-150. osterwalder, a. & pigneur, y. (2002). an ebusiness model ontology for modeling ebusiness. bled 2002 proceedings, 2. osterwalder a. & pigneur, y. (2010). business model generation: a handbook for visionaries, game changers, and challengers. canada: john wiley & sons. pagani, m. (2013). digital business strategy and value creation: framing the dynamic cycle of control points. mis quarterly, 37(2), 617-632. papadopoulou, e., stobart, a., taylor n.k. & williams, m.h. (2015). enabling data subjects to remain data owners. smart innovation, systems and technologies, 38, 239-248. pentland, a. (2012). society’s nervous system: building effective government, energy, and public health systems. ieee comput. 45(1), 31–38. poikola, kuikkaniemi, honko (2015). mydata – a nordic model for human-centered personal data management and processing. ministry of transport and communications. white paper. http://urn.fi/urn:isbn:978-952-243-455-5. journal of business models (2018), vol. 6, no. 3, pp. 79-105 102 rayna, t., darlington, j. & striukova, l. (2015). pricing music using personal data: mutually advantageous firstdegree price discrimination. electronic markets, 25, 139–154. redman, t.c. (2015). 4 business models for the data age. harvard business review. rehman, m. h., chang, v., batool, a. & wah, t. y. (2016). big data reduction framework for value creation in sustainable enterprises. international journal of information management, 36, 917–928. richardson, j. (2008). the business model: an integrative framework for strategy execution. strategic change, 17, 133-144. rietveld, j. (2017). creating and capturing value from freemium business models: a demand‐side perspective. strategic entrepreneurship journal. riquelme, h. (2001). do consumers know what they want?. journal of consumer marketing, 18(5), 437-448. roeber, b., rehse, o., knorrek, r& thomsen, b. (2015). personal data: how context shapes consumers’ data sharing with organizations from various sectors. electronic markets. 25, 95-108. rochet, j.-c. & tirole, j. (2003). platform competition in two-sided markets. journal of the european economic association, 1(4), 990–1029. sabourin, v. (2016). multi sided platforms (msps) value captation and monetization strategies: a strategic management perspective. business management and strategy, 7(1), 189-205. saldaña, j. (2015). the coding manual for qualitative researchers. sage. schweiger, a., nagel, j., böhm, m., & krcmar, h. (2016). platform business models. digital mobility platforms and ecosystems, 66-77. shafer, s. m., smith, h., j., linder, j. c. (2005). the power of business models. business horizons, 48, 199-207. shin, d.-h. (2016). demystifying big data: anatomy of big data developmental process. telecommunications policy, 40, 837-854. spiekermann, s. & novotny, a. (2015). a vision for global privacy bridges: technical and legal measures for international data markets. computer law & security review, 31(2), 181-200. spieth, p., schneckenberg, d., & ricart, j. e. (2014). business model innovation–state of the art and future challenges for the field. r&d management, 44(3), 237-247. tan, b., pan, s. l., xianghua, l. & lihua, h. (2015). the role of is capabilities in the development of multi-sided platforms: the digital ecosystem strategy of alibaba.com. journal of the association for information systems, 16(4), pp. 248–280. tavory, i., & timmermans, s. (2014). abductive analysis: theorizing qualitative research. university of chicago press. tucker, c. e. (2014). social networks, personalized advertising, and privacy controls. journal of marketing research, 51(5), 546-562. journal of business models (2018), vol. 6, no. 3, pp. 79-105 103 täuscher, k., & laudien, s. m. (2017). understanding platform business models: a mixed methods study of marketplaces. european management journal. 1-11. in press. van putten, b-j. & schief, m. (2012). the relationship between dynamic business models and business cases. electronic journal information systems evaluation, 15(1), 138-148. vargo, s. l. & akaka, m. a. (2012). value cocreation and service systems (re)formation: a service ecosystems view. service science, 4(3), 207–217. vargo, s. l., maglio, p. p. and akaka, m. a. (2008). on value and value co-creation: a service systems and service logic perspective. european management journal, 26(3), 145-152. vescovi, m., moiso, c., pasolli, m., cordin, l. & antonelli, f. (2015). building an eco-system of trusted services via user control and transparency on personal data. ifip international federation for information processing, 454, 240-250. voelpel, s.c. leibold, m. tekie, e.b. (2004). the wheel of business model reinvention: how to reshape your business model to leapfrog competitors. journal of change management, 4(3), 258-276. wang, y., tang, j.,  jin, q. & ma, j. (2014). on studying business models in mobile social networks based on two-sided market (tsm). journal of supercomputing, 70(3), 1297–1317. wang, j., & wang, z. (2014). a survey on personal data cloud. sci. world journal, 13, article id 969150. doi:10.1155/2014/969150. weber, r. h. (2015). the digital future a challenge for privacy? computer law & security review, 31, 234-242. wirtz, b. w., schilke, o. & ullrich, s. (2010). strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43, 272-290. yablonsky, s. a. (2016). multi-sided search platforms: global and local. international journal of technology marketing, 11(3), 319. yin, r. k. (2015). qualitative research from start to finish. guilford publications. zissis, d. & lekkas, d. (2012). addressing cloud computing security issues. future generation computer systems, 28(3), 583–592. zott, c., & amit, r. (2007). business model design and the performance of entrepreneurial firms. organization science,18(2), 181-199. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019-1042. journal of business models (2018), vol. 6, no. 3, pp. 79-105 104 m.sc. laura kemppainen is a doctoral candidate at martti ahtisaari institute of global business and economics at the aacsb accredited oulu business school, finland. she holds a m.sc. in marketing from oulu business school. laura’s research interests include platform business models, human-centered personal data management, digital innovation and value creation. the objective of the doctoral dissertation is to build more profound understanding about the creation, capture and co-creation of value in the emerging platform-driven and human-centered personal data ecosystem through the lens of servicedominant logic of marketing. dr. timo koivumäki is a professor of digital service business at martti ahtisaari institute, university of oulu business school. previously he has worked as a research professor of mobile business applications at vtt and at university of oulu, as a professor of information and communication business and as a research professor of electronic commerce at the university of oulu. all in all, koivumäki has over 20 years of experience in the field of digital business. his research interests include consumer behavior in digital environments, user-driven innovation, digital service business, digital marketing and strategic networking. koivumäki has been active in various duties (e.g. planning, managing and conducting research) in many national and international research and development projects. koivumäki has also published in numerous top level academic journals. about the authors journal of business models (2018), vol. 6, no. 3, pp. 79-105 105 minna pikkarainen is a joint professor of connected health in vtt technical research centre of finland and university of oulu / oulu business school, martti ahtisaari institute and faculty of medicine. the research professor is working as a scientific leader and as a collaborator between different units and departments in university of oulu, vtt and other ouluhealth (http://www.ouluhealth.fi/) ecosystem players from both public and private sector. currently minna is focusing on her research in the data, ai driven service co-creation and decision making services in health and wellbeing sectors. in her current projects minna has been researching the health transformation, innovation orchestration and ecosystemic business models. during 2010-2012 minna pikkarainen has been working as a business developer in institute mines telecom, paris and eit (european innovation technology) network in helsinki. her key focus areas as a business developer has been in healthcare organizations and digital cities. before minna’s research has been focused on the areas of software development, agile development and service innovation. antti poikola is a phd researcher at aalto university / department of computer science with research interests in how to utilize personal data for the benefit of individuals. he is the main author for the guidebook, mydata human centric way to organize personal data recently published by the finnish ministry of transport and communications. poikola is also experienced community builder, he has been successfully facilitating the establishment of finnish ecosystem around open data, finnish industry alliance for mydata and european network of personal data management platform providers. about the authors journal of business models (2019), vol. 7, no. 4, pp. 1-5 1 editorial introduction to the special issue based on papers presented at the business model conference 2019 please cite this paper as: montemari (2019) editorial introduction to the special issue based on papers presented at the business model conference 2019, vol. 7, no. 4, pp. 1-5 over the last three years, the business model conference has brought together more than 150 international academics and practitioners from a multitude of disciplines, the aim being to enhance collaboration and discussion among scholars in the business model community. the 3rd business model conference, held at fordham university, new york city, represented a further important step in this journey, providing the members of the community with a great opportunity to discuss the latest research, innovative teaching methods, and best practices on business model research. around 100 academics and practitioners attended the conference, where 38 papers were presented. two influential keynote speakers inspired and challenged participants: professor ramon casadesus-masanell (harvard business school, usa) and professor oliver gassmann (university of st. gallen, switzerland). the conference was also enriched by a phd colloquium, a teaching forum, and a panel debate on the effects of internationalization on business models. the phd colloquium was organized and carried out by professor xavier lecocq and professor benoit demil – assisted by professor svetla marinova, professor marin marinov, and professor petri ahokangas – who shared insights with doctoral students about the challenges of conducting research on business models. the colloquium was also a great opportunity for doctoral students to present and discuss their research with distinguished international scholars. the teaching forum was organized by phd candidate ryan rumble, professor anna b. holm, professor petri ahokangas, and dr. jesper sort with the aim of providing participants with innovative teaching formats and best practices for teaching business models. the panel debate focused on the theme “internationalization and business model configurations” and involved five contributors: professor christian nielsen, professor petri ahokangas, professor marin marinov, professor sam holloway, and professor minna pikkarainen. these contributors, moderated by professor svetla marinova, provided perspectives and input on whether and how the business model configurations of journal of business models (2019), vol. 7, no. 4, pp. 1-5 2 purely domestic companies differ from those of international companies and how different business model configurations may enable internationalization. the scientific committee undertook intense activities, both before and after the conference. in the months preceding the conference, the scientific committee reviewed all the papers submitted for presentation in order to ensure high standards; those selected were organized into 11 streams: conceptual views; ecosystems; innovation drivers and processes; research approaches and techniques; evolution, value, and measurement; digitalization; challenges and decision making; taxonomies and configurations; society and sustainability; innovation levers and barriers; and platform-related aspects. following the conference, the scientific committee selected 11 papers to be included in this special issue of the journal of business models. originality, significance, and rigor were the three criteria that guided the selection process, leading to a “compilation” of papers that tackle business model issues from different angles and through different research methods. let me briefly introduce these papers by focusing mainly on their objectives and respective contributions. dasilva and osiyevskyy (2019) investigate the nature, components, and underlying mechanisms of business model innovation as well as its crucial antecedents and consequences. in order to address these issues, the authors propose a multi-level theory of business model innovation that explains business model dynamics within established firms, integrating the processes that take place at the individual (micro-), collective (meso-) and organizational (macro-) levels. this multi-level approach shows that team cognition processes taking place at the inter-managerial (meso-) level translate the potential business model innovation (individual-level schemata) into realized business model innovation (organization-level change). drejer et al. (2019) investigate the relationship between corporate culture and the development of new business models. the authors propose the cultural elasticity model as a new perspective on how existing companies may better perform continuous organic development of business models. in particular, the proposed model suggests three organizational pillars – mutual trust, creativity, and engagement – play a role in the development of organizations with strong cultural elasticity, which enhances the organization’s ability to innovate business models. earle et al. (2019) consider that the transition from scientific discoveries to marketable products can be challenging, particularly as this process often involves organizations with different missions, incentives, and logics. to address this issue, the authors propose leveraging hybrid business model features, such as their ability to combine multiple institutional logics and to integrate public and private value creation, thus creating more robust interfaces with both universities and private firms. gomes et al. (2019) highlight the need for ecosystemic business models in the health-related area where it is crucial to overcome boundaries between the different actors to ensure a sound utilization of heterogeneous data and the improvement of service delivery. in light of this, the authors develop four alternative scenarios of ecosystemic business models, categorized according to a matrix that combines the following business model properties: opportunity exploration and exploitation, value creation and capture, and advantage exploration and exploitation. novikova (2019) investigates the consequences of the new european union data protection regulation on organizations’ business models. in particular, the paper explores the business model of an online media company and discusses how the new regulations on data ownership affect its business model. the author shows that new regulations regarding data ownership, processing, and storage will lead to customer-centric business models and will provide customers with the opportunity to monetize their data in a variety of ways. sort and turcan (2019) explore the impact of de-internationalization on companies with a particular focus on the challenges pertaining to re-configuring their business models and re-thinking their value propositions in response to de-internationalization. the authors develop a multi-level framework to conceptualize the relationships between de-internationalization and business models and to identify a series of business journal of business models (2019), vol. 7, no. 4, pp. 1-5 3 model-related decisions that need to be taken when companies withdraw from international markets. thomsen (2019) highlights the need to both advance business model research from concepts to theory and to fill the gap in available quantitative data on business models. to address these needs, the author aims to describe and represent business models configurations in a software-based structure in order to build the foundation for subsequent concepts and tools to assess, develop, and manage business models. developing a comprehensive database of business model configuration would pave the way for generating a true business model taxonomy, thus creating a business model innovation support system for corporate managers and identifying key performance indicators. van andel (2019) recognizes that making a business model work consistently in everyday operations is often problematic, entailing the risk of relegating this tool to a rather conceptual and abstract level. to propose a solution to this problem, the author underscores the importance of using business model “tactics” to apply the business model “holistic” rationality to dayto-day actions. for example, by following the logic of fluidity and strategic ambiguity, creating and playing out multifaceted identities, widely adopting a strategy of boundarylessness, informality, and openness, and finally, by strategically using complexity. verstraete and jouison (2019) offer an anthropological interpretation to present the conceptualization of business models as myths that have been institutionalized by a collective group of stakeholders. the myth allows the stakeholders to become coordinated and committed to a project and what brings them all together is shared values and/or value-sharing. they argue that the project is led by an entrepreneur who embodies the myth of the business model and who communicates the myth through the pitch, which is conceptualized as a rite of value sharing or, rather, of sharing values. williamsson et al. (2019) underscore that the business model literature misses an overarching concept that enhances the understanding of how business strategies, business models, and business processes develop and interact. in order to fill this gap, the authors use the idea of military doctrine and introduce a similar concept, called business logic, that can be defined as a general understanding of the history and trajectory of an industry, or category of similar business models. business logic includes issues such as resource utilization, value creation and capture, regulation, and stakeholder relationships. thus, the authors conceptualize business logic as encompassing the three levels of business analysis and functioning as a communication vessel between those levels. yeger and shenhar (2019) present a framework that aims to assess the degree of business model transformation of established companies, based on the following dimensions: target market, value proposition, value delivery, and value capture. the extent of change in each dimension is then quantified as no change, medium change, or high change. aggregating change on all dimensions enables classifying a specific business model transformation as incremental, semi-radical, or radical. the framework moves beyond generic typologies by offering a higher degree of granularity to provide new ways to operationalize and assess business model transformation. allow me to emphasize that this is a special issue composed of short papers, an innovative publication format adopted by the editors of the journal of business models, designed to fast-track the publishing process and thereby speed up the development of business model research. with a lean template and an emphasis on standard content, the authors focus on a single clear message. such a format enables a fast-track publishing process: decisions in 20 days from submission to possible acceptance; instructions for revision from each reviewer provided in maximum 100 words; two weeks given for submitting a revised version; in-print versions online instantly. the scientific committee and the conference committee are already at work to organize the business model conference 2020 and to maintain the high standards of the three previous conferences and resultant special issues of the journal of business models. i am glad to announce that the 4th business model conference will be held at aalborg university’s copenhagen campus on june 3-4, 2020. three influential keynote speakers have already been lined up: professor xavier lecocq (university of lille, france), professor benoit demil (university journal of business models (2019), vol. 7, no. 4, pp. 1-5 4 of lille, france), and prof. oliver gassmann (university of st. gallen, switzerland). these arrangements are certainly promising indications for the next business model conference and for the future of the journal of business models. in closing, i hope that the reader will find the short papers included here of value. since the business model conference was launched, i have been a member of the scientific committee of the conference and this has provided me with an ongoing opportunity to remain up to date and follow the research directions of business models. i must admit that this is, indeed, a privilege. i would like to thank all of the members of the scientific committee who have contributed their time and effort to the review process of the papers submitted for presentation at the conference and to the selection process of the papers included in this special issue. my special thanks go to professor robin roslender and professor christian nielsen, for their support during the production of this special issue, and to mette hjorth rasmussen, for her excellent, conscientious editorial assistance. marco montemari department of management, università politecnica delle marche, ancona, italy journal of business models (2019), vol. 7, no. 4, pp. 1-5 5 references dasilva c.m., osiyevskyy o. (2019), business model innovation: a multi-level routine-based conceptualization, journal of business models, vol.7, n. 4, pp.6-12 drejer a., byrge c., bjerre lyndgaard d., lassen h.m. (2019), development of new business models: introducing the cultural elasticity model, journal of business models, vol.7, n.4, pp. 13-19 earle a., leyva de la hiz d., turell y. (2019), hybrid business models and the public science-private industry interface, journal of business models, vol.7, n.4, pp.20-26 gomes j.f., kemppainen l., pikkarainen m., koivumäki t., ahokangas p. (2019), ecosystemic business model scenarios for connected health, journal of business models, vol.7, n.4, pp.27-33 novikova o. (2019), the new media business model: when customer controls the data, journal of business models, vol.7, n.4, pp.24-38 sort j., turcan r. (2019), de-internationalization: a business model perspective, journal of business models, vol.7, n.4, pp.39-44 thomsen p. (2019), business model performance: paving the road for comparable data on business models, journal of business models, vol.7, n.4, pp.45-52 van andel w. (2019), tactical shapeshifting in business modeling, journal of business models, vol.7, n.4, pp.53-58 verstraete t., jouison e. (2019), anthropological interpretation of the business model: myth, institutionalization and sharing, journal of business models, vol.7, n.4, pp.59-65 williamsson j., sandoff a., schaad g. (2019), business logic – the missing link between strategy, business model and business process?, journal of business models, vol.7, n.4, pp.66-72 yeger d., shenhar a.j. (2019), a unified framework for classification of business model transformations of established firms, journal of business models, vol.7, n.4, pp 73-78. journal of business models (2019), vol. 7, no. 3, pp. 100-110 100 activate business model learning through flipped classroom and backward design leandro bitetti1,2,* abstract the paper presents a teaching experience in a master course about business models following a pedagogical approach, which combines flipped classroom and backward design to facilitate the development of students’ competencies. the results confirm this method is effective, though it requires a significant shift in both lecturers’ and students’ roles. please cite this paper as: bitetti, l. (2019), activate business model learning through flipped classroom and backward design, vol. 7, no. 3, pp. 100-110 keywords: flipped classroom; backward design; competency-based learning 1 inno3 competence centre, department of business economics, health and social care, university of applied sciences and arts of southern switzerland 2 institute of marketing and communication management, faculty of communication sciences, università della svizzera italiana * corresponding author at: inno3 competence centre, department of business economics, health and social care, university of applied sciences and arts of southern switzerland, stabile suglio, 6928 manno, switzerland. leandro.bitetti@supsi.ch journal of business models (2019), vol. 7, no. 3, pp. 100-110 101 introduction this article aims to present a teaching experience based on the flipped classroom approach, integrated with backward design in a course on business models and business model innovation. the course is labelled “advanced strategic management ii”. it consists of a course of the master of science in business administration with major in innovation management at the university of applied sciences and arts of southern switzerland (supsi). developing a course about business models is not a matter of selecting the right contents only. actually, the most critical decision for instructors is about the teaching method to implement. the educational panorama has evolved a lot, with a rise of innovative models such as moocs, online university programs, and blended learning. the web has increased the access to information while lowering the cost to access it (nizet et al., 2016). in the case of the business model subject, the web provides academic online courses for free or through a relatively small fee via online learning platforms like coursera, edx, and futurelearn among others. in the same platforms, students can enrol in full business model online programs offered by well-known universities. there is also an increase in online courses given by professionals and consulting firms. in this fiercely competing panorama, higher education may be asked to reconfigure its role from an exclusive place of knowledge transfer to a facilitator role, consistently with the competencybased learning (burke, 1989; tardif, 2006). given that the information is widely distributed, lecturers may be suggested to use the time of the classroom for practical activities, while leaving out-of-class the knowledge acquisition, through videos, readings, etc. the latter is the core idea of the flipped classroom approach. following the competence-based perspective, the flipped classroom is an assembly of several educational practices under the approach of active learning (akçayir and akçayir, 2018; bergmann and sams, 2012; cecchinato and papa, 2016). bonwell and eison (1991: 19) define active learning as any teaching methodology, which “involves students doing things and thinking about the things they are doing”. in other words, students are directly active in their learning process. active learning fosters students’ performance as the synthesis of 1’200 meta-analyses by hattie (2015: 80) reveals. many of the highest ranked are principles of the flipped classroom approach, such as “classroom discussion”, “reciprocal teaching”, “feedback”, “problem-solving teaching”, “interactive video methods”, and “small group learning”. six decades earlier, dale (1954) revised its “cone of learning”, which already showed how people remember more by practicing than by reading or by listening. the latter does not mean that educators should stop asking students to read, but a mix between theory acquisition and practice contributes solving the knowing-doing gap (pfeffer and sutton, 2000). the pedagogical approach presented in this article consists in the combination of flipped classroom and the “backward design” (wiggins and mctighe, 1998), which is a consistent method with flipped classroom (hurtubise et al., 2015). the goal of the study is to assess whether the approach is an appropriate methodology to teach and learn business models and business model innovation. the rationale behind the study is supported by the importance for entrepreneurs and managers to develop competencies related to business models. in fact, zott and amit (2010) explain that “business model thinking” has been an important priority that contributed to inditex corporate success. at the same time, “thinking in terms of business model” has been reported as one major challenge when dealing with the ideation of new business models (frankenberger et al., 2013). an educational program that aims to train future managers or entrepreneurs should be aware that business model related competencies are important but difficult to build. for this reason, teaching theoretical aspects of business models and business model innovation only is not sufficient. schneckenberg et al. (2017) assess business model innovation as a process where decision-makers need to deal with uncertainty. approach this section presents how the approach implemented applies these two models, after providing the theoretical background of both briefly. the flipped classroom the basic idea of the flipped classroom is essentially an overturning of the educational logic. lecturers move before the class the acquisition of knowledge through readings, videos, audios, etc., while in class there is the practice of what learned at home through journal of business models (2019), vol. 7, no. 3, pp. 100-110 102 discussion and complex problem-solving activities. these classroom activities are often done in small groups under the supervision of the lecturer who acts as a facilitator of the learning process (bergmann and sams, 2012; cecchinato and papa, 2016; lage et al., 2000). bergmann and sams (2012) argue that there are significant changes in both out-of-class and inclass activities. the activities performed at home are considered equal in terms of time spent, but different at a conceptual level. in fact, two main changes are introduced in class. the first is about the revision and the discussion of the activity performed at home. in the traditional classroom, lecturers go over the concepts taught the previous sessions, and grade in class the homework provided. in the flipped classroom, the revision activity becomes a validation for the lecturer of the knowledge acquired by the students at home. the second is about the amount of time provided to the practice, which allows to increase the complexity of the task and assist students in its fulfilment. in class, students benefit from the tutoring of the lecturer, and from the presence of peers (hung, 2015). concerning out-of-class resources, lecturers have to make a choice about the key concepts to focus on in the video, as the latter is shorter than the usual lecture. for this reason, it is imperative to understand the educational goals at the very beginning of the instructional design. the method of backward design provides operational guidance to lecturers interested in designing courses with the approach of the flipped classroom. the backward design the “backward instructional design model” has been coined by wiggins and mctighe in 1998, who criticized the traditional approach in education design. the latter consists of the design of a curriculum by beginning with the selection of the topics and the reading list of the lectures. on the contrary, according to the backward design, once the lecturer identifies the core competencies students should develop, the design continues with the determination of the pieces of evidence the lecturer needs to collect in order to prove the achievement of the competencies aimed (wiggins & mctighe, 1998). lecturers need to select the different types of assessment (e.g. tests, quizzes, projects, etc.) to evaluate students’ learning performance. only after these reflections, it is possible to proceed to the planning of the contents and the teaching methodologies most consistent to contribute to the identified competencies development. the course planning and implementation the module of “advanced strategic management ii” is offered in the second semester of the first year of the master of science in business administration at supsi. the master program’s mission is to develop the “change agents” of tomorrow: professionals capable of managing innovation projects by understanding and answering to emerging customers’ needs, in a sustainable way through a systemic approach. the master is a consecutive part-time program conceived to allow students to gain working experience. every year the master program enrols 25-30 students only. the course of “advanced strategic management ii” is at its third edition. the pedagogical approach of the course has always been the flipped classroom. in these three editions, some changes occurred. first, the business model literature has exploded and continues to grow in these last years (massa et al., 2017) and this contributes to a continuous update of the contents, as well as the cases brought in class to practice. second, some improvements were made in pedagogical terms. students’ feedback highlighted the key critical aspects of the method, such as the length of the videos and the fact that they worked in groups with low interaction within the class during and after the practical activity. for these reasons, videos have been shortened, while a course blog, moderated by the lecturer, has been implemented. the blog allows students to exchange thoughts with peers and with the lecturer also after the lecture. the blog is a tool that facilitates students’ revision, by benefitting from the lecturer’s feedback. prior to the introduction of the course presented in this article, business models and business model innovation have been taught within the traditional classroom approach by other lecturers, always during the first year of the master program. when students arrived at the second year, they followed a practice-oriented course about innovation management. the lecturer acknowledged a lack of prerequisite competencies in terms of business modeling. given the uncertain and complex nature of innovation projects, the present course was redesigned in order to implement a mixed approach between theory and practice. in fact, entrepreneurship education claims that theory and practice have to be journal of business models (2019), vol. 7, no. 3, pp. 100-110 103 seen as a continuum (neck et al., 2014). the flipped classroom has been a natural choice to allows both theory acquisition and competencies development. the presented approach concerns the latest edition of the course. figure 1 illustrates the three key steps of the course’s backward design following the process described by wiggins and mctighe (1998). the desired result of the course is to develop a holistic approach to understand the strategic issues of an organization, and to design a structured process to solve these issues. to achieve this goal consistently, “business model” is used as the unit of analysis along the entire module, as it provides a “systemic view” on firms (massa et al., 2017). in terms of business model and business model related competencies, the course aims at developing the understanding, the description and the assessment of a business model, and the understanding and the application of processes and tools for business model innovation. the ultimate goal of the course is to train students to formulate and argue strategic recommendations on business models. once identified the students’ competencies to develop through the course, three various types of assessment have been determined. the first is a traditional written individual exam to test the knowledge of students. in fact, in order to express a competence, a student needs to consolidate its knowledge (abeysekera and dawson 2015; tardiff, 2006). as a second summative assessment, students have been asked to prepare a weekly individual short essay concerning a brief discussion of the theoretical concepts. to achieve the course’s goals in terms of competencies, students need to understand theoretical concepts, but most importantly they need to interpret the practical implications of these concepts. the questions asked for the essays could be summed up with: “what does this theory mean in practice?”. the translation from theory to practice is not so easy to achieve. for this reason, the assessment is performed weekly, also to monitor the students’ improvement due to lecturer’s feedbacks, the feedbacks from classmates, and the practice done in class. the operationalization of this kind of assessment within the course consists of the writing of an essay of 100 words to be posted on the course’s blog at least one day before the lecture. prior to the lecture, the lecturer comments each post with personal feedback. the third and most important assessment is about a simulation of a strategy workshop on business models. tardif (2006) asserts that a realistic task is considered the ideal context to assess students’ competencies. this edition’s final exam is the result of a continuing fine-tuning process, involving colleagues, education experts and “business model” lecturers, also met at the business model conference in 2018. actually, a competency-based assessment is particularly challenging to design (tardif, 2006). the first edition of the course involved a simulation in group about four competing companies that dealt with the necessity to innovate their business model. in the second edition, the exam consisted of an open-book case study performed individually, where students were asked to criticize a strategic report written by a consultant for a company. for this edition, a more “in-action” assessment has been experimented to simulate a real scenario even closer. in practice, students have been provided with a realistic situation of a company’s actual business model with some additional information (competitive analysis, innovation goals, perceived threats, etc.), and they were asked in groups of three to prepare a strategy workshop. students had to interpret the challenge provided to them and design an activity that lasted 30 minutes. the day of the final exam the same groups of students performed their designed activities to a team of faculty members, who acted as company members. the lecturer role was to assess how students conducted the workshop. in detail, the consistency of the activity proposed and their ability to manage the activity, by applying tools learned in class, have been assessed. this assessment is figure 1: backward design of the course “advanced strategic management ii” journal of business models (2019), vol. 7, no. 3, pp. 100-110 104 a sort of a big match for students, where students have to mobilize all the resources they developed along the course. in order to allow students to play a good match, a meticulous training program has to be designed. in terms of contents, both in-class and out-of-class education have been organized, over ten lectures. the first five lectures cover basic concepts of business models and business model innovation, while the last five lecturers deal with most advanced and in-depth topics. as represented in figure 2, out-of-class activities consist of a weekly video-lecture to be watched and a scholarly article to be read and discussed before the class day. in-class activities entail the discussion of the essays written by the students about the scholarly article read, and a simulation, a role play or a real case resolution. these practical activities are often codeveloped and co-conducted with local companies the author collaborates with in research projects. all the out-of-class activities are available at the beginning of the course to students via the course platform. the video-lecture has almost always been a screencast of a personal presentation recorded personally (i.e. a record of a slides-based presentation and the lecturer’s voice in background). more increasingly, videos prepared by other lecturers all over the world have been selected, through the educational platforms like coursera, edx, futurelearn, and other websites1. besides the authoritativeness of the lecturers and the higher quality of videos, this tactic also allows differentiating the point of views on the topic of “business models”. 1 in the latest edition of the module many resources have been selected by www.businessmakeover.eu in addition to the video, a scholarly article is provided to deepen their knowledge of the week’s specific topic. when students arrive in class, the lecture begins with the discussion of the essays. in this activity, the lecturer is less active. the lecturer’s primary role is to assess how students argue their essays and actively co-consolidate the knowledge they acquired through the out-of-class activity. voluntary students initiate the discussion by sharing their thoughts about the article and the topic in general. then, some students are asked by the lecturer to share a particular subject of their essays, which will be useful for the following case. in fact, the goal of this section of the lecture is to deepen the theoretical basis in order to facilitate the execution of the practical activity. then, a real case, a simulation, or a role play is launched by the lecturer or by a local firm. for example, the lecture about “value proposition design” debates the “jobs to be done theory” (see christensen et al., 2016) and the “value proposition canvas” tool (osterwalder et al., 2014). in class, students dealt with a local entrepreneur who had challenges in terms of its value proposition. students played a role-play to develop an improving value proposition, after having applied the jobs to be done theory through the value proposition canvas. after the activity, groups are asked to prepare and publish their results on the blog. the last minutes of the lecture there is a very important wrap up conducted by the lecturer in order to clearly explain the linkages between out-of-class and in-class activities. this is an extremely useful moment for students, that allows them to never miss the entire course overview and the link between theory and practice as structured in the course program as presented in table 1. figure 2: structure of the course “advanced strategic management ii” journal of business models (2019), vol. 7, no. 3, pp. 100-110 105 key insights after three editions of the course, results indicate that the flipped classroom approach combined with the backward design is an effective approach to develop business model related competencies. the final assessment proved that students mastered competencies to design a business model innovation workshop, consistently with the specific situation of the case provided to them. the study assesses that these results could have been possible thanks to the pedagogical approach used. in the context of the present study, the topic of business model is quite new for students and it is also complex from a conceptual point of view. moving before the class all the acquisition of theoretical concepts through videos and giving students the time to absorb the theory allowed them to develop business model related competencies with the right pace. in particular, students had time to understand and deepen the theory behind the business model construct. then, in class, students realized the complexity of a business model. instead of “filling the boxes” of the business model of a fake company, bringing to them a real situation made them develop a critical attitude towards a company ’s business model. this outcome is more difficult to achieve also through only practice-oriented programs. in fact, balancing theory and practice by giving the right timing for both is essential. the flipped classroom methodology was crucial to develop an understanding of the barriers to business model innovation. showing to the students some cognitive challenges (as in frankenberger et al., 2013) has been an important prerequisite to interview an entrepreneur and understand in practice some barriers he faced during the business model innovation process. students understood concretely how to solve some cognitive challenges that prevent business model innovation. the study shows the same results with the value proposition design lecture. besides knowing technically how to describe a job to be done, students understood how difficult table 1: description of the lectures’ goals and relative practical activities journal of business models (2019), vol. 7, no. 3, pp. 100-110 106 is that task in reality. in all this, the lecturer plays the delicate role of keeping the silver thread all along the course. the study reports the same positive outcomes with other flipped classroom experimentations. consistently with akçayir and akçayir (2018), the impact on students’ performance in the assessments is particularly positive. both knowledge-based and competencybased exams report low rates of failures (i.e. one student per year) and lasting results as confirmed by other lecturers in the subsequent courses. in terms of engagement and motivation students actively participate and engage with positive energy. when the lecture takes place, nonattendances are very rare and even the shyest students are delighted to discuss with peers. the flipped classroom environment makes the student feel comfortable to share their point of view with peers and with the lecturer (akçayir and akçayir, 2018). moreover, students’ perceptions confirm the effectiveness of the approach. every year a focus group is conducted with some voluntary students to ask them some suggestions to improve the course and specific insights about their satisfaction, in a very open and honest environment, once grades have already been communicated to them. students feel more competent after the course. they appreciate the fact that the approach taught them a mindset and a process to be able to understand and solve complex business problems. the yearly anonymous course evaluations confirm these perceptions. in the first two editions, students gave positive feedback to the course (a mean of 3.8/4 the first year, and of 3.9/4 the second year, while the evaluation of the third year is ongoing). further comments of the course evaluations show that students were surprised about the workload that did not increase compared to other traditional classes. additionally, students confirmed that the flipped classroom approach constrained them to study every week. this allowed them to perform and learn better in class. thus, they spent less time preparing for the written exams and the final assessment. one last key insight is about lecturer personal satisfaction. this approach revolutionized how teaching activity is conceived: it is challenging but much more rewarding and stimulating. discussion and conclusion as the competitive landscape has changed, it is lecturers’ responsibility to guide students to develop significant managerial competencies about business models to help companies to stay competitive (zott and amit, 2010), and to facilitate business model innovation processes (frankenberger et al., 2013). the flipped classroom combined with the backward design is a mindset that allows business model lecturers to enhance students’ competencies. even if it is not a brand-new approach and some convergence about advantages and pitfalls is reported in the literature, it is still difficult to warrant generalizability (akçayir and akçayir, 2018; hung, 2015). both literature and the author’s experience highlight some potential issues in implementing this approach. these challenges are both in general and in the specific context of a course on business models. here, the article discusses the main obstacles and possible solutions. first, besides the technicalities of the backward design and of the flipped classroom, lecturers should be aware that this approach requires a shift in both lecturer’s and students’ roles. along the course, it is imperative to provide frequent feedback to inform students about their development (bergmann and sams, 2012). the use of a blog, as in the present study, facilitates the continuous feedback process. moreover, flipped teachers have to verify if students performed the activities expected in preparation of the lecture and if they understood the concepts. scholarly literature provides many examples such as online quizzes, clickers, q&a, discussion boards, etc. (abeysekera and dawson, 2015; lage et al., 2000; vaughan, 2014). for those who are inspired by the present approach, but worried about the time needed, hurtubise et al. (2015) suggest that the flipped classroom could be implemented also in a small educational unit as a single lecture. technically speaking, this is possible but pay attention to the fact that students need to become gradually familiar with the approach to benefit from its advantages. in fact, students are not always used to active approaches in learning. most lectures are still “talk and chalk” and when students shift courses and encounter a flipped lecture, confusion may arise as both lecturer’s and students’ roles change. moreover, the most frequently cited pedagogical challenge reported by akçayir and akçayir (2018) is a poor students’ preparation prior to journal of business models (2019), vol. 7, no. 3, pp. 100-110 107 the lecture. for this reason, the most important task to perform at the beginning of a flipped classroom course is to explain the “rules” and the value of the approach and to be clear on its implications. a useful tactic to use is to bring other students’ feedbacks and perceptions about the approach to lower the preconceptions such as the fact that flipped classroom means increased workload. second, there is a general worry about the application of the flipped classroom approach in large class sizes. the master’s in business administration at supsi is characterized by a small number of participants. of course, this facilitates the implementation and conduction of active learning approaches. nevertheless, there are different effective flipped classroom experiences in courses with a high number of participants (butt, 2014; davies et al., 2013; hung, 2015). in these cases, it is important to carefully determine the in-class activities in order to ensure active tutoring (e.g. more lecturers in class, increased peer work, use of digital technologies, and virtual coaching). as it is easy to imagine, large class sizes increase the complexity of flipped classroom management, also because of infrastructure requirements (akçayir and akçayir, 2018). third, business model and business model innovation are complex topics. in the flipped classroom approach, theoretical concepts are acquired by students alone. even if the classroom activity will complement students’ knowledge, it is important for instructors to carefully select or produce the conceptual resources (e.g. videos, articles, etc.). students claim they would benefit from more guidance at home in the flipped classroom approach (akçayir and akçayir, 2018). the model works if the lecturer is able to build a consistent program. in the present case, the course has been split in two: basic concepts on business model and business model innovation (i.e. lectures from 1 to 5), and advanced concepts (i.e. lectures from 6 to 10). even if some advanced concepts would be useful to come before in time, the first lectures aimed at developing some basic skills and understanding of the topic. to conclude, this article explains in detail an innovative teaching approach, by presenting the process followed, the adjustments done, the assessment methods, and the contents of the course. business model instructors can adapt the approach according to their own necessities and design an effective and engaging educational program. in fact, replication of the method is possible. the article contributes to the innovation management education literature, by shedding lights on how the right mix and allocation of time between theory acquisition and practice activity fosters the development of students’ competencies. journal of business models (2019), vol. 7, no. 3, pp. 100-110 108 references abeysekera, l. & dawson, p. (2015), motivation and cognitive load in the flipped classroom: definition, rationale and a call for research, higher education research & development, vol. 34, no. 1, pp. 1-14. akçayir, g. & akçayir, m. (2018), the flipped classroom: a review of its advantages and challenges, computers & education, vol. 126, pp. 334-345. bergmann, a. & sams, j. (2012), flip your classroom: reach every student in every class every day, international society for technology in education, new york. bonwell, c. c. and eison, j. a. (1991), active learning: creating excitement in the classroom. 1991 ashe-eric higher education reports. eric clearinghouse on higher education, the george washington university, one dupont circle, suite 630, washington, dc 20036-1183. burke, j.w. (1989), competence-based education and training, falmer, london. butt, a. (2014), student views on the use of a flipped classroom approach: evidence from australia, business education & accreditation, vol. 6, no. 1, 33-43. cecchinato, g. and papa, r. (2016), flipped classroom: un nuovo modo di insegnare e apprendere, de agostini, novara. christensen, c. m., hall, t., dillon, k., & duncan, d. s. (2016), competing against luck: the story of innovation and customer choice. harper collins publishers, new york. dale, e. (1954), cone of learning, audio-visual methods in teaching (revised), holt, rinehart & winston, new york. davies, r.s., dean, d.l. and ball, n. (2013), flipping the classroom and instructional technology integration in a college-level information systems spreadsheet course, educational technology research and development, vol. 61, no. 4, pp. 563-580. frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013), the 4i-framework of business model innovation: a structured view on process phases and challenges, international journal of product development, vol.18, no. 3/4, pp. 249-273. hattie, j. (2015), the applicability of visible learning to higher education. scholarship of teaching and learning in psychology, vol. 1, no. 1, pp. 79-91. hurtubise, l., hall, e., sheridan, l. and han, h. (2015), the flipped classroom in medical education: engaging students to build competency, journal of medical education and curricular development, vol. 2, pp. 35-43. hung, h. t. (2015), flipping the classroom for english language learners to foster active learning, computer assisted language learning, vol. 28, no. 1, pp. 81-96. lage, m.j., platt, g. j. and treglia, m. (2000), inverting the classroom: a gateway to creating an inclusive learning environment, the journal of economic education, vol. 31, no. 1, pp. 30-43. massa, l., tucci, c. l. and afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. journal of business models (2019), vol. 7, no. 3, pp. 100-110 109 neck, h. m. greene, o. g., brush, c.g. (2014), practice-based entrepreneurship education using actionable theory. in m.h. morris (ed.), annals of entrepreneurship education pedagogy, edward elger publishing, northampton, ma, pp. 3-20. nizet, i., galiano, o. and meyer, f. (2016), vers un cadrage théorique pour comprendre la classe inversée, in dumont, a. and berthiaume, d. (eds.), la pédagogie inversée, de boeck supérieur, louvain-la-neuve, belgium, pp. 39-50. osterwalder, a., pigneur, y., bernarda, g., smith, a., (2014), value proposition design. how to create products and services customers want. wiley, hoboken. pfeffer j. and sutton, r. i. (2000), the knowing-doing gap: how smart companies turn knowledge into action, harvard business school press, boston. schneckenberg, d., velamuri, v. k., comberg, c., and spieth, p. (2017), business model innovation and decision making: uncovering mechanisms for coping with uncertainty. r&d management, vol. 47, no. 3, pp. 404-419. tardif, j. (2006), l’évaluation des compétences, la chenelière, montréal. vaughan, m. (2014), flipping the learning: an investigation into the use of the flipped classroom model in an introductory teaching course, education research and perspectives, vol. 41, no. 1, pp. 25-41. wiggins, g. and mctighe, j. (1998), what is backward design? in understanding by design, merrill prentice hall, upper saddle river, nj, pp. 7–19. zott, c. and amit, r. (2010), business model design: an activity system perspective. long range planning, vol. 43, no. 2/3, pp. 216-226. journal of business models (2019), vol. 7, no. 3, pp. 100-110 110 leandro bitetti is a lecturer and researcher at the inno3 competence centre at the department of business economics, health and social care of the university of applied sciences and arts of southern switzerland (supsi), and a phd student in the topic of business model innovation at the faculty of communication sciences at the università della svizzera italiana, in lugano. he holds a master of science in management with a specialisation in organizational behavior from the university of lausanne. his main responsibilities concern education, research and consulting activities in the field of innovation management, in particular in the area of innovation strategy and business model design. about the authors journal of business models (2020), vol. 8, no. 2, pp. i ii i welcome to the first standard issue of volume 8 of the journal of business models. despite the current restrictions on everyone’s activities, the team has been able to assemble an issue that includes eight papers, five full length and three short papers. the opportunity to include three short papers is particularly welcome and the hope is that going forward each standard issue will incorporate one or more of them. responsibility for short papers was recently assumed by dr marco montemari (m.montemari@staff.univpm.it) of the universita politecnica delle marche in ancona, italy. marco has previously had editorial responsibility for the special issues of short papers presented at the business model conferences in 2018 and 2019. the word limit for short papers will increase in the future and they will continue to be subject to external peer review but we aim to complete the review process within an appropriate timescale. special issues of the journal of business models have become more numerous in recent volumes, something the editorial team wish to continue. responsibility for special issues now resides with professor lorenzo massa, who recently joined aalborg university business school. suggestions for and enquiries about future special issues should be directed to professor massa at lorenzo.massa@buisness.aau.dk. full length submissions remain the responsibility of professor robin roslender, now also a faculty member at aalborg university business school. all submissions are subject to a double-blind peer review process which, while being lengthy, is designed to ensure the quality and enhance the impact of the papers published in the journal of business models. reviewers are drawn from the journal’s editorial boards together with a pool of ad hoc reviewers, all of whom have a demonstrated expertise in the business model and related fields. enquiries about prospective submissions should be mailed to me at rroslender@business.aau.dk. as many readers will know, the fourth business model conference scheduled to be held in copenhagen in early june of this year was cancelled as a result of the covid-19 epidemic. the event has now been rescheduled for 3 and 4 november, with a phd workshop on 2 november, at aalborg university’s copenhagen campus. submissions are still invited, with the existing submissions being carried forward. dr montemari will again take responsibility for receipt and processing submissions on behalf of the scientific committee. full details of the event are available on the conference website. a message from the editorial team robin roslender, editorin-chief; christian nielsen, consulting editor journal of business models (2020), vol. 8, no. 2, pp. i ii ii the conference will provide the opportunity for an inaugural meeting of the journal’s editorial boards, at which we will discuss a publication strategy for the next three years. details of this strategy will be added to the journal website by the end of the year as part of a comprehensive overhaul of its structure and content. the meeting will also provide the opportunity to formally thank our colleagues and former senior editors of the journal of business models, colin haslam and petri ahokangas, who together with christian nielsen founded the journal in 2013 and have worked tirelessly to establish its current reputation. one member of the editorial team merits particular mention, the managing editor mette rasmussen. many readers will already have communicated with mette in her support contact role, one of many she undertakes conscientiously in connection with the journal of business models. this work is only one part of her portfolio of responsibilities at aalborg, all of which she performs in similar manner. many, many thanks mette hope to see many of you in copenhagen in november professor robin roslender, editor-in-chief professor christian nielsen, consulting editor 1 working paper aalborg university business school what’s your innovation capacity? how do your stakeholders view your innovativeness? are your efforts to become more innovative fruitful, and do they make a difference? the net innovator score is a measure of your innovativeness. when measured consistently over time, the net innovator score provides valuable feedback on the success of your innovation efforts. in 2003, fred reichheld introduced the net promotor score® as the single number you need to grow in his seminal harvard business review article. this simple kpi has significantly influenced the perception and use of customer experience and loyalty as a forward-looking indicator of business growth. today, the net innovator score is the new number you must grow before you grow the net promotor score®. before enhancing your customer experience through your products and services, you need to offer competitive and innovative products and services. therefore, you should focus on increasing your net innovator score before your net promotor score®. being an innovative company today is more crucial than ever before. in terms of long-term survival, innovation is the key to remaining on top, evidenced by developments in the composition of the s&p500 index, where the average age of member companies is at an all-time low and turnover is at an all-time high. product, technological, and business model innovations are currently driving the economic growth of the industrialised world. the net innovator score christian nielsen1 introduction please cite this paper as: nielsen, c. (2020), the net innovator score, working paper, aalborg university business school keywords: font: net innovator score, net promoter score, innovation 1 aalborg university, denmark working paper, aalborg university business school 22 think about how you typically measure innovation being innovative is complex. measuring innovativeness is even more complicated compared to measuring your annual r&d spending, the number of patents, or revenues from a new product portfolio. being an innovative organisation is more about a mindset. being innovative craves focus and an organisational culture that nurtures sincere willpower to improve. none of these features is captured in r&d spending or other similar measures. so, how can you measure these highlevel characteristics? the net innovator score provides your organisation with valuable insights into how its key stakeholders perceive the innovativeness of the company. as a oneoff measurement, the net innovator score provides a perfect point of departure for improvement and an analysis of how separate stakeholder groups, such as employees or customers, perceive your organisation. when calculated consistently, the net innovator score provides essential information on how these perceptions evolve and can be related to your strategies and action points. the net innovator score calculation the net innovator score is based on the calculationmethodology of the net promotor score® proposed by reichheld (2003) and its later expansion by reichheld (2011). net innovator score measures your immediate stakeholders’ experiences of your innovativeness, i.e., your organisation’s ability to innovate. it is thus an ideal point of comparison. in using the net innovator score systematically, your company obtains a predictor of how your ability to innovate evolves over time and provides a core measurement for innovation development and innovation management programs. to calculate your net innovator score, your stakeholders must answer the following question on a 0–10 scale: is this company innovative in your opinion? respondents are then grouped into the following classes: • promoters (scores 9–10) are enthusiastic about the innovativeness of your organisation who will readily refer to your organisation when asked to provide best practice examples of innovative companies. • passives (scores 7–8) are satisfied with the innovativeness of your company but not enthusiastic enough to highlight your abilities when asked. • detractors (scores 0–6) are unhappy about the level of innovation they experience and can damage your credibility through negative word-of-mouth. subtracting the percentage of detractors from the percentage of promoters yields the net innovator score, which can range from a low of -100 (if every respondent is a detractor) to a high of 100 (if every respondent is a promoter). respondents to the survey question should be comprised of the three stakeholder groups of employees, customers, and partners. the amount of respondents in each stakeholder group should be balanced to capture an overall perception of your organisation’s innovation fitness. the sample size depends on your acceptable margin of error, as well as the available respondent base in each stakeholder group. in the net innovator score survey tool, respondents from these groups are asked to provide additional information about their specific relationship to your organisation. after reporting their perception of your innovativeness as described above, the respondents are then asked to evaluate in which areas they perceive you to be the most innovative (if they score from 7 to 10), or the type of innovation they consider would benefit the organisation for the future (if they score from 0 to 6). to take a sample survey, click here. to obtain a customised link to the survey tool to use for your organisation’s net innovator score calculation, visit www.netinnovatorscore.com. https://jobm.typeform.com/to/hafppsxr http://www.netinnovatorscore.com working paper, aalborg university business school 33 how to use the net innovator score in your organisation as a stand-alone measure, if you only have a single net innovator score survey available, you can analyse differences reported between each stakeholder groups’ perceptions along with their observations of your strengths and weaknesses in innovation. for example, do significant differences exist in the net innovator score reported from the employees, customers, and strategic partners? if these differences suggest a concern, then what can you do to examine in more depth? next, review each stakeholder group separately. for example, look at your strategic partners. what do the detractors say about which areas they believe you should improve? in which categories of innovation do the promotors consider you as an innovative company? this type of analysis can be repeated for each stakeholder group and compared. this information can also be leveraged to conduct interviews with selected respondents to obtain a better understanding of the perceived strengths and weaknesses. the ability to measure the evolution of your innovation is an important mechanism to apply your net innovator score for your advantage. however, innovativeness, like corporate culture, is not something that changes quickly. therefore, the net innovator score is most appropriately a measure that should be repeated, but not too often. a good rule of thumb is to conduct the survey once or twice a year at regular intervals. a possible justification for inconsistent timing in the survey interval is if your organisation launches a large-scale innovation initiative, launches into a new market, or alters its business model. through these types of scenarios, you can capture how these new activities or strategies impact your innovativeness through a before and after perspective survey. although the net innovator score provides multiple types of insights, additional value can be achieved by benchmarking with other organisations in similar industries, regions, or situations. the following are four best practices for implementing your net innovator score surveying: 1. be consistent and measure once or twice per year. 2. use the survey to provide insights on activities and strategies. 3. leverage the stakeholder contacts to keep in touch and help maintain their awareness of you as a proactive organisation. 4. combine surveys with follow-up interviews to discover more about interesting or concerning perceptions. concluding remarks the net innovator score is a simple and understandable forward-looking metric to provide indications of the future success of your company. the capability of your organisation to innovate is not something you should leave to chance. innovative companies are focused and structured while investing heavily in future success. the net innovator score is a straightforward calculation to monitor effects and anticipations of such investments. references reichheld, f. f. (2003), the one number you need to grow, harvard business review, 81(12), 46-55 reichheld, f.f. (2011), the ultimate question 2.0 (revised and expanded edition): how net promoter companies thrive in a customer-driven world, harvard business review press journal of business models (2020), vol. 8, no. 2, pp. 92-100 92 opportunity complementarity in data-driven business models yueqiang xu laura kemppainen petri ahokangas minna pikkarainen 1.martti ahtisaari institute, oulu business school, university of oulu, finland 2.empirical software engineering in software, systems and services, faculty of information technology and electrical engineering, university of oulu, finland 3.research unit of medical imaging, physics and technology, university of oulu, finland 4.vtt, technical research centre of finland * corresponding author: yueqiang xu, yueqiang.xu@oulu.fi abstract business model research typically focuses on value co-creation and co-capture logic to study business models in the ecosystem. to understand the “ex-ante” source of ecosystem-based value creation/capture, this paper proposes opportunity complementarity as a key antecedent for the ecosystem-based value creation and capture in data-driven business ecosystems. please cite this paper as: xu et al. (2020), opportunity complementarity in data-driven business models, vol. 8, no. 2, pp. 92-100 keywords: business model, opportunity, data-driven service introduction digitalization has been driving the transformation of traditional industries (e.g. healthcare, energy). a key characteristic of this transformation is digital convergence, namely the convergence of information and communication technologies (icts), data and new (digital) business models. the digital convergence requires to open the business research inquiry from the development of individual products and business models to business models created within business ecosystems (teece, 2018). since the inception of the business ecosystem concept introduced by moore (1993), the ecosystem has gained popularity in different domains, such as vargo, akaka and vaughan’s (2017) service ecosystem as a complex system of actors that are interconnected by shared institutional arrangements and mutual value creation targets (pikkarainen, huhtala, kemppainen, & häikiö, 2019). the theoretical connection between business models and business ecosystems has also been established (gomes, kemppainen, journal of business models (2020), vol. 8, no. 2, pp. 92-100 93 pikkarainen, & koivumäki, 2019). business ecosystems are deemed as a network of business models (jansson, ahokangas, iivari, perälä-heape, & salo, 2014), where the firms seek various business models (e.g. bundled or hybrid) to aggregate services from different parts of the digital ecosystem (iivari, ahokangas, komi, tihinen, & valtanen, 2016). furthermore, the ecosystem discussion has been connected to platforms, for instance, xu, ahokangas, turunen, mäntymäki and heikkilä (2019) examined the ecosystemic business models for ai (artificial intelligence) platforms. jacobides, cennamo and gawer (2018) distinguish ecosystem and platform, suggesting that a “business ecosystem” centres on a company and its environment, while a “platform ecosystem” considers how actors organize around a (technical) platform. thus, while all platforms can be considered as ecosystems, not all ecosystems are platforms. so far, business model research in ecosystems mainly focuses on the value aspect and advantage aspect of business models. for instance, the value perspective considers value co-creation and co-capture as a key characteristic for digital businesses in ecosystems (nenonen & storbacka, 2010). the advantage perspective suggests that joint open innovations are essential for the sustained competitive advantages of the actors involved (chesbrough, lettl, & ritter, 2018). however, so far the literature has looked at the fundamental driver of such co-creation and co-capture within ecosystems only rarely. teece (2018) suggests complementarity as a new way to form the phenomenon that tech companies jointly create and capture value in an ecosystem, arguing that complementarity should not be solely seen as value capture mechanisms, rather it is a key requirement or prerequisite for the technology and business model to fun in the digital age. building on teece’s (2018) complementarity thinking, this study proposes opportunity complementarity as a new construct and driver for the co-creation and co-capture actions in the digital ecosystems from the opportunity perspective. the concept of opportunity has been widely recognized in the business literature. the existing study suggests that companies need to explore and exploit business opportunities to survive in the long term (benitez, llorens, & braojos, 2018). opportunity has been characterised as a cognition that emerges in the creative process (alvarez & barney, 2010), an objective phenomenon that exists and is independent of the company (shane, 2003) and as a realization of something that brings value to the customer (sridhar & corbey, 2015). however, the opportunity is implicitly considered as a singular/atomistic construct, and little investigation has been conducted on complementary opportunities in business model and ecosystem literature. for example, previous study (gomes, iivari, pikkarainen, & ahokangas, 2018) suggests that business ecosystems need to be organized around only a specific broad business opportunity. however, this study argues that there can be multiple opportunities in an ecosystem. the opportunities are characterized as a social construction bringing value to the customer that are jointly explored and exploited by public and private actors in two datadriven ecosystems in the study. the study investigates the opportunity complementarity in the context of data-driven business ecosystems. as data has become a valuable resource for companies and their business models, the data-driven aspect is an inherent characteristic of digital businesses (hartmann, zaki, feldmann, & neely, 2016). in data-driven business models, the value is created and captured within an ecosystem (shafer, smith, & linder, 2005) by using data as the key resource in the business activities (hartmann et al., 2016). data-driven business models such as amazon or netflix are designed around collecting, organizing, and summarizing data, with the goal of better identifying the unmet customer needs and other opportunities in the market (sorescu, 2017). overall, this study contributes to the concept of complementarity from the opportunity perspective to the business model literature to enhance theoretical and empirical understanding of ecosystemic opportunity exploration and exploitation in the context of datadriven businesses. approach the review of business model literature shows that the business model can be conceptualized through three important aspects that connect the business models to the business context, the value perspective that concerns with the value proposition, value creation and capture (xu, ahokangas, & reuter, 2018), the opportunity perspective focusing on opportunity exploration journal of business models (2020), vol. 8, no. 2, pp. 92-100 94 and exploitation (teece, 2018) and the perspective of competitive advantage (priem, wenzel, & koch, 2018). the concept of complementarity was proposed in teece’s (1986) seminal pfi (profit from innovation) framework. pfi framework stresses the importance of complementarity from resource and capability perspectives, suggesting that complementary technologies and assets are key to the success of the business model. recently, six streams of complementarity have been identified (teece, 2018): 1) production complementarity, which means that complementarity happens when a decrease in the price of one factor leads to an increase in the quantity used of its complements in production (hicks, 1970); 2) consumer complementarity, which means that two products are complements in consumption if the utility of consuming them together is greater than consuming each product separately (edgeworth, 1925); 3) input complementarity that means that two products can have complementarity with each other if they are used together but sold by separate companies (teece, 2018); 4) asset price complementarity, which suggests that an actor can speculate on complementary assets likely to increase in value in the futures market (hirshleifer, 1971); 5) technology complementarity: in technology systems, there are complementary components within the systems and the technical complementarity relation between different components (holgersson, granstrand, & bogers, 2018); 6) innovation complementarity that occurs when improvements in a general-purpose technology increase the productivity in downstream sectors (teece, 2018). the new type of complementarity: opportunity complementarity overall, economic literature looks at most of the complementarities as market-related phenomena. only technology and innovation complementarities are related to the advantage perspective of business models. this study identifies a new type of complementarity, namely the opportunity complementarity, as a key antecedent of the business model, especially in ecosystem settings. opportunity research has its root in entrepreneurship studies, being mostly defined as as “situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships” (eckhardt & shane, 2003:336). research on the opportunity can be divided into two major streams. first, the discovery stream considers opportunity as an objective phenomenon that exists in the external world, independent of the actors (eckhardt & shane, 2003). instead, the creation perspective considers an opportunity as linked to entrepreneurial cognition and emerging due to a creation process (alvarez & barney, 2010). regarding opportunity and business models, an opportunity would provide a basis for value creation (atkova, 2018). the concept of complementary opportunity can be seen in mathematical social sciences (herrero, iturbeormaetxe, & nieto, 1998) through the notions of (i) opportunity profiles, e.g. individual or atomistic opportunity that is the opportunity specifically for individual actor and is not complementary to other actors’ opportunities, and (ii) the common opportunity (or complementary opportunity) available in the society. in our definition, opportunity complementarity means that business actors (especially in an ecosystem) can have opportunities that are complementary to each other, which can lead to the creation and the capture of value in a collective manner, namely to an ecosystemic value co-creation and co-capture. evidently, opportunity complementary is different from the complementarities in economic studies such as production complementarity or consumer complementarity. it is particularly important to address the difference between technology complementarity and opportunity complementarity: 1) the former focus on the modular technical systems that require two or more modules to be combined so the overall system will function properly, such as software (e.g. windows operating system) for hardware (personal computers). without the correct and welldefined specification, the technology complementarity can barely work; 2) the latter suggests that business actors can create and capture value from complementary opportunities for individual or collective benefits. there is no rigid lock-in for the opportunities. the categorisation of data-driven business models on scale and scope data-driven business models can be categorized based on whether they are scaleor scope-oriented. in scale-oriented business models, the companies in the journal of business models (2020), vol. 8, no. 2, pp. 92-100 95 ecosystem partner with one another to integrate data and create data-driven products or services by focusing on the economics of scale. in a scope-oriented business model, the companies in the ecosystem aim for a platform model that allows a higher level of technology integration to enable the companies to create innovations in variety to address the needs and opportunities in the market (pikkarainen, ervasti, hurmelinna-laukkanen, & nätti, 2017), thus, the economies of scope. research methodology this study employs a multi-method and interpretive case study (walsham, 2006). we include and crossexamine two data-driven business ecosystems from essentially un-related industries, in particular, one from the european union (eu)’s energy innovation project (p2p-smarttest) and the other from the finnish national healthcare innovation project (icory). in doing so, we aim at enhancing the findings’ reliability and demonstrating the wide presence of data-driven business models. the eu’s p2p-smarttest project investigates a smarter electricity distribution system integrated with advanced ict, regional markets and innovative business models. the project has 10 partners (5 companies and 5 public players) to develop four data-driven business model archetypes (figure 1): conventional utility model, esco (energy service company) model, shared network access model and the p2p platform model. the icory project aims for creating an intelligent and customer-driven solution for orthopaedic and paediatric surgery journey in collaboration with companies, hospitals and researchers in finland and singapore. the project has 18 partners (9 companies and 6 public players) who jointly identified four business model archetypes: the conventional healthcare model, the health service platform model, the health data integration model and health innovation ecosystem model. during the workshops, the data business model archetypes were developed and a systematic way of generating the opportunity scenarios was applied similarly in both projects. for instance, both projects adopt an ecosystem approach to involve and engage the key actors and stakeholders in the ecosystem, including both public and private partners. the ecosystem approach seeks complex problem solving from the partner’s diverse background and heterogeneous contributions. thus, the benefits of such systems are the creation of alternative or complementary solutions to the opportunity (exploration and exploitation) and (value creation and capture) aspects of the business model. key insights the business model cases collected from the two projects are mapped on the opportunity complementarity map based on the type of opportunity source and from the perspective of data-driven business (figure 1). from the two case studies, some common findings emerge. first, atomistic opportunities exist to be mainly beneficial to certain actors with the closed data model (single-source data to create a targeted application) or the single-sided data platform model that only benefits the platform operator. in the icory project, the closed data model was the only option due to the healthcare-related data protection issues. second, both cases confirm the presence of opportunity complementarity before the creation of business models. the opportunity complementarity brings the public and private partners together to explore and exploit the opportunities with digital technologies and more innovative business models like the data integration model, in which partners integrate technology and share data to create scale-oriented applications or the multi-sided platform incorporating different technologies and data sources for diverse applications. it is key to note that as both cases involve digital technology, therefore the technology complementarity and opportunity at om is tic op po rt un ity co m pl em en ta ry op po rt un ity scale-oriented business model scope-oriented business model closed data model data integration model single-sided data platform multi-sided data platform icory project: conventional healthcare model p2p smartest project: conventional utility model icory project: health service platform model p2p smartest project: esco (energy service company) model icory project: health data integration model p2p smartest project: shared network access model icory project: health innovation ecosystem model p2p smartest project: p2p platform model figure 1: opportunity complementarity mapping journal of business models (2020), vol. 8, no. 2, pp. 92-100 96 complementarity can be observed as intertwined in each case. as such, the integration of data and technical interoperability (technology complementarity) facilitates the new ways of collaborative value creation and capture for new markets and business models (opportunity complementarity). specifically, the icory project enables small and medium-sized companies and hospitals with the help of researchers to find opportunities for more customercentred and innovative business models. instead of one business model, in this case, the ecosystem consists of different companies with various offerings and different opportunity complementarities have been identified. instead of pursuing atomistic opportunities, the companies aim for creating value together for the hospitals and patients and seizing complementarity opportunity with both a health data integration model and a multi-sided platform model. in the health data integration model, companies such as patient engagement platform provider, data analysis provider and video communication provider aim to integrate their resources for addressing the needs of the healthcare providers and patients. in the multi-sided platform model (health innovation ecosystem model), we found even more collaboration happening in the ecosystem, where all the ecosystem participants form a portfolio of services that are connected and integrated to create more value for the healthcare providers. in the icory case, several complementarities are observed: 1) the companies created consumer complementarity by combining the digital solutions with typical medical treatment to enhance the patient experience; 2) the product complementarity is created as individual solution are targeting different stages in the care pathway, but complementing each other in the patient journey; 3) input complementarity can be seen when two companies jointly provide codes and data for a new bundled patient solutions that are sold separately by the two companies; 4) technology complementarity is achieved through integration of apis (application programming interface) from different companies; 5) the innovation complementarity is visible as the use of ai and data analytics improve the front-end user applications; 6) the opportunity complementarity not only enables the collaborative value creation and capture but also motives the public sector to overcome the institutional barrier and status quo to co-create new digital solutions and innovations with the startups and small healthcare companies, which is an unconventional practice of the public hospitals. in p2p smartest, a key driver for the co-creation of the smart energy business models is the complementary opportunities from actors positioned in different domains of the ecosystem (e.g. electricity distribution, energy service, energy forecasting and energy trading). the opportunities are complementary to each other, so these actors can integrate their technical capabilities, utilizing assets and redirecting resources to co-develop new business models with the focus of scalability, replicability and business sustainability. the study identifies that a traditionally centralized utility with a closed business model (closed data model) starts to shift its focus towards the open business model (multi-sided data platform model) in the data-driven smart energy ecosystem. this would not have happened without the recognition of shared opportunities that are complementary to and from other energy ecosystem actors. another key finding of the research is the non-static nature of opportunity complementarity. the opportunity complementarity can affect the choice of business models while the choice or design of the business model can also affect the opportunity complementarity. for instance, in p2p smartest, the complementary opportunities in the emerging smart grids domain drive the energy ecosystem actors to embrace more open business models (e.g. sharing network access model and the p2p platform model) over the atomistic models (e.g. closed data model). in contrast, when energy utilities choose a business model (or design of business model), the opportunity complementarity changes significantly. more specifically, the shared network access model provides complementary opportunities for energy network operators who traditionally have closed and non-cooperative model with each other to generate new revenue streams by sharing their own data. the p2p platform model enables better opportunity complementarity between peer energy producers and energy service companies while it does not create complementarity for energy network operators anymore. in the icory case, addressing the unique nature of these particular cases as public-private partnerships journal of business models (2020), vol. 8, no. 2, pp. 92-100 97 would also be useful. in icory, three companies used the health innovation ecosystem model to address the opportunity in the public sector. in the first company, the national players in the international market helped them to modify their solution to be complement with the regulatory rules. they also worked together helping the company to co-create a solution content so that it is more complementing the needs at the public hospitals and among the patients. in the other case company, the discussions with the public international partners helped them to sell their solutions in a way that it is better to fit the targeted market. in the third company, the discussions with the public international players started as a multi-sided manner but it stopped suddenly because the solution does not fill the patient needs in the target country. this means that the collaborators did not anymore see the complementarity of their opportunities. the icory case shows that despite the structural constraints of the hospitals as a type of key public actor in the healthcare ecosystem, the opportunity complementarity helps reduce the conflict and barriers (due to high safety and security requirements for healthcare products and services) that the small healthcare solution companies typically face when commercializing their solutions. however, it is also visible that institutional arrangements, such as data privacy and protection in healthcare institute do hinder the opportunities to be truly complementary. discussion and conclusions the business model literature, and particularly research based on the perspective of value creation and capture, has evolved from single-actor models to multiactor models, such as platform business models and ecosystem-oriented business models in the context of industry convergence and digitalisation. this paper presents two case studies of large-scale digitalization projects at eu and finnish national levels with datadriven business models that are created within the two ecosystems. this paper provides several contributions. first, it enriches the business model literature by proposing the opportunity complementarity as a new construct and antecedent prior to the creation of business models in the ecosystem setting. in particular, this paper adds to the literature by distinguishing the atomistic and complementary opportunities that are conceived and perceived by different ecosystem actors. this contributes to a deeper understanding of the ecosystem actors’ rationale of engaging in value co-creation and co-capture processes in (digital) ecosystems, which is opportunity complementarity as an important factor. furthermore, without a proper logic for value capture, even a ground-breaking opportunity is of no practical value due to its detachment from the business reality. to bring opportunities into business reality, actions are required to build business models through value cocreation and co-capture processes. second, this study investigates the data-driven business models in two large and established industries that are undergoing a digital transformation, proposing four data-driven business model archetypes. when an ecosystem adopts a scope-oriented business model, the players embrace a more integrated approach (e.g. connecting individual digital systems through platforms) to pursue the common opportunities, sharing data, knowledge, and technical resources. when dealing with scale-oriented data business models, companies are less likely to opt-in for a common platform and prefer to reserve their own data in silos. third, the study adds to the emerging platform research filling in a relevant research gap by explaining the opportunity complementary as an “ex-ante” driver for the creation of a platform business model. in doing so, we bring the concept of complementarity from economic literature to offer a novel understanding to address the research gap in understanding the drivers of business ecosystems in business model literature from the opportunity perspective by proposing the concept of opportunity complementarity that unites ecosystem and entrepreneurship studies. fourth, this research contributes to the ecosystem and platform research by showing that business platforms typically have ecosystem revolving around them or “platform ecosystem” per se (jacobides et al., 2018). however, not all platforms are open. in fact, the nonexistence of opportunity complementarity can lead to closed or “semi-closed” platforms, such as the singlesided data platform model in the research (figure 1). fifth, from the empirical cases, six types of complementarities (including opportunity complementarity) journal of business models (2020), vol. 8, no. 2, pp. 92-100 98 are observed. the only missing one is the production complementarity. the potential explanation is that the solutions within the two cases are mainly digital applications rather than physical products. the increased supply and use of data as an input did not lead to a decrease in the solution price but enhanced solution quality. such finding may support the further investigation on the economics and complementarity of data in the digital age. the research limitation is the missing of longitudinal perspective. the icory case of the research shows that the opportunity complementarity may change over time as the opportunity itself has a fluid nature and is context-dependent: the old opportunity may lose its effect while new opportunities may emerge. hence, the dynamic nature and longitudinal aspect of the opportunity complementarity and its impact on the business model require further research endeavour. furthermore, this study acknowledges that opportunity complementarity is not static and further investigation is needed to understand the formation and dynamics of opportunity complementarity. journal of business models (2020), vol. 8, no. 2, pp. 92-100 99 references alvarez, s. a., & barney, j. b. (2010). entrepreneurship and epistemology: the philosophical underpinnings of the study of entrepreneurial opportunities. the academy of management annals, 4(1), 557–583. https://doi.org/10.10 80/19416520.2010.495521 atkova, i. (2018). from opportunity to business model: an entrepreneurial action perspective. university of oulu, acta universitatis ouluensis. g, oeconomica. retrieved from http://urn.fi/urn:isbn:9789526218915 benitez, j., llorens, j., & braojos, j. (2018). how information technology influences opportunity exploration and exploitation firm’s capabilities. information and management, 55(4), 508–523. https://doi.org/10.1016/j.im.2018.03.001 chesbrough, h., lettl, c., & ritter, t. (2018). value creation and value capture in open innovation. journal of product innovation management, 35(6), 930–938. https://doi.org/10.1111/jpim.12471 eckhardt, j., & shane, s. (2003). the individual-opportunity nexus. in z. acs & & d. audretsch (eds.), handbook of entrepreneurship research: an interdisciplinary survey and introduction (pp. 161–191). dordrecht, the netherlands: kluwer l aw international. https://doi.org/10.1007/0-387-24519-7_8 edgeworth, f. y. (1925). papers relating to political economy. london: macmillan. https://doi.org/10.2307/2547849 gomes, j. f., iivari, m., pikkarainen, m., & ahokangas, p. (2018). business models as enablers of ecosystemic interaction: a dynamic capability perspective. international journal of social ecology and sustainable development (ijsesd), 9(3), 1–13. gomes, j. f., kemppainen, l., pikkarainen, m., & koivumäki, t. (2019). ecosystemic business model scenarios for connected health, 7(4), 27–33. hartmann, p. m., zaki, m., feldmann, n., & neely, a. (2016). capturing value from big data – a taxonomy of datadriven business models used by start-up firms. international journal of operations & production management, 36(10), 1382–1406. https://doi.org/10.1108/mbe-09-2016-0047 herrero, c., iturbe-ormaetxe, i., & nieto, j. (1998). ranking opportunity profiles on the basis of the common opportunities. mathematical social sciences, 35(3), 273–289. https://doi.org/10.1016/s0165-4896(98)00003-1 hicks, j. (1970). elasticity of substitution again: substitutes and complements. oxford economic papers, 22(3), 289–296. hirshleifer, j. (1971). the private and social value of information and the reward to inventive activity. the american economic review, 61(4), 561–574. holgersson, m., granstrand, o., & bogers, m. (2018). the evolution of intellectual property strategy in innovation ecosystems: uncovering complementary and substitute appropriability regimes. long range planning, 51(2), 303– 319. https://doi.org/10.1016/j.lrp.2017.08.007 iivari, m. m., ahokangas, p., komi, m., tihinen, m., & valtanen, k. (2016). toward ecosystemic business models in the context of industrial internet. journal of business models, 4(2), 42–59. jacobides, m. g., cennamo, c., & gawer, a. (2018). towards a theory of ecosystems. strategic management journal, 39(8), 2255–2276. https://doi.org/10.1002/smj.2904 journal of business models (2020), vol. 8, no. 2, pp. 92-100 100 jansson, n., ahokangas, p., iivari, m., perälä-heape, m., & salo, s. (2014). the competitive advantage of an ecosystemic business model: the case of ouluhealth. interdisciplinary studies journal, 3(4), 282–295. retrieved from http://search.proquest.com/docview/1527435925?accountid=45153 moore, j. f. (1993). predators and prey: a new ecology of competition. harvard business review, 71(3), 75–86. retrieved from http://www.mendeley.com/research/predators-and-prey-a-new-ecology-of-competition/ nenonen, s., & storbacka, k. (2010). business model design: conceptualizing networked value co-creation. international journal of quality and service sciences, 2(1), 43–59. retrieved from http://dx.doi.org/10.1108/17566691011026595 pikkarainen, m., ervasti, m., hurmelinna-laukkanen, p., & nätti, s. (2017). orchestration roles to facilitate networked innovation in a healthcare ecosystem. technology innovation management review, 7(9), 30–43. https://doi. org/10.22215/timreview/1104 pikkarainen, m., huhtala, t., kemppainen, l., & häikiö, j. (2019). success factors for data–driven service delivery networks. journal of innovation management, 7(4), 14–46. https://doi.org/10.24840/2183-0606_007.004_0003 priem, r. l., wenzel, m., & koch, j. (2018). demand-side strategy and business models: putting value creation for consumers center stage. long range planning, 51(1), 22–31. https://doi.org/10.1016/j.lrp.2017.07.007 shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, 48(3), 199–207. https://doi.org/10.1016/j.bushor.2004.10.014 shane, s. (2003). a general theory of entrepreneurship the individual-opportunity nexus. northampton, ma: edward elgar. sorescu, a. (2017). data-driven business model innovation. journal of product innovation management, 34(5), 691– 696. https://doi.org/10.1111/jpim.12398 sridhar, a., & corbey, m. (2015). customer profitability analysis and customer lifetime value: comparing and contrasting two key metrics in customer accounting. management accounting, 89(7–8), 265–273. teece, d. j. (1986). profiting from technological innovation: implications for integration, collaboration, licensing and public policy. research policy, 15(6), 285–305. https://doi.org/https://doi.org/10.1016/0048-7333(86)90027-2 teece, d. j. (2018). profiting from innovation in the digital economy: enabling technologies, standards, and licensing models in the wireless world. research policy, 47(8), 1367–1387. https://doi.org/10.1016/j.respol.2017.01.015 vargo, s. l., akaka, m. a., & vaughan, c. m. (2017). conceptualizing value: a service-ecosystem view. journal of creating value, 3(2), 117–124. https://doi.org/10.1177/2394964317732861 walsham, g. (2006). doing interpretive research. european journal of information systems, 15(3), 320–330. https:// doi.org/10.1057/palgrave.ejis.3000589 xu, y., ahokangas, p., & reuter, e. (2018). eaas: electricity as a service? journal of business models, 6(3), 1–23. xu, y., ahokangas, p., turunen, m., mäntymäki, m., & heikkilä, j. (2019). platform-based business models: insights from an emerging ai-enabled smart building ecosystem. electronics, 1–20. https://doi.org/10.3390/electronics8101150 journal of business models (2020), vol. 8, no. 2, pp. 22-30 22 ai and business model innovation: leverage the ai feedback loops evangelos katsamakas1 and oleg pavlov2 abstract purpose: the article analyzes the effects of artificial intelligence (ai) on business model innovation (bmi), focusing on the platform business model. design/methodology/approach: proposes a cld (causal loop diagram) model and analyzes the model to discuss insights about the structure and performance of the business model. findings: shows that ai enables key strategic feedback loops that constitute the core structure of the business model. practical implications: managers and entrepreneurs who seek to leverage ai should invest in the ai feedback loops. an ai strategy for bmi should seek to create, strengthen, and speed-up ai feedback loops in the business model. originality/value: analyzes the effects of ai on bmi while accounting for dynamic complexity as a business model property to be understood and leveraged. contributes to our understanding of the business value and impact of ai. please cite this paper as: katsamakas, e. and pavlov, o (2020), ai and business model innovation: leverage the ai feedback loops, vol. 8, no. 2, pp. 21-30 keywords: ai strategy, business model, platforms, digital transformation, dynamic complexity. 1 gabelli school of business, fordham university, new york, ny, usa 2 worcester polytechnic institute, worcester, ma, usa journal of business models (2020), vol. 8, no. 2, pp. 22-30 23 introduction ai is expected to have a transformative impact on the economy and society (brynjolfsson and mcafee, 2016). however, companies are struggling to make sense of the business impact of ai and create a coherent ai strategy. this article brings together the concepts of ai and business model innovation, analyzing the effects of ai on business model innovation. bmi can be seen as a process and an outcome, the innovative business model (foss and saebi, 2017). to make the analysis specific and useful, the article focuses on the platform business model (economides and katsamakas, 2006; parker and van alstyne, 2005), the most innovative business model archetype in the digital economy (abdelkafi et al., 2019; parker, van alstyne, and choudary, 2016). an extensive literature on business models spans across fields such as management, strategy, innovation, and information systems. in early work, (osterwalder, pigneur and tucci, 2005) called for a clarification of the business model concept. in simple terms, a business model is “a blueprint of how a company does business,” and it defines ”the logic of the firm”: how a company creates and delivers value to customers and how it captures value. business model innovation (bmi) is crucial to business viability (demil and lecocq, 2010). several authors propose normative frameworks for practitioners, such as the business model canvas (osterwalder and pigneur, 2010), a template of nine building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, cost structure. zott, amit, and massa (2011) note the business model concept is emerging as a new unit of analysis, emphasizing a holistic approach to how a firm does business. moreover, firm activities play an essential role in a business model, “a system of interconnected and interdependent activities that determines the way the company does business with its customers, partners and vendors.” in most recent reviews, (massa, tucci and afuah, 2017) suggest three interpretations of business model (attributes of firms; cognitive schemas; formal representation of how a business functions) and discuss the relationship with the rest of strategy literature. (foss and saebi, 2017) identify issues of construct clarity and research gaps and recommend future research related to complexity and entrepreneurship. (täuscher and abdelkafi, 2017) review the value of visual tools in bmi. (wirtz and daiser, 2017) explore an integrative bmi framework in which technology and firm dynamics are important dimensions. it also discusses bmi at google as an illustrative example. the closest article to our approach is (casadesus-masanell and ricart, 2010), which clarifies the difference between strategy and business model, and proposes that causal loop diagrams (clds) are a useful representation of business models illustrating an old-economy airline example. this article contributes to a rigorous understanding of business model dynamics in the digital economy. it provides a framework to understand ai effects on business models, adding to the literature related to the dynamic impact of technology on business (georgantzas and katsamakas, 2008). the critical motivating question is: how can we analyze the effects of ai on bmi while accounting for dynamic complexity as a feature of business that needs to be understood and leveraged? approach and model we build a framework to explore business models using causal loop diagrams (clds). a positive link between two variables in a cld means that an increase of the first variable leads to an increase of the second variable. the research focuses on key feedback loops that drive business model performance and sheds light on the dynamic complexity of digital business models. we focus on the platform business model, which is the most important new form of business model enabled by the internet and digital technologies (bakos and katsamakas, 2008; sorri et al., 2019). the availability of more content, apps, and services on a digital platform attract more users, which in turn attract even more content, apps and services (eisenmann, parker and van alstyne, 2006; hagiu, 2014; journal of business models (2020), vol. 8, no. 2, pp. 22-30 24 katsamakas and madany, 2019). this mechanism of two cross-side network effects constitutes a reinforcing feedback loop, depicted at the top left corner of our model (r0 feedback loop in figure 1). our model (figure 1) illustrates the structure of one type of digital platform, an advertising-based content and services platform (e.g., google). the platform provides users with access to digital content and services and makes revenue from advertisers. we describe some of the critical feedback loops that constitute the core structure of the business model. users bring more users to the platform through digital wom (word of mouth) (r1 reinforcing feedback loop). this feedback loop is an important mechanism for platform adoption and growth. more users mean that the platform collects more data from users, which drives higher quality of search algorithm, which provides more relevant organic search results, hence attracts more users (r2 reinforcing feedback loop). advertisers are attracted by platform users. more advertisers and more data from advertisers help improve the quality of ad matching algorithm. this has two effects: it directly attracts more advertisers (r3 reinforcing feedback loop), and it improves the quality of ads, which helps attract more users, thus more advertisers (r4 reinforcing feedback loop). more advertisers raises the platform revenue and profits, which helps attract ai/engineering talent, which further helps drive a higher quality of search algorithm, which brings even more users and more advertisers (r5 reinforcing feedback loop). ai/engineering talent brings improvements to quality of ad matching algorithm, which leads to more advertisers (r6a feedback loop), as well as higher quality of ads and more users (r6u feedback loop). ai/engineering talent is also crucial for improving infrastructure efficiency, as they optimize digital infrastructure at scale, aided by moore’s law. this helps increase profits, which helps attract event more ai/engineering talent (r7 feedback loop). moreover, serving more users and advertisers leads to more data from infrastructure operations (e.g., running sophisticated data centers), which is used to further improve infrastructure efficiency and profits, with associated positive effects on users (r7u feedback loop) and advertisers (r7u feedback loop). all these reinforcing feedback loops provide the core structure of the ad-based platform business model and drive its performance, growth, and sustainability. the business model performance can be measured by profits, as well as by market-share (number of users and advertisers).   figure 1. advertising based digital content and services platform business model (e.g., google)  users advertisers ai/engineering talent data from users revenue profits attractiveness to talent quality of search algorithm digital wom r1 r2 r5 b1 quality of ad matching algorithm data from advertisers quality of ads r7u & r7a r3 r4 talent cost content r0 infrastructure efficiency moore's law r6u & r6a competition for talent data from infrastructure operations r7 figure 1: advertising based digital content and services platform business model (e.g., google) journal of business models (2020), vol. 8, no. 2, pp. 22-30 25 figure 1 also shows one balancing feedback loop that may moderate the effect of the reinforcing loops. as the platform attracts more ai/engineering talent, and has to pay higher salaries due to competition for talent, the talent cost increases and this hurts profits (b1 balancing loop). analysis and key insights ai as a field aiming to build and understand intelligent systems, has a long history and applications, such as expert systems, natural language processing, robotics etc. (russell and norvig, 2010). but recent advances in ai, especially in the form of machine learning and neural networks (deep learning), allowed for more innovation and elevated the use of ai in business as a primary concern of business leaders (mckinsey, 2018). for example google has been using algorithms that learn from data in search since the company’s inception.but most recently, google has substantially improved the quality of search results using deep learning algorithms, such as bert (nayak, 2019). several researchers have written about the business effect of ai, exploring issues such as the future of work, bias and trust, and the economics of ai (raj and seamans, 2019). for example, (agrawal, gans and goldfarb, 2018, 2019) argue that ai lowers the cost of prediction, and this has significant implications for managers. the unique perspective of our article is that it looks at the effect of ai at the level of the business model. we use the proposed framework to understand the effects of ai on business model innovation, focusing on the platform business model. figure 1 shows that ai has a crucial effect on a platform business model, because it enables new reinforcing feedback loops that constitute the core structure of the business model and drive its growth and profitability. ai may also strengthen, or speed up, existing reinforcing feedback loops. table 1 summarizes the effects of ai in a template of three elements: ai for user experience, ai for advertiser experience, ai for efficient infrastructure at scale. each element is a cluster of feedback loops. in all three elements, data is a strategic resource connecting ai with business model innovation. we summarize selected insights from each element. ai for user experience: data from users is a key resource in this cluster of feedback loops that reinforces an improvement of user experience over time. ai/engineering talent leverages data from users to improve the quality of search algorithm, which improves the user experience concerning access to content (r0, r2, r5). ai/engineering talent leverages data from advertisers to improve the quality of ad-matching algorithm, which enhances the user experience for relevant advertising (r4). other secondary feedback loops that help attract ai/engineering talent (either through more revenues or lower infrastructure costs) also contribute to better user experience (e.g., r6u, r7u). ai for advertiser experience: data from users is a crucial resource in this cluster of feedback loops that reinforce an improvement of user experience over time. ai/engineering talent leverages data from advertisers to improve the quality of ad-matching algorithm (r3), which improves the targeting of users. feedback loops, such as r4, that increase the number of users are aibm template element key feedback loops primary data resources other key resources ai for user experience r0, r2, r5, r4 data from users, data from advertisers ai/engineering talent, search algorithm, ad-matching algorithm ai for advertiser experience r3, r4 data from advertisers ai/engineering talent, ad-matching algorithm ai for efficient infrastructure at scale r7, r7u, r7a data from infrastructure operations ai/engineering talent, infrastructure optimization algorithms table 1: aibm template – key effects of ai on business model journal of business models (2020), vol. 8, no. 2, pp. 22-30 26 crucial to the business model. other secondary feedback loops that help attract ai/engineering talent also contribute to better advertising experience (e.g., r6a, r7a). ai for efficient infrastructure at scale: ai/engineering talent leverages data from infrastructure operations to improve the efficiency of infrastructure, which increases profits and help attract even more ai/engineering talent in a competitive market for talent (r7). other secondary feedback loops that help attract more users and more advertisers help the company collect more data from infrastructure operations, contributing to improved economies of scale (r7u, r7a). we can now generalize these mechanisms into two high-level ai-related processes that apply to all business models: data accumulation and data exploitation. data accumulation is the process of aggregating data from serving customers and other business processes and operations. figure 1 shows how data from users, data from advertisers, and data from infrastructure operations accumulate in the platform business model. data from external sources (data acquisition) can support data accumulation when necessary. data exploitation is the process of using artificial intelligence (ai) to leverage accumulated data to create business value. data exploitation helps improve the quality of platform services and business processes, as well as the overall performance of the business model. figure 1 shows how the platform business model exploits data to improve the quality of search algorithm, quality of ad matching, and infrastructure efficiency. our causal model shows that data accumulation and data exploitation are crucial processes. most importantly, those two processes reinforce each other: the more data a platform accumulates, the more data it can exploit, which helps collect even more data. discussion and conclusion the unique contribution of this article is that it brings together the bmi and ai concepts, and it analyzes the effects of ai at the level of business model. this article makes progress towards understanding business models as complex systems (massa, viscusi and tucci, 2018). we focused on the dynamic, not the combinatorial, complexity of a business model. we presented a framework for describing the structure of digital business models using causal loop diagrams (cld). the framework brings together key platform resources, such as data, algorithms, ai talent, and infrastructure. we proposed a three-element template (aibm), and we showed that the feedback loop concept is critical in understanding the effects of ai at the level of business model. we generalized our discussion into data accumulation and data exploitation processes that reinforce each other. our research provides several insights for managers and entrepreneurs. first, mapping the business model using clds can be very powerful in the fast-changing digital economy, where platforms and platform ecosystems are prevalent (jacobides, cennamo, & gawer, 2018; katsamakas, 2014; parker, van alstyne, & choudary, 2016). a focus on feedback loops can help managers map the core structure of their business model that drives behavior and business performance. moreover, it supports communication and assists managers and entrepreneurs to refine their mental models (groesser and jovy, 2016; moellers et al., 2019). second, managers need to understand and invest in the ai feedback loops in their business model. an ai strategy for bmi should seek to create, rewire, strengthen, and speed-up ai feedback loops in the business model. managers and entrepreneurs need to ask: do the ”ai feedback loops” work for our company? or they work against our company? how can we best leverage the ”ai feedback loops” in our bmi initiatives? third, managers need to invest in the reinforcing mechanism of data accumulation and data exploitation to maximize the value of ai in their company. we call for more research that accounts for the dynamic complexity in the context of bm and ai. future research could map and analyze the clds of more business models, and synthesize that knowledge into generic patterns. moreover, future work could take the analysis a step forward, building computational models. journal of business models (2020), vol. 8, no. 2, pp. 22-30 27 references abdelkafi, n. et al. (2019), multi-sided platforms, electronic markets, 29(4), pp. 553–559. doi: 10.1007/ s12525-019-00385-4. agrawal, a., gans, j. and goldfarb, a. (2018), prediction machines: the simple economics of artificial intelligence, harvard business review press. doi: 10.1016/0166-3615(86)90070-9. agrawal, a., gans, j. s. and goldfarb, a. (2019), exploring the impact of artificial intelligence: prediction versus judgment, information economics and policy, 47, pp. 1–6. doi: 10.1016/j.infoecopol.2019.05.001. bakos, y. and katsamakas, e. (2008), design and ownership of two-sided networks: implications for internet platforms, journal of management information systems, 25(2), pp. 171–202. doi: 10.2753/mis0742-1222250208. brynjolfsson, e. and mcafee, a. (2016), the second machine age. new york: w. w. norton & company. casadesus-masanell, r. and ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, 43(2–3), pp. 195–215. doi: 10.1016/j.lrp.2010.01.004. demil, b. and lecocq, x. (2010) business model evolution: in search of dynamic consistency, long range planning, 43(2–3), pp. 227–246. doi: 10.1016/j.lrp.2010.02.004. economides, n. and katsamakas, e. (2006), two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry, management science, 52(7) pp. 1057-1071. doi: 10.1287/ mnsc.1060.0549. eisenmann, t., parker, g. and van alstyne, m. w. (2006), strategies for two-sided markets, harvard business review, 84(10), pp. 92–101. foss, n. j. and saebi, t. (2017) fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management, 43(1), pp. 200–227. doi: 10.1177/0149206316675927. georgantzas, n. c. and katsamakas, e. (2008), information systems research with system dynamics, system dynamics review, 24(3), pp. 274–284. doi: 10.1002/sdr.420. groesser, s. n. and jovy, n. (2016), business model analysis using computational modeling: a strategy tool for exploration and decision-making, journal of management control, 27(1), pp. 61–88. doi: 10.1007/s00187-015-0222-1. hagiu, a. (2014), strategic decisions for multisided platforms, mit sloan management review, 55(2), pp. 71–80. jacobides, m. g., cennamo, c. and gawer, a. (2018), towards a theory of ecosystems, strategic management journal, 39(8), pp. 2255–2276. doi: 10.1002/smj.2904. katsamakas, e. (2014), value network competition and information technology, human systems management, 33(1–2). doi: pp. 7-17 10.3233/hsm-140810. katsamakas, e. and madany, h. (2019), effects of user cognitive biases on platform competition, journal of decision systems, 28(2), pp. 138–161. doi: 10.1080/12460125.2019.1620566. journal of business models (2020), vol. 8, no. 2, pp. 22-30 28 massa, l., tucci, c. l. and afuah, a. (2017), a critical assessment of business model research, academy of management annals, 11(1), pp. 73–104. doi: 10.5465/annals.2014.0072. massa, l., viscusi, g. and tucci, c. (2018), business models and complexity, journal of business models, 6(1), pp. 59–71. doi: 10.5278/ojs.jbm.v6i1.2579. mckinsey (2018), an executive’s guide to ai, report. moellers, t. et al. (2019), system dynamics for corporate business model innovation, electronic markets. electronic markets, pp. 387–406. doi: 10.1007/s12525-019-00329-y. nayak, p. (2019), understanding searches better than ever before, google blog. available at: https://www.blog. google/products/search/search-language-understanding-bert/ (accessed: 1 may 2020). osterwalder, a. and pigneur, y. (2010), business model generation, wiley. hoboken, nj: wiley. osterwalder, a., pigneur, y. and tucci, c. l. (2005), clarifying business models: origins, present, and future of the concept, communications of the association for information systems, 16(1), pp. 1–25. doi: 10.17705/1cais.01601. parker, g., van alstyne, m. and choudary, s. (2016), platform revolution. new york: w.w. norton & company. parker, g. g. and van alstyne, m. w. (2005), two-sided network effects: a theory of information product design, management science, 51(10), pp. 1449–1592. doi: 10.1287/mnsc.1050.0400. raj, m. and seamans, r. (2019), primer on artificial intelligence and robotics, journal of organization design, 8, 11 (note: it is online article so it does not have pages, it is just issue 8, article 11) doi: 10.1186/s41469-019-0050-0. russell, s. and norvig, p. (2010), artificial intelligence: a modern approach. 3rd editio, pearson. 3rd editio. new york: prentice hall. doi: 10.1017/s0269888900007724. sorri, k. et al. (2019), business model innovation with platform canvas, journal of business models, 7(2), pp. 1–13. täuscher, k. and abdelkafi, n. (2017), visual tools for business model innovation: recommendations from a cognitive perspective, creativity and innovation management, 26(2), pp. 160–174. doi: 10.1111/caim.12208. wirtz, b. w. and daiser, p. (2017), business model innovation : an integrative conceptual framework, journal of business models, 5(1), pp. 14–34. zott, c., amit, r. and massa, l. (2011), the business model: recent developments and future research, journal of management, 37(4), pp. 1019–1042. doi: 10.1177/0149206311406265. journal of business models (2020), vol. 8, no. 2, pp. 22-30 29 evangelos katsamakas is professor of information, technology & operations, at gabelli school of business,  fordham university. professor katsamakas’ research analyzes the strategic and economic impact of digital technologies focusing on digital transformation, platforms and ecosystems, network effects, open source and open innovation, business analytics, and dynamics of complex systems. his research interests include economics of technology and analytical modeling, machine learning and computational modeling of complex business systems. prof. katsamakas’ research appeared in management science, journal of management information systems, system dynamics review, international journal of medical informatics, electronic commerce research and applications, business process management journal  and in multiple other scholarly journals, conference proceedings and books. he served as guest editor of  the special issue on information systems research and system dynamics (system dynamics review, 2008). his research on digital innovation received the 2016 best academic paper award from sim (society of information management). he received the 2018 dean’s award for teaching innovation for his contribution to curriculum innovation. he served as department chair from 2012 to 2018. professor katsamakas holds a ph.d. from the stern school of business, new york university, m.sc. from the london school of economics and a computer science and engineering degree from the university of patras, greece. about the authors journal of business models (2020), vol. 8, no. 2, pp. 22-30 30 oleg pavlov is an associate professor of economics and system dynamics at worcester polytechnic institute (wpi) in massachusetts, usa. he uses simulations and systems thinking tools to study causal feedback effects in complex social and economic systems. his research has been published in the system dynamics review, computational economics, journal of economic issues, journal of economic dynamics and control, journal of the operational research society, and the handbook of service science. he serves on the editorial boards of the system dynamics review and entrepreneurship research journal. dr. pavlov is a past president of the economics chapter of the international system dynamics society and he was a coleman foundation faculty entrepreneurship fellow. he has taught in the u.s., finland, china, russia, and the uk. dr. pavlov received an mba from cornell university, and a phd and ma in economics and a bs in physics and computer science from the university of southern california. about the authors 8 journal of business models (2021), vol. 9, no. 1, pp. 8-12 in this paper, we expose how managers within one industry leverage interorganizational collaborations to create a new business model. based on an inductive case study of an automotive gps navigation company, we develop an emergent theory of how organizations use interorganizational collaborations to develop new business models. our preliminary findings suggest that organizations enact 3 practices: activation (clash between familiar and unfamiliar knowledge), combining (socially constructed projection of the future), and calibration (alignment of interests among partners). these practices enabled the co-creation of a pioneering business model involving four distinct but highly complementary partners. this study provides preliminary insights on a theory of business model innovation via interorganizational collaboration. more broadly, we help open up organization theory to a fresh conceptual lens—the business model—that highlights how organizations work and create value through collaboration. from one context to another: how business models emerge carlos m. dasilva1 please cite this paper as: dasilva, c. m. (2021), from one context to another: how business models emerge, journal of business models, vol. 9, no. 1, pp. 8-12 keywords: business model innovation, interorganizational collaboration. 1 “heg school of management | hes-so university of applied sciences western switzerland doi: https://doi.org/10.5278/jbm.v9i1.3691 abstract https://doi.org/10.5278/jbm.v9i1.3691 journal of business models (2021), vol. 9, no. 1, pp. 8-12 99 introduction interorganizational collaboration has become essential for innovation (ahuja, 2000; dobusch et al., 2019; parmigiani and rivera-santos, 2011). it brings together knowledge, actors, and various forms of technological and financial resources to create ‘collaborative advantage’ (carlile, 2002; vangen and huxham, 2006). innovation often requires firms to renew their business models to match new contexts with the aim of achieving exponentially increasing returns to scale (lund and nielsen 2018). existing research on business model change suggest that organizations change business models by importing analogies from other contexts (e.g., gavetti et al., 2005). the key idea in this research is that an idea from one domain gets translated to another domain, and that successful innovation is a function of managers cognitively representing their environment in a way that reflects the “deep structure” of their business challenges. however, many organizations operate in contexts that require a large amount of interorganizational collaboration (carlile 2002; roslender and nielsen 2019; vangen and huxham 2006). this context of interorganizational collaboration challenges the aforementioned approaches to developing new business models (lund and nielsen 2018). specifically, importing analogical business models from other domains requires organizational actors to make an analogy work through activities such as stretching, bending, and positioning ( glaser et al., 2016). these activities associated with making an analogy work are likely to be unique in contexts featuring interorganizational collaboration since the collaboration requires diverse actors with competing interests to coordinate activities; and competitive environments—particularly those environments featuring rapidly changing technologies —change over time. consequently, in this paper, we ask the following research question: how do organizational actors create business models based on analogies in contexts featuring interorganizational collaboration? approach to answer our research question, we conduct an inductive study of a corporation that sought to commercialize a pioneering business model via interorganizational collaboration. due to the lack of theory on the phenomenon of business model change (ahokangas and atkova 2020) and the complexity of associated with interorganizational collaboration, our aim is to advance grounded theory ( glaser and strauss, 1967) via an inductive method instead of a deductive one an interpretative case study, instead of a large scale statistical analysis. we obtained unique access that included interviews of c-suite executives, managers, and detailed archival materials. we collected data from three sources: (1) 16 interviews with firm a`s founder, ceo, cfo, coo, lead project manager, product manager, accountant, business development consultant, software developers, testers, hardware specialist and the former facility manager, (2) 5 interviews with relevant ecosystem players and partners, and (3) archival data comprising formal files such as proposals, presentations, agreements and informal files such as communications between the four partners. furthermore, we sourced secondary data from private and public company documents, press releases, company website and major industry blog posts. we interviewed the former ceo of firm b to understand the case from a partnership angle, as well as a journalists who`s focus was the navigation industry. the originator of the sponsor-based business model idea made available to us his notes and files from those early days. we re-interviewed the c level executives as well as the project and product managers for points of clarification. key insights/discussion through a combination of data and conceptual development, we deduced seven subprocesses that led to the novel sponsor-based business model: familiar knowledge; unfamiliar knowledge; selective matching; selective projecting; alignment; resource complementarity; and risk mitigation. due to poor fit between existing theoretical constructs and these subprocesses, they were clustered into three aggregate processes: activation, combination and calibration. activation the brain is a highly connected and interconnected organ, and the activations of those connections are journal of business models (2021), vol. 9, no. 1, pp. 8-12 1010 constantly shifting. activation makes certain patterns available for use at certain times. but much of the activation process is the work of the imagination striving to find appropriate connections between inputs that can be both based on internal and external information. some of these activations come from external real-world information that impinge upon us, others from what people say to us, others from internal configurations of our brains acquired through personal biography, culture, and, ultimately, from biological evolution. in our case, activation was sparked by the reading of the book written by chris anderson entitled “free: the future of a radical price”. one of the ceos interviewed mentioned the ideas written in the book opened is mind to a whole new level of understanding and had a tremendous impact in the conceptualization of the free gps business model. “it (the book) was highly influential in a lot of industries, software navigation included, where people understood that usage and millions of users should not be dependent on your ability to process logistics or having massive capital investments.” once such connection is activated, however, it triggers the combining process we discuss next. combination combining is indispensable for intellectual work. when the ceo of the gps navigation firm communicated with his team and later with the different stakeholders how to generate revenues without charging a cent to end users by inviting partners to imagine they are the “google adsense” of the navigation industry, it may look as if they were simply to incorporate a known business pattern – lead generator, but not so: performing the exact same business pattern present in google adsense is impractical in the navigation industry due to the high costs associated with mobile data, map licenses and address directories. rather, they selectively combined the business pattern of advertising (inspired from google adsense) with the traditional location specific advertising industry (popular business directory in france) and developed a new emergent business pattern:the free gps navigation on a mobile phone this might seem like a simple execution of a wellknown business model – advertising, but again not so: google advertising business model is based on publicly available data on the internet that may or may not be accurate, delivered for free on a web browser. in the free gps navigation business model, reliable search result data was expensive (contact details and accurate address were available almost exclusively on paid databases), internet mobile data was prohibitory expensive and maps were sold on a license basis (accurate maps were sold on a perlicense basis by third party suppliers). “then, we started having a series of conversations. we had the technology. we had the software. we had the ability to build a product. firm b had the brand. they had the delivery mechanism on the app stores. they had the ability to bring and service the product in market. there was one thing missing. the only thing that was missing to the model that we wanted to achieve was to persuade one of the two players that were at the time was a duopoly on the map segment, and to convince one of the two players that they would be able to make more money by giving it away for free rather than by selling a license. in other words, move towards a revenue sharing environment as opposed to having it per license fee.” the creation of combinations is guided by cognitive pressures and principles, but in the case of gps free, it is also guided by industry specific characteristics. most advertising models a manager in the gps industry can imagine are undesirable to execute. but within the conceptual blend prompted by the activation phase, and under the conditions afforded by the industry, possibilities may emerge. the management team astutely used a hidden analogy between a small aspect of the google adsense advertising model and the desired gps navigation model proposed to their stakeholders. “i read them about half a page of this book. one of the things that i told them, this was part of my pitch, was to explain them that the world was changing and that they had an opportunity to change with the world. and that the model journal of business models (2021), vol. 9, no. 1, pp. 8-12 1111 they had as a per license fee was essentially something of the past.” independent of the combinations, however, this analogy would make little sense. managers were not suggesting to become the “google” of the gps industry. it’s only within the whole when stakeholders try to mentally conceive of a sponsor-based advertising business model while operating within their own industry that the intended model emerges. managers in our case engage in a social effort aimed at matching aspects of the google adsense business model with their own industry. the aim is integration of selected patterns from google adsense. once such elements have been selectively integrated, the links to the search engine can be abandoned. managers need not forever think about google in order to conceptualize and implement their newly combined business model – but the activation phase was essential in order to guide the combination process. “at the time, i think that it’s also probably fair to say that the story was essentially “hey, let’s try something new.” right? it was new for us”.” calibration calibration is a result of the combination process. this could be limited to one single company, but in our case, calibration occurs when partners align interest and join forces in the design of a pioneering business model in the gps navigation industry at the time. “i was doing the calculation how long for us to build this kind of app, quite long.” the complementarity of the business model allowed each partner to mitigate their risk and commitment of resource. complementarity was key, as was the common belief that such business model was actually “not risky” form a perspective of resource commitment. ”i need resources to build. i have so much to do in rebuilding the entire firm. i don’t want to invest time and money in that. and that’s where we had that idea. okay, let’s build an audience. we share the risk. and then for me it was riskless because i was not paying for that.” conclusions we find that business model innovation occurs as a result of 1) activation (clash between familiar and unfamiliar knowledge), 2) combination (socially constructed projection of the future) and 3) calibration (alignment of interests among partners). these practices enabled the co-creation of a pioneering business model involving four distinct but highly complementary partners. this research is important as it answers the call made by business models scholars (see foss and saebi, 2017) on “the mechanisms and processes of business model innovation and change” (george and bock, 2011: 88) and “the process and elements of business model innovation” (schneider and spieth, 2013: 134) and consequently form strategic conditions for interorganizational collaboration. journal of business models (2021), vol. 9, no. 1, pp. 8-12 1212 references ahokangas, petri, and irina atkova. 2020. “from structure to process: dynamic aspects of business model change.” journal of business models 8(2):57–72. ahuja, gautam. 2000. “collaboration networks, structural holes, and innovation: a longitudinal study.” administrative science quarterly 45(3):425–455. carlile, paul r. 2002. “a pragmatic view of knowledge and boundaries: boundary objects in new product development.” organization science 13(4):442–455. dobusch, laura, leonhard dobusch, and gordon müller-seitz. 2019. “closing for the benefit of openness? the case of wikimedia’s open strategy process.” organization studies 40(3):343–370. foss, nicolai j., and tina saebi. 2017. “fifteen years of research on business model innovation: how far have we come, and where should we go?” journal of management 43(1):200–227. doi: 10.1177/0149206316675927. gavetti, giovanni, daniel a. levinthal, and jan w. rivkin. 2005. “strategy making in novel and complex worlds: the power of analogy.” strategic management journal 26(8):691–712. george, gerard, and adam j. bock. 2011. “the business model in practice and its implications for entrepreneurship research.” entrepreneurship theory and practice 35(1):83–111. doi: 10.1111/j.1540-6520.2010.00424.x. glaser, b. g., and a. l. strauss. 1967. the discovery of grounded theory: strategies for qualitative research. aldinetransaction. glaser, vern l., peer c. fiss, and mark thomas kennedy. 2016. “making snowflakes like stocks: stretching, bending, and positioning to make financial market analogies work in online advertising.” organization science 27(4):1029–1048. lund, morten, and christian nielsen. 2018. “the concept of business model scalability.” journal of business 6(1):1–18. parmigiani, anne, and miguel rivera-santos. 2011. “clearing a path through the forest: a meta-review of interorganizational relationships.” journal of management 37(4):1108–1136. roslender, robin, and christian nielsen. 2019. “performative research in the business model field.” journal of business models 7(2):31–36. schneider, sabrina, and patrick spieth. 2013. “business model innovation: towards an integrated future research agenda.” international journal of innovation management 17(01):1340001. vangen, siv, and chris huxham. 2006. “achieving collaborative advantage: understanding the challenge and making it happen.” strategic direction 22(2):3–5. journal of business models (2019), vol. 7, no. 5, pp. 25-47 25 ex-ante business model evaluation methods: a proposal of improvement and applicability jose m. mateu1 and alejandro escribá-esteve2 abstract purpose: the purpose of this paper is to choose the best method for ex ante business model evaluation, improve it and provide a framework to put it into practice. design/methodology/approach: after an in-depth review, we chose the best method for ex ante business model evaluation, improved this method, and applied it to a real case study in which business models had been proposed for a sustainable smart district project. findings: we analysed existing ex ante business model evaluation methods, justifying our choice of the best one. we improved this key question-based method by combining classic management tools and a new, promising procedure. we finally found a strong tool to improve business models before their implementation or, in other words, to improve business model design. practical implications: the resulting methodology can be applied in a broad range of situations in which a set of business models needs to be evaluated and ordered before making decisions about their implementation. accordingly, we think it represents a significant contribution to the field of business model evaluation. social implications: we applied this methodology to a set of business models to be used in a new sustainable smart district. this term has gained momentum over the last few years because it is understood to be a good way to combat climate change. originality/value: we refined and improved an existing methodology for ex ante business model evaluation making it more accurate and credible, and we applied it in the context of a relevant social field, such as the fight against climate change. please cite this paper as: mateu, j. m. and escribá-esteve, a. (2019), ex-ante business model evaluation methods: a proposal of improvement and applicability, vol. 7, no. 5, pp. 25-47 keywords: business model innovation; business model assessment; business model evaluation; smart city; smart sustainable district acknowledgements: the authors would like to thank the la pinada team for their cooperation and positive feedback, the eu’s climate-kic for supporting the project, the two anonymous reviewers for their valuable comments and the journal’s editor in chief por his help. 1 universitat politècnica de valència, department of transport infrastructure and engineering, camino de vera, s/n, 46022 valencia, españa, tel. 34 96 387 73 70, e-mail. jomaces1@tra.upv.es 2 university of valencia, departament of business administration & ivie, av. dels tarongers, s/n, 46022 valencia, spain, tel. 34 96 382 83 12, e-mail. alejandro.escriba@uv.es journal of business models (2019), vol. 7, no. 5, pp. 25-47 26 introduction the purpose of this paper is to make a contribution to the evaluation of the business models field. to achieve this, we review existing literature in the area about methods that can evaluate business models before being implemented (ex-ante methods), and we propose a scientific advance to improve these methods, in order to compare and select the most promising business models among those available. several methods have been proposed over the last few years for business model evaluation. however, most of them are not useful for our goals or have numerous limitations, partly because they have not been specifically developed for this purpose. they often use forecasts for different economic and financial parameters which, in a context of extreme uncertainty, may not be reliable. in this paper, after an in-depth review, we choose a method that has been specifically developed for business model evaluation, such as the one proposed by mateu and march-chorda (2016). this method consists of a scale of eight indicators that evaluate eight key factors in a business model. the implementation of this method in a real case study gave us the opportunity to refine and improve the method. the real case study consisted of the evaluation of a set of 22 services, with their corresponding business models, which had been proposed for development in a new smart sustainable district (ssd). the improved methodology presented in this paper can be applied to a large number of analogous situations. the business model is the cornerstone of the current entrepreneurship paradigm. accordingly, entrepreneurs must choose the most promising business model for their venture carefully. similarly, companies that face problematic situations, or firms that are considering diversification or intrapreneurship processes also need to choose the most promising business model. along these lines, we are convinced that our findings can be useful in a wide range of situations. the rest of this paper is organised as follows. we start with a systematic literature review of the field of business model evaluation, which focuses mainly on choosing the most suitable method to achieved our goals. then, once the most suitable method has been identified, we propose several improvements to the method. using a real case study, we also test the applicability of the improved method in order to refine our proposal. the paper ends with a discussion of the results, analyses the findings, and provides some concluding remarks and comments about the limitations of the work and possible future developments. business model evaluation methods general approach to business model evaluation methods pateli and giaglis (2004) identified business model evaluation as a sub-domain of business model research, but they considered that the area was still too immature. research on this topic has increased considerably since then, but there are still important gaps that have not yet been addressed. d’souza, wortmann, huitema and velthuijsen (2015) identified three different goals for evaluating business models: comparison with competitors, evaluating alternative business models for implementation by a firm, and evaluating business models according to their viability. our focus centres on the second goal, given our ex-ante applicability requirement. our review of business models evaluation literature targeted four systematic reviews on the subject by alexa (2014), tesch and brillinger (2017), schoormann, kaufhold, behrens and knackstedt (2018) and steinhöfel, hussinki and bornemann (2018). alexa (2014) identified eleven business model evaluation methods, and briefly described most of them, focusing on the evaluation criteria they used. hamel (2000) used four criteria (efficiency, uniqueness, fit and profit boosters); zott and amit (2007) evaluated four sources of value (novelty, lock-in, complementarities and efficiency); afuah and tucci (2003) used profitability measures and benchmark questions to compare the business model with competitors’ models; morris, schindehutte and allen (2005) suggested a method with seven performance indicators, although “it is not clear how it can be operationalized” (alexa 2014, p. 254); ballon, kern, poel and tee (2005) proposed a five-step framework to evaluate objectives and scope, journal of business models (2019), vol. 7, no. 5, pp. 25-47 27 market developments, innovation topics and bottlenecks; horsti’s tool is based on critical success factors (horsti, 2007); osterwalder and pigneur (2010) proposed an evaluation of the big picture as well as swots of each building block in their business model ontology. tesch and brillinger (2017) catalogued 39 business model evaluation methodologies according to two criteria, namely causal vs. effectual and qualitative vs. quantitative evaluation. both are interrelated, and it is important to clarify these dichotomies. traditional entrepreneurship theory (casson, 2003; shane, 2003) emerged within a causal perspective. according to this theory, the entrepreneur draws up a business plan to turn the idea or the opportunity into a successful company. the recommendations to draw up this plan include specifying quantitative details, thus quantifying future sales and profits and including them in financial spreadsheets. at the start of this century, some authors pointed out that uncertainty was so high in the business creation environment that it was more than a leap of faith to believe in this comfortable path (ries, 2011) with planning being seriously questioned in the business creation arena (gruber, 2007; brinckmann, grichnik and kapsa, 2010; chwolka and raith, 2011). the first task of a start-up shifts as a consequence moving to the adoption of a new task: the validation of a business model (blank, 2006) by means of a learning process (ries, 2011), of experimentation (mcgrath, 2010), and trial and error (morris, schindehutte and allen, 2005; sosna, trevinyo-rodriguez and velamuri, 2010). to foresee credible future numbers in this context becomes difficult, and often impossible. sarasvathy raised the bar seeing that successful serial entrepreneurs, far from planning their ventures, used a more diffuse logic, the so-called effectual logic (sarasvathy, 2001, 2008). effectual logic becomes useful when decisions must be taken in a context of significant uncertainty. tesch and brillinger (2017) brought together several qualitative business model evaluation methods under the effectual logic umbrella. these methods are not methods to classify and compare alternative business models. they are actually methods to check and improve a specific business model, through analysing ontology components and their coherence (osterwalder and pigneur, 2010), through a list of key questions (teece, 2010), suggesting business model choices (casadesus-masanell and enric ricart, 2010), proposing business model patterns which can be compared with the real or designed ones (gassmann, frankenberger and csik, 2014), through roadmapping (reuver, bouwman and haaker, 2013), and through experimentation and an iterative process of trial and error (mcgrath, 2010; sosna, trevinyo-rodriguez and velamuri, 2010). conversely, causal logic enables both qualitative and quantitative methods. on the qualitative side, tesch and brillinger (2017) included some papers that adapted traditional management tools, like a swot analysis (martikainen, niemi and pekkanen, 2014) and a pestel analysis (yüksel, 2012). other qualitative methods presented by these authors focused on generating alternative business models rather than on evaluating them, i.e. methods based on morphological boxes (kley, lerch and dallinger, 2011) and methods based on levers to provide new business models (bosbach, tesch and kirschner, 2017). on the quantitative side, tesch and brillinger (2017) included the paper by gordijn and akkermans (2001), which measures the value for all of the actors involved, expressing that value in monetary units, although the authors found that estimating precise profit was unrealistic. other quantitative methods identified by tesch and brillinger are based on balanced scorecards and metrics (i.e. heikkilä, bouwman, heikkilä, solaimani and janssen, 2016), scenario planning (i.e. bouwman, zhengjia, van der duin and limonard, 2008), market simulations, predictions and forecasting (kauffman and wang, 2008), etc. schoormann et al. (2018) revised 45 approaches to business model evaluation, and catalogued them into 10 categories (i to x) and 44 subcategories. these categories are: i benchmark-, comparisonand trade offoriented evaluation, ii -economic-/financial-oriented evaluation and metrics, iii mathematical-oriented evaluation methods, iv surveyand questionnaire-oriented evaluation, v simulation-based evaluation modelling techniques/tools, vi strategy-oriented evaluation tools, vii business model ontology-oriented evaluation, viii decision structuring-oriented evaluation, ix journal of business models (2019), vol. 7, no. 5, pp. 25-47 28 patternand key question-based evaluation and x value proposition-oriented evaluation tools. finally, steinhöfel, hussinki and bornemann (2018) found 21 relevant papers focused on tools, methodologies and approaches to evaluate business models. in the specific field of smart cities, diaz-diaz, munoz and perez-gonzalez (2017) developed a comprehensive method to evaluate business models, but it cannot be considered as an ex-ante method, because although the new business model is evaluated before its implementation, it is evaluated by comparing it to the previously existing model. therefore, it is not useful to evaluate and compare totally new business models before their implementation. finally, we made a new search, in order to update these reviews. as both of the latest reviews are based on articles published up to january 2018, we searched for articles published in 2018 and 2019 in the scopus and web of science databases (the search was carried out in july 2019). we used the same search criteria used by steinhöfel, hussinki and bornemann (2018), namely articles containing ‘business model*’ in the title as well as one of these textual streams: ‘analy*’, ‘assess*’, ‘compar*’, ‘control*’, ‘estimat*’, ‘evaluat*’, ‘examin*’, ‘measur*’, ‘monitor*’, ‘test*’ or ‘valuat*’. this search produced 118 articles in scopus and 112 articles in the web of science which, after removing 39 duplicate papers, yielded a total of 191 articles. adding the lists by alexa (2014), tesch and brillinger (2017), schoormann et al. (2018) and steinhöfel et al. (2018), and subtracting duplicated papers, we obtained a total of 98 articles directly related to business model evaluation methodologies. adding our less refined list of articles from 2018 and 2019, we ended up with a final list of 299 articles. required characteristics of an ex-ante business model evaluation method we now turn our attention to the characteristics that a good business model evaluation method must have in order to meet our goal. as we stated before, this paper aims to develop and propose an improved exante method that can compare alternative potential business models. consequently, we will not consider methods that compare new business models with current ones, or methods that only suggest improvements to a specific business model without any way of comparing them. we intend to develop a proposal that may help decision-makers to choose a business model as early as possible during the entrepreneurial process, in order to avoid wasting time and effort, yet ensuring the choice is as rigorous as possible. in this sense, we discarded the methods based on unrealistic numerical forecasts, and the methods that only provided qualitative information, which is difficult to check from one business model to another. we aimed to develop a method that used numerical indicators derived from the business model definition, not from the hypothetical behaviour of the business model once launched. as these indicators try to measure a hypothetical construct (the goodness of the model to a certain extent) we demanded validity and reliability (bannigan and watson, 2009), completeness (indicators had to be able to cover all the possible values the variable can take), exclusivity (no overlapping) and precision (cea d’ancona, 1999). finally, the proposed method had to be useful to evaluate business models used in different industries and sectors. consequently, from our list of 299 methods we removed those that focused on evaluating real companies’ business models (e.g. brea-solís, casadesus-masanell and grifell-tatjé, 2015), methods focused on improving current business models (e.g. diaz-diaz, munoz and perez-gonzalez, 2017), those that proposed evaluation methods to be applied ex-post (e.g. horsti, 2007), methods defined for a specific industry (e.g. shin and park, 2009), those based on financial forecasts or similar ‘unrealistic at this stage’ numerical indicators (e.g. gordijn and akkermans, 2001), methods that only evaluated specific business model characteristics which were not sufficient to forecast the success of the business models (hamel, 2000) and methods that did not have a manageable level of operationalisation, like simple lists of questions (e.g. osterwalder, 2007, or teece, 2010), or variables that were difficult to operationalise (e.g. morris, schindehutte and allen, 2005). many papers were excluded for more than one of these reasons. the result was a short list of two methods journal of business models (2019), vol. 7, no. 5, pp. 25-47 29 from which to choose: ishida, sakuma, abe and fazekas (2006) and mateu and march-chorda, (2016). the method drawn up by ishida et al. (2006) offers an exhaustive list of indicators catalogued in five categories, namely business concept, environment analysis, technology competitiveness analysis, modelling, and profitability analysis. each category includes between 6 to 12 indicators that are scored from 1 to 5, making a total of 38 indicators. mateu and march-chorda’s methodology (2016) proposes a scale for ex-ante business model assessment consisting of eight indicators that evaluate eight key factors in the model. the evaluation is carried out by answering specific questions about the model that is being analysed. possible answers are 1, 2, 3, 4 and 5. table 1 shows the questions in their generic formulation. 1. how would the value proposition bring utility to the customer? to what extent? 2. are all the necessary complements already available? if not, can we obtain those complements or develop them conveniently and at a reasonable price? 3. how large is the market in terms of both customer volume and purchasing power? 4. how difficult will it be to explain the benefits of the value proposition to the potential customers? 5. would the potential customers be ready to pay the price and make the effort the new business model requires? 6. will it be costly for us to offer the value proposition?, or, on the contrary, will it give us an attractive margin? 7. are there many alternative value propositions competing for the same customers? how valuable are those alternative options? how strong are those competitors? 8. does the new business model provide a mechanism to hold the imitators at bay? table 1: questions for ex-ante business model evaluation method (mateu and march-chorda, 2016). mateu and march-chorda’s methodology (2016), in addition to fulfilling all our conditions, has several advantages. first, it is a good answer to alexa’s statement, i.e., “there is a need for simple and versatile instruments” (alexa, 2014, p. 259). second, it is clearly focused on the business model, thus enabling the isolation of this key element from other concomitant factors like entrepreneurs’ capabilities or the environment. third, it considers a wide range of relevant business model factors (steinhöfel, hussinki and bornemann, 2018). the general template used to evaluate business models using this methodology includes the questions and some elements to facilitate the evaluation, such as examples of well-known models that could obtain a particular score, as well as a description of extreme cases (1 and 5) for each indicator (see mateu and marchchorda, 2016). refining and improving mateu and march-chorda’s methodology a relevant issue in this methodology is related to who carries out the evaluation. in the original formulation of mateu and march-chorda’s method, evaluation was entrusted to management experts or people that were familiar with the sector. the varying nature of the eight indicators suggests that each could be best rated using different techniques and entrusting them to different authors. indicator 1, for example, is related to the value that the business model gives to the potential customer. therefore, it would be useful to find out the opinion of these potential customers in order to evaluate this indicator. this also holds true for indicator 3 to a certain extent, because this indicator tries to measure not only the size of the market but also the part of the market that is interested in the value proposition. according to teece, “a good business model yields value propositions that are compelling to customers” (teece, 2010, p. 174). how can we measure to what extent a business model is compelling to customers? traditional marketing has been postulating for decades the advantages of using market research to answer this question (kotler and keller, 2016). bearing in mind that a number of core marketing activities are part of a business model (ehret, kashyap and wirtz, 2013), including value proposition delivery, recent scholar’s works have recovered the link between business model research and marketing (coombes and nicholson, 2013; klimanov and tetriak, 2019). in fact, some authors journal of business models (2019), vol. 7, no. 5, pp. 25-47 30 have already used surveys with potential customers in order to evaluate the value proposition of the business models, and especially to compare different business models (ghezzi, georgiades, reichl, le-sauze, di cairano-gilfedder, and managiaracina, 2013; piscicelli, ludden and cooper, 2018). the rest of the indicators require more expert knowledge. only an expert in management can, for instance, evaluate aspects such as the effort required to implement a business model before this model is comprehensively defined (indicator 2). consequently, we refined the method introducing a mixed evaluation in which each indicator was evaluated using the most suitable process. to evaluate the indicators for each of the business models, we used the following processes and rules. indicators 1 and 3 were rated with a survey answered by the future residents of the district. indicators 2, 4, 5, 6 and 8 were rated by experts, that is to say, the authors of this study, who individually rated each model for each indicator. when scores diverged they were discussed to reach a consensus. finally, indicator 7 was also rated by experts, though on this occasion, we used porter’s five forces analysis (porter, 1980). indicator 7 is focused on measuring the number and strength of competitors. porter’s five forces analysis centres specifically on measuring competitive rivalry. it is particularly useful when it is not only the competitors’ force that is relevant. for instance, in many of the services, customers could choose a self-service option or just go without the service. consequently, we think that it is important to open the scope of the analysis taking other agents into consideration. this led us to use a traditional, broad-scope method, porter’s five forces analysis (porter, 1980). in fact, the five competitive forces are used as five of the 12 indicators to analyse the environment by ishida et al.’s (2006) business model evaluation method. the five forces analysis takes into consideration the rivalry of existing competitors, but also four additional forces: (1) the threat of substitutes or alternatives to satisfy the need, (2) the bargaining power of suppliers, (3) the bargaining power of customers, and (4) the threat of new entrants. five forces framework has been criticised from the perspective of the dynamic capabilities framework (teece, 2007), because of its limited ability to describe competition in dynamic environments. however, most of teece’s criticisms are not relevant in this context. teece criticises porter’s tool because it does not take into account factors which in mateu and march-chorda’s evaluation method are assessed by other indicators, not by indicator seven, such as factors that impact imitation and appropriation issues (evaluated in indicator 8), the role of complementary assets (evaluated in indicator 2), network externalities (evaluated in indicator 6) and factors inside the company that constrain choices (this is not relevant to us because we are evaluating the business model in isolation). in conclusion, although other minor criticisms made by teece remain unanswered, the five forces method fits the need and the context correctly. testing the improved method: application to a real case study after introducing the refined method, we applied it to our case, in order to test whether it was applicable and useful for decision-makers. we applied our improved formulation of mateu and march-chorda’s methodology to a project for a smart city which is being developed in the valencia region of spain. we defined a smart city as a ‘forward-looking city performing well in economy, people, governance, mobility, environment, and living, built on the smart combination of endowments and activities of selfdecisive, independent and aware citizens’ (diaz-diaz, munoz and perez-gonzalez, 2017; following giffinger and gudrun, 2010). the term smart city has gained momentum over the last few years (mora, bolici and deakin, 2017), not only among academics, but also among a wide range of practitioners, such as local authorities and private realestate developers. as an example, the spanish network of smart cities (red española de ciudades inteligentes) is made up of 65 spanish towns and cities. journal of business models (2019), vol. 7, no. 5, pp. 25-47 31 the european union promotes and supports communities of universities, companies and other organisations centring on a specific global challenge, under the name of knowledge and innovation community (kic). climate-kic is a european union knowledge and innovation community working towards a prosperous, inclusive, climate-resilient society founded on a circular, zero-carbon economy. climate-kic has four areas of focus: (1) urban transitions, (2) sustainable production systems, (3) decision metrics & finance and (4) sustainable land use. the first of these areas pursues the challenge of creating the climate-resilient and zero-carbon towns and cities of tomorrow. climate-kic’s urban transitions include initiatives on different scales, such as buildings, districts and even whole cities. the smart sustainable districts initiative (ssd) is focused at district level, with twelve district projects from european cities being supported through the ssd programme so far, such as the queen elizabeth olympic park, in london, and moabit west, in berlin. la pinada has been one of the ssds in climate-kic since 2017, and it is similar to the rest of the ssds in its intention to build an innovative and sustainable district in all its dimensions: intelligent use of energy and water, sustainable mobility, circular and shared economy, integration with nature, social cohesion, community vitality, and local shops and services, all backed by socially and environmentally responsible suppliers. la pinada is to be built as a district of the metropolitan area of valencia, in spain, and it is set to house around a thousand families in a 25 ha area. it is a peculiar project insofar as it is going to be developed almost entirely with private investment and because it is going to be built via a co-creation process, in which its future residents will be taking part. in fact, these future inhabitants are already giving their opinion about all the relevant decisions that will affect the appearance of the district, the characteristics of the buildings and the kind of services they want the district to provide. a long list of possible services has been identified. some of them have been suggested by the future inhabitants during a series of co-creation sessions. the rest have been suggested by other teams involved in the climate-kic’s ssd programme. as the original list of models was too long, we extracted a shorter list for this article, which is included in table 2. the specific questionnaire we gave to the la pinada team, in order to gather information about the different models, is included in appendix 1, as well as the answers for model c, which are provided as an example. these services have been chosen under the premise that they contribute to the objectives established for a ssd. accordingly, they must be environmentally friendly and they must improve the inhabitants’ quality of life, but beyond this, they must be sustainable from an economic perspective. this means that these services must also be managed from a business perspective. the economic viability assessment, as defined by la pinada team, pursued a twofold objective: 1. to assess the economic viability of the business models proposed to start up each of the services. 2. to prioritise their implementation, in order to start with the models that have the greatest potential. business model evaluation methods are required to achieve these goals. we applied our refined methodology. we found this methodology to be specially suited to this case. similarly, we found this case to be particularly useful, because most of the situations that required business model evaluation only included a small number of business models that had to be evaluated. a significant number of business models enables us to test the methodology in depth, as well as to obtain more interesting findings. details about this application are summarised below. 1. value creation condition as has been said, we appealed to the stakeholders, that is to say, the potential customers (future residents of the district), to rate indicator 1. we asked them about the value they saw in each of the business models. the survey asked them to rate this value on a scale from 1 (totally useless) to 5 (extraordinarily useful). appendix 2 shows the details of this survey. it offered only a brief description of the business models, because giving all the details would have discouraged respondents from completing the survey. journal of business models (2019), vol. 7, no. 5, pp. 25-47 32 the survey was sent to all available emails in the la pinada database (1,093 emails, belonging to people that had showed interest in the project at some stage). the emails were sent at the beginning of september 2018, and respondents had until 16th september to respond. 352 people opened the survey, but only 30 completed questionnaires were received. as the focus of the article centres on the definition of the methodology, not on the analysed business models, the lack of representativeness of the sample is not deemed to be relevant. additionally, although the sample is not representative of the whole group of potential customers, it is representative of the most motivated and committed members. the current entrepreneurship paradigm gives an outstanding role to these most highly motivated members of the market, making them lead-users (hippel, 1986). in fact, the value proposition must be focused on these lead-users, turning them into the beachhead that can clear market access (moore, 1991). we used the average of the 30 answers as the scores for indicator 1, for each of the models. these scores are shown in the column of indicator 1 in table 4 (included in the results section of this article). code service/business model short value proposition description a collective transport to the city centre a means of transport (bus), with a scheduled timetable, to transport the neighbours between the neighbourhood and different points in the city centre. b launderette service available washers and dryers in a specific area of each building. c car-sharing electric cars available for hours or days. d advisory service an expert that can help to better control subscriptions and personal accounts. e second-hand shop to sell objects in good condition that are no longer needed, and to buy them. f appliance rental store physical store that offers limited-use and high-priced appliances (thermomix, steam wagons) for a short period of time. g bike repair to have the premises, the tools and the spare parts to repair or self-repair bikes and similar devices. h general repairs to solve the small setbacks that may arise in the day to day running of a house (internet connections, moving furniture, home repairs) i elderly care personal care for elderly people. j fitness centre facilities and qualified personnel to stay fit k orchard rental to rent an urban orchard l reception of goods and delivery of packages reception point for receiving and sending packages, including home delivery. m local removal firm transport of personal objects from one place to another n ambulance service ambulance that allows immediate transport to the hospital o property management building administration service p bike sharing system of shared bicycles within the neighbourhood q service exchange platform a platform through which people do jobs in exchange for virtual currencies or in exchange of other services carried out by others r take-away meals shop of traditionally cooked meals to take away s toy library allows children and adults to have a greater variety of toys t household cleaning service house cleaning service, by people at risk of exclusion u central purchasing body buying together provides better offers and lower negotiated prices. v rental of spaces for activities to rent common areas on the ground floor of the buildings to organise events table 2: list of services to be evaluated journal of business models (2019), vol. 7, no. 5, pp. 25-47 33 2. complete value proposition condition we adapted this indicator to answer the question: how much effort will be required to implement the business model? we assigned a score to each model for this indicator based on the experience and management knowledge of the authors of this study. to do this, we had to add some premises. these included applying minimal investment as a criterion. accordingly, any required asset would be rented if possible, instead of buying them, at least initially (until the viability of the model was demonstrated). this would be the case of a bus for model a, for example. on the other hand, the majority of the models are not radically new or hard to implement. therefore, the majority of the models obtained a high score in this indicator (from 3 to 5). the specific rubric was as follows: • rated with a score of 5: easy to implement models that require very low economic investment, and do not need any sophisticated technological resources or particularly qualified staff. • rated with a score of 4: models that require a small economic investment (such as the refurbishment of a space facilitated by the la pinada organisation, or the purchase of some equipment) and/or to hire qualified staff with specialisations which abound in the labour market (tax advisors, for example). • rated with a score of 3: models that require a more significant economic investment or sophisticated technological resources. although an asset such as a bus or minibus can be rented, with or without a driver, the supplier will demand a certain minimum commitment, which will raise the required investment, although not as much as if the vehicle has to be purchased. conversely, we understand sophisticated technological resources as being the software and other elements required to start up a more innovative service. • rated with a score of 2: models that require a larger-scale investment, for example, to buy goods that cannot be rented, are expensive or are hardly accessible. • rated with a score of 1: models that require major investment and/or cutting-edge technological adaptations. 3. sufficient size of the market condition the approach of the proposed models is to provide services to the neighbourhood, and this significantly limits the target audience. consequently, we have limited the maximum score for this indicator to 3. by doing so, we maintain the comparability of our evaluation with that of other models in other works. the specific score was assigned based on the willingness to use the services of the 30 future neighbours who responded to the survey. the survey question that addressed this goal was: would you use this service if it were available at a reasonable price? the answer could vary between 1 (i would not use it) and 5 (i would always use it, or almost always). as already mentioned above, and in order to maintain comparability with the general scale, the means of the 30 responses for each service were adjusted to a scale between 1 and 3, that is, they were divided by 5 and multiplied by 3. the results are shown in table 4, included in section 5. 4. access to the potential customer condition the geographical concentration of the main potential market of all the proposed services greatly facilitates their communication and promotion. on the other hand, the genesis of the neighbourhood requires the participation of the neighbours and their engagement in local activities. this explains the high score assigned in this indicator to the majority of the models. in summary, the target audience of communication is close at hand and it is willing to listen, and this makes it easy to promote the services. based on this we established the following rubric: • rated with a score of 5: models which are obviously useful (they do not need any explanation), journal of business models (2019), vol. 7, no. 5, pp. 25-47 34 regardless of whether the service is of interest to a particular resident. • rated with a score of 4: models which, given their professional foundation, require a certain degree of explanation in order to show their value or usefulness. • rated with a score of 3: models which, given their novelty value or innovative nature, represent a change in the way potential customers now solve the specific need that is served. • scores 1 and 2 have no meaning in this context. 5. willingness to make an effort condition different and sometimes opposing factors should be taken into consideration to evaluate this indicator. these factors had to be balanced out to reach just one score. one of these factors is, for example, the extra cost incurred by the potential customer in the way the new model aims to solve the need which has been fulfilled in a different and cheaper way up until now. another example is the extra effort the potential customer must make for the same reason. based on this, and using an expert evaluation, we propose the following rubric. for descriptive purposes, we used the reverse order from the one we used in previous indicators (from 1 to 5 in this case). • rated with a score of 1: services usually offered for free. • rated with a score of 2: models that offer services that the customer can self-provide or can hire at a low cost and with little effort. • rated with a score of 3: models that offer services for which the customer has comparable alternatives, though with different attributes. a score of 3 was also given to models that are more neutral in character compared to the existing alternatives. • rated with a score of 4: models that provide significant added value to potential users. this would be the case of a service that provides something occasionally or that gives an advantage when needed (such as buying second-hand goods or renting them). • rated with a score of 5: models for which we understand that the effort required of users will be made willingly. 6. affordable costs condition we rated this indicator for each model based on our experience and management knowledge. rates were low for the majority of the models, because they involve a high degree of personal effort and, consequently, there are no economies of scale. based on this, we use the following rubric (ordered from 1 to 5). • rated with a score of 1: models based almost exclusively on personal effort, with no economies of scale. • rated with a score of 2: models that have a certain degree of economies of scale in secondary activities of the value chain, or can delegate certain activities to the customer via technology. the first case would be the case of models that require a physical space for their provision, in so far as they can benefit from economies of scale in terms of the rental cost. • rated with a score of 3: models that involve better economies of scale. • rated with a score of 4: models that only require sporadic or occasional staff participation, that is, the user does not require assistance from staff during the service. • rated with a score of 5: models with excellent economies of scale, network economies or others. 7. superiority over competitor condition as stated above, we applied the five forces analysis to rate this indicator. accordingly: • we rated each of the five forces for each of the models as low, medium or high. • suppliers have low bargaining power for the majority of the models, because they compete in mature markets. • the score attributed to rivalry depends on the advantage offered by proximity. if many of the journal of business models (2019), vol. 7, no. 5, pp. 25-47 35 services are out of the district it is difficult to operate them. in this case, rivalry must be rated as low. when proximity is not an advantage, the model must compete against competitors both online and from the city. in this case, rivalry is rated as high. • once the service is established, the threat of new entrants will be low, because the small size of the direct market will discourage potential new entrants. • the definitive score is calculated by subtracting to 5 all the forces that have been rated as high. for each force qualified as medium, only a half point is subtracted. our knowledge and experience using the aforementioned criteria gave the scores shown in table 3. 8. entry barrier existence condition applying the general rubric (table 1), we observed that the assessment would be low in general for this indicator, as there are no elements of significant differentiation or innovation that can be protected legally (patents) or network effects or other analogous mechanisms. scores of 5 in this indicator are therefore meaningless. for some of the models, the most significant protection comes from the size of the investment required, which, when targeting a reduced market, discourages potential competition. however, to take advantage of this fact, the first-mover advantage would have to be activated (reducing time to market, for example). mod substitutes suppliers competitors customers new entrants score a low low low high low 4 b low low low (far) high low 4 c medium low low high low 3.5 d medium low high high high 1.5 e high low high low low 3 f low low low high low 4 g low low low high low 4 h medium low high medium medium 2.5 i low low high medium medium 2 j high low medium high medium 2 k high low low low low 4 l medium medium medium high low 2.5 m low low high high medium 2.5 n medium low high medium low 3 o low low high medium high 2.5 p high low medium high low 2.5 q high low low low low 4 r high low medium high low 2.5 s high low low high low 3 t medium low high high medium 2 u medium medium low low low 4 v medium medium medium low low 3.5 table 3: scores for indicator 7 using the five forces analysis (porter 1980). journal of business models (2019), vol. 7, no. 5, pp. 25-47 36 therefore, we applied the following rubric: • rated with a score of 4: models that have network effects, or other similar effects, that would help a first mover to gain a competitive advantage. • rated with a score of 3: models that are easy to imitate but which have a considerable entry barrier given the volume of investment they require and the small market they serve. • rated with a score of 2: models that are easy to imitate but could have first-mover advantages at local level. • rated with a score of 1: easy to imitate models where it is difficult to establish any barrier to deter copies. evaluation results table 4 sets out the score obtained by each of the models in each of the eight indicators on the scale, in line with the rules presented above. the set of eight indicators evaluates each model briefly, but at the same time provides a wealth of information, given that it evaluates relevant criteria of a very different nature. in any case, when evaluating a significant number of models in each of the indicators, an important volume of data is obtained (176 pieces of data). this volume may be hard to manage in some cases, such as when the goal is to prioritise the models and establish an order for their implementation. therefore, it would be 1 2 3 4 5 6 7 8 avg. int. a collective transport to the city centre 4.03 3 2.15 5 4 3 4 3 3.52 3.66 b launderette service 3.76 3 2.15 5 2 2 4 3 3.11 3.35 c car-sharing 4.45 3 2.13 3 4 2 3.5 3 3.13 3.52 d advisory service 3.45 4 1.59 4 2 1 1.5 2 2.44 2.73 e second-hand shop 4.17 4 2.21 5 3 2 3 2 3.17 3.52 f appliance rental store 3.66 2 1.93 5 3 2 4 2 2.95 3.25 g bike repair 4.10 4 2.12 5 4 1 4 2 3.28 3.64 h general repairs 3.93 3 1.95 5 3 1 2.5 2 2.80 3.25 i elderly care 4.34 4 1.78 5 3 1 2 2 2.89 3.35 j fitness centre 4.00 2 2.23 5 3 4 2 3 3.15 3.36 k orchard rental 4.17 3 2.23 4 4 3 4 3 3.43 3.62 l reception of goods and delivery of packages 3.82 4 1.93 5 1 3 2.5 3 3.03 3.14 m local removal firm 3.25 5 1.52 5 5 1 2.5 2 3.16 3.19 n ambulance service 3.54 2 1.71 5 1 1 3 3 2.53 2.89 o property management 3.32 4 1.76 5 4 1 2.5 2 2.95 3.13 p bike sharing 4.46 2 2.40 4 3 2 2.5 3 2.92 3.47 q service exchange platform 4.00 3 2.16 3 4 4 4 4 3.52 3.50 r take-away meals 3.82 2 1.97 5 5 3 2.5 3 3.29 3.45 s toy library 4.14 5 2.22 5 5 3 3 2 3.67 3.78 t household cleaning service 3.96 5 2.01 5 4 1 2 2 3.12 3.43 u central purchasing body 4.29 3 2.31 3 5 4 4 4 3.70 3.74 v rental of spaces for activities 4.07 4 2.16 5 5 4 3.5 3 3.84 3.80 3.94 3.36 2.03 4.59 3.50 2.23 3.02 2.64 3.16 3.40 table 4: scores obtained by each model in each of the indicators on the scale, average scores and scores obtained through the emulation of intuitive assessment journal of business models (2019), vol. 7, no. 5, pp. 25-47 37 necessary to obtain a sole (or brief) assessment for each model. next, we present two ways to obtain a sole evaluation of each model, using the set of scores obtained by the model in the eight indicators. average score in this case, we obtained the sole model evaluation by averaging the assessment obtained by the model in the eight indicators. in practice, this meant giving the same weight to each of the eight indicators. table 4 shows this evaluation in its penultimate column. intuitive assessment intuitive model assessment is deemed to be an evaluation that would be given without carrying out a detailed analysis like the one conducted here. mateu and marchchorda (2016) showed the correlation between their eight indicators evaluation and a purely intuitive assessment. this allowed us to estimate the intuitive assessment of a model as a linear combination of the scores obtained by this model in each of the eight indicators on the scale. where: e i is the intuitive assessment of the model i p j is the weight assigned to indicator j in the linear combination (j takes values between 1 and 8). e ij is the rating of the model i in indicator j (in our case they are the numbers showed in table 4 for each of the models) table 5 shows the weights that mateu and marchchorda (2016) found when emulating the intuitive assessment through this linear combination of the eight indicators on their scale. as we can see, indicators 1 and 3 were the ones that received greater consideration or greater weight. table 4 shows the intuitive assessment of the models in its last column, by means of the linear combination and the weights included in table 5. discussion figure 1 shows the original models according to both aggregation profiles (average score and intuitive assessment). it shows the most highly rated models in the upper right quadrant. they are models a, g, k, q, s, u and v. by contrast, the evaluated models with the poorest results appear in the lower left quadrant. they are models d and n. in any case, table 4 and figure 1 respond to the specific objectives established, that is, to evaluate the potential viability of the different models and facilitate their prioritisation, thus becoming the most useful tool for the managers of the project. this can also be a starting point for additional research on the improvement of the business models. the score obtained by many of the models in indicators 3, 6 and 8 points to the need to improve the business models in certain directions: 1. are there new customer segments we could serve? the most obvious response is to expand the target audience of the services, offering these services to potential customers outside the district. this will have advantages and disadvantages that need to be taken into account in order to reformulate (to improve) the models. 2. another question that can give us clues for improvement is: are there activities we would be better outsourcing to partners? to a certain indicator weight 1. value creation 0.33 2. complete value proposition 0.04 3. sufficient size of the market 0.25 4. access to the potential customer 0.10 5. willingness to make an effort 0.05 6. affordable costs 0.05 7. superiority over competitors 0.12 8. entry barriers existence 0.10 table 5: weights for each indicator in a sole evaluation that emulates intuitive assessment, through a linear combination of the eight indicators put forward by mateu and march-chorda. journal of business models (2019), vol. 7, no. 5, pp. 25-47 38 extent, this dovetails with the following: are there key resources that could be provided more efficiently and/or cheaper by suppliers or partners? 3. are there ways we could reduce our cost structure? this is an important question which, given the impossibility of applying economies of scale when the target audience is so small, we could change as follows: can we activate alternative economies in order to reduce costs? the last of these suggestions (the search for economies of scope) points to the need to reformulate the models with a broader perspective instead of simply improving the elements of the model independently. in other words, in order to find more effective ways to improve the models, with fewer disadvantages, we must take into consideration the systemic effects derived from the interaction of the different elements in the business model. there are several logics or mechanisms which explain the low score obtained by many of the models in indicators 3, 6 and 8. they include the following: 1. the threat of not reaching the critical mass, and consequently the viability threshold, due to the lack of clients. 2. incurring high unit costs due to the lack of customers and, as a consequence, implying that the necessary resources work below their optimum activity level. 3. the difficulty to incorporate certain key resources due to the impossibility of assuming their cost. this would be the case of certain members of staff; perhaps not in operational tasks but certainly in organisational tasks (executive staff). in view of these mechanisms, solutions emerge not related to increasing the size of the target audience, but to sharing certain resources or by synchronising certain activities across different models, in line with the search for the aforementioned economies of scope. for instance, the unqualified staff required by the household cleaning service (model t) could manage the launderette service (model b) when they did not have to perform the previous task. something similar could be applied to the staff in charge of the appliance rental store (f), the second-hand shop (e) or the bike repair service (g). sharing and optimising human resources can in this case also be extended to material resources, such as physical space, maintenance tools or other kind of equipment. this sharing of resources could, if not neutralise, at least palliate the threats discussed above: 1. the critical mass should not be reached for a given service, but for a specific resource, by sharing it among several services. 2. more efficient use of resources would reduce downtime, increasing the percentage of time actually figure 1: presentation of the models according to their average score and their intuitive assessment journal of business models (2019), vol. 7, no. 5, pp. 25-47 39 spent on customers. lower prices could thus cover the cost of resources, by not having to finance idle time in those resources. 3. the margin for administration and organisation, extended to the group of jointly managed services, would allow financing more efficient human resources for these tasks. this would mean increasing management knowledge, and enabling virtuous systemic circles to be activated that would ensure the viability of the services. based on this analysis, we grouped most of the services initially proposed into five higher level services (those shown in table 6). the names proposed are merely illustrative. we have assigned codes consisting of greek letters to differentiate them from those used in the initial services. some of the original models are not grouped. an interesting fact can be highlighted here. during our research for a robust method to evaluate business models before their implementation we found a strong tool to improve business models before their implementation or, in other words, to improve business model design. all of this thanks to the details provided by mateu and march’s methodology and our improvements. conclusions and future developments in this paper we have tackled the issue of choosing the most promising business models before implementing them. to do this, we chose mateu and march-chorda’s business model evaluation methodology. their eight independent indicators enabled us to break down their scale and use the most suitable ways to rate each of the eight indicators on the scale. in fact, the varying nature of each indicator suggested the most suitable way to rate each one. table 7, summarises the ways we defined to award a score to each of the indicators, thus improving this useful evaluation method. code service/model and description models 1 2 3 4 5 6 7 8 avg. int. α la pinada, mobility this could group the services oriented to facilitate the sustainable mobility of the residents a, c, n and p 4.62 3 2.60 5 4 3 3.50 3 3.59 3.94 β la pinada, professional services this could group the services that require qualified staff d, g, h and o 4.20 4 2.35 5 4 2 3.00 3 3.44 3.72 γ la pinada, personal services this could group the services that require low qualified staff b, i, j, m and t 4.36 5 2.44 5 4 3 2.80 3 3.70 3.85 δ la pinada, circular economy this could group the services oriented to facilitate savings and the efficient and sustainable use of long-lasting products e and f 4.41 4 2.57 5 4 3 3.67 3 3.71 3.93 ε la pinada, community resources focused on managing community resources k, l, s and v 4.55 5 2.64 5 5 4 3.50 3 4.09 4.15 4.43 4.20 2.52 5.00 4.20 3.00 3.29 3.00 3.71 3.92 table 6: proposal of grouped or higher-level models journal of business models (2019), vol. 7, no. 5, pp. 25-47 40 the set of eight indicators provided a wealth of information. it allowed us to explore and propose an interesting way to improve the case study’s original business models, thus grouping them into higher level business models. we provided two ways to offer a sole assessment for each model, departing from the information provided in the eight indicators: average score and intuitive score (using a linear combination also provided by mateu and march-chorda). this suggests a possible field for future research, based on new specific profiles for evaluation. what weightings would experts give to different indicators (expert profile)? which evaluation profile could highlight the models with the greatest potential for extraordinary profit (or extraordinary losses)? conversely, which evaluation profile could highlight the most conservative models (those that will probably generate little profits or small losses)? identifying new and useful evaluation profiles suggests an interesting and fruitful avenue for improving decision-making paradigms. a more ambitious line of research would be to compare the ex-ante evaluation obtained by each potential business model with the results of the model after implementation, although this possibility would only be possible for business models that had been effectively implemented. in summary, we refined and improved mateu and march-chorda’s ex-ante business model evaluation methodology, making the measurements calculated for each indicator more accurate and credible. this refined and improved methodology is useful when a set of business models has to be evaluated and ordered. we applied this methodology to a set of business models to be used in a new sustainable smart district, thus drawing interesting conclusions, though this method can also be applied in a broad spectrum of other situations. indicator description scoring 1 value creation condition research into potential market/ lead users (survey or others) 2 complete value proposition condition by experts 3 sufficient size of the market condition research into potential market/ lead users (survey or others) 4 access to the potential customer condition by experts 5 willingness to make an effort condition by experts 6 affordable costs condition five forces analysis by experts 7 superiority over competitor condition by experts 8 entry barrier existence condition by experts table 7: improved business model evaluation method summary. journal of business models (2019), vol. 7, no. 5, pp. 25-47 41 references afuah, a. and tucci, c. l. (2003) ‘a model of the internet as creative destroyer’, ieee transactions on engineering management. doi: 10.1109/tem.2003.819651. alexa, m. (2014) ‘business model evaluation – a conceptual approach’, review of economic and business studies. alexandru ioan cuza university, faculty of economics and business administration, (14), pp. 245–260. ballon, p., kern, s., poel, m. and tee, r. (2005) ‘best practices in business modelling for ict services’, report, sge de munck tno-ict. bannigan, k. and watson, r. (2009) ‘reliability and validity in a nutshell’, journal of clinical nursing. available at: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1365-2702.2009.02939.x (accessed: 12 august 2019). blank, s. g. (2006) the four steps to the epiphany. cafepress edition. bosbach, k., tesch, j. and kirschner, u. (2017) ‘a business model perspective on innovation susceptibility: levers for strategic business model innovation’, proceedings of ispim conferences. available at: https://www.researchgate. net/profile/jan_tesch/publication/318340644_a_business_model_perspective_on_innovation_susceptibility_ levers_for_strategic_business_model_innovation/links/5964b989458515183cfa8ad5/a-business-model-perspective-on-innovation-suscept (accessed: 12 august 2019). bouwman, h., zhengjia, m., van der duin, p. and limonard, s. (2008) ‘a business model for iptv service: a dynamic framework’, info (2008) ‘a business model for iptv service: a dynamic framework’, emerald insight. doi: 10.1108/14636690810874377. brea-solís, h., casadesus-masanell, r. and grifell-tatjé, e. (2015) ‘business model evaluation: quantifying walmart’s sources of advantage’, strategic entrepreneurship journal. doi: 10.1002/sej.1190. brinckmann, j., grichnik, d. and kapsa, d. (2010) ‘should entrepreneurs plan or just storm the castle? a meta-analysis on contextual factors impacting the business planning-performance relationship in small firms’, journal of business venturing, 25, pp. 24–40. doi: 10.1016/j.jbusvent.2008.10.007. casadesus-masanell, r. and enric ricart, j. (2010) ‘from strategy to business models and onto tactics’, long range planning, 43(2–3). doi: 10.1016/j.lrp.2010.01.004. casson, m. (2003) the entrepreneur. 2nd edn. edward elgar, cheltenham, uk. cea d’ancona, m. a. (1999) metodología cuantitativa : estrategias y técnicas de investigación social. síntesis, d.l., madrid chwolka, a. and raith, m. g. (2011) ‘the value of business planning before start-up — a decision-theoretical perspective’, journal of business venturing, 27, pp. 385-399. doi: 10.1016/j.jbusvent.2011.01.002. coombes, p. and nicholson, j. (2013) ‘business models and their relationship with marketing: a systematic literature review’, industrial marketing management, 42, pp. 656–664. diaz-diaz, r., munoz, l. and perez-gonzalez, d. (2017) ‘the business model evaluation tool for smart cities: application to smartsantander use cases’, energies, 10(3). doi: 10.3390/en10030262. journal of business models (2019), vol. 7, no. 5, pp. 25-47 42 d’souza, a. d’, wortmann, h., huitema, g. and velhuijsen, h. (2015) ‘a business model design framework for viability; a business ecosystem approach’, journal of business models, 3(2), pp. 1–29. ehret, m., kashyap, v. and wirtz, j. (2013) ‘business models: impact on business markets and opportunities for marketing research’, industrial marketing management, 42, pp. 649–655. gassmann, o., frankenberger, k. and csik, m. (2014) ‘the business model navigator: 55 models that will revolutionise your business’. pearson, harlow, uk. ghezzi, a., georgiades, m., reichl, p., le-sauze, n., di cairano-gilfedder, c. and managiaracina, r. (2013) ‘generating innovative interconnection business models for the future internet’, emerald insight. doi: 10.1108/info-12-2012-0054. giffinger, r. and gudrun, h. (2010) ‘smart cities ranking: an effective instrument for the positioning of cities?’, architecture, city and environment, (12), p. 19. gordijn, j. and akkermans, h. (2001) ‘designing and evaluating e-business models’, ieee intelligent systems, 16(4), pp. 11–17. available at: www.cs.vu.nl/~gordijn/research. gruber, m. (2007) ‘uncovering the value of planning in new venture creation: a process and contingency perspective’, journal of business venturing, 22, pp. 782–807. hamel, g. (2000) leading the revolution. boston, ma: harvard business school press. heikkilä, m., bouwman, h., heikkilä, j., solaimani, s. and janssen, w. (2016) ‘business model metrics: an open repository’, information systems and e-business management, 14, pp. 337-366. doi: 10.1007/s10257-015-0286-3. hippel, e. von (1986) ‘lead users: a source of novel product concepts’, management science, 32(7), pp. 691–705. horsti, a. (2007) essays on electronic business models and their evaluation, electronic business. helsinki school of aconomics. helsinki ishida, f., sakuma, h., abe, h. and fazekas, b. (2006) ‘remodeling method for business models of r&d outputs’, in 2006 technology management for the global future picmet 2006 conference. ieee, pp. 708–714. doi: 10.1109/ picmet.2006.296603. kauffman, r. j. and wang, b. (2008) ‘tuning into the digital channel: evaluating business model characteristics for internet firm survival’, information technology and management, 9(3), pp. 215–232. doi: 10.1007/s10799-008-0040-3. kley, f., lerch, c. and dallinger, d. (2011) ‘new business models for electric cars-a holistic approach’, energy policy, 39(6), pp. 3392–3403. doi: 10.1016/j.enpol.2011.03.036. klimanov, d. and tetriak, o. (2019) ‘linking business model research and marketing: new network-based approach to business model analysis’, journal of business & industrial marketing, 34(1), pp. 117–136. kotler, p. and keller, k. l. (2016) marketing management. 15th edn. pearson, boston. martikainen, a., niemi, p. and pekkanen, p. (2014) ‘developing a service offering for a logistical service provider— case of local food supply chain’, international journal of production economics, 157(c), pp. 318–326. available at: https://www.sciencedirect.com/science/article/pii/s0925527313002533 (accessed: 12 august 2019). journal of business models (2019), vol. 7, no. 5, pp. 25-47 43 mateu, j. m. and march-chorda, i. (2016) ‘searching for better business models assessment methods’, management decision, 54(10), pp. 2433–2446. doi: 10.1108/md-07-2015-0325. mcgrath, r. g. (2010) ‘business models: a discovery driven approach’, long range planning, 43(2–3). doi: 10.1016/j. lrp.2009.07.005. moore, g. a. (1991) crossing the chasm. harper business, new york. mora, l., bolici, r. and deakin, m. (2017) ‘the first two decades of smart-city research: a bibliometric analysis’, journal of urban technology, 24(1), pp. 3–27. doi: 10.1080/10630732.2017.1285123. morris, m., schindehutte, m. and allen, j. (2005) ‘the entrepreneur’s business model: toward a unified perspective’, journal of business research, 58(6), pp. 726–735. doi: 10.1016/j.jbusres.2003.11.001. osterwalder, a. (2007) ‘how to describe and improve your business model to compete better’, draft version, pp. 1–23. available at: http://faculty.uml.edu/vkijewski/businessmodel.pdf (accessed: 30 october 2018). osterwalder, a. and pigneur, y. (2010) business model generation. john wiley & sons, inc., hoboken, nueva jersey. pateli, a. g. and giaglis, g. m. (2004) ‘a research framework for analysing ebusiness models’, european journal of information systems, 13(4), pp. 302-314. doi: 10.1057/palgrave.ejis.3000513. piscicelli, l., ludden, g. and cooper, t. (2018) ‘what makes a sustainable business model successful? an empirical comparison of two peer-to-peer goods-sharing platforms’, journal of cleaner production, 172, pp. 4580-4591. available at: https://www.sciencedirect.com/science/article/pii/s0959652617319029 (accessed: 12 august 2019). porter, m. e. (1980) competitive strategy. free press, new york. reuver, m. de, bouwman, h. and haaker, t. (2013) ‘business model roadmapping: a practical approach to come from an existing to a desired business model’, international journal of innovation management, 17(1), pp. 1–18. available at: https://www.worldscientific.com/doi/abs/10.1142/s1363919613400069 (accessed: 12 august 2019). ries, e. (2011) the lean startup. crown business, new york. sarasvathy, s. d. (2001) ‘causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency’, academy of management review, 26(2), pp. 243–263. doi: 10.2307/259121. sarasvathy, s. d. (2008) effectuation. elements of entrepreneurial expertise. edward elgar, cheltenham, uk. schoormann, t., kaufhold, a., behrens, d. and knackstedt, r. (2018) ‘towards a typology of approaches for sustainability-oriented business model evaluation’, in lecture notes in business information processing. doi: 10.1007/978-3-319-93931-5_5. shane, s. a. (2003) a general theory of entrepreneurship. the individual-opportunity nexus. edward elgar, cheltenham, uk. journal of business models (2019), vol. 7, no. 5, pp. 25-47 44 shin, j. and park, y. (2009) ‘on the creation and evaluation of e-business model variants: the case of auction’, industrial marketing management, 38, pp. 324–337. available at: https://www.sciencedirect.com/science/article/ pii/s0019850108000084 (accessed: 12 august 2019). sosna, m., trevinyo-rodriguez, r. n. and velamuri, s. r. (2010) ‘business model innovation through trial-and-error learning the naturhouse case’, long range planning, 43(2–3). doi: 10.1016/j.lrp.2010.02.003. steinhöfel, e., hussinki, h. and bornemann, m. (2018) ‘evaluation of business models – a systematic literature review’, conference paper. available at: https://www.researchgate.net/profile/erik_steinhoefel/publication/326736215_ evaluation_of_business_models_-_a_systematic_literature_review/links/5b619a89458515c4b2574ed9/evaluation-of-business-models-a-systematic-literature-review.pdf (accessed: 12 august 2019). teece, d. j. (2007) ‘explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance’, strategic management journal, 28, pp. 1319–1350. doi: 10.1002/smj.640. teece, d. j. (2010) ‘business models, business strategy and innovation’, long range planning, 43(2–3). doi: 10.1016/j. lrp.2009.07.003. tesch, j. and brillinger, a. (2017) ‘the evaluation aspect of digital business model innovation: a literature review on tools and methodologies’, in proceedings of the 25th european conference on information systems (ecis). guimarães, portugal, pp. 2250–2268. yüksel, i. (2012) ‘developing a multi-criteria decision making model for pestel analysis’, international journal of business and management, 7(24), pp. 52–66. zott, c. and amit, r. (2007) ‘business model design and the performance of entrepreneurial firms’, organization science, 18(2). doi: 10.1287/orsc.1060.0232. journal of business models (2019), vol. 7, no. 5, pp. 25-47 45 appendix 1: example of business model description (model c.car sharing) 1. what need does the model address? what problem does it solve? what wants does it satisfy? it offers a personal mean of transport available by hours. what value attributes complement the value proposition? it avoids the need to have a personal car, or use it systematically. it uses low pollutant and low consumption electric cars. to what extent does it meet the need or solve the problem it can avoid the purchase of a car, which is a major expense. 2. is it a need or want shared by most of the residents or only by some of them? it is probably a broadly shared want or need. could the model serve residents outside the neighbourhood? initially not, maybe depending on which areas it could be used in. 3. how is the service provided? (describe the system and resources required to provide the service) it depends on whether we work together with a company in the sector or we decide to start from scratch. investment is greater in the second scenario, as we would have to buy cars and create the platform. in the first scenario, the cost is smaller. 3.1. how difficult would it be to start up and run the service? what particularly complex elements does the model require? it would be complex because cars would have to be bought, the platform created, areas of use defined and rates established, etc. 3.2. what initial investments does the model require for start up? (include an estimate if known) depending on the model, the investment could be very high. 3.3. what are the main recurring costs associated with the provision of the service? (include an estimate if known) maintenance of the platform, vehicles, and customer service system. 3.4. will the model compete with the service provided by companies outside the neighbourhood that offer an analogous service? direct competition: people who prefer to have their own car, and public transport. 4. would the potential customer be ready to pay the price and put in the effort required by the new business model? probably. which of these income formulas are contemplated in the model (either exclusively or simultaneously)? free for all periodic fee (flat rate) pay per use x (*) other (to specify) (*) a one-off payment plus a payment based on kilometres travelled journal of business models (2019), vol. 7, no. 5, pp. 25-47 46 appendix 2: survey we would like to find out your opinion about some services that we are thinking of setting up in the neighbourhood. all of them will feature the environmental and social concerns that characterise the project. it is also important to know how useful you would find these services, and if you would use them. we would like you to rate these services with a score ranging from 1 to 5, depending on how useful they would be to you. give a score of 1 to those services you find totally useless, a score of 5 to those that you would find totally useful, or scores 2, 3 or 4 for intermediate ratings. let us show you an example. choose the answer that best fits haw useful you would find a service that consists of… o f n o u se a t al l o f lim it ed u se fu ln es s o f av er ag e u ti lit y q u it e u se fu l e xt ra or d in ar ily u se fu l ... a means of public transport (bus), with a set timetable, which connects the neighbourhood with several key places in valencia 1 2 3 4 5 for this service, please answer this question as well: would you use this service if it was available at a reasonable price? (select the option that best describes your willingness to use it). i w ou ld n ot u se it i w ou ld u se it o cc as io n al ly i w ou ld u se it s om et im es i w ou ld u se it v er y of te n a lw ay s or a lm os t al w ay s ... a means of public transport (bus), with a set timetable, which connects the neighbourhood with several key places in valencia 1 2 3 4 5 journal of business models (2019), vol. 7, no. 5, pp. 25-47 47 dr josé m. mateu completed phd in management, degree in civil engineering and master’s degree in business strategy. he worked for more than 20 years in the private sector, where he held management positions in different sectors, such as aeronautics, telecommunications and consulting. he taught strategy and marketing at several business schools in spain, and was in charge of a couple of public initiatives aimed to support entrepreneurs. he wrote nine books about entrepreneurs, business creation and marketing, and recently returned as a lecturer to the academia, where he teaches air transport exploitation, at the universitat politècnica de valència. his phd thesis was framed in the field of business model innovation, and he has published some articles about this subject in prestigious journals. dr. alejandro escribá-esteve is full professor of strategic management at the university of valencia (spain). his research interests focus on the interface between the characteristics and processes of top management teams and business and corporate strategies in smes and family firms. he is also interested in business model innovation. he has been guest lecturer at bocconi university (italy), hec montreal and concordia university (canada). he has published more than thirty articles in several spanish and international journals, as well as five books and nine book chapters. he is member of six national and international management associations. about the authors journal of business models (2020), vol. 8, no. 2, pp. 1-21 1 business models for accelerators: a structured literature review carlo bagnoli1, maurizio massaro2, daniel ruzza3,*, and korinzia toniolo4 abstract purpose: this paper aims to provide a better understanding of accelerators’ phenomenon, developing a business model framework for these organizations. the proposed framework aims to offer helpful guidance for practitioners and policymakers, together with various research opportunities for scholars. design/methodology/approach: the study employs a structured literature review methodology, which guarantees the repeatability of the research and the validity of the outcomes. additionally, to further test the results of our analysis, we interviewed ten practitioners from some accelerators located in italy and slovenia. findings: findings show that the literature on accelerators is still fragmented and under-investigated. the presented framework for an accelerator business model provides insights about the activity and the role of such organizations. the study offers fruitful avenues for future research on accelerators’ business models. research limitations/implications: given the fragmented nature and the novelty of the literature on the topic, there may be relevant papers and reports missing in our analysis. further research should investigate the role of accelerators in the ecosystem they operate in and provide a clear and shared definition in collaboration with all stakeholders. practical implications: the presented framework provides practitioners with useful insights for understanding an accelerator activity and valuable recommendations for managing these organizations in the future. social implications: since we consider society among the key stakeholders of an accelerator’s business model, this study provides significant insights into the social impact of accelerators in the ecosystem they operate. relevant implications may be useful, especially for policymakers. originality/value: the main contribution of this study is the extent analysis of a new topic in the entrepreneurial literature, providing a clear and broad perspective of the phenomenon. furthermore, this study provides relevant insights into the role of accelerators in academic research as well as for practitioners and policymakers. please cite this paper as: bagnoli et al. (2020), business models for accelerators: subtitle: a structured literature review, vol. 8, no. 2, pp. 1-21 keywords: business model, accelerator, structured literature review, start-up, performance 1 department of management, ca’ foscari university of venice, italy, www.unive.it/persone/bagnoli, bagnoli@unive.it 2 department of management,ca’ foscari university of venice, italy, https://www.unive.it/data/persone/18972961, maurizio.massaro@unive.it 3 department of business and management, luiss guido carli, roma, italy, http://phdmanagement.luiss.it/profile/daniel-ruzza/, druzza@luiss.it 4 department of management disa, university of bologna, italy, https://www.unibo.it/sitoweb/korinzia.toniolo2, korinzia.toniolo2@unibo.it acknowledgements: this research was supported as part of cab project, an interreg project supported by the italy-slovenia cooperation programme of the european regional development fund of the european union. the content of this publication does not necessarily reflect the official positions of the european union. the responsibility for the content of this publication belongs to the authors journal of business models (2020), vol. 8, no. 2, pp. 1-21 2 introduction accelerators are proliferating across the globe, increasing from the first one in 2005 with the foundation of y combinator to over 500 in 2015 (busenitz, l., matusik, s., anglin, a. and dushnitsky, g., 2017). they are becoming a more established phenomenon, driving up the demand for acceleration programs by start-ups and attracting corporates and governments, despite initially cautious and doubtful of their value (cruz, 2016). notwithstanding the growing attention focused on this topic, the existing literature is fragmented, and there does not seem to be a generally recognized definition of an accelerator (torun, 2016). this study analyses the multifaceted definitions of accelerators found in the literature, identifying a standard set of characteristics. the variety of interpretations reflects the heterogeneity of the types of accelerators considering the organization that supports them, the sector in which they specialize, and the geographical focus they choose. additionally, this research tries to develop a business model framework for accelerators, bringing together the vital elements for each building block gathered from the analyzed literature. the proposed framework aims to enhance the understanding of the accelerator phenomenon and to present helpful guidance for practitioners, as well as a starting point for future research. as the industry is still young, many business models are yet unproven, and, in the same way, there are no standard indicators for measuring the success or failure of an accelerator program (cruz, 2016). in this context, our study provides a list of the main success factors identified in the literature. the paper is organized as follows. section two depicts the research methodology. section three describes the main findings from the literature, presenting the accelerator business model framework. section four discusses the findings and ends the paper with some considerations for future research opportunities. methodology to develop our study, we employ a structured literature review (slr) approach, as described by massaro et al. (2016). an slr is defined as “a method for studying a corpus of scholarly literature, to develop insights, critical reflections, future research paths and, research questions” (massaro, m., dumay, j. and guthrie, j., 2016). this method requires a rigid structure and a precise work plan; therefore, it guarantees that the search can be replicated (tranfield, d., denyer, d. and smart, p., 2003) and that the different outcomes are valid. data acquisition to develop our study, we first searched the database scopus using the keyword “accelerator”. indeed, scopus is “one of the largest abstract and citation databases of peer-reviewed literature” (massaro, m., dumay, j. and bagnoli, c., 2019). still, it does not include, for example, consultancy reports. one of the authors read all the abstracts and selected only papers related explicitly to accelerators. withdraw articles focused on other entities such as incubators and business angels. additionally, to enlarge our research, we developed an online analysis searching for papers not published in scopus, such as european union reports and practitioners’ articles. indeed, “researchers should not confine slrs solely to journal articles” (massaro et al., 2016). therefore, a total amount of twenty-four journal articles, eleven consultancy reports, four institutional reports, and three websites were included in our dataset. data analysis all papers and documents, as described above, were imported in nvivo and analyzed using a predefined framework split into five primary levels of analysis, using dedicated nodes. the first level of analysis depicts the definition of an accelerator, showing how accelerators differ from other organizations such as incubators and business angels. the second level of analysis aims to identify the main types of accelerators, while the third level recognizes the most promising industries for acceleration. the fourth level seeks to investigate the most relevant features of accelerators’ business models provided by the literature. to describe the main characteristics of accelerators, we used the framework developed by biloslavo, r., bagnoli, c. and edgar, d. (2018) as the main reference of our study. biloslavo et al.’s business model canvas is built “as its visual presentation to be used in practice,” adopting a circular viewpoint of the building blocks, instead of a linear one; therefore, we believe it fits the purpose of journal of business models (2020), vol. 8, no. 2, pp. 1-21 3 our study. looking at society as one of the nine building blocks of the canvas allows the accelerator to be considered in an ecosystem, assuming a holistic driven approach. finally, the fifth and last level of our analysis focuses on the success and risk factors of an acceleration program. table i depicts our research framework and the nodes used. codes name a_defining accelerators a 01_definitions a 02_differences from incubators a 03_differences from angels a 04_theme not addressed b_types of accelerators b 01_venture-backed accelerator b 02_government-backed accelerator b 03_corporate-sponsored accelerator b 04_university-led accelerator b 05_sector focus b 06_geographic focus b 07_theme not addressed c_most promising industries for acceleration d_accelerator business model d 01_value proposition d 02_society d 03_partners d 04_resources d 05_internal processes d 06_external processes d 07_customers d 08_products d 09_revenue streams d 10_costs d 11_theme not addressed e_key success factors and risk factors of accelerators reliability testing to further test the results of our analysis, we interviewed ten practitioners from some accelerators located in italy and slovenia to gather fundamental informants’ review or analysis (yin, 1984). the interviews were conducted using half-structured questionnaires, focusing on the services offered to startups and on the accelerators’ business models. in the slr approach, the use of reliability measures helps researchers in demonstrating that their data: “(a) have been generated with all conceivable precautions in place against known pollutants, distortions and biases, intentional or accidental, and (b) mean the same thing for everyone who uses them” (krippendorff, 2004, p. 267). therefore, by reducing bias, researchers can argue that their analytical framework is reliable. findings a definition of accelerator the global accelerator landscape is growing and changing at a rapid pace (gali, 2016). it is becoming more and more challenging to reach a shared and precise definition of an accelerator. as new models emerge, the term accelerator describes an increasingly diverse set of programs and organizations and, often, the lines that distinguish accelerators from similar institutions, like incubators and early-stage funds, become blurred (goldstein, a., lehmann, e. j., prax, e., 2015). from our literature review, we found 29 different definitions, which we analyzed using the software “leximancer”, a text-mining tool for visualizing the structure of concepts and themes in a text (cretchley, j., rooney, d. and gallois, c., 2010). figure 1 is a graphic representation of the main characteristics of accelerators detected by the software. the spheres identified as most important in figure 1 by their size (mentorship, start-ups, support, program, event, model, early) map the most relevant features of accelerators. indeed, despite the variety of definitions, they all refer to the need to keep a timelimited (three to six months) cohort-based program targeted to early-stage start-ups, including mentorship support and public pitch events (miller and bound, 2011; isabelle, 2013; cohen and hochberg, 2014). interestingly, accelerators bear some similarities to incubators and angel investors (cohen and hochberg, 2014). they all help and fund nascent ventures, offering educational components and mentorship programs (cohen, 2013). the fixed length of the program, its intensity, the provision of benefits and services, and the cohort-based nature distinguish accelerators from incubators, which lack a fixed term and do not typically table 1: research framework journal of business models (2020), vol. 8, no. 2, pp. 1-21 4 provide equity investment in return for cash ( clarysse, b., wright, m. and hove, j. van., 2015). on the other hand, accelerators are maybe more similar to business angel investors (cohen and hochberg, 2014). those are wealthy individuals who invest their own money into early-stage start-ups, usually having previous experience in seed investing or who might have started a few businesses on their own before (wiltbank, r., read, s., dew, n. and sarasvathy, s.d., 2009). like accelerators, angel investments can improve the survival rate of start-ups. types of accelerators and most prosing industries as accelerators have increased in popularity, many potential entrepreneurs and organizations, such as universities, companies, and regional development agencies, feel attracted by the idea of starting an accelerator (clarysse et al., 2015). however, starting an accelerator needs a very clear vision and strategy about the goal to be achieved. the rationale behind different accelerator models lies in their ability to target a broad category of start-ups, as well as having different objectives and stakeholders (tasic, i., montoro-sànchez, a. and cano, m., 2015). the analyzed literature identifies four main types of accelerators based on the organization that supports them. out of the total of the papers analysed, most speak of corporate-sponsored accelerators, followed by venture-backed accelerators. the first type identified refers to venture-backed accelerators. also referred to as “investor-backed archetype” figure 1: the accelerator’s definition analysis journal of business models (2020), vol. 8, no. 2, pp. 1-21 5 (clarysse et al., 2015), this kind of accelerator is funded by business angels, venture capital funds, or corporate venture capital. it focuses on start-ups in the later stage of development, seeking significant returns on equity investments (cruz, 2016). the most effective example is y-combinator. it is the world’s most successful and most influential accelerator and acts as a model for many other accelerators (fowle, 2017). this accelerator selects two cohorts of startups each year and gives them money, mentorship, connection, in exchange for 7% equity (cruz, 2016). some examples of ”unicorns” that join the program are airbnb, dropbox, stripe. the second type, named the government-backed accelerator, typically selects ventures in a very early stage in the lifecycle (nesta, 2014), stimulating the start-up activity in the ecosystem. indeed, public accelerators are a popular policy instrument to foster entrepreneurship and regional innovation, aiming to create jobs and catalyze local economic growth (miller and bound, 2011). start-up chile is the biggest accelerator in latin america, and the chilean government founds it. it is based in santiago and, startups can benefit from several benefits that the chilean government offers them as an equity-free investment, working visa for a year, soft landing when the startuppers arrive in chile. the program has a double goal: to boost local startups to use chile as a platform to go global and to attract external start-ups and make chile the innovation and entrepreneurship hub of latin america (cruz, 2016). the third type of accelerator, the corporate-sponsored accelerator, is set up by corporates, whose goal is to insource external innovation and to stimulate corporate innovation (kanbach and stubner, 2016). interestingly, it often has no profit orientation, and the main goal is to match the startups with potential corporate stakeholders (clarysse et al., 2015). an example is the fintech innovation lab led by accenture. it was initially developed in new york, but now, thanks to its success, it is also run in london and honk kong. it creates a win-win situation for both accenture and startups. its primary focus is to create a platform for the financial services industry to collaborate on innovation with early-stage ventures. in the meantime, accenture can strengthen its relationship with banking clients (clarysse et al., 2015). however, it is focused on a specific industry and startups outside that industry is not admitted. similarly, the fourth type, the university-led accelerator, generally does not offer initial funds and takes no equity in the student-founded ventures (cruz, 2016). this type of accelerator is a non-profit educational entity, supporting student entrepreneurship and fostering innovation inside and outside the university (dempwolf, c.s., auer, j. and ippolito, m.d., 2014). one of the most successful examples of a university-led accelerator is startx. founded in 2011, startx is associated with stanford university. today, the companies that startx has accelerated from the foundation phase have a combined value of more than 19 billion dollars. the key to its success is that it is a not-for-profit organization that does not take equities, does not give a time limit to the startup, and does not have mandatory events (cruz, 2016). on the other side, at least one member of the company must have some connections with stanford university. the accelerators may also differ based on the industry sector and geographical focus. concerning the geographic model, the literature identifies three levels: local, cross-border, and global. accelerators focused on a specific area have an impact on the local entrepreneurial ecosystem (komarek, r., knight, d. and kotysschwartz, d.a., 2016). cross-border accelerators are conceived to develop integrated activities between two or more players located in different adjacent regions or countries; they perceive common goals as creating a network of key players. global accelerators aim to spread best practices internationally. several corporate accelerator programs have multiple international locations, building relationships among different ecosystems (kanbach and stubner, 2016; eas, 2016). regarding the sector, this can range from being very generic to very specific (clarysse et al., 2015). recently, the growing competition among accelerators has led to a trend of specializations (greiler, 2017), bringing more value to start-ups through more qualified acceleration teams and close corporate ties to related markets (gust, 2016; bauer, s., obwegeser, n. and avdagic, z., 2016)). typically, venture-backed and corporate-sponsored accelerators tend to choose a few verticals, boosting specific industries or technologies (cruz, 2016). in our literature review, we have identified twenty promising sectors for acceleration (table 2). the most cited industry is technology, media, and telecommunications. the journal of business models (2020), vol. 8, no. 2, pp. 1-21 6 term technology means that the start-ups accepted by the accelerator are focused on a relatively narrow range of connected technologies (dempwolf et al., 2014). this is followed by financial services and healthcare identified in seven of the analyzed sources. according to ream and schatsky (2016), twenty-three percent of accelerators are focused on financial services. consumer goods and education are considered promising industries for acceleration in four papers; while, just three papers talk about agriculture and food. the other sectors seem to have less marked relevance in the analyzed literature. the accelerator business model in the literature review performed in this study, a number of papers try to provide insights about accelerators’ business models. for example, kohler (2016) defines four design dimensions (people, process, proposition, place) to set up corporate accelerators, intending to provide a starting point for managers who want to set up or enhance a corporate accelerator. similarly, kanbach et al. (2016) discuss a typology for corporate accelerators, identifying possible configurations. other studies adopt the seminal framework developed by osterwalder and pigneur (2010), highlighting the foundational role of the value proposition (dempwolf et al., 2014; torun, 2016). in this context, carvalho et al. (2017) assert that the nature of accelerators is evolving, trying to adopt sustainable business models, while kupp et al. (2017) assert the necessity for companies to adjust and align their business models to face digital transformation by creating corporate accelerators. however, these studies do not provide a comprehensive framework for analyzing the accelerators’ business model. in this paper, in order to identify and analyze the characteristics of the accelerators’ business model, we focused on the nine building blocks of biloslavo et al.’s framework (2018). this model differs from other approaches, such as osterwalder and pigneur’s (2010), for the following reasons: (1) the value creation is seen from a broader point of view including customers’ value, society ’s value, partners’ value, and the same company ’s value; (2) it considers the overall costs and benefits generated by the company ’s business; (3) the resources involve everything able to create benefits, including the natural environment; (4) the nine building blocks that shape the framework are designed as triangles to visually support the systemic relationships developing among the partners (biloslavo et al., 2018). in the following sub-sections, the nine building blocks of accelerators’ business model are described. value proposition the value proposition represents the proposal that the organization makes towards its stakeholders aimed at satisfying their needs and challenges (bagnoli, c., massaro, m., dal mas, f. and demartini, m., 2019). the accelerators’ value proposition at start-ups is to speed up their growth and development (nesta, 2014). through their programs, which offer a combination of financial support, guidance, and training, they try to add value to start-ups helping new-born ventures to adapt quickly and learn (torun, 2016). for venture capitalists and angel investors, the value proposition consists of brokerage services, which keep them informed of viable investments, while for established companies, it consists of acquisition opportunities (dempwolf et al., 2014). additionally, the more structured accelerators let their skills and experience available to the most promising industries for acceleration sources technology, media & telecommunications 9 financial services 7 healthcare 7 consumer goods 4 education 4 agriculture and foods 3 entertainment 2 e-commerce 2 cloud services 2 biotech 2 drones 2 real estate 2 publishing 1 life science 1 energy 1 water and sanitation 1 environment 1 business & productivity 1 marketing & advertising 1 creative industries 1 table 2: most promising industries for acceleration journal of business models (2020), vol. 8, no. 2, pp. 1-21 7 companies who want to start their corporate accelerator, helping them to run and manage it. society society includes various stakeholders by whom firms establish and maintain mutually beneficial relationships, as well as the natural environment with its ecosystem services, which represent a source of all human life and activities (biloslavo et al., 2018). accelerators promote the ecosystem development by fostering innovation and economic growth (battistella, c., de toni, a.f. and pessot, e., 2017; thurik & wennekers, 1999), as well as contributing to the cultural capital development of the region they operate in (bauer et al., 2016). successful accelerators have a fundamental role in introducing and building new network ties between founders, investors, and other stakeholders (battistella et al., 2017), generating new value. additionally, many public-funded accelerators focus on social and environmental benefits, i.e., working as critical drivers for the creation of new jobs (ebn, 2015) and encouraging social innovation (nesta, 2014). partners the partners’ building block consists of the network of suppliers and partners that makes the business model work (biloslavo et al., 2018). mentors are among the key partners for an accelerator because mentorship is one of the most significant values that an acceleration program provides to its start-ups (cruz, 2016). mentors are experienced entrepreneurs or angel investors who are heavily vetted before being included in the accelerator’s program (clarysse et al., 2015). the key characteristics of a good mentor are the unique expertise acquired through experience, his/her network (cruz, 2016), and his/her specific sector knowledge. these allow accelerators to improve the selection process further and provide more targeted mentoring, training, and network building services to its incubates (stam and buschmann, 2011). furthermore, not all successful entrepreneurs can act as good mentors. indeed, there is a need for a strong predisposition and willingness to help new entrepreneurs to achieve success. accelerators should tighten relationships also with their alumni. all accelerators acknowledge their alumni network as a valuable asset of the program; thus, promoting an alumni network is a priority (nesta, 2014). most accelerators run regular events for alumni and invite them back into the program to share their experiences. after several years of activity, accelerators can identify future mentors or investors among successful alumni. these alumni are more likely to help those who have guided them in taking the first steps in their entrepreneurial journey (clarysse et al., 2015). another fundamental category of partners is investors. usually, these are venture capitalists or angel investors. most accelerators have their network of business angels and venture capitalists willing to provide funding to the most promising start-ups admitted in the program (battistella et al., 2017). they tend to invest in such companies because they may earn a massive return on their investments(dempwolf et al., 2014). it is possible to identify also technological partners who support the technical development of the startup’s products or services. the collaboration between successful start-ups and tech partners developed during the program can go further and become a long term partnership for product or service co-development (battistella et al., 2017). finally, accelerators develop partnerships with corporations. accelerators typically link with relevant industry players to get the expertise they need (nesta, 2014). resources resources used by companies can be distinguished into the following types: financial (e.g., cash used in transactions), manufactured (e.g., semi-products, infrastructure), intellectual (e.g., patents, tacit knowledge), human (e.g., labor, skills, motivation), social and relationship (e.g., shared norms, brand loyalty), and natural (e.g., clean air, biodiversity) (biloslavo et al., 2018). focusing on accelerators, manufactured resources are mostly made up of the offices’ space that the accelerator makes available to start-ups. in most of the cases, start-ups are co-located in a shared open office space that encourages peer–to–peer learning and collaboration (clarysse et al., 2015). financial resources are essential to support expensive acceleration programs. the majority of accelerators retrieve the financial resources they need from partnerships with investors, such as angel investors or venture capitalists or from companies’ partnerships. internal coaches are part of human resources; they try to guide the entrepreneurs in the right decision journal of business models (2020), vol. 8, no. 2, pp. 1-21 8 choice (clarysse et al., 2015). other professional figures can be identified in the accelerator staff, for example, business developers who help the start-ups in testing their business idea on the market (clarysse et al., 2015). considering social and relationship resources, we have identified the credibility as a critical resource for all accelerators. credibility is linked to several factors: reviews, reputation, exits, networks (cruz, 2016). the accelerators’ credibility depends on the success stories of their alumni. if their start-ups finish the program, but they fail in finding investors, this can reflect badly on the accelerator (cruz, 2016). accelerator’s reputation enables a virtuous circular system: greater credibility will attract the best start-ups that, performing successfully, will contribute to increasing further the accelerator brand awareness (fowle, 2017). finally, a start-up cannot cover all the expertise it requires from day one and very often, not even after a few years (kupp, m., marval, m. and borchers, p., 2017). therefore, a good accelerator must provide the knowledge needed by the start-ups, and it must be able to transfer it in an effective way (bauer et al., 2016). processes processes include inbound logistics (i.e., procurement and supply channels), r&d, and operations as well as marketing and outbound logistics (i.e., distribution and communication channels) (biloslavo et al., 2018; nielsen, c., lund, m., montemari, m., paolone, f., massaro, m. and dumay, j., 2018). processes can be distinguished in external as well as internal processes. the accelerator’s external processes identified in the literature review are communication, events, demo days, and selection process. for an accelerator, it is essential to define a strategy for communicating the acceleration program (cruz, 2016). methods of communication include broadcasting, newsletters, and showcase events to illustrate their programs (clarysse et al., 2015). however, the website is the most used tool to communicate with the stakeholders (stam and buschmann, 2011). accelerators use to organize events with different purposes and objectives. the vast majority of the events are training sessions, workshops, and practical learningoriented events(clarysse et al., 2015). most accelerators run regular events in collaboration with the alumni network inviting them to share their experiences(clarysse et al., 2015). moreover, events such as meetups, talks, hackathons, and other similar initiatives bring together different ecosystem stakeholders such as entrepreneurs, investors, mentors, design experts, tech people, and others (cruz, 2016). demo days are the events that close the program. during the demo days, ventures pitch to a broad audience of qualified investors (melvin, a.d., lucia, a.c., solomos, g., volta, g. and emmony, d.c., 1990) for visibility and follow-on funding purposes (goldstein et al., 2015). through the selection process, the accelerators identify the companies that fulfill the essential criteria to be admitted to the program (ebn, 2015). the most common approach to kick off the selection process is the launch of a competitive call, which is usually free and available on the accelerator’s website (zhdanova and milyaev, 2016). the selection process of top tier acceleration programs is generally structured as follows: start-uppers fill a detailed questionnaire, including a video presentation; then, they are interviewed online, and finally, there is a panel interview (online or personal) (cruz, 2016). finally, the development and maintenance of partner relationships are part of the external processes (cruz, 2016). the accelerator’s internal processes identified by the literature are mentoring, monitoring, education, technical, and financial assistance. the education process provides start-ups with basic knowledge to develop a business. for example, it provides the knowledge to understand the deal’s structure and the evaluation process, to negotiate with investors and to evaluate if the investor’s proposal suits their needs (cruz, 2016). the focus is on financing alternatives and the expected effects of financial choices rather than on calculations and discussing financial ratios and impact (malmström and johansson, 2017). jaffee (2007) identifies more benefits of the learning process, such as the interaction with peers, the active engagement and problem-solving development, and the development of relationships(fowle, 2017). accelerators have to teach start-uppers how to get the most out of the mentors, to allow them to make the best use of mentorship service (cruz, 2016). navigating a vast network of mentors with diversified skills can be difficult for earlystage ventures, so some programs offer open sessions with mentors (nesta, 2014). increasingly, mentors and journal of business models (2020), vol. 8, no. 2, pp. 1-21 9 mentees are matched through speed dating or matchmaking events, which enable teams and mentors to quickly find out if there is any chemistry between them (nesta, 2014). moreover, mentors are trained by the accelerator and evaluated by the start-ups at the end of the process (cruz, 2016). not only the mentors are evaluated, but the start-ups, too. by telling them that they are going to be monitored, they get into the habit of measuring and reporting (battistella et al., 2017). customers the customer’s building block includes the different groups of people or organizations that the firm aims to reach and serve by its products and services (biloslavo et al., 2018). the acceleration programs are mainly developed and implemented for a single customer category: start-ups. the vast majority of the accelerators work with cohorts or classes of start-ups rather than individual companies (clarysse et al., 2015). there are different types of programs to target a wide range of start-ups with different objectives and key stakeholders (clarysse et al., 2015). there are acceleration programs focused on specific stages of the start-up lifecycle as well as on specific industries or technologies (cruz, 2016). there are accelerators focused on entrepreneurs. although some entrepreneurs have a clearly formulated business model when they start a business, many of them start with partially formed and incomplete models (malmström and johansson, 2017). often, they have not yet developed a value proposition, and sometimes it is just a person with an idea (clarysse et al., 2015). entrepreneurs apply for an opportunity to develop their concepts on-site during a fixed time period (drover, w., busenitz, l., matusik, s., townsend, d., anglin, a. and dushnitsky, g., 2017). there are accelerators focused on early-stage start-ups that may have initial market traction but require further funding and will likely not yet be generating profits; and on growth-stage start-ups that demonstrate viability, growth, and potential profitability (gali, 2016). we can identify two more types of customers in many of the accelerator’s business models: the companies and the investors. companies show a growing interest in working with start-ups (cruz, 2016) because they look for innovative products or new firms to acquire as part of their business strategies (dempwolf et al., 2014). moreover, there is a considerable number of companies that outsource the company’s accelerator management to established accelerators. this happens because the launch and execution of a corporate accelerator program are complex tasks, and usually, the parent company does not have the required capabilities (kanbach and stubner, 2016). in some cases, investors can be considered as real customers. they provide capital to the accelerator to get a service that consists of the reduction of the research and selection costs of early-stage investments (bauer et al., 2016). products products are the bundle of goods and services that create value for customers by satisfying their needs and wants (biloslavo et al., 2018). the product that accelerators make available to start-ups is the acceleration program. although this is variable based on the accelerator’s type, it is possible to identify some common characteristics. according to goldstein et al. (2015), the acceleration proposal is made up of five basic steps: the selection process, the deal, the program, the completion, and the alumni program. the selection process defines the methods of scouting and selecting start-ups (goldstein et al., 2015). the selection process can have multiple interactions, such as interviews, pitch events, and q&a sessions. the deal marks the beginning of the acceleration program and determines the contractual ties between the start-up and accelerator (goldstein et al., 2015). the acceleration program consists of a series of services that the accelerator provides to start-ups to boost their growth. the program closes with a demo day inviting the network of investors and business angels, as well as internal investors, to create funding opportunities, and representatives of the organization to assess possibilities of further cooperation (goldstein et al., 2015). the start-ups that have completed the program continue to develop and scale in the alumni program. this is the time when start-ups receive follow-on funding. the key elements of the program identified in the literature review are: • limited duration: the duration of the program is typically three months (cruz, 2016) and no more than six to instill a sense of urgency and, thereby, encourage fast results (goldstein et al., 2015). journal of business models (2020), vol. 8, no. 2, pp. 1-21 10 • the education and training: business accelerators use to organize specific training that all accepted startups go through. they include lectures, seminars, workshops, masterclasses, and business games that can cover a wide range of topics, from finance, marketing, logistics to legal, and hr aspects, among others (zhdanova and milyaev, 2016). • support from the management team: this means regular interactions with the management team to review progress and provide business advice(nesta, 2014). teams receive regular counseling, often in the form of weekly office hours. these regular meetings with the accelerator management team generate mutual trust, providing the founding teams with business assistance and enabling a constant review of their progress(clarysse et al., 2015). • a program of events, expert workshops, and inspiring talks (goldstein et al., 2015). • structured mentoring: mentorship is frequently cited as one of the most valuable aspects of accelerator programs (roberts, p.w., edens, g., davidson, a., thomas, e., chao, c., heidkamp, k. and yeo, j.h., 2017). the accelerator directors and program’s mentors meet founders on a periodical basis to provide guidance, network opportunities and to create a mutual trust with stakeholders that potentially could become later-stage investors and advisors (goldstein et al., 2015). • co-location: shared open space co-location in a shared open office space encourages peer–to–peer learning and collaboration(clarysse et al., 2015), moreover, it informally stimulates peer pressure to guarantee quality and time management (goldstein et al., 2015). • networking opportunities: these can be established with experts and professionals and with other start-ups. the cohort meets together for weekly speaker dinners, and start-ups have regular office hours with mentors(clarysse et al., 2015). • funding: access to investors is a service that all accelerators provide to start-ups. they facilitate these connections through both investor events and one-to-one matchmaking. revenues revenues are divided among benefits delivered to society and the environment (i.e., public and partner value) and revenue sources by which the firm captures some economic value for itself (biloslavo et al., 2018). in the 2016 gust report, 60.2% accelerators indicated that they intended to follow the traditional cash-for-equity model, established in 2005 by y combinator. this model is based on investing a small and fixed amount of money, between 15.000$ and 30.000$, in exchange for a fixed percentage of start-up’s equity, between 5% and 10% (brunet, s., grof, m., izquierdo, d., 2016). even if it is still very used, this model is being replaced by other forms of revenue. the reason must be sought in the tiny percentage of successful exits and the longtime required for these to be realized. in a sample of accelerators analyzed by nesta (2014), only 2.1% had gone through an exit of $5 million or more, and less than 10% generated revenues from equity returns or success fees charged to investors (gali, 2016). moreover, exits usually happen not before three to five years of a start-up’s lifecycle, which highlights the issue of additional revenue streams for maintaining the costly programs (greiler, 2017). alternative revenue streams are usually mentorship fees, rents, events, and very often, corporate sponsorships and partnerships. in 2016, corporate revenues generated by accelerators came from two main sources: corporate partnerships, generally in the form of a white-labeled or jointly-run acceleration program created by the accelerator on behalf of the corporation, and corporate sponsorship packages sold by accelerators (brunet, s., grof, m., izquierdo, d., 2016). costs costs are divided between costs that represent the negative impact of a firm’s outcomes and outputs on society and environment and cost drivers that impact the financial aspects of a firm’s performance. (biloslavo et al., 2018). the costs that an incubator could incur can vary depending on the nature of the services as well as on the business ecosystem and target group. the main costs for the accelerators analyzed are staffing costs (stam and buschmann, 2011). however, the costs for the journal of business models (2020), vol. 8, no. 2, pp. 1-21 11 equity purchase and the costs related to the coworking spaces are also significant expense items(torun, 2016). key success factors and key risks factors business models support management in the systematic analysis of the factors of success and the adaptation of business activities (nielsen et al., 2018). as accelerators have different goals and objectives, the literature concerning accelerators lacks clear information about key success factors (ksf), as well as key risk factors (krf). however, they are a further important aspect of the literature (fowle, 2017). there have been many attempts to bring together accelerators’ success factors, but these are generally derived and adapted from incubators (fowle, 2017). additionally, due to the start-up nature of many accelerators, they do not have time and resources for gathering and processing data, which they do not commonly convey or publish (brigl, m., roos, a., schmieg, f. and watten, d., 2017). table 2 shows the thirty ksfs identified in the forty-two papers examined, connected to each building block of the business model canvas. considering the value proposition as the essence of the strategy (kaplan and norton, 2001) and the most influential component of a business model (lecocq, 2010; teece, 2010), the presence of a clear value proposition is a relevant indicator to determine the success of an accelerator. biloslavo et al. (2018) highlight three types of value, namely customer value, partner value, and public value. the success of an accelerator is not only determined by the value delivered to its customers, but also by the value delivered to its partners, like alumni, mentors, and investors, and to society, i.e., the other actors of the ecosystem in which it operates. as stated by haslam (2015), “a firm’s business model is also about total value creation for all partners involved”. focusing on the extended network of relationships outside the company (biloslavo et al., 2018; morten and nielsen, 2014), this broader overview allows considering the impact in the ecosystem as a key success factor, which takes into account the critical role of an accelerator in boosting its entrepreneurial community. accelerators act as focal points for introducing and building connections between founders, investors, and other stakeholders. symmetrically, the disconnection to the local investment community must be recognized as a key risk factor. in our literature review, it is only mentioned by miller and bound (2011), but it is confirmed by the accelerators we interviewed. resources processes products society value proposition costs revenue ecosystem development regional development social innova4on fast valida4on advisory communica4on events selec4on process demo days staff office space credibility/brand knowledge financial resources mentors investors alumni technological partners corporates startups entrepreneurs companies investors mentoring monitoring educa4on technical assistance financial assistance accelera4on program startups investment opportuni4es equity returns mentorship fees events corporate sponsorship and partnerships staffing costs rent equity purchase figure 2 the accelerator’s business model framework journal of business models (2020), vol. 8, no. 2, pp. 1-21 12 similarly, considering the partners’ building block (biloslavo et al., 2018), mentorship quality is the most cited ksf, together with the extent of the partners’ network. indeed, these are crucial factors for start-ups and entrepreneurs who decide to join an acceleration program (gali, 2016). all practitioners we interviewed confirmed the importance of the development of partners’ networks, providing similar responses. the network is widely recognized as the biggest asset for accelerators because it adds credibility to the product they deliver (i.e., the program) through the involvement of mentors, investors, corporate executives, experts, and alumni (roberts et al., 2017). concerning the alumni network, we identified a specific ksf in the literature. the alumni network is an important source for mentors and investors, as successful graduates are more likely to invest back into the community, which supported them in the first place (fowle, 2017). furthermore, they actively contribute to raising brand awareness of the accelerator. building block key success factors sources value proposition definition of clear long-term objectives 7 set of transparent and aligned goals 3 definition of a clear value proposition 3 society impact in the ecosystem 4 location 3 partners mentorship quality 27 extent of partners network 21 extent of alumni network 9 corporate backing 5 quality of experts involved 4 resources brand reputation 9 accelerator team experience 6 links to funding sources 5 product expertise 4 business expertise 4 processes events as network opportunity 11 dialogue with startups and inside cohorts 5 clear definition of selection process & criteria 4 effective organization design 3 definition of metrics to track startup success 3 quality of applications 3 customers startup financial support 7 right startup portfolio size 3 services for companies 2 products quality of the program 7 strategic alignment 4 action orientation 3 extracurricular programs 3 education offered 2 time limited support 1 table 3: key success factors identified in the literature journal of business models (2020), vol. 8, no. 2, pp. 1-21 13 interestingly, in the resources building block, we stated brand reputation and credibility as crucial resources. biloslavo et al. (2018) recognize the brand as part of the resources, as it is “required to deliver the value proposition to customers”(biloslavo et al., 2018, p. 754). an accelerator builds its brand through features, positive associations, and remarkable alumni stories. reputation allows it to attract more partners and better applicants, creating a virtuous cycle: the increased quality creates better outcomes and a richer stakeholders and alumni network who enhance the reputation still further (fowle, 2017). the effects of accelerator’s brand reputation are not limited to raising investors and attracting the best applicants, but it also affects start-ups’ reputation. in any negotiation, the reputation of the start-up, which has no track record, is heavily affected by association with the accelerator. therefore, brand reputation could be a ksf as well as a krf, if it arises from negative feedbacks and opinions. in this sense, one practitioner said: “we are strongly concerned about the development and monitoring of our brand awareness, indeed nowadays reputation is a strong driver of attraction if positive, but if negative it is totally a business threat.” considering the processes building block (biloslavo et al., 2018), events, meetups, talks, and hackathons work as communication channels both for accelerators and start-ups. indeed, networking at events and conferences is considered an important success factor for two reasons. for accelerators, this represents the possibility to identify and attract promising start-ups with skilled entrepreneurial teams and excellent ideas. on the other side, for start-ups, events like demo days represent the possibility of connecting with potential investors (nesta, 2014). in the same context, another important success factor is the dialogue between accelerator directors and participating ventures to “encourage ventures to learn and adapt” (cohen and hochberg, 2014). fowle (2017, p. 12) highlights the role of dialogue inside cohorts, saying that “the practice of dialogue in accelerator cohorts creates a culture of dialogue that founders are more likely to take into their start-ups”. finally, looking at customers, we identify start-ups and entrepreneurs as the main customers for an accelerator. the most cited kfs concerning this building block is start-up financial support. in this sense, kaplan and strömberg (2001) assert that, for a start-up, participating in an accelerator, of itself, may significantly mitigate the principal-agent problem. considering the product, fowle (2017) focuses on two main ksfs, namely the quality of the program and the action orientation. the last one is recognized to be a critical entrepreneurial trait, and this is confirmed by the practitioners interviewed in our study. many of them endorse the use of practical methods, which means doing things to deal with problems and not just talking about ideas. although most of the identified ksfs are common to all four types of accelerators identified. it is possible to identify some ksfs that are more relevant for some types rather than others. for venture-backed accelerators, it is imperative to produce an economic return; therefore, the ksfs that lead to it are brand reputation, business expertise, and program quality (fowle, 2017). for government-backed accelerators, the impact on the ecosystem and the location are fundamental. for corporate-backed accelerators, the link between the accelerator and the financing company is mandatory. thus, the accelerator team is an essential ksf and must refer to a mix of people inside and outside the company (kanbach and stubner, 2016). finally, for the university-backed accelerators, the training is the most critical aspect; consequently, the education offered is one of the most relevant ksf (komarek et al., 2016). discussion and conclusions to conclude the paper, the authors reflect on the main findings of this study and, therefore, develop and address several implications for practitioners, policymakers, and scholars in the following sub-sections. implication 1: focusing on accelerators’ definition the starting point of our article is the effort to present a clear definition of an accelerator, identifying the main characteristics cited in the literature. as stated by torun (2016, p. 1) “there is an ambiguity about the definition of accelerators and incubators as well as their differences. however, if an adequate amount of literature is reviewed, one can easily reach the needed staff about the incubation and acceleration industry.” we encountered plenty of varying definitions and approaches which reflect the heterogeneity of the journal of business models (2020), vol. 8, no. 2, pp. 1-21 14 field. given the pragmatic role of accelerators in the entrepreneurial ecosystem, the lack of a clear definition prevents practitioners from understanding the activity of such organizations and the distinctive role of other entities like incubators. regarding the future stream of research, it seems reasonable that scholars should try to build their studies upon a common basis to create a homogeneous understanding of accelerators and their potentialities. additionally, “different definition or focus of studies may impede their comparative use when drafting international industrial policies” (massaro et al., 2016). making the concept of accelerators more transparent, understandable, and manageable enables a clearer perception also for policymakers who are in charge of developing the right policies and regulations in compliance with the phenomenon. as stated by massaro et al. (2016), “scholars should focus on the stakeholders of research findings, thus developing pragmatic science”. this is considered by anderson (2011) the most important type of research because it conjugates both methodological rigor and practical relevance. it aims to fill the gap between research and stakeholders of research findings, specifically addressing their practical needs, thus improving collaboration between scholars and practitioners. the findings of this study help to reach a shared definition of an accelerator. interestingly, not all the papers analyzed define the concept of an accelerator, making comparison difficult for academics and practitioners. implication 2: types of accelerators and most promising industries this study finds different types of accelerators, considering the support they receive. as stated by hathaway (2016), “not all accelerators are created equally”. this reflects the different types of missions and the objectives they intend to pursue, which explain why they exist. for instance, focusing on public-backed accelerators, they play a unique role as a policy tool, contributing to local innovation and entrepreneurship. additionally, our study provides findings also about the most promising industries for acceleration, which cater implications, especially for policymakers. from a european perspective, policies like smart specialization strategies (s3), aiming to deliver smart, sustainable, and inclusive growth, can take advantage of this kind of study for their implementation. indeed, regional policymakers need to ensure that their policies facilitate innovation diffusion and local development from the very start (carayannis and rakhmatullin, 2014), which means, e.g., targeting start-ups in specific industry sectors. therefore, they should be aware of which industries to focus on and which not. in this context, research can support policymakers in the decision processes concerning the sectors to develop, the funds to be allocated, and the programs to be implemented. implication 3: business modeling for accelerators to describe accelerators’ business model, we have applied to biloslavo et al. (2018) framework. one of its distinctive features is the presence of society as a building block of the business model. society as a building block (including the natural environment) integrates the framework developed by osterwalder and pigneur (2010) and frequently used for analyzing the accelerators’ business model (dempwolf et al., 2014; torun, 2016). additionally, looking at the value proposition, one of the advantages of biloslavo et al.’s framework is that it considers all stakeholders and their different perspectives. considering customer value, partner value, and public value as foundational to build the value proposition, it links economic value together with social and ecological value. thanks to the circular approach, the “eco-critical perspective of value proposition” (biloslavo et al., 2018, p. 753) could be beneficial to the building of accelerators’ sustainable business models (carvalho, a.c., grilo, a., pina, j.p. and zutshi, a., 2017). considering that most of the existing business model frameworks do not include society in the group of stakeholders (biloslavo et al., 2018), it is not surprising that this element was the most difficult building block to analyze. therefore, focusing on the ecosystem perspective, it is necessary to investigate the accelerator business model in a broader sense. the fifth helix framework developed by carayannis and campbell (2010) can be applied to this purpose. the fifth helix is a metaphor that indicates five actors interacting while maintaining their independent identity (etzkowitz, 2007). the five actors are national or regional authorities, the wider business community (industry), academia (including other research-focused institutions) (etzkowitz, 2007), the media-based and culture-based public and civil society (carayannis and rakhmatullin, 2014), the environment and the natural environments (carayannis and campbell, 2010). journal of business models (2020), vol. 8, no. 2, pp. 1-21 15 building on these premises, entrepreneurial initiatives can be considered not only as of the actions of individuals from the industrial sphere (etzkowitz, 2007) but also as the conjoint effort of all stakeholders in the ecosystem considered. this is confirmed by carayannis and rakhmatullin (2014) who label accelerators as hybrid institutions synthesizing elements of academia, industry, government as well as society and environment. it is necessary to develop a greater integration with the aim of developing an ecosystem that enables interconnections between the different actors. however, in the literature review, we did not find research on the topic. indeed, elements such as universities, society, and the environment are rarely and marginally treated. for this reason, future research should investigate the multifaceted role of an accelerator in its ecosystem. implication 4: ksfs and krfs of accelerators according to this study’s results, the key success factors for accelerators have been primarily inferred from incubators’ literature, and just a few authors have tried to create a definitive list. our findings confirm the fragmented literature about ksfs, yet identifying thirty recurring success factors. this contributes to the identification of the so-called “spiral of success” (fowle, 2017), which is a self-reinforcing, positive feedback loop, such as the virtuous cycle of alumni and brand reputation. on the other hand, we have not identified a significant number of key risk factors (krfs) or failure factors. as for key success factors, risk factors can be taken up from incubators (sramana, 2013); otherwise, key success factors can be seen from the negative side (preuss, 2015). this scarcity of krfs shows a lack in the literature; therefore, more in-depth research on the subject is required. research under theories of failure and risk could bring knowledge also about the different perspectives of stakeholders, their role, and motivations, improving the understanding of accelerators’ activity in the broader ecosystem they operate. interestingly, building on lyytinen and hirschheim (1987) categories of failure, failure can be viewed not just as a lack to meet objectives and specifications, but also an expectation failure. in this sense, a key factor to be retrieved is stakeholder’s perception over time, whose decisions and actions contribute to shaping the outcome. as studies of success and failure are common in emerging fields (miskon, s., bandara, w., gable, g. and fielt, e., 2011), these should be addressed in future research about accelerators, providing guidance to practice on what to emphasize and what to avoid. finally, analyzing failure factors not just as hindrances to the achievement of success, but also as outcomes of specific organizational, cultural, and political aspects (gable, 1996), can implement the strategic view of failure as a step towards success. limitations and future research despite its multiple insights for scholars, practitioners, and policymakers, this study implies some limitations. first of all, the framework of the business model adopted in this study could require some degree of adaptation by managers used to look at the most famous osterwalder and pigneur’s (2010) tool. the additional element of society and the ecological perspective embedded in the model can raise questions about the appropriateness of these elements for the building of accelerators’ business models. additionally, given the rigid nature of the analytical approach adopted, it is unlikely that every available scientific and practitioner publication was included in the literature review we conducted. however, despite the fragmentary and novelty nature of the topic investigated, the sample should provide a significant contribution to the advancement of the research in the field. indeed, literature reviews contribute to developing research paths and questions by providing a foundation on which to build on prior discoveries (massaro et al., 2016). in this context, our study opens the way to several new research opportunities. first, scholars should be focused on developing a clear, widely-accepted, and shared definition of accelerators. this could be achieved with the collaboration of practitioners, given the strong practical implications of the topic investigated. second, further research should focus on the social role of accelerators, given the extent of relationships they build in the ecosystem they operate, especially looking at the implications derived from public-backed accelerators. finally, another research stream could be built on success and failure factors in order to develop a common framework useful both for practitioners and policymakers. journal of business models (2020), vol. 8, no. 2, pp. 1-21 16 reference anderson, n. (2011), “the practitioner-researcher divide in industrial, work and organizational (iwo) psychology: where are we now, and where do we go from here?”, jorunal of occupational and organizational psychology, vol. 74, pp. 391–411. bagnoli, c., massaro, m., dal mas, f. and demartini, m. (2019), “defining the concept of business model. a literature review: searching for a business model framework”, international journal of knowledge and system science, vol. 9 no. 3. battistella, c., de toni, a.f. and pessot, e. (2017), “open accelerators for start-ups success: a case study”, european journal of innovation management, vol. 20 no. 1, pp. 80–111. bauer, s., obwegeser, n. and avdagic, z. (2016), “corporate accelerators: transferring technology innovation to incumbent companies.” paper presented at tenth mediterranean conference on information systems (mcis), paphos, cyprus, september 2016, avaiable at: https://aisel.aisnet.org/mcis2016/57/. biloslavo, r., bagnoli, c. and edgar, d. (2018), “an eco-critical perspective on business models: the value triangle as an approach to closing the sustainability gap”, journal of cleaner production, elsevier ltd, vol. 174, pp. 746–762. brigl, m., roos, a., schmieg, f. and watten, d. (2017), incubators, accelerators, venturing, and more, avaiable at: https://www.bcg.com/publications/2014/mergers-acquisitions-growth-incubators-accelerators-venturing-more. aspx (accessed 30 january 2019). brunet, s., grof, m., izquierdo, d. (2016), “global accelerator report 2016”, available at: http://gust.com/accelerator_reports/2016/global/, (accessed 30 january 2019). busenitz, l., matusik, s., anglin, a. and dushnitsky, g. (2017), “a review and road map of entrepreneurial equity financing research: venture capital, corporate venture capital, angel investment, crowdfunding, and accelerators”, journal of management, vol. 43 no. 6, pp. 1820–1853. carayannis, e.g. and campbell, d.f.j. (2010), “triple helix, quadruple helix and quintuple helix and how do knowledge, innovation and the environment relate to each other?”, international journal of social ecology and sustainable development, vol. 1 no. 1, pp. 41–69. carayannis, e.g. and rakhmatullin, r. (2014), “the quadruple/quintuple innovation helixes and smart specialisation strategies for sustainable and inclusive growth in europe and beyond”, journal of the knowledge economy, vol. 5, pp. 212–239. carvalho, a.c., grilo, a., pina, j.p. and zutshi, a. (2017), “how business startup accelerators envision their future”, paper presented at the 7th annual conference on industrial engineering and operations management (ieom 2017), 11-13 apr 2017, rabat, morocco. clarysse, b., wright, m. and hove, j. van. (2015), “a look inside accelerators. building businesses”, avaiable at: https://media.nesta.org.uk/documents/a_look_inside_accelerators.pdf, (accessed 30 january 2019). cohen, s. (2013), “what do accelerators do? insights from incubators and angels”, innovations technology governance globalization, vol. 8 no. 3, pp. 19-25. journal of business models (2020), vol. 8, no. 2, pp. 1-21 17 cohen, s.l.g. and hochberg, y. v. (2014), “accelerating startups: the seed accelerator phenomenon”, ssrn journal, no. march, pp. 1–16. cretchley, j., rooney, d. and gallois, c. (2010), “mapping a 40-year history with leximancer: themes and concepts in the journal of cross-cultural psychology”, journal of cross-cultural psychology, vol. 41 no. 3, pp. 318–328. cruz, e. (2016), “acceleration today: trends & challenges”, avaiable at: http://www.europeanacceleratorsummit. com/wp-content/uploads/sites/14/2016/12/acceleration-today.pdf, (accessed 30 january 2019). dempwolf, c.s., auer, j. and ippolito, m.d. (2014), “innovation accelerators: defining characteristics among startup assistance organizations”, small business administration, no. october, pp. 1–44. drover, w., busenitz, l., matusik, s., townsend, d., anglin, a. and dushnitsky, g. (2017), “a review and road map of entrepreneurial equity financing research: venture capital, corporate venture capital, angel investment, crowdfunding, and accelerators”, journal of management, vol. 43 no. 6, pp. 1820–1853. ebn. (2015), accelerating international growth. a practical guidebook for business support organisations, available at: http://europeanace.eu/index.php/guides/item/download/86_7feaa57990b464173fde3514b67eaa81, (accessed 30 january 2019). etzkowitz, h. (2007), “university-industry-government: the triple helix model of innovation”, social science information sur les sciences sociales, vol. 42 no. 3, pp. 293–337. fowle, m. (2017), “critical success factors for business accelerators: a theoretical context”, in british academy of management conference 2017, warwick business school, uk. gable, g.g. (1996), “a multidimensional model of client success when engaging external consultants”, management science, vol. 42 no. 8, pp. 1175–1198. goldstein, a., lehmann, e. j., prax, e. (2015), “corporate accelerator. design principles for building a successful corporate accelerator”, available at: https://www2.deloitte.com/content/dam/deloitte/de/documents/technology/ corporate_accelerator_en.pdf, (accessed 30 january 2019). greiler, f. (2017), top 20 european accelerators of 2017, available at: https://www.venionaire.com/european-accelerators-2017/, (accessed 30 january 2019). haslam, c., tsitsianis, n., andersson, t. and gleade, p. (2015), “accounting for business models and increasing the visibility of stakeholders”, journal of business models, vol. 3 no. 1, pp. 62–80. hathaway, i. (2016), “what startup accelerators really do”, available at: https://hbr.org/2016/03/what-startup-accelerators-really-do, (accessed 30 january 2019). isabelle, d.a. (2013), “key factors affecting a technology entrepreneur’s choice of incubator or accelerator”, technology innovation management review, no. february 2013, pp. 16–22. kanbach, d.k. and stubner, s. (2016), “corporate accelerators as recent form of startup engagement: the what, the why, and the how”, the journal of applied business research, vol. 32 no. 6, pp. 1761–1776. kaplan, r.s. and norton, d.p. (2001), the strategy-focused organization: how balanced scorecard companies thrive in the new business environment, harvard business school press, boston ma. journal of business models (2020), vol. 8, no. 2, pp. 1-21 18 kaplan, s.n. and strömberg, p. (2001), “venture capitalists as principals: contracting, screening, and monitoring.” american economic review, vol 91, pp. 426-430. kohler, t. (2016), “corporate accelerators: building bridges between corporations and startups”, business horizons, vol. 59 no. 3, pp. 347–357. komarek, r., knight, d. and kotys-schwartz, d.a. (2016), “assessment of a cross-disciplinary university startup accelerator”, asee’s 123rd annual conference, new orleans, la. krippendorff, k. (2004), content analysis. an introduction to its methodology, sage publications ltd, university of pennsylvania. kupp, m., marval, m. and borchers, p. (2017), “corporate accelerators: fostering innovation while bringing together startups and large firms”, journal of business strategy, vol. 38 no. 6, pp. 47–53. lecocq, x. (2010), “business model evolution: in search of dynamic consistency”, long range planning, pergamon, vol. 43 no. 2–3, pp. 227–246. lyytinen, k. and hirschheim, r. (1987), “information systems failure a survey and classification of the empirical literature”, oxford surveys in information technology, oxford university press, new york, pp. 257–309. malmström, m. and johansson, j. (2017), “practicing business model management in new ventures”, journal of business models, vol. 5 no. 1, pp. 1–13. massaro, m., dumay, j. and bagnoli, c. (2019), “transparency and the rhetorical use of citations to robert yin in case study research”, meditari accountancy research, p. medar-08-2017-0202. massaro, m., dumay, j. and guthrie, j. (2016), “on the shoulders of giants: undertaking a structured literature review in accounting”, accounting, auditing and accountability journal, vol. 29 no. 5, pp. 767–801. melvin, a.d., lucia, a.c., solomos, g., volta, g. and emmony, d.c. (1990), “a note on the use of the thermal response to deformation as a damage assessment tool”, journal of materials science letters, vol. 9 no. 7, pp. 752–753. miller, p. and bound, k. (2011), “the startup factories. the rise of accelerator programmes to support new technology ventures”, available at http://www.eban.org/wp-content/uploads/2014/09/14.-startupfactories-the-rise-of-accelerator-programmes.pdf, (accessed 30 january 2019). miskon, s., bandara, w., gable, g. and fielt, e. (2011), “success and failure factors of shared services: an is literature analysis”, 2011 international conference on research and innovation in information systems, available at: https:// doi.org/10.1109/icriis.2011.6125726, (accessed 30 january 2019). morten, l. and nielsen, c. (2014), “the evolution of network-based business models illustrated through the case study of an entrepreneurship project”, journal of business models, vol. 2 no. 1, pp. 105–121. nielsen, c., lund, m., montemari, m., paolone, f., massaro, m. and dumay, j. (2018), business models: a research overview, routledge, new york. osterwalder, a. and pigneur, y. (2010), business model generation, wiley, new jersey. journal of business models (2020), vol. 8, no. 2, pp. 1-21 19 preuss, m. (2015), “why most accelerators fail...and why yours doesn’t have to”, available at: https://visible.vc/ blog/why-accelerators-fail/, (accessed 30 january 2019). ream, j. and schatsky, d. (2016), “corporate accelerators. spurring digital innovation with a page from the silicon valley playbook”, deloitte university press. roberts, p.w., edens, g., davidson, a., thomas, e., chao, c., heidkamp, k. and yeo, j.h. (2017), accelerating startups in emerging markets: insights from 43 programs, available at: https://www.galidata.org/assets/report/pdf/accelerating%20startups%20in%20emerging%20markets.pdf, (accessed 30 january 2019). roberts, i. (2014), “startup accelerator programmes. a practice guide”, available at: https://www.nesta.org.uk/ toolkit/startup-accelerator-programmes-a-practice-guide/, (accessed 30 january 2019). sramana, m. (2013), “the problems with incubators, and how to solve them”, avaiable at: https://hbr.org/2013/08/ the-problems-with-incubators-a, (accessed 30 january 2019). stam, n. and buschmann, s. (2011), “lessons on virtual business incubation services”, available at: https://www. academia.edu/33360400/lessons_on_virtual_business_incubation_service_provision, (accessed 30 january 2019). tasic, i., montoro-sànchez, a. and cano, m. (2015), “startup accelerators: an overview of the current state of the acceleration phenomenon”, xviii congresso aeca, cartagena. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43 no. 2–3, pp. 172–194. thurik, r. and wennekers, s. (1999), “linking entrepreneurship and economic growth”, small business economics, vol. 13, pp. 27–55. torun, m. (2016), “business accelerators and their differences from incubators”, working paper, available at: https:// doi.org/10.13140/rg.2.2.25975.62884. tranfield, d., denyer, d. and smart, p. (2003), “towards a methodology for developing evidence-informed management knowledge by means of systematic review”, british journal of management, vol. 14 no. 3, pp. 207–222. wiltbank, r., read, s., dew, n. and sarasvathy, s.d. (2009), “prediction and control under uncertainty: outcomes in angel investing”, journal of business venturing, vol. 24, p. 3011. yin, r.k. (1984), case study research: design and methods, 1st ed., sage, newbury park, ca. zhdanova, o.a. and milyaev, k. v. (2016), “criteria for the selection of venture projects by the business accelerators”, international journal of applied business and economic research, vol. 14 no. 14, pp. 785–798. journal of business models (2020), vol. 8, no. 2, pp. 1-21 20 carlo bagnoli is full professor of business policy and strategy at the department of management, ca’ foscari university of venice. he received a ph.d. in business economics at ca’ foscari university of venice. he was visiting research fellow at the university of florida. he is scientific director of the innovarea project funded by the regional italian government. his research interests include knowledge management, competitive strategy, business model innovation. carlo’s research work has been published in various outlets, including the journal of business economics and management, industrial management & data system, journal of management and governance and journal of intellectual capital. maurizio massaro, ph. d., is associate professor at ca’ foscari university of venice. before joining academia, he was founder and ceo of multiple consultancy firms. he has been a visiting professor at florida gulf coast university and leicester university. his research interests include knowledge management, intellectual capital, and research methods. in 2016 he won the emerald literati award for excellence as highly commended paper in the journal of knowledge management. his last book “sustainable development in the developing world” got the endorsement of us ambassador andrew young who wrote the “to the reader” section. about the authors journal of business models (2020), vol. 8, no. 2, pp. 1-21 21 daniel ruzza is currently a phd student at luiss guido carli in the department of business and management. he was a research fellow at ca’ foscari venice university and he received a m.sc. in accounting and finance at ca’ foscari university of venice. his research interests include business model, blockchain, and business model patterns. korinzia toniolo is currently a phd student at university of bologna. she was a research fellow at ca’ foscari venice university in the management department. she received a m.sc. in economics and management at ca’ foscari university of venice. her research interests include business model and artificial intelligence. about the authors 13 journal of business models (2021), vol. 9, no. 1, pp. 13-19 with digitalization and the emergence of disruptive technologies, organizations should restructure their business models within their ecosystems to achieve sustainable revenues and value creation. this paper presents a business model configuration for ecosystem contexts by using the port ecosystem as an example. the paper concludes with a business model typology for the port ecosystem. a business model approach to port ecosystem anita golzarjannat1, petri ahokangas2, marja matinmikko-blue3, seppo yrjölä3,4 please cite this paper as: golzarjannat et al. (2021), a business model approach to port ecosystem, journal of business models, vol. 9, no. 1, pp. 13-19 keywords: business model, ecosystem, platform acknowledgments : the authors would like to acknowledge the 5g-viima project funded by business finland and 6g flagship funded by the academy of finland (grant no. 318927). 1 university of oulu, oulu business school, finland 2 martti ahtisaari institute, oulu business school, finland 3 center of wireless communications, university of oulu, finland 4 center of wireless communications, university of oulu; nokia, finland doi: https://doi.org/10.5278/jbm.v9i1.4261 abstract https://doi.org/10.5278/jbm.v9i1.4261 journal of business models (2021), vol. 9, no. 1, pp. 13-19 1414 introduction along with increasing digitalization, the concept of business models has changed and evolved to meet new needs. massa et al. (2017) defined business models as an illustration of firm functions and moves to achieve their goals, such as value creation, value capture, and growth. in this sense, business models can be seen as a means to analyze how companies work and create value (amit et al., 2011). traditional definitions have focused on value creation from the supply-side and value capture from the demandside, while the recent models have placed more emphasis on business ecosystems and stakeholder interaction (massa et al., 2017). many businesses are currently influenced by the new concept of platformization (ahokangas et al., 2019). businesses change to interact around platforms which act as spaces to provide opportunities for various players, such as customers and suppliers. the platforms aim to facilitate the exchange of data, services, and views and to provide opportunities and value for related stakeholders by using appropriate business models (teece, 2018). rapid changes with new technologies have raised the need for platform business models as a new way of designing businesses and to encourage value creation (thomas et al., 2014; gomes, j. f et al., 2019). unlike traditional business models, platform business models focus on social and economic interaction to create value by providing an infrastructure for stakeholders’ communication and actions within the ecosystem ( xu, y et al.,2020 ). the ecosystem terms originate from ecology, from where the term was adopted for use in business studies and social science (iansiti & levien, 2004). an ecosystem can be defined as a group of interconnected players that work together to create value and gain benefits (thomas et al., 2014). there are several types of ecosystems, including business ecosystems (moore, 1993), industrial ecosystems (frosch & gallopoulos, 1989), knowledge ecosystems (van der borgh et al., 2012), and innovation ecosystems (adner & kapoor, 2010). westerlund et al. (2014) argued that an ecosystem business model with roots in ecosystem research builds on “value pillars” and explains the value creation and capture of the firm and its ecosystem. ecosystem platform architecture helps to understand the whole ecosystem’s parts and the way the ecosystem is partitioned (yrjölä et al., 2019). ports and harbors are a good example of such ecosystems where many players interact with each other. they establish infrastructures where stakeholders can exchange data and services through the ecosystem. furthermore, ports need to assure those platform standards are addressed at a certain level and to enhance the stakeholders’ performance and to improve data exchange and security in the whole ecosystem (gawer & cusumano, 2002). approach this paper aims to investigate and propose a business model configuration for the port ecosystem, based on a case study conducted in the port of oulu, finland. we have adopted the business model approach for the ecosystem context to provide a better understanding of the business ecosystem, both from internal and external perspectives. businesses need to review and renew their business models as well as the business model components due to the digital transformation that is changing the role of players in the ecosystem (yrjölä et al., 2019). the changes in the business models, from the ecosystem viewpoint, warrant more research into the role of the players within the ecosystem. specifically, it is of interest to research the relations and interactions within the ecosystem due to the shared goals of the stakeholders (ritala et al., 2013). it is easier to classify and organize business models and study roles and relations in an ecosystem with a coherent business model typology. the “4c typology” (connection, content, context, and commerce) addresses a holistic view of almost all business model activities in the ict (information and communication technologies) context, providing thus a tool for better understanding the stakeholders’ activities in the markets (wirtz et al., 2010). the 4c typology can be seen as consisting of layers where the lower layer enables value creation and capture for the layers at the higher levels. in this typology, the lowest level is journal of business models (2021), vol. 9, no. 1, pp. 13-19 1515 the connection and the highest one is commerce. each stakeholder can be present at any (combination) of the layers of content, commerce, context, or connection alone or together with other stakeholders (yrjölä et al., 2015). in the port environment, the connection layer includes physical and/or virtual communication network infrastructures for port stakeholders’ interactions. the ecosystem value proposition is realized by providing a base for exchanging information and the revenue can come from the subscription (wirtz et al., 2010) to the port platform, for example. the content layer aims to collect, select, compile, distribute, and present data in the ecosystem. the value proposition for this layer comes from the approaches and solutions providing convenient and user-friendly access to data. at the context layer, the aim is to provide a structure, increase transparency, and reduce complexity by providing a single platform for stakeholder communication and transaction in the ports. finally, the commerce layer focuses on negotiation, initiation, payment, and service and product deliveries in the port ecosystem. commerce-oriented business models enable online transactions and provide a cost-efficient marketplace for buyers or sellers (yrjölä et al., 2015). commerce offers, e.g., marketplace and platforms of data, information or context over the available connectivity. context pertains to provide situational awareness, e.g., search or location regarding the context of activity content information from other layers, e.g., data can be transferred over the available connections connection enables interaction and connectivity to one or several communication networks figure 1: the 4c typology in ports ports as a base for connected and co-evolving players, such as campus owners, connectivity providers and users, data providers and owners, legal authorities, and customers can be seen either as a business or industrial ecosystem. a prior study (moore, 1993) noted that a business ecosystem emphasizes the role of a company as a part of the business ecosystem in a larger environment. ict-based infrastructure platforms have become the basis for ecosystems, allowing them to orchestrate and organize the activities of many companies (gatautis, 2017). complexity, interdependency, and co-evolution are aspects of the business ecosystems in the port context. the port business ecosystem can enable non-linear value creation (moore, 1993), as the value is created through collaboration and cooperation within a network of different players with interconnected roles (sorri, k et al., 2019). in the port ecosystem, the relationships between actors are cooperative and competitive, aiming at a common goal such as creating products or services. from the industrial ecosystem and successful business models’ perspectives, it is important to optimize sustainability (schaltegger et al., 2016), including the overall energy efficiency and waste in ports. according to the structural framework presented by autio et al. (2018), ecosystem elements can be categorized into four parts that cover goals and outcomes, structure, processes, and contingencies. a structured viewpoint towards ecosystems will improve our understanding of the role of players and their effects on the whole ecosystem. key insights this paper applies the four ecosystem elements from the structural ecosystem framework presented by autio et al. (2018) and explores them in the port of oulu ecosystem in finland applying the 4c business model typology. the results in table 1 provide a holistic view of the port ecosystem elements and the relevant business model components. the combination of the ecosystem and business model adds value to the analysis and helps to depict the complexities of multi-stakeholder ecosystems. in the port ecosystem, the main goal of the port is to provide trustworthy, high capacity, and low latency connections for services utilized within the port. the ecosystem structures include any physical-digital infrastructures such as 4g/5g wireless connections, journal of business models (2021), vol. 9, no. 1, pp. 13-19 1616 table 1. business model typology ecosystem elements connection content context commerce goaloutcomes: the goal of the ecosystem is to optimize the port operations through the digitalization of the services utilized within the port ecosystem. • offering and utilization of a trustworthy, high capacity connectivity network to achieve more efficient, seamless, and smooth operation and communication for the different services in the port. • providing a high-privacy connection network between physical & virtual port models “digital twins.” • making services and internal/external information/data available for the different users and stakeholders when and where needed. • providing a structure and optimizing the use of resources within the port area. • generating indirect or direct revenue streams for the port ecosystem stakeholders • making replicable and scalable services available inside and outside of the port structure: any physical and digital infrastructures or assets within the port ecosystem • high-quality wireless mobile communications infrastructure. • a platform that provides the base for secure data transactions between the port ecosystem stakeholders. • secure, private real-time edge cloud • real-time data used, contextual & situational data, open data, data from other ports. • video analytics, positioning, edge analytics, drone systems. • a digital twin presenting the situational awareness of the port ecosystem. • support for daily operations from data suppliers. • optimized service performance with the help of artificial intelligence (ai) and (ml) machine learning. new business systems for the port. secure and confidential transactions. processes: any activities and services ongoing within the port based on the port structure and to achieve stakeholders’ goals • speeding up the communication process and/or access to the information with data. • optimizing service behavior in the port ecosystem with ai, ml • integration of existing connectivity solutions at the port and interworking with systems outside the port area. • understanding requirements for the port processes. • secure and private processing of data and knowledge sharing. • making data available. • providing digital service logs and reports. • providing a digital traffic flow. • providing data for existing systems. • providing structure and navigation for users. • providing situational awareness for the local services. • improving digital services usage. • identifying and deploying stakeholders' needs in process design. • visualizing and virtualizing platform processes for the port. stakeholders and customers. • data ownership. • digital trust. • improving business data sharing inside and outside the port. exploit open data to develop “situational awareness.” • development of commercial platform. • optimization of business transaction workload. • improving the attraction for new customers. • expanding the market for the port with other ports and ecosystems. • creating a holistic view of port operations. • making high availability & robustness for business transactions. contingencies: policies, regulations, standards, and culture regarding connectivity, data, and platform influencing the port ecosystem. • global communication standards. • connectivity related regulations. • net neutrality. • safety-related to the use of data. • data regulation and standards as well as privacy, security, and confidentiality regulation. • open data standards. • port-specific regulations. • regulation related to making data available and for sharing. • conformity of business transactions with law. • regulating interaction between players. • business platform regulation. table1: the 4c business model typology to the port ecosystem. journal of business models (2021), vol. 9, no. 1, pp. 13-19 1717 fixed optical fiber connections, sensor networks, big data storage “digital twins” and analytics utilizing artificial intelligence/machine learning which are considered assets and enable a variety of operating processes in ports. additionally, ecosystem processes address activities and services considering the port structure. finally, the port ecosystem contingencies include regulations, standards, and local policies. table 1 presents the key findings of an analysis that cross-examines the 4c business model framework and the elements of the ecosystem. discussion and conclusions this paper investigates business model configurations and components for digitalized ecosystem contexts, with a specific focus on a port ecosystem. the ecosystem elements and the 4c business model typology were examined to shed light on the port ecosystem. the findings indicate that a shift in the port ecosystem goals is expected to take place as modern network communication and computing technologies offer opportunities for trustworthy mobile connectivity, data storage, transfer, and analytics, with external services and resource optimization in the port, which will improve the revenue expectations from the whole ecosystem. indeed, the typology as such is the key conceptual contribution of the paper. the managerial implications of the analysis for ports are of strategic and technological nature. from a strategic perspective, the findings indicate a direct relationship between the ecosystem and the business model applied by the port. specifically, appropriate bundling of different business models— the connectivity, content, context, and commerce ones—is required and this bundling needs to correspond with the characteristics of the ecosystem. however, this bundling should not be seen as a universal approach as some customers may require more atomic or narrower approach due to their specific or restricted needs or due to the need for control by the port itself. from technological point of view, establishing high-quality wireless communications with lowered latency in ports will enable real-time data processing, open and situational data. edge cloud computing elements and interfaces enable local, instant, private, and secure services, e.g., for situational awareness and fast discovery of people, services, devices, resources, and any local information near the user that cannot be collected by centralized search engines. such digital twin information service platforms could be used to optimize the daily operations and enable new businesses, e.g., in the creation of a highly local and dynamic marketplace for services, resources, and information. global communication standards and data regulations will assure stakeholders concerning the conformity of business transactions with law and regulations. journal of business models (2021), vol. 9, no. 1, pp. 13-19 1818 references adner, r., & kapoor, r. (2010). value creation in innovation ecosystems: how the structure of technological interdependence affects firm performance in new technology generations. strategic management journal, 31(3), 306-333. ahokangas, p., matinmikko-blue, m., yrjölä, s., seppänen, v., hämmäinen, h., jurva, r., & latva-aho, m. (2019). business models for local 5g micro operators. ieee transactions on cognitive communications and networking, 5(3), 730-740. ahokangas, p., matinmikko, m., yrjola, s., okkonen, h., & casey, t. (2013). simple rules for mobile network operators’ strategic choices in future cognitive spectrum sharing networks. ieee wireless communications, 20(2), 20–26. https://doi.org/10.1109/mwc.2013.6507390 amit, r. h., massa, l., & zott, c. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019-1042. autio, e., nambisan, s., thomas, l. d., & wright, m. (2018). digital affordances, spatial affordances, and the genesis of entrepreneurial ecosystems. strategic entrepreneurship journal, 12(1), 72-95. frosch, r. a., & gallopoulos, n. e. (1989). strategies for manufacturing. scientific american, 261(3), 144-153. gatautis, r. (2017). the rise of platforms: business model innovation perspective. engineering economics, 28(5), 585-591. gawer, a., & cusumano, m. a. (2002). platform leadership: how intel, microsoft, and cisco drive industry innovation (vol. 5, pp. 29-30). boston, ma: harvard business school press. gomes, j. f., kemppainen, l., pikkarainen, m., koivumäki, t., & ahokangas, p. (2019). ecosystemic business model scenarios for connected health. journal of business models, 7(4), 27-33. iansiti, m., & levien, r. (2004). strategy as ecology. harvard business review, 11(1), 23–32. massa, l., tucci, c. l., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73–104. https://doi.org/10.5465/annals.2014.0072 moore, j. f. (1993). predators and prey: a new ecology of competition. harvard business review, 71(3), 75–86. retrieved from http://blogs.law.harvard.edu/jim/files/2010/04/predators-and-prey.pdf ritala, p., agouridas, v., assimakopoulos, d., & gies, o. (2013). value creation and capture mechanisms in innovation ecosystems: a comparative case study.  international journal of technology management,  63(3/4), 244-267. schaltegger, s., hansen, e., & lüdeke-freun, f. (2016). business models for sustainability: origins, present research, and future avenues. organization & environment, 29(1), 3-10. sorri, k., seppänen, m., still, k., & valkokari, k. (2019). business model innovation with platform canvas. journal of business models, 7(2), 1-13. https://doi.org/10.5465/annals.2014.0072 http://blogs.law.harvard.edu/jim/files/2010/04/predators-and-prey.pdf journal of business models (2021), vol. 9, no. 1, pp. 13-19 1919 teece, d. j. (2018). business models and dynamic capabilities *. long range planning, 51(1), 40–49. https://doi. org/10.1016/j.lrp.2017.06.007 thomas, l. d. w., autio, e., & gann, d. m. (2014). architectural leverage: putting platforms in context. academy of management perspectives, 28(2), 198–219. https://doi.org/10.5465/amp.2011.0105 van der borgh, m., cloodt, m., & romme, a. g. l. (2012). value creation by knowledge-based ecosystems: evidence from a field study. r and d management, 42(2), 150–169. https://doi.org/10.1111/j.1467-9310.2011.00673.x westerlund, m., leminen, s., rajahonka, m., & ferber, s. (2014). designing business models for the internet of things. (july), 5–14. wirtz, b. w., schilke, o., & ullrich, s. (2010). strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43(2-3), 272-290. xu, y., kemppainen, l., ahokangas, p., & pikkarainen, m. (2020). opportunity complementarity in data-driven business models. journal of business models, 8(2), 92-100. yrjölä, s., ahokangas, p., & matinmikko, m. (2015, september). evaluation of recent spectrum sharing concepts from business model scalability point of view. in 2015 ieee international symposium on dynamic spectrum access networks (dyspan) (pp. 241-250). ieee. yrjölä, s., ahokangas, p., & matinmikko-blue, m. (2019). novel platform-based ecosystemic business models in the future mobile. nordic academy of management conference 2019, (ic), 1–31. https://doi.org/10.1016/j.lrp.2017.06.007 https://doi.org/10.1016/j.lrp.2017.06.007 https://doi.org/10.5465/amp.2011.0105 journal of business models (2019), vol. 7, no. 1, pp. 39-70 39 a design thinking framework for circular business model innovation eva guldmann1,*, nancy m.p. bocken2,3, and han brezet4 abstract purpose: circular business model innovation (cbmi) can support sustainable business transitions, but the process is poorly understood and there is a lack of tools to assist companies in cbmi. this article aims to contribute to closing this gap by developing a framework for cbmi based on a design thinking approach, which can support the cbmi process. design: the cbmi framework was derived from a multiple case study in which six case companies created circular business models in collaboration with the researchers. the cbmi processes were studied from the time when circular economy and circular business models were first introduced to the companies and the following six months to two years. findings: a design thinking process typically consists of three innovation spaces, an exploratory, an ideation, and a prototyping and testing space. yet, based on the empirical data, this paper identifies two additional spaces, an introductory and an alignment space, for cbmi. the results derived from the six case companies indicate that the developed framework including its tools and techniques are useful for cbmi. practical implications: this study contributes with a framework to help practitioners facilitate and manoeuvre the challenging cbmi process. the framework provides guidelines for the cbmi process and inspiration for tools that could be applied flexibly depending on the organisational setting. value: the main contributions of the paper are: an empirically grounded framework to assist cbmi; deeper insight into the use of design thinking for cbmi; a number of tools to support cbmi more generally; and a better understanding of the stages and activities of a cbmi process. please cite this paper as: guldmann, e., bocken, n. m. p., and brezet, h. (2019), a design thinking framework for circular business model innovation, vol. 7, no. 1, pp. 39-70 keywords: circular economy; circular business models; sustainable business models; circular business model innovation; design thinking acknowledgements: the authors want to thank all the case companies for their collaboration on the research project. we would also like to thank associate professor søren kerndrup for useful theoretical discussions. the research was funded by aalborg university and supported with a grant from the danish environmental protection agency. 1, 4 aalborg university, department of planning, rendsburggade 14, 9000 aalborg, denmark; 2 lund university, iiiee, tegnérsplatsen 4, 223 50 lund, sweden; 3 tu delft, industrial design engineering, landbergstraat 15, 2628 ce delft, the netherlands. * corresponding author: eva guldmann, guldmann@rotundo.dk journal of business models (2019), vol. 7, no. 1, pp. 39-70 40 introduction human activities and resource use diminish natural capital at a rate faster than it can be replenished, resulting in a deterioration of the ecological systems our societies depend upon (wwf, 2016; earth overshoot day, 2017). with a rising global population and a larger part of the population moving into the middle class, these problems will continue to grow unless we take swift action (royal society, 2012; ipcc, 2018). a key element in reversing this development is to make a transition in how we consume and produce goods (wbcsd, 2010; bocken et al., 2014; adams et al., 2016; zou et al., 2017). companies have integrated concepts such as cleaner production, efficiency improvements, eco-design, life cycle management, and corporate social responsibility in the pursuit of sustainable development (kørnøv et al., 2007; short et al., 2014). nevertheless, literature suggests that incremental product, process and technological innovations are insufficient to transform organisations, industries and societies towards sustainable development (bocken et al., 2014; abdelkafi and täuscher, 2016; adams et al., 2016; ceschin and gaziulusoy, 2016). current tactics may lead to a reduction of environmental harm, but do not lead to a broader form of value creation, nor to the next level of sustainable business, in which the company has a net positive impact on society (short et al., 2014; adams et al., 2016). instead, we need a more systemic approach that aligns business operations with longterm sustainability (stubbs and cocklin, 2008; boons and lüdeke-freund, 2013). sustainable business model innovation offers a possible avenue to integrate sustainability considerations more fully and systematically into the firm (stubbs and cocklin, 2008; short et al., 2014; abdelkafi and täuscher, 2016; evans et al., 2017; geissdoerfer et al., 2018b) and is considered a force for industry transformation and sociotechnical transitions by many authors (bocken et al., 2013; 2014; boons and lüdeke-freund, 2013; dentchev, 2018; geissdoerfer et al., 2016; 2017a; b). while the area of business model innovation more generally continues to be on the rise in academia (wirtz et al., 2016; dasilva, 2018; wirtz and daiser, 2018), the field of sustainable and circular business model innovation has emerged to address increasing sustainability challenges (bocken et al., 2014; schaltegger et al., 2016; massa et al., 2017; breuer et al., 2018; dentchev et al., 2018; hopkinson et al., 2018; lüdeke-freund et al., 2018a). sustainable business models that are integrated within the circular economy (ce) paradigm are referred to as circular business models (cbms) (bocken et al., 2016; nußholz, 2017; geissdoerfer et al., 2018a). a shift to cbms is considered a key enabler of a ce (bakker et al., 2014b; tukker, 2015; lieder and rashid, 2016; lüdeke-freund et al., 2018b), and, potentially of companies that have a net positive impact (adams et al., 2016). the ce is a regenerative economy in which companies strive to maximise the value and utilisation of products, components and materials at all times (ellen macarthur foundation, 2012; 2013a; webster, 2015; blomsma and brennan, 2017; geissdoerfer et al., 2017a). a key element of cbms is the bundling of products that are fit for sharing, repair, upgrades, reuse, refurbishment and/or recycling with supporting services that enable the utilisation of these product features (ellen macarthur foundation, 2013a; bocken et al., 2016; ranta et al., 2018) to move from a linear ‘take-make-dispose’ paradigm towards a circular economy (esposito et al., 2018). however, operational guidelines for the realisation of a ce are lacking (ghisellini et al., 2016; blomsma and brennan, 2017; kirchherr et al., 2017;) not the least in relation to the development and implementation of cbms (tukker, 2015; antikainen and valkokari, 2016; linder and williander, 2017) with a few exceptions, many of those being covered within the grey literature (e.g., achterberg et al., 2016; ellen macarthur foundation and ideo, 2016; kraaijenhagen et al., 2016), but also within the emerging academic literature in this field (e.g. antikainen and valkokari, 2016; heyes et al., 2018). a number of companies have already adopted cbms and provide some best-case examples (see e.g. ellen macarthur foundation, 2012; 2013b; b; guldmann, 2016; kraaijenhagen et al., 2016). the cases nevertheless provide merely the first insights into how companies started to make the transition towards a circular business. as inspiring as the exemplars and other guidelines are, deeper knowledge is needed about how the innovation process is carried through to facilitate genuine change. this includes knowledge about how to design an appropriate cbm for the company (lüdeke-freund et al., 2018b) and about how to facilitate the associated changes in the organisation (roome and louche, 2016) and the value chain (geissdoerfer et al., 2018b). journal of business models (2019), vol. 7, no. 1, pp. 39-70 41 a transition to cbms requires that companies deal with challenges at multiple socio-technical levels spanning from the employee level, over the organisational and value chain levels and on to the institutional level (evans et al., 2017; guldmann, 2018), including cognitive and structural lock-in to the linear business paradigm (evans et al., 2017; guldmann, 2018). the complexity of designing new cbms infer that cbmi can be considered a ‘wicked’ design problem, i.e. a design problem that is multi-causal, multi-scalar and interconnected, spans organisational and disciplinary boundaries, lacks definite formulations and solutions, and is characterised by conditions of high uncertainty (rittel, 1972 cited in liedtka, 2015). according to buchanan (1992) there is a fundamental indeterminacy (i.e. wickedness) in all but the most trivial design problems. solving wicked issues takes time and effort and perhaps they are never completely solved. instead, the suggested solutions are better or worse as opposed to right or wrong and it can take a long time to evaluate solutions, which ramify throughout the system (buchanan, 1992). design thinking (dt) is a design philosophy that offers a possible approach to design problems of this complicated nature (liedtka, 2015) and is suitable for radical (and incremental) innovation (fleury et al., 2016). the ability of dt to facilitate the development of possible solutions to wicked problems, by fostering learning and managing uncertainty (beckman and barry, 2007), thus seems highly relevant in a cbmi context. however, the opportunity to leverage cbmi processes by applying dt remains under-examined. the goal of the present article is to address this gap in the literature by examining if dt is a useful approach to cbmi, by addressing the research question: what could a dt framework tailored to cbmi look like? we endeavour to answer this question by means of an exploratory multiple case study. the remainder of this paper is structured as follows. section 2 describes key theoretical concepts for this study and section 3 illustrates the research methods. section 4 introduces results from the research, and the paper is rounded off by conclusions, implications of the study and suggestions for further research in section 5. theoretical background circular economy our current economic system is based on extracting raw materials for products that are ultimately turned into waste. such a linear production system will eventually face difficulty as raw materials grow scarcer and waste problems larger, and the ce has been proposed as an alternative to this production paradigm (webster, 2015; ghisellini et al., 2016; geissdoerfer et al., 2017; esposito figure 1: system diagram depicting biological (green) and technical (blue) resource loops in a ce. adapted from ellen macarthur foundation (2015) recycle reuse/  redistribute refurbish/  remanufacture maintain/  prolong/ share customers product / service  sales product  manufacturer parts  manufacturer mining / material  manufacturing incineration  /landfill farming/ hunting/  fishing extract biochemical  feedstock cascades biogas anaerobic digestion/  composting restoration of  biosphere journal of business models (2019), vol. 7, no. 1, pp. 39-70 42 et al., 2018). the ce is outlined as a regenerative industrial system (ellen macarthur foundation, 2012) and can be perceived as “a way to design an economic pattern aimed at increased efficiency of production (and consumption) by means of appropriate use, reuse and exchange of resources, and do more with less” (ghisellini et al., 2016, p. 8). the notion of a ce builds on pre-existing concepts such as the principles of reduce, reuse and recycle (ghisellini et al., 2016; geissdoerfer et al., 2017), but nevertheless articulates a distinct cognitive unit compared to other sustainability paradigms due to the clearer pronunciation of resource life-extension as a means to create value and to reduce value destruction (bakker et al., 2014b; achterberg et al., 2016; blomsma and brennan, 2017). the distinction between technical and biological nutrients is another central aspect of a ce (mcdonough and braungart, 2002; ellen macarthur foundation, 2012; 2013a; ghisellini et al., 2016; blomsma and brennan, 2017; lüdeke-freund et al., 2018b) as illustrated in figure 1, where the left-hand side of the figure corresponds to the biological sphere and the right-hand side to the technical sphere. manufacturing companies, which are the focal point of the present paper, will typically operate in the technical sphere, where resources are ideally circulated repeatedly in the economy to prolong the useful life of products, components and materials (stahel, 2010; ellen macarthur foundation and university of bradford, 2012; achterberg et al., 2016;). the aim is to increase resource efficiency of the production system and reduce the need for new products, components and virgin raw material and minimise waste generated, through the systematic use of sharing, repair, reuse, remanufacturing and recycling strategies (ellen macarthur foundation, 2013a; 2015; ghisellini et al., 2016; lüdeke-freund et al., 2018b). circular business models the transition to a ce requires changes at the micro, meso and macro levels of society (ghisellini et al., 2016) and at the micro level an adoption of cbms is central (ghisellini et al., 2016; geissdoerfer et al., 2018a; lüdeke-freund et al., 2018b). in general, a business model is “(…) a description of how a company does business” (richardson, 2008, p.136). although there are many different views on business models, a commonly accepted understanding is that a business model is a story about, or a blueprint of, how the company operates (magretta, 2002; osterwalder and pigneur, 2010) and it can be perceived as consisting of a number of elements or building blocks. richardson (2008), for example, describes three such building blocks: the value proposition, which is the product of service offering; value creation, which is how value is provided; and value delivery and capture, which is how a firm makes money and captures other forms of value (cf. grey elements of figure 2). osterwalder and pigneur (2010) detail the description into nine building blocks in their business model canvas, namely value proposition, customers, distribution channels, customer relationships, activities, resources, partners, costs and revenue, which jointly represent the business model blueprint (cf. blue elements of figure 2). a cbm is a type of sustainable business model (bocken et al., 2014; 2016; geissdoerfer et al., 2018a; lüdekefreund et al., 2018b). several definitions of what constitutes a cbm have been proposed recently, within the emerging field of cbm research, but no uniform and complete definition has been established yet (lewandowski, 2016; nußholz, 2017). it has been suggested that cbms integrate environmental and economic value creation (bocken et al., 2016; lieder and rashid, 2016) by generating profits from a continual flow of reused materials and products over time (bakker et al., 2014a) and by capitalising on the value embedded in used products (achterberg et al., 2016; linder and williander, 2017). cbms thus aim to preserve the value of products at the highest possible level of utility (webster, 2015; achterberg et al., 2016; velte and steinhilper, 2016). companies can take different approaches to the development of cbms (tukker, 2015). bocken et al. (2016) suggest these are categorised into strategies to slow, close and narrow resource loops. slowing resource loops is aimed at prolonging product, component and material life through, for instance, maintenance, reuse and remanufacturing (stahel, 1981; 2010; bocken et al., 2016; lüdeke-freund et al., 2018b), corresponding to the three inner resource loops of figure 1. closing resource loops is concerned with recycling resources to put post-use products and materials back into the economy at the end of their functional life (stahel, journal of business models (2019), vol. 7, no. 1, pp. 39-70 43 1981; 2010; bocken et al., 2016; lüdeke-freund et al., 2018b), corresponding to the outermost resource loop of figure 1. narrowing resource loops is a third strategy concerned with designing products, services and systems for improved resource efficiency. this tactic is already omnipresent in the linear economy and is relevant as a means to complement slowing and closing strategies from both an environmental and economic viewpoint, although it is not sufficient to constitute a cbm in itself (bocken et al., 2016). a further detailing of these strategies is suggested by geissdoerfer et al. (2018a) to also include intensifying, i.e. supporting a more intense use phase for instance through sharing, and dematerialising, i.e. the substitution of product utility by service and software solutions. while slowing, intensifying, dematerialising, closing and narrowing resource loops can be attained using both product design or business model design as a starting point (bocken et al., 2016), this article focuses on the latter. building on osterwalder and pigneur (2010), bocken et al. (2016), evans et al. (2017) and geissdoerfer et al. (2018a), we define a cbm as follows: in a circular business model, the business model elements are joined together to provide a compelling value proposition to customers, generate economic profit to the value network, and minimise environmental impacts by means of slowing, intensifying, dematerialising, closing and narrowing resource loops. with this definition, for the sake of focus, we purposely define our business model as a rather simplistic producer – consumer type. however, we are aware of more advanced ways of modelling via collaborative networked organisations and customer communities for value co-creation and co-innovation (romero and molina, 2011). in a ce, new value networks among companies and other stakeholders will have to be developed to create and deliver novel products and services that demands new forms of company collaboration, customer interaction, logistical systems etc. (kortmann and piller, 2016; evans et al., 2017; romero and rossi, 2017; geissdoerfer et al., 2018a; brown et al., 2019). the configuration of the cbm, including the value proposition, key activities, customer relationships etc., will be unique in each case depending on the company context. the context is made up of such factors as the existing business models and value chain partnerships, extant business and environmental strategies and whether the company aims to slow, intensify, dematerialise, close and/or narrow resource loops (cf. green box of figure 2). other factors of relevance are the level of management support, the amount of resources available to the cbmi process and the interest of suppliers and customers in engaging in a co-development of new business models. the blue boxes of figure 2 constitute one way of illustrating the building blocks of a business model in general. all of these building blocks will have to be considered in cbmi before arriving at the final business model configuration, but in addition, the developed cbms have to tally with specific principles that relate to a ce as well. figure 2: circular canvas, i.e. a visual representation of a cbm that was one of the intervention tools in the study toolbox. developed from osterwalder and pigneur (2010), richardson (2008), bocken et al. (2016) and ellen macarthur foundation (2013a) slow, intensify, dematerialise, close and narrow resource loops sustainable  inputs key  partners key activities key resources value  proposition customer  segments customer  relationships channels value delivery cost revenue value creation value proposition value capture value capture journal of business models (2019), vol. 7, no. 1, pp. 39-70 44 there are five principles to adhere to in the design of cbms to create economic and environmental value: the first of these, ‘inner circles’, stresses the economic and environmental benefits of circulation in the inner circles as opposed to the outer circles of figure 1 (ellen macarthur foundation, 2012; 2013a; linder and williander, 2017) as demonstrated e.g. by jensen (2018) for wind turbines: retrofitting the turbines to improve energy output and extend the product lifetime (i.e. slowing resource loops), is economically and environmentally viable, whereas material recycling (i.e. closing resource loops), on the other hand, is viable for certain high-value components such as permanent magnets, whereas blade recycling is not. second, the principle of ‘circling longer’ concerns keeping products, components and materials in circulation for as long as possible (ellen macarthur foundation, 2012; 2013a). third, ‘cascading use’ is about using products, components and materials for new applications, possibly in new industries, when they no longer work for their original use (ellen macarthur foundation, 2012; 2013a). these three principles focus on value retention of products, components and materials, i.e., keeping products and materials at the highest value for as long as possible (bakker et al., 2014a; b; achterberg et al., 2016). the fourth principle of ‘pure flows’ concerns ensuring material flows, where materials are uncontaminated and separable to enable recycling, refurbishment and remanufacturing (ellen macarthur foundation, 2012; 2013a; bakker et al., 2014a; bocken et al., 2016). these first four principles interlink with the transformation of resource loops through slowing, intensifying, dematerialising, closing and narrowing strategies and are illustrated in the top green box in figure 2. the fifth principle, ‘sustainable inputs’, is about utilising sustainable raw material inputs (e.g. recycled and/or recyclable materials) and renewable energy throughout the value chain to support reduction of the environmental impact of products and/or services (ellen macarthur foundation, 2012; 2013a), and this principle is illustrated via a separate green box in figure 2. business model innovation business model innovation (bmi) is a form of organisational innovation (foss and saebi, 2017) that is concerned with developing novel configurations of the business model in a mature company or creating entirely new business models in a start-up or within a new business area of a mature company (e.g. mitchell and coles, 2003; osterwalder and pigneur, 2010). it is considered an important area of innovation by many authors (e.g. richardson, 2008; teece, 2010), not least as a means of transforming business towards sustainable development (romero and molina, 2011; evans et al., 2017; geissdoerfer et al., 2017b). four streams of research can be distinguished within the bmi literature (foss and saebi, 2017): conceptualisations and classifications of business model innovation; descriptions of the new business models that are the outcome of the innovation process; assessments of the consequences of bmi on organisational performance; and examinations of bmi as an organisational process. although also drawing on and contributing to the literature from other streams, this paper primarily falls under the latter, as it focuses on cbmi as a dynamic organisational process. from this process perspective, it is important to note that in addition to making deliberate changes to the core elements of the company, bmi will often involve changes to the underlying business logic (bucherer et al., 2012; schaltegger et al., 2012), and this is certainly the case in cbmi (evans et al., 2017; lüdeke-freund et al., 2018b) as the traditional linear business, where profit is generated from onetime sale of goods, is substituted with a circular value creation logic, where profit is instead generated from a continual flow of reused materials and products over time (bakker et al., 2014a; linder and williander, 2017). contextual factors are also a key concern, since cbmi, as any innovation, takes place within a given social, organisational and individual setting, which shapes the process (hargadon, 2014; foss and saebi, 2017; stål and corvellec, 2018) by influencing among other things what types of cbms are possible, what stakeholders are involved in the innovation process and what level of novelty can be expected in the outcome of the innovation process (guldmann and huulgaard, 2019, icibaci, 2019). building on institutional theory, stål and corvellec (2018), highlight the relevance of the context of the cbmi by examining the phenomenon of decoupling, i.e. a discrepancy between stated objectives of circular business operations and actual practices, which remain journal of business models (2019), vol. 7, no. 1, pp. 39-70 45 largely linear. they find that cbm implementation displays decoupling, particularly when external pressures are weak, and transparency is lacking: “a firm does not choose to adopt a particular sustainability approach in a vacuum but is influenced by cognitive, normative and regulative processes.” (stål and corvellec, 2018, p. 638). cbms demand a deliberate configuration and coordination of organisational functions such as marketing, sales, r&d, production, logistics, it, finance and customer service within and across organisations (geissdoerfer et al., 2018a). facilitating the needed redesign of organisational functions and their interaction as well as of the company-network, which accompanies the development and implementation of new cbms, requires a collaborative and co-creation-oriented approach across functions and organisations. particularly, as suggested by icibaci (2019) in her case study on the reuse of building products in the netherlands, cocreative governance is needed to avoid that sub-system-based legislation and other governmental rules hinder or even completely block ce implementation in daily practice. cognitive and structural lock-in at the organisational, technological, industrial and institutional level is, nevertheless, likely to impede the cbmi process (unruh, 2002; doganova and karnøe, 2012; evans et al., 2017; foss and saebi, 2017) as the development of cbms will require a break with both existing business logic (evans et al., 2017; foss and saebi, 2017) and existing organisational and value network structures, as outlined above, to create new, systemic solutions (geissdoerfer et al., 2018a) that furthermore involve more stakeholders (roome and louche, 2016) and entail an increased operational risk compared to the existing, linear business models (linder and williander, 2017). the literature emphasises the importance of experimentation as a key means of dealing with the outlined challenges (antikainen and valkokari, 2016; kraaijenhagen et al., 2016; evans et al., 2017; weissbrod and bocken, 2017). experimentation helps companies test hypotheses underlying the business model ideas and supports organisational learning (thomke, 2003; sarasvathy, 2005; chesbrough, 2010; osterwalder and pigneur, 2010). eventually, every part of the business model (as illustrated by the blue boxes of figure 2) should by verified through such experimentation, which can take place within or across companies (mcgrath, 2010) and has been recommended as a sustainability and ce innovation mechanism (weissbrod and bocken, 2017). mapping out extant and new business models, e.g. in a circular canvas, is an example of an internally oriented tool or approach for experimentation (chesbrough, 2010), and a market or focus group study constitutes a market-oriented tool that could be applied at early stages of the bmi process (mcgrath, 2010), while a test launch in a specific market could be employed at later stages to attain high fidelity in the experiments (thomke, 2003; chesbrough, 2010). the choice of experimentation tool will depend on the organisational and field-level landscapes, i.e. on the organisational, value network and institutional setting (hargadon, 2014) and the cbm under consideration, which means that the experimentation that was conducted in the present study, i.e. the exact configuration, order and scope of experiments, was unique in each case company. design thinking the complexity and uncertainty inherent in cbmi (evans et al., 2017; linder and williander, 2017) and the experimental approach towards learning that is recommended in the literature (antikainen and valkokari, 2016; kraaijenhagen et al., 2016; weissbrod and bocken, 2017) links well with dt. dt is appropriate for dealing with uncertainty and in contrast to traditional management approaches, dt actively avoids making definitive choices for as long as possible to maximise learning as a deliberate uncertainty reduction strategy (beckman and barry, 2007). dt can be defined as “the application of design methods by multidisciplinary teams to a broad range of innovation challenges” (seidel and fixson, 2013, p.19) and this approach to innovation has gained increasing academic and practitioner interest in recent years and spread from the field of architecture into many other fields including education, industrial design, industrial engineering, information systems and innovation management (dolak et al., 2013). dt can be understood as a cognitive style; as an embedded principle in professional practice; and as a method to guide the process of designing, respectively (dolak et al., 2013). in this journal of business models (2019), vol. 7, no. 1, pp. 39-70 46 paper, we focus on dt as an innovation management tool, used to guide the process of designing new cbms and a useful definition of dt that applies in this context is: “(…) a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.” (brown, 2008, p.2). in other words, dt can integrate customer needs with a feasible business model. accordingly, dt can be understood as an approach to integrate often conflicting viewpoints on what is desirable in a given (business model) design. the ability of dt to incorporate opposing perspectives applies both at the top level, for conflicts between customer needs, market opportunities, technological and economic constraints, and at the team level, for conflicting viewpoints between innovation team members. in fact, this kind of conflict is perceived as a driving force for creativity in dt termed ‘creative friction’ (fleury et al., 2016) and multidisciplinary teams incorporating formally trained designers as well as non-designers is indeed encouraged to exploit such friction (carlgren et al., 2016a). this ability of dt to integrate multiple viewpoints is relevant in a cbmi context, where multiple actors are oftentimes indispensable to create systems innovation (antikainen and valkokari, 2016; geissdoerfer et al., 2018a), and dt has been found useful in the related context of sustainable bmi (geissdoerfer et al., 2016). definitions, terminology and the number of process steps described for dt vary somewhat in the literature (d.school, n.d.; brown, 2008; seidel and fixson, 2013; carlgren et al., 2016b; fleury et al., 2016). liedtka (2015) nevertheless concludes that there are some typical characteristics of this type of innovation process: “all descriptions of the process emphasise iterative cycles of exploration using deep user research to develop insights and design criteria, followed by the generation of multiple ideas and concepts and then prototyping and experimentation to select the best ones usually performed by functionally diverse groups working closely with users.” (p.927). a dt process is an iterative, fluid, or even chaotic journey through three distinct ‘innovation spaces’ (brown, 2008). the aim of the exploratory space is to define a problem, an opportunity, or both (brown, 2008; seidel and fixson, 2013). tools utilised at this stage are observation, interviewing and other kinds of ethnographic research approaches (liedtka, 2011; 2015). the idea generation or ideation space focuses on generating and developing ideas, meaning that brainstorming techniques are relevant here, along with mind-mapping, and other kinds of sense-making tools (seidel and fixson, 2013). finally, the prototyping and testing stage aims at building prototypes to experiment and generate learning, to make abstract ideas tangible and enhance feedback conversations with decision makers (liedtka, 2011; 2015). surfacing and testing assumptions is also among the techniques featured in this phase. visual and narrative visualisation instruments such as charts for visual representation along with analogies and storytelling for narrative visualisation can be applied in all innovation stages and so can co-creation techniques that involve users in the generation, development and testing of ideas. table 1 summarises the main characteristics of the dt process and some typical techniques used. the selection of tools offered in table 1 is not exhaustive, but an indication of the sort of tools that could be applied in the process. notably, taking a dt approach to innovation is not so much about the specific tools utilised in the innovation process, but rather about applying techniques that are relevant in the given context and which support an iterative movement between the exploratory, the idea generation, and the prototyping and testing spaces, and which support collaboration, learning and a user-centred focus (plattner et al., 2011). thus, there are a large number of techniques that could be applied in the process and ultimately the process should be adapted to fit the specific work at hand (d.school, n.d.). the adjustment of the approach to a particular organisational and external setting is in line with the flexibility called for by scholars (e.g. hargadon, 2014). such adjustment of the process to fit the cbmi context is a key theme of the remainder of this article. research gap: circular business model innovation and design thinking the pressing need to move towards sustainable development renders a wider adoption of cbms desirable (linder and williander, 2017). however, based on a recent review, geissdoerfer et al. (2018b) point out that it remains unclear how organisations can transition to journal of business models (2019), vol. 7, no. 1, pp. 39-70 47 more sustainable business models in practice; what phases a company undergoes in the process; what the key activities of each phase are; and what tools can support the process. it is nevertheless clear that cbmi involves challenges at the employee, organisational, value chain and institutional levels (e.g. rizos et al., 2016; linder and williander, 2017; evans et al., 2018; guldmann, 2018). these challenges relate to lock-ins in terms of value creation logic and structures and result in organisational inertia (chesbrough, 2010; evans et al., 2017), and consequently there is a need for tools to support companies in the development of sustainable business models (upward and jones, 2016; geissdoerfer et al., 2018b), not least circular ones. dt appears to be a promising approach to address these challenges and a few academic papers have explored dt in relation to sustainable bmi (e.g. geissdoerfer et al., 2016; baldassarre et al., 2017), where they have focused on formats to generate sustainable value propositions in one or a few sittings. kozlowski et al. (2018) found that dt involved a relevant potential for reducing the negative impact of fashion products, both environmentally and socially, and propose a design tool, the redesign canvas, to support fashion design entrepreneurs in their sustainable decision-making process (kozlowski et al., 2018). a selection of tools for ‘circular innovations’ has been suggested by the ellen macarthur foundation and ideo (2016), who present several tools based on dt principles such as ‘learn from nature’, ‘find circular opportunities’, and ‘product journey mapping’ that are organised into four themes, namely understand, define, make and release circular innovations (ellen macarthur foundation and ideo, 2016). these tools are oriented at facilitating a transition towards ce in product design, packaging, the use of raw materials etc. one of the tools suggested by the ellen macarthur foundation and ideo (2016), ‘circular business model’ (as well as elements of some of the other tools), relate to the specific development of cbms, and it builds on the original business model canvas (corresponding to blue parts of figure 2), which is supplemented by questions to prompt reflections on a redesign of the current business model. design thinking aspects key points guiding principles • user-centred • collaboration across functions, perspectives and experience bases • iterative cycles of moving through innovation spaces • emphasise learning innovation spaces exploratory space ideation space prototyping and testing space aim of spaces definition of a problem or opportunity generation of multiple ideas and concepts. seeking higher-order thinking and creative solutions building models and experimenting to facilitate the development and selection of the best ideas and concepts examples of techniques and tools used in individual spaces ethnographic research techniques: • observation • interviewing • job to be done • journey mapping sense-making and ideation tools: • mind-mapping and other forms of cluster analysis • brainstorming • concept development techniques to generate hypotheses about potential opportunities prototyping and testing approaches: • assumption surfacing and testing • field experiments with external stakeholders • prototyping techniques such as storyboarding and user scenarios examples of techniques and tools that span all spaces co-creation approaches: • engage users in generation, development and testing of ideas visualisation techniques, visual or narrative: • charts • organising post-it notes • storytelling • metaphors table 1: general design thinking model. adapted from brown (2008), seidel and fixson (2013) and liedtka (2011; 2015) journal of business models (2019), vol. 7, no. 1, pp. 39-70 48 while aspects of dt and some specific tools have thus been examined in relation to parts of the cbmi process, the application of a dt framework and a selection of tools to the cbmi process in its entirety are less well explored. based on a case study of multiple cases, this paper suggests a framework and tools that links with dt principles, which can guide the cbmi process in its entirety and start to fill this gap in the literature. methods the study was designed as an exploratory study of six case companies (o’connor et al., 2003; yin, 2014). a case study approach is recommended when the topic of interest is complex and needs to be studied in its context (flyvbjerg, 2006; eisenhardt and graebner, 2007), since it allows the researcher to grasp a complex situation and describe actors and processes in an accessible format (eriksson and kovalainen, 2008). a multiple-case study can be used to identify common patterns and characteristics between cases (eriksson and kovalainen, 2008) and is instrumental in allowing analytical generalisation beyond the specific research context (healy and perry, 2000). the study applied action research, which is a research method where the researcher is directly involved in activities that are intended to foster change on the group, organisational and societal levels (dickens and watkins, 1999). the researcher thus immerses in a situation to learn from the insights and perspectives of practitioners and to obtain greater understanding of a problem domain (evered and louis, 1981) and a shared interest between researchers and practitioners in learning is a prerequisite for this kind of collaborative research (shani et al., 2012). the researchers are proactive and visible change agents, who use experimental interventions as a mode of inquiry (van de ven and johnson, 2006; van de ven, 2007). in the present study, these interventions were in the form of taking a dt approach to the cbmi process, including suggesting the use of certain tools, proposing involvement of stakeholders from other parts of the organisation or from the value chain etc. in action research, the research process is centred around cycles of planning, acting and observing, and reflecting (kemmis and mctaggart, 1988), which means that, while some initial planning and overall organisation of the research process is possible, the details of the unfolding process of research interest will not be known beforehand. instead, reflection amongst researchers and practitioners on the data generated from the interventions will guide the next step of the process (cf. figure 3). action research is useful to accelerate research in areas where there is a pressing need for progress (mcmanners, 2016), as it allows for experimentation with different interventions to induce change as opposed to detached observation, and it works well in combination with case studies (prendeville et al., 2017). the researchers’ immersion into the problem field and the multiple data preparations action research with unstructured interviews and participant‐ observation; document analysis; semi‐structured interviews desk research practice and  literature review to  discern tools to  test: ‐ ce system  diagram ‐ idea map ‐ cbm principles ‐ best practice  exemplars of  cbms ‐ circular canvas learning loops with on‐going reflection upon data  (planning ‐ acting and observing – reflecting) iteratively  sifting through  data to  develop case  descriptions creating cbmi  toolbox to test facilitating cbmi processes initial data  analysis developing  case histories  and analytical  chronologies research strategies multi‐method data  collection mixed‐method data  analysis action research; multiple‐case study; experiments with cbmi  formats and tools creating dt  framework for  cbmi applying  theoretical lens practice and  literature review applying dt lens  to data to assess  similarities and  differences  compared to  general dt  framework figure 3: overview of the research process journal of business models (2019), vol. 7, no. 1, pp. 39-70 49 collection points (see table 3) result in access to rich data on the studied processes. the quality of the gathered data is ensured via data triangulation between multiple data sources (e.g. participant-observation and unstructured interviews), researcher triangulation as well as practitioner reviews of the data. these methods to ensure robust data without bias were all applied in the present research (see section 3.3. for details). processes such as the cbmi process are most appropriately examined via data collection as the events unfold and before the outcome is known, to prevent post hoc rationalisation, to understand the impact of short-lived factors and changes, and discern patterns over long periods of time (o’connor et al., 2003). ideally, the processes should be studied from beginning to end (eisenhardt, 1989), however we were only able to follow the process closely within the two-year period of the research project. during this time, we gained detailed insights about the initiation of cbmi and the early stages of the process (since we had the chance to introduce the companies to ce and cbms) as well as some insight into later stages, including testing elements of and implementing cbms. via later research projects and follow-up contact with the companies, we tracked whether the cbmi work was continued after the study ended (cf. table 5). preparation of study case selection in exploratory research into business model learning, companies do not have to be stringently comparable (tolkamp et al., 2018) as business model learning is not restricted to comparable firms (mcgrath, 2010). in this study, all six case companies designed and sold physical products, but were of varying sizes, belonged to two different industries and served both business customers and consumers. the diverse characteristics of the companies allowed us to study differences and similarities between them with the advantage that “similarities observed across a diverse sample offer firmer grounding for propositions than constant elements observed in a homogenous sample” (o’connor et al., 2003, p.356). the differences between the companies meant that the collaboration process had to be adjusted to fit the individual company setting, not least because the cbmi project was also anchored at different organisational levels and because the intensity of the collaboration varied (cf. table 2). preparation of a cbmi toolbox as part of the case study protocol (yin, 2014), a few basic tools were developed that would work as interventions to experiment within the companies. because the research was prepared in the beginning of 2014, little literature was available on ce at the time, and the concept had not been translated into operational guidelines, arguably a shortcoming that persists (ghisellini et al., 2016; blomsma and brennan, 2017). consequently, the toolbox was based on early reports published by the ellen macarthur foundation (2012; 2013a), the business model canvas developed by osterwalder and pigneur (2010) and a practice review of cbms in operation that was compiled through desk research (see guldmann, 2016). the tools were selected with the purpose of supporting all stages of the innovation process, as well as striking a balance between instruments that were on the one hand sufficiently general to work in all the participating companies, and on the other hand detailed enough to convey the principles and potentials of the ce and cbms in a comprehensive way, which would enable idea generation and concrete discussions. we experimented with the application of these tools throughout the six cbmi-processes to examine their usefulness. the tools are presented and discussed in section 4.2 of the paper. circular business model strategies pursued in the cbmi process, the researchers encouraged development of cbms based on a strategy to slow resource loops via the introduction of maintenance, repair, reuse, refurbishment and/or remanufacturing activities, because this kind of cbm was expected to provide radically new and environmentally beneficial solutions and entail a complex and thus revelatory innovation process. cbm strategies to intensify or dematerialise resource loops were either less relevant or seemed too much of a stretch for the companies to relate to, and strategies to narrow or close resource loops seemed too incremental. it was, however, possible for the companies to move in another direction if they preferred that and case company a, for instance, decided to work on a (novel) recycling solution (a cbm for closing resource loops), while most other companies in our sample developed cbms for slowing resource loops. journal of business models (2019), vol. 7, no. 1, pp. 39-70 50 data collection the initial data collection in the companies focused on facts about company age, type of business, customer segments, the cbmi project anchoring in the company etc. as well as information regarding the company history of sustainability work, any previous experience with cbms etc., which provided the historical setting (pettigrew, 1997) for the cbmi process. the primary unit of analysis, nevertheless, was the concrete cbmi process. at the beginning of the study it was not possible to discern what data would be relevant to appropriately document and understand the cbmi process and, consequently, the data collection aimed to document as many details about the processes as possible. only gradually did meetings and workshops of the cbmi process, stakeholders involved, tools applied, outcomes and encountered issues become the focal points of the data collection. due to the action research nature of the study, participant-observation and unstructured interviews (yin, 2014) relating to our on-site meetings and workshops with the companies were particularly important sources of data. this data was supplemented by semi-structured interviews and document analysis as outlined in table 3. the companies participating in the research, had agreed to get introduced to ce and cbms, but it was up to the companies if they wanted to engage in cbmi after this introduction and for how long within the two-year research period. the researchers suggested approaches and next steps during this collaboration, but ultimately, the companies decided on the next steps, whom to involve and when. in this way, the researchers collaborated closely with company participants to facilitate the cbmi process. data analysis including cross-case analysis the inductive data analysis began in parallel with the unfolding cbmi processes as field notes were used to reflect on emerging patterns in the empirical data (eisenhardt, 1989; yin, 2014) and to consider what might case company size* industry customer segment project anchoring collaboration period arrangement of cbmi process a micro clothing and textiles business owner-manager and the only employee 6 months working meetings with the owner-manager and employee, with potential new value chain partners and with experts on textile recycling. b micro electrical and mechatronic goods business the owner-manager 2 years working meetings with the owner-manager. collaboration with students to develop new product concepts and student meetings with an existing value chain partner in this connection. c small clothing and textiles consumer owner-manager responsible for sustainability 2 years a series of workshops with the management team, interview of sales agents, dialogue with potential new value chain partners. d medium clothing and textiles business project manager, sustainability department 2 years working meetings with the project manager and diverse internal stakeholders. interviews with key customers. e large electrical and mechatronic goods business (and consumer) chief technical advisor, r&d 2 years working meetings with the technical advisor as well as cross-organisational meetings. f large electrical and mechatronic goods business (and consumer) corporate sustainability director 2 years working meetings with the sustainability director and a cross-organisational workshop. table 2: case company overview. *micro companies have less than 10 employees; small companies less than 50; medium companies less than 250; and large companies 250 or more (eurostat, 2016) journal of business models (2019), vol. 7, no. 1, pp. 39-70 51 be an appropriate next step of the cbmi process in the company. at the end of the research collaboration, a case history, i.e. a description characterised by temporal presentation (pettigrew, 1990; 1997), was drafted on each company compiled from field notes, minutes of meetings, corporate documents and interviews applying data triangulation where possible (yin, 2014). over the course of approximately six months, the case histories were developed through repeated iterations to arrive at analytical chronologies of each company, i.e. case descriptions that aim “to get on top of the data, to clarify sequences across levels of analysis, suggest causal linkages between levels of analysis, and establish early analytical themes” (pettigrew, 1990, p. 280). the analytical chronologies were between three and nine single-spaced pages in length and comprised a preliminary withinand cross-case analysis that pointed to some conceptual similarities and differences between the cbmi processes in the companies (eisenhardt, 1989; pettigrew 1997; 1990; o’connor et al., 2003). the case histories and analytical chronologies were reviewed by a professor who had been involved in some company number of sessions involving participant-observation and unstructured interviews number of phone meetings involving unstructured interviews semi-structured interviews examples of documents a 6 3 application for funding for a development project with a partner company company website b 6 4 marketing material technical product sheet company website c 11 5 sales agent in sweden sales agent in germany folder on company's approach to sustainability marketing material company website d 8 3 key account manager in united kingdom key account manager in southern europe customer and project manager from one business unit customer from another business unit interviewed two times sustainability reports annual reports company website e 8 2 sustainability project manager sustainability consultant presentation slides from the sustainability director sustainability reports annual reports company website f 4 6 sustainability director hardware director ehs manager hardware specialist internal design guideline sustainability reports annual reports company website table 3: data collection in the case companies journal of business models (2019), vol. 7, no. 1, pp. 39-70 52 of the sessions and who had worked with the companies before, as well as a researcher who was not part of the study, to point out any weak points, inconsistencies or researcher bias, thus incorporating researcher triangulation (eisenhardt, 1989). the analytical chronologies were further verified by getting feedback from the main contact at all case companies to ensure facts were correct and our interpretations of events were in line with the company participants’ perceptions, which is a tactic with particular confirmatory power (miles and huberman, 1984). the authors naturally retained editorial control and the various researcher and company participant reviews only gave rise to minor discussions about and adjustments to the case descriptions. at this stage of the data analysis, eisenhardt (1989) recommends enfolding relevant literature, and the characteristics of the cbmi processes that had emerged led us to examine the dt literature closer and formulate the research question addressed in this article. the question was examined by comparing data from the multiple-case study with a general dt framework (cf. table 1), i.e. pattern matching (yin, 2014). the pattern matching followed a systematic procedure, where we first analysed each cbmi process individually to examine: (1) what spaces of the general dt framework had the cbmi process moved through, based on the aim and techniques of each dt space? (2) were there any significant cbmi-activities in the case company that could not be related to the spaces of the general dt framework? (3) what tools were applied in the companies? and finally, (4) were there similarities and differences between the processes in terms of spaces covered, tools applied, stakeholders involved, speed of progress and outcome? the results of these analyses are presented in section 4. results and discussion in the following, we show what cbmi-specific and general tools were utilised during the innovation processes. we also illustrate where the innovation processes that we facilitated align with the innovation spaces of the general dt framework and where additional spaces were needed to capture the characteristics of the processes. subsequently, we discuss what the principles that guided the cbmi process in the case companies were, and how they relate to a general dt framework. the innovation process in the case companies the first step of the innovation process was to clarify the company context, and the researchers examined if the companies had previous experience with cbm principles (cf. section 2.2); the role of sustainability in company values and strategies; links between ce and extant strategic and tactic aspirations; as well as what economic and human resources were available to the cbmi project. unstructured interviews with company employees supplemented with document analysis of annual reports, sustainability reports, corporate websites etc. were applied for this purpose. this information was used to decide, in close collaboration with the company participants, on the planning of the cbmi process going forward. in case company c, for example, the process was arranged as a series of workshops with the management team. in company e, various cross-organisational meetings were arranged, while the process featured meetings with a small core team of employees and a cross-organisational workshop in company f. the introduction to the notion of ce, the principles behind cbms, and concrete best practice exemplars of implemented cbms followed next. often, the ownermanager(s) plus a few other employees were involved in the small companies, while specialists, consultants and middle managers were involved in the mediumsized and large companies. as part of this introduction, or at subsequent workshops, the companies were invited to engage in cbmi by generating ideas for cbms and selecting a few of the most promising ideas for further examination. at company a, the innovation process revolved around an examination of ways to close the loop at end-of-life of a work wear collection that was under development. our examinations focused on existing and upcoming technologies to support such recycling and involved discussions with external partners representing these technologies. at company b, a number of new product concepts were developed that integrated sustainability considerations to narrow loops into the product design. in addition, a small-scale take-back and refurbishment scheme to extend the life of the used electrical products to slow resource loops, was established. company journal of business models (2019), vol. 7, no. 1, pp. 39-70 53 c developed several cbm ideas, one of which involved repair, redesign and sales of used apparel, to slow loops, as well as apparel recycling, to close resource loops. the collaboration resulted in development of a business case for this cbm quantifying the economic, social and environmental potential and the company involved applied for a grant to support a full-scale experiment with the implementation of this business model. company d developed several cbm ideas and tested the attitude of relevant internal stakeholders and customers towards two of these. the ideas concerned slowing resource loops through maintenance and repair services for furniture in two different business units. company e focused on an internal clarification on the relevance of ce and cbms to the company, although some initial cbm ideas were also generated. finally, at company f internal stakeholders were engaged in discussions on the relevance of ce and cbms to the company and generated initial ideas for cbms. the innovation process also led to the integration of cbm principles in a revised product development guide and specific cbms were explored further through collaboration projects with external stakeholders. a business model to extend the life of electronic products to slow resource loops, was, for example, explored by the company together with an industry association. findings regarding the use of different tools in the cbmi processes in the case companies, tools from the prepared cbmi toolbox (cf. section 3.1.2) were applied along with general innovation tools. the toolbox consisted of the following tools: • ce system diagram: the system diagram is illustrated in figure 1. the diagram was intended to convey the key principles of a ce, and to illustrate the biological and technical resource loops that can be targeted via cbms. • idea map: the system diagram was also used for clustering and visualising cbm ideas according to the resource loops of the diagram. when applied in this manner it was termed an idea map. • cbm principles: the five principles are described in detail in section 2.2. in short, they concern the value of inner circles, circling longer, cascaded use, pure flows and sustainable inputs (ellen macarthur foundation, 2013a). they were included in the toolbox to demonstrate what dimensions could and should be considered in relation to new cbms. • best practice exemplars of cbms: a case collection of cbms in operation (see guldmann, 2016). the idea was to provide relevant and inspiring examples to engage companies in the cbmi process, a method utilised in earlier research to facilitate sustainable business thinking (e.g. bocken et al., 2013; 2015). • circular canvas. a business model template like the business model canvas in figure 2 was intended to guide the bmi process as suggested by other authors (e.g. chesbrough, 2010; bocken et al., 2015). the intention with this tool was to ensure all relevant elements of the new business models were considered. the six innovation processes were unique, depending on the company setting, but shared some common features: all processes were facilitated by external actors (i.e. the researchers) and all case companies were new to cbmi. this meant it was necessary to 1) introduce the company to the researchers including its experience with sustainable business development so far, which was attained through formal company presentations and a close dialogue and 2) introduce ce and cbms to the case companies. the ce and cbm concepts were typically introduced to the case companies by utilising the system diagram, the cbm principles and best practice exemplars described above. at later stages, the researchers would come back to some of these tools, and the system diagram, for instance, became a tool for idea generation, clustering of ideas (in the form of an idea map), or inspiration for new ce narratives. similarly, best practice exemplars were now introduced by the researchers, not to kick-start the innovation process, but rather to provide support for a given idea or to challenge the case company to, for instance, consider developing a more ambitious cbm or contemplate particular dimensions of the cbm idea. through iterative examinations of 1-2 business model ideas the general configuration of the business model along with the specifics of individual business model elements were gradually clarified. we expected that a visual representation of the business model (like figure 2) would be needed to support and organise journal of business models (2019), vol. 7, no. 1, pp. 39-70 54 this work. nevertheless, the company participants that were involved in the cbmi were experienced business people. they were closely acquainted with the need to consider key elements of a business model idea to ensure its success, for example, having a relevant value proposition to a specific customer segment, providing the value proposition in a cost-efficient way, and establishing relevant business partnerships that would enable operationalization of the cbm. they also assessed quite naturally whether a given cbm idea fitted company values, image, and aspirations. consideration of business model elements hence effortlessly permeated the discussions during the cbmi process, which meant a visual representation of the business model was not needed at the early stages of cbmi that were studied. a circular canvas or a similar visual business model template may, however, be relevant at later stages of the innovation process, as a checklist to ensure relevant elements of the cbm have been considered; or in cases where company participants are less familiar with the business model concept. the cbmi toolbox proved flexible in use and, as table 4 shows, the ce system diagram, the idea map, the cbm principles and best practice exemplars were applied successfully in most of the case companies. an ‘x’ in the table indicates that a tool was applied; ‘(x)’ indicates that some cbmi activities were in line with a particular tool, but without concrete application of the tool; ‘-’ indicates that the tool was not applied. only the circular canvas proved redundant as outlined earlier, but was instead replaced with effortless discussions of the associated business model elements, which is reflected in the table by the addition of a ‘business model elements’ column. in addition to the cbmi-specific toolbox, a selection of general techniques was applied, such as brainstorming sessions, customer interviews and surveys, economic calculations, competitor analysis, trend analysis, examining best available technology etc. this type of techniques to support an innovation process, are part of the general dt framework (cf. table 1) and can be found under the headlines of ethnographic research techniques; sense-making and ideation tools; prototyping and testing approaches; visualisation techniques; and co-creation approaches. these techniques were also found to be relevant in a cbmi context and were applied ad hoc, as appropriate. findings regarding spaces of the innovation processes exploratory, ideation and prototyping and testing spaces the data analysis of the innovation process in each of the case companies revealed that, although each process was unique, the three original innovation spaces the exploratory, the ideation, and the prototyping and testing spaces were observed in all the cbmi processes, although the aim and activities of these spaces changed a little in the cbmi context. the exploratory space hence became a phase where a deeper understanding of the company setting and cbm opportunities was established through interaction with internal and external stakeholders. the ideation space became, not only a phase where more than 100 ideas and concepts for cbms were generated across the companies, but a phase of also seeking higher-order thinking and systems solutions. finally, in the prototyping and testing space eight of the best ideas were examined and developed further. this stage was oriented towards case company ce system diagram idea map cbm principles best practice exemplars circular canvas business model elements a (x) x x x b x (x) x x x c x x x x (x) x d x x x x x e x x x x f x x x x table 4: application of cbmi-specific tools in the case companies journal of business models (2019), vol. 7, no. 1, pp. 39-70 55 testing ideas in relation to the entire stakeholder group (i.e. the involved network of organisations) of a given cbm, as opposed to the narrower focus on the users in the general dt framework. the data analysis also revealed that the general framework did not fully capture the way in which the cbmi processes unfolded. introductory space as indicated in section 4.1 an introduction of the company participants to ce and cbms, together with an introduction of the companies to the researchers, was needed to kick-off the cbmi process in the companies. the introduction to ce and cbms was oriented at making clear the fundamental principles behind these concepts and at creating a common vocabulary for the participants in the innovation team. a similar introduction is argued for by bocken et al. (2013) in the context of a value mapping tool for sustainable bmi, where the authors note an introduction on sustainability may precede the bmi activities depending on background knowledge of participants. such a starting point may be more broadly formulated as a joint vision for future collaborative ce work (brown et al., 2019). however, the general dt model does not include such an innovation stage; consequently, an introductory space was added to the cbmi framework to more appropriately mirror the cbmi processes. the innovation process started from this space and iterated back through it, when new internal or external stakeholders got involved in the cbmi process, since these new stakeholders also needed to understand key concepts and principles associated with cbms and had to be introduced to the vocabulary used by the other participants in the innovation team. the introductory space was also revisited when a recapitulation of key ce and cbm principles was needed for the innovation team to stay on track. for instance, if idea generation regressed into a discussion of sustainable inputs or resource efficiency (i.e. a narrowing of resource loops), disregarding the need for more advanced solutions such as slowing resource loops, participants were challenged to also consider more advanced forms of cbmi to slow resource loops, for example by focusing on reuse, repair and remanufacturing (bocken et al., 2016). in cases where the organisation engages in cbmi on its own accord (in contrast to the present study, where ce and cbms were introduced to the companies by the researchers), a phase where key stakeholders in the organisation get acquainted with ce and cbms and their principles must also necessarily precede the concrete cbmi activities. thus, an introductory space is expected to be typical of cbmi processes, whether initiated by internal or by external stakeholders. alignment space while our research set out to support a concrete cbm development process in the companies, interactions with the companies revealed that there was a need to clarify the company’s position on ce in the larger companies (i.e. d, e, f) alongside the cbmi activities. these clarification activities are conceptualised as a separate innovation space, an alignment space. in this alignment space, the company participants sought to engage groups of relevant stakeholders in the cbmi process and to delineate what cbms might mean to the company through cross-organisational dialogues. in company d, the primary company contact engaged in informal dialogues with the design department manager, to clarify whether she saw some potential in cbms and would be interested in actively engaging in the development of these. the contact also sought to involve employees from a business unit that was identified as possibly holding cbm potential. in one of the large companies, the primary company contact sought to engage peers as well as management in the alignment activities. for instance, a meeting was set up including directors and vice presidents from the strategy and sustainability departments, two specific business units and r&d. the meeting agenda outlined the need to decide on a company approach to ce: “[...] what is circular economy, and what does it mean to [us]? who else are active in this area, and what experiences have they gained? do we have to take a reactive approach to it or do we want to take a proactive approach? can we gain anything by taking the proactive approach to it? i don’t think we will be able to answer any of those questions but we need to discuss whether we want to put resources into this area to clarify what influence it might have for us in the future.” as the quote indicates, the discussions in the alignment space seemed to revolve around whether to approach ce proactively or not. none of the companies journal of business models (2019), vol. 7, no. 1, pp. 39-70 56 found that their customers asked specifically for cbms, which was interpreted by employees in some of the larger companies as a signal that it was not necessary to integrate cbms in the business yet. communiqués on the ce by the european commission nevertheless caught the attention of several of the larger companies. a company participant expressed the motivation for engaging in cbmi in this way: “we could see [circular economy] is starting to accelerate. we saw the material that came from the eu last year before christmas regarding many of these things. it was perhaps also an attempt to have due care and diligence. to avoid getting into difficulties, because we experienced that before for example with respect to the rohs directive.” despite the motivation provided by the european commission and the opportunities to link cbms with other strategic agendas in the companies, which we return to below, the progress in the alignment space was slow in the larger companies and this phase took up considerable time and energy in these companies (i.e. d, e and f). one possible explanation for the slow progress in this space is the fundamentally new business logic of cbms compared to the dominant linear value creation logic (chesbrough, 2010; evans et al., 2017) and the way the cbm challenges the existing organisational, technological and industrial structures that companies are locked into (unruh, 2002; doganova and karnøe, 2012). the alignment space was different in the smaller companies (i.e. a, b and c). first, the smaller companies quickly saw potential in taking a proactive approach to cbmi: company a, for example, found there was a good fit between cbms and the company’s aspiration to support an on-going innovation project with a partner company. in company c, the sustainability manager explained that the company was small and had to stay ahead of the sustainability game to have a chance against the big companies with lower prices for sustainable apparel, and that cbms could potentially help the company to stay ahead. cbms were thus perceived as a chance to leverage on-going projects or company aspirations in the small companies and they did not need further validation of the relevance of cbms before engaging in cbmi activities. second, management was directly involved in the cbmi activities in the small case companies, so management endorsement was built into any decisions made in the cbmi process. this cbmi setting meant that the alignment activities were much more integrated with the activities of the other innovation spaces. for small companies, in which actors other than management initiate the cbmi process, the alignment space is nonetheless likely to take on a format more like that found in larger companies. as outlined above, the small companies quickly linked the old (e.g. on-going projects and pre-existing strategic spaces covered and objectives fulfilled other outcome case com pany introductory explora tory alignment ideation prototyp ing and test ing cbm implementa tion contin ua tion of cbm work introduc tion to ce and cbms exploring cbm op por tunities in the specific setting investigating alignment btw. cbmi and extant aspira tions genera tion of multiple cbm ideas examina tion and development of cbm ideas a x x (x) x x b x x (x) x x x x c x x (x) x x (x) x d x x x x x (x) e x (x) x (x) x f x x x x (x) x table 5: cross-case comparison of the innovation process journal of business models (2019), vol. 7, no. 1, pp. 39-70 57 aspirations) with the new (i.e. cbms) (hargadon, 2014) and this linking process was also detected in the larger companies. for instance, in company d, where one of the ideas was selected for further examination because it involved close customer interaction and potential cocreation of cbms, and the notion of working closely with customers to develop new business opportunities was an established practice in the company. in company f, several themes on the pre-existing strategic agenda emerged as relevant to integrate with the cbmi: an aspiration for more modularisation in the product design and predictive maintenance to cater to unmet customer needs, for example. the innovation process varied between the companies, as explained earlier. however, the companies moved through all or most of the innovation spaces, corresponding to all companies getting introduced to ce and cbms; exploring the specific company setting and the cbm opportunities in this setting; ensuring alignment with extant aspirations; and generating cbm ideas. all companies, except company e, furthermore examined specific cbm ideas. this is summarised in table 5, where ‘x’ indicates that yes, the space was covered/the goal attained; ‘(x)’ indicates this was partly the case; and ‘-’ indicates this was not the case. wider scope of guiding principles within the general dt framework, having a user-centred perspective and collaborating across functions and experience bases inside the organisation are emphasised as important guidelines (liedtka, 2015). however, a wider system perspective is called for in the cbmi context (ellen macarthur foundation and ideo, 2016; evans et al., 2017; geissdoerfer et al., 2018a). a perspective that considers the needs of value chain stakeholders and the environment (in the form of slowing, intensifying, dematerialising, closing and narrowing resource loops ) in addition to users’ needs. this requires companies to be open to collaborations with external in addition to internal stakeholders. indeed, multiple stakeholders from within and across all the companies that will be involved in operating a new cbm must be included in the innovation process at some stage (geissdoerfer et al., 2018a), because no single function and no single company holds all the knowledge and competences necessary to do systemic innovation. in our study, it proved difficult to include external stakeholders, such as existing or new value chain partners, in some of the companies at the beginning of the cbmi. in company c, for instance, a field note entry three months into the collaboration stated: “[company c] prefers not to talk to their customers, salesmen or fashion experts. the company believes it could potentially backfire if the concept is not implemented. in that case, the network will get disappointed and demotivated.” it seemed an internal orientation was needed, initially, in some of the case companies to allow for organisational alignment and a relatively safe learning space to understand how to manoeuvre the cbm innovation journey (van de ven et al., 1999; van de ven, 2017). companies b and d opened up to collaboration with existing value chain partners early in the process, whereas companies a and c opened up to external collaboration during the collaboration and focused on collaborating with new potential value chain partners (as opposed to partners from the existing value chain). the large companies were reluctant to bring in external partners and when they did, the companies preferred collaboration with non-value chain stakeholders such as industry associations and other universities (company f) or engaging in dialogue with companies from other industries with experience in cbmi (company e). the two last guidelines of the general dt framework, ‘iterative cycles of moving through innovation spaces’ and ‘emphasise learning’, remained relevant in their original form. towards a comprehensive framework the general and the cbmi-specific tools that were applied in the study have been organised according to the spaces in which they were utilised (at one or more case companies) in the overview in table 6. the table also illustrates the two new innovation spaces that were derived from the data and summarises the adapted guiding principles and aims of the spaces. the framework has been developed into a visually engaging tool for cbmi that can be found in the appendix. journal of business models (2019), vol. 7, no. 1, pp. 39-70 58 design thinking aspects key points guiding principles • systemic perspective • collaboration across functions, perspectives and experience bases inside and outside the organisation • iterative cycles of moving through innovation spaces • emphasise learning innovation spaces introductory space exploratory space alignment space ideation space prototyping and testing space aim of spaces determine company setting including basis for cbmi. present ce and cbm principles. inspire action explore cbm opportunities in the specific company setting investigate alignment between cbmi and extant strategies and aspirations generate multiple cbm ideas. seek higher-order thinking and systemic solutions examine cbm ideas and develop best ideas further tools and techniques for individual spaces communication tools: • company presentation • presentation of ce and cbms using system diagram, cbm principles and best practice exemplars communication tools: • presentation of ce and cbms using system diagram, cbm principles and best practice exemplars ethnographic research techniques: • dialogue/interview with internal and external stakeholders e.g. existing/new customers or suppliers • as-is mapping e.g. using an idea map or circular canvas communication tools: • company presentation including strategic agenda and aspirations • presentation of ce and cbms using system diagram, cbm principles, and best practice exemplars to wider range of internal stakeholders ethnographic research techniques: • dialogue/interview with internal stakeholders to investigate alignment between cbmi and extant strategies and aspirations sense-making and ideation tools: • cbm best practice exemplars • brainstorming • cluster analysis • concept development techniques • to-be mapping e.g. using an idea map or circular canvas prototyping and testing approaches: • to-be mapping e.g. using an idea map or circular canvas • prototyping techniques such as scenario building • assumption surfacing and testing e.g. by asking challenging questions • testing ideas with internal and external stakeholders through e.g. interviews • evaluating ideas e.g. against cbm principles and best practice exemplars • assessing what resource loops are targeted by a cbm e.g. using an idea map • field experiments e.g. small-scale market tests tools and techniques that span spaces co-creation approaches: • on-going dialogue between knowledge experts (e.g. researchers) and company participants • engaging internal and external stakeholders (e.g. customers and existing/new value chain partners) in generation, development and testing of ideas data collection and analysis techniques: • dialogue, interviews, observation, desk research etc. • competitor analysis, economic calculations, trend analysis etc. • considering design and viability of business model elements (as illustrated in the circular canvas) • considering overall fit between cbm ideas and image, resources, values, aspirations etc. of the company visualisation techniques, visual or narrative: • ce system diagram • idea map (e.g. with post-it notes) to cluster and visualise ideas • storytelling about new kinds of customer experiences, new company roles • storytelling inspired by best practice exemplars table 6: design thinking framework for cbmi journal of business models (2019), vol. 7, no. 1, pp. 39-70 59 it should be emphasised that neither all the cbmispecific tools (e.g. the system diagram) nor the generic tools for supporting innovation (e.g. customer interviews) were equally relevant in each case. the tools were adjusted in a flexible manner to fit the individual case company setting (similar to the actors involved, the tempo, the order of innovation spaces, the meeting and workshop formats etc.). bmi is a complex and lengthy process, and chesbrough (2007) advocates that two to three years is too little time to “develop business-model experiments, obtain clear results, interpret and understand the results, and then carry out a broad deployment of those results” (chesbrough, 2007, p.17). arguably, this is particularly the case in cbmi in which a fundamentally new, circular, business logic is also introduced and has to be integrated in the business models that are crafted. in these circumstances, the results attained during the typically two years that we collaborated with the companies are deemed satisfactory: all case companies started to discuss the relevance of cbms and generated cbm ideas, and all except case company e created cbm experiments, acquired results from the experiments, and interpreted those results to decide on follow-up experiments. notably, most companies have continued the cbmi work in some form after the research collaboration ended, and a few companies have moved on to cbm implementation or preparations hereof. overall, these results indicate the framework was a relevant means of introducing the companies to cbmi, inspiring action and supporting the innovation process towards cbm development and implementation. conclusion this exploratory study examined how dt can support the cbmi process. to this end, we experimented with the application of different tools within a dt framework using action research. based on this, four main contributions are made to the literature: the development of a dt framework for cbmi (cf. figure 4); deeper insight into the use(fulness) of dt for cbmi and identification of gaps and opportunities within this field; further insight in tool development and use for cbmi more generally; as well as exploring the process stages and activities involved in cbmi. with respect to the first contribution, which involved the development of a dt framework for cbmi, two new innovation spaces, the introductory and the alignment space, are suggested to complement the common exploratory, ideation, and prototyping and testing spaces of dt to appropriately accommodate the cbmi context. the framework proposes guiding principles for the cbmi process that expand the focal point from users and cross-organisational collaboration to systems and value chain collaboration. it furthermore outlines the aims of the innovation spaces and the associated core activities. finally, the framework comprises a cbmi toolbox (in the form of a system diagram, an idea map, cbm principles, best practice exemplars and business model elements) that is complemented with innovation techniques of a general character to apply throughout the innovation process. as for the second contribution related to the use of dt for cbmi, we studied the cbmi process from ce was first introduced in the companies and the subsequent six months to two years, which is little time for the complex innovation task of developing new business models (chesbrough, 2007), particularly circular ones. against this backdrop, the results in the case companies are encouraging and indicate that a dt approach to cbmi is indeed relevant, which confirms similar results from the broader field of sustainable bmi, where dt was also found to be useful (geissdoerfer et al., 2016; baldassarre et al., 2017). the third contribution relates to the developed design thinking framework for cbmi, and its suggestions for guidelines, tools and techniques to apply (in individual innovation spaces as well as across spaces). this responds to calls for more instruments to support the cbmi process (antikainen and valkokari, 2016; blomsma and brennan, 2017). the presented tools and techniques were applied during the cbmi process in six case companies and derived results towards the creation of new cbms, which means their utility has been illustrated in practice for a small group of case companies. however, more research is needed to determine if the framework and its instruments are relevant in a wide range of organisational settings as the results so far indicate. the final contribution to the literature is the exploration of a process perspective on cbmi delineated by the journal of business models (2019), vol. 7, no. 1, pp. 39-70 60 innovation spaces of the framework and the core activities involved in these (cf. aims of spaces). such deeper understanding of the innovation process is needed in relation to bmi more generally (chesbrough, 2007; foss and saebi, 2017), as well as in relation to sustainable and circular bmi (antikainen and valkokari, 2016; geissdoerfer et al., 2018b). the relevance for practice from this research is related to an improved understanding of the cbmi process that can assist innovation managers and business developers in manoeuvring this challenging type of innovation process, by providing an overview of the innovation spaces and the associated activities. the developed framework describes a number of concrete tools (e.g. an idea map and cbm principles) that can be applied by practitioners to facilitate innovation at different stages of the cbmi process and offers some overall principles (e.g. strive for internal and external collaboration across functions and emphasise learning). in terms of limitations, since cbmi is a rather new research field it remains under-explored and therefore this study is mainly explorative and descriptive of nature (de groot, 1969), with an attempt to formulate the beginning of an explanation for some of the observed phenomena. it is expected that some of the findings can serve as relevant propositions for further research in follow-up studies. this research focused predominantly on front-end cbmi and the framework has consequently not been sufficiently tested in relation to later stages of the cbmi process such as market testing and full-scale implementation of cbms and may need to be modified to encompass these stages appropriately. furthermore, a reinforced involvement of external stakeholders, as well as of internal stakeholders in the large companies, would seem beneficial, which may require the development of sub-processes and workshop formats specifically targeted at supporting such interand intra-organisational collaboration. insights from the open innovation literature on networked production organisations and consumer communities would seem relevant to study further in this respect (e.g. chesbrough and crowther, 2006; laursen and salter, 2006; romero and molina, 2011). moreover, the type of cbmi pursued (e.g. cbms for slowing or closing resource loops) as well as the tools used were influenced by the engaged research approach, deemed necessary at the time of the research when the ce concept was still highly new to most organisations, but will have had an impact on the development and focus of the cbmi framework and tools. in this paper, we have pointed towards the need to align cbmi activities with extant organisational strategies and aspirations (in the alignment space) and touched upon differences between the innovation process in the small and the large case companies. more research is, nevertheless, needed to examine interrelations between the specifics of the organisational as well as industrial, societal, and institutional setting and a suitable configuration of the cbmi process. such examinations constitute an area currently under-researched within the wider bmi literature (foss and saebi, 2017) and only few steps (e.g. guldmann, 2018; stål and corvellec, 2018; guldmann and huulgaard, 2019) have been taken to examine this in relation to cbmi (geissdoerfer et al., 2018a). journal of business models (2019), vol. 7, no. 1, pp. 39-70 61 appendix • systemic perspective • collaboration across functions, perspectives and experience bases inside and outside the organisation • iterative cycles of moving through innovation spaces • emphasise learning  tools and  tech‐ niques for  individual  spaces  tools and  tech‐ niques  that span  spaces guiding  principles exploratory spaceintroductory space determine company setting  including basis for cbmi.  present ce and cbm  principles. inspire action  communication tools: • company presentation  including strategic agenda  and aspirations • presentation of ce and  cbms using system  diagram, cbm principles,  and best practice  exemplars to wider range  of internal stakeholders  sense‐making and ideation  tools: • cbm best practice  exemplars  • brainstorming • cluster analysis • concept development  techniques • to‐be mapping e.g. using  an idea map or circular  canvas  prototyping and testing  approaches: • to‐be mapping e.g. using  an idea map or circular  canvas • prototyping techniques  such as scenario building • assumption surfacing and  testing e.g. by asking  challenging questions • testing ideas with internal  and external stakeholders  through e.g. interviews • evaluating ideas e.g.  against cbm principles and  best practice exemplars • assessing what resource  loops are targeted by a cbm  e.g. using an idea map • field experiments e.g.  small‐scale market tests  communication tools: • presentation of ce and  cbms using system  diagram, cbm principles  and best practice exemplars communication tools: • company presentation • presentation of ce and  cbms using system  diagram, cbm principles and best practice exemplars  co‐creation approaches: • on‐going dialogue between knowledge experts (e.g. researchers) and company participants • engaging internal and external stakeholders (e.g. customers and existing/new value chain partners) in generation, development and testing of ideas visualisation techniques, visual or narrative: • ce system diagram • idea map (e.g. with post‐it notes) to cluster and visualize ideas • storytelling about new kinds of customer experiences, new company roles • storytelling inspired by best practice exemplars  ethnographic research  techniques: • dialogue/interview with  internal and external  stakeholders e.g.  existing/new customers or  suppliers • as‐is mapping e.g. using an  idea map or circular canvas  ethnographic research  techniques: • dialogue/interview with  internal stakeholders to  investigate alignment  between cbmi and extant  strategies and aspirations  alignment space ideation space prototyping and testing  space investigate alignment  between cbmi and extant  strategies and aspirations explore cbm opportunities in  the specific company setting  generate multiple cbm ideas.  seek higher‐order thinking  and systemic solutions  examine cbm ideas and  develop best ideas further  innovation  spaces aim of  spaces data collection and analysis techniques: • dialogue, interviews, observation, desk research etc. • competitor analysis, economic calculations, trend analysis etc. • considering design and viability of business model elements (as illustrated in the circular canvas) • considering overall fit between cbm ideas and image, resources, values, aspirations etc. of the company figure 4: framework and tools for cbmi developed in this research in the figure, tools from the developed toolbox (cf. section 4.2) are marked with a bold font, whereas general innovation techniques that were found useful for supporting the cbmi processes are not bolded. journal of business models (2019), vol. 7, no. 1, pp. 39-70 62 references abdelkafi, n. & täuscher, k. (2016), business models for sustainability from a system dynamics perspective, organization & environment, vol. 29, no. 1, pp. 74-96. achterberg, e., hinfelaar, j. & bocken, n.m.p. (2016), “master circular business models with the value hill”, circle economy, available at: https://www.circle-economy.com/wp-content/uploads/2016/09/finance-whitepaper-20160923.pdf (accessed 30 january 2019). adams, r., jeanrenaud, s., bessant, j., denyer, d. & overy, p. (2016), sustainability-oriented innovation: a systematic review, international journal of management reviews, vol. 18, no. 2, pp. 180-205. antikainen, m. & valkokari, k. (2016), a framework for sustainable circular business model innovation, technology innovation management review, vol. 6, no. 7, pp. 5-12. bakker, c.a., den hollander, m.c., van hinte, e. & zijlstra, y. (2014a), products that last product design for circular business models, tu delft, delft, netherlands. bakker, c., wang, f., huisman, j. & den hollander, m. (2014b), products that go round: exploring product life extension through design, journal of cleaner production, vol. 69, pp. 10-16. baldassarre, b., calabretta, g., bocken, n.m.p. & jaskiewicz, t. (2017), bridging sustainable business model innovation and user-driven innovation: a process for sustainable value proposition design, journal of cleaner production, vol. 147, pp. 175-186. beckman, s.l. & barry, m. (2007), innovation as a learning process: embedding design thinking, california management review, vol. 50, no. 1, pp. 25-56. blomsma, f. & brennan, g. (2017), the emergence of circular economy: a new framing around prolonging resource productivity, journal of industrial ecology, vol. 21, no. 3, pp. 603-614. bocken, n.m.p., bakker, c., de pauw, i. & van der grinten, b. (2016), product design and business model strategies for a circular economy, journal of industrial and production engineering, vol. 33, no. 5, pp. 308-320. bocken, n.m.p., rana, p. & short, s.w. (2015), value mapping for sustainable business thinking, journal of industrial and production engineering, vol. 32, no. 1, pp. 67-81. bocken, n., short, s., rana, p. & evans, s. (2013), a value mapping tool for sustainable business modelling, corporate governance, vol. 13, no. 5, pp. 482-497. bocken, n.m.p., short, s.w., rana, p. & evans, s. (2014), a literature and practice review to develop sustainable business model archetypes, journal of cleaner production, vol. 65, pp. 42-56. boons, f. & lüdeke-freund, f. (2013), business models for sustainable innovation: state-of-the-art and steps towards a research agenda, journal of cleaner production, vol. 45, pp. 9-19. breuer, h., fichter, k., lüdeke-freund, f. & tiemann, i. (2018), sustainability-oriented business model development: principles, criteria, and tools, international journal of entrepreneurial venturing, vol. 10, no. 2, pp. 256-286. brown, t. (2008), design thinking, harvard business review, vol. 86, no. 6, pp. 84-92. journal of business models (2019), vol. 7, no. 1, pp. 39-70 63 brown, p., bocken, n., balkenende, r. (2019). why do companies pursue collaborative circular oriented innovation?, sustainability, vol. 11, no. 3, pp. 635-658. buchanan, r. (1992), wicked problems in design thinking, design issues, vol. 8, no. 2, pp. 5-21. bucherer, e., eisert, u. & gassmann, o. (2012), towards systematic business model innovation: lessons from product innovation management, creativity & innovation management, vol. 21, pp. 183-198. carlgren, l., elmquist, m. & rauth, i. (2016a), the challenges of using design thinking in industry experiences from five large firms, creativity and innovation management, vol. 25, no. 3, pp. 344-362. carlgren, l., elmquist, m. & rauth, i. (2016b), framing design thinking: the concept in idea and enactment, creativity and innovation management, vol. 25, no. 1, pp. 38-57. ceschin, f. & gaziulusoy, i. (2016), evolution of design for sustainability: from product design to design for system innovations and transitions, design studies, vol. 47, pp. 118-163. chesbrough, h. (2007), business model innovation: it’s not just about technology anymore, strategy & leadership, vol. 35, no. 6, pp. 12-17. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, pp. 354-363. chesbrough, h. & crowther, a.k. (2006), beyond high tech: early adopters of open innovation in other industries, r&d management, vol. 36, no. 3, pp. 229-236. dasilva, c. m. (2018), understanding business model innovation from a practitioner perspective, journal of business models, vol. 6, no. 2, pp. 19-24. dentchev, n., rauter, r., jóhannsdóttir, l., snihur, y., rosano, m., baumgartner, r., nyberg, t., tang, x., van hoof, b. & jonker, j. (2018), embracing the variety of sustainable business models: a prolific field of research and a future research agenda, journal of cleaner production, vol. 194, pp. 695-703. dickens, l. & watkins, k. (1999), action research: rethinking lewin, management learning, vol. 30, pp. 127–140. doganova, l. & karnøe, p. (2012), “the innovator’s struggle to assemble environmental concerns to economic worth: report to grundfos new business”, gnb clean-tech report, available at: https://www.industriensfond.dk/ sites/default/files/grundfos.pdf (accessed 30 january 2019). dolak, f., uebernickel, f. & brenner, w. (2013), “design thinking and design science research”, working paper, university of st. gallen, st. gallen, switzerland, 1 june 2013, available at: https://www.alexandria.unisg.ch/223547/ (accessed 30 january 2019). d.school (n.d.), “an introduction to design thinking: process guide”, hasso plattner institute of design at stanford, available at: https://dschool-old.stanford.edu/sandbox/groups/designresources/wiki/36873/attachments/74b3d/ modeguidebootcamp2010l.pdf (accessed 30 january 2019). earth overshoot day (2017), “past earth overshoot days”, available at: http://www.overshootday.org/newsroom/ past-earth-overshoot-days/ (accessed 7 november 2017). journal of business models (2019), vol. 7, no. 1, pp. 39-70 64 eisenhardt, k.m. (1989), building theories from case study research, academy of management review, vol. 14, no. 4, pp. 532-550. eisenhardt, k. & graebner, m. (2007), theory building from cases: opportunities and challenges, academy of management journal, vol. 50, no. 1, pp. 25–32. ellen macarthur foundation (2012), “towards the circular economy vol. 1: an economic and business rationale for an accelerated transition”, available at: https://www.ellenmacarthurfoundation.org/assets/downloads/publications/ellen-macarthur-foundation-towards-the-circular-economy-vol.1.pdf (accessed 30 january 2019). ellen macarthur foundation (2013a), “towards the circular economy vol.2: opportunities for the consumer goods sector”, available at: https://www.ellenmacarthurfoundation.org/assets/downloads/publications/tce_report-2013. pdf (accessed 30 january 2019). ellen macarthur foundation (2013b), “the circular economy applied to the automotive industry”, available at: http:// www.ellenmacarthurfoundation.org/news/the-circular-economy-applied-to-the-automotive-industry-1 (accessed 4 november 2014). ellen macarthur foundation (2015), “delivering the circular economy: a toolkit for policymakers”, available at: https://www.ellenmacarthurfoundation.org/assets/downloads/publications/ellenmacarthurfoundation_policymakertoolkit.pdf (accessed 30 january 2019). ellen macarthur foundation & ideo (2016), “circular design guide”, available at: https://www.circulardesignguide. com (accessed 17 march 2017). ellen macarthur foundation and university of bradford (2012), “walter stahel on the performance economy”, [video online], available at: https://www.youtube.com/watch?v=phj-yzwdavo (accessed 30 january 2019). eriksson, p. & kovalainen, a. (2008) qualitative methods in business research, sage, los angeles, usa. esposito, m., tse, t. & soufani, k. (2018). introducing a circular economy: new thinking with new managerial and policy implications. california management review, vol. 60, no. 3, pp. 5-19. eurostat (2016), “glossary: enterprise size”, available at: http://ec.europa.eu/eurostat/statisticsexplained/index. php/glossary:enterprise_size%0d%0a (accessed 5 may 2018). evans, s., vladimirova, d., holgado, m., van fossen, k., yang, m., silva & e., barlow, c. (2017), business model innovation for sustainability: towards a unified perspective for creation of sustainable business models, business strategy and the environment, vol. 26, no. 5, pp. 597-608. evered, r. & louis, m.r. (1981), alternative perspectives in the organizational sciences: “inquiry from the inside” and “inquiry from the outside”, the academy of management review, vol. 6, no.3, pp. 385–395. fleury, a.m., stabile, h. & carvalho, m.m. (2016), an overview of the literature on design thinking: trends and contributions, international journal of engineering education, vol. 32, no. 4, pp. 1704-1718. flyvbjerg, b. (2006), five misunderstandings about case-study research, qualitative inquiry, vol. 12, no. 2, pp. 219–245. journal of business models (2019), vol. 7, no. 1, pp. 39-70 65 foss, n. j. & saebi, t. (2017), fifteen years of research on business model innovation, journal of management, vol. 43, no. 1, pp. 200–227. geissdoerfer, m., bocken, n.m.p. & hultink, e.j. (2016), design thinking to enhance the sustainable business modelling process – a workshop based on a value mapping process, journal of cleaner production, vol. 135, pp. 1218-1232. geissdoerfer, m., morioka, s.n., de carvalho, m.m. & evans, s. (2018a), business models and supply chains for the circular economy, journal of cleaner production, vol. 190, pp. 712-721. geissdoerfer, m., savaget, p., bocken, n.m.p. & hultink, e.j. (2017a), the circular economy – a new sustainability paradigm?, journal of cleaner production, vol. 143, pp. 757-768. geissdoerfer, m., savaget, p. & evans, s. (2017b), the cambridge business model innovation process, procedia manufacturing, vol. 8, pp. 262-269. geissdoerfer, m., vladimirova, d. & evans, s. (2018b), sustainable business model innovation: a review, journal of cleaner production, vol. 198, pp. 401-416. ghisellini, p., cialani, c. & ulgiati, s. (2016), a review on circular economy: the expected transition to a balanced interplay of environmental and economic systems, journal of cleaner production, vol. 114, pp. 11-32. guldmann, e. (2016), “best practice example of circular business models”, danish environmental protection agency, available at: https://www2.mst.dk/udgiv/publications/2016/06/978-87-93435-86-5.pdf (accessed 30 january 2019). guldmann, e. (2018), circular business models innovation journeys towards a circular economy, phd dissertation, aalborg university, denmark, available at: https://www.researchgate.net/publication/330728278_circular_business_models_-_innovation_journeys_towards_a_circular_economy (accessed 30 january 2019). guldmann, e. & huulgaard, r. (2019), circular business model innovation for sustainable development, in bocken, n.m.p., ritala, p., albareda, l. & verburg, r. (eds.), innovation for sustainability business transformations towards a better world, palgrave macmillan, in press. groot, a.d. de (1969), methodology foundation of inference and research in the behavioral sciences, mouton, the hague, the netherlands. hargadon, a.b. (2014), brokerage and innovation, in dodgson, m., gann, d.m. & phillips, n. (eds.), the oxford handbook of innovation management, oxford university press, new york, pp. 163-180. healy, m. & perry, c. (2000), comprehensive criteria to judge validity and reliability of qualitative research within the realism paradigm, qualitative market research: an international journal, vol. 3, no. 3, pp. 118–126. heyes, g., sharmina, m., mendoza, j.m.f., gallego-schmid, a. & azapagic, a. (2018), developing and implementing circular economy business models in service-oriented technology companies, journal of cleaner production, vol. 177, pp. 621–632. hopkinson, p., zils, m., hawkins, p. & roper, s. (2018). managing a complex global circular economy business model: opportunities and challenges. california management review, vol. 60, no. 3, pp. 71-94. journal of business models (2019), vol. 7, no. 1, pp. 39-70 66 icibaci, l. (2019), re-use of building products in the netherlands – the development of a metabolism based assessment approach, phd dissertation, delft university of technology, the netherlands, available at: https://journals. open.tudelft.nl/index.php/abe/article/view/3248/3429 (accessed 30 january 2019). ipcc (2018), “summary for policy-makers”, intergovernmental panel on climate change (ipcc), available at: http:// report.ipcc.ch/sr15/pdf/sr15_spm_final.pdf (accessed 21 january 2019). jensen, j.p. (2018), narrowing, slowing and closing the resource loops circular economy in the wind industry, phd dissertation, aalborg university, denmark, available at: http://vbn.aau.dk/files/281675213/phd_jonas_pagh_ jensen_e_pdf.pdf (accessed 30 january 2019). kemmis, s. & mctaggart, r. (eds.) (1988), the action research planner, deakin university press, victoria, australia. kirchherr, j., reike, d. & hekkert, m. (2017), conceptualizing the circular economy: an analysis of 114 definitions, resources, conservation and recycling, vol. 127, pp. 221-232. kortmann, s. & piller, f. (2016). open business models and closed-loop value chains: redefining the firm-consumer relationship. california management review, vol. 58, no. 3, pp. 88-108. kozlowski, a., searcy, c. & bardecki, m. (2018) the redesign canvas: fashion design as a tool for sustainability, journal of cleaner production, vol. 183, pp. 194–207. kraaijenhagen, c., van oppen, c. & bocken, b. (2016), circular business: collaborate and circulate, circular collaboration, the netherlands. kørnøv, l., thrane, m., remmen, a. & lund, h. (eds.) (2007), tools for sustainable development, aalborg universitetsforlag, aalborg, denmark. laursen, k. & salter, a. (2006), open for innovation: the role of openness in explaining innovation performance among u.k. manufacturing firms, strategic management journal, vol. 27, no. 2, pp. 131-150. lewandowski, m. (2016), designing the business models for circular economy—towards the conceptual framework, sustainability, vol. 8, no. 1, pp. 1-28. lieder, m. & rashid, a. (2016), towards circular economy implementation: a comprehensive review in context of manufacturing industry, journal of cleaner production, vol. 115, pp. 36-51. liedtka, j. (2011), learning to use design thinking tools for successful innovation, strategy & leadership, vol. 39, no. 5, pp. 13-19. liedtka, j. (2015), perspective: linking design thinking with innovation outcomes through cognitive bias reduction, journal of product innovation management, vol. 32, no. 6, pp. 925-938. linder, m. & williander, m. (2017), circular business model innovation: inherent uncertainties, business strategy and the environment, vol. 26, no. 2, pp. 182-196. lüdeke-freund, f., carroux, s., joyce, a., massa, l. & breuer, h. (2018a), the sustainable business model pattern taxonomy—45 patterns to support sustainability-oriented business model innovation, sustainable production and consumption, vol. 15, pp. 145-162. journal of business models (2019), vol. 7, no. 1, pp. 39-70 67 lüdeke-freund, f., gold, s. & bocken, n.m.p. (2018b), a review and typology of circular economy business model patterns, journal of industrial ecology, in press. magretta, j. (2002), why business models matter, harvard business review, vol. 80, no. 5, pp. 86-92. massa, l., tucci, c. l. & afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. mcdonough, w. & braungart, m. (2002), cradle to cradle: remaking the way we make things, north point press, new york, usa. mcgrath, r. (2010), business models: a discovery driven approach, long range planning, vol. 43, pp. 247-261. mcmanners, p. (2016), the action research case study approach: a methodology for complex challenges such as sustainability in aviation, action research, vol. 14, no. 2, pp. 201–216. miles, m. b. & huberman, a. m. (1984), drawing valid meaning from qualitative data: toward a shared craft, educational researcher, vol. 13, no. 5, pp. 20–30. mitchell, d. & coles, c. (2003), the ultimate competitive advantage of continuing business model innovation, journal of business strategy, vol. 24, no. 5, pp. 15-21. nußholz, j.l.k. (2017), circular business models: defining a concept and framing an emerging research field, sustainability, vol. 9, no. 10, pp. 1810. o’connor, g.c., rice, m.p., peters, l. & veryzer, r.w. (2003), managing interdisciplinary, longitudinal research teams: extending grounded theory-building methodologies, organization science, vol. 14, no. 4, pp. 353-373. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, new jersey, us. pettigrew, a. m. (1990), longitudinal field research on change: theory and practice, organization science, vol. 1, no. 3, pp. 267–292. pettigrew, a. m. (1997), what is a processual analysis?, scandinavian journal of management, vol. 13, no. 4, pp. 337–348. plattner, h., meinel, c. & leifer, l. (eds.) (2011), design thinking: understand improve apply, springer heidelberg, germany. prendeville, s. m. et al. (2017), uncovering ecodesign dilemmas: a path to business model innovation, journal of cleaner production, vol. 143, pp. 1327-1339. ranta, v., aarikka-stenroos, l. & mäkinen, s. j. (2018), creating value in the circular economy: a structured multiplecase analysis of business models, journal of cleaner production, vol. 201, pp. 988-1000. richardson, j. (2008), the business model: an integrative framework for strategy execution, strategic change, vol. 17, no. 5-6, pp. 133-144. journal of business models (2019), vol. 7, no. 1, pp. 39-70 68 rizos, v., behrens, a., van der gaast, w., hofman, e., ioannou, a., kafyeke, t., flamos, a., rinaldi, r., papadelis, s., hirschnitz-garbers, m. & topi, c. (2016), implementation of circular economy business models by small and mediumsized enterprises (smes): barriers and enablers, sustainability, vol. 8, no. 11, pp. 1212-1230. romero, d. & molina, a. (2011), collaborative networked organisations and customer communities: value co-creation and co-innovation in the networking era, production planning & control, vol. 22, no. 5-6, pp. 447-472. romero, d. & rossi, m. (2017), towards circular lean product-service systems, procedia cirp, vol. 64, pp. 13-18. roome, n. & louche, c. (2016), journeying towards business models for sustainability: a conceptual model found inside the black box of organisational transformation, organization & environment, vol. 29, no. 1, pp. 11-35. royal society (2012), “people and the planet”, available at: https://royalsociety.org/~/media/royal_society_content/policy/projects/people-planet/2012-04-25-peopleplanet.pdf (accessed 30 january 2019). sarasvathy, s.d. (2005), “what makes entrepreneurs entrepreneurial”, available at: http://www.effectuation.org/ sites/default/files/documents/what-makes-entrepreneurs-entrepreneurial-sarasvathy.pdf (accessed 8 june 2018). schaltegger, s., lüdeke-freund, f. & hansen, e.g. (2012), business cases for sustainability and the role of business model innovation: developing a conceptual framework, international journal of innovation and sustainable development, vol. 6, no. 2, pp. 95–119. schaltegger, s., hansen, e. g. & lüdeke-freund, f. (2016), business models for sustainability: origins, present research, and future avenues, organization & environment, pp. 3-10. seidel, v.p. & fixson, s.k. (2013), adopting design thinking in novice multidisciplinary teams: the application and limits of design methods and reflexive practices, journal of product innovation management, vol. 30, pp. 19-33. shani, a.b., coghlan, d. & cirella, s. (2012), action research and collaborative management research: more than meets the eye?, international journal of action research, vol. 8, no. 1, pp. 45-67. short, s.w., bocken, n.m.p., barlow, c.y. & chertow, m.r. (2014), from refining sugar to growing tomatoes, journal of industrial ecology, vol. 18, no. 5, pp. 603-618. stahel, w.r. (1981), the product-life factor, in orr, s.g. (ed.), an inquiry into the nature of sustainable societies: the role of the private sector. harc, houston, tx, pp. 72–96. stahel, w.r. (2010), the performance economy, palgrave macmillan, hampshire, uk. stubbs, w. & cocklin, c. (2008), conceptualizing a “sustainability business model”, organization & environment, vol. 21, no. 2, pp. 103-127. stål, h. i. & corvellec, h. (2018), a decoupling perspective on circular business model implementation: illustrations from swedish apparel, journal of cleaner production, vol. 171, pp. 630–643. teece, d.j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2-3, pp. 172-194. thomke, s.h. (2003), experimentation matters: unlocking the potential of new technologies for innovation, harvard business press, boston, usa. journal of business models (2019), vol. 7, no. 1, pp. 39-70 69 tolkamp, j., huijben, j.c.c.m., mourik, r.m., verbong, g.p.j. & bouwknegt, r. (2018), user-centred sustainable business model design: the case of energy efficiency services in the netherlands, journal of cleaner production, vol. 182, no. 5, pp. 755–764. tukker, a. (2015), product services for a resource-efficient and circular economy – a review, journal of cleaner production, vol. 97, pp. 76-91. unruh, g.c. (2002), escaping carbon lock-in, energy policy, vol. 30, no. 4, pp. 317-325. upward, a. & jones, p. (2016), an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science, organization & environment, vol. 29, no. 1, pp. 97-123. van de ven, a.h. (2007), engaged scholarship: a guide for organizational and social research, oxford university press, new york, usa. van de ven, a.h. (2017), the innovation journey: you can’t control it, but you can learn to maneuver it, innovation, vol. 19, no. 1, pp. 39-42. van de ven, a.h. & johnson, p.e. (2006), knowledge for theory and practice, academy of management review, vol. 31, no. 4, pp. 802. van de ven, a.h., polley, d.e., garud, r. & venkataraman, s. (1999), the innovation journey, oxford university press, new york, usa. velte, c. j. & steinhilper, r. (2016), “complexity in a circular economy: a need for rethinking complexity management strategies”, in proceeding of the world congress on engineering 2016, london, uk, 29 june–1 july 2016, pp. 763-768. wbcsd (2010), “vision 2050: the new agenda for business”, world business council for sustainable development (wbcsd), available at: https://docs.wbcsd.org/2018/02/vision2050.pdf webster, k. (2015), the circular economy: a wealth of flows, ellen macarthur foundation publishing, cowes, isle of wight, uk. weissbrod, i. & bocken, n.m.p. (2017), developing sustainable business experimentation capability – a case study, journal of cleaner production, vol. 142, pp. 2663-2676. wirtz, b. & daiser, p. (2017), business model innovation: an integrative conceptual framework, journal of business models, vol. 5, no. 1, pp. 14-34. wirtz, b., göttel, v. & daiser, p. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 1, pp. 1-28. wwf (2016), “living planet report 2016: summary”, world wildlife foundation (wwf), available at: https://d2ouvy59p0dg6k.cloudfront.net/downloads/lpr_2016_summary_high_res.pdf (accessed 30 january 2019). yin, r.k. (2014), case study research: design and methods, sage, thousand oaks, usa. zou, h., du, h., wang, y., zhao, l., mao, g., zuo, j., liu, y., liu, x. & huisingh, d. (2017), a review of the first twentythree years of articles published in the journal of cleaner production: with a focus on trends, themes, collaboration networks, low/no-fossil carbon transformations and the future, journal of cleaner production, vol. 163, pp. 1-14. journal of business models (2019), vol. 7, no. 1, pp. 39-70 70 eva guldmann (1976) is circular business consultant and ceo at rotundo. she holds a phd from aalborg university and a msc in engineering from the technical university of denmark and has more than ten years of industry experience. her research focuses on the implementation of circular economy at company level including research into circular business models, the role of business experimentation and other tools in circular business model innovation as well as barriers to such innovation. she has conducted action research to co-create knowledge with industry, practice reviews and other qualitative research. nancy bocken is professor in sustainable business management and practice at the international institute for industrial environmental economics at lund university, sweden. she is also associate professor at delft university of technology and fellow at the cambridge institute for sustainability leadership. nancy’s main areas of interests around sustainability are: business models; business experimentation; innovation for sustainability; circular economy; scaling up sustainable businesses; and closing the ‘idea-action’ gap in sustainability. han brezet (1951) is professor  in sustainable product design at the department of planning, aalborg university. he holds a msc in electrical engineering from tu delft, and completed his phd in energy innovation at the erasmus university in rotterdam. he has held several jobs in industry and was director of the institute of environmental economics (tme), before returning to tu delft where he established the design for sustainability program. in cooperation with unep paris and companies like philips, the program was among the first in the world in the area of life cycle-oriented ecodesign. about the authors journal of business models (2020), vol. 8, no. 2, pp. 39-56 39 seizing the business opportunities of the mydata service delivery network: transforming the business models of health insurance companies minna pikkarainen1,*, timo koivumäki2, and marika iivari3,* abstract purpose: this paper discusses how personal data-driven service delivery networks based on mydata phenomenon may impact and transform the business models and offer new kinds of business opportunities especially for health insurance business design/methodology/approach: this research is a case study / empirical findings: this study demonstrates how health insurance organizations are heading towards acting as active members of human centric, collaborative service delivery networks. the biggest opportunity transformation from transaction based to service-based businesss research limitations/implications: as the use of personal data is still a paradigm in europe, the results of this study address the potential use and implications and cannot be validated through large-scale empirical studies. practical implications: this research highlights how companies should build adaptable service architecture that are easily connected or disconnected from the other organizations in their business ecosystems in order to allow smooth data usage and sharing. the service delivery network approach may offer insurance companies the needed structure and role in the emerging mydata business. originality/value: this study contributes to the discussion of data-driven business models via an emergent phenomenon. especially in occupational healthcare sector, use of personal data can open up new kinds of business opportunities with networked or ecosystemic business models. please cite this paper as: pikkarainen, m., koivumäki, t., and iivari, m. (2020), seizing the business opportunities of the mydata service delivery network: transforming the business models of health insurance companies, vol. 8, no. 2, pp. 39-56 keywords: business model, mydata, personal data, service delivery network, data-driven, health insurance business 1 professor of connected health, martti ahtisaari institute, oulu business school and the faculty of medicine, university of oulu, and vtt technical research centre of finland, minna..pikkarainen@oulu.fi 2 professor of digital service business, martti ahtisaari institute, oulu business school, university of oulu 3 d.sc., oulu business school, p.o. box 4600, 90014 university of oulu, finland, marika.iivari@gmail.com * corresponding author journal of business models (2020), vol. 8, no. 2, pp. 39-56 40 introduction increasing healthcare costs have become a global challenge which has led countries and healthcare providers to the point where healthcare systems and the underlying business logic of actors providing healthcare services must be reinvented. at the same time, technological development has created new ways to monitor health and wellbeing and has provided the means to focus healthcare on a more personalized and preventive direction (hood & galas, 2008). consequently, the use of data in the healthcare sector has become increasingly important, and “discovering a game-changing relationship previously hidden in the data” (redman, 2015) is seen to lead to data-driven innovations. people are embracing a future healthcare system that allows them to control and share their personal health information for receiving improved personalized care (hood & galas, 2008). the adoption of cloud technologies and mobile devices, for instance, enable novel ways to generate, access, and manage personal health data (wang et al., 2016). people voluntarily agree to vast amounts of personal data being stored and utilized by companies in exchange of services. for the use of personal health data, the mydata paradigm has therefore emerged to address and strengthen digital human rights. simultaneously, mydata is also opening new network-based opportunities for businesses for developing personal data-driven services. these novel service delivery networks based on sharing an individual’s data for better, tailored healthcare services, require new kinds of networked business models because collaboration is not only seen as a way to differentiate from the competition but also to ensure better services for customers. network-based business models have been researched in recent studies looking at the perspective of the business model evolution (lund & nielsen, 2014), partnering portfolios (rindova et al., 2012), and interdependent innovation (kleinbaum & tushman, 2007). while the open innovation literature has been focusing on the use of organizational models and resource combinations (chesbrough, 2003a, 2003b), there is still a lack of understanding of the influence of data on networked business models. new kinds of service networks sharing individual’s data between actors are crucial, especially in preventive healthcare services (pikkarainen et al., 2018). yet there are still only a few available research studies on the context of human-centered personal data management (see, e.g., kemppainen et al., 2019; huhtala, 2018; pikkarainen et al., 2018; koivumäki et al., 2017). service delivery networks include a group of actors that do not necessarily have natural boundaries but who have a target to create a connected, overall service adopting a customer-centric approach. in the service delivery network, a customer assembles the relevant set of actors. in the service delivery network, “the customer acts as the ’‘hub’’ or focal node and the network includes as nodes the set of actors (service providers) who directly touch the customer in his particular service journey, with the customer’s encounters represented by ties between the customer and the providers” (tax et al., 2013). the mydata scenario of a personal data network is based on a transition from an organization-centered model towards human-centered personal data management and towards a service delivery network in which the individual is in the position of being his or her own data controller (see, e.g., gnesi et al., 2014; papadopoulou et al., 2015). in other words, mydata refers to an approach that seeks to transform the current organization-centric system to a human centric-system to use personal data as a resource that individuals themselves can access, control, and share based on mutual trust (koivumäki et al., 2017). in the mydata model, the importance of personal data ownership is highlighted as a potential channel for the increase in individual health data (häkkilä et al., 2016). in the healthcare sector, this transformation means that the focus shifts from reactive disease treatment to proactive wellness maintenance, emphasizing an individual instead of population-based disease diagnosis (hood, 2013). scrutinizing the emerging mydata-based healthcare services from the service delivery network perspective enables the investigation of relationships, interactions, and interdependencies between actors, and the examination of how these actors adapt to and evolve due to environmental changes (frow et al., 2016). the mydata phenomenon is highly focused on service delivery networks, as it both enables and requires active collaboration among healthcare businesses for fulfilling the human-centric service perspective through technological solutions. a shared mydata infrastructure enables decentralized management of personal data, improves journal of business models (2020), vol. 8, no. 2, pp. 39-56 41 interoperability, makes it easier to comply with tightening data protection regulations, and allows individuals to change service providers without proprietary data lockins (poikola et al., 2014). data processing technology has grown since the 1960s. data privacy rules and regulations have been evolving together with an increasing organizational capability to collect, process, and interlink data in an expanded way. many players have already started to use the data for the development of personalized services and marketing (tikkinen-piri et al., 2018). increased customer-centricity and efficiency can also be seen as a competitive advantage for companies (brownlow et al., 2015). in the changed situation, it is important to (1) understand the value of the novel personal data driven ecosystem, (2) explore roles in the value network, and (3) stress the importance of collaboration, regulations, and institutional ecosystem practices between ecosystem players (huhtala, 2018). for insurance companies in europe, personalized data can be seen both as a risk and an opportunity. in many countries, lack of trust among individuals has been showering down related to the development and innovative use of new technologies (reding, 2010) and related to the management of personal data (tikkinen-piri et al., 2018). people are often afraid that health insurance companies will start to use personal data strategically for profit maximization, for instance by excluding risk patients. as a part of the data misuse against them, people are often worried about the level of data security through the whole service continuum. it is no longer enough that data management is only done by one network partner. standardization of data protection requires a different level of collaboration between different network players (huhtala, 2018). the sharing and use of data between health professionals—including insurance companies—could contribute, however, to increased health and wellbeing through preventive healthcare and result in lowered insurance costs, bringing positive added value as well to the individual client. in this situation, it is important to increase understanding of how organizations, such as insurance players and other network players, are adapting to the changes in personal data usage and are addressing the related risks (tikkinen-piri et al., 2018). therefore, how mydata eventually impacts insurance companies in service delivery networks and how the potential change in insurance business is going to influence other players’ business models in the same network are very topical and relevant questions. therefore, the aim of this study is to increase knowledge about how mydata influences business models in the field of occupational healthcare, in the case of health insurance companies and their service delivery network. the primary unit of analysis in this study is the service delivery network, which we are looking at from the perspective of european insurance players. in our analysis, we are focusing specifically on the mydata phenomenon and the influence of mydata on the business models of insurance players. building on the business model literature, the primary research question of this study asks: how is mydata transforming health insurance companies’ business models in service delivery networks? in order to answer the research question, this paper first discusses the theoretical foundations of business models in data-driven business. it then dives deeper into mydata as a human-centric approach to healthcare. research methodology and the empirical case are described next. the study ends with a discussion of research results, findings, and conclusions. data-driven business models one of the buzzwords of contemporary business is the concept of the business model (zott et al., 2011; onetti et al., 2010). previous literature has described and defined business models in various ways, such as a structure, an architecture, or a business frame: a representation of a firm’s relevant interactions and activities (wirtz et al., 2016). although scholars are debating over a unanimous definition of the concept, the common view is that business models act as pathways to fulfill unmet needs, profitability, and the promise of service (wirtz et al., 2016) that will lead to competitive advantage (zott et al., 2011; teece, 2010). thus, business models are to “create and capture value in an inimitable way and through rare and valuable resources that are utilized efficiently” (ahokangas et al., 2014). this means that a business model is a system of specific activities conducted to satisfy the perceived needs of the market, as well as specifying who does what (whether it is the firm or its partners), and how these journal of business models (2020), vol. 8, no. 2, pp. 39-56 42 activities are linked to each other. from a collaboration perspective, a business model also acts as a system of interconnected activities that determine the way a company does business with its customers, partners, and vendors (zott & amit, 2010). business models are often imposed by technological innovation that creates the need to bring discoveries to market, and the opportunity to respond to unmet customer needs (teece, 2010). from this background, the concept of the data-driven business model has emerged to address connectivity issues, the internet of things, and big data (pujol et al., 2016). hartmann et al. (2014) define data-driven business models as business models that rely on data as a key resource. according to hartmann et al. (2014), the source for this data can be either internal or external, the offering can consist of the data itself, information, or a non-data product or service. data may be packaged, retrieved, or sold (sorescu, 2017). revenues can consist of sales, licensing, or subscriptions, but their definition does not consider data-sharing and re-use (pujol et al., 2016), as implied in the mydata paradigm. according to research conducted by pujol et al. (2016), data sharing is still uncommon in current data-driven business, to which this research contributes from the business model perspective. using data has become a necessity for many organizations in order to remain competitive or survive in their field (brownlow et al., 2015). in healthcare, the most successful services should place the sensing and supporting technologies around the needs of individuals in a manner that is highly personalized and makes the person a driver of his own health and wellbeing. the key challenges of integrating personal data are both data availability from different silos and consumer protection laws that currently hinder data usage especially in the health sector. recently, open source solutions around modern web interfaces or database solutions have started to break the data silos in different sectors. this has resulted in the “api economy” (anuff, 2016), which means that companies separately create revenues through application programming interfaces (apis)—either licensing, use-for-fee, or other monetization models—very much on personal data sets. on the other hand, an aggregator model emphasizes the controlling role of a central organization. in an open business environment, a shared mydata infrastructure enables decentralized management of personal data, makes it easier for companies to comply with tightening data protection regulations, and allows individuals to change service providers without proprietary data lock-ins (poikola et al., 2014). mydata model means that organizations are moving from traditional, technology, and aggregator models towards a human-centric data management approach (figure 1.) in the traditional “structureless” api economy, there is no clear infrastructure or platform in place for controlling and organizing the use of data in a logical manner. organizations do not systematically collaborate, and the ecosystem is governed by closed business models. aggregating data control would make life easier for organizations and individuals, but different aggregators do not have a built-in incentive to develop interoperability between them. in this model, there is an ecosystem in place, however it is a closed system, dominated by large corporations. compared to the aggregation model, mydata is a resilient model because it does not depend on a single organization but works as a shared open infrastructure (poikola et al., 2014). mydata can been seen as a way to convert data from figure 1: mydata model (adapted from poikola et al., 2014). journal of business models (2020), vol. 8, no. 2, pp. 39-56 43 closed silos into an important, reusable resource. it can be used to create new services that help individuals to manage their lives. the providers of human-centric services can therefore create new data sharing based service ecosystems and new business models, leading to economic growth in whole society (poikola et al., 2014). data-driven business models in a networked environment there has been much research during the past decade from different perspectives on company networks (see, e.g., rindova et al., 2012; hallen, 2008; zott & huy, 2007). moving from the above-defined service delivery network and the defined roles of business models, it is also necessary to define and describe the actors involved (mettler & eurich, 2012). however, the roles are highly dynamic, flexible, and service-context specific, as noted by möller and svahn (2009); and the identification of the core actors, their roles, and corresponding relationships is a challenging task, especially in the case of emerging human-centric mydata service delivery networks. to tackle this challenge, we must first identify the focal firm in the service network and take the underlying flows in the network as the starting point of the analysis. in mydata networks, there are three types of flows (poikola et al., 2014): (1) consent flows between the mydata operator, data sources, and data using services, which specify the flows of data from their sources to the services using the data, (2) actual data flows between the sources and the services, and (3) monetary flows between different network actors. the actors involved in each flow depend on their roles. these flows are the underlying drivers of the interactions and transactions between the focal firm and the other actors, which in turn are at the core of business models. thus, business models can be seen as the focal firm’s boundary-spanning transactions with external parties (zott et al., 2011). indeed, collaboration of the focal firm with its network can be considered as one of the main functions of the business model. this approach is wellcaptured in the mydata paradigm, yet it brings a lot of challenges for organizations to realign their current strategies and business models for a human-centric approach. as ahokangas and myllykoski (2014) state, the transformation of an existing business brings special challenges for business models. business model transformation is about transforming an existing organization through repositioning the core business and adapting the current business model into the altered market place (ahokangas et al., 2014; ahokangas & myllykoski, 2014). the emergence of data sharing and the control of individuals over their health data will transform healthcare business. this means shifting away from the transactional fee-for-service model towards strategic value-based care (kaiser et al., 2015). yet, academic research has not widely addressed issues related to business model transformation in spite the business model being an actionable concept that includes an underlying assumption of a process (ahokangas & myllykoski, 2014; juntunen, 2017). here, applying value-based care provides an opportunity to “better understand their true customer, the patientconsumer; tailor products to meet their needs; and to capture a high share of distinct customer subsets who will pay for and be loyal to their brand” (numerof, 2015). of course, transforming the whole logic of value creation is not painless. transforming an organization requires a lot of commitment from the management, as the old ways of doing things may become a challenge (giannopoulou et al., 2011). the activities and logic related to the new business model may be incompatible with the status quo (chesbrough, 2010). therefore, business models should always be assessed and attuned against the business context so that an optimal fit with the environment can be found (teece, 2010). often, the traditional approach for business model research is to focus on the supply side, not the demand side, of value co-creation (massa et al., 2017). however, working together as a business ecosystem, the service delivery network players are provided with better possibilities to create value that none of the players in the ecosystem can create alone. the ecosystemic business model, as a type of networked business model, uses the ideology of open innovation supporting complementarity and coopetition. the business model wheel is a tool to understand ecosystemic and networked business opportunities and future contexts (see, e.g., ahokangas et al., 2014, ahokangas et al. 2019). in this model, the business opportunity is at the heart of business model. the wheel includes relevant elements of what? (customers are offering, value proposition, and differentiation), how? (to sell the solution to the market, delivery, key operations, and basis of advantage), why? (basis of pricing, way of charging, cost drivers, journal of business models (2020), vol. 8, no. 2, pp. 39-56 44 and cost elements), and where? (to do business— internal or external local firms) (figure 2) (ahokangas et al., 2019). in today’s turbulent business environment, companies are challenged in how to alter their business models and service development (palo & tähtinen, 2013). it is therefore important to acknowledge that a firm does not have to bind itself to a single business model but should experiment with several simultaneously (trimi & berbegal-mirabent, 2012). in fact, testing and validating a new business model often requires a period of co-existence with the current and new model(s) (chesbrough, 2010). it is not clear what the new business model will be like, but by experimenting, the data needed to justify the transformation can be gained. business models become fully comprehensible for firms only through action in the business context in which they emerge (ahokangas & myllykoski, 2014). according to numerof (2015), the main actionable strategies driving the transformation of health insurance companies start with (1) developing partnerships with the right parties, moving away from volume towards limited partnerships, and innovative treatment pathways. (2) predictive care paths, when correctly executed, are the true offerings for future hospitals and physicians. insurance businesses can play a key role in building such collaborations that have the power to achieve measurably better health outcomes at lower overall costs. in the (3) systematic transformation, payers will have a significant role to play in bridging the divide between providers and patients (numerof, 2015). mydata and networked business environments poikola et al. (2014) defined four roles that are inherent in mydata delivery networks. these roles include (1) the individual, i.e., a person who is the creator and owner of a data account which is used in the mydata-based services and who authorizes the use of the account; (2) mydata operators, who orchestrate the mydata-based service provision by data account provision, consent management, and authorization; (3) data sources, who provide data about the individuals to the service; and (4) the actual services using data in service personalization. the network is depicted in figure 3. methodology, data collection, and analysis as this study seeks to gain an in-depth understanding of the mechanisms of change in an organizational setting, an action-based research methodology was applied for data collection (ballantyne, 2004). daniel et al. (2003) suggest that action research is a valuable method to study dynamic and turbulent environments. as the mydata paradigm shift is still evolving, the method enables researchers to get close to the current business reality. thus, it fosters the development of deep and rich insights into the complexities within (data-driven) decision-making (carson et al., 2001) in the context of mydata. the data utilized in this study is figure 2: business model wheel (ahokangas et al., 2019). figure 3: mydata network roles (adapted from poikola et al., 2014) journal of business models (2020), vol. 8, no. 2, pp. 39-56 45 part of a wider european research project on healthcare service ecosystems, digital health revolution dhr2. the action research approach was applied based on abductive reasoning, which can be characterized as an iterative and recursive loop between empirical and theoretical insights. dubois and gadde (2002) refer to this approach as “systematic combining,” where the theoretical framework, empirical fieldwork, and data analysis are evolving at the same time. the primary data was collected from ten semi-structured in-depth interviews with insurance company representatives and stakeholders related to the insurance business during 2016 (table 1). the 10 actors included in the sample were initially brought together in the dhr2 research project. we intentionally selected both insurance players and their stakeholders in order to understand the business of insurance companies from different perspectives. before the data collection, the mydata approach was introduced to all network players. in this presentation and discussion, the mydata model was explained in detail and how it differs from the aggregation model. in early 2017, the data collected from the interviews was further elaborated during a joint 3-hour workshop with insurance companies and their stakeholder ecosystems to validate the potential impact of mydata on business models. in the data analysis, statements were identified, sorted, and structured to identify the impacts of mydata on healthcare insurance companies and their service delivery network actors. the business model wheel (ahokangas et al., 2014) was used as a tool to analyze the derived data in order to thematically identify the potential impact and use of the mydata model on healthcare insurance business within service delivery networks, as this business model tool helps to identify the points of action and network collaboration in a simplistic manner. the template addresses the following elements: (1) what—comprising offering, value proposition, customer segments, and differentiation; (2) how—covering key operations, basis of advantage, mode of delivery, and sales and marketing; (3) why—describing the pricing basis, method of charging, cost elements, and cost drivers; and (4) where— all these items are located, internally or externally to the firm, as each part of the business model can be executed through collaborating with outside partners (ahokangas et al., 2014) . the data analysis was based on the thematic analysis approach (guest, 2012). first, the interview transcripts were analyzed and categorized and coded by two researchers using nvivo and the business model wheel framework. secondly, all the findings from both researchers were combined together and further analyzed a second time to discover commonalities and patterns in order to identify new contextually specific themes and categories. findings in exploring how mydata will potentially impact the business models of health insurance companies and company key business domain interviewee duration (min) sme technology provider ceo 106 health provider healthcare development director 45 insurance player banking, finance, healthcare chief actuary 60 sme wellness training and coaching ceo and director of international growth 75 sme wellness training and coaching personal trainers 45 insurance player insurance business developer 35 insurance player insurance manager 45 large company mobile network operator innovation manager 45 large company technology provider head of research 73 sme technology provider ceo 56 table 1: data collection of the study. journal of business models (2020), vol. 8, no. 2, pp. 39-56 46 the related network players, we thematically categorized our interview findings and mapped them together with the themes discussed in the joint workshop. the results are summarized in figure 3 and discussed in more detail below through business model elements, where collaboration is addressed in all components. business opportunities of mydata a new type of access to human-centric data provides a novel possibility for insurance companies to take a bigger role in the preventive healthcare field. in this service delivery network, the aim for insurance companies is to help their end-customers live a more healthy and safe life, which will also support the insurance business by decreasing compensation costs related to chronic disease and accidents. in this new field, insurance companies see that: “our role is not anymore just to buy compensation, it is more to help to make sure that everything is fine with the individual.” at a concrete level, insurance companies consider that “the mydata approach will offer us new opportunities to give better and updated information, for example, about the value of their property or risks for future accidents and the like.” but, mydata is seen as also enabling a more general approach to wellbeing: “as soon as end users buy from us, we can start to offer the services that help them to improve their health and life style.” this is based on some initial work that insurance companies have conducted in the field: “we have noticed in our research that it is important to offer a bonus or some price for people when they are changing their lifestyle“ … “smoking is a good example, if you get 3,000 to stop it, perhaps people will do it.” this indicates that in the future system, the insurance companies can be characterized more as a service provider than as a player that buys compensation for general risks or issues that have already occurred. value and competitive advantage of mydata for insurance business what. mydata was seen as enabling extended and novel offerings based on the collaborative use of data: “the data sharing would make it possible that both insurance company and doctor sees the same information, and we could better serve individuals.” figure 4: mydata service delivery network and the health insurance service business model. journal of business models (2020), vol. 8, no. 2, pp. 39-56 47 from the medical doctor perspective, people are already now coming to see them with data about themselves, e.g., the data they have been collecting using mobile applications or different tracking devices. data management services through mydata operators would allow them to “enter pre-information, e.g., about the insurance coverage before the appointment, which would save everyone’s time.” director at a health service provider. new players will also emerge to collect and analyze data. first, insurance companies aim to use data to achieve close to real-time customer insights to better align themselves with customers for better services. value could be captured especially in situations when a person has been using one service provider for 10 years and then decides to change. “that could be the case in which the end user could make some effort to be able to transfer information easily.” secondly, insurance companies could base the costs of insurance on real, not estimated, situations. this means that people with a high-risk profile will have higher costs, whereas those who are living a healthy life could get some compensation. costs would be based on a person’s lifestyle and activity level, which is not currently possible due to legal regulations. thirdly, with mydata, insurance companies could offer a feeling of safety, such as using data from sensors and devices to detect the likelihood for potential accidents. additionally, early risk detection services can be an opportunity for the insurance business. “… if we could use the sensor and personal data with the permission of the end-user to check if something is wrong with the car tire and it is better to fix it before a long journey.” insurance services can also be customized based on the data. for example, in many cases the insurance companies are supporting groups in employee organizations. “the use of the mydata approach will especially change the role of employer organizations in the occupational health business sector during the next 10 years.” indeed, employer organizations were seen as a core player that would benefit the most from the transformation to mydata-enabled healthcare: “in the new mydata-based model, employee organizations should be able to better take into account the coping, energy level, wellbeing, and health of their own employees.” other important players in this new business model could be banks, food stores, aviation industry, utilities, and housing companies. how. utilizing collaborative service networks were identified as the key strategic approach in mydata, as it is not possible to build open access to data open business or innovation models. “we have opened the interfaces and helped developers to build interfaces and open data sources.” “we have organized hackathons targeted to give developers a possibility to use their data as a basis for new application development.” however, insurance companies also highlighted the importance of a mydata operator in the service network. they mentioned that there is a key player missing in this field—an operator who could be responsibile for data sharing and offer needed collaboration interfaces. supporting customers in deciding what data to share is important in the mydata transformation. without an operator in place, it might be difficult for insurance companies to get access to the personal data without legal problems. insurance companies have an interest in leading this, but their challenge is that citizens could see it as scary. hence, in the current business environment, they felt that they cannot take the role of the mydata operator in the service network. insurance companies aim to develop rapid data usage as a source of competitive advantage: “the faster we can use the data, either as a service or information or to do better pricing, the better we can manage in the business compared to our competitors.” combining personal data with environmental data such as for cars or housing, insurance players could maximize the probability of customers finding products they journal of business models (2020), vol. 8, no. 2, pp. 39-56 48 want to buy. it was also mentioned in the interviews that data usage is not only a competitive advantage but a must-have for insurance players in the future if they want to survive: “the basic model in which we just send bills and compensation does not work anymore in the current digital world. if we cannot use the data, we will stay behind in the insurance market.” why. from the revenue perspective, the individual was highlighted as the most important player in the future mydata-driven business. in the new insurance business model, individuals can get discounts for their insurance if they are improving their lifestyle. at the same time the assumption was that the insurance companies should pay less compensation for chronic diseases and accidents. however, insurance companies do not yet have evidence that costs actually decrease if data is better used. one approach could be reciprocal data sharing within the service network that also includes the end-customer: “i think some players are also ready to buy the data from individuals.” equally, “you need to buy if you want to get valuable services based on your data.” help is needed from other players such as individuals, developer organizations, and data operators. a key issue is who owns the data and who has the right to use or sell the data within mydata–based collaborative networks. it was mentioned in the interviews that “consumers need someone who can take responsibility for their wellbeing during their whole life.” however, the manager of an insurance company noted that “the insurance companies cannot take this role because people are so suspicious of insurance players.” … “they think that we just want to decrease our own costs.” this will leave room for private or public healthcare providers to create revenue through the new services that can be created through the mydata approach. it was evaluated that the key players who will buy new mydata-based services are individuals and employee organizations who will clearly benefit financially from new data-driven services. insurance players and health service providers can achieve the mydata transformation by opening the interfaces and organizing hackathons to help developers build solutions. this means that in order to attract and retain customers, insurance companies can offer lowered prices for those who voluntarily share their health data. this results in lowered income in the form of insurance payments (the higher the risk indicators, the more one has to pay), but equally lowers the compensation paid to individuals. thus in general, both losses and profits will decrease. discussion and conclusions individuals cannot see or control the recorded data because of the outmoded business model that supports the current relationship between doctors and patients (nash, 2018). a change is also happening through legislative changes, for example, the european data protection regulations called gdpr (https://eugdpr.org/). in fact, it is predicted that in the future, individuals or patients should no longer deny access to their own data because it will help them make better choices about their lives, get better decisions about their treatment, or in the preventive domain, about their health-related actions (nash, 2018). the central goal of this article is to understand the business of insurance companies with a broader network view that emerges when the individuals’ providers and data management approach of related services are taken into account. tax et al. (2013) note that gaining individuals’ trust and confidence may be dependent on the firm’s coordination and a harmonized approach to operate its network. this is in line with our study, which showed that the emergence and actors of the mydata operator and healthcare service providers direct affect the opportunity of insurance players to operate in its network where the mydata approach is used. mydata as a way to utilize data from individual organizational silos into an important, reusable, and shared resource was also acknowledged by insurance companies in order to build better, preventive healthcare services (hood & galas, 2008). the providers of human-centric services are thereby able to develop their service delivery networks even further into a sustainable sharing-based service network, which eventually leads to economic growth in the society as a whole (poikola et al., 2014), but especially leading to improved and personalized health in all of us. journal of business models (2020), vol. 8, no. 2, pp. 39-56 49 implications the results of the study thus indicate that the use of personal data and the coming of mydata may dramatically transform the business models of health insurance companies from a transaction-based to a service-based business. this will also influence business models of the other actors such as employee organizations, healthcare, service data and platform operators that are working in the same service delivery network. thus, this study contributes to the business model transformation literature and practice by highlighting how insurance businesses are able to explore alternative business models by operating in service delivery networks. on a practical level, our research shows that business model changes are difficult to conduct, especially in the health insurance market. although the interviewed insurance players and their service delivery network actors could clearly see that the transformation towards mydata approach would clearly benefit individuals, allowing them better preventive support with a more coherent service offering, it was impossible for the interviewed insurance players to change the business model because of people’s concerns and lack of trust related to data misuse as well as the lack of platform operator players in their network. this is the case, although data misuse is illegal for insurance players in many countries. therefore, the only way insurance players have progressed with personal data use is through small test pilots in which people have collected personal data and given their permission for its use as well as organizing hackathons allowing app developers to build their solutions using health insurance data. besides insurance players, it has been revealed in previous studies that it is also equally important also for the other players in the service delivery network or ecosystem that data protection issues are strongly communicated to the stakeholders so that people and professionals could really trust the handling of their personal data. thus, similar concerns related to regulations and practices in the use of data applies to all stakeholders also in different contexts (huhtala, 2018). as ahokangas & myllykoski (2014) noted, it is not clear how the eventual business model will turn out, but by experimenting, the data needed to justify the transformation into a service business can be gained. in our analysis, we went beyond the basic conceptual categorization of the business model and focused on a future approach of business models networked or in an ecosystemic context that targets operation in the commercial market as a way to achieve social goals to support healthcare for individuals. this is a research area that has only recently begun in the business model domain (see, e.g., francis gomes et al., 2017; 2018). in this context, the business model design is made using resources from different network actors (zott & amit, 2010), and the individual can be seen as a central resource provider of his own personal data. according to tax et al. (2013), the main reason for the importance of adopting a service network perspective is that individuals encounter many providers in pursuit of achieving their service goals. in our study, the service delivery network and customer-journey thinking helped participating players in the service delivery network to understand the potential opportunities as well as the risks in the mydata approach. to deliver a better customer experience, firms need to understand the entire constellation of service providers and their activities that help customers achieve their goals (tax et al., 2013). in the mydata service networks, insurance companies could take a leading role. but in that role, they might have a competitive advantage in securing a customer’s trust and confidence. our findings show that while mydata offers insurance players many new opportunities to gain more information from individuals and create new type of services, it is also driving insurance companies to work more closely with mydata operators, data provider, organizations and healthcare providers in their networks. from a broader perspective, in the eu area, gdpr has already identified specific conditions for personal data processing and consent that is making the mydata approach possible. according to this new law, organizations can already use personal data (1) if they have the proven consent for the potential data usage, and (2) if they take care of proper data portability and properly maintain the data (tikkinen-piri et al., 2018). because the mydata approach mixes players from the public and private sectors, there are important policy implications for data regulation and legislation, as consent and control in the use of personal data is a central journal of business models (2020), vol. 8, no. 2, pp. 39-56 50 aspect of mydata in its use by for-profit companies for business gains. by addressing an emergent phenomenon, this study contributes to the business model literature, especially on data sharing within data-driven business models. thus, this study also contributes to data-based aspects of the sharing economy discussion as well. limitations and future research the main limitations relate to empirical validity. as mydata is a still a paradigm, the results of this study still address the potential use and implications and cannot be validated through large-scale empirical studies. similarly, as the project took place in the occupational healthcare sector, the implications for revenue models and competitive advantages for organizations also involve public institutions and healthcare providers. hence, larger-scale future scenario work would be useful to validate the business potential of mydata, especially from the regulation and legislation points of view. the role of data protection laws are relevant, as they directly impact how companies may utilize private and sensitive data. who eventually controls the use of and access to data? it seems that data-driven business models will be mandatory in future insurance business. they will open new opportunities for new services and therefore help insurance players to remain a significant player in the preventive healthcare business. as palo and tähtinen (2013) noted, companies are challenged in how to adjust their business models and service development to the ever-changing business environment. in order to survive the upcoming change, the companies need to build a service architecture and platforms that are adaptable and easily connected or disconnected from the other organizations in their business ecosystems in order to allow smooth data usage and sharing. the service delivery network approach may offer insurance companies the needed structure and role in the emerging mydata business. we have yet to see whether the findings of this study will soon become a reality in the health insurance business. in the meantime, further research in the design and orchestration of networks around mydata would be extremely valuable, especially from the point of view of the mydata operator business. moreover, the voice of individual consumers from a user-driven innovation perspective could contribute to human-centric data management. thus, more research is needed to understand what kind of role the individuals will play in mydata-based service networks. journal of business models (2020), vol. 8, no. 2, pp. 39-56 51 references ahokangas, p., juntunen, j., & myllykoski, j. (2014) cloud computing and transformation of international e-business models. research in competence-based management, vol. 7, pp. 3–28. ahokangas, p. & myllykoski, j. (2014) the practice of creating and transforming a business model. journal of business models, vol. 2 no. 1., pp. 6–18. ahokangas, p. matinmikko, m. yrjölä, s. seppänen, v. hämäläinen, h. jurva, w. latva-aho, m. (2019) business models for local 5g micro operators, doi 10.1109/tccn.2019.2902547, ieee transactions on cognitive communications and networking. anuff, e. (2016) almost everyone is doing the api economy wrong, techcrunch, 21 march 2016.https://techcrunch. com/2016/03/21/almost-everyone-is-doing-the-api-economy-wrong/ ballantyne, d. (2004) action research reviewed: a market-oriented approach. european journal of marketing, vol. 38, no. 3-4, pp. 321-337. brownlow, j., zaki, m., neely, a. & urmetzer, f. (2015) data and analytics – data-driven business models: a blueprint for innovation. university of cambridge service alliance, working paper, pp. 1–15. carson, d., gilmore, a., perry, c., & gronhaug, k. (2001) action research and action learning. qualitative marketing research. london, sage. chesbrough, h. (2010) business model innovation: opportunities and barriers. long range planning, vol. 43, no. 2–3, pp. 354–363. daniel, w. & wilson, h. (2001) the role of dynamic capabilities in e-business transformation. european journal of information systems, vol. 12, no. 4, pp. 282-296. eu gdpr portal, accessed 10.6.2019 (https://eugdpr.org/). francis gomes, j. pikkarainen, m. ahokangas, p. niemelä, r. (2017) towards business ecosystems for connected health. finnish e-health journal, vol 9, no 2-3. francis gomes, j., iivari, m. pikkarainen, m. ahokangas, p. (2018) business models as enablers of ecosystemic interaction: a dynamic capability perspective. international journal of social ecology and sustainable development vol. 9, nro. 3, p. 13. frow, p., mccoll-kennedy, j. r. & payne, a. (2016) co-creation practices: their role in shaping a health care ecosystem. industrial marketing management, vol. 56, pp. 24-39. giannopoulou, e., yström, a. & ollila, s. (2011) turning open innovation into practice: open innovation research through the lens of managers. international journal of innovation management, vol. 15, no. 3, pp. 505–524. gnesi, s., matteucci, i., moiso, c., mori, p., petrocchi, m. & vescovi, m. (2014) my data, your data, our data: managing privacy preferences in multiple subjects personal data. lecture notes in computer science. 8450, pp. 154-171 guest g. (2012) applied thematic analysis. thousand oaks, california: sage. journal of business models (2020), vol. 8, no. 2, pp. 39-56 52 hallen, b.l. (2008) the causes and consequences of the network positions of new organizations: from whom do entrepreneurs receive investments? administrative science quarterly 53(4), pp.685–718. hartmann, p.m., zaki, m., feldmann, n., neely, a. (2014) big data for big business? university of cambridge service alliance, working paper, pp. 1–29. hood, l. (2015). the wellness revolution. policy: a journal of public policy and ideas. vol. 31 no. 3, pp. 3–5. hood, l.e. & galas, d.j. (2008) 4p medicine: personalized, predictive, preventive, participatory: a change of view that changes everything. december 12, 2008. a white paper prepared for the computing community consortium committee of the computing research association. http://cra.org/ccc/ resources/ccc-led-whitepapers/ horgan, d., romao, m., torbet, r. & brand, a. (2014) european data-driven economy: a lighthouse initiative on personalised medicine, health policy and technology, vol. 3, no. 4, pp. 226-233. juntunen, m. (2017) business model change as a dynamic capability. doctoral dissertation, acta universitatis ouluensis. häkkilä, h., alhonsuo, m., virtanen, l., rantakari, j., colley, a., koivumäki, t. (2016) mydata approach for personal health – a service design case for young athletes, 2016 49th hawaii international conference on system sciences. kaiser, l.s. & lee, t.h. (2015) harvard business review turning value-based health care into a real business model, 08 october 2015. https://hbr.org/2015/10/turning-value-based-healthcare-into-a-real-business-model kleinbaum, a.m. and tushman, m.l. (2007). building bridges: the social structure of interdependent innovation, strategic entrepreneurship journal, vol. 1, pp. 103–122. kemppainen, l. pikkarainen, m. koivumäki, t. poikola, a. (2018), emerging revenue models for personal data platform operators: when individuals are in control of their data, journal of business models. koivumäki, t., pekkarinen, s., lappi, m., väisänen, j., juntunen, j., pikkarainen, m. (2017), consumer adoption of future mydata-based preventive ehealth services: an acceptance model and a survey study, j med internet res. vol 19, no 12 (2017): december. lund, m. & nielsen, c. (2014), the evolution of network-based business models illustrated through the case study of an entrepreneurship project, the journal of business models, vol. 2, no. 1, pp. 105-121 massa, l., tucci, c.l., afuah, a. (2017) a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. mettler, t. & eurich, m. (2012) a ”design-pattern”-based approach for analyzing e-health business models. health policy and technology, vol. 1, no. 2, pp. 77 –85. möller, k. & svahn, s. (2009) how to influence the birth of new business fields — network perspective. industrial marketing management, vol. 38, no. 4, pp. 450-458. journal of business models (2020), vol. 8, no. 2, pp. 39-56 53 nash, i. (2018) it’s my heart. why not my data? circulation, vol 137, no. 1, pp. 4–6. doi: 10.1161/ circulationaha.117.031392 numerof, r. (2015) 3 strategies for changing the health insurance business model. fiercehealthcare, 26 october 2015. http://www.fiercehealthcare.com/payer/3-strategies-for-changing-healthinsurance-business-model onetti, a., zucchella, a., jones, m.v. & mcdougall-covin, p.p. (2010) internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management and governance, vol. 16, pp. 337–368. palo, t. & tähtinen, j. (2011) a network perspective on business models for emerging technology‐based services, journal of business & industrial marketing, vol. 26 issue: 5, pp. 377–388, doi: 10.1108/08858621111144433 papadopoulou, e., stobart, a., taylor n.k. & williams, m.h. (2015) enabling data subjects to remain data owners. smart innovation, systems and technologies, vol. 38, pp. 239-248. poikola, a., kuikkaniemi, k. & honko, h. (2014) mydata – a nordic model for human-centered personal data management and processing. ministry of transport and communication, open knowledge finland. pujol, l., osimo, d., wareham, j. & porcu, f. (2016) data-driven business models in the digital age: the impact of data on traditional businesses. paper presented at the 3rd world open innovation conference, barcelona, 14–15 december 2016. pikkarainen, m. pekkarinen, s. koivumäki, t. huhtala (2018) data as a driver for shaping the practices of a preventive healthcare service delivery network, journal of innovation management, vol 6, nro 1. redman, t.c. (2015) 4 business models for the data age, harvard business review, may 20, 2015, https://hbr. org/2015/05/4-business-models-for-the-data-age rindova, v.p., yeow, a., martins l.l. and s. faraj. (2012) partnering portfolios, value-creation logics, and growth trajectories: a comparison of yahoo and google (1995 to 2007), strategic entrepreneurship journal, vol. 6, pp. 133–151. reding, v. (2010) the upcoming data protection reform for the european union. int data privacy law 2010, vol. 1, pp. 3-5. sorescu, a. (2017) data-driven business model innovation. the journal of product innovation management, vol 34. no. 5, pp. 691-696. tax, s., mccutcheon, d., & wilkinson, i.f. (2013) the service delivery network (sdn): a customer-centric perspective of the customer journey, journal of service research vol. 16 no. 4, pp. 454-470. teece, d. (2010) business models, business strategy and innovation. long range planning, vol. 43, pp. 172–194. tikkinen-piri, c. rohunen, a., markkula, j. (2018) eu general data protection regulation: changes and implications for personal data collecting companies, c0omputer law & security review 34 (2018) 134–15. journal of business models (2020), vol. 8, no. 2, pp. 39-56 54 trimi, s. & berbegal-mirabent, j. (2012) business model innovation in entrepreneurship. internatonal entrepreneurship management journal, vol 8. pp. 449–465. wirtz, b., pistoia, a., ullrich, s. & göttel, v. (2016) business models: origin, development and future research perspectives. long range planning, vol. 49, no. 1, pp. 36–54. zott, c. & amit, r. (2010) business model design: an activity system perspective. long range planning, vol. 43, no.2, pp.216–226. zott, c., amit, r. & massa, l. (2011) the business model: recent developments and future research. journal of management, vol. 37, no. 4. , pp. 1019–1042. zott c, huy q.n. (2007). how entrepreneurs use symbolic management to acquire resources. administrative science quarterly 52, vol 1, pp 70–105. journal of business models (2020), vol. 8, no. 2, pp. 39-56 55 dr. minna pikkarainen is a joint connected health professor of vtt technical research centre of finland and university of oulu / oulu business school, martti ahtisaari institute and faculty of medicine. as a professor of connected health minna is doing on multidisciplinary research on innovation management, service networks and business models in the context of connected health service cocreation. professor pikkarainen has extensive record of external funding, her research has been published large amount of journal and conference papers e.g. in the field of innovation management, software engineering and information systems. during 2006-2012 professor minna pikkarainen has been working as a researcher in lero, the irish software engineering research centre, researcher in sirris, collective “centre of the belgian technological industry” and business developer in institute mines telecom, paris and eit (european innovation technology) network in paris and helsinki. her key focus areas as a business developer has been in healthcare organizations. previously, minna’s research has been focused on the areas of agile development, software innovation and variability management. about the authors journal of business models (2020), vol. 8, no. 2, pp. 39-56 56 dr. timo koivumäki is a professor of digital service business at martti ahtisaari institute, university of oulu business school. previously he has worked as a research professor of mobile business applications at vtt and at university of oulu, as a professor of information and communication business and as a research professor of electronic commerce at the university of oulu. koivumäki has over 20 years of experience in the field of digital business. his research interests include consumer behavior in digital environments, user-driven innovation, digital service business, digital marketing and strategic networking. koivumäki has been active in various duties (e.g. planning, managing and conducting research) in many national and 2 international research and development projects. koivumäki has also published in numerous top level academic journals. dr. marika iivari (econ. & bus. admin) has been a postdoctoral researcher within martti ahtisaari institute at oulu business school. she defended her doctoral dissertation on business models, open innovation and ecosystems in 2016. she has been involved in projects related to digitalization, demand-driven co-creation, innovation collaboration, as well as knowledge management in healthcare. about the authors journal of business models (2016), vol. 4, no. 1, pp. 29-44 29 purpose: business models define the activity system that an organization employs to create and capture value. as such, business models are essentially the application of strategic management. the term business model, however, suffers from definitional ambiguity which makes the construction of effective business models problematic. we argue that this ambiguity is largely due to a lack of clarity around value. this paper seeks to provide clarity around value and in doing so aid in the development of effective business models. design: theoretical paper that deconstructs value into use value and exchange value and develops these concepts. findings: we deconstruct value into use value and exchange value to explain the micro-conditions of value creation and capture. in doing so, we also provide an explanation of how vrin and non-vrin resources can be traded for gain as well as opening up greater strategic options for managers in their development of business models. originality / value: against the background of the study’s focus on bmi, its comparably broad literature basis, and its quantitative and qualitative analysis approach, which provides straightforward recommendations for future research, the study caters an original contribution to the field. exploring value as the foundation of value proposition design abstract please cite this paper as: powell & huges (2016), exploring value as the foundation of value proposition design, journal of business models, vol. 4, no. 1, pp. 29-44 keywords: business models, value, rent appropriation, competitive advantage, resource-based view 1 cardiff business school, cardiff university, powellth@cardiff.ac.uk 2 durham business school, durham university, mat.hughes@durham.ac.uk taman h. powell 1 and mathew hughes 2 * the authors would like to thank philip bromiley and cliff bowman for helpful comments on earlier versions of this paper. journal of business models (2016), vol. 4, no. 1, pp. 29-44 30 introduction business model is a term that that is widely used in boardrooms, by managers in organizations, by consultants, by commentators of business, and even on radio and television programs aimed at the general public. indeed it is more widely used than almost any other concept in strategy (baden-fuller and morgan, 2010). the ubiquity of the term and its uses suggest that business models are profoundly important to the work of organizations. business models define how an organization delivers value to customers, entices customers to pay for that value, and how this value is shared between the customers and the organization (blyler and coff, 2003; zott and amit, 2007; amit and zott, 2001). or more simply, “a business model is a framework or recipe for making money – for creating and capturing value” (afuah, 2014). it is suggested that a “good” business model yields value propositions that are compelling to customers, achieves advantageous cost and risk structures, and enables significant value capture by the business that generates and delivers the products and services (teece, 2010). as is evident from these definitions, value and value proposition design is central to business models (osterwalder et al., 2015). yet, despite the prominance, we contend that value is poorly defined and under theorised, and this is hindering business model development. in the following we highlight the issues surrounding value. we then expand on value creation and value capture via developing the use value and exchange value constructs in ways that enable us to resolve this confusion. via clarifying the issues, and developing constructs that help to resolve this confusion, we hope to aid the understanding of value and in doing so business model construction. the problem with value value is typically treated as an outcome of business activity (conner, 1991), and even recent theoretical advancements maintain the same standpoint: that “there is minimal theory explaining ‘how’ managers/ firms transform resources to create value” (sirmon et al., 2007, p. 273). instead, “value” is used as a catchall term focused on value for the consumer and wealth for the organization. this is problematic. for example, porter defines value as “the amount buyers are willing to pay for what a firm provides them. value is measured by total revenue ... a firm is profitable if the value it commands exceeds the costs involved in creating the product” (1985, p. 38); and barney notes that a firm’s resources and capabilities “are valuable if, and only if, they reduce a firm’s costs or increase its revenues compared to what would have been the case if the firm did not possess those resources” (1997, p. 147, emphasis added). we contend that both of these definitions are limited and inadequate as the first employs revenue, and the second profit, as a proxy for value. these definitions do not locate the drivers of value creation, explain how value is created, or who captures the value and why. moreover, they do not define the nature of the value that is generated and captured either. these issues have been repeatedly neglected (alvarez and barney, 2004; coff, 1999). while studies have considered the erosion of resource stocks (dierickx and cool, 1989) and changes in the value of resources (miller and shamsie, 1996), there is ignorance about how value is created from the acquisition or development of resources and resource combinations. more problematically, the notions of value creation and competitive advantage risk being a tautology under its present definition. if value creation begins by providing value to consumers, the firm that produces greater value to consumers then enjoys a competitive advantage providing increased organizational wealth (hoopes et al., 2003; powell, 2001; sirmon et al., 2007). yet, providing value to the consumer does not necessarily translate to the organization generating profit from this value as it is entirely possible that the resource provider or consumer may capture much of the surplus (coff, 1999). furthering these problems, advantage may not accrue to the firm holding the most resources as bounded rationality leads to difficulties in realizing the value among resources. bromiley & fleming (2002) argue that given the same set of resources, the causal chain journal of business models (2016), vol. 4, no. 1, pp. 29-44 31 linking those resources to performance remains ambiguous and depends on decisions managers make— some will use resources well, other will squander them, and managers may respond differently to opportunities and threats in the markets regardless of resources held. framed in the context of value, if it is assumed that value derives from the possession of resources, such an assumption negates the problem of how managers connect resources together and it further negates a view that the value of resources connected together may be greater than the simple sum of those resources in the context of the market. in other words, value may come from the integrated web of ties among resources being connected together, i.e. the constructed business model, whether acquired or held internally or both. thus, the manner in which resource are orchestrated or arranged can create quite different outcomes (sirmon et al., 2011; holcomb et al., 2009). together these theoretical problems give rise to important research questions about business models: what forms does value take as a resource undergoes a process of transformation into a product or service? and does the linking or chaining of resources hold the potential to intensify value creation and capture? unpacking value we contend that value is not only poorly defined but poorly theorized. we develop the constructs use value and exchange value in ways that enable us to resolve this confusion. use value is the benefit received from resources and capabilities and exchange value is the money that change hands when resources, products, or services are traded (lepak et al., 2007; bowman and ambrosini, 2000). the internal assets and activities of the firm, is the domain of use values. in contrast, exchange value is a function of market relationships between economic agents. problems arise when we fail to distinguish between these two forms of value. for example, in treating value as a single body or single item, we fail to distinguish at what point particular resources and activities become valuable and in what ways. our theorization of value in terms of use value and exchange value provides a basis to understand how the broader resource base of the firm and its market interactions can contribute valuable properties to a final good or service that provides a defendable advantage in comparison to competing alternatives. this understanding is fundamental to the construction of a firm’s business model. we focus our theoretical development on resources and how their use defines market position, viewing the sourcing and orchestrating of resources across the firm as the business model. in doing so, we seek to integrate resources formally in established views of business models. business models have been defined as representing the substance and configuration of “transactions” capturing how the firm engages in “economic exchanges” to create value (amit and zott, 2001, p. 511; zott and amit, 2007, p. 181). we contest these economic exchanges are primarily to source resources as the basis to shape products and services from which value flows, and where linkages among resources create an inimitable web of value that makes a business model hard to replicate. many scholars emphasize the importance of firm differences in explaining heterogeneous performance among firms, and conceptualize firms as unique bundles of resources and capabilities to this end (e.g., penrose, 1959; wernerfelt, 1984; barney, 1986; 1991). under the principles of the resource-based view, “rbv resources” are ones that possess characteristics of being valuable, rare, inimitable, and non-substitutable a set of characteristics commonly known as the “vrin” criteria. under these criteria, non-vrin resources or resources deemed as readily available or not unique are seen as trivial to value creation because they can either be readily copied or acquired. while it is generally argued that vrin resources are critical to firm performance, the trading of these resources is difficult as a firm can conceivably end up paying out the entire value of the resource to the seller (dierickx and cool, 1989). given traditional economic assumptions made about actor rationality and optimization behavior, it has been argued that only through luck or superior foresight can a firm “gain” in the trading of rbv or vrin resources in strategic factor markets (barney, 1986). relying on “luck” is a sub-optimal solution in itself and others posit that if a firm cannot gain from buying such resources, it should instead invest in developing such resources internally (dierickx journal of business models (2016), vol. 4, no. 1, pp. 29-44 32 and cool, 1989). these traditional assumptions about rationality and optimization have been contrasted by a behavioral logic which argues that, owing to constraints of bounded rationality and causal ambiguity, different perceptions may exist among managers and firms about the nature of a resource (e.g., whether it is a vrin resource or not) and its use (whether it is seen as valuable or relevant to the firm or not) (bromiley and fleming, 2002). employing such behavioral insights, a buyer of a resource may then conceivably gain value should a firm owning a resource not detect its vrin properties in comparison to a buyer who can see its value potential. whilst these behavioral insights are informative, we believe that the underlying “economic/rational” foundations can be built upon more fully to explain how advantage can be gained via resource transfer. we suggest that this economic structure should be more fully articulated prior to overlaying the behavioral insights. in doing so we can have a fuller understanding of the micro-conditions of value creation, value capture and business model construction. we propose that treating a resource in isolation misunderstands its value creating potential. we posit that use value is driven by resource combinations, rather than the resource in isolation: it is how a resource is combined with a firm’s other resources and capabilities that creates use value (moran and ghoshal, 1999; adegbesan, 2009, vargo et al., 2008). an acquired resource in combination with the existing resource base of the firm enables resources that are vrin or otherwise to be traded for advantage without luck. these ideas speak to recent developments in the rbv about resource orchestration (sirmon et al., 2007; 2011), which advocates the bundling, structuring, and leveraging of resources into combinations which are then seen as the vessels containing value. however, the work on resource orchestration so far does not explain the causal mechanisms behind value creation and value capture in terms of the interrelationships among individual resources at the value level. in addition to resource value being driven by resource combination providing an explanation of how (vrin and non-vrin) resources can be traded in a manner where both firms can gain, this also removes the necessity of resource ownership. resources do not need to be owned as it is the interrelationships between and among resources that delivers the value. our view is that a substantial amount of value is generated by and tied up in the usage and not the ownership of the resource, and not in the vrin or non-vrin nature of the resource itself. we propose that as a resource is brought into the firm (acquired or developed) its linking with another resource adds use value. as the chain of resource connections build (such as in a process of orchestration), the overall use value grows further, adding vrin properties to even simple resources (if treated in isolation) and will expand the body of value created beyond the amount of value held by any one resource. we see this argument as significant as it provides clarity around value creation and capture and in doing so opens up new options for the strategist in the construction of business models. the theoretical development that follows seeks to build on ideas contained in resource transfer and resource orchestration arguments by explaining the causal mechanisms of value. our logic sits between the rbv transfer perspective and recent works on resource orchestration as we seek to explain how resources can be traded for gain and, because of this logic, how resources do not need to be solely traded for value creation and can be orchestrated to unlock value as well. the result, we argue, is a more complete understanding of value that enables the informed construction of business model activity systems. to clarify the concept of value, and develop our argument, we investigate use value and exchange value in the context of a business-to-business (b2b) market scenario. a b2b market scenario is one where a productive resource is sold from a supplier to a buyer in a strategic factor market. the trading of productive resources in strategic factor markets has received much attention in the resource-based literature (e.g. barney, 1986) and its exploration and clarification is central to the arguments put forward in this paper. a productive resource is one that may or may not be currently in use by the supplier and can be put into use by the buyer in a way that will achieve greater value. this could be the case of purchasing a machine, a brand name, a drug formula or similar. the primary idea is that the resource journal of business models (2016), vol. 4, no. 1, pp. 29-44 33 is traded to a firm that can achieve a higher use value and therefore pay a higher exchange value than the use value achieved by the seller. this results in positive gains for both parties and higher overall levels of value from the resource. we will start by analyzing the transaction from a use value perspective. use value the use value (uv) of a resource is the benefit achieved by a firm via the addition of the resource. use value is therefore synonymous with value creation. as noted previously, there is much discussion in the resourcebased literature around what characteristics make particular resources valuable (barney, 1986), though there is less written about how and why this is so (bowman and ambrosini, 2000). we propose that use value is driven by resource combinations, rather than the resource in isolation (moran & ghoshal, 1999). it is how a firms combines a newly-acquired resource with its other resources and capabilities that creates use value. this can be seen as a similar concept to the notion of value co-creation (vargo et al., 2008). despite much of the rbv literature focusing on resource characteristics (e.g., vrin) as the driving force behind resource value, a central argument of the resource-based view is that firms are bundles of heterogeneous resources and are therefore themselves capable of heterogeneous outcomes (barney, 1991; hughes and morgan, 2007). from the perspective of resource combinations then, as firms are different resource bundles, they will obtain different use values from the same new resource because the subsequent combination with its current resource base will differ. as such the use value of a resource is specific to the firm in question (adegbesan, 2009). in other words, given the addition of an identical single resource, the use value achieved will be different for different firms as the remainder of their resource bases will be different, as held within the assumptions of the rbv. thus, while a resource may hold some intrinsic use value, this value grows as the resource is linked to other resources and capabilities in the firm and this combined value is what we describe as “use value”. there is no absolute need to distinguish resources based on whether they appear to be vrin or not because these qualities will differ between buyers who can employ different (and subsequently vrin) combinations of an isolated resource when combined with their firm’s existing ones. this observation invalidates simple pricing schemes as a means to determine value. by way of a simple example, a saw handle has no value without a blade. the value created is not then attributable to the saw handle or the blade but rather to the combination of the two—because it is at that point when value is generated. without accepting this principle, we would have to suspend the acceptance of the view that firms have different use values. in this sense, not only are firms heterogeneous bundles of resources for value creation purposes, they are also heterogeneous in terms of the combinations they are capable of making (moran and ghoshal, 1999). the sequence of resource linking is not important at this stage; rather, it is the bringing of resources together (value between resources) and then the collective addition of resources with other ones in the conversion process (value among resources) that shapes the body of use value. in monetary terms, use value can be defined as the price the buyer is prepared to pay for the resource if there is a single source of supply (collis, 1994). it has been put forward that use value can be estimated through a thought experiment where a buyer purchases a resource from a supplier. if the buyer is interested in purchasing a resource from the supplier, we can first imagine that the resource is given to the buyer at no cost. the buyer must find this situation preferable to the original situation when they were without the resource: now start taking money away from the buyer. if only a little money is taken away, the buyer will still gauge the new situation (product [i.e. resource] minus a little money) as better than the original status quo. but as more and more money is taken away, there will come a point at which the buyer gauges the new situation as equivalent to the original status quo. (beyond this amount of money, the buyer will gauge the new situation as worse.) the amount of money at which equivalence arises is the buyer’s willingness-to-pay [i.e. use value] for the quantity journal of business models (2016), vol. 4, no. 1, pp. 29-44 34 of product [i.e. resource] in question. (brandenburger and stuart, 1996, p. 8) the notion of use value being driven by resource combination is significant for two reasons. first, it allows the trading of resources to occur while achieving benefits for both parties. second, it allows competitive advantage to be gained via the trading vrin resources. this distinction is important because trading of such resources for competitive advantage appears to be nominally impossible when use value is attributed to resources in isolation vis-à-vis resources in combination. a real-world transaction of this type could be the sale of a new drug compound. in this case, the supplier could be a small r&d company. a large pharmaceutical company could purchase this compound, and combine it with resources and capabilities that the supplier does not possess—such as the ability to go through clinical trials rapidly, along with a global marketing/sales force and distribution—and would be able to achieve greater use value from the compound than the supplier who lacks these complementary resources and capabilities. as the resource’s use value is driven by resource combinations, some of the incremental use value will be delivered by the buyer’s current resources and capabilities. indeed some of the incremental use value must be driven by these existing resources and capabilities for the resource to deliver different levels of use value in different firms. for simplicity, we allocate all the incremental use value to the new resource, in terms of its uv. this is because the overall incremental use value would not be achieved without the addition of the new resource to the buyer’s current resources and capabilities. although as exampled earlier the use value truly derives from the combination of the new resource with an existing resource, but we contend that such a combination could not have been realized without the new resource and therefore for the sake of simplicity it is easier to allocate the value created to the new resource. expanding on the second point, much of the rbv literature has focused on resources and capabilities in isolation driving competitive advantage. essentially resources meeting vrin criteria are judged to deliver competitive advantage (barney, 1991). focusing on the benefits from a resource in isolation brings up the challenge of how to purchase such a resource without transferring the entire use value of the resource to the resource seller and thereby not gaining from the transaction. the arguments of how to benefit from such a purchase have centered on superior foresight and luck or the need to avoid the market entirely and develop a similar resource internally instead (dierickx and cool, 1989). moving the locus of use value from resources in isolation to resources in combination makes it feasible to purchase a resource that may not be particularly vrin in itself but can be added to existing resources to create a vrin resource combination. or purchase a resource that is vrin but becomes more so when combined with the buyer’s complementary resources and capabilities. as the benefit from the purchased resource is partially already owned by the buyer, the resource can be purchased below the use value that the resource delivers to the buyer. such a transaction, as highlighted in the previous example, can benefit both firms involved. exchange value exchange value (xv) is the price paid by the buyer to the supplier of the resource. essentially it is the value that is captured by the supplier from the use value that is created via the buyer combining the resource with their existing resources and capabilities. the exchange value of a resource will be driven by the competitive dynamics of the market for the resource in question (iveroth et al., 2012). these markets have been termed “strategic factor markets”. the exchange value of the resource needs to be higher than the use value of the resource to the supplier (uvs), otherwise the supplier would have no reason to sell the resource. outside this constraint, the exchange value will be set by the competitive dynamics of the market. figure 1 is used to stylize the strategic factor market that the supplier and buyers compete in. here it can be seen that the supplier and the three firms interested in the resource place different use values on the resource. the resource’s use value to each firm represents the expectations of how much use value will be delivered when the resource in question is added to their current unique resources and capabilities. as noted previously, this is not an estimation of the use value of the resource in isolation but rather of it in combination. as each firm is different in terms of resources and capabilities, each firm will have a different use value from journal of business models (2016), vol. 4, no. 1, pp. 29-44 35 the addition of the new resource. in a normal bidding situation, firm b would purchase the resource as they place the highest use value on the resource ($5). as firm a can only achieve a use value of $3 from the resource, they would not be willing to bid above this price. therefore, firm b would be expected to pay no more than $3 for this resource as this is the maximum that the firm with the next highest use value estimation (firm a) would be willing to bid. importantly, the supplier is willing to sell the resource as it only achieves a use value of $1 when combined with the supplier’s other resources and capabilities. therefore, firm b could expect to purchase the resource that it values at $5 for around $3 and would expect to benefit from the purchase once the resource is integrated with its current resources and capabilities. so essentially, while the “market value” of the resource is $3, the use value to firm b is $5. firm b is thereby able to purchase the resource and expects to gain from the transaction. the supplier also gains from the sale of the resource as they are only achieving a use value of $1 from the resource. so the supplier sells the resource for around $3 and loses $1 of use value thereby gaining $2 through the transaction. firm b purchases the resource for around $3 and gains a use value of $5 thereby gaining $2 through the transaction. as such both parties gain from the transaction (figure 2). use value and exchange value interaction the incremental use value achieved from the resource by firm b vis-à-vis the supplier can be seen as value creation. the exchange value paid for the resource defines how this value created is shared between the parties. as such, the combination of use value and exchange value determine the value capture in terms of the surplus that goes to each party. the minimum exchange value that the supplier would be willing to transact on would be slightly greater than the use value that the resource delivers to the supplier. similarly, the maximum exchange value that the buyer would be willing to transact on would be slightly less than the use value that the resource delivers when combined with the buyer’s resources and capabilities. there is the risk that if the seller knows (or can deduce) the buyer’s use value for the resource, they will seek to extract additional exchange value closer to the buyer’s use value. however a rational seller would sell the resource to the highest bidder in the market as long as that bidder pays an exchange value higher than the seller is able to achieve in terms of their own use value. under normal circumstances, one would expect sufficient ambiguity on the part of a seller in predicting the potential use of the resource by the supplier to result in different beliefs towards the value of that resource. the large incremental use value achieved by the buyer, versus the use value achieved by the supplier, would indicate that the use value of the resource is driven more from the buyer’s resources and capabilities than the additional resource. if the incremental use value was lower, this would indicate that the use value is driven more by the resource in isolation as both the buyer and supplier are placing high use value on the resource. in a normal market scenario there are many buyers and suppliers of “resources”. each buyer and seller will figure 1: use value for different firms figure 2: sharing incremental use value journal of business models (2016), vol. 4, no. 1, pp. 29-44 36 make an assessment of the use value that the resource can deliver and the exchange value that will need to be paid to secure the resource. importantly, the resource purchase will be dependent on the interrelationship of both use value and exchange value in the form of buyer surplus and supplier surplus. if we focus on the buyer perspective, they are not necessarily primarily interested in purchasing a resource that they can achieve the highest use value from, but instead the resource that they will achieve the highest buyer surplus from this being a combination of both use value and exchange value (i.e. uvb xv). in effect then, firms are competing in the strategic factor market based on surplus. this surplus is based on the interaction of use value and exchange value. discussion central to our discussion is that traditional resourcebased explanations focus on the vrin nature of the resource in isolation, while we suggest that it is the vrin nature of the resource in combination with the buyer’s existing resources and capabilities that is more important for understanding value creation and capture. the key reason that the firms have different use values for the same new resource is due to these firms being different bundles of heterogeneous resources and capabilities (vrin or otherwise) and are therefore able to construct different activity systems, or business models, with the new resource. in contrast, if the use value was driven by the resource in isolation, it would be expected that the firms’ predictions of use values would be far more aligned. in this case, the variation in use value would be driven by differences in the firm’s ability to estimate the resource’s use value, which is bounded rationally (bromiley and fleming, 2002). while this variation in the ability to estimate use value for a resource is still present when use value is driven by the perceived resource combination and it is arguably an even more complicated calculation seeing use value as dependent upon the combination of the new resource with other resources and capabilities existing within the buyer provides an alternative explanation for variation in use value and therefore value creation, value capture, value proposition design, and business model construction. we put forward this argument as an explanation of how firms can purchase vrin or non-vrin resources and not pay out all of the benefits associated with the resource, thereby gaining from the transaction. we also show how a vrin or non-vrin resource can increase its vrin properties when it is linked or chained with other resources generating a higher use value than the resource in isolation would be capable of. this is not to say that we disagree with the notion that resources in isolation can be particularly valuable nor that all firms have some existing valuable resources and capabilities. figure 3 combines both scenarios relating the vrin nature of the new resource and the vrin nature of the existing resources and capabilities of the firm. understanding the nature of the resource base of the firm in question along with that of other relevant resources is central to a firm constructing a competitive business model. the left hand side of this diagram highlights the more traditional resource-based perspective where it is the new resource that is driving the use value. in such a scenario, it has been noted that it is difficult to profitably purchase the resource without superior foresight or luck (barney, 1986), and the advice is to build such a resource internally (dierickx and cool, 1989). the right hand side of the diagram relates to when the buyer firm has existing vrin resources and capabilities that can be combined with the resource. in such a scenario figure 3: vrin combinations journal of business models (2016), vol. 4, no. 1, pp. 29-44 37 it has been argued in this paper that the resource can be profitably purchased. in the scenario where both the resource and the firm’s resources and capabilities are vrin, the upper right quadrant, it follows that either building, buying, or borrowing in some form of joint venture may be appropriate. rather than considering resources as absolutely vrin or non-vrin, they can instead be seen as on a continuum between the two extremes. by implication, whether a resource is vrin or not depends on the value its properties and uses hold for one firm over another, and may hold when combined with its existing resources or capabilities. in terms of use value versus exchange value, it is worth noting that the more the supplier’s use value is attributed to the resource in question, versus the resources and capabilities of the buyer, the less incremental use value (i.e. uvb – uvs) can be achieved by the buyer via the transfer of the resource. this in turn will mean that more of this use value will be transferred to the seller of the resource in the form of the exchange value payment as the exchange value moves closer to the buyer’s use value. via the addition of use value being created through resource combination to the traditional perspective we can see that additional options emerge for the strategist for the development of their business model (i.e. figure 3). they are no longer caught in the dilemma of relying on luck or superior foresight to profitably purchase resources. nor are they forced to develop these resources internally to avoid this dilemma and create and capture value. instead firms have options ranging from purchase, alliance to internal development. these options are available prior to overlaying insights from the behavioral perspective which in turn provide further options and explanations for variation in value creation and capture. the nature and composition of the mix of resources and capabilities brought together creates a potentially difficult-to-replicate business model that can withstand competitive erosion. our work contributes to research on the resource-based view, use value and exchange value but especially so to the burgeoning literature on business models. traditionally, a business model has been conceived of as a system of components, linkages between those components, and the dynamics among those components (afuah and tucci, 2000); defining how customers are provided with valuable and meaningful products and services (mitchell and coles, 2003), and defining how a firm gains value from the economic exchanges it engages in and the substance and configuration of these exchanges (amit and zott, 2001; zott and amit, 2007). until now, the notion of resources, their features, and orchestration as well as market forces in leveraging value has been absent. our work offers insight that both clarifies the current debate on value creation within business models and extends the debate in new directions. by situating the value problem in business models in the same sphere as the rbv and value research, a more comprehensive understanding can be brought to bear on how and why some firms succeed at generating valuable business models and also the starting points to understand why some business models cause complex rigidities for firms when environmental and market change happens. conclusion the objective of this paper was to provide clarity around value creation and capture as the foundation of a firm’s business model. in doing so, the intention was to develop an understanding of what value is, what forms it takes, where it is located, and how value is generated from (a) transactions among actors in strategic factors markets and (b) the escalation of use value through combining an acquired resource with existing resources and capabilities en-route to finishing a product or service that can be taken to the market by the buyer. value is historically poorly conceptualized and is operationalized in highly problematic ways. seen as a function of total revenue and increases in total revenue, the information lost and information hidden by this proxy prevents scholars from understanding the integrated basis of value underpinning a firm’s competitive advantage and prevents managers from understanding the chain among resources and market decisions that are integral to its performance. we put forward two forms of value. the first, use value, stems from the utility a resource offers when combined with a firm’s existing resources and capabilities. the second, exchange value, is the monetary amount that a firm will pay for a resource based on its journal of business models (2016), vol. 4, no. 1, pp. 29-44 38 use value. use value and exchange value closely relate to value creation and capture. by conceptualizing value in this way, it is possible to foresee how traditionally non-vrin resources can prove valuable in generating organizational wealth. moreover, it offers scholars and managers a clear basis and mandate from which to make judgments about how a firm accrues value, in what ways, and the interrelationships among sources of value. future challenges in this work we show that use value and exchange value are not necessarily mutually exclusive but codependent in raising each other’s relative levels. but what we do not consider is the nature of the strategic decisions made by a firm, only how, where, and in what ways value may accrue from decisions made. it is apparent in our framing of use value and exchange value that the more obscure the causal chain linking together a new resource with existing resources and capabilities, and, the more bargaining power is located in either the buyer or the supplier, the greater the scope for variance in value creation. this is perhaps inevitable in strategic management in that ultimately its purpose is to maximize the amount of value that the buying firm generates, but this may come at the expense of a supplier. there is also the issue that the true value or utility of a resource and its market exchange may only be realized in the future and be more or less valuable than expected. our analysis does not address this asymmetry problem because it does not change the nature of the forms of value accrued, merely their numerical worth. but in an age of sustainability and responsible action, it does raise questions about how value can degenerate into a different form of zero-sum game than through competitive erosion—the manipulation of value derived by one party (e.g., a buyer) at the expense of fair value to another (e.g., a supplier) owing to differences in the ability to price the future value of the resource or know in advance the real value of a resource when combined with existing assets. these challenges do not detract from our ability to conceptualize the presence of use and exchange values. rather, they further underscore how total revenue or increases in income are entirely inadequate ways to conceptualize value. not only do such proxies risk considerable measurement malaise (dalton and aguinis, 2013) they also offer dubious construct validity (ketchen et al., 2013) with respect to sufficiently capturing the multifaceted nature of value, let alone sufficient information about value itself. we believe our conceptualization offers firmer ground for understanding how or why some firms outperform others and understanding how interrelationships among resources (especially seemingly innocuous ones) and market decisions come together to generate value and secure competitive advantage. our theorization of use and exchange values provides a basis to understand how the broader resource base of the firm and its market interactions come together to great a causally complex set of valuable properties that contribute a defendable advantage to a final good or service in comparison to competing alternatives. we believe our work offers the basis for greater rigor and specificity in the study of value, value creation, and value capture by firms and encourage further debate to move away from the unsatisfactory manner in which value is currently defined, depicted, and measured. journal of business models (2016), vol. 4, no. 1, pp. 29-44 39 reference list adegbesan, j. (2009), on the origins of competitive advantage: strategic factor markets and heterogeneous resource complementarity, academy of management review, vol. 34, no. 3, pp. 463-75. afuah, a. (2014), business model innovation: concepts, analysis, and cases (1 ed.), routledge, new york. afuah, a. & tucci, c. (2000), internet business models and strategies: text and cases, mcgraw hill higher education, new york. alvarez, s. & barney, j. (2004), organizing rent generation and appropriation: toward a theory of the entrepreneurial firm, journal of business venturing, vol. 19, no. 5, pp. 621-35. amit, r. & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 67, pp. 493-520. baden-fuller, c. & morgan, m. (2010), business models as models, long range planning, vol. 43, no. 2-3, pp. 156-71. barney, j. (1986), strategic factor markets: expectations, luck, and business strategy, management science, vol. 32, no. 10, pp. 1231-42. barney, j. b. (1991), firm resources and sustained competitive advantage, journal of management, vol. 17, no. 1, pp. 99-121. barney, j. (1997), gaining and sustaining competitive advantage, addison-wesley, reading, ma. blyler, m. & coff, r. (2003), dynamic capabilities, social capital, and rent appropriation: ties that split pies, strategic management journal, vol. 24, no. 7, pp. 677-86. bowman, c. & ambrosini, v. (2000), value creation versus value capture: towards a coherent definition of value in strategy, british journal of management, vol. 11, no. 1, pp. 1-16. brandenburger, a. & stuart, h. (1996), value-based business strategy, journal of economics & management strategy, vol. 5, no. 1, pp. 5-24. bromiley, p. & fleming, l. (2002), the resource-based view of strategy: a behaviorist critique, in augier, m & march, j. (eds.), the economics of choice, change and organization, edward elgar, new york, pp. 319-336. chesbrough, h. & rosenbloom, r. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, vol. 11, no. 3, pp. 529-55. coff, r. (1999), when competitive advantage doesn’t lead to performance: the resource-based view and stakeholder bargaining power, organization science, vol. 10, no. 2, pp. 119-33. collis, d. (1994), how valuable are organizational capabilities?, strategic management journal, vol. 15, no. s1, pp. 143-52. conner, k. (1991), a historical comparison of resource-based theory and five schools of thought within industrial organization economics: do we have a new theory of the firm?, journal of management, vol. 17, no. 1, pp. 121-55. journal of business models (2016), vol. 4, no. 1, pp. 29-44 40 dalton, d. & aguinis, h. (2013), measurement malaise in strategic management studies the case of corporate governance research, organizational research methods, vol. 16, no. 1, pp. 88-99. dierickx, i. & cool, k. (1989), asset stock accumulation and sustainability of competitive advantage, management science, vol. 35, no. 12, pp. 1504-12. holcomb, t., holmes, r., & connelly, b. (2009), making the most of what you have: managerial ability as a source of resource value creation, strategic management journal, vol. 30, no. 5, pp. 457-85. hoopes, d., madsen, t., & walker, g. (2003), guest editors’ introduction to the special issue: why is there a resource-based view? toward a theory of competitive heterogeneity, strategic management journal, vol. 24, no. 10, pp. 890-904. hughes, m. & morgan, r. (2007), deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth, industrial marketing management, vol. 36, no. 5, pp. 651-61. iveroth, e., westelius, a., petri, c.-j., olve, n.-g., cöster, m., & nilsson, f. (2012), how to differentiate by price: proposal for a five-dimensional model, european management journal, vol. 31, no. 2, pp. 1-15. ketchen, d., ireland, r., & baker, l. (2013), the use of archival proxies in strategic management studies castles made of sand?, organizational research methods, vol. 16, no. 1, pp. 32-42. kyhnau, j., & nielsen, c. (2015), value proposition design: how to create products and services customers want. journal of business models. lepak, d., smith, k., & taylor, m. (2007), value creation and value capture: a multilevel perspective. academy of management review, vol. 32, no. 1, pp. 180-194. miller, d. & shamsie, j. (1996), the resource-based view of the firm in two environments: the hollywood film studios from 1936 to 1965, academy of management journal, vol. 39, no. 3, pp. 519-44. mitchell, d. & coles, c. (2003), the ultimate competitive advantage of continuing business model innovation, journal of business strategy, vol. 24, no. 5, pp. 15-21. moran, p. & ghoshal, s. (1999), markets, firms, and the process of economic development, academy of management review, vol. 24, no. 3, pp. 390-413. osterwalder, a., pigneur, y., bernarda, g., smith, a., papadakos, t., kyhnau, j. et al. (2015), value proposition design. journal of business, vol. 3, no. 1, pp. 81-89. osterwalder, a., & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, new york. penrose, e. (1959), the theory of the growth of the firm, wiley, new york. porter, m. (1980), competitive strategy, free press, new york. journal of business models (2016), vol. 4, no. 1, pp. 29-44 41 porter, m. (1985), competitive advantage, free press, new york. powell, t. (2001), complete advantage: logical and philosophical considerations, strategic management journal, vol. 22, no. 9, pp. 875-88. priem, r. & butler, j. (2001), is the resource-based “view” a useful perspective for strategic management research?, academy of management review, vol. 26, no. 1, pp. 22-41. sirmon, d., hitt, m., ireland, r., & gilbert, b. (2011), resource orchestration to create competitive advantage: breadth, depth, and life cycle effects, journal of management, vol. 37, no. 5, pp. 1390-412. sirmon, d., hitt, m., & ireland, r. (2007), managing firm resources in dynamic environments to create value: looking inside the black box, academy of management review, vol. 32, no. 1, pp. 273-92. teece, d. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2-3, pp. 172-94. vargo, s., maglio, p., & akaka, m. (2008), on value and value co-creation: a service systems and service logic perspective. european management journal, vol. 26, no. 3, pp. 145-152. wernerfelt, b. (1984), a resource-based view of the firm, strategic management journal, vol. 5, no. 2, pp. 171-80. zott, c. & amit, r. (2007), business model design and the performance of entrepreneurial firms, organization science, vol. 18, no. 2, pp. 181-99. popper, k.r. (2002), the logic of scientific discovery, routledge classics, london. price, d.d.s. (1986), little science, big science … and beyond, 2nd ed., columbia university press, new york. pynnönen, m., hallikas, j. and ritala, p. (2012), “managing customer-driven business model innovation”, international journal of innovation management, vol. 16, no. 4, 1250022-1–18. richter, m. (2013a), “business model innovation for sustainable energy: german utilities and renewable energy”, energy policy, vol. 62, pp. 1226–1237. richter, m. (2013b), “german utilities and distributed pv: how to overcome barriers to business model innovation”, renewable energy, vol. 55, no. july, pp. 456–466. roaldsen, i. (2014), “dynamic capabilities as drivers of business model innovation–from the perspective of smes in mature industries”, international journal of entrepreneurship and innovation management, vol. 18, no. 4, pp. 349–364. sánchez, p. and ricart, j.e. (2010), “business model innovation and sources of value creation in low-income markets”, european management review, vol. 7, no. 3, pp. 138–154. schindehutte, m., morris, m.h. and kocak, a. (2008), “understanding market-driving behavior: the role of entrepreneurship”, journal of small business management, vol. 46, no. 1, pp. 4–26. journal of business models (2016), vol. 4, no. 1, pp. 29-44 42 schneider, s. and spieth, p. (2013), “business model innovation. towards an integrated future research agenda”, international journal of innovation management, vol. 17, no. 1, 134000-1–34. schneider, s. and spieth, p. (2014), “business model innovation and strategic flexibility: insights from an experimental research design”, international journal of innovation management, vol. 18, no. 6, 1440009-1–1440009-21. schneider, s., spieth, p. and clauss, t. (2013), “business model innovation in the aviation industry”, international journal of product development, vol. 18, no. 3-4, pp. 286–310. seidenstricker, s. and linder, c. (2014), “a morphological analysis-based creativity approach to identify and develop ideas for bmi: a case study of a high-tech manufacturing company”, international journal of entrepreneurship and innovation management, vol. 18, no. 5-6, pp. 409–424. shelton, r. (2009), “integrating product and service innovation”, research-technology management, vol. 52, no. 3, pp. 38–44. simmons, g., palmer, m. and truong, y. (2013), “inscribing value on business model innovations: insights from industrial projects commercializing disruptive digital innovations”, industrial marketing management, vol. 42, no. 5, pp. 744–754. sinfield, j.v., calder, e., mcconnell, b. and colson, s. (2011), “how to identify new business models”, mit sloan management review, vol. 53, no. 2, pp. 85–90. sosna, m., trevinyo-rodríguez, r.n. and velamuri, s.r. (2010), “business model innovation through trial-and-error learning: the naturhouse case”, long range planning, vol. 43, no. 2/3, pp. 383–407. spieth, p., schneckenberg, d. and ricart, j.e. (2014), “business model innovation–state of the art and future challenges for the field”, r&d management, vol. 44, no. 3, pp. 237–247. taran, y., boer, h. and lindgren, p. (2015), “a business model innovation typology”, decision sciences, vol. 46, no. 2, pp. 301–331. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43, no. 2-3, pp. 172–194. tongur, s. and engwall, m. (2014), “the business model dilemma of technology shifts”, technovation, vol. 34, no. 9, pp. 525–535. trimi, s. and berbegal-mirabent, j. (2012), “business model innovation in entrepreneurship”, international entrepreneurship and management journal, vol. 8, no. 4, pp. 449–465. tuulenmäki, a. and välikangas, l. (2011), “the art of rapid, hands-on execution innovation”, strategy & leadership, vol. 39, no. 2, pp. 28–35. voelpel, s.c., leibold, m. and tekie, e.b. (2004), “the wheel of business model reinvention. how to reshape your business model to leapfrog competitors”, journal of change management, vol. 4, no. 3, pp. 259–276. wang, q., voss, c., zhao, x. and wang, z. (2015), “modes of service innovation: a typology”, industrial management journal of business models (2016), vol. 4, no. 1, pp. 29-44 43 & data systems, vol. 115, no. 7, pp. 1358–1382. webster, j. and watson, r.t. (2002), “analyzing the past to prepare for the future: writing a literature review”, mis quarterly, vol. 26, no. 2, pp. xiii–xxiii. wikström, p. and ellonen, h.-k. (2012), “the impact of social media features on print media firms’ online business models”, journal of media business studies, vol. 9, no. 3, pp. 63–80. wirtz, b.w. (2011), business model management: design instruments success factors, gabler, wiesbaden. wirtz, b.w. (2016), business model management: design process instruments, textbook for the digital society, 2nd ed., speyer. wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016) “business models: origin, development and future research perspectives.” long range planning, vol. 49, no. 1, pp. 36-54. wu, j., guo, b. and shi, y. (2013), “customer knowledge management and it-enabled business model innovation: a conceptual framework and a case study from china”, european management journal, vol. 31, no. 4, pp. 359–372. yang, d.-h., you, y.-y. and kwon, h.-j. (2014), “a framework for business model innovation using market, component and innovation tool”, international journal of applied engineering research, vol. 9, no. 21, pp. 9235–9248. yunus, m., moingeon, b. and lehmann-ortega, l. (2010), “building social business models: lessons from the grameen experience”, long range planning, vol. 43, no. 2, pp. 308–325. zott, c. and amit, r. (2007), “business model design and the performance of entrepreneurial firms”, organization science, vol. 18, no. 2, pp. 181–199. zott, c., amit, r. and massa, l. (2011), “the business model. recent developments and future research”, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2016), vol. 4, no. 1, pp. 29-44 44 dr. taman powell is lecturer in strategic management & innovation at cardiff business school. his research addresses how organizations create and capture value with a specific focus on knowledge related practices and how organizations can influence these practices to achieve this value creation and capture. he has completed an mba (with distinction) at insead, a phd at warwick business school, and was an esrc post-doctoral fellow at warwick business school and harvard business school. prior to academia, he worked for 10 years in management, starting in brand management with procter & gamble and then moving to management consulting with accenture. dr. mathew hughes is reader in entrepreneurial management at durham university business school. mat’s areas of expertise and research interests lie in firm-level entrepreneurship and its management. his research has focused on such topics as entrepreneurial orientation, building the innovative organization, social capital and network-based learning, and top management change. his work is published in such journals as strategic entrepreneurship journal, journal of product innovation management, british journal of management, journal of world business, and journal of business research. mat is also a currentlyserving member of the editorial boards of the journal of management studies and the international journal of entrepreneurial venturing. about the authors journal of business models (2020), vol. 8, no. 2, pp. 31-38 31 can the blockchain lead to new sustainable business models? francesca dal mas1,* maurizio massaro2 juan manuel verde3 lorenzo cobianchi4 1 lincoln international business school, university of lincoln, lincoln (united kingdom) 2 department of management, ca’ foscari university of venice, venice (italy) 3 institute of image-guided surgery institut hospitalo-universitaire (ihu) strasbourg (france) 4 department of clinical-surgical, diagnostic and pediatric sciences, university of pavia, pavia (italy) * corresponding author. email address: email.dalmas@gmail.com abstract new technologies can foster the development of new sustainable business models (sbms). our paper wants to investigate how the blockchain can facilitate the development of new sbms by analyzing some real-world case studies. findings highlight how the characteristics of the blockchain can extend existing theories in leading to new sbms. please cite this paper as: dal mas et al. (2020), can the blockchain lead to new sustainable business models?, vol. 8, no. 2, pp. 31-38 keywords: blockchain – sustainable business models – technologies introduction new technologies and the development of new sbms new technologies enable economic, social, and business transformation (cohen et al., 2017). first studies focused mainly on the impact of new technologies for enhancing the organizations’ competitive advantage to increase profits and the value for the shareholders (melville et al., 2004). later studies highlighted the need to enlarge the benefits gained with technological innovation to a new dimension, fostering sustainability. technologies could so enhance environmental sustainability by, for instance, reducing the use of nonrenewable resources, and social sustainability, by promoting equality and inclusion (bagnoli et al., 2018, mailto:email.dalmas@gmail.com journal of business models (2020), vol. 8, no. 2, pp. 31-38 32 2019; cancino et al., 2018). in doing so, the need for developing new business models emerged, calling for a business model innovation (lewandowski, 2016), and not only the creation of new sustainable products and processes. new sustainable business models (sbms) have the characteristics of bringing value not only to shareholders and customers but also for the whole society (cosenz et al., 2020; massaro et al., 2020), following the triple bottom line of principles of people, planet, profit (wilson and post, 2013). sbms incorporate ”concepts, principles, or goals that aim at sustainability, or integrating sustainability into their value proposition, value creation and delivery activities, and/or value capture mechanisms” (cosenz et al., 2020, p. 1). a different definition sees them as ”a holistic and systemic reflection of how a company operationalizes its strategy, based on resource efficiency (through operations and production, management and strategy, organizational systems, governance, assessment and reporting, and change), so the outputs have more value and contribute to sustainability more than the inputs (with regard to material and resources that are transformed into products and services, economic value, human resources, and environmental value)” (lozano, 2018, p. 1164). technological innovation may enhance sustainability both by providing a new value proposition or increasing resource efficiency (angeles, 2019; vafaei et al., 2020). for instance, presch et al. (2020) discuss how platform business models or so-called ”platfirms” (presch et al., 2020) can create new sbms through the circular economy. dal mas et al. (2020) highlight how platform business models can enhance social sustainability through data analytics by reducing decision-making biases, also in critical sectors like healthcare. biloslavo et al. (2020) discuss how digital technologies and innovation can radically bring a new value proposition to organizations, turning the business model into a sbm one. the blockchain technology and the development of new sbms among the new disruptive technologies, the blockchain has been placed among the top five technology trends in 2018 (panetta, 2018; ruzza et al., 2020). the european commission has defined the blockchain as “a technology that allows people and organisations to reach agreement on and permanently record transactions and information in a transparent way without a central authority ” (eu, 2020). the european union agency for cybersecurity has given a more technical definition, as “a public ledger consisting of all transactions taken place across a peer-to-peer network. it is a data structure consisting of linked blocks of data, e.g. confirmed financial transactions with each block pointing/referring to the previous one forming a chain in linear and chronological order. this decentralised technology enables the participants of a peer-to-peer network to make transactions without the need of a trusted central authority and at the same time relying on cryptography to ensure the integrity of transactions” (enisa, 2020). according to the european commission, the blockchain “has been recognised as an important tool for building a fair, inclusive, secure and democratic digital economy ” which will have “significant implications for how we think about many of our economic, social and political institutions” (eu, 2020). according to iansiti and lakhani (2017), blockchain ”has the potential to create new foundations for our economic and social systems” becoming more than a disruptive technology and fostering, therefore, the development of new business models. following tapscott and tapscott (2016) blockchain is ”the first native digital medium for value, just as the internet was the first native digital medium for information … and this has big implications for business and the corporation”. however, despite its implications, most of the attention on the blockchain is concentrated on its use in the crypto economy fostered by bitcoins and other cryptocurrencies. a research on the scientific database scopus shows that while there are more than 7,500 papers published on the blockchain, only 1,100 of those focus on business management and accounting. therefore, we argue that there is a need to foster the development of the theoretical implications of blockchain technology for the creation of new sbms. as a brand new domain, further empirical research is needed. thus, building on this premise, our research question (r.q.) is: r.q. how can the blockchain technology facilitate the development of new sbms? journal of business models (2020), vol. 8, no. 2, pp. 31-38 33 approach to develop our analysis, we employ a multiple case study approach to test how the blockchain can extend the existing theories to create new sbms. we collected data from secondary sources such as company whitepapers, investors’ opinions published online, newspaper articles, corporate websites, and video interviews of the founders, managers, and experts in the field. starting from the real-world cases, we try to identify which features of the blockchain can have an impact to foster the creation of new sbms. results presented in the paper are the preliminary findings of a study conducted analyzing 5,967 startups presented in the website icobench.com. from the study, a group of researchers focused on top-rated companies according to the website evaluation. a sample of 516 startups was considered. secondary material from each company was downloaded, such as the whitepaper, investor comments, and founders’ interviews. a crucial step in multiple case study research is the selection criteria, that should be developed on the theoretical relevance of the case rather than using a statistical sampling technique (eisenhardt, 1989). as suggested by eisenhardt (1989), we defined a theoretical sampling approach based on a selection of cases that we believed likely to extend existing theories staying within the range of 4-10 cases suggested by eisenhardt. therefore, we defined a selection protocol focusing on the following key elements: 1. clear connection with an existing theory; 2. the global value of the company to avoid companies that lost all their value form the initial quotation; 3. availability of further documents such as funders interviews. following that procedure, we shortlisted a group of five companies/ cases. the data analysis was developed by collecting all the material in a nvivo database. an in vivo coding process was employed (miles et al., 2019). results were then discussed among all the authors to assure reliability (massaro et al., 2019). the following sections present the key insights of the preliminary analysis. key insights asset tokenization and stakeholders’ engagement according to tapscott and tapscott (2016) ”at its most basic, blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value – money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes – can be moved and stored securely and privately”. the possibility of creating unique data exchangeable through the web created what it is called the ”internet of value” (tapscott and euchner, 2019) allowing companies to digitalize some of their assets and exchange them through the web into specific tokens. additionally, when the assets tokenized give specific rights to the owners, they might be used to create transparent and shared decision processes, allowing stakeholders to participate in the company’s decision. for example, with the specific aim to create fan engagement, some major football clubs are creating ”fan tokens” to involve fans and followers in the company decision process (see: www.socios.com). following those examples, the blockchain can support the development of more participated business models, where stakeholders are actively involved in a company’s decisions, making the overall decision process more transparent and shared with external stakeholders. the blockchain allows the stakeholders’ engagement formally and clearly, ensuring maximum trust. although several other modern technologies, like the internet and smartphones, can promote participated business models, the level of trust, transparency, and the possibility to set specific rules, are indeed more rigorous in the case of the blockchain, as in the case of socios. transparency and social proof one of the main characteristics to allow asset tokenization is that the overall chain of the transaction is transparently observable (schmitz and leoni, 2019). interestingly enough, this can create imitation processes. previous studies developed in sustainable food consumption releveled that quality signals coming from other consumers work as social proof and have http://www.socios.com/ journal of business models (2020), vol. 8, no. 2, pp. 31-38 34 a significant influence on other consumer behaviours (sigurdsson et al., 2019). other tools, commonly used to create social proof, are experts’ opinions, testimonials, accreditation badges/shields, and customer feedback (consumeraiffairs, 2016). building on the ”social proof theory”, the company vouchforme (see: https://vouchforme.co/) aims to create a transparent approach were people vouch for other drivers allowing everyone to see drivers perceived quality. the company’s tokens award the backing, but car accidents caused by the endorsed person will lead to vouchers obligations. according to the company’s white paper, transparency and social proof will lead to a more sustainable system that changes the insurance sector and influences drivers’ behaviours. fostering people to drive safer, vouchforme is showing how transparency of the blockchain can be used to develop new sbms. due to its transparency, blockchain technology is gaining more and more interest also in the healthcare and medicine sector. the american food & drug administration (fda) held a public meeting back in 2016 to evaluate some design objectives of potential pilot initiatives that would ”explore and evaluate methods to enhance the safety and security of the pharmaceutical distribution supply chain”1. the result was the draft of the drug supply chain security act (dscsa) interoperability pilot. the goal was to provide end-to-end transparency of the pharmaceutical supply chain, making it possible to digitally verify a drug product and its journey, as well as eliminate data siloes among supply chain actors. thus, accreditation badges can be used to create trustworthiness and support sustainability, eliminating risks of the fake drugs trade, which is worth 10% of the total market of drugs in developing countries2. a new way of managing the supply chain supports thus social sustainability. first of all, the blockchain-based business model ensures that all the pharmaceutical products in the market are not counterfeit, preserving so the health and safety of patients. the financial 1 source fda at the following link https://www.fda.gov/drugs/ drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program 2 see https://www.reuters.com/article/us-pharmaceuticals-fakes/ tens-of-thousands-dying-from-30-billion-fake-drugs-trade-whosays-iduskbn1ds1xjbv aspect assures that the public, as well as private money spent, are paid for real drugs, and not wasted. last but not least, the new business model ensures the efficacy of the distribution in case, for instance, of defected or expired products to be withdrawn from the market. absence of middleman and the transaction costs the trust mechanisms provided by the blockchain technology does not require the presence of a middleman. immutable data registered in the blockchain allow reaching a system where people trust the mechanisms. additionally, the introduction of smart contracts within the blockchain permitted the automation of transactions. in all, the overall transaction process within the blockchain technology is developed with no need to involve an intermediary, with a significant impact in terms of transaction costs (andreassen et al., 2018). the reduction of the transaction cost and the asset tokenization will allow the development of new forms of sharing economy. for example, the company golem.network (see: www.golem.network) offers a new approach to share unused computational power, offering, therefore, an alternative and more sustainable approach that allows utilizing unused resources. distribution and the democratization of entrepreneurship and innovation interestingly, while the sharing economy is not new (see for example airbnb, zipcar, and other similar services), the blockchain allows the development of a democratic process where everyone can participate, and profits are not massively retained by the middleman. in the blockchain system, the overall process is organized through ”smart contracts,” that allow the automation of the transaction process and the reduction of fees. additionally, everyone can participate in the system, offering the required technology to develop the transaction, resulting in a democratization entrepreneurship process (chen, 2018). for example, the company dav network (see: https://dav.network/) offers an automatic drone delivery system. autonomous drones need recharging stations to cover the delivery systems. instead of building recharging stations all over the cities, dav network uses blockchain technology to allow everyone to participate in the system. people offering recharging stations will be rewarded using tokens issued by the company creating a shared system. https://vouchforme.co/ https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/dscsa-pilot-project-program https://www.reuters.com/article/us-pharmaceuticals-fakes/tens-of-thousands-dying-from-30-billion-fake-drugs-trade-who-says-iduskbn1ds1xjbv https://www.reuters.com/article/us-pharmaceuticals-fakes/tens-of-thousands-dying-from-30-billion-fake-drugs-trade-who-says-iduskbn1ds1xjbv https://www.reuters.com/article/us-pharmaceuticals-fakes/tens-of-thousands-dying-from-30-billion-fake-drugs-trade-who-says-iduskbn1ds1xjbv http://www.golem.network/ https://dav.network/ journal of business models (2020), vol. 8, no. 2, pp. 31-38 35 discussions and conclusions to end our paper, we want to start from the premise that inspired it. new technologies foster the creation of new sbms by providing a new value proposition or increasing resource efficiency. the blockchain is defined as one of the most disruptive technologies, and the analysis of real-world examples from several sectors allowed us to claim how it can enhance the creation of new sbms extending existing theories, thanks to its unique features. the asset tokenization influences the stakeholders’ engagement theory. the blockchain allows the development of participated business models, in which stakeholders can be actively involved in the organization’s decision-making process. such engagement is more trustable, clear, and rigorous, thanks to the technological features of the blockchain than other available modern technologies. the transparency of the distributed ledger can build on the social proof theory, positively affecting the consumers’ behaviour, thus leading to more sustainable approaches. the absence of intermediaries or middlemen has an impact on transaction costs, allowing the more sustainable use of extra resources and reducing waste. the overall sharing economy is enhanced at a lower price. as in the case of golem.network, unused computation capacity can be shared, reducing the need to build new data elaboration centres. differently from other solutions based on the sharing economy such as airbnb, golem.network works as a peer-to-peer system. the system operates automatically; the infrastructure allows to split the computational request into parallel sessions. the automation enables to reduce the transaction costs. additionally, even though a centralized data centre might be more efficient in terms of energy consumption, it would also require a specific building and the needed plants. therefore, even though energy consumption cannot be optimized in a distributed solution, the sharing economy has proved to be more sustainable compared to more traditional solutions. the distribution of the ledger builds on the democratization of entrepreneurship and innovation. the possible distribution and diffusion of investments and profits allow more people to participate in the business idea offering new ways for financing startups. the following table summarizes the blockchain’s features, the theories used, the impacts on sustainability, and some real-world examples from different fields. further studies may investigate how the single blockchain’s characteristics may enhance the development of sbms more in details. blockchain characteristic theories used to develop new sbms sustainable impacts examples sector asset tokenization stakeholder engagement participated business models where stakeholders can take part into companies’ decisions socios.com sports and leisure transparency social proof consumer behaviors are driven though more sustainable approaches vouchforme/dscsa pilot insurance – healthcare/ pharma no middleman transaction cost utilization of unused resources leading to waste reduction golem.network ict distributed democratization of entrepreneurship and innovation distributed investments and profits allowing more people to participate the business idea dav network transportation table i: blockchain characteristics, theories, and examples journal of business models (2020), vol. 8, no. 2, pp. 31-38 36 references andreassen, t.w., riel, a.c.r. van, sweeney, j.c. and vaerenbergh, y. van. (2018), “business model innovation and value-creation : the triadic way”, journal of service management, vol. 29 no. 5, pp. 883–906. angeles, r. (2019), “internet of things (iot)-enabled product monitoring at steadyserv: interpretations from two frameworks”, journal of cases on information technology, vol. 21 no. 4, pp. 27–45. bagnoli, c., dal mas, f. and massaro, m. (2019), “the 4th industrial revolution and its features. possible business models and evidence from the field”, international journal of e-services and mobile applications, vol. 11 no. 3, pp. 34–47. bagnoli, c., massaro, m., dal mas, f. and demartini, m. (2018), “defining the concept of business model: searching for a business model framework”, international journal of knowledge and systems science, vol. 9 no. 3, pp. 48–64. biloslavo, r., bagnoli, c., massaro, m. and cosentino, a. (2020), “business model transformation toward sustainability: the impact of legitimation”, management decision, vol. in press. cancino, c.a., la, a.i., ramaprasad, a. and syn, t. (2018), “technological innovation for sustainable growth : an ontological perspective”, journal of cleaner production, vol. 179, pp. 31–41. chen, y. (2018), “blockchain tokens and the potential democratization of entrepreneurship and innovation”, business horizons, “kelley school of business, indiana university”, vol. 61 no. 4, pp. 567–575. cohen, b., amorós, j.e. and lundyd, l. (2017), “the generative potential of emerging technology to support startups and new ecosystems”, business horizons, vol. 60 no. 6, pp. 741–745. consumeraiffairs. (2016), the top 5 tools for social proof. and why they matter now more than ever., available at: www.consumeraffairs.com/brands. cosenz, f., rodrigues, v.p. and rosati, f. (2020), “dynamic business modeling for sustainability: exploring a system dynamics perspective to develop sustainable business models”, business strategy and the environment, vol. 29 no. 2, pp. 651–664. dal mas, f., piccolo, d. and ruzza, d. (2020), “overcoming cognitive bias through intellectual capital management . the case of pediatric medicine .”, in ordonez de pablos, p. and edvinsson, l. (eds.),intellectual capital in the digital economy, routledge, london. eisenhardt, k.m. (1989), “building theories from case study research”, the academy of management review, vol. 14 no. 4, pp. 532–550. enisa. (2020), “blockchain”, csirts in europe, glossary, available at: https://www.enisa.europa.eu/topics/csirts-ineurope/glossary/blockchain (accessed 25 may 2020). eu. (2020), “blockchain technologies”, shaping europe’s digital future, available at: https://ec.europa.eu/digitalsingle-market/en/blockchain-technologies (accessed 25 may 2020). iansiti, m. and lakhani, r.k. (2017), “the truth about blockchain”, harvard business review, no. january-february, pp. 1–17. journal of business models (2020), vol. 8, no. 2, pp. 31-38 37 lewandowski, m. (2016), “designing the business models for circular economy — towards the conceptual framework”, sustainability, vol. 43 no. 8, pp. 1–28. lozano, r. (2018), “sustainable business models: providing a more holistic perspective”, business strategy and the environment, vol. 27 no. 8, pp. 1159–1166. massaro, m., dal mas, f., chiappetta jabbour, c.j. and bagnoli, c. (2020), “crypto-economy and new sustainable business models: reflections and projections using a case study analysis”, corporate social responsibility and environmental management, vol. in press, doi:10.1002/csr.1954. massaro, m., dumay, j. and bagnoli, c. (2019), “transparency and the rhetorical use of citations to robert yin in case study research”, meditari accountancy research, pp. 44–71. melville, n., kraemer, k. and gurbaxani, v. (2004), “review: information technology and organizational performance: an integrative model of it business value”, mis quarterly: management information systems, vol. 28 no. 2, pp. 283–322. miles, m.b., huberman, a.m. and saldana, j. (2019), qualitative data analysis a methods sourcebook, sage publications inc., newbury park, 4thed. panetta, k. (2018), 5 trends emerge in the gartner hype cycle for emerging technologies, 2018 smarter with gartner, gartner. presch, g., dal mas, f., piccolo, d., sinik, m. and cobianchi, l. (2020), “the world health innovation summit (whis) platform for sustainable development. from the digital economy to knowledge in the healthcare sector”, in ordonez de pablos, p. and edvinsson, l. (eds.),intellectual capital in the digital economy, routledge, london. ruzza, d., dal mas, f., massaro, m. and bagnoli, c. (2020), “the role of blockchain for intellectual capital enhancement and business model innovation”, in ordonez de pablos, p. and edvinsson, l. (eds.),intellectual capital in the digital economy, routledge, london. schmitz, j. and leoni, g. (2019), “accounting and auditing at the time of blockchain technology: a research agenda”, australian accounting review, vol. 29 no. 2, pp. 331–342. sigurdsson, v., magne larsen, n., alemu, m.h., karlton gallogly, j., menon, r.g.v. and fagerstrøm, a. (2019), “assisting sustainable food consumption: the effects of quality signals stemming from consumers and stores in online and physical grocery retailing”, journal of business research. tapscott, d. and euchner, j. (2019), “blockchain and the internet of value”, research-technology management, vol. 62 no. 1, pp. 12–19. tapscott, d. and tapscott, a. (2016), “the impact of the blockchain goes beyond financial services”, harvard business review, vol. 10, p. 7. vafaei, a., yaghoubi, s., tajik, j. and barzinpour, f. (2020), “designing a sustainable multi-channel supply chain distribution network: a case study”, journal of cleaner production, vol. 251, p. 119628. wilson, f. and post, j.e. (2013), “business models for people, planet (& profits): exploring the phenomena of social business, a market-based approach to social value creation”, small business economics, vol. 40 no. 3, pp. 715–737. journal of business models (2020), vol. 8, no. 2, pp. 31-38 38 francesca dal mas, msc, jd, phd is a lecturer in strategy and enterprise at the lincon international business school of the university of lincoln, uk. her research interests include the impact of new technologies on sustainable business models, knowledge management, and knowledge translation. she is a member of the editorial advisory board of jobm. maurizio massaro, msc, phd is an associate professor in digital management and control at the department of management of the ca’ foscari university of venice. his research interests include the impact of new technologies on sustainable business models, innovation, and knowledge management. he is the scientific chief of the mike – most innovative knowledge enterprise award for italy. juan manuel verde, md, mss is an associate researcher in surgical innovation and image-guided liver procedures at the institute of image-guided surgery institut hospitalouniversitaire (ihu) of strasbourg, france. his research interests include the impact of disruptive technologies in the field of minimallyinvasive and image-guided hepatobiliary surgery. he is also interested in the use of blockchain technology in healthcare. lorenzo cobianchi, md, phd is an associate professor in general surgery at the department of clinical-surgical, diagnostic and pediatric sciences at the university of pavia, italy. besides his clinical research topics about miniinvasive surgery, oncology, new integrated approaches for the treatment of pancreatic cancer and regenerative medicine, he is interested in the impact of new technologies on surgery and healthcare, knowledge translation, and co-production in medicine and surgery. about the authors 60 journal of business models (2021), vol. 9, no. 1, pp. 60-66 in this conceptual paper, we employ business model configuration theoretical lenses to explore how firms re-internationalise. specifically, we discuss various reasons for firms strategic choices to de-internationalise, and put forward, using a business model configuration perspective, respective re-internationalisation strategies, aimed, inter alia, at boosting further firm growth. business model configuration view for realising a re-internationalisation strategy jesper c. sort1, yariv taran2 and romeo v. turcan3 please cite this paper as: sort et al. (2021), business model configuration view for realising a re-internationalisation strategy, journal of business models, vol. 9, no. 1, pp. 60-66 keywords: business model configuration, de-internationalisation, re-internationalisation 1-3 aalborg university business school doi: https://doi.org/10.5278/jbm.v9i1.3854 abstract https://doi.org/10.5278/jbm.v9i1.3854 journal of business models (2021), vol. 9, no. 1, pp. 60-66 6161 introduction in this conceptual paper, we employ business model configuration theoretical lenses to explore the reasons firms de-internationalise, and suggest how these firms can re-internationalise, kick-start their internationalisation growth strategies again. we study these phenomena within firm, market, industry or sector, political and national contexts. we aim to facilitate theoretical and practical understanding of how re-internationalised firms identify and pursue appropriate international growth trajectories by re-configuring their business models, as a response to their previous de-internationalisation decisions. our contribution is threefold building on extant knowledge gap. undeniably, de-internationalisation and re-internationalisation add to the variance and complexity of the international business field but have received little consideration from the international business scholars (turcan, 2003; 2013; 2016). current research in business model tells us very little on how firms can reinvent themselves in situations such as de/re-internationalisation. theoretical and empirical research at the de-internationalisation and business model configuration intersection is virtually non-existent. with this paper, we aim to address this knowledge gap by exploring reasons for de-internationalisation, and how firms, learning from this experience can re-configure their business models to develop and pursue appropriate reinternationalisation strategies. approach we draw on existing knowledge to develop our proposed framework. first, we discuss the reasons that led firms to de-internationalise (benito and welch, 1997; turcan, 2006), linking these to re-internationalisation theoretical and empirical contexts (bell et al, 2003; welch and welch, 2009; johansson and abrahamsson, 2014). using business model configuration theory (foss and saebi, 2017; nielsen et al. 2019), we then develop and discuss a conceptual framework (table 1) that explains how firms can learn from their de-internationalisation choices and reconfigure their business models aiming to re-internationalise. key insights setting the scene the last decade has witnessed a number of global trends that affected in a dramatic way industries and global value chains nationally and internationally. these trends include, but not limited to: rise of nationalist and protectionist policies on trade and economic development in europe, uk, and us, unfair competition, reorganisation of the global economy, dismantling and reconfiguration of industries, global value chains and global alliances, withdrawal of firms by brining production or other parts of their corporate value chains back home, development of innovative and disruptive technologies, most of the time with negative impact (turcan, 2020), large scale displacement of labour force and other resources, openness towards intra firm collaborations, and ease of communication, management and cooperation across borders. disruption, dismantling and reconfiguration of industries and global value chains manifest in the erosion of scale and arbitrage advantages, shrinkage of internal trade to 1/3, with external value chains doing the rest; making global value chains more knowledge intensive, service oriented; making industries and value chains that tried to globalised work best when national or regional (see e.g., economist, 2017a; economist, 2017b). in response to these global trends, firms de-internationalise or withdraw from international markets partially or totally and as a result rethink their business models. de-internationalisation de-internationalisation is a relatively young research field with one of the first definitions of the term stated in 1997 by benito and welch. the authors describe de internationalisation as “any voluntary or forced action that reduce a company`s engagement in or exposure to current cross-border activities” (benito and welch, 1997, p.9). often times, de-internationalisation is seen as inconvenient, undesirable endeavour as it is perceived as a failure (turcan, 2003; 2013). overall, research in international business focuses on positive growth and ignores firms that failed or chose to withdraw from their international activities (turcan, 2006; 2010). however, de-internationalisation should not always journal of business models (2021), vol. 9, no. 1, pp. 60-66 6262 be considered as a forced or un-voluntary retraction. de-internationalisation could also be seen as “a voluntary process of decreasing involvement in international operations in response to organizational decline at home or abroad” (mellahi, 2003 p.151). whether de-internationalisation is either forced or voluntary, de-internationalising firms have at their disposal various strategies to pursue (buckley and casson, 1998) to re-organise. deinternationalisation process can be seen as an attempt to correct an error a firm previously made in the process of internationalisation (turcan, 2011). in this context, the process of cross-border activity of firms could be viewed as a cause-effect link between internationalisation and de-internationalisation (turcan, 2003). this suggests different reasons are behind the process of de-internationalisation. we side with turcan (2003; 2006) and sort and turcan (2019) who maintains that de-internationalisation should not be seen as a failure, but an opportunity to re-grow and re-internationalise with an even stronger e.g., value proposition than before. re-internationalisation current research is telling us very little on re-internationalisation of firms compared to their internationalisation (bell et al, 2003; welch and welch, 2009). the choice of a firm to de-internationalise puts this firm in a different position compared to other firms; it needs time, resources, commitments, among other things, before it attempts, hopefully successfully, tore-internationalise (welch and welch, 2009). re-internationalisation decision by firms is usually based on prior related knowledge and experience form previous failed or partly successful attempts, as well as understanding that a new attempt to internationalise will probably generate more positive outcomes, such as changes in management/ownership structures, gains in new competences and skills, partners, and shifts in own or neighbouring sectors. re-internationalisation processes can follow three distinctive paths: • imitation of the first internationalisation attempt, but assuming that circumstances has changed e.g. economic, political. • partial imitation of the first internationalisation attempt, but adding new (or modifying existing) processes, resources and/or activities e.g., new suppliers; new customer segment. • selection of completely new entry modes, processes and international target markets, previously unknown to, or untried by, the firm. in the pursuit of the first two paths, a firm can learn from its earlier internationalisation ‘footprint’ (welch and welch, 2009), such as knowledge, resources, capabilities, human and social capital, and cultural differences. in the pursuit of the third path, a firm faces more uncertainties and challenges, somewhat similar to the ones faced during their earlier (failed) internationalisation attempt. this nonlinear internationalisation process (bell et al, 2003) brings both challenges and opportunities. business model configuration the need for firms to adapt to rapid changing environment (e.g., massa and tucci, 2013; osiyevskyy and dewald, 2015; wirtz and daiser, 2018), and reconfigure their business models on a much more frequent basis than in the past, is considered a relevant practice. understanding how firms change and reconfigure their business model patterns or configurations is well established in the current literature, offering numerous ways of organising and constructing a business model of a given firm that seeks to differentiate (see gassmann et al., 2014; taran et al., 2016; thomsen et al., 2019). however, while the extant of knowledge on de-internationalisation and re-internationalisation strategies are considered limited, their intersection with business model configuration is currently non-present. discussion from business model (bm) configuration perspective, re-internationalisation could be seen as a process of restructuring and generating new ideas within existing business models. in table 1, we put forward an initial point of departure to understand contexts and reasons of why a company (voluntarjournal of business models (2021), vol. 9, no. 1, pp. 60-66 6363 ily or not) chooses to withdraw from international markets. furthermore, in view of bm configurations literature, table 1 offers a configuration list to consider for a re-internationalisation strategy. it draws from contexts and reasons for de-internationalisation found in, for example, benito and welch (1997), buckley and casson (1998) and reiljan (2004) and employs bm configurations, presented in taran et al. (2016), to align de-internationalisation reasons with re-internationalisation opportunities. for example, in a “firm specific” context where “resource constraints” are one of the reasons for de-internationalisation, a firm has different options to reconfigure its business model. if the ‘resource constrains’ were related, for example, to lack of funds to set up a retail chain to follow a demand, the firm could be inspired by employing “vn7 – franchising” configuration (examples being mcdonalds and starbucks), enhancing firm’s performance within the limited scope of resources currently controlled. in a ‘market specific’ context, where a firm de-internationalises due to ‘market specific’ reasons, such as ‘change in ‘supply chain power relations’, a firm might face re-sellers and/or distributers that take a large table 1. context reasons to de-internationalise (partly or fully) (based on turcan 2006) configurations to re-internationalise (configuration categories and numbering based on taran et al. 2016) firm specific resource constraints vp20 value added reseller; vp13 price-reduction bundling; vco3 core focused; vn7 franchising; vn8inside-out; vn10 outside-in; vca9 leasing quality control and lead-time constraints vp7 full service provider; vp21 value bundling technological advancement vn1 – adaptive; vn9 integrated market specific customer demand to company ’s offerings decreased vp14 quality selling; vp11 no frills; vp13 price-reduction bundling; vp16 user design; vs2 customer focused customer demand more sustainable and longer lasting offerings vp18 -trusted operation; vp19 trusted product/service leadership; vs2 customer focused; vco1 branded reliable commodity; vco13 trash to cash; vn5 crowd funding; vn10 outside-in; vca9 leasing industry specific changes in competition density vs4 multi-sided platforms; vco14 white label; vca1 bait and hook; vca 5 fractionalization supply chain power relations vco2 channel maximization; vco4 – disintermediation; vco9 -integrator; vco6 – procurement; vp23 – value chain coordinator political and national specific  cultural constraints vco11 self-service; vco12 trade show; vn2 affinity club; vn5 crowd funding uncertainty in country ’s economic, political and labour market conditions vp22 value chain coordinator; vco4 – disintermediation; vco8 external sales force; vco10 reverse innovation; vca9 – leasing; vs5 robin hood; vs6 round up buyers; vs7 target the poor; vco10 reverse innovation; vca 10 pay-as-you-go; vca11 pay what you want; vca14 subscription club; vca15 the long tail; vca16 upfront payment. increase in trade costs (e.g. import tariffs) vp11 no frills; vn8inside-out table 1: reasons for de-internationalisation, and bm configurations to re-internationalise journal of business models (2021), vol. 9, no. 1, pp. 60-66 6464 percentage of the value-chain profit, thus diminishing value-added offers. in this situation, a firm could be inspired by vco4 – disintermediation configuration (example being dell), leading to ‘by-passing’ the resellers and selling directly to its customers via own channels. table 1 should not be perceived in a normative context lenses, i.e., “cause and effect”, but rather as a practical strategic learning toolkit available for firms to understand both the aftermath of their de-internationalisation experience, and an inspiration list of different avenues available for them to kick-start their future international growth strategies. conclusions this is a first attempt to link “de” and “re” internationalisation challenges and opportunities with bm configuration literature. we demonstrate the relevance of bm configuration body of knowledge to decision makers in the international business context. we call for future conceptual and empirical research to further elaborate on the theoretical, practical and policy understanding and implications of this intersection, within a global, regional, national, industry, and firm related contexts. this advancement will shed more light on the limitedly explored, but highly relevant phenomenon of re-internationalisation of firms. future pointers, to name a few, for future research could be to learn: what are the benefits or downsides of deinternationalisation; what are the implications of de-internationalisation on a firm’s business model; which parts of a firm’s business model are affected most by de/re-internationalisation strategies; how value creation, capturing and delivery activities are affected by de-internationalisation and re-internationalisation strategies; what are the success rates of re-internationalised strategies pursued by firms. journal of business models (2021), vol. 9, no. 1, pp. 60-66 6565 references bell, j., mcnaughton, r., young, s., & crick, d. (2003). towards an integrative model of small firm internationalization. journal of international entrepreneurship, 1(4), 339–362. benito, g., & welch, l. (1997). de-internationalisation. management international review, 7-25 buckley, p., & casson, m. (1998). analyzing foreign market entry strategies: extending the internalization approach. journal of international business studies, 539–561. economist. (2017a). in retreat; the multinational company. the economist; london, vol. 422, iss. 9025. economist. (2017b). in the lurch; left-behind places. the economist; london, vol. 425, iss. 9063. foss, n. j., & saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go?. journal of management, 43(1), 200-227. gassmann, o., frankenberger, k., & csik, m. (2014). the business model navigator: 55 models that will revolutionise your business. pearson uk. johansson, m., & abrahamsson, j. (2014). competing with the use of business model innovation--an exploratory case study of the journey of born global firms. journal of business models, 2(1), 33-55. massa, l., & tucci, c. l. (2013). business model innovation.  the oxford handbook of innovation management, 20(18), 420-441. mellahi, k. (2003). the de-internationalisation process: a case study of marks and spencer. in internationalisation (pp. 150-162). palgrave macmillan, london. nielsen, c., lund, m., montemari, m., francesco, p., massaro, m. and dumay, j. (2019) business models: a research overview. routledge, new york osiyevskyy, o., & dewald, j. 2015. explorative versus exploitative business model change: the cognitive antecedents of firm level responses to disruptive innovation. strategic entrepreneurship journal, 9: 58–78. reiljan, e. (2004). de-internationalisation motives: a theoretical framework. download from: http://www .mattimar.ee/publikatsioonid/ettevottemajandus/2004/11_reiljan.pdf sort, j. c., & turcan, r. v. (2019). de-internationalization: a business model perspective. journal of business models, 7(4), 39-44. thomsen, p., sort, j. c., & kristiansen, k. b. (2019). booster cards: a practical tool for unlocking business model innovation. journal of business models, 7(3), 131-142. taran, y., nielsen, c., montemari, m., thomsen, p., & paolone, f. (2016). business model configurations: a five-v framework to map out potential innovation routes. european journal of innovation management, 19(4), 492-527. turcan, r. (2003). de-internationalisation and the small firm. in c. wheeler, f. mcdonald and i. greaves (eds.), internationalisation: firm strategies and management (pp. 208-222). great britain: palgrave. http://www.mattimar.ee/publikatsioonid/ettevottemajandus/2004/11_reiljan.pdf http://www.mattimar.ee/publikatsioonid/ettevottemajandus/2004/11_reiljan.pdf journal of business models (2021), vol. 9, no. 1, pp. 60-66 6666 turcan, r. v. (2006). de-internationalisation of small high-technology firms: an international entrepreneurship perspective. doctoral dissertation. university of strathclyde: glasgow, uk. turcan, r. v. (2013). the philosophy of turning points: a case of de-internationalisation. advances in international management, 26, 219-235. turcan, r. v. (2016). exploring late globalization: a viewpoint. markets, globalization & development review, 1(2), [4]. turcan, r. v. (2020). newness and uncertainty: innovating aau pbl model in liquid times. manuscript in preparation. in r. v. turcan, & j. e. reilly (eds.), populism and higher education curriculum development: problem based learning as a mitigating response. palgrave macmillan. welch, c.l. and welch, l.s. (2009) re-internationalisation: exploration and conceptualization, international business review, 18(6), 567-577. wirtz, b. w., & daiser, p. (2018). business model development: a customer-oriented perspective.  journal of business models, 6(3), 24-44. journal of business models (2021), vol. 9, no. 3, pp. 70-79 70 teaching sustainable business models— a modeling-driven approach maren stadtländer1, thorsten schoormann2, and ralf knackstedt3 abstract we report on lessons learned from a master-level university course teaching the development of sustainability-oriented business models by emphasizing the modeling perspective. our approach combines traditional lectures with experiential learning-based elements such as small group exercises, case studies, and in-class reflection to foster students’ factual knowledge and practical skills. please cite this paper as: stadtländer, m., schoormann, t., and knackstedt, r. (2021), teaching sustainable business models— a modeling-driven approach., vol. 9, no. 3, pp. 70-79 keywords: business model development, business model modeling, sustainability acknowledgment : funding was provided by the european regional development fund and the investitionsund förderbank (“smarthybrid; id: zw 6-85003451) and the niedersächsisches ministerium für wissenschaft und kultur (“qualität plus”; id: 27-73724/15-4). issn: 2246-2465 doi: https://doi.org/10.5278/jbm.v9i3.5736 1–3 department of information systems and enterprise modelling, university of hildesheim, universitätsplatz 1, 31141 hildesheim, germany, maren.stadtlaender@uni-hildesheim.de; thorsten.schoormann@uni-hildesheim.de; ralf.knackstedt@uni-hildesheim.de introduction “the greatest threat to our planet is the belief that someone else will save it.” –robert swan (author, conservationist) new business models enable the old way of doing things to be replaced, and thus open opportunities for better solutions (magretta, 2002). in pursuing to address one of the most fundamental challenges of today’s society, contributing to sustainable development (brundtland et al., 1987), novel or improved business models play an important role because they have the power to capture “economic value while maintaining or regenerating natural, social, and economic capital” (schaltegger et al., 2016, p. 6). in order to boost the development of more sustainable business models, organizations typically face challenges concerning how to arrive at creative ideas and how to translate ideas into specific models (chesbrough, 2010). therefore, “structure and guidance to frame and focus thought” (eppler et al., 2011, p. 1324) are required. since “visual thinking is indispensable to working with business models” (osterwalder and pigneur, 2010, p. 148), it has been determined as the main tool for developing business models (täuscher and abdelkafi, 2017). following this, numerous business model modeling languages (bmmls) (john et al., 2017) are have been proposed that structure business models through pictorial, mathematical, or symbolic journal of business models (2021), vol. 9, no. 3, pp. 70-79 71 forms (massa et al., 2017)—including the quasi-standard from osterwalder and pigneur (2010), the business model canvas. even though those modeling languages are well-applied, they do not necessarily focus on sustainability (bocken et al., 2015), which is however important to foster the design of more sustainable businesses that, for instance, establish closed-loop production or replace ‘fire and forget’ models (lüdekefreund et al., 2017). to overcome this, modeling languages and the represented business model components need to be reframed (breuer et al., 2018) and adapted (schoormann et al., 2016) to the specific context of sustainability. in this teaching approach, we build upon the idea of reframing and adapting modeling languages for business models and confront students with a variety of established and (still) evolving languages. we encouraged them to critically examine the languages’ suitability during the analysis and development of new business models. in doing this, students reflect on positive and negative aspects of business models by taking into account a model-driven perspective in which they continuously adapt modeling languages to specific use cases. thereby, the following key challenge is addressed: how to use modeling languages for enabling students to critically reflect sustainability in business models? this paper describes a teaching approach and lessons learned from its multiple iterations in a master-level university course with students from diverse disciplines such as information systems, environmental preservation, and organizational pedagogy. in addition to traditional lecture-styles, the didactic underpinning draws on elements of experiential learning (kolb, 1984) including case discussions, collaborative projects, and presentations of results in the form of pitches. through alternating phases of traditional lecture styles with input from teachers, working in small groups (reflection-in-action), and discussing results within the entire course (reflection-on-action), this teaching approach seeks to leverage the learning-by-doing effect (schön, 1983). accordingly, this paper shows that teaching modeling languages supports students in developing, analyzing, and communicating sustainability-oriented aspects of business models. in this spirit, we hope to increase the students’ ability and understanding to act more sustainably (e.g., as potential decision-makers in companies or start-ups and consumers) and to complement the landscape of available courses on business models with a sustainability-oriented modeling lens. for lecturers, we provide a course design including tools and formats as well as recommendations for implementing them. approach educational objectives and didactic approach the purpose of this teaching approach is to enable students to systematically analyze and improve existing business models in terms of sustainability as well as to develop and implement completely new ideas for more sustainable business models. therefore, we aim to build factual (e.g., specific business cases) and methodic (e.g., modeling languages) knowledge. this knowledge is then applied to collaboratively solve realistic problems through representing, analyzing, and discussing sustainability in real-life business model cases (e.g., from domains such as circular economy, fashion, and sharing economy); thereby drawing from experiential learning (kolb, 1984), for example, by conducting group exercises (i.e., gaining concrete experiences) and in-class reflections. to meet the overall purpose, the present teaching approach focuses on achieving the following learning outcomes—defined according to bloom’s taxonomy of educational objectives (bloom et al., 1956): students will be able to (1.1, factual) understand the origins of sustainable development and theoretical backgrounds taught in the course, (1.2, methodic) apply general strategies and patterns for contributing to sustainability, (2.1, factual) understand the origins and the concept of business models, (2.2, methodic) apply modeling languages taught in the course to create and evaluate business models, (2.3, factual) remember selected use cases of sustainable business models, (3.1, methodic) evaluate and analyze the suitability of certain modeling languages in representing sustainability-oriented aspects, (3.2, methodic) apply and create adaptions of modeling languages. journal of business models (2021), vol. 9, no. 3, pp. 70-79 72 general course structure and overview of weekly lecture sessions table 1 gives an overview of the weekly sessions, assignments, and formats employed. next, the course structure is described in more detail, particularly highlighting aspects related to the course’s modeling focus. to meet the challenge of teaching the topic to an interdisciplinary group, shared knowledge is built at the beginning of the course, for example, by introducing definitions of business models (session 2), selected models of sustainability and strategies for taking sustainable action (sessions 3–4), as well as a practice case, here in the context of the sharing economy provided by a local startup (use case a, session 5). since the course focuses on modeling, students were first instructed in the business model canvas (osterwalder and pigneur, 2010), which was selected due to being relatively easy to learn and well-established in research and practice (session 2). afterwards, the students were motivated to critically reflect the abilities and limitations of the business model canvas and other available modeling languages for adequately representing and analyzing a business model’s economic, ecological, and social sustainability. additionally, we introduced common customizations for representing sustainability in the original canvas including (figure 1), for instance, adding new business model components for environmental impacts (see schoormann et al., 2016 for an overview), and presented the sustainability-oriented triple-layered canvas weekly session students will learn/do… learning outcome format 01 introduction • introduction and motivation for the course. — lecture 02 business models • common business model definitions. • business model modeling languages (bmml) and how they can be applied/adapted. understand lecture; in-class reflection 03-04 sustainability • origin of sustainable development. • sustainable entrepreneurship. • theoretical background (e.g., stakeholder theory). understand lecture; in-class reflection 05 use case a—introduction • introduction to a practical use case. remember in-class discussion 06 sustainability in business model development • (software supported) customization of bmmls to incorporate sustainability. • theoretical/conceptual approaches to foster sustainability in business models (e.g., patterns). evaluate; analyze lecture; in-class reflection 07 use case a—design • group exercise: represent use case a’s business model with special consideration on sustainability. apply; create collaborative exercise; in-class reflection 08 use case b—introduction and ideation • basic principles of design thinking. • business model development using design thinking. apply; create collaborative project 09 use case b—design • development and visualization of a new (sustainable) business model. apply; create collaborative project 10-11 use case b—communication • presentation and discussion of business models. • analysis of the business model’s (ecological, economic, social) sustainability. apply; create collaborative project; presentation; in-class reflection 12 written exam • reflection on approaches for considering sustainability in business model development approaches (e.g., in bmmls). evaluate; analyze; apply; create individual exam table 1: overview of course design journal of business models (2021), vol. 9, no. 3, pp. 70-79 73 (joyce and paquin, 2016) (session 6). we hereby allowed students to reflect existing approaches as well as design approaches of their own. in doing this, the plurality of different approaches is emphasized and a need for reframing and adapting approaches to a specific context such as sustainability is stressed (breuer et al., 2018). this methodic knowledge of applying and adapting modeling languages for business models and their sustainability-oriented aspects was employed in two group assignments. for the first assignment (session 7), the students modeled use case a with the business model canvas and integrated various aspects of sustainability using customizations introduced in previous sessions, such as adding new components for ecological and social costs. students thereby applied their knowledge of business model modeling, and practiced critical thinking by selecting appropriate customizations. figure  2 illustrates the consolidated and anonymized sharing business model as well as selected customizations, particularly in the form of additional canvas components (displayed here using a custom software prototype developed in our department). students then spent three weeks working on a problem-based group assignment to develop and pitch their own business model (use case b; resulting in three online platforms for sharing tools, appliances, or services, as well as an online agency equipping temporary workers with the knowledge to become multiplicators for ecological sustainability) (sessions  8–11). here, modeling business models served two purposes. first, each group applied a variety of sustainability-oriented customizations to collect suggestions of how to implement their business idea not only to generate financial success, but also act environmentally and socially conscious and assess the potential business model’s impact. simultaneously, the students were empowered to make informed choices of suitable approaches including, but not limited to, the previously practiced modeling languages and customizations, and presented their methodical approach to their peers. therefore, students are enabled to more easily navigate the variety of available approaches and extend them where necessary to design sustainability-conscious business models. second, each group used the visualized model in their presentations to pitch their business idea. the visualization thereby becomes a boundary object (star and griesemer, 1989) for communicating the idea to peers and lecturers, allowing for a structured discussion and collaborative assessment of the business model and its potential impacts. since not all students are comfortable with teaching styles that require them to take responsibility for their own learning individually or in groups with their peers (hoveskog et al., 2018) and at times show reluctance to work collaboratively or participate in open figure 1: overview of customizations and exemplary application in a canvas-based approach journal of business models (2021), vol. 9, no. 3, pp. 70-79 74 in-class discussions, we selected an individually written exam for the course assessment. in this exam, students applied their knowledge to create and represent another business model, and to critically discuss, select, and implement (modeling) languages for disclosing sustainability-relevant aspects (session 12). key insights in order to verify the usefulness of the presented course, we (1) analyzed a standardized questionnaire given out by the university’s quality management allowing to obtain data using open and closed questions (e.g., regarding the course environment and the students’ effort to pass the course). the questionnaire was completed by fifteen students in the last iteration. moreover, we (2) conducted a focus group, a “moderated discussion among six to twelve people who discuss a topic” (tremblay et al., 2010, p. 600). for this, we carried out a voluntary, 90-minute workshop with nine students that participated in the course, transcribed the verbal protocols recorded, and carved out observations with two researchers. in performing this evaluation, we were able to observe general changes of awareness for sustainability-related issues, including tentative changes in behavior through participating in the course (e.g., “i try to buy products that have less packaging”; “i started to look where [the water brand i drink] actually comes from”; “i have joined some second-hand apps.”). referring to the modeling-driven focus, four main observations emerged that should be taken into account by lectures intending to adapt or design a similar course (table 2). (1) modeling language customizations. most importantly, we found that modeling languages and component-based customizations for sustainability taught in the lectures were recognized as helpful for considering more than only financial aspects of a business model (e.g., “[...] the established canvas can be adapted like by adding new blocks for ecological and social impacts, which leverages the consideration of further aspects.”). students also emphasized that visualizing the business models helped them to systematically compare and integrate different perspectives of sustainability figure 2: demonstration of the practical use case for sharing business models journal of business models (2021), vol. 9, no. 3, pp. 70-79 75 (e.g., “the goal of modeling was to not only consider the economic but also the social and ecological perspective [which helps to] deliberately analyze trade-offs.”) as well as to consider the manifold sustainability-related stakeholders and perspectives on a business model (e.g., “i was encouraged to critically reflect things like by using modeling languages for business models and their sustainability-oriented customizations. these foster me to consider not only economic goals but also ecological and social ones [...]”). however, some students criticized that the in-class discussions of the project presentations (session 11) should have a stronger focus on discussing and comparing the modeling customizations used by each group. this highlights that teachers need to provide students with various opportunities for applying and practicing their methodical knowledge throughout the entire course, for example, by preparing guiding questions for the project presentations (e.g., “apply and justify suitable customizations for modeling and analyzing a given business model regarding its sustainability”). (2) collaborative modeling. efforts towards sustainability force different stakeholders to collaborate to reach a variety of often conflicting goals. equally, diverse points of view are beneficial when tackling multi-perspective challenges of sustainability. our observations underline the importance of allowing the students to work collaboratively on case studies (e.g., “it was beneficial to work intensively in small groups. […] we had to consider many stakeholders, and this helped reflecting about them.”). to facilitate this, students need to be equipped with both abilities for and experience of solving (practical) problems in heterogeneous teams. lecturers therefore need to provide an environment that fosters students to communicate and debate their different perspectives, experiences, and beliefs, for example, by conducting team building exercises, establishing constructive conversational rules, and encouraging peer feedback. (3) real use cases. we have observed that students often struggle with applying knowledge to real-world problems which is, however, necessary to translate knowledge into action (e.g., “we have learnt how to model [sustainability solutions], but have seldomly tested feasibility [in real life].”). consequently, students should be taught about real-life problems early on, for instance, by inviting external organizations and industry partners to report on their business models, and students should be enabled to apply modeling languages to real use cases. doing this, they build problem-solving skills, are motivated, and assess the usefulness of modeling languages in different practical scenarios. (4) interdisciplinary groups. due to the interdisciplinary composition of the course, some students may struggle at first with the modeling lens (the degree of observation lessons learned and exemplary recommendations (1) modeling language customizations introduce and compare a variety of modeling approaches for business models. reflect on the capability of available approaches to contribute to sustainability (e.g., customizations). encourage the adaptation and extension of existing and development of novel modeling approaches to account for sustainability aspects. (2) collaborative modeling provide the students with a structure, environment, and discussion culture to communicate and debate different perspectives, experiences, and beliefs. conduct exercises in small groups. implement team building exercises, peer feedback, and conversational rules. (3) real use cases introduce real-life problems early on, for instance, by inviting external organizations and industry partners to report on their business models. enable students to apply methods, (software) tools, and best practices to real cases (e.g., from industry partner). (4) interdisciplinary groups identify and close gaps in fundamental knowledge and skills required in the early stages of the course. provide introductory lectures or additional tutorials. table 2: summary of observations and preliminary recommendations journal of business models (2021), vol. 9, no. 3, pp. 70-79 76 the course’s prerequisites was perceived as rather high) or miss the link between the factual and methodic knowledge (e.g., “with an isolation [of the modeling languages] from the model content, it becomes clear that the goal is not to develop an innovative business model, but to use the methods and discuss why we did what”). closing gaps in basic skills required for the course through introductory sessions (see sessions  1–4) therefore is necessary. modeling languages should be chosen considering common languages, suitability for the context, and with the group composition in mind. they need to be introduced in appropriate detail. discussion and conclusion in this article, we have reported on a teaching approach that builds upon experiential learning and takes into account the modeling aspect of business models in particular. thereby, we aimed at empowering students to reflect on sustainability in business models (i.e., factual knowledge) as well as on the modeling languages themselves (i.e., methodic knowledge). we complement available courses, both with and without emphasis on sustainability (e.g., bitetti, 2019; karlusch et al., 2018; szopinski, 2019), by primarily applying a modeling lens on business models. although our insights are anchored in a specific field of application, namely a master-level university course taught face-to-face in a classroom, we believe that the course design is applicable also to other settings, which we will justify in the following. first, the course primarily targets information systems students who usually are already experienced in the use of modeling languages (e.g., for business processes). however, since the course is part of a university-wide certificate—education and sustainability—we also gained experience with teaching students from other programs such as environmental preservation and organizational pedagogy. we argue that our course design sufficiently takes interdisciplinary groups into account by closing knowledge gaps and selecting modeling approaches that are easy to comprehend even without previous experience, and thus is transferable to other group compositions in higher education. second, the course is geared towards master-level students who are usually practiced with critical reflection and analysis. nevertheless, we believe that by focusing on factual knowledge and case study modeling (e.g., modeling and analyzing multiple case studies) and/or adding guided tutorial sessions, the course could also be adapted towards the needs of bachelor-level students. third, our course is not necessarily restricted to an in-classroom setting. due to the existence of supporting software tools (see szopinski et al., 2019) which allow for spatially and temporally independent modeling, our course can also be applied in a hybrid or entirely virtual setting. finally, the group size in the past fluctuated between 22 and 46 participants, which is comparable to other courses at this university. in line with large-scale courses with a similar theme (e.g., szopinski, 2019), we believe that the course can be scaled up and down without any or with only slight adaptions to the design (e.g., a different exam setting or using peer feedback). however, the group size must allow for collaborative work in small groups (e.g., 3-6 students), and scaling up can lead to an increased workload for academic staff. even though we present a promising teaching approach, our study is not free of limitations. the selection of modeling languages applied within our course was based on individual decisions, and thus has restrictions. furthermore, due to the time limitation of our course, further research is demanded that, for example, explores whether the course addresses the value-action gap (kollmuss and agyeman, 2002), or how specific tools, didactic methods, or content covered relate to theories such as self-efficacy (i.e., the expectation of a person that they are able to successfully perform an action; bandura, 1977). overall, this article describes the design of a particularly modeling-driven course on analyzing sustainability in existing models, as well as developing more sustainable ones. thereby we aim at complementing the emerging landscape of courses on business models. we hope that by highlighting observations from evaluating one iteration of the course design (2019), discussing positive outcomes, challenges, and recommendations, and discussing transferability, our experiences will aid lecturers interested in developing or adapting courses of their own. journal of business models (2021), vol. 9, no. 3, pp. 70-79 77 references bandura, a. (1977), “self-efficacy: toward a unifying theory of behavioral change”, psychological review, vol. 84 no. 2, pp. 191–215. bitetti, l. (2019), “activate business model learning through flipped classroom and backward design”, journal of business models, vol. 7 no. 3, pp. 47–57. bloom, b.s., engelhart, m.d., furst, e.j., hill, w.h. and krathwohl, d.r. (1956), taxonomy of educational objectives: the classification of educational goals. handbook i: cognitive domain, david mckay company, new york, usa. bocken, n.m.p., rana, p., short, s.w. (2015), “value mapping for sustainable business thinking”, journal of industrial and production engineering, vol. 32 no. 1, pp. 67–81. breuer, h., fichter, k., lüdeke-freund, f. and tiemann, i. (2018), “sustainability-oriented business model development: principles, criteria and tools”, international journal of entrepreneurial venturing, vol. 10 no. 2, pp. 256–286. brundtland, g.h., khalid, m., agnelli, s., al-athel, s. and chidzero, b. (1987), our common future, oxford, england. chesbrough, h. (2010), “business model innovation opportunities and barriers”, long range planning, vol. 43 no. 2, pp. 354–363. eppler, m.j., hoffman, f. and bresciani, s. (2011), “new business models through collaborative idea generation”, international journal of innovation management, vol. 15 no. 6, pp. 1323–1341. hoveskog, m., halila, f., mattsson, m., upward, a. and karlsson, n. (2018), “education for sustainable development: business modelling for flourishing”, journal of cleaner production, vol. 172, pp. 4383–4396. john, t., kundisch, d. and szopinski, d. (2017), “languages for modeling business models: a critical review and future research directions”, in proceedings of the thirty-eighth international conference on information systems, seoul, korea, pp. 4070–4091. joyce, a. and paquin, r.l. (2016), “the triple layered business model canvas: a tool to design more sustainable business models”, journal of cleaner production, vol. 135, pp. 1474–1486. karlusch, a., sachsenhofer, w. and reinsberger, k. (2018), “educating for the development of sustainable business models: designing and delivering a course to foster creativity”, journal of cleaner production, vol. 179, 169–179. kolb, d.a. (1984), experiential learning: experience as the source of learning and development, prentice hall, englewood cliffs, new jersey, usa. kollmuss, a. and agyeman, j. (2002), “mind the gap: why do people act environmentally and what are the barriers to pro-environmental behavior?”, environmental education research, vol. 8 no. 3, pp. 239–260. lüdeke-freund, f., freudenreich, b., schaltegger, s., saviuc, i. and stock, m. (2017), “sustainability-oriented business model assessment—a conceptual foundation”, in carayannis, e.g. and sindakis, s. (eds.), analytics, innovation, and excellence-driven enterprise sustainability, palgrave macmillan, pp. 169–206. magretta, j. (2002), “why business models matter”, harvard business review, vol. 80 no. 5, pp. 86–92. journal of business models (2021), vol. 9, no. 3, pp. 70-79 78 massa, l., tucci, c.l. and afua, a. (2017), “a critical assessment of business model research”, the academy of management annals, vol. 11 no. 1, pp. 73–104. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, wiley. schaltegger, s., hansen, e.g. and lüdeke-freund, f. (2016), “business models for sustainability: origins, present research, and future avenues”, organization & environment, vol. 29 no. 1, pp. 3–10. schön, d.a. (1983), the reflective practitioner: how professionals think in action, basic books. schoormann, t., behrens, d., kolek, e. and knackstedt, r. (2016), “sustainability in business models–a literature-review-based design-science-oriented research agenda”, in proceedings of the twenty-fourth european conference on information systems, istanbul, turkey. star, s.l. and griesemer, j.r. (1989), “institutional ecology, ‘transitions’ and boundary objects: amateurs and professionals in berkeley’s museum of vertebrate zoology, 1907-39”, social studies of science, vol. 19 no. 4, pp. 387–420. szopinski, d. (2019), “squaring the circle: business model teaching in large classroom settings”, journal of business models, vol. 7 no. 3, pp. 90–100. szopinski, d., schoormann, t., john, t., knackstedt, r. and kundisch, d. (2019), “software tools for business model innovation: current state and future challenges”, electronic markets, pp. 1–26. tremblay, m.c., hevner, a.r. and berndt, d.j. (2010), “focus groups for artifact refinement and evaluation in design research”, communications of the association for information systems, vol. 26 no. 27, pp. 599–618. journal of business models (2021), vol. 9, no. 3, pp. 70-79 79 maren stadtländer is a research assistant at the university of hildesheim. research interests involve approaches for teaching the development and analysis of sustainabilityoriented business models to students and organizations as well as innovative digital solutions for increasing student learning outcomes and satisfaction. thorsten schoormann is a post-doctoral research assistant at the university of hildesheim, department of enterprise modelling and information systems. his research interests include business models, business process models, and supporting softwarebased tools (e.g., business model development tools) that contribute to economic, ecological, and social sustainability. ralf knackstedt is a full professor of information systems and enterprise modeling at the university of hildesheim. his research areas include reference modeling, product-service systems, conceptual modeling, and business process management. he received his doctoral degree and habilitation at the university of münster and worked at the european center for information systems (ercis). his work has been published in academic journals such as business information systems engineering, ieee transactions on engineering management, communications of the ais, and scandinavian journal of information systems. about the authors journal of business models (2019), vol. 7, no. 2, pp. 14-30 14 communicating the business model at a swedish start-up: an interpretive study emelie havemo1 abstract purpose: although the notion of articulating and communicating ideas is central to theories of business models, the current literature has scarcely explored how business models are used and communicated by practitioners. the label “business model” itself can both organize and construct beliefs and actions. the purpose of this paper is to explore the roles of practitioner-described business models by using an interpretive approach. design/methodology/approach: the study is based on the case study of a swedish technology start-up with a business model labelled “hardware plus software”. the firm’s conceptualizations of this business model in public and non-public sources were analysed in order to show how a practitioner-described business model was used. findings and contributions: the business model label can be used at different organizational levels using different levels of abstraction, and may include multiple—and sometimes conflicting—perspectives. the paper shows how a practitioner-defined business model label served as a communication device by supporting three roles: communicating strategy, learning from others, and articulating identity. originality/value: the study introduces the notion of the business model as a communication device by showing how the label itself both enables and constrains interpretations of the firm in practice. the finding of parallel representations contradicts the implicit assumption that firms refer to a “single business model” by showing the diversity of articulations of the business model depending on the time frame, the role of the communicator, and communication arenas. please cite this paper as: havemo, e. (2019), communicating the business model at a swedish start-up: an interpretive study, vol. 7, no. 2, pp. 14-30 keywords: communication, business model, archetypal label, case study, new venture 1 department of management and engineering, linköping university, 581 83 linköping, sweden, emelie.havemo@liu.se acknowledgements: i am grateful for the financial assistance and support provided by the management and it research school, hosted by uppsala university in sweden. journal of business models (2019), vol. 7, no. 2, pp. 14-30 15 introduction the idea of business models dates back to medieval forms of organizing as well as earlier strategy literature (chesbrough and rosenbloom, 2002; baden-fuller and morgan, 2010; demil and lecocq, 2010), but recently the number of studies on business models has been growing rapidly since the business model label began to gain popularity with the rise of e-commerce in the late 1990s (demil and lecocq, 2010; olve et al., 2013; wirtz et al., 2016). the notion that all firms have a business model, whether they are aware of it or not, is continuously emphasized by researchers (e.g. casadesus-masanell and ricart, 2010; fielt, 2013; dasilva and trkman, 2014; malmström and johansson, 2017). in addition, the business model concept has evolved in parallel as a label used by practitioners as well as researchers (chesbrough and rosenbloom, 2002; jensen, 2013; petri, 2014). this highlights the business model label’s potential to communicate about value creation in both academic and practical settings. although the idea of the business model as a communication device is not a well-used description at present (but see doganova and eyquem-renault, 2009; aversa et al., 2015; täuscher and abdelkafi, 2017; havemo, 2018), the assumption of the business model’s communicative power is implicit in many studies. for example, the business model has been proposed to be a story of how the enterprise works (magretta, 2002), a description of how it creates value (teece, 2010), and its way of doing business (zott, amit and massa, 2011). while magretta (2002) highlights the power of a “good story” or a shared idea about what makes the business successful, teece (2010) argues that the business model can “articulate” the logic of value creation. relatedly, some researchers highlight the ability to articulate causality as a main benefit of business models (casadesus-masanell and ricart, 2010; baden-fuller and mangematin, 2013). in line with this, massa tucci and afuah (2017) note that business models fill a growing need for an explanatory concept in light of new revenue models in the digital economy (massa, tucci and afuah, 2017). both views—the business model as a story and the business model as a means to articulate value creation logics—implicitly assume that communication is a central aspect of business models. as a label that carries meaning about how firms work, the meaning of the term “business model” can be enacted to create outcomes for firms. here i argue that it is the concept as such that carries specific associations, and can be meaningful from a communication perspective as a label for a set of ideas about value creation. the power of labels was emphasized by ruth hines (1988), who stated that accountants’ power comes not from describing reality in accounting terms, but in creating accounting concepts in the first place and making them real to society as a whole. her paper, titled in communicating reality, we construct reality, conveys that conceptualizations and labels equally organize and shape our understanding, thus creating the reality of the firm. in line with the view that labels are closely linked with social constructions to organize meaning, this paper adopts an interpretive approach, aiming to “understand phenomena through the meanings that people assign to them” (klein and myers, 1999, p. 69). this is done by studying business models as a label and what roles the label plays as actors in the case-study firm communicate using the label in different communication arenas. this paper thus differs from some of the business model literature, which focuses on researcher-described business models. in light of the above, there is an opportunity to enrich the business model literature with a practitioner-based perspective on how business models work, focusing especially on the role of business models as communication devices. thus, the purpose of this paper is to explore the roles of practitioner-described business models by using an interpretive approach. this is done through a case study of a swedish technology start-up, where the business model was a key component of how company actors described the company both internally and externally. the contribution of this paper is to lay the groundwork for a complementary perspective of business models as communication devices, which is implicit but not fully explored in the business model literature to date, and also to show the roles that a specific type of business model label, the archetype, plays once it is adapted from idea to practice. the rest of the paper is organized as follows. in the literature review, i compare framework-based and practitioner-based descriptions of business models. based on an overview of research of practitioner-based descriptions, i identify two research gaps related to the purpose of exploring practitioner-described business journal of business models (2019), vol. 7, no. 2, pp. 14-30 16 models. these gaps are addressed in the paper. next, i discuss the research methodology, including the case selection and how i captured a practitioner perspective on business models. the findings are presented in three sections, each of which contains a presentation of the empirical findings followed by an interpretive analysis in relation to the purpose of the paper. finally, the findings are summarized and discussed in terms of research implications in the concluding discussion. literature review a large share of the strategic management literature on business models has been framework dominated, i.e. aimed at developing frameworks or describing business models according to frameworks. this is evident in the large number of studies proposing components (e.g. amit and zott, 2001; hedman and kalling, 2003; demil and lecocq, 2010; osterwalder and pigneur, 2010; see also wirtz et al., 2016 for an overview), levels of analysis (e.g. osterwalder, pigneur and tucci, 2005; casadesus-masanell and ricart, 2010; jensen, 2013; dasilva and trkman, 2014; massa and tucci, 2014), and themes (zott, amit and massa, 2011; see also fielt, 2013 for an overview) through which to analyse the business model. more recently, massa, tucci and afuah (2017) proposed to divide previous research into categories depending on the treatment of the business model concept. they identified three different interpretations of the business model: as attributes of real firms, as cognitive or linguistic schemas, and as formal conceptual representations of how firms work. the cognitive schema view is interesting in light of the business model as a communication device, since it highlights both the storytelling and sensemaking aspects of business models. as massa et al. point out: “narratives of the business model can be constructed by managers and entrepreneurs and used not only to simplify cognition, but also as a communication device that could allow achieving various goals, such as persuading external audiences, creating a sense of legitimacy around the venture (e.g., by drawing analogies between a venture’s business model and the business model of a successful firm: “we want to be the uber of…”) or guiding social action (e.g., by focusing attention on what to consider in decision-making and instructing on how to operate).” (massa, tucci and afuah, 2017, p. 84) several of the empirical studies identified as “cognitive schema” interpretations by massa et al. (2017) use frameworks and conceptualizations developed by the researchers to describe business models, rather than business model labels used by the studied firms, which is a key aspect of the practical use of business models. this includes martins, rindova and greenbaum (2015), who used a framework-based definition of what the “business model schema” should contain, such as “design of activities and exchanges that reflect critical interdependencies and value-creation relations” (p. 105), and also aspara et al. (2013), who explored how the beliefs about the business of finnish firm nokia’s top management played a role in the decisions taken to transform the business model. although the study followed conceptualizations of the managers’ cognitive schemas and how these influenced strategic transformations, the business model label seems to have been added ex-post by the researchers to explain change, rather than being the guiding terminology for the managers. while these examples show the tendency to treat the business model as an analytical framing, there are few examples of a business model acting as a “good story ” in practice. one such study is doganova and eyquem-renault (2009), who investigated how the business model of a french new venture served as a “market device” as it was adapted to different formats and scopes when communicating with different stakeholders. however, despite differences, the study indicates that, at the core, the basic cognitive schema remained the same. this implies that business model descriptions used across different communication arenas follow a common underlying logic. in another study, george and bock (2011) analysed themes of business model definitions using two text samples, the business model literature and managers’ definitions. more than 20 different themes were found through discourse analysis of the material, including the business model as exploitation of value, a plan or map, a structure, activities, design, and products and services. this implies a variety of interpretations of what the business model is among practitioners. the views were, however, derived from generic definitions of the term “business model” rather than descriptions of the managers’ own firms, which leaves the question of what role the practitioner-described cognitive schema plays in firms. journal of business models (2019), vol. 7, no. 2, pp. 14-30 17 in their empirical investigation of how one type of external stakeholder (financial analysts) interpreted the business model of a danish pharmaceutical company, nielsen and bukh (2011) found that the analysts had trouble explicating what a business model was, both as a general concept and for the case company. the researchers found that more specific descriptions including internal configurations and relationships were found more useful than industry level definitions, but also that the concept “business model” could be a hurdle in terms of getting the interviewees to talk about the value creation processes of the case company. while these findings were limited to a complex business model and a single case, they suggest that explaining a business model to organizational outsiders can be difficult, and that understanding is linked to different degrees of abstraction. financial disclosure is another field where the business model artefact has gained research attention in recent years. in this context, the analysed material is firms’ business model disclosures in annual reports (e.g. beattie and smith, 2013; giunta, bambagiotti-alberti and verrucchi, 2013; haslam et al., 2015; bini, dainelli and giunta, 2016; michalak et al., 2017; havemo, 2018). this literature highlights another dimension of the business model as a communication device, namely that it can serve as a way for firms, regulators, and society to describe the firm in quantifiable terms to its stakeholders. however, as michalak et al. (2017) noted in their overview of voluntary disclosure behaviour of business models, there are few studies of business model disclosure in the intellectual capital reporting field to date. among the extant studies, it has been suggested that the business model could increase the information quality of reports by providing a holistic framework (bukh, 2003; icaew, 2010; beattie and smith, 2013; nielsen and roslender, 2015), though as michalak et al. (2017) show, the definition of “business model” differs across frameworks like the strategic report and integrated reporting guidelines, making comparisons difficult. a recent study that examined business model reporting was conducted by bini et al. (2016). by performing content analysis on business model disclosure in uk annual reports, they found that the most commonly reported business model component was value creation, but that explanations of interdependencies in line with the “holistic framework” idea were rare. this is supported in havemo (2018), which shows that for firms using visualizations of their business models in annual reports, it was common to depict the business model with few visual indicators of change (value creation logics). at the same time, bini et al. (2016) indicated that a range of business model descriptions were used in uk firms’ disclosures, from very limited to more expansive accounts, which suggests that firms use the business model as a communication device in different ways in their external communication. in their study of business model disclosures, giunta et al. (2013) observed what they call fashion effects in italian annual reports, suggesting that some firms report business models mostly because it is fashionable, i.e. an attempt at impression management. in a similar vein, melloni et al. (2016) sought to determine whether business model disclosure is informative by checking for thematic manipulation. with their sample of 51 companies that have adopted the integrated reporting (ir) framework, melloni et al. (2016) concluded that business model disclosure usually adopted a positive tone, which the authors argue is an indication of impression management. in sum, previous research has shown that firms report on the business model to different extents and for different purposes (bini, dainelli and giunta, 2016; melloni, stacchezzini and lai, 2016), and that there is a large span of interpretations of what business models mean to practitioners (george and bock, 2011; täuscher and abdelkafi, 2017; havemo, 2018). this suggests that the business model serves a purpose as a communicative device for firms. however, the literature on business models is largely framed in analytical rather than empirical terms, using a framework approach where the label “business model” is often used ex-ante to analyse an empirical material. with the exception of doganova & eyquem-renault (2009), who propose that the business model can serve as a “market device” for new ventures when engaging with investors, there are few studies indicating the practical uses of a business model as a communication device. taken together, these aspects leave a gap in the knowledge of how firms use the business model label in practice, which is the question that this study addresses through the purpose of exploring practitioner-described business models. journal of business models (2019), vol. 7, no. 2, pp. 14-30 18 research method to investigate practitioner-described business models, a single-case research design was chosen to allow for a comparison of the business model descriptions across communication arenas. it could therefore be described as empirically driven and exploratory. the case, a swedish new venture (“tech startup”), was chosen because the business model was a prominent element in the way the firm defined itself. as a fast-growing tech start-up in swedish industry, tech startup needed to be able to explain its value proposition to investors, similar to the venture in the study by doganova and eyquem-renault (2009), and this is where the business model played a part. in addition, by studying a small company with a limited scope of operations, it was expected that “business model” would refer to a single idea, enabling comparisons between communication arenas. tech startup produced, marketed and sold a consumer electronics product in the “wearables” segment, similar to products such as the fitbit activity tracker and the gopro action camera. at its peak, tech startup had around 50 employees in three swedish offices and one us office, and had attracted media attention in sweden and abroad as a start-up to watch. with hopes of rapid growth, the firm had taken on venture capital from multiple investors in several rounds. the time period covered in the interviews and other material (20142016) corresponds to the height of the firm’s success in the sense of having generated substantial venture capital to scale operations, and being in the process of launching a new version of its offering. given the new product launch, the interviews were characterized by a positive, if uncertain, outlook on the future. however, as of 2017, the company was no longer in business following the unsuccessful launch of the new product and the inability to sustain sufficient revenues, resulting in bankruptcy. one limitation of the paper is that, since the purpose is to explore practical articulations of the business model, there is no data available to speculate about any potential relationship between the business model and the bankruptcy of the firm. i will therefore not return to this aspect in the empirical section. to capture descriptions used across communication arenas, data was gathered from both public and nonpublic sources, including interviews, the annual report and a crowdfunding pitch. since the study’s aim is to explore the roles of practitioner-described business models, the focus on both internal and external uses of the business model allows issues to emerge based on the data collected from the case company. an overview of the sources for this study is presented in table 1. source public (y/n) description time frame business model mentions interviews n 2 semi-structured interviews with cfo, approx. 2 hours march/april 2015 high n 1 semi-structured interview with hr manager (hrm), approx. 1 hour june 2015 moderate company presentation n company presentation and q&a session by cfo to audience of junior and senior researchers, 1 hour march 2015 some crowdfunding pitch at kickstarter y the company’s crowdfunding pitch, where the product idea was described and customers could contribute funding 2012 none conference appearances y video from tech conference, interview/ panel with ceo 2013 some annual reports y publicly available annual reports 2013-2015 some online communication y tech startup’s website, including the company’s blog, which contained news 2014-2016 none (except press release) table 1: list of sources journal of business models (2019), vol. 7, no. 2, pp. 14-30 19 in the table, i also indicate the extent to which the business model was mentioned in the sources. understandably, the business model featured more clearly in the interviews, which were designed to discuss the business model, while the public sources ranged from no mentions to some mentions of the business model. for the internal perspective, three interviews were conducted with two managers at the case company. two semi-structured interviews were conducted with the cfo. the main interview used open-ended questions designed to allow the subject to discuss topics such as the business model, the value chain, and key stakeholders. the second interview was a follow-up interview to address topics not covered by the first interview, mainly regarding the firm’s partnering strategy and considerations regarding business model scalability. the interview with the hr manager addressed the topic of the business model, but also covered questions regarding hrrelated aspects in general, and collaborations within and outside the company. the hr manager was new to the company whereas the cfo had been with the company for a longer period. questions about the business model were open-ended in the sense that the term “business model” (in swedish) was used by both the interviewer and interviewees, but without an agreement about the definition of the term. the cfo leaned more towards external descriptions and activities, whereas the hr manager focused on boundary-spanning collaborations and on the task of managing human resources and activities inside the company. once it became clear that the interviewees used other definitions than i did, the rest of the interview discussions were interpreted based on this view rather than any theoretical definition that might otherwise be used. for example, the idea of seeing activities (which feature e.g. in the business model canvas by osterwalder and pigneur (2010)) as part of the firm’s business model was rejected by the cfo, who argued that the business model was “hardware plus software”. in addition, it was also clear in the material that the organizational members used the business model label differently depending on the context and the source of communication. both these aspects seem to be largely unexplored in the business model literature, and therefore came to serve as a point of departure for practitioner-based perspectives on business models. the method used to capture accounts of the business model was to use an interpretive approach. the usual limitations of interpretive analyses therefore apply: the interpreter cannot know for certain that every utterance has been interpreted as it was meant, nor that the communicators’ intentions have been captured in their entirety. however, to guide the analysis, i have taken care to be transparent about how the paper topic was developed in this chapter, and to include the interpreted texts (e.g. interview quotations, annual report content) as part of the empirical findings in the next chapter. after the interviews, which were recorded with the interviewees’ permission, the sessions were transcribed (in swedish, the interview language). the collected business model descriptions were gathered in a single file to provide an overview of the material (miles, huberman and saldaña, 2014). after this, the descriptions were organized in units based on instances where either the “business model” or the firm’s own chosen archetypal label “hardware plus software” was mentioned. instances from different sources were used to inform about either internal or external communication about the business model, but were treated as non-convergence evidence (yin, 2014) for the most part, since their use in the study was to address descriptions of the business model in different communication arenas, rather than confirming validity across data sources. for the external communication dimension, i collected publicly available data published by the company. the data exemplified how the firm presented itself in external channels such as on the website, in annual reports, at conferences, and in the crowdfunding project description that was originally used to finance the launch of the company’s product, most of which did not make explicit mentions of the business model. the public sources were intended to capture different communication arenas. for example, the annual report is a legally mandated document where claims made should account for the firm’s past activities and future strategies (stanton and stanton, 2002), while the company’s online communication on its website and blog might contain more customer-oriented information designed to present the company and its products in a favourable light. the sources were checked for mentions of the business model label (that is, journal of business models (2019), vol. 7, no. 2, pp. 14-30 20 texts that included the term “business model” or the words adopted as the business model label by the firm, “hardware and software”). although it can be seen as a limitation that the sample is relatively small, the collected material covers much of the public communication made by the company using its own channels (blog, website, annual report) during the studied time period, which allows for comprehensive coverage of external communication arenas. because the archetypal label “hardware and software” was so prominently used by the cfo and ceo, the analysis of the public and non-public material was inspired by massa and tucci’s (2014) classification of business model perspectives according to the degree of abstraction from reality. in their classification, narratives are the highest level of abstraction of business models, and these, along with the second highest level, archetypes, are more conceptual and therefore difficult to measure and compare since they contain little detailed information (archetype) or an abundance of company-specific un-coded information (narrative). in the business model literature, archetypes are generic labels that describe key elements of the business model (e.g. linder and cantrell, 2000; johnson, 2010), and are one way that practitioners’ business models are often identified in business discourse (purkayastha and sharma, 2016). popular examples include the southwest airlines business model (morris, schindehutte and allen, 2005; teece, 2010; fielt, 2013) and various firms’ interpretation of it (casadesus-masanell and ricart, 2010; aversa et al., 2015), as well as the razorand-blades (chesbrough and rosenbloom, 2002; osterwalder and pigneur, 2010; teece, 2010) and freemium business models. based on the “archetypal” way of defining business models as outlined above, it was clear that the case firm used mainly one level of abstraction for its business model, the archetype. this is why, in this study, the concept of business model label was operationalized using the case firm’s archetype-based label and thus drawing on the archetype perspective to understand the use of the business model term in practice. as a result, the analysis aimed to link the case firm’s archetypal label with (1) how the business model was described by the case company and in which communication arenas, and (2) what role the archetypal label played in the firm’s various descriptions of the business model. business model descriptions at tech startup this section provides an overview of the findings of the study in accordance with the purpose of exploring the roles of practitioner-described business models. the empirical case is outlined in the section “descriptions of the business model”, in which business model descriptions are introduced and discussed; this corresponds to the principle of abstraction from empirical data to the level of general concepts and theories in interpretive research (klein and myers, 1999). a small swedish start-up in the technology sector, tech startup designed, produced and marketed a tech product in the wearables segment. in addition to the physical hardware, the product also included software (data analysis algorithms) and a storage service for customers to store the data generated by the hardware and software. the integration of hardware and software was seen as integral to the company’s competitive advantage: “it’s the system as a whole (…) that’ll give us a competitive advantage.” (cfo, interview 2015). both elements were crucial for its value proposition, and the company strove to develop both aspects, leading the firm to describe its business model as “hardware and software”. for example, when asked to specify whether the company was a hardware company or a software company at a conference in 2013, the ceo maintained that “we are a hardware plus software company.” the cfo adopted the same approach to describing the business model in 2015: “the business model is hardware + software, […] a combination of upfront selling and after-market selling.” although at first glance this business model related to the product, the hardware/software also represented an overarching strategy for how the business was supposed to generate revenue, as explained by the cfo: “[w]e could run them as separate companies. (…) we should think like that in the business model as much as possible, that we don’t subsidize one with the other. (…) in this type of company, you need to be able to shift focus, in case it turns out we’re not making any money here, we need to shift to this and that.” (cfo, interview 2015) journal of business models (2019), vol. 7, no. 2, pp. 14-30 21 the idea of the “hardware/software” divide was closely linked to the revenue model and the profitability of the company. the cfo also commented on the link between customer value, profit and the business model, explaining that customer value was a key aspect when making decisions about future strategic directions for the business model: “if you ask the sales manager, he’ll say: ‘it’s problematic to sell a product that the customer feels he or she buys completely.’ it’s like with a mobile phone… the phone costs money, but for it to be valuable, you have to buy additional [services] all the time… you should find a way to charge for what the customer perceives as valuable, and not charge for the rest. so if it turns out that it’s the software that’s valuable, then you might want to lease the hardware to the customer, and have them pay a monthly fee that’s three times as high… and have them return the hardware when they’re done… that’s why we want to keep them separate, to be able to change our focus.” (cfo, interview 2015) in addition to showing that the role of the business model was closely intertwined with the cfo’s reasoning about the future directions of the firm, the quotation demonstrates another role for the archetype. by using a recognizable label that held both generic shared meaning and local meaning within the firm, the cfo could draw on the generic archetypal label to link the firm’s business model to similar models in other industries, in this case mobile phones. based on this, the generic logics could be adapted to the firm’s local setting by using these terms to discuss revenue and customer value based on the company’s own products. as indicated in the above quotation, the interviews suggested that the business model archetype was used by tech startup to discuss changes now and in the future. in 2015, tech startup was in the process of iterating possible approaches to find a viable balance between its hardware and software offerings. the ability to shift from one to the other, depending on which was more profitable, was viewed as a foundation for future strategic change by both the cfo and the hr manager. for example, the hr manager stated that the business model’s focus was “… both hardware and software… but in case we don’t become profitable, we might have to change our focus somehow.” (hr manager, interview 2015). in line with this, the hr manager stressed the developing nature of the business model, explaining that: “i would say that our business model… if you look at what we actually do, it’s to create an innovative product that is revolutionary in the market… and the business model that we are building around that, it’s about trying to—first and foremost maybe not about being profitable, but to have alternative financing—but in the long term to become profitable… so i think our business model is very challenging, because right now we don’t even know what’s going to happen with the second generation [of the product].” (hr manager, interview 2015) the above quotations from the cfo and the hr manager show that the business model was seen as developing, and that the developments were framed in terms of the cognitive schema afforded by the archetypal label “hardware and software”. some discussions of the business model were centred around future directions: it was about becoming profitable, and about viewing the two elements (product features) as two sides of the product offering, although that balance was not absolute but rather reconsidered on a continuous basis. put differently, the archetypal label served as a lens to focus discussions and to pick out key strategic points of interest in relation to the offering, customer value and profitability concerns. the annual report description was one of the few occasions where a link was made between activities (what the company does) and what products or offerings each activity related to. for example, the 2014/15 annual report stressed that the software and the hardware were being developed separately. this created a conceptual link between the business model label at the archetypal level and the setup of activities linked to each part (development and sales). the annual report also stated that the business model was to sell the offerings separately from each other, highlighting separation as a key element of the business model, emphasized in writing by using the word “separate” twice: “the [hardware] and the software are developed separately and the company’s business model is to sell them separately.” (annual report, 2014/15) journal of business models (2019), vol. 7, no. 2, pp. 14-30 22 in the annual report of the following year, the term “business model” was no longer included in the narrative section of the annual report, although the essence of the message remained the same: “the company develops and sells hardware and software” (annual report, 2015/16), which may suggest that the label “business model” was no longer thought to be necessary to frame the descriptions of the company, and also that the archetype label had come to be seen as equivalent to a business model within the firm. in contrast to the explicit use of the term “business model” externally, internally the idea that the company should be “separated into two parts” was not part of the informants’ conceptualizations of operations. on the contrary, the prevailing idea in terms of activities was that that tech startup should be perceived as one company from the customer’s perspective. for example, the cfo stated that: “the business model should only be kept separate in the sense of a business model. we’re supposed to look like one company. it’s the same thing with the american subsidiary, for instance. we want to look like one company. completely.” (cfo, interview 2015) in the cfo’s view, it was important that customers perceive the company as one, rather than as two separate entities delivering the physical product and the software product separately. one way to achieve this perception was to ensure that the support function was fully integrated, and that employees understood the whole value chain from the customer’s perspective. the cfo put it the following way: “the support function is the same throughout the two value chains [of hardware and software]. it’s the same support. we want the customer to perceive it the same way. it’s separate in the business model so that we can shift focus, but from the customers’ perspective, we want it to work the same way, that they should be able to ask the same person.” (cfo, interview 2015) this shows that the cfo was careful to separate the idea of the business model (the strategic description or the idea of the company), and the actual activities taking place such as the support function or the development functions. the strategic label acted at a different level of abstraction than the operational side of the business, and the cfo argued that these aspects were, in fact, not the same thing, and as a result, it was possible to reason with opposing descriptions (the hardware and software as separate or integrated) of the business model depending on the context it was applied to. thus, at the activity level (the lowest level of abstraction in massa and tucci’s (2014) framework), the business model was secondary to the practicalities of running the company, as well as the perceived source of customer value. the goal to be perceived as one company regardless of the overall business model logic, and legal structures in different markets, was also reflected in the internal organization of the company. as shown above, this was reflected in customer support operations, but the approach is also present in the developer team, although the competences and skills of the developers might get in the way of complete integration between the two, as pointed out by the cfo: “… it’s not two separate companies. the developers do a little bit of this and a little bit of that. though of course, if you do circuit board design one day you won’t work with front-end design the next day. [the developers] have their specialized skill sets.” (cfo, interview 2015) one implication of the above descriptions is that there were differences between internal and external communication arenas in the sense that external descriptions treated hardware and software products as separate and complementary, while internal descriptions instead stressed the integration of the two. this idea is in line with the view that business models can exist on many levels of—different but still cohesive—abstractions (jensen, 2013). in the case of tech startup, however, it was not only the representation that differed, but also how the business model was constructed in different communicative arenas. for example, the hr manager raised the issue of unity by stating that: “we are fairly ‘undefined’ regarding our vision and mission and so on.” (hr manager, interview 2015). this quotation highlights that the hr manager saw the business model as a strategic tool, linking it to other strategy concepts such as vision and mission, but also that there was a lack of agreement about the meaning of the business model internally. journal of business models (2019), vol. 7, no. 2, pp. 14-30 23 externally, the company communicated about the business model in some communication arenas, such as the annual report, but not in customer-oriented contexts. for example, the blog entries on the website primarily focused on the value proposition to customers, giving numerous examples of customers enjoying the product. in a similar vein, the crowdfunding pitch that was used to support the launch of the product did not mention the term “business model” or the “hardware and software” label, instead focusing on the product development process, collaborations established to develop the product, and, most prominently, the product specifications and value proposition to the customers. interestingly, these are aspects often interpreted as elements of the business model in business model studies (e.g. osterwalder and pigneur, 2010; zott and amit, 2010), but the terms were not linked to the business model concept at tech startup. the business model was, however, mentioned in the annual report, and was brought up at a technology conference panel attended by the ceo in 2013, where several follow-up questions addressing the nature of the business model were posed by the audience. at the internal level, this section of the paper has shown that the cfo treated the business model as a framework to describe the company’s operations in terms of its two main products (hardware and software). conversely, the hr manager focused more on the internal perspective and also noted a lack of unity in views on the business model among the managers. however, although the cfo did describe the customer experience in terms of the business model archetype, this was done by downplaying the separation of hardware and software. similarly, descriptions relating to internal operations did not incorporate the idea of the archetype hardware/software, nor was the business model explicitly mentioned in other ways. rather, descriptions of the company’s internal operations focused on the activity level, which indicates that the firm adhered to the archetype only when addressing audiences which were familiar with term business model, and expected the term to be used. although the business model archetype was used to communicate with both internal (e.g. other managers, employees) and external audiences (e.g. investors, industry experts and readers of the annual report), the label as such was not necessarily adopted at all levels. roles of the archetype in the new venture in this section, i analyse the data presented in the previous section in terms of which roles the business model played at tech startup. at tech startup, the archetypal label “hardware and software” served as the main way to conceptualize the business model. despite not serving as a cognitive schema on all internal levels, nor acting as a key communication device in external communication arenas, the material in the previous section highlights that the business model, expressed as an archetypal label, played a number of roles as a communication device, and more broadly, as a cognitive schema. based on the discussion in the previous section, i have identified three roles of the archetype, summarized in table 2 below, and discussed in the following subsections. communicating strategy the first, and perhaps most prominent role in the interviews and external data, was the role of the archetype when communicating the strategy. this was done by adopting the label “hardware and software” when describing the firm to external audiences, thus helping tech startup to derive legitimacy from the use of established terminology and meaning. the archetype role description communicating strategy the archetype provided the terminology for communicating the strategy externally, e.g. to investors and industry professionals. the label became the foundation for theorizing about customer value internally, helping to frame value creation mechanisms. learning from others the archetype helped in identifying similar models in other industries to learn from, in the sense of the archetype acting as a “recipe” to mimic. articulating identity in the logic of “becoming” successful as a new venture, the label helped to articulate a future identity, serving as “scaffolding” for reflecting on differences and thus articulating on perceptions of the firm’s identity. table 2: roles of the business model archetype in the new venture journal of business models (2019), vol. 7, no. 2, pp. 14-30 24 provided the terminology for describing the underlying logic of the business for the hardware and software model, which both acted to enable ways of thinking, and constrained possible strategies based on the current structure. at the internal level, the label also helped to elucidate sources of customer value. interestingly, depending on which communication arena the label was used to communicate in, different aspects of the business model were highlighted in relation to the archetypal label. externally, communication focused on the revenue model and offering, i.e. how to generate value with the two products, hardware and software. for instance, the revenue dimension was present in the ceo’s description of the company to the external audiences of experts from the tech industry. when discussing the business model from an internal perspective, however, the production logic of the integration of hardware and software was stressed as opposed to the externally conveyed idea of separation. learning from others second, tech startup used the archetypal label to draw inspiration and make comparisons with companies operating similar business models in other industries. this corresponds to the perspective that a business model label transcends firm contexts and that the basic elements of a business model can be generalized, and thus compared, across industries (baden-fuller and morgan, 2010). this study shows how the business model can be used in this manner as a way to both legitimize the local adaptation of the business model idea and draw inspiration from other industries using the same label. the case also adds to business model theory by showing that archetypal labels can be translated from the generic to the specific in a company setting, and that this allows the generic label to play several roles in practice rather than simply as a label, which is one of the criticisms directed against business model conceptualizations at the generic levels of narratives and archetypes (massa and tucci, 2014). this corresponds with research that explores the multifaceted and complex processes of translation as business models are adopted and adapted in a sustainability context (ahlgren ode and wadin, 2019). articulating identity the third role played by the archetypal label was as “scaffolding” for articulating the firm’s current and future identity. the interviews suggest that the label was not merely a generic word used in external communication, but that it had also became a language for describing the firm, i.e. a way to articulate the identity of the firm. the scaffolding function worked both by constraining the number of possible business model interpretations, and as an enabler of different future interpretations based on a single logic. an example of potentially constraining scaffolding was how the cfo, having supported the idea of the business model as the archetype “hardware/ software”, instantly dismissed other perspectives on business models in the interviews, such as it being a set of activities, a system, or a network, which are common perspectives on business models among researchers (see e.g. amit and zott, 2001; hedman and kalling, 2003; zott and amit, 2010; wirtz et al., 2016). this is similar to the way nokia’s top management acted when forced to consider alternative strategic directions in the study by aspara et al. (2013). for nokia’s management, the difficulty was not in detecting new opportunities, but rather in reaching consensus about how to pursue them. in contrast, tech startup’s (mainly) external focus on the hardware/software archetype seems to have served as a cognitive constraint in the sense of it becoming a dominant logic (prahalad and bettis, 1986) for thinking about the business model in the first place. in addition to the limiting role outlined above, the archetypal label could also be seen as an enabler, for example to link the present situation to planned future strategic decisions. the idea of “having two legs to stand on” and the dynamic role of the two products in the process of “becoming profitable” recurred throughout the interviews and became the basis upon which to present a future state. vendelø (1998) studied a software firm’s attempts to establish legitimacy as a new venture, finding that reputation narratives (a kind of identity articulation) were future oriented because there was little in the way of present performance that could serve as evidence of performance. similarly, this study highlights that the archetypal label played a role in providing a legitimating foundation for describing an intended future state since the interviewees’ descriptions focused on the future viability of the business model—whether the firm would “become” profitable. for instance, profitability was described as a matter of current and future concern for the interviewees, and one of the determinants of the current strategy journal of business models (2019), vol. 7, no. 2, pp. 14-30 25 was the perceived ability to change the focus between hardware and software in the future. the perspective of “becoming” is in line with the view of entrepreneurship advocate steve blank, who argues that a key difference between new and established ventures is that “while existing companies execute a business model, start-ups look for one” (blank, 2013, p. 67). the quest described by the informants, of becoming a viable firm, largely corresponds with blank’s description of startups looking for a business model. however, in tech startup, this search was framed in terms of a generic label, with the “becoming” aspect revolving around operationalizing this label in practice. in line with this, it has been recognized that the business model can play a key role for new ventures by providing a “framework that assists the entrepreneur in assessing consistencies and recognizing trade-offs among decisions” (malmström and johansson, 2017, p. 2). tech startup’s choice to keep the hardware and software elements separate on a strategic level can be explained as a design strategy to remain flexible in case the company learned that one side of the business was more profitable than the other. in fact, a solidification of the business model seemed difficult precisely because the company was in the process of growing a customer base and developing a new generation of products. in other words, the case describes the difficulty in conceptualizing the business model concretely and consistently in the start-up phase, which may be related to the company’s ongoing quest to find a viable business model. one implication of this is that, for new ventures, descriptions of the company or its business model could be descriptions of the intended future state on which to build reputation, rather than an intended representation of the present, but with the downside of different conceptualizations depending on the purpose and audience. for researchers looking to understand business models that are undergoing pressures of change, it is important to consider different levels of abstraction and the dynamism of the business model during the ongoing process of searching for a viable configuration. conclusion this study offers an example of how business models have been conceptualized in a practitioner case. the purpose of this paper is to explore the roles of a practitioner-described business model by focusing on its role as a business model archetypal label in practice. the literature review indicated that the business model field has yet to show what the business model does in practice when used as a communication device (massa, tucci and afuah, 2017) by firms. in response to this gap, the study shows that the adopted business model archetype can play both an enabling and a constraining role in firms’ communication about their business model. the business model label, although not conforming to academics’ notion of what a business model should contain, nevertheless helped the case firm to identify similar business models in other contexts to learn from, which is in line with baden-fuller and morgan’s (2010) idea of the business model as a recipe to replicate and to learn from. finally, the business model helped to articulate the current and future strategy of the new venture. this study expands the theoretical knowledge of business models by showing how archetypal business model labels can be interpreted and enacted in practice, and how the business model concept can be understood as a communication device that contributes to constructing the idea of the firm, e.g. as part of articulating the firm’s identity. through the case explored in this paper, i have exemplified how business models help to construct reality through labels as discussed by hines (1988). as opposed to previous studies, which have described archetypal labels as parsimonious at the expense of practical usefulness (massa and tucci, 2014), this study shows that the translation of generic ideas from an archetype to a company setting is possible once the label is integrated as a communication device that guides communication, learning and identity articulation. the findings could inspire new practice-based research and business model teaching, taking practitioners’ business model conceptualisations and business model label use as a point of departure. considering the current popularity of practice-oriented research, a key contribution of this study is to exemplify the number of roles that business models can play when used as a communication device in firms, and that there may be different interpretations of the business model within a single firm. it is important to try to capture the hitherto neglected diversity of the term on the practitioner side both across and within firms, especially with the growing academic interest journal of business models (2019), vol. 7, no. 2, pp. 14-30 26 in business models, and the trend that regulatory bodies encourage reporting on business models (e.g. frc, 2014), but often in divergent ways (michalak et al., 2017). for instance, this study shows that there seems to be a difference in how the business model is described depending on the informant’s role in the firm—the hr manager’s perspective was more internally focused, while the cfo, whose job involved pitching the idea to investors, tended to adopt an archetypal label as a means to describe the business model. finally, this study also challenges the often present, but rarely explicated, assumption that a firm has a single, clearly stated, and effectively shared, business model. the “one firm, one business model” motto is often an implicit assumption; in the financial reporting literature, for example, it is suggested that the firm’s business model could serve as a holistic framework in reporting, indicating that there is only one business model. similarly, in the business model literature, studies often imply the existence of a single model, e.g. zott and amit (2007), who coded firms according to two business model design parameters, efficiency and novelty. in contrast to this finding, this study instead implies that there can be more complexity in business models than the “one firm, one business model” assumption implies. multiple ideas, complementary and contradictive, may exist at once. this is something which might change how we investigate business models in firms: rather than discussing the business model of the firm, research will need to consider which multiple business logics are at play, and how these are interrelated—for example, are they nested logically from a shared overarching business logic but at different levels of abstraction, are they related but not directly connected (e.g. focusing on different product categories, or markets), or, as this study shows, do they cover multiple, sometimes contradictory, meanings? the interpretation and description of business models in firms would differ depending on each, and an awareness of the logic at play when investigating firms that claim to have business models is needed. journal of business models (2019), vol. 7, no. 2, pp. 14-30 27 references ahlgren ode, k. and wadin, j. (2019) ‘business model translation: the case of spreading a business model for solar energy’, renewable energy, 133, pp. 23–31. amit, r. and zott, c. (2001) ‘value creation in e-business’, strategic management journal, 22(6–7), pp. 493–520. aspara, j. et al. (2013) ‘corporate business model transformation and inter-organizational cognition: the case of nokia’, long range planning, 46(6), pp. 459–474. aversa, p. et al. (2015) ‘from business model to business modelling: modularity and manipulation’, in baden-fuller, c. and mangematin, v. (eds) advances in strategic management, pp. 151–185. baden-fuller, c. and mangematin, v. (2013) ‘business models: a challenging agenda’, strategic organization, 11(4), pp. 418–427. baden-fuller, c. and morgan, m. s. (2010) ‘business models as models’, long range planning, 43(2–3), pp. 156–171. beattie, v. a. and smith, s. j. (2013) ‘value creation and business models: refocusing the intellectual capital debate’, the british accounting review, 45(4), pp. 243–254. bini, l., dainelli, f. and giunta, f. (2016) ‘business model disclosure in the strategic report: entangling intellectual capital in value creation process’, journal of intellectual capital, 17(1), pp. 83–102. blank, s. (2013) ‘“lean” is shaking up the entrepreneurial landscape’, harvard business review, 91(5), pp. 63–72. bukh, p. n. (2003) ‘the relevance of intellectual capital disclosure: a paradox?’, accounting, auditing & accountability journal, 16(1), pp. 49–56. casadesus-masanell, r. and ricart, j. e. (2010) ‘from strategy to business models and onto tactics’, long range planning, 43(2–3), pp. 195–215. chesbrough, h. w. and rosenbloom, r. s. (2002) ‘the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies’, industrial and corporate change, 11(3), pp. 529–555. dasilva, c. m. and trkman, p. (2014) ‘business model: what it is and what it is not’, long range planning, 47(6), pp. 379–389. demil, b. and lecocq, x. (2010) ‘business model evolution: in search of dynamic consistency’, long range planning, 43(2–3), pp. 227–246. doganova, l. and eyquem-renault, m. (2009) ‘what do business models do? innovation devices in technology entrepreneurship’, research policy, 38(10), pp. 1559–1570. fielt, e. (2013) ‘conceptualising business models: definitions, frameworks and classifications’, journal of business models, 1(1), pp. 85–104. frc (2014) ‘guidance on the strategic report’. london: financial reporting council. journal of business models (2019), vol. 7, no. 2, pp. 14-30 28 george, g. and bock, a. j. (2011) ‘the business model in practice and its implications for entrepreneurship research’, entrepreneurship theory & practice, 35(1), pp. 83–111. giunta, f., bambagiotti-alberti, l. and verrucchi, f. (2013) ‘business model disclosure: evidence from annual reports of italian listed companies’, oxford journal: an international journal of business & economics, 8(1), pp. 27–39. haslam, c. et al. (2015) ‘accounting for business models: increasing the visibility of stakeholders’, journal of business models, 3(1), pp. 62–80. havemo, e. (2018) ‘a visual perspective on value creation: exploring patterns in business model diagrams’, european management journal, 36(4), pp. 441–452. hedman, j. and kalling, t. (2003) ‘the business model concept: theoretical underpinnings and empirical illustrations’, european journal of information systems, 12(1), pp. 49–59. hines, r. d. (1988) ‘financial accounting: in communicating reality, we construct reality’, accounting, organizations and society, 13(3), pp. 251–261. icaew (2010) business models in accounting: the theory of the firm and financial reporting. the institute of chartered accountants in england and wales. available at: icaew.com/frf. jensen, a. b. (2013) ‘do we need one business model definition?’, journal of business models, 1(1), pp. 61–84. johnson, m. w. (2010) seizing the white space: business model innovation for growth and renewal. boston: harvard business press. klein, h. k. and myers, m. d. (1999) ‘a set of principles for conducting and evaluating interpretive field studies in information systems’, mis quarterly, 23(1), pp. 67–93. linder, j. and cantrell, s. (2000) ‘changing business models: surveying the landscape’. accenture institute for strategic change. magretta, j. (2002) ‘why business models matter’, harvard business review, 80(5), pp. 86–92. malmström, m. and johansson, j. (2017) ‘practicing business model management in new ventures’, journal of business models, 5(1), pp. 1–13. martins, l. l., rindova, v. p. and greenbaum, b. e. (2015) ‘unlocking the hidden value of concepts: a cognitive approach to business model innovation’, strategic entrepreneurship journal, 9(1), pp. 99–117. massa, l. and tucci, c. l. (2014) ‘business model innovation’, in dodgson, m., gann, d. m., and phillips, n. (eds) the oxford handbook of innovation management. oxford: oxford university press, pp. 420–441. massa, l., tucci, c. l. and afuah, a. (2017) ‘a critical assessment of business model research’, academy of management annals, 11(1), pp. 73–104. melloni, g., stacchezzini, r. and lai, a. (2016) ‘the tone of business model disclosure: an impression management analysis of the integrated reports’, journal of management & governance, 20(2), pp. 295-320. michalak, j. et al. (2017) ‘business model disclosures in corporate reports’, journal of business models, 5(1), pp. 51–73. journal of business models (2019), vol. 7, no. 2, pp. 14-30 29 miles, m. b., huberman, a. m. and saldaña, j. (2014) qualitative data analysis: a methods sourcebook. 3rd edn. los angeles: sage. morris, m., schindehutte, m. and allen, j. (2005) ‘the entrepreneur’s business model: toward a unified perspective’, journal of business research, 58(6), pp. 726–735. nielsen, c. and bukh, p. n. (2011) ‘what constitutes a business model: the perception of financial analysts’, international journal of learning and intellectual capital, 8(3), pp. 256–271. nielsen, c. and roslender, r. (2015) ‘enhancing financial reporting: the contribution of business models’, the british accounting review, 47(3), pp. 262–274. olve, n.-g. et al. (2013) prissättning: affärsekologier, affärsmodeller, prismodeller. lund: studentlitteratur. osterwalder, a. and pigneur, y. (2010) business model generation: a handbook for visionaries, game changers, and challengers. hoboken: wiley & sons. osterwalder, a., pigneur, y. and tucci, c. l. (2005) ‘clarifying business models: origins, present, and future of the concept’, communications of the association for information systems, 16(1), pp. 1–38. petri, c.-j. (2014) ‘using an innovative price model to leverage the business model: the case of a price model innovation in the largest swedish taxi company’, journal of business models, 2(1), pp. 56–69. prahalad, c. k. and bettis, r. a. (1986) ‘the dominant logic: a new linkage between diversity and performance’, strategic management journal, 7(6), pp. 485–501. purkayastha, n. and sharma, s. (2016) ‘gaining competitive advantage through the right business model: analysis based on case studies’, journal of strategy and management, 9(2), pp. 138–155. täuscher, k. and abdelkafi, n. (2017) ‘visual tools for business model innovation: recommendations from a cognitive perspective’, creativity and innovation management, 26(2), pp. 160–174. teece, d. j. (2010) ‘business models, business strategy and innovation’, long range planning, 43(2–3), pp. 172–194. vendelø, m. t. (1998) ‘narrating corporate reputation’, international studies of management & organization, 28(3), pp. 120–137. wirtz, b. w. et al. (2016) ‘business models: origin, development and future research perspectives’, long range planning, 49(1), pp. 36–54. yin, r. (2014) case study research: design and methods. 5th edn. los angeles: sage. zott, c. and amit, r. (2007) ‘business model design and the performance of entrepreneurial firms’, organization science, 18(2), pp. 181–199. zott, c. and amit, r. (2010) ‘business model design: an activity system perspective’, long range planning, 43(2–3), pp. 216–226. zott, c., amit, r. and massa, l. (2011) ‘the business model : recent developments and future research’, journal of management, 37(4), pp. 1019–1042. journal of business models (2019), vol. 7, no. 2, pp. 14-30 30 emelie havemo is currently a phd candidate at the department of management and engineering, linköping university. she is interested in the ongoing trend to use visual communication in society as well as in organisations. this trend is explored by studying the role of representations in the world of business, for example the role that business models play when constructing the idea of the organisation to various stakeholder groups. emelie’s previous research has added novel insights on the visual side of business models by exploring the use of business model diagrams in annual reports and the historical roots of visuals in financial reporting. about the authors 35 journal of business models (2021), vol. 9, no. 1, pp. 35-42 the study investigates a business model transformation of a service provider on a sharing economy platform using a dynamic business model perspective. the study takes an inductive approach and draws on a set of semi-structured interviews, observations and other sources from a longitudinal single case study. the study is among the first ones to depict the process of the business model transformation of a service provider on a sharing economy platform along four dimensions: resource structure, organization structure, value proposition, and process dimension, i.e. “trial-anderror experimentation”. the study also uncovers the service provider’s multiple channel api (application programming interface) strategy whereby the provider uses api to cross-list the listings on various online platforms. this strategy has implications for other providers and platforms within the sharing economy context. business model transformation of a service provider on a sharing economy platform olga novikova1 please cite this paper as: novikova, o. (2021), business model transformation of a service provider on a sharing economy platform, journal of business models, vol. 9, no. 1, pp. 35-42 keywords: business model transformation, sharing economy, hospitality, multiple channel strategy 1 hanken school of economics doi: https://doi.org/10.5278/jbm.v9i1.4281 abstract journal of business models (2021), vol. 9, no. 1, pp. 35-42 3636 introduction during the last few years the phenomenon of sharing economy, also referred to as collaborative economy or even on-demand economy, became almost ubiquitous. even though some argued that the term has been misleading (slee, 2015), the sharing economy has firmly accommodated itself in the popular press (economist, 2013; karsten, 2017; owyang, 2016) and has also found its way into the academic research (laamanen, pfeffer, rong and van den ven, 2018; mitchell and strader, 2018). the sharing economy is an umbrella concept (acquier, daudigeos and pinkse, 2017) that covers diverse sectors and a variety of organizational forms and practices, both for-profit and non-profit (schor, 2014; sundararajan, 2016). examples of companies disrupting traditional industries are abundant and range from accommodation marketplace airbnb in hospitality industry (http://airbnb.com), to transportation network uber (http://uber.com) and carsharing company zipcar (http://zipcar.com) in transportation industry, to peer-to-peer landing platform zopa (http://zopa.com) in finance, and online course platform coursera (http://coursera.org) in education (botsman, 2012, 2013; owyang and samuel, 2015). despite a surge of attention to the sharing economy, little is known about the business model development of service providers that constitute one of the pillars and driving forces behind the growth of sharing economy. studying business models within the sharing economy is particularly important because of their novel nature and a potential to disrupt established industries (dreyer, lüdeke-freund, hamann and faccer, 2017). this paper aims to enhance knowledge on business model evolution in the context of sharing economy, with a focus on business model transformation of a peer service provider on a sharing economy platform, which has been identified as important but under-researched area (benoit, baker, bolton, gruber and kandampully, 2017). this will be achieved by answering the following exploratory question: how does a hobbyist peer provider in sharing economy develop its business model in the process of becoming a professional service provider? the longitudinal study is based on the data obtained from interviews, analysis of company documents, discussions, and observations of a sharing economy peer service provider from finland. the paper begins with a review of business model literature to anchor this research in its specific context. then, the methodology section is presented followed by the empirical findings. finally, findings, limitations and future research directions are discussed. approach the primary intention of this research was the exploration of the business model development in the context of sharing economy in a particular case of a peer provider on a sharing economy platform. the study was designed as a qualitative single case study (yin, 2003; demil and lecocq, 2010) due to the explorative nature of the research question and limited amount of research conducted in the area of business model development within the particular context. the data for this study has been collected through semi-structured interviews, participatory observations in the meetings, discussions and analysis of company documents, available for the years 20132018, to ensure triangulation of various methods (gibbert, ruigrok and wicki, 2008). in addition, website information, publicly available digital documents and other online media resources were used to deepen the understanding of the studied phenomenon. such approach has been pursued to ensure the robustness of the study (creswell, 2007; denzin and lincoln, 2003). the data was collected during five years period from 2013 to 2018. as typical of inductive research, the analytical process was iterative and overlapped with the data collection (yin, 2003). the data collection consisted of several phases. initially, 11 interviews with the peer provider and users of the particular peer provider services on airbnb platform were conducted. further, 12 interviews with both professional and non-professional peer providers on airbnb platform were conducted in order to uncover the motives, challenges and actual processes of hosting on the peerto-peer platform. additionally, interviews with sharing economy experts were conducted to gain deeper understanding of the sharing economy phenomenon. in total, 30 interviews (ranged from 45 minutes to 1 hour 30 minutes) were conducted for this study. journal of business models (2021), vol. 9, no. 1, pp. 35-42 3737 the interviews were recorded and later transcribed, followed by a coding procedure where firstly basic codes were identified and summarized, and later grouped into meaningful themes using thematic coding procedure (miles, huberman and saldana, 2013). the secondary data was triangulated towards the insights obtained from the interviews. based on the data derived from the interviews and company documents a factual timeline of critical events in the process of firm evolution was constructed. the emerging findings were iteratively discussed with the peer provider to gain further insights and sharpen the understanding of their business model development. key insights case description the empirical setting of this study is hospitality context of the sharing economy, with focus on a service provider or ‘host’ on a peer-to-peer accommodation platform airbnb. the service provider of this case study is located in finland. the peer provider has started its operations in 2011 by becoming an individual host on airbnb platform with two properties. in 2013 the host has decided to establish a venture that would focus on a branded hotel experience. at the same time, together with like-minded entrepreneurs he created a business entity that rented several apartments in helsinki in order to further list them on airbnb platform. the apartments were co-called themed apartments, with every apartment named and decorated according to a certain theme. in 2014 the company has expanded its offering to over 20 apartments, whereby apartment’s interior design was streamlined and themed apartments lost in importance. in 2014, after observing the declining occupancy rates for the apartments listed on airbnb platform, the case company ’s board of directors has decided to list the apartments on different hospitality channels, such as i.e. booking.com and hotels. com. the cross-listing of properties on multiple online channels and subsequent increased exposure of the apartments to potential guests have raised the occupancy rates and enabled to further expand operations by doubling the amount of apartments to rent. at the same time, an own website and brand were created, whereby apartment rental bookings began also through an own channel. as of 2018, only 7% of company ’s revenue came from airbnb, compared to 100% before, around 50% of revenue came through booking.com, and over 30% from its own channel. the growth of the business entity through multichannel strategy has allowed to strengthen the brand and potentially expand the provider’s value proposition towards becoming a service provider to other peer providers within sharing economy hospitality space. resources and competencies the resources of the organization may be developed internally or come from external markets, while the competencies refer to the abilities and knowledge of managers to develop the services their resources can offer (demil and lecocq, 2010). the experience, diverse knowledge, expertise and skills of co-founders and shareholders of the company that evolved into a professional service provider have played a substantial role in the business model creation and development. shareholders’ complementary capabilities regarding the value network aspects, such as legal, real estate management, property sales and technology have been instrumental for the company. in the process of business model development, the host has acknowledged the financial resources as a major challenge in sustaining of business operations. organizational system the organizational structure pertains to the organization’s activities and relations it has established with the stakeholders in order to utilize and exploit its resources. it encompasses the activities and value network consisting of relations with its suppliers, customers, competitors and regulators (demil and lecocq, 2010, amit and zott, 2001). the organizational system of a service provider consisted of online platforms, customers, government, city and professional organizations and competitors. value proposition the value proposition of a peer provider has changed with the process of the business model evolution. starting as an individual host on airbnb platform with focus on experience accommodations, the peer provider has formed a business entity and exjournal of business models (2021), vol. 9, no. 1, pp. 35-42 3838 panded its offering. later, faced with the challenge of booking calendar synchronization, peer provider adopted a multichannel api strategy, and was able to increase exposure and absorb the demand on various hospitality channels (beritelli and schegg, 2016). finally, own brand experience living was created and expanded, with a potential future focus on becoming an operator for other peer providers discovery driven approach in the process of business model transformation the peer provider has adopted a discovery driven approach. as mcgrath puts it, “discovery driven processes demand that business model assumptions are both articulated and tested. having come up with an idea that an executive thinks represents an opportunity, the next step is to validate whether it can really deliver a compelling result for the company” (2010: 258). in the process of discovering the right approaches as new information is revealed, the peer provider has embraced an interplay of “trial–and-error experimentation” i.e. exploration and exploitation of emerging opportunities (ahokangas and myllykoski, 2014; sosna, trevinyo-rodríguez and velamuri, 2010). indeed, the peer provider has revealed the instances reflecting on the process of trial and error in business model development: “we made many mistakes during this past. we hired a lot of cleaners, service people. that’s not scalable, then you are stuck with your human resource cost.” [peer provider] “now we are trying to outsource scalable resource model, when we don’t have any people on our hr and we pay per cleaning/service.” [peer provider] trial and error learning (sosna et al., 2010) is influenced by cognition of the entrepreneur, in form of cognitive maps that can be conceptualized as perceptions of environmental cognitions coupled with own prior knowledge. this is reminiscent of the notion of ‘entrepreneurial judgement’ as put forward by penrose (1959), the ability to discover new ways of dealing with known problems, perceive productive possibilities outside of the established routines and engage in the process of carrying out new combinations of resources in development of a venture (ghoshal, hahn and moran, 1997; langlois, 1995). multichannel api strategy during the process of professionalization, growth has become one of the provider’s major objectives: “we need to keep up pace of multiplying every year, otherwise it dies. we just need to keep up growing, and the bigger multiplier we can achieve, the better.” [peer provider] observing the limited demand on airbnb platform as one of the major obstacles for growth, peer provider has pursued a multiple online channel strategy with the use of apis. beritelli and schegg (2016) find out in their recent study on traditional hospitality channels, that the multiple online channel strategy seems to be the more effective approach to maximizing bookings online, regardless of the platforms chosen. in this study ’s case, the sharing economy provider has utilized apis in order to synchronize booking calendar across channels. application programming interface, or api, is “a way for two computer applications to talk to each other over a network using a common language that they both understand” (jacobson, brail and woods, 2012). the api, in its simplest description, is a contract that allows software to communicate with each other and share information. apis are becoming enablers of omnichannel selling and diverse service business models and could be most useful in creating new business models and streamlining selling across all channels. the greatest revenue potential they provide is removing barriers to growing revenue by integrating platforms and apps so organizations can launch new business models and scale fast (jacobson et al., 2012). so far apis has been looked upon as a tool for organizations (zachariadis and ozcan, 2017). however, with users of sharing platforms becoming businesses in themselves, a new potential use for api is emerging. indeed, the peer provider has acknowledged the revenue optimization and commissions management that was enabled by the multichannel api strategy: “until everyone is linked to every sales channel, you have competitive advantage, where you can optimize revenue according to sales channel demand and everything, you can charge a bit lower price on airbnb because airbnb has significantly lower commission, than booking.com.” [peer provider] journal of business models (2021), vol. 9, no. 1, pp. 35-42 3939 discussion and conclusions this study has explored the process of business model development in the context of sharing economy, with a focus on the professionalization of a peerprovider on a sharing economy platform. the study is the among the first ones to depict the adopted strategies of the service provider, that have been identified as important but under-researched areas in the emergent literature on sharing economy (benoit et al., 2017). embedded in the penrosian (1959) dynamic view of the firm growth and consistent with the conceptualization of demil and lecocq (2010) and george and bock (2011), the study presents the business model development along four dimensions: resource structure, organization structure, value proposition, and process dimension, i.e. “trail-and-error experimentation”. the peer provider has adopted a discovery driven approach in the process of business model transformation, whereby embracing the interplay of “trial-and-error experimentation” with emerging opportunities (sosna et al., 2010) and exercising ‘entrepreneurial judgement’ in carrying out new combinations of resources in creation of a new venture and development of its business model (ghoshal et al., 1997; langlois, 1995, penrose, 1959). the study contributes to the emerging literature on dynamic perspective of business models with its focus on actual process of business model development (wirtz and daiser, 2018; wirtz, göttel and daiser, 2016) in a new context of sharing economy. it also introduces the concept of api – application programming interface – as a strategic tool utilized in business model development. the findings of this study have practical implications for online sharing platforms and peer service providers. the increasing impact of the sharing economy on hospitality industry has been noted (zervas, proserpio and byers, 2017). with it as enabler of sharing economy (puschmann and alt, 2016), it is conceivable that more individual hosts would pursue the path of professionalization. the adaptation on multichannel api strategy might create a further impact on traditional hospitality industry by increasing competition within online booking channels. furthermore, some (slee, 2015) have argued that majority of hospitality platforms’ revenue comes from hosts with multiple listings. the multichannel strategy and potential creation of own sales channels decreases host dependency on sharing economy platforms and can have implications for the supply of listings to the platforms on which they rely in their growth strategy (lane and woodworth, 2017). finally, multi-channel api strategy has a potential of a wide-scale adaptation within peer service providers on sharing economy platforms as apis enable omnichannel selling and diverse service business models. limitations and future research directions this research was carried out as a longitudinal single case study therefore its findings are not generalizable on a larger population. multiple case studies, as well as quantitative studies on the process of professionalization within the sharing economy could be carried out to shed light on the potential effects the professionalization and multichannel strategies may have on sharing economy platforms, as well as hospitality industry at large. further research could study in detail what effect the professionalization of peer provider has on the business model of platform provider, and whether peer service provider professionalization is beneficial for the platform provider in a long term. additionally, studies on peer service providers in different cultural and geographical settings would shed light on the dynamics and differences in the development of professional service providers. also, this study has focused on a peer provider in hospitality setting. future research could investigate whether and how the professionalization occurs in different industry context and how the value is created in the interplay between consumer, provider and the platform. journal of business models (2021), vol. 9, no. 1, pp. 35-42 4040 references acquier, a., daudigeos, t. and pinkse, j. (2017), promises and paradoxes of the sharing economy: an organizing framework, technological forecasting & social change, vol. 125, pp. 1–10. ahokangas, p. and myllykoski, j. (2014), the practice of creating and transforming a business model, journal of business models, vol. 2, no. 1, pp. 6-18. amit, r. and zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, pp. 493-520. benoit, s., baker, t., bolton, r., gruber, t. and kandampully, j. (2017), a triadic framework for collaborative consumption (cc): motives, activities and resources & capabilities of actors, journal of business research, vol. 79, pp. 219–227. beritelli, p. and schegg, r. (2016), maximizing online bookings through a multi-channel strategy, international journal of contemporary hospitality management, vol. 28, no. 1, pp. 68 – 88. botsman, r. (2012), welcome to the new reputation economy, wired magazine, vol. 9, available at: http:// www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy (accessed 10 august 2015). botsman, r. (2013), the sharing economy lacks a shared definition, available at: http://www.fastcoexist. com/3022028/the-sharing-economy-lacks-a-shared-definition (accessed 15 december 2015). botsman, r. and rogers, r. (2011), what’s mine is yours. how collaborative consumption is changing the way we live, collins, london, uk. creswell, j. (2007), qualitative inquiry and research design: choosing among five designs, sage publications, thousand oaks, california. demil, b. and lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 43, pp. 227-246. denzin, n. and lincoln, y. (2003), strategies of qualitative inquiry, sage publications, thousand oaks, california. dreyer, b., lüdeke-freund, f., hamann, r. and faccer, k. (2017), upsides and downsides of the sharing economy: collaborative consumption business models’ stakeholder value impacts and their relationship to context, technological forecasting & social change, vol. 125, pp. 87–104. gibbert, m., ruigrok, w., and wicki, b. (2008), what passes as a rigorous case study? strategic management journal, vol. 29, no. 13, pp. 1465–1474. ghoshal, s., hahn, m., and moran, p. (1997), an integrative theory of firm growth: implications for corporate organizations and management, insead working paper series, 97/87/sm. jacobson, d., brail, g. and woods, d. (2012), apis: a strategy guide: creating channels with application programming interfaces, o’reilly media, kindle edition. http://www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy http://www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition journal of business models (2021), vol. 9, no. 1, pp. 35-42 4141 karsten, j. (2017), sharing economy offers flexibility and efficiency to consumers, available at: https://www. brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ (accessed 20 october 2018). laamanen, t., pfeffer, j., rong, k. and van den ven, a. (2018), editor’s introduction: business models, ecosystems, and society in the sharing economy, academy of management discoveries, vol. 4, no. 3, pp. 213-219. lane, j. and woodworth, r. (2017), hosts with multiple units – a key driver of airbnb growth, cbre hotels’ americas research. langlois, r. (1995), capabilities and coherence in firms and markets, in montgomery, c. (ed.), resource-based and evolutionary theories of the firm: towards a synthesis, kluwer academic, norwell, ma and dordrecht, pp. 71-100. mcgrath, r. (2010), business models: a discovery driven approach, long range planning, vol. 43, pp. 247-261. miles, m., huberman, a. and saldana, j. (2013), qualitative data analysis: a methods sourcebook, sage, london. mitchell, a. and strader, t. (2018), introduction to the special issue on “sharing economy and on-demand service business models”, information systems and e-business management, vol. 16, pp. 243-245. owyang, j. (2016), honeycomb 3.0: the collaborative economy market expansion, available at: http://www. web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ (accessed 31 august 2018). owyang, j. and samuel, a. (2015), the new rules of the collaborative economy. the threat to traditional companies can’t be ignored, available at: https://www.visioncritical.com/resources/new-rules-collaborative-economy/ (accessed 01 august 2016). penrose, e. (1959), the theory of the growth of the firm, (4th edition 2009), oxford university press, oxford. puschmann, t. and alt, r. (2016), sharing economy, business & information systems engineering, vol. 58, no.1, pp. 93–99. schor, j. (2014), debating the sharing economy, great transition initiative. sosna, m., trevinyo-rodríguez, r. and velamuri, s. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, pp. 383-407. slee, t. (2015), what’s yours is mine. against the sharing economy, or books, new york and london. sundararajan, a. (2016), the sharing economy: the end of employment and the rise of crowd-based capitalism, mit press, cambridge, ma. the economist (2013), all eyes on the sharing economy, 9 march, available at: https://www.economist.com/ technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy (accessed 10 april 2015). wirtz, b. and daiser, p. (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, pp. 40-58. https://www.brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ https://www.brookings.edu/blog/techtank/2017/01/09/sharing-economy-offers-flexibility-and-efficiency-to-consumers/ http://www.web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ http://www.web-strategist.com/blog/2016/03/10/honeycomb-3-0-the-collaborative-economy-market-expansion-sxsw/ https://www.visioncritical.com/resources/new-rules-collaborative-economy/ https://www.visioncritical.com/resources/new-rules-collaborative-economy/ https://www.economist.com/technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy https://www.economist.com/technology-quarterly/2013/03/09/all-eyes-on-the-sharing-economy journal of business models (2021), vol. 9, no. 1, pp. 35-42 4242 wirtz, b., göttel, v. and daiser, p. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1-28. yin, r. (2003), case study research: design and methods, sage publications, thousand oaks, ca. zachariadis, m. and ozcan, p. (2017), “the api economy and digital transformation in financial services: the case of open banking”, working paper no. 2016-001, swift institute, 15 june. zervas, g., proserpio, d. and byers, j. (2017), the rise of the sharing economy: estimating the impact of airbnb on the hotel industry, journal of marketing research, vol. 54, no. 5, pp. 687-705. journal of business models (2019), vol. 7, no. 3, pp. 1-11 1 teaching business models: introduction to the special issue anna b. holm department of management aarhus school of business and social sciences christina m. bidmon smart city innovation lab católica lisbon school of business and economics tassilo henike chair of innovation management and entrepreneurship university of potsdam kirstin e. bosbach chair of innovation economics technical university berlin with charles baden-fuller centenary chair in strategy cass business school please cite this paper as: holm et al. (2019), teaching business models: introduction to the special issue, vol. 7, no. 3, pp. 1-11 acknowledgements: we would like to sincerely thank all authors for their trust and openness in so generously sharing the approaches they have developed and granting access to their teaching material. we would also like to thank all reviewers of this special issue for their invaluable contribution in time and effort. journal of business models (2019), vol. 7, no. 3, pp. 1-11 2 introduction the business model concept has been widely adopted in a range of disciplines, including business administration, the humanities, engineering, and even the medical sciences. its popularity can be explained by the fact that, at the strategic level, the business model explains how a firm creates, delivers and captures value (teece, 2010), while at the tactical level, it specifies how a firm makes its products, services, or technologies attractive to customers and turns its offerings into financially successful outcomes (casadesus-masanell and ricart, 2010). in this way, the business model builds a bridge between defining and realising value-creation and value-capture mechanisms through customerfirm arrangements that both generate value for the consumer and profits or other resources for the firm (baden-fuller et al., 2017). business-model design often starts with a feasible customer value proposition (cvp) that addresses essential customer problems. similarly, a firm’s resources and value-chain partners need to be aligned in such a way as to create and deliver the cvp as economically as possible. establishing such complex linkages requires experimentation, and is not likely to be solely based on rational decisions. it may also stem from intuitive thoughts, courageous activities with unpredictable consequences, or emotional linkages to consumers. during this process, managers will also have to decide how and how much value to create for consumers, and how the captured value will be distributed between the firm and its partners in the value network. given the constant state of flux in consumer and market conditions, managers also need to refine, change, or even re-invent their business models, which encourages them to search for inspirational examples and successful ‘recipes’ on how to do business. as ‘recipes’, business models can provide templates for how the various elements of their business can be fruitfully put together, arranged, and combined (badenfuller and morgan, 2010). business models can thus be copied, albeit with variation, in strategic elements such as markets, technologies, products, and customers. however, even minor changes to the recipe can change the business model and produce unexpected variation and innovation, or even result in a completely new business model, i.e. a new ‘recipe’ for firm behaviour (baden-fuller and morgan, 2010). for example, the emergence of digital platforms and the sharing economy has turned decades-old laws of competition upside down and challenged proven business ‘recipes’. for all these reasons, business-model thinking has become entrenched in the minds of entrepreneurs and managers, as a result of which, teaching business models has become important for a wide range of business disciplines such as strategy, entrepreneurship, and marketing. an informal survey of 40 strategy academics conducted by markides  (2015) showed that, although not entirely convinced about the novelty of the business model as a theoretical concept, 95% of the scholars used the business model concept in their teaching, and the remainder planned to do so in the future. various research contributions have offered insights into both the definitions and conceptualizations of business models, the processes and factors influencing business modelling (for a good literature survey see e.g. zott et al., 2011; schneider and spieth, 2013; gassmann et al., 2016; foss and saebi, 2017; massa et al., 2017), and business-model design and reconfiguration challenges (massa and tucci, 2014). however, since business modelling has many practical aspects, educators also need to balance imparting such theoretical knowledge to their students with ensuring its applicability (pfeffer and sutton, 2000; hogan and warrenfeltz, 2003). as a result, business educators have gradually progressed from general teaching about business models to integrating hands-on business modelling in their courses (piperopoulos and dimov, 2015). furthermore, since educators have diverse audiences and pursue different teaching objectives, they also create unique curricula and teaching approaches. this has led to diverse and valuable, yet dispersed, know-how on how to teach business models. about this special issue in order to provide a platform for sharing and disseminating educators’ experience with teaching business models in various contexts and show-case innovative teaching methods, we organised teaching forums at business model conferences in venice, italy, in 2017, florence, italy, in 2018, and new york, usa, in 2019. however, the very positive feedback and high degree of interest journal of business models (2019), vol. 7, no. 3, pp. 1-11 3 in the approaches presented at these conferences made us aware of the need for a broader and more permanent platform for sharing knowledge and experience. together with the journal of business models and former editor-in-chief christian nielsen, the idea for this special issue was born. in autumn 2018, we therefore invited educators from all over the world to submit application-focused short papers on proven formats and best practices for teaching business models, ranging from specific techniques or approaches to reflections on the usefulness of various frameworks. as a result of the many interesting papers we received, which varied widely in both content and nature, we decided to split the special issue into two volumes, the first of which contains 12 papers. the papers in this first volume represent a great variety of teaching approaches. each paper presents approaches or instruments that have been successfully used in either the classroom or in online teaching. furthermore, the authors provide clear guidance on how to apply their approaches, describe in detail the course set-ups, and clarify the learning objectives. they share insights into the main pedagogical challenges of teaching business models, and offer tips and recommendations for implementation based on their experiences and observations. we hope that this special issue will not only fuel the debate on innovative teaching approaches in contemporary business education but also be of practical use for: • young teachers looking for inspiration for their first course designs; • experienced teachers looking for ways to improve their teaching; • coaches and accelerator units trying to help founders and corporate entrepreneurs to master the art of business modelling. charles baden-fuller on the importance of business-model education as the different approaches to business-model teaching show, the topics included have developed rapidly over the past twenty years. therefore, we have also invited charles baden-fuller, one of the pioneers of businessmodel teaching and a much sought-after consultant, to review this development, talk about current business model challenges, and judge the relevance of this special issue for practitioners, students, and educators. charles, what do you see as the fundamental challenges of teaching students and practitioners about business models? why is teaching about business models necessary? i would like to emphasise that teaching to either students or executives about business models is really difficult. this is because the business model concept connects two different domains that are usually separated in companies and in the classroom, those of dealing with customers and their needs and wants, and those dealing with the processes of making and delivering products and services. whilst one might think that the latter should be connected to the former, in actual practice the overlaps are minimal. and to make matters more challenging, most students and executives are happiest talking about the physical world of making and delivering things. fewer have a good grasp of the complexities of identifying needs and wants and figuring out how to persuade people to pay. the “design process” is clearly a valuable approach to the problem, but it is not a complete solution. the classical design process delves deep into the questions of “what does the customer want”, but it does not really explore critically “how much will the customer pay for what they want” and “is it better that some other actor pays?” you mention the value of the design process. could you elaborate on what is so special about teaching business models and why businessmodel teaching can add significantly to the design approach in today’s business world? so, when asked what is it that is special about the teaching of business models, i emphasise the above points about making difficult connections between these two spheres of the emotional cognitive needs of customers and the physical world of products and services. this leads me to speculate that one of the competencies of working with business models is the competence of the design process – because the design process emphasises the importance of the connections between what a customer might want and how the product or service journal of business models (2019), vol. 7, no. 3, pp. 1-11 4 should be designed. it has a clear set of guidelines for dealing with the problem. however, the classical design process does not go far enough, because it does not deal with the issue of getting people to pay, which is another emotional and analytical challenge. when designing the business model we need to realise that the firm faces an important choice, does the user pay or does someone else pay? and, there are more choices, which is the better route to market, is it the fully integrated solution or a takeaway product. the underlying physical product may be the same in both cases, but the delivery mechanism differs. the current teaching of design does not engage with these important questions. so there are two approaches, one is to teach students and executives about design and make the necessary modifications, and the other is to start from scratch and not pretend there are simple solutions. and since it is not clear that one is better than the other, i tend to adopt both approaches, stressing their strengths and weaknesses. looking back on the development and importance of business models over the last two decades, has the teaching of business models become easier? in some ways, the teaching of business models got easier over the past few years. first, the academic writing has evolved enormously. we have a much deeper understanding of the different business model types as evidenced by the appearance of many articles that deal with the complexities of platform economics. and in addition, the evidence of the complexity of the business model challenge is now evident all around us. the appearance of secondgeneration digital firms such as netflix, google and facebook, that have displaced the previous giants of kodak, nokia, and yahoo, and that there is a third-generation of firms – many of which are unicorns (valued at more than $1 billions) – emerging has heightened students’ awareness that the business model question is highly relevant and has non-trivial answers. with these challenges in mind, what do you think is important for teaching business models? what is your approach? i think we need to think broadly and deeply about this question. for me, the teaching of business models requires addressing emotional, cognitive issues and also analytical issues. the first requires digging into issues of how to teach about cognition. this requires interactive teaching and challenging students. for the second, i am a fan of using bm typologies to emphasise that executives have to make choices. and i am also a fan of looking carefully at what actually works – rather than what we might think should work. too many teach concepts such as the bm canvas because it appears to give clear answers. but such tools can be deceptive and even dangerous. human nature and the world around us is full of surprises. for this reason, i get my students to examine a range of newly formed firms competing in a variety of industries to realise how many different kinds of business models really exist and how they actually compete. the businessmodelzoo.com is a website that shows more than 100 unicorn companies, valued at around $1 billion or more and that describes their business models. students find this incredibly valuable for the challenge it poses. a final question, and to put teaching about business models into a broader perspective, where should the topic of business models be in the curriculum? strategy as a profession is in crisis, because much of what we taught in strategy over the last 15 years is not robust for the new digital world. the old mantra that superior resources lead to superior results, is clearly invalid as a general statement. better business model choice is an important moderator, this is because firms with superior business models have ousted firms with vastly superior resources but outdated models. kodak, nokia and yahoo are important examples of firms that have got into crises not because they were not innovative or in charge of superior resources, but because they made the wrong business model choice. in contrast, a superior business model can allow a firm to assemble better resources and achieve an upward spiral of success. in short, business models should be at the core of the strategy curriculum, and the profession needs to recognise that teachers of bm are at the forefront of strategy teaching, without them, strategy will die and be relegated to the dustbin. journal of business models (2019), vol. 7, no. 3, pp. 1-11 5 papers in this volume the papers in this first volume address various aspects of teaching business-model design, innovation, validation and scale-up. the majority of the authors eschew the traditional lecture format and present creative ways to enable student interaction and group work with the help of digital tools and blended learning. they cleverly integrate elements of gamification and playfulness in their teaching formats, and present exciting ways to teach business modelling to specific audiences. some take a holistic approach and develop courses aimed at teaching business model thinking in general, while others focus on a specific element, type or aspect of a business model. several papers offer insights into how massive open online courses (moocs) can be used for businessmodel teaching. the paper, “online courses on business model innovation for practitioners in smes”, by mark de reuver, martijn cligge and timber haaker, presents best practices for disseminating business-model thinking to managers of small companies who have very hands-on, practical demands and limited time. the authors reflect on online functionalities and design principles of moocs for sme managers with heterogeneous (educational) backgrounds, and report on their experiences from the practical execution of the courses for a large group of international participants. the tools and frameworks of the moocs were designed to make it easier to convert business-model innovation concepts from theory to practice in diverse contexts, and included quizzes, assignments, creative brainstorming tools, interviews with real-life business owners, and some quantitative tools. the authors conclude that designing such courses requires a considerable amount of time and diverse expertise, as well as tight project management (de reuver et al., 2019). alina margolina and rené bohnsack’s paper, “teaching business models for new ventures via blended-learning” describes a sophisticated educational online platform to support the course in new venture creation. the blended learning format they present has a specific focus on tailoring online content to the classroom experience. during the course, participants are guided through a step-bystep process of translating an initial business idea into a working business model. the online steps include idea development, customer discovery and value-proposition formulation, building a business model, strategy development, business implementation, and a business plan pitch, thus addressing both the value proposition and value capture elements of a business model. the authors conclude that, besides designing and logically structuring the online content of the course, the business-model development process as a whole still requires comprehensive instructor guidance and feedback (margolina and bohnsack, 2019). in the paper, “using digital gamification in the context of business models”, jesper chrautwald sort and holst explain how the introduction of gamification and blended learning in (ridder et al., 2015) the course on new venture creation and business modelling produced a high degree of interaction and engagement among participants. their online learning tool is anchored in the new venture creation process from the “idea/concept” stage to the “get-to-market” stage, and includes the possibility of getting ‘investors’ feedback’ by allowing students to buy or sell stocks in all venture creation projects on the platform except their own. according to the authors, the use of the stock market mechanism gives a better and deeper understanding of new venture projects based on criteria of validation, potential, and scalability. the authors also observe that, in order to achieve the learning objectives within a blended learning and gamification framework, instructors need to properly introduce it and follow up on its utilization during the entire educational process (sort and holst, 2019). in their paper, “developing a viable business model for start-ups at the gruendungsgarage”, christiana mueller, elisabeth poandl, and martin glinik describe their interdisciplinary and inter-university teaching format, named gruendungsgarage (gg). this format enables students and academic staff to translate their business ideas into viable business models for a start-up. gg follows an experience-based learning approach, where participants play active roles while gaining experience and reflecting on the various processes and outcomes involved. the participants are supported by a specially designed mooc on the business model concept, but facilitators also support the actual design work on business models through in-depth discussions. according to the authors’ observations, discussions with mentors in particular had a big influence on the development of business models (müller et al., 2019). journal of business models (2019), vol. 7, no. 3, pp. 1-11 6 in their paper, “insights from teaching sustainable business models using a mooc and a hackathon”, niels faber and jan jonker focus on the important question of how to introduce the notion of sustainability in business-model teaching. the authors offer interesting insights into creating a mooc to help practitionerlearners develop a community-based business model. the mooc is based on the principles of peer-learning, where participants are required to provide feedback on each other’s work. according to the authors, it is more beneficial to run the mooc in parallel with regular teaching and then design cross-connections between the two. the other teaching format they present, the hackathon, is designed for third-year bachelor students across academic disciplines following a course on sustainable business modelling. the hackathon requires students to work in teams playfully and interact intensively with teachers and practitioners inside and outside the classroom, and is designed to help them develop a sustainable business model and present it to a professional jury (jonker and faber, 2019). while the articles mentioned above present approaches designed to teach business modelling holistically, the following two papers zoom in on specific decision-making aspects during the business modelling process. “cognitive exploration strategies and collective decisionmaking in entrepreneurial business modelling”, by tassilo henike and katharina hölzle, presents an approach to incorporating business-model thinking into a course on innovation management. the authors point to the importance of cognition and collective decision-making in entrepreneurial processes, and that students must therefore first learn cognitive exploration strategies and then apply them to decisions related to business models. thus, students are asked to design their first business model for an existing service firm that has not yet defined a specific value proposition and has no valuecapture mechanism. besides business-model thinking, this approach encourages students to improve their cognitive flexibility, communication and argumentation skills (henike and hölzle, 2019). matthew spaniol, christina m. bidmon, anna b. holm, and rené rohrbeck present “five strategic foresight tools to enhance business-model innovation teaching”. based on their experiences from running a course for mba students, the authors describe how they use strategic foresight (sf) thinking and tools to force managers to look beyond the existing business model of their company or industry. the authors find that the application of sf thinking can effectively overcome cognitive bounds and manager inertia that hamper the design of novel business models. moreover, sf tools help students identify weaknesses and evaluate current business models, foresee possible future changes, and test the robustness of the new business models they develop. however, the authors also acknowledge that sf tools are more suitable for students with prior work experience, and that the correct use of the sf methods requires skilled instructors (spaniol et al., 2019). the third group of papers shows how educators can deal with particular audiences or constraints they encounter in their teaching environment. in his paper, “squaring the circle: business model teaching in large classroom settings”, daniel szopinski examines the highly relevant question of how educators can convey an experiential approach such as business modelling to large audiences (200+ students). his didactic approach aims at creating an interactive, collaborative, and experience-driven learning environment, involving peer feedback and the use of digital tools. through online interactions, students build, extend, and refine their business model knowledge. in the article, the author describes best practices for facilitating students’ interaction in such a way that even large classes can work on real-life cases and receive in-depth sparring on their projects (szopinski, 2019). reflection and switching lenses is also a central topic in leandro bitetti’s paper, “activate business model learning through flipped classroom and backward design”, where he describes how to “flip” the traditional lecture format to one where teachers become sparring partners, and how employing tools such as blogging can help students take a step back and discuss their point of view with peers and lecturers. extensive feedback from lecturers, classmates and practitioners, video lectures, as well as a simulation of a strategy workshop, were also incorporated in the course on business-model innovation. the high level of student involvement ensured that, in addition to learning theoretical concepts, students were required to interpret the practical journal of business models (2019), vol. 7, no. 3, pp. 1-11 7 implications of these concepts and develop an understanding of the barriers to business-model innovation (bitetti, 2019). mika yrjölä focuses on the potential of broadening marketing students’ perspective on this subject by teaching the concept of value. in his paper, “teaching value propositions as part of the business model”, he describes a teaching approach that focuses on equipping students with a language to develop, evaluate and manage an organization’s cvps and how the cvp relates to the organization’s business model. students also learn about the implications of cvps for the design, management and organization of the business. by applying their learning to the development of a concrete cvp, the students engage in deeper-level thinking and learning, such as reflecting, applying, relating and arguing (yrjölä, 2019). the final two papers introduce specific tools and methods which educators can integrate into their businessmodel teaching. ryan rumble examines why existing frameworks and canvases used in business modelling are overly two-dimensional. in his paper, “the startup jungle: four-dimensional business modelling”, he introduces a playful sandtable approach for business-model ideation that not only fosters learners’ haptic and visual experiences but also includes a temporal dimension. the ‘startup jungle’ combines a metaphorical jungle landscape with mapping a business ecosystem, modelling a new one, developing implementation strategies, considering consequences, and a scenario plan. the article describes how the tool can be applied in classroom settings, but it can also be used by entrepreneurs and incumbent organisations for business modelling and strategizing. however, the author also notes that the startup jungle requires much more preparation than alternative business modelling tools (rumble, 2019). playfulness as a way to stimulate ideation is also a theme in the paper “booster cards: a practical tool for unlocking business model innovation”. here, peter thomsen, jesper c. sort, and kristian brøndum present 71 “booster cards” that can be integrated into business-model teaching. these booster cards represent a set of business model patterns, or ‘recipes’, and build on the idea of analogical reasoning to overcome students’ limited business-model design capabilities. each card represents a specific configuration, contains a short description of the configuration, and a reallife example to further strengthen the analogy. the authors observe that using booster cards helps break the barriers of dominant logic, enable experimentation with various ideas, and provide a range of diverse alternatives for consideration (thomsen et al., 2019). we hope this special issue sparks a lot of new ideas for teachers of business modelling. enjoy! journal of business models (2019), vol. 7, no. 3, pp. 1-11 8 references baden-fuller, c., giudici a., haefliger s. & morgan m.s. (2017), “business model and value: analytical comparisons of scalable solutions and digital platforms”, working paper, cass business school, london, uk. baden-fuller, c. & morgan m.s. (2010), business models as models, long range planning, vol. 43, no. 2-3, pp. 156-171. bitetti, l. (2019), activate business model learning through flipped classroom and backward design, journal of business models, vol. 7, no. 3, pp. 100-110 . casadesus-masanell, r. & ricart e.j. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, no. 2-3, pp. 195-215. de reuver, m., cligge m. & haaker t. (2019), online courses on business model innovation for practitioners in smes journal of business models, vol. 7, no. 3, pp. 12-23 . foss, n.j. & saebi t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management, vol. 43, no. 1, pp. 200-227. gassmann, o., frankenberger k. & sauer r. (2016), exploring the field of business model innovation, palgrave macmillan, switzerland. henike, t. & hölzle k. (2019), cognitive exploration strategies and collective decision-making in entrepreneurial business modelling, journal of business models, vol. 7, no. 3, pp. 67-76 . hogan, r. & warrenfeltz r. (2003), educating the modern manager, academy of management learning & education, vol. 2, no. 1, pp. 74-84. jonker, j. & faber n. (2019), insights from teaching sustainable business models using a mooc and a hackathon, journal of business models, vol. 7, no. 3, pp. 57-66 . margolina, a. & bohnsack r. (2019), teaching business models via blended-learning, journal of business models, vol. 7, no. 3, pp. 24-37 . markides, c. (2015), research on business models: challenges and opportunities, business models and modelling (advances in strategic management, vol. 33). emerald group publishing limited, pp. 133-147. massa, l., tucci c.l. & afuah a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73-104. müller, c., poandl e.m. & glinik m. (2019), developing a viable business model for start-ups at the gruendungsgarage, journal of business models, vol. 7, no. 3, pp. 47-56 . pfeffer, j. & sutton r.i. (2000), the knowing-doing gap: how smart companies turn knowledge into action, harvard business school press, boston, ma. piperopoulos, p. & dimov d. (2015), burst bubbles or build steam? entrepreneurship education, entrepreneurial self-efficacy, and entrepreneurial intentions, journal of small business management, vol. 53, no. 4, pp. 970-985. journal of business models (2019), vol. 7, no. 3, pp. 1-11 9 ridder, h.-g., hoon c. & mccandless a. (2015), the theoretical contribution of case study research to the field of strategy and management, research methodology in strategy and management. pp. 137-175. rumble, r. (2019), the startup jungle: four-dimensional business modelling, journal of business models, vol. 7, no. 3, pp. 119-130 . schneider, s. & spieth p. (2013), business model innovation: towards an integrated future research agenda, international journal of innovation management, vol. 17, no. 01, 1340001. sort, j.c. & holst, p. m. (2019), using digital gamification in the context of business models, journal of business models, vol. 7, no. 3, pp. 38-46 . spaniol, m., bidmon c.m., holm a.b. & rohrbeck r. (2019), five strategic foresight tools to enhance business model innovation teaching, journal of business models, vol. 7, no. 3, pp. 77-88. szopinski, d. (2019), squaring the circle: business model teaching in large classroom settings, journal of business models, vol. 7, no. 3, pp. 89-99 . teece, d.j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no., pp. 172-194. thomsen, p., sort j.c. & brøndum k. (2019), booster cards: a practical tool for unlocking business model innovation, journal of business models, vol. 7, no. 3, pp. 131-142 . yrjölä, m. (2019), teaching value propositions as part of the business model, journal of business models, vol. 7, no. 3, pp. 111-118 . zott, c., amit r. & massa l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019-1042. journal of business models (2019), vol. 7, no. 3, pp. 1-11 10 charles baden-fuller is the centenary professor of strategy and leader of the strategy group at cass business school, city, university of london. charles is one of the leading global thinkers on business models, and is particularly interested in business models from a managerial cognitive perspective. he has actively followed the growing importance of business models over the last twenty years. at cass business school, he developed the business model zoo™, and is one of the pioneers of business-model teaching. among other things, he is senior fellow at the wharton school, university of pennsylvania, former editor-in-chief of long range planning, fellow of the strategic management society, and fellow of the academy of social sciences. anna b. holm is associate professor at the department of management, aarhus university, denmark. she holds a phd (2010) in organization and management theory from aarhus university, and an mba (1995) from bradford university school of management, uk. her research areas include virtual organizing, business model design and innovation, and media management. prior to her academic career, anna worked for over a decade as a business development consultant and in various managerial positions in industry. christina m. bidmon is a postdoctoral researcher at católica lisbon school of business and economics, where she works in the business model design lab. her research interests include the emergence of novelty in incumbent organizations, sustainabilitydriven and digital innovation, and business modelling. christina holds a phd from aarhus school of business and social sciences, denmark. before joining academia, she worked in various corporate strategy functions and spent a few years in management consulting. about the authors journal of business models (2019), vol. 7, no. 3, pp. 1-11 11 about the authors tassilo henike is a teaching assistant and phd student at the chair for innovation management and entrepreneurship, university of potsdam, germany. he holds an msc in business administration and engineering from technical university berlin, germany. tassilo is especially interested in the effect of cognitive factors on innovation behaviour, and he is currently investigating the impact of cognitive dispositions, activities and bm visualisations on entrepreneurial business modelling. his research has been published in such international outlets as long range planning and the routledge companion to innovation management. kirstin e. bosbach is a corporate consultant at bosch management consulting and works in the field of strategy definition, with a focus on digital lighthouse projects and digital business models. she is a phd student at the chair for innovation economics, technical university berlin, germany, and holds a masters degree in organisational innovation and entrepreneurship from copenhagen business school, denmark. her research interests include corporate innovation, in particular corporate business model innovation and experimentation. 2 journal of business models (2020), vol. 8, no. 3, pp. 2-8 purpose: under pressure of declines in the cultural sector, many classical music organizations are reacting similarly with a turn towards predictability regarding both organizational model and artistic output. in response to this situation, this paper examines the business model of an organization that utilizes a commoning approach in order to unlock possibilities for artistic innovation. design/methodology/approach: this study follows an in-depth single case study of a business model of an alternatively-organized music venue. data on the splendor case have been collected during several on-site visits, and a series of three interviews with key representatives. findings: the case study demonstrates that commoning principles can be utilized in a business model through a series of collective duties, which help unlock the potential for individual artistic freedom. originality/value: the article highlights the potential of designing of a business model that is based on commoning principles. commoning is increasingly gathering momentum as a new way of collectively organizing the use of a (im)material resource, which is based on the values of sharing, common (intellectual) ownership, and cooperation. divide and create: a commoning approach to business modeling walter van andel1, arne herman2 , annick schramme3 please cite this paper as: andel, w. v., herman, a., and schramme, a. (2020), divide and create: a commoning approach to business modeling, vol. 8, no. 3, pp. 2-8 keywords: commoning; classical music; artistic innovation acknowledgements: this work was supported by the fund for scientific research flanders (fonds voor wetenschappelijk onderzoek vlaanderen, fwo) and its odysseus research program. an extended version of this paper has been accepted for publication in forum+ for research and arts, and will be published in forum+ vol. 28, no. 1, january 2021.” 1–2 ph.d. researcher, university of antwerp 3 professor, university of antwerp abstract journal of business models (2020), vol. 8, no. 3, pp. 2-8 33 introduction over the last decade, classical music organizations have been affected particularly hard by declines in the cultural sector. arguments over government funding, homogeneous audience bases, and the perceived irrelevance of a reproductive institution in an innovation-oriented society dominate the global classical music scene (glynn, 2000). as a result, a particular ‘dominant logic’ (prahalad and bettis, 1986) has emerged, in which music organizations around the world react similarly to the current situation by making safe and predictable choices in terms of their organizational structure (commonly a hierarchical structure led by a director of music and a director of operations), as well as in terms of their musical choices (commonly playing older, well-known works by famous composers as they are universally accepted and can therefore attract audiences and external financiers, without much effort). this has led to focus on a certain selection of works from the past (a canon), over innovative and contemporary works of art that have not yet endured a historical selection process (herman, 2019). it could be argued that these attempts to protect the field of classical music might have a detrimental long-term affect, as it in effect blocks all creative experimentation in the field. recently, alternative musical ensembles and venues have emerged, underpinned by innovative business models that enable them to reopen possibilities for artistic innovation, while averting the above-mentioned challenges to the current musical landscape. the emergence and advance of new organizational initiatives exemplify artists’ urge to develop initiatives that actively explore the possibility to foster their creativity in the most unrestricted form, while also being more adapted to the eclectic demands of the present-day audience and financial challenges of the current cultural environment. approach through an in-depth case study of the business model of the music venue splendor amsterdam, this paper attempts to explore the overall potential of such an alternative. data on the splendor case have been collected during several on-site visits, in a series of three interviews with key representatives: the chairman and co-founder david dramm; venue manager norman van dartel; and co-founding splendor musician michael gieler. the business model is a particularly useful concept for studying cultural initiatives (van andel, 2020), as it goes beyond a mere analysis of financial aspects of an organization, highlighting the holistic system that enables an organization to create and capture value in many forms (magretta, 2002; fielt, 2013). moreover, it also highlights a fundamental issue that underlies cultural organizations: the distinction between value creation and value capture, where it is often suggested that the main purpose for artists is value creation, rather than value capture (fuller, warren, thelwall and alamdar, 2010). currently the debate within arts management focuses mainly on the value creation capacity of the organizations, as well as on how to manage and innovate the business model to make this capacity more sustainable and impactful (schiuma and lerro, 2017). the commercial exploitation of the created value, however, is often claimed to be neglected under peer pressure (thelwall, 2007). value capture for arts organizations, however, is typically seen as not only the firm’s capacity to capture a material (financial) return, but is regularly seen in terms of the appropriation of immaterial (e.g., knowledge, reputation, reach) returns received in exchange for the cultural product or experience delivered (van andel, 2020, see also powell and hughes, 2016; dane-nielsen and nielsen, 2019). highlighting both aspects of the business model in an analysis of a cultural organization can therefore provide interesting insights into its working. in this paper, the concept of the business model is used to analyze which specific business model choices are made by our focus organization that enable them to create value for its stakeholders, and capture value in return. key insights since 2013, splendor unites composers, musicians, and stage artists, who came together to form an artist-run cooperative that independently exploits a music venue in which the musicians have complete autonomy. in this initiative, a professionally equipped music venue is operated in its entirety by a group of journal of business models (2020), vol. 8, no. 3, pp. 2-8 44 50 top-flight professional musicians (among which players of the main dutch orchestras such as the concertgebouw orchestra, rotterdam philharmonic and the radio orchestras, as well as names from the world of opera, jazz, electronics and ethnic music) who felt the necessity for having a place for experimentation outside of the institutionalized environments in which they are employed. the musicians display a high degree of diversity, both in terms of instruments as well as in musical styles employed. this diversity offers unique opportunities for cross-fertilized artistic innovation through unexpected combinations. moreover, it provides possibilities to fully utilize the venue’s capacity and opportunities, as various musicians tend to use the building in different ways, and on different moments of the week (e.g. some concerts are more suited for a sunday afternoon, while others might be more appropriate for a friday night). utilizing a specific organizational model in which responsibility for all aspects of the organization (from acquiring finances to musical programming) is shared among all members, splendor is an example in which ‘commoning’ is an integral part of their business model. commoning is increasingly gathering momentum as a new way of collectively organizing the use of a (im)material resource, which is based on the values of sharing, common (intellectual) ownership, and cooperation while it emphasizes solidarity and trust among participants to develop new ways of production and management (dockx and gielen, 2018). through their organizational decisions, splendor is able to fully utilize the twofold character of a common good (de angelis, 2017): on the one hand splendor exemplifies a use-value for a plurality (by providing artistic freedom to all connected artists), on the other it requires a plurality claiming and sustaining the ownership of the common good. together, these two elements form the core values of the splendor business model: the pursuit of complete artistic freedom and autonomy, and a collectively shared sense of ownership and responsibility. by operationalizing these core values, splendor is able to offer a unique value proposition to their artists as well as to the public. to the participating artists, splendor offers a venue in which they are free to practice and perform, as well as where they can experiment with reducing the often-perceived gap between the artists and the public. towards the audience, splendor is able to offer a value proposition which is built on three elements: 1) unique, highquality, and innovative concerts; 2) possibilities for direct contact and interaction with the artists; and 3) an experience of being a contributing part of a music development process. financial viability to make the splendor business model financially viable, the organization has developed a financial model that is dependent on different types of income. utilizing the cooperative rationale, the initial capital input needed came from the 50 musicians, who each invested €1.000 in the form of a corporate bond. the remaining startup funding was raised through private investors, who in return for providing capital – in the form of purchasing a ten-year bond – received a private concert by one or some of the musicians at home as dividend (the more that was invested, the more musicians you receive at home). as the artists are not financially reliant on their activities at splendor (they are all professionally employed musicians), the venue strives for break-even operations. operational costs are covered by a combination of individual ticket sales for concerts (of which 70% goes to the organizing musician, and 30% to the venue) and income coming from the approximately 1200 splendor members. for an annual contribution of €120, these public members are entitled to designated free concerts, as well as reduced ticket prices for other concerts. finally, income through the in-house exploitation of food and beverages goes to the venue. through their financial model, splendor is able to run a break-even operation without relying on external (governmental) subsidies. for the artists, financial gains from their endeavors at splendor usually adequately covers their costs incurred. however, this is complemented by a large value creation and appropriation in an immaterial sense, as the venue offers the artists unique opportunities for artistic exploration. their value capture focuses therefore mostly on the artistic freedom and autonomy that is made possible through the business model. artistic freedom and autonomy the first and foremost goal of splendor is to create an environment with complete artistic independence. as a general rule, splendor does not make a formal journal of business models (2020), vol. 8, no. 3, pp. 2-8 55 procedure for something unless it is absolutely required. splendor was meant to be a place free of institutional and artistic boundaries, where anything is possible and appreciated. in terms of musical output, there are no limitations: repertoire and newly composed avant-garde music are equally welcomed, as well as experimentation in content, concept and artist-audience relationship is embraced. such a venue was missing in the amsterdam musical landscape: “we needed somewhere to play little ideas, and make small concerts. that was important. and maybe a place to work” van dartel states. based on this premise of artistic autonomy, splendor takes on specific business model activity sets that enable the organization to further exploit its vision. first, splendor has decided to employ a ‘noprogramming program’ for the venue. splendor has an open agenda, in which each of the 50 musicians can reserve a slot for any of the three possible performance spaces (housing an audience of 100, 60, or 30 people) in the building on a first-come, first-served basis. the musicians can reserve a place for a rehearsal or concert of themselves but are also free to program a concert played by outside musicians that they deem interesting to showcase. in the absence of a splendor programmer, all partaking musicians are free to develop any project they want, without having to answer to anyone but themselves. indeed, every musician is responsible for his/her own projects, both artistically and financially speaking, as their fees depend on the number of people that attend the concerts. based on the same logic, splendor has deliberately decided to not make a claim for any subsidies, as this choice could push splendor into a context of more institutionalization. subsidies often come with their own set of stipulations toward the organization in terms of elements such as organizational structures, reporting, expectations, and a certain balance in musicians, concerts, outreach, etc. (stockenstrand and ander, 2014). as such, the autonomy which forms the essence of this endeavor could be compromised drastically. shared ownership and responsibility a second foundational element of the splendor business model concerns a sharing of ownership and responsibility. through this system, each artist has certain duties towards the organization as a whole, which collectively unlocks possibilities for unrestricted personal artistic endeavors. in return for their commitment to the project, and the initial €1.000 investment, each musician literally received the key to the building, indicating the unlimited potential for ad hoc creative endeavours and encounters among all musicians. the venue is available to them for 365 days per year, day and night for any musical endeavour, from rehearsals to performances, to create and explore, to produce and to program in whatever manner they find interesting. besides the initial investment, each musician commits themselves to give one ‘member-concert’ per year, in which the splendor members have free entrance. as there is no intervening programmer, and as all musicians have collectively invested financially as well as in terms of time and effort in the project, splendor is truly a representative of a ‘common good’: it is owned, produced and sustained by all. as such, splendor will never interfere in the content of the programming of the individual musicians but the group does consider tactics to maximize the use of the building in order to create the largest common good for all. for example, it is always allowed to give a concert that will probably only attract a very limited amount of people, but then the group might suggest to plan it on the same evening as another small concert so that they can work that day with just a limited staff for the bar. the sense of co-ownership is not limited to just the musicians, as the organization deliberately attempts to induce a sense of co-ownership among the audience as well, especially with its members. the audience’s input goes beyond the mere financial aspect that they bring in, as splendor concerts are deliberately organized in order to enhance the artist-audience connection. by cultivating an informal setting during the concerts – which often includes many moments of interaction with the audience – as well as after the concerts where artists and audience meet at the bar for discussion afterwards, a sense of artistic exchange occurs. such an approach, that incorporates the three core values mentioned above, facilitates feedback loops between artists and audience that is nearly impossible in the more distant institutionalized classical music settings. this enables splendor to promote peer-to-peer as well as artist-to-audience exchanges which support the development of innovative music. journal of business models (2020), vol. 8, no. 3, pp. 2-8 66 discussion and conclusions developed out of a sensed urgency among a group of musicians for more autonomy, the splendor model emerged from within the cracks of the current dominant system, and provides opportunities for artistic development that the stable and secure traditional institutions are unable to provide. this model of an artist-run cooperative has the potential to play an interesting complementary role in many cultural fields currently under pressure for innovation (see schiuma and lerro, 2017). the case example indicates that a viable business model in the arts does not only answer the typical business model question: ‘what is of value to the customer’ (see e.g. fjeldstad and snow, 2018), but also and even more: ‘what is of value to the artist’. splendor has found the answer to these questions in its interconnectivity. in that manner, value creation and value capture manifest themselves through a collective and shared approach in which artists as well as the audience add to, and appropriate from, the common creation in an immaterial form. a weakness of the model, however, lies in the fact that the splendor organization alone is not able to provide a large financial gain to the artists, and these (small) gains are dependent on the musicians’ own initiatives, which are unpredictable in frequency as well in terms of revenue. as the artists are all professionally-employed musicians, the organization can only survive by virtue of an overarching, institutionalized subsidizing system. therefore, the splendor model can be seen as an important addition to the larger music ecosystem as it reintroduces opportunities for artistic innovation, rather than a replacement model for the established music institutions. journal of business models (2020), vol. 8, no. 3, pp. 2-8 77 references dane-nielsen, h., and nielsen, c. (2019), value creation in business models is based on intellectual capital – and only intellectual capital! journal of business models, vol. 7, no. 2, pp. 64–81. de angelis, m. (2017), omnia sunt communia: on the commons and the transformation to postcapitalism (in common). zed books, london. dockx, n. and gielen, p. (2018), exploring commonism—a new aesthetics of the real. valiz. fielt, e. (2013), conceptualising business models: definitions, frameworks and classifications. journal of business models, vol. 1, no. 1, pp. 85–105. fjeldstad, ø. d. and snow, c. c. (2018), business models and organization design. long range planning, vol. 51, no.1, pp. 32–39. fuller, t., warren, l., thelwall, s. and alamdar, f. (2010), rethinking business models as value creating systems. leonardo, vol. 43, no. 1, pp. 96–97. gandia, r. and parmentier, g. (2017), optimizing value creation and value capture with a digital multi-sided business model. strategic change, vol. 26, no. 4, pp. 323–331. glynn, m. a. (2000), when cymbals become symbols: conflict over organizational identity within a symphony orchestra. organization science, vol. 11, no. 3, pp. 285–298. herman, a. (2019), pragmatized aesthetics: the impact of legitimacy pressures in symphony orchestras. the journal of arts management, law, and society, vol. 49, no. 2, pp. 136–150. magretta, j. (2002), why business models matter. harvard business review, vol. 80, no. 5, pp. 86–92. powell, t. h. and hughes, m. (2016), exploring value as the foundation of value proposition design. journal of business models, vol. 4, no. 1, pp. 29–44. prahalad, c. k., and bettis, r. a. (1986), the dominant logic: a new linkage between diversity and performance. strategic management journal, vol. 7, no. 6, pp. 485–501. ramnarine, t. k. (2011), the orchestration of civil society: community and conscience in symphony orchestras. ethnomusicology forum, vol. 20, no. 3, pp. 327–351. schiuma, g. and lerro, a. (2017), the business model prism: managing and innovating business models of arts and cultural organisations. journal of open innovation: technology, market, and complexity, vol. 3, no. 1, pp. 3-13. stockenstrand, a.-k. and ander, o. (2014), arts funding and its effects on strategy, management and learning. international journal of arts management, vol. 17, no. 1, pp. 43–53. thelwall, s. (2007), capitalising creativity developing earned income streams in cultural industries organisations. cultural snapshot, vol. 14, pp. 1–14. van andel, w. (2020), balancing the creative business model. international journal of entrepreneurship and small business, vol. 40, no. 2, pp. 230–246. journal of business models (2020), vol. 8, no. 3, pp. 2-8 88 about the authors walter van andel is a phd researcher focusing on sustainable business models of cultural and creative organizations at the culture commons quest office of the university of antwerp. arne herman studied musicology and philosophy at the ku leuven, and clarinet at luca school of arts. since 2016, he has been working on a phd in the field of music aesthetics, at the culture commons quest office of the university of antwerp. annick schramme is full professor and academic director of the master in cultural management and the competence center management, culture & policy at the faculty of business & economics of the university of antwerp. 1 journal of business models (2021), vol. 9, no. 1, pp. 1-7 the concept of business models has entered the realm of corporate reporting through recent regulations. this article aims to offer a conceptual discussion about the importance of investigating preparers’ and users’ perceptions of the business model and its constitutive elements in relation to such reporting and disclosure requirements. while prior studies on business model reporting have investigated the amount and quality of disclosures utilizing content analysis, we argue that it would be relevant to take a step back and understand how preparers and users of financial statements understand and consider this concept, as well as the respective alignment of their interpretation. such an analysis is expected to provide insights on the underlying reasons for, and antecedents of, the current disclosure levels and about the capability of the business model concept to provide a framework for other types of information, as postulated by the literature. business model reporting: why the perception of preparers and users matters laura bini1, francesco giunta2, christian nielsen3, stefan schaper4, lorenzo simoni5 please cite this paper as: bini et al. (2021), business model reporting: why the perception of preparers and users matters, journal of business models, vol. 9, no. 1, pp. 1-7 keywords: business model concept, definition, non-financial reporting 1-2 department of economics and management, university of florence, florence (italy) 3 aalborg university business school, aalborg (denmark) 4 department of management, aarhus university, aarhus (denmark) 5 department of economics and business studies, university of genoa, genoa (italy) doi: https://doi.org/10.5278/jbm.v9i1.4240 abstract https://doi.org/10.5278/jbm.v9i1.4240 journal of business models (2021), vol. 9, no. 1, pp. 1-7 22 introduction the bm offers a simplified representation of how a company operates and creates value in the long term (casadeus-masanell and ricart, 2010). the knowledge of the bm allows users to better understand the role of the different processes and resources in the value creation process (bukh, 2003), exemplified by the case of financial analysts in nielsen and bukh’s (2011) account of how they engage in bm discussions. among such reasoning, the concept of bms has been proposed by scholars as a framework for non-financial reporting (nielsen and roslender, 2015; bini et al., 2016), with a focus on performance measures (bini et al., 2018; montemari et al., 2019). accounting for bm from a stakeholder theory perspective has been conceptualised by haslam et al. (2015) and michalak et al., (2017) provide an overview of the state and the development of bm disclosures in corporate reports. recent regulations require certain large european companies to include a description of their bm in the annual report (companies act, regulations 2013; eu directive 95/2014). these initiatives confirm the importance of the concept of the bm in corporate reporting. however, they do not provide detailed guidelines or frameworks on how to report the given company ’s bm. the absence of a clear definition and of especially specific guidelines has led to the adoption of different approaches of bm disclosure by firms and to a misalignment between the bm information disclosed and investors’ needs (frc, 2016; bini et al., 2016, 2019). recently, the frc (2018) has emphasized the need to improve bm disclosure practices to respond to investors’ requests. current studies have documented varying levels of bm disclosures in the annual report and different market reactions to these disclosures (bini et al., 2016; mechelli et al., 2017; bini et al., 2019; malmmose and lueg, 2019; simoni et al., 2019) as well as to business model innovation (abrahamsson et al., 2019). however, a lack of a widely shared definition of bm has also been addressed by academic scholars (e.g., massa et al., 2017). in the academic literature, which is to a large part preceding or detached from bm reporting regulation, there is inconsistency about the definition and constitutive elements of bm (bagnoli et al., 2018). while most academics agree that the bm differentiates itself from similar “neighbour concepts” like strategy or value chain, different conceptualizations exist in the literature (e.g., osterwalder and pigneur, 2010; wirtz et al., 2016). it can be assumed that the low amounts and quality of information reported under the bm sections in companies’ annual reports and their capability to influence user decisions depend on how preparers and users conceive the bm. previous attempts at regulating non-financial information clearly indicate that the involvement of final recipients is necessary to guarantee the success of any regulatory process because they play a critical role in the implementation phase. a prominent example is provided by the initiatives related to the regulation of intellectual capital (ic) reporting. in the 1990s and early 2000s, companies started reporting their intellectual capital to satisfy investor demands. the growing importance of ic and intangibles created information asymmetries between the market actors, similarly to what the distinctive elements of a company ’s bm do. this communication took the shape of intellectual capital statements, which were prepared and presented either as part of, or separately from, the annual report. these statements’ popularity grew to the point where regulation was issued at the national level in some countries (mouritsen et al., 2003). however, even under the presence of a participatory and co-created guideline in denmark, ic statements started a rapid decline, as many companies did not prepare them even when they were mandatory (nielsen et al., 2017). the decline of ic statements can be attributed to several factors, including the loose regulatory requirements (nielsen and madsen, 2009; nielsen et al., 2017), the lack of enforcement mechanisms, the perceived costs associated with intellectual capital disclosure, but also the lack of a clear and widespread definition of the intellectual capital concept, its boundaries, its main components. recent studies of bm disclosure of listed uk firms after the introduction of a mandatory requirement for corporate bm descriptions found that in the presence of low specified requirement, bm disclosure in annual reports is fragmented, mainly consisting of journal of business models (2021), vol. 9, no. 1, pp. 1-7 33 generic descriptions and characterized by a high level of heterogeneity among companies (bini et al., 2016), thus hampering any form of comparability. researchers that have examined bm reporting have not considered critical aspects such as how the concept of the bm is perceived by users and preparers, whether a definition is commonly shared and what the role attributed to the bm concept within non-financial information is. different conceptualizations of the bm might lead preparers and users to consider different items as part of the bm or to assign different meanings to the concept. thus, alternative conceptualizations of the bm could result in different perceptions in terms of relevance, compared to other similar concepts like strategy, value chain, or a company ’s purpose. this discussion sheds light on the challenges that actors involved in the regulation process need to overcome to avoid future regulatory initiatives’ failure. furthermore, it can be of interest for both users and preparers to have a clear depiction of the main issues concerning bm reporting. approach this conceptual paper discusses the importance of investigating market participants’ views and conceptions of the bm concept. after having outlined relevant issues addressed in the management and accounting literature on bm and outlining the concept’s relations with associated concepts that could limit bm reporting’s efficacy, the article defines the “meaning gap” arising from possible misalignments around these concepts. key insights the investigation of the degree of alignment between preparers and users can be accomplished by analysing the perceptions of respondents in these two categories. in the selection of subjects that can be identified as representing preparers and users, respondents working in organizations that have to prepare financial statements and financial analysts who follow those entities are good cases to examine. since the preparation of corporate reporting generally involves many different functions within a company, preparers are usually represented by the entire organisation. on the other hand, users encompass all types of investors, including sophisticated users such as professional investors, and unsophisticated users, i.e., individual investors. due to the heterogeneity that affects this category, researchers often prefer to focus on financial analysts. being market intermediaries, financial analysts are considered an optimal proxy for investors. they are independent experts and regularly evaluate a set of listed companies. thus, they represent an essential reference for investors, both sophisticated and unsophisticated. according to agency theory, an information asymmetry exists between a company and its investors. this asymmetry results from unidirectional information flows that run from the “inside” of the company to the external users. that being the case, investors may suffer an information gap that prevents them from having sufficient and appropriate information for their decision processes. concerning a company ’s bm, information asymmetries could be attributed to a second gap between companies and analysts, which is a “meaning gap”. this gap derives from the misalignment of perceptions of the same bm element or bm as a whole by different subjects. such a gap is able to undermine the effectiveness of the information flow, because the message sent by the issuer changes meaning when the recipient receives it. research seems to confirm the existence of such a “meaning” gap related to the bm concept. nielsen and bukh (2011), in interviewing financial analysts about the role of bm information in company valuations, found that analysts tend to use information that can be seen as part of the bm, but they do not have a common understanding of what is meant by a bm and its potential role in depicting value creation. these results highlight the need for more research on this topic to verify whether, and to what extent, different perceptions of the bm concept exist between companies and analysts and to what extent they can influence the valuation process. as stated above, there are at least two main issues that could be considered as potential sources of “meaning” gaps in relation to the bm concept: the lack of a unique and common definition of the bm journal of business models (2021), vol. 9, no. 1, pp. 1-7 44 and its main components (klang et al., 2014), and the relationships between the bm concept and related management concepts, like corporate strategy and value chains. regarding the first aspect, klang et al. (2014) complain that, despite the dramatic increase in the number of bm publications since the late 1990s and early 2000s (ghaziani and ventresca, 2005), primarily non-cumulative research exists with a weak conceptual base and idiosyncratic definitions (zott et al., 2011). it is stated that bm studies mainly focus on clustering and the categorization instead of showing gaps and limitations of the current status quo of research that could be useful to increase the acceptance of the business model concept (klang et al., 2014). in a similar vein, morris et al. (2005) add that the lack of consensus leads to confusion in terminology “as business model, strategy, business concept, revenue model, and economic model are often used interchangeably” (p. 726). this has inevitably hampered the adoption of the bm concept in practice and has limited the convergence of disclosure practices among firms: “while it has become quite fashionable to discuss business models, many executives remain confused about how to use the concept” (shafer et al., 2005, p. 199). the overlaps between the bm and other related management concepts especially applies to corporate strategy. both deal with the concepts of value and value creation. according to some scholars, the difference between the two interrelated concepts should be clear (shafer et al., 2005; zott et al., 2011), as the competitive strategy deals with how a company differentiates itself, while the bm defines on which basis this is to be achieved, i.e., how a company combines its know-how and resources to deliver the value proposition. contrarily, other researchers do not even strictly differentiate between a firm’s strategy and its bm (casadesus-masanell and ricart, 2010). similar considerations can be made about the relations between bm and the value chain. this aspect is less debated in the academic literature, but it appears to be of particular interest in the perspective of bm reporting, especially to avoid the duplication of information and to guarantee effective bm reporting. a value chain is commonly defined as a set of serially performed activities for a firm in a specific industry. the bm is called to explain the different aspects of value creation across the value chain, showing how these aspects affect a company ’s bottom line (nielsen, 2010). the significant points of contact between the two concepts could give rise to concerns among managers and professionals who have to report about their companies’ bm. therefore, it is important to make clear that the bm notion extends the value chain concept beyond the boundaries of a firm, and integrates external factors (like customers, competitors, suppliers, etc.) and processes (i.e., activities) that enable transactions and influence a firm’s performance (zott et al., 2011). in fact, in current developed economies value is increasingly no longer created by firms that act autonomously, but by firms that operate in conjunction with other parties that are external to the legal entity. it implies that some bm components have their  locus inside a firm, while others are related to a firm’s external stakeholders or to the environment it operates in. these two issues are arguably very important in evaluating the bm concept’s potential in the domain of corporate reporting. unambiguous identification of the constitutive pillars together with a clear distinction from other neighbouring contents is essential to identify the information to be disclosed and avoid possible misunderstanding. previous evidence clearly shows the limitations of a generic bm regulation in enabling quality and reliable bm reporting. discussion and conclusions the considerations listed above call for investigating the understanding and perception of bms’ meaning in reporting and the degree of alignment between preparers and users of this information. such an investigation would have the potential to identify and specify the details of a possible “meaning gap” and justify the inclusion of these actors and their views into the regulatory process. the analysis of perceptions of preparers and users through survey research and interviews with the subject involved might also shed light on the incentives associated with the disclosure of the bm and its use in relation to corporate valuation. interview research could also shed light on barriers, like proprietary costs of journal of business models (2021), vol. 9, no. 1, pp. 1-7 55 disclosure for preparers and costs associated with information collection for users, which might cause further gaps among market participants. with its unique participatory setup directly involving company analysts, academics, and others, the danish project for ic reporting could serve here as a blueprint for inspiration. similar to previous experiences in non-financial reporting, the creation of a commonly accepted framework is arguably also a necessary precondition for creating meaningful bm reporting. journal of business models (2021), vol. 9, no. 1, pp. 1-7 66 references abrahamsson, j., maga, a., & nicol, c. (2019). the effect of business model innovation on share prices–a study of us listed technology firms. journal of business models, vol. 7 no. 2, pp.37-52. bagnoli, c., massaro, m., dal mas, f. and demartini, m. (2018), ‘defining the concept of business model: searching for a business model framework’, international journal of knowledge and systems science, vol. 9 no, 3, pp. 48-64. bini, l., dainelli, f. and giunta, f. (2016), business model disclosure in the strategic report: entangling intellectual capital in value creation process, journal of intellectual capital, vol. 17 no. 1, pp. 83-102. bini, l., simoni, l., dainelli, f. and giunta, f. (2018), business model and non-financial key performance indicator disclosure, journal of business models, vol. 6, no. 2, pp. 5-9. bini, l., dainelli, f., giunta, f. and simoni, l. (2019), are non-financial kpis in annual reports really “key”? an investigation of company disclosure and analyst reports in the uk,the institute of chartered accountants of scotland, edinburgh. bukh, p.n. (2003), the relevance of intellectual capital disclosure: a paradox?, accounting, auditing & accountability journal, vol. 16 no. 1, pp. 49-56. casadesus-masanell, r. and ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43 no. (2-3), pp. 195-215. financial reporting council (frc) (2014), financial reporting council guidance on the strategic report. financial reporting council (frc) (2016), business model reporting. financial reporting council (frc) (2018), business model reporting; risk and viability reporting. where are we now? ghaziani, a. and ventresca, m.j. (2005), keywords and cultural change: frame analysis of business model public talk, 1975–2000, sociological forum, vol. 20, pp. 523–559. haslam, c., tsitsianis, n., andersson, t., & gleadle, p. (2015). accounting for business models: increasing the visibility of stakeholders. journal of business models, vol. 3 no. 1, pp. 62-80 klang, d., wallnöfer, m. and hacklin, f. (2014), the business model paradox: a systematic review and exploration of antecedents, international journal of management reviews, vol. 16 no. 4, pp. 454-478. malmmose, m. and lueg, r. (2019), business model communication and financial performance in cross-national acquisitions, journal of business models, vol. 7, no. 5, pp. 70-89. massa, l., tucci, c. l. and afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11 no. 1, pp. 73-104. mechelli, a., cimini, r. and mazzocchetti, f. (2017), the usefulness of the business model disclosure for investor’s judgement in financial entities a european study, spanish accounting review, vol. 20 no. 1, pp. 1-12. journal of business models (2021), vol. 9, no. 1, pp. 1-7 77 michalak, j., rimmel, g., beusch, p., & jonäll, k. (2017). business model disclosures in corporate reports. journal of business models, vol. 5 no. 1, pp. 51-73. montemari, m., chiucchi, s. and nielsen, c. (2019), designing performance measurement systems using business models, journal of business models, vol. 7, no. 5, pp. 48-69. morris, m., schindehutte, m. and allen, j. (2005), the entrepreneur’s business model: toward a unified perspective, journal of business research, vol. 58 no. 6, pp. 726-735. mouritsen, j., bukh, p.n., flagstad, k., thorbjørnsen, s., johansen, m.r., kotnis, s., larsen, h.t., nielsen, c., kjærgaard, i., krag, l., jeppesen, g., haisler, j. and stakemann, b. (2003), intellectual capital statements – the new guideline, danish ministry of science, technology and innovation (dmsti), copenhagen. nielsen, c. and madsen, m.t. (2009), “discourses of transparency in the intellectual capital reporting debate: moving from generic reporting models to management defined information”, critical perspectives on accounting, vol. 20 no. 7, pp. 847-854. nielsen, c. (2010), conceptualizing, analyzing and communicating the business model, working paper, aalborg university. nielsen, c. and bukh, p. n. (2011), what constitutes a business model: the perception of financial analysts, international journal of learning and intellectual capital, vol. 8 no. 3, pp. 256-271. nielsen, c. and roslender, r. (2015), enhancing financial reporting: the contribution of business models, the british accounting review, vol. 47, pp. 262-274. nielsen, c., roslender, r. and schaper, s. (2017), explaining the demise of the intellectual capital statements in denmark, accounting, auditing & accountability journal, vol. 30 no. 1, pp. 38-64. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley and sons. shafer, s., smith, j.h. and linder, j.c. (2005), the power of business models, business horizons, vol. 48, pp. 199-207. simoni, l., bini, l. and giunta, f. (2019), the effects of business model regulation on the value relevance of traditional performance measures. some evidence from uk companies, financial reporting, vol. 1, pp. 83-111. wirtz, b. w., pistoia, a., ullrich, s. and göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, vol. 49 no. 1, pp. 36-54. zott, c., amit, r. and massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, pp. 1019–1042. 43 journal of business models (2021), vol. 9, no. 1, pp. 43-51 the aim of this paper is to find out if the business ideas of digital entrepreneurs develop within the opportunity discovery or creation context and what digital levels their business models have in this context. following an exploratory research design, ten digital start-ups were interviewed and analyzed. digital entrepreneurs and the origin of their business models christiania ropposch¹, elisabeth stiegler² & christian gubik³ please cite this paper as: ropposch et al. (2021), digital entrepreneurs and the origin of their business models, journal of business models, vol. 9, no. 1, pp. 43-51 keywords: opportunity discovery and creation, digital entrepreneurship, business model 1 -3: graz university of technology, austria doi: https://doi.org/10.5278/jbm.v9i1.4274 abstract https://doi.org/10.5278/jbm.v9i1.4274 journal of business models (2021), vol. 9, no. 1, pp. 43-51 4444 introduction business model innovation resulting from digital technologies has brought about a transformation in several industries including media or accommodation. these transformations were largely introduced by pioneering start-ups that grew into giants like airbnb or amazon (sorri et al., 2019; zaheer et al., 2019). digital technologies have thus had an important impact on the new venture idea and the entrepreneurial process (nambisan, 2016) and open up a wide range of possibilities for entrepreneurs (kraus et al., 2019) and new business models (cuc, 2019). the new opportunities driven by digitalization build the basis for digital entrepreneurship. digital entrepreneurship is “a subcategory of entrepreneurship in which some or all of what would be physical in a traditional organization has been digitized” (hull et al., 2007, p. 293); it “embraces all new ventures and the transformation of existing businesses that drive economic and/or social value by creating and using novel digital technologies” (european commission, 2015 cited by sahut et al., 2019, p. 4); it’s the process of creating a digital start-up (zaheer et al., 2019). a digital start-up is in an early stage of development and growth (klotz et al., 2014) where digital technologies “enable at least one component of a business model in a way that is not just functional but vital to the firm” (zaheer et al., 2019, p. 2). the basis for every new venture is the business opportunity pursued by the entrepreneur, such as opportunities due to digital technologies (kraus et al., 2019). ardichvili et al. (2003) describe the identification of the right opportunities for entrepreneurs as one of the key activities behind success and forms the basis and starting point for entrepreneurial behavior. before a business model or a business plan can be developed, however, entrepreneurial chances and opportunities must be discovered or created. within the opportunity discovery context, based on the description of kirzner (1979), opportunities exist independent from the activities of a person and wait to be discovered and used. in the opportunity creation context, opportunities do not yet exist, as described by its originator schumpeter (1934). instead, they are created if an entrepreneur develops them within an iterative process of acting and reacting. the finding and development of new ideas, as well as the networking of existing resources with existing and new possibilities form the basic building blocks from which new and future business models are created (ardichvili et al., 2003), especially against the background of rapidly proliferating digitalization. table 1 highlights the specific characteristics of opportunity discovery and creation. examples of airbnb or facebook showed how digital companies can become game changers in industries in conditions of high uncertainty, which is a characteristic of the opportunity creation context. ojala (2016) investigated the issue of companies developing their business model under conditions of high uncertainty, namely the opportunity creation context. but so far, investigations have not extended to whether digital entrepreneurs develop their business model in the opportunity creation or the discovery context. in order to understand the business model characteristics of digital entrepreneurs in a better way, hull et al. (2007) identified three levels of digitalization – mild, moderate and extreme – with each level having specific characteristics. hull et al. (2007) state that empirical investigations based on their characteristics should shed more light on the development of digital entrepreneurs and how digitized their business models are. more insights about the digital level of business models is also requested by kraus et al. (2019). furthermore, zaheer et al. (2019) state that the research on digital entrepreneurship is still very fragmented and in-depth knowledge about the specifics of a digital entrepreneurs business model is still in very short supply. following the requests of hull et al. (2007), kraus et al. (2019) and zaheer et al. (2019) to shed more light on the characteristics of digital entrepreneurs and their business models, the goal of our research is to identify 1) in which opportunity context digital entrepreneurs develop their business model and 2) which level of digitalization characterizes these digital businesses. journal of business models (2021), vol. 9, no. 1, pp. 43-51 4545 table 1. no. characteristic discovery theory creation theory 1 opportunity existence opportunities are available independently from the entrepreneur and wait to be discovered. they result from unbalances in the environment, evoked by new technological standards or customer needs. opportunities emerge through an iterative process of acting and reacting. they result from individual and personal visions of the entrepreneur. 2 entrepreneur entrepreneurs identify opportunities through an active search for opportunities and have a higher particular inclination to perceive them (alertness). entrepreneurs are no different to anyone else; they can develop themselves further by creating a new possibility. 3 information information about the market, customers and competition are available and lead to the recognition of a new opportunity. as a result of an evolutionary process, the outcome of opportunity creation is open and unknown in advance. opportunities are sometimes unrelated to currently available information. new extensive knowledge can emerge. 4 peculiarity new opportunities can be identified due to special abilities and knowledge of the entrepreneurs. the path-depending process of creating an opportunity can lead to significant differences between entrepreneurs and others. 5 decisions the opportunities are based on risks; there is sufficient information about possible outcomes and the possibility of occurrence available. decisions are made deductively and from evidence, based on facts and information. the opportunities are based on uncertainty; information about possible results of a decision and the possibility of occurrence is not available. decisions are made inductively and depend on the context. 6 approach causation: selection of the necessary resources to reach a defined goal. effectuation: development of new possible goals by using the available resources. 7 strategy fully formulated strategy, almost no adaptions. emergent strategy, many adaptions based on a trialand-error. 8 employees based on experiences from working in industrial companies. based on former entrepreneurial experiences. 9 founding formal, based on rules. informal, based on the situation. 10 competitors competitive advantages emerge from building up barriers due to knowledge about the market and the product. competitive advantages emerge by a high level of innovativeness. table 1: characteristics of the opportunity creation and discovery approach (based on alvarez and barney, 2011; ardichvili et al., 2003; eckhardt and shane, 2003; fueglistaller et al., 2012; gaglio and katz, 2001; geißler and zanger, 2015; ghezzi, 2019; gontareva et al., 2018; hills et al., 2004; jones and barnir, 2019; shane, 2000) approach in order to find out how entrepreneurial opportunities are formed and how this relates to the level of digitalization, this study follows an exploratory research design encompassing ten semi-structured interviews with digital entrepreneurs who started their businesses in the university context. the informants were ceos or founders of the companies who were able to describe how the founding process of the company took place. we followed a purposive sampling strategy (flick, 2014) as we deliberately selected digital entrepreneurs with an academic journal of business models (2021), vol. 9, no. 1, pp. 43-51 4646 background. the interview guideline used consisted of questions addressing the idea development, the founding process of the start-up, the development of the business model and the digital level of the business model. the interviews were conducted between january and march 2020 and lasted between 20 and 42 minutes each. with the exception of one telephone interview, all the interviews were conducted in person. the interviews were all recorded and fully transcribed. the process of deductive data analysis described by mayring and fenzel (2014) was followed for analyzing the data. the characteristics from table 1 were utilized to identify whether a company operates in the opportunity discovery or the opportunity creation context, and every interview was deductively analyzed with the aid of these characteristics. in order to assess the digital level of every company interviewed, the classification into three digital levels proposed by hull et al. (2007) was followed. in order to be able to classify the companies according to the three digital levels, we used the characteristics of the typology of digital entrepreneurship advocated by hull et al. (2007) and combined them with the characteristics of the digital maturity model proposed by pwc (pricewaterhousecoopers, 2014). this provided us with a structured and sound operationalization for identifying the digital level. the categories were defined as the (1) digitalization as a company goal, (2) internal and external processes, (3) usage of digital technologies for cooperation and development, (4) usage of digital technologies for marketing and sales, (5) current level of digitalization for their business model elements, (6) collection of customer data, and, (7) support of digital education of employees. key insights according to the characteristics of the opportunity discovery and creation approach (see table 1), we revealed that 5 out of 10 companies identified and explored new opportunities in relation to the discovery context (a, b, e, g, j), whereas the remaining 5 companies did the same within the creation context (c, d, f, h, i). although evidence of both theories has been found in every company, they could be clearly assigned to one single opportunity context. table 2 provides an overview of the interviewed companies and their assignment to the discovery or creation context based on the characteristics from table 1 and complemented by exemplary phrases from the interview. in addition, table 2 indicates the digital level of the company ’s business. the majority of founders recognized an imbalance in the market, triggered by specific customer needs or problems. but there is no clear tendency toward the discovery context of opportunities. furthermore, entrepreneurs developing their business models in the opportunity creation context also reach a point where their product or service solves a potential problem in the market of which they were unaware at the time they started. moreover, at the end of the development of a business opportunity toward a business model, entrepreneurs sometimes find themselves with a completely different product than the one they started with (e.g. company d). since five out of ten start-ups analyzed established their company in the opportunity creation context, a high degree of innovativeness is assumed in these cases. the creation of new business opportunities is based on developing products and services without or just restricted knowledge of the market and the competition. the founders create a new market demand by offering completely new products and services to customers. in our investigation it became evident that entrepreneurs in the founding process intuitively and individually deal with the respective tasks and problems depending on the situation and do not strictly follow the characteristics of one opportunity context. whether the entrepreneurs operate more in the discovery or creation context also depends on the combination of several factors, including access to a new opportunity, the environment, the mindset and previous developments. by analyzing the digital level of all companies, we faced the challenge that a strict separation of each digital level is hardly possible. nevertheless, we revealed that the business models of six companies have an extreme digital level (a, b, e, g, h, i), one has journal of business models (2021), vol. 9, no. 1, pp. 43-51 4747 table 2. company discovery theory creation theory determining characterization example of assigned phrase digital level a x 1, 2, 3, 4, 5 “it was completely clear for me, that the potential of this technology will grow and that this will lead to huge changes. i see many parallels with internet as this topic also arose.” (no. 1 & 3) extreme b x x 1, 2, 3, 5, 6, 10 “mobile access to web systems of the university was not possible with good user experience, our co-founder realized that this was so and it bothered him, he wanted to create better accessibility for himself and the students.” (no. 2 & 3) ”after running several startup projects in parallel, we finally decided to focus only on company b, problem-solution-fit.” (no. 5 ) extreme c x 1, 3, 5 “the idea came out of nothing. i thought that there is a similar solution for the industry and asked myself why there is no solution for the construction topic.” (no. 1) ”we have had to and still have to do a lot of groundwork here.” (no. 5) moderate d x 1, 3, 5, 6, 7, 10 “after a research of our new idea we noticed that a solution like ours did not exist at the present time.” (no. 1 & 3) ”if you have a sensor device there [...] then you can save labor and the risk of accidents. this results in a great added value in terms of cost savings. and that is where there has been an expansion of the business model.” (no. 10) moderate extreme e x 1, 2, 3, 4, 5, 6, 7 “what i did was to scout trends. i detected a customer need and developed a special solution for it.” (no. 1 & 2) ”[...] and our product is simply an addition or an innovation from the already known solution.” (no. 5) extreme f x 1, 2, 4, 5, 6 “we simply wanted to establish a company [...] the whole construct has developed over time.” (no. 1) ”my partners and i wanted to start and run a company and feverishly thought about what we could do. [...] we asked ourselves what we could do better than our competitors, and what the problem was and why other solutions didn’t work as well.” (no. 2 & 4) moderate extreme g x 1, 2, 3, 4 “the idea came up because we detected a certain problem shared by catering companies concerning their online review system.” (no. 1) ”because of our customers, we have again been working on new features and products.” (no. 3) ”i actually didn’t always want to be self-employed. (...) retrospectively, i have to reflect and honestly say that, in mind-set terms, starting my own business was a good fit for me.” (no. 2) extreme h x 1, 3, 4, 5, 10 “that simply arose from the idea that there was nothing like that at the time. [...] and that didn’t exist at the time, at least not in the quality we needed. that’s why we did it ourselves.” (no. 1 & 3 & 5) ”i have always been self-employed, so i have never worked in a company. i am ceo.” (no. 4) extreme i x 1, 4, 5, 6, 8, 9, 10 “[…] the idea arose independently of the motivation to start a company. we simply made the product for ourselves.” (no. 1) ”we have seen the problem of not having accurate data. we have seen this in everyday life, however, we did not know or never knew about how big this problem really is and how big a need there is behind it.” (no. 5) extreme j x 1, 2, 3, 4, 5, 6, 8 “we saw what he was doing and thought there must be a simpler solution. we came up with our solution to a problem that was unknown to us until then.” (no. 2 & 4) ”and then, above all, we have both seen different companies and have also seen many things that did not suit us so well there and that we wanted to do better in our own company.” (no. 8) moderate extreme table 2: assignment of the companies to the opportunity theory approach and their digital level journal of business models (2021), vol. 9, no. 1, pp. 43-51 4848 a moderate level (c), and three reach a moderate to extreme level (d, f, j) of digitalization. a clear assignment to an extreme digital level was not possible in these cases. on the one hand they are providing solutions on a high digital level, and at the same time they are operating in industries in which non-digital contacts or processes are still required to a large extent (geriatric care, human resources, and stock farming). the only company with a moderate level of digitalization has developed a web-based tool for the interdisciplinary configuration of buildings in the construction industry, in which non-digital components of the business model and the industry must also be considered to a greater extent. by combining the results on the opportunity context with the results on the digital level of each business model, our results revealed that the companies operating in the discovery context are more likely to have an extreme level of digitalization (a, b, e, g), despite company j (moderate-extreme), than companies operating in the creation context (c, d, f, h, i), showing more often a moderate level of digitalization. nevertheless, with our results we are able to show that all the companies have a large proportion of high digitalization, although there are also indications in the direction of a moderate digital level. the reason behind this high general digital level is based on the fact that every company surveyed offers various digital aspects in its business model, predominantly digital products and services. overall, there is a slight tendency toward a higher degree of digitalization in conjunction with the opportunity discovery context. this suggests that entrepreneurs who found their start-up in the opportunity discovery context and have sufficient information about the market and the competition are able to place a greater focus on digitalization than entrepreneurs in the opportunity creation context. we assume that entrepreneurs in the creation context devote greater energy to developing their business idea than to dealing with the issue of the company ’s appearance and operations with regard to digitalization. instead, the focus is on the product or service to be developed. in comparison, entrepreneurs in the opportunity discovery context focus more strongly on digitalization, since more information about their customers and competition is already available. we further revealed that companies founded in connection within the opportunity creation context have to iterate more often in the development of their products and services due to the path-dependent process of trial and error. in most cases, the founders developed completely new products or services in the course of this process, so that the orientation toward competitors is not possible and customer preferences or market acceptance are difficult to predict. discussion and conclusions the goal of our paper was to show in which opportunity context – creation or delivery – digital entrepreneurs develop their business models, depending on their level of digitalization. in sum, we revealed that digital pioneers with an extreme level of digitalization (kraus et al., 2019) in the opportunity discovery context use digital technologies to develop userfriendly solutions for customer needs. thus, entrepreneurs have sound knowledge of the market and customers in terms of opportunities in the discovery theory context, with the result that it is more likely to offer a higher level of digitalization. fueglistaller et al. (2012) argue that successful entrepreneurs need to be one step ahead of their competitors to gain a competitive advantage. this would explain the high level of digitalization in this context. by contrast, companies in the opportunity creation context show a tendency toward a moderate level of digitalization due to a lower level of digitalization of internal processes or marketing and sales activities. companies in the opportunity creation context have to deal with questions of uncertainty (geißler and zanger, 2015; ojala, 2016), because of unknown customers, an unknown market and unknown sales channels where they cannot primarily focus on a high level of digitalization. this explains in our cases the focus on the development of digital products and services and the neglect of other aspects. nevertheless, hull et al. (2007) stated that digital entrepreneurs selling digital products or services have at least a moderate digital level, which is also shown by our results. if we view the results through the lens of the business model, we see the main differences in both journal of business models (2021), vol. 9, no. 1, pp. 43-51 4949 value creation and value delivery. the value proposition of the business model is geared toward creating value with the help of smart products and services. according to hull et al. (2007), this is a characteristic of digital entrepreneurs. the value delivery shows that companies combine digital distribution with traditional sales activities (e.g., direct sales). we have rarely found a complete digitalization here. in value creation, digital technologies are predominantly used in the collaboration with other companies. of course, this is relatively easy to implement in software companies, since they are thoroughly familiar with the use of digital tools in software development and document sharing. internal processes are very often not yet digitized. in sum, our findings are in line with the findings of zaheer et al. (2019) who state that digital technologies play a vital role in the elements of digital companies’ business models. with our study, we contribute to the discussion about business models of digital entrepreneurs by gaining more insights on digital levels of the business models. we also contribute to the discussion on the development of opportunities by showing, in which of the two opportunity contexts (creation or discovery) digital entrepreneurs develop their business models. in terms of practice, we were able to demonstrate the origins and peculiarities of the opportunity context and what to consider when starting a digital business. our study also has its limitations. first of all, we only have 10 companies included in our sample. more empirical data is needed to strengthen our findings. additionally, more information about the business model is needed to gain deeper insights into the elements of the business model of digital entrepreneurs. in the case of imprecisely formulated statements in the expert interviews, it was not always possible to make a clear assignment of a text passage to the appropriate category. we addressed this challenge with intercoder agreement and multiple, iterative considerations of the text material. future research can take our results as a basis for a quantitative study to reveal correlations between the opportunity context and digital level of the business model. furthermore, it can be fruitful to reveal which of the characteristics or which combination of characteristics of either the opportunity creation or discovery are crucial for the entrepreneur to finally develop the opportunity in the creation or discovery context. journal of business models (2021), vol. 9, no. 1, pp. 43-51 5050 references alvarez, s. a. and barney, b. (2007), discovery and creation: alternative theories of entrepreneurial action, strategic entrepreneurship journal, vol. 1, no. 1–2, pp. 11–26. ardichvili, a., cardozo, r. and ray, s. (2003), a theory of entrepreneurial opportunity identification and development, journal of business venturing, vol. 18 no. 1, pp. 105–123. cuc, j. e. (2019), trends in business model research: a bibliometric analysis, journal of business models, vol. 7, no. 5, pp. 1–24. flick, u. (2014), an introduction to qualitative research, sage publications ltd., london. eckhardt, j. t. and shane, s. a. (2003), opportunities and entrepreneurship, journal of management, vol. 29, no. (3), pp. 333–349. fueglistaller, u., müller, c., müller, s. and volery , t. (2012), entrepreneurship: modelle – umsetzung – perspektiven mit fallbeispielen aus deutschland, österreich und der schweiz, springer fachmedien, wiesbaden. gaglio, c. m. and katz, j. a. (2001), the psychological basis of opportunity identification: entrepreneurial alertness, small business economics, vol. 16, no. 2, pp. 95–111. geißler, m. and zanger, c. (2015), opportunities und opportunity recognition als aufgabe des gründungsmarketings, in freiling, j. and kollmann, t. (eds.). entrepreneurial marketing, springer fachmedien, wiesbaden, pp. 179–197. ghezzi, a. (2019), digital startups and the adoption and implementation of lea startup approaches: effectuation, bricolage and opportunity creation in practice, technological forecasting and social change, vol. 146 (2019), pp. 945–960. gontareva, i., chorna, m., pawliszczy, d., barna, m., dorokhov, o. and osinska, o. (2018), features of the entrepreneurship development in digital economy, technology education management journal, vol. 7, no. 4, pp. 813–822. hills, g. e., hansen, d. j. and hultman, c. (2004), “opportunity recognition processes: a value creation context”, paper presented at the babson-kauffman entrepreneurship research conference (bkerc), 3 june – 5 june, strathclyde, scotland, available at: https://www.researchgate.net/profile/ david_hansen10/publication/228961801_opportunity_recognition_processes_a_value_creation_context/ links/02e7e52b34783254b4000000/opportunity-recognition-processes-a-value-creation-context.pdf (accessed 14 march 2020). hull, c. e. et al. (2007), taking advantage of digital opportunities: a typology of digital entrepreneurship, international journal of networking and virtual organisations, vol. 4, no. 3, pp. 290–303. jones, r. j. and barnir, a. (2019), properties of opportunity creation and discovery: comparing variation in contexts of innovativeness, technovation, vol. 79 (2019), pp. 1–10. kirzner, i. m. (1979), perception, opportunity, and profit: studies in the theory of entrepreneurship, university of chicago press, chicago. journal of business models (2021), vol. 9, no. 1, pp. 43-51 5151 klotz, a. c., hmielski, k. m., bradley, b. h. and buenitz, l. w. (2014), new venture teams: a review of the literature and roadmap for future research, journal of management, vol. 40, no. 1, pp. 226–255. kraus, s., palmer, c., kailer, n., kallinger f. l. and spitzer, j. (2019), digital entrepreneurship: a research agenda on new business models for the twenty-first century, international journal of entrepreneurial behaviour and research, vol. 25, no. 2, pp. 353–375. mayring, p. and fenzel, t. (2014), qualitative inhaltsanalyse, in baur, n. and blasius, j. (eds.), handbuch methoden der empirischen sozialforschung, springer fachmedien wiesbaden, wiesbaden, pp. 543–556. nambisan, s. (2016), digital entrepreneurship: toward a digital technology perspective of entrepreneurship, entrepreneurship: theory and practice, vol. 41, no. 6, pp. 1029–1055. ojala, a. (2016), business models and opportunity creation: how it entrepreneurs create and develop business models under uncertainty, information systems journal, vol. 26, no. 5, pp. 451–476. pricewaterhousecoopers (2014), “digitalisierungsbarometer”, available at: https://www.pwc.de/de/digitaletransformation/assets/pwc_digitalisierungsbarometer_2014.pdf (accessed 22 january 2021). sahut, j. m., iandoli, l. and teulon, f. (2019), the age of digital entrepreneurship, small bus econ, (2019). schumpeter, j. a. (1934), theory of economic development: an inquiry into profits, capital, credit, interest and the business cycle, harvard university press, cambridge. shane, scott (2000): prior knowledge and the discovery of entrepreneurial opportunities, organization science, vol. 11, no. 4, pp. 448–469. sorri, k., seppänen, m., still, k. and valkokari, k. (2019), business model innovation with platform canvas, journal of business models, vol. 7, no. 2, pp. 1–13. zaheer, h., breyer, y. and dumay, j. (2019), digital entrepreneurship: an interdisciplinary structured literature review and research agenda, technological forecasting and social change. vol. 148 (november), p. 119735. https://www.pwc.de/de/digitale-transformation/assets/pwc_digitalisierungsbarometer_2014.pdf https://www.pwc.de/de/digitale-transformation/assets/pwc_digitalisierungsbarometer_2014.pdf 9 journal of business models (2020), vol. 8, no. 3, pp.9-26 a ‘storytelling science’ approach making the eco-business modelling turn david m. boje, kenneth mølbjerg jørgensen abstract purpose: to develop a transdisciplinary approach called eco-business modelling. design/methodology/approach: the first step is an analysis of the ways triple bottom line and circular economy emplotments have colonized and co-opted the united nations and european union agenda 2030 initiatives by privileging business-as-usual scenarios. the second step is to construct a storytelling approach model to business modelling. the third step is to propose a ‘self-correcting’ storytelling science method to make the transition from the contemporary business-as-usual model to eco-business modelling. findings: the challenge is to create comprehensive ecological business models that foster worstcase and best case scenario comparisons with status quo business-as-usual. originality value: we propose that business modelling is about storytelling, making ‘bets on the future’ scenarios, and we propose a ‘five worlds of storytelling model’ business modelling. research implications: the contribution is to propose a ‘self-correcting’ storytelling method of iterative, ‘crossover storytelling conversations’ as a way of developing collaborative ‘interdisciplinary learning’ across specialized business model disciplines. practical implications: we call for crossover conversations that challenge the unintended consequences of the triple bottom line and circular economy business models. social implications: with ozone depletion, climate change, natural resource depletion, loss of biodiversity and habitat, there are pressures to develop ecologically sensitive business models. key words: eco-business models, storytelling, triple bottom line, circular economy, scenario-analysis, transdisciplinary conversations acknowledgements: the authors declare that there are no sources of external research funding for this article. please cite this paper as: boje, d. m., and jørgensen, k. m. (2020), a ‘storytelling science’ approach making the eco-business modelling turn, vol. 8, no. 3, pp. 9-26 1-2 aalborg university business school, davidboje@gmail.com; kmj@business.aau.dk journal of business models (2020), vol. 8, no. 3, pp. 9-26 1010 a ‘storytelling science’ approach making the eco-business modelling turn approaches to sustainable business modelling have been dominated by triple bottom line (3bl) and circular economy (ce) approaches to shape what is called corporate environmentalism (linstead and banerjee, 2009). therefore, they reduce the context of sustainable business modelling to a matter of customer value, profit, and market opportunities. thus, a real turn to eco-business modelling in which nature matters as much as profit, costs, revenues, and growth has been co-opted, colonized, and obscured by corporate environmentalism that serves the pr purposes of greenwashing rather than actual moves to limit ozone depletion, global heating, natural resource depletion, and loss of biodiversity and habitat. such shallow forms of sustainable business modelling preserve and perpetuate a non-ecological business modelling logic. critics have argued that they can also colonize areas of third world social life that are not yet ruled by the logic of the market or the consumer and violate forests, water rights, and sacred sites (banerjee, 1999: 9; escobar, 1995; visvanathan, 1991). in this paper, we suggest a more holistic and grounded eco-business modelling approach, which we construct through storytelling and storytelling science. this approach answers our research question: how to begin an ecological turn from ‘corporate environmentalism to ‘eco-business modelling’? we answer this question in three steps. first, we deconstruct the dominant narratives of business modelling to disclose how two corporatized environmentalism approaches, triple bottom line (3bl) and circular economy (ce), dominate and prevent a turn to eco-business modelling. both narratives have been coming under increasing criticism for putting economic bottom line interests ahead of both equity and ecosystem concerns (lazarevic and valve, 2017; milne, 2005; norman and mcdonald, 2004). we conclude that ce uses the same logic as 3bl and therefore merits the same critique. the 3bl theory tries to balance profit, people, and planet, aka economic prosperity, or by economics, equity, and environment. our proposed ecological approach to business modelling is based in theories of storytelling and a comprehensive ethical framework that connects business model cycles with the cycles of nature. the principle that these cycles can begin again is identified as the highest principle of all being, and it is embedded in our storytelling approach. we propose a ‘five worlds of storytelling model’ in order to visualize our understanding of the complex interactions between past/future and abstract narratives/grounded stories in business modelling which construct ‘bets on the future’ scenarios. second, we propose a ‘self-correcting’ storytelling science method to make the transition from contemporary business-as-usual model to an ecological and in the end ecological business ethics model. iterative, crossover storytelling conversations are ways of developing collaborative ‘interdisciplinary research projects’ across specialized business model disciplines. these storytelling conversations are important to allow comparisons of alternative future scenarios with business models for more effective and extended risk management in which nature’s cycles play an important part. deconstructing triple bottom line (3bl) and circular economy (ce) the climate crisis has set a new agenda for 21st century strategies and business models. in 2015, members of the united nations (un) agreed on 17 sustainable development goals (sdg) that encompass and combine goals concerning nature, cultural, social and economic development. partnerships for the goals was mentioned as the last one. collaboration among actors, strong institutions, and peace were seen as important for avoiding temperatures that rise to more than 1.5-2 degrees. climate action and policies concerning life on land, life below water, clean water, and so forth were seen as necessary for avoiding not only rising temperatures but also a decline in biodiversity, changes in land systems, loss of animal and fish populations (including commercial fish), ocean acidification, and so forth. for business and business modelling, the un sdgs have been understood differently. mcateer (2019) argues journal of business models (2020), vol. 8, no. 3, pp. 9-26 1111 that sustainability is a new advantage and defines sustainability in a way which is perfectly consistent with corporate social responsibility (csr), namely as a balance between profit, people, and planet (mcateer, 2019: 29). this is also consistent with the narrative of globalization, which according to latour (2018) has accompanied post-war political and economic agendas. latour instead proposes coming down to earth through what he calls a ‘terrestrial politics’ that not only sustains nature’s life cycles but also engenders them. his suggestion is radical and implies moving our attention from ‘systems of production’ to ‘systems of engendering’ in business modelling (latour, 2018: 82). this new narrative entails moving attention to the multiple agencies that are entangled in the living matter that is laying between the atmosphere and bedrock in a minuscule ‘critical zone’ (arènes et al., 2018) that is only few kilometers thick—“…a biofilm, a varnish, a skin, a few infinitely folded layers” (latour, 2018: 78). this narrative of the terrestrial is directly opposed by an out-of-this world climate denial narrative (i.e., latour, 2018) supported financially by major corporations and of course donald trump. to return to the ground is to extend arendt’s (arendt, 1998: 12–15) notion of natality to all living beings such that all these terrestrials, among which we humans are only one, have reasonable possibilities to not only recreate themselves but also to flourish and appear as beautiful and unique creations among diverse and multiple beings. this entails seeing ‘nature as a process’ instead of ‘nature as a context’ for our actions (gleason, 2019; latour, 2018). moving towards such systems of engendering is a huge challenge for business modelling. contemporary approaches to business modelling, also those that claim to be sustainable, are firmly embedded in a systems of production approach. 29th july was earth overshoot day, the calculated day when humanity ’s resource consumption exceeds earth’s capacity to regenerate those resources that year. in 1987, the earth overshoot day was 23rd october. in 1970 it was 29th december. the earth overshoot day for denmark was march 29 in 2019. for usa it was march 15th. while the earth overshoot day is a very rough estimate, it does tell a story of the mismatch between contemporary material practices, including business models, and the cycles of nature. perhaps the earth overshoot day even paints a more optimistic picture, since scientists all over the world have been claiming that we currently are living through a 6th mass extinction event. businesses in denmark and all over the world have embraced the un sdgs. or have they? the un sdgs have actualized a renewed interest in corporate social responsibility and their proposal of a balance between profit, people and planet (vallentin, 2011), i.e., 3bl. furthermore, ce has been emphasized as the new economic concept that would save the planet from resource depletion. thus, it is narrated that if we can just recycle, then there would be no need or at least less need for the planet’s resources. however, we suggest that 3bl and ce combined is a narrative hoax designed to keep the relations of production and consumption going at the same pace of business-as-usual scenarios. this has been observed by several authors such as valenzuela and böhm, among others. “given the all too obvious social and environmental crises associated with out-of-bounds growth capitalism, the circular economy has been one of the main references for rebuilding and reforming a political economy of sustainable growth” (valenzuela and böhm, 2017: 23). today 3bl and ce have interpenetrated ideas of sustainable business modelling and are endorsed by the un (see for example business & sustainability development commission, 2017) as well as the eu (see for example european commission, 2018). one is translating its concepts into the other, while watering them down so they do not address the complexity and breadth of problems of climate change, global warming, and what most scientists predict as catastrophic consequences of business-as-usual approaches. from a storytelling standpoint, this includes the ways that the business models’ chronotopes are coming into alignment. chronotopes (bakhtin, 1981) are the spacetime emplotments of their respective narrative events unfolding into the future. emplotment is central here in denoting how journal of business models (2020), vol. 8, no. 3, pp. 9-26 1212 people transform and reorganize events in a story and thus insert themselves into history through processes of interpretation and action (rhodes & brown, 2005; young-bruehl, 1977). such emplotment is embedded in human constructs which include concepts, theories, and models. both sets of chronotopes in 3bl and ce respectively lack the deep ecology standpoint to be of much use in achieving the un agenda 2030 limit of 1.5 degree c average earth temperature increase. ce is usually seen as a sustainable alternative to the linear model of economy as illustrated by weetman (2016). figure 1: contrast of linear economy model to circular economy (ce) model we suggest that ce is a counternarrative that needs deconstruction because it reduces ecosystem stewardship to just an economic bottom line. in short, ce is constituted as a solution to the business of ‘sustainable development, which is itself a watered-down version of deep ecology and is an example of ‘corporate environmentalism’. it is a weak appropriation with substitutions of economic prosperity and continued growth of the linear economy that ce purports to move away form. there are few published critiques of ce (see valenzuela and böhm, 2017). geissdoefer, savaget, bocken, and hultink’s (2017) review of the merger of business modelling with the circular economy focuses on areas of attention such as closed loop value and supply chains (guide and van wassenhove, 2009; wells and seitz, 2005; govindan et al., 2015; stindt and sahamie, 2014), circular business models and product design (bocken et al., 2016). our argument is that the 3bl and ce chronotopes need to be more long-term and more terrestrially grounded to be effective. nature consists of multiple ecological systems and critical zones (i.e., arènes et al., 2018; jørgensen et al., in review; latour, 2018) which are exacerbated by temperature increase (boje, 2019). the earth is approximately 4.5 billion years old, and in the span of their 140,000 year existence, humans have managed to disrupt the climate, raising its temperature about 1 degree c since the industrial revolution. if the existence of the earth were reduced to 24 hours, humankind would have existed only three seconds. the extinction of animals is now 1,000 times the natural background rates. both ce and 3bl are for putting profit/economics ahead of people/equity and planet/environment. they may contribute to slowing down the pace of climate changes but will not stop them. ce and 3bl have robust measures of profit/economic variables but not much on the people/equity or planet/ environment, and this supports our argument. the premise of ce is that there is a set of boundary conditions that ensures that all activity translates to contributing towards a positive impact for 3bl, profit, people, and planet (aka economic, equity and environment). the business modelling logic of ce can be as profitable as it has been in the linear model of grow now, clean up later. focus is still on short-term gains at the expense of long-term externalities. while it is possible to somewhat reduce, reuse, and recycle, the circular economy, in its circularity, is all about economy and development without limits to growth. ce is then rather traditional in following the same kind of growth-mania economics, which keep placing more demands for additional natural resources and evermore growth, and it does not account for exceeding nine planetary limits on the carrying capacity for all life on planet earth (rockström et al, 2009). as an example, ce puts eco-business modelling (pateli and giaglis, 2004) within economic logic. lewandowski (2016) offers the critique: “existing business models for the circular economy have limited transferability and there is no comprehensive framework supporting every kind of company in designing a circular business model.” a limitation is that lewandowski tries to translate business model concepts, such as the value proposition, as a core component of the circular business model and extend how the circular value proposition offers a product, table 1: this is a table showing something that is really awesome and interesting. journal of business models (2020), vol. 8, no. 3, pp. 9-26 1313 product-related service, or a pure service. a problem with such an approach is that it does not address the myopic approach of the circular economy itself and its reductionism of climate changes to product design, component reuse, and recycling. bakker et al. (2014) consider circularity as absolutely necessary for sustaining economic output, but they do not give equal attention to ecosystem or equity. next, we will begin constructing a new eco-business modelling approach based on storytelling and storytelling science. we will begin by discussing relations between storytelling and business modelling. storytelling and business modelling a business model is a description of the value a company offers to one or several sets of customers. this means developing and adopting business models with strategies that have a positive economic, social, and environmental impact, i.e., 3bl. joyce and paquin (2016) extend the original 3bl model by adding two layers to economic development: an environmental layer based on a lifecycle perspective and a social layer based on a stakeholder perspective. as with earlier versions, joyce and paquin (2016) place the economic development over and above the equity (social) and the ecology (nature) layers. rather than continuing business-as-usual modelling through 3bl and ce, we suggest ecological business modelling needs to partner with more contextual and relational business storytelling by reframing market competitive dynamics as a much wider geological and longer term sustainability-ethics shift (agrafioti and diamadopoulos, 2012). we thus suggest that business models are all about storytelling in that they can be seen as chronotopes that integrate diffused and differentiated activities and events unfolding in different time-spaces. such chronotopes include the usual business modelling questions. • how are key components and functions, or parts, integrated to deliver value to the customer? • how are those parts interconnected within the organization and throughout its supply chain and stakeholder networks? • how does the organization generate value or create profit through those interconnections? the chronotopes embedded in business models can be more or less complex. corporations seek to enact complex chronotopes through integrating activities in many diffused and differentiated time-spaces. for understanding the complexities involved and for using storytelling to make a move towards eco-business storytelling, we need to distinguish between the different ways in which storytelling works. three characteristics of storytelling need to be discussed: storytelling as sensemaking, politics, and how storytelling relates to sustainability. storytelling and sensemaking: antenarrative, living story, and narrative first, storytelling is important for sensemaking and meaning-making in business modelling. boje (1991) argues that storytelling is the dominant sensemaking currency in organizations. storytelling is thus essential for the motivation to enact business models in practice and for the communication and coordination among actors participating in the business model’s value chain. we can further distinguish between three different modes of storytelling as sensemaking. business modelling is about storytelling by making “antenarrative bets on the future’ (boje, 2001; boje, haley and sailors, 2016; vaara and tienari, 2011). antenarrative is a story of the future. business model canvas and other methods and concepts are all designed to produce and support antenarrative future-scenarios. business modelling is about storytelling in that the socio-material enactment of business models relies on living stories which emerge spontaneously through the situated, collective, discursive, and material interactions between people (boje, 2001, 2008; jørgensen and boje, 2010; jørgensen and strand, 2014; strand, 2012). living stories constitute the present and involve the techniques, systems, procedures, and competences through which business models are to be enacted in practice. business storytelling is about storytelling in producing or at least embedding stories from the past. this interpretation of the past can be more or less institutionalized in stiffened or petrified narratives: a dominant linear journal of business models (2020), vol. 8, no. 3, pp. 9-26 1414 and undisputed account of what the organization’s business is, how it was created, and so forth (boje, 2001, 2008; czarniawska, 1997). such retrospective sensemaking (weick, 1995) is about the past and is often used to describe the organization’s identity, which should be materialized in the business model. storytelling as politics second, storytelling is important for the ‘politics of business modelling’. this politics signals that actors, who are at the same time acted upon, enact business models in time-spaces. in practice, this means that business models are continuously shaped and reshaped through potentially complex interactions in many different time-spaces. as a chain of interactions, business models are storied and re-storied by many different a actors. storytelling is never merely a matter of senseand meaning-making but an aspect of the between-ness of actors in which a variety of different private and public interests are always problematically in play (arendt, 1998; jackson, 2013; jørgensen, 2020). business models are spatial practices whose outcomes are responded to by stakeholders and shareholders and which feed back into business models. three different parts of the politics of storytelling are of interest in business modelling: appearance, mobilization, and negotiation. business modelling is about storytelling in terms of how organizations appear before the shareholders, stakeholders, and society. an important aspect is how the story of the business model is perceived and how that influences the value of the business model (i.e., market value, future expectations, and attractiveness of the organization to customers, suppliers, investors, new leaders, new employees, and so forth). a bad story can be devastating for an organization. non-sustainable and non-ethical business models become bad stories and can influence all of the other business models in an organization. storytelling is essential for business modelling in that a good story mobilizes and collects stakeholders and generates resources. as an ‘act of love ‘ (sandoval, 2001) a good story can mobilize both internal and external actors inviting them to be part of the story. in contrast, a business model without a story is no business model at all. finally, storytelling as politics makes evident that business models are the results of negotiated relationships between stakeholders across time-spaces. all actors in the business model seek to generate value from the business model and satisfy their interests. storytelling and sustainability storytelling is also about sustainability. arendt suggests that storytelling is the means by which people become reborn again in action. she identified this principle as natality (arendt, 1998: 176-185) but only applied it to humans (totschnig, 2017). however, she submitted natality to what she identified as the highest principle of beings, namely eternal recurrence (arendt, 1998: 97). latour, as noted before, reconfigures the human as a terrestrial with the intention of dissolving the duality of human and non-human actors. we are terrestrials among many; we are parts and rely on the entanglement of multiple agencies contained in the topsoil, water, air, forests, lakes, plants, and other animals. we are part of how multiple species translate and rework life and our life and our aliveness physically, materially, spiritually, and culturally. we rely on what haraway (2016: 10) calls ‘multi-species storytelling’. the point is one of fundamental interdependence on the eternal recurrence of the multiplicities of species and life forms, but also societies and communities. business modelling is part of communities’ and nature’s life cycles and depends on them. terrestrial politics (jørgensen, svane and boje, forthcoming) is thus a ‘politics of natality ’ (vatter, 2006) extended to all terrestrials in ways in which sustainability is not only a question of survival and reproduction but of flourishing. in other words, sustainability is not only a question of keeping nature alive at the minimum level required, but it is a question of allowing nature to unfold and live for the good of all terrestrials. a transition from business models to eco-business models is accomplished in a deep and pervasive sense when the politics of natality becomes embedded in all processes and relations and becomes grounded in ecosystem constraints and biophysical realities. in this way, business modelling becomes not only a matter of eco-efficiency but also of viable logistics and supply chain relationships. eco-business journal of business models (2020), vol. 8, no. 3, pp. 9-26 1515 modelling practices sustainability without exceeding the planetary limits of the earth’s ecosystems. sustainability storytelling within business modelling implies extending the ‘the bets on the future’ and develop business modelling scenarios of planet and people without falling into hyperbole or clinging to the status quo scenario, the ‘only bottom line is profit’ trap of business model value creation.’ the current state of ‘storytelling science’ is dominated by ‘status quo’ business model theories, methods that lack interdisciplinary collaboration, and interventions that produce status quo scenarios that, we contend, do not go far enough or fast enough to keep up with global climate change. it is the storytelling business culture that drives the business modelling’s geographical and temporal horizons. when corporate social responsibility (csr) is framed as a mainstream business ‘climate change’ strategy, it then expresses concerns for its geo-economic and long-term value chain rather than being reduced to short-term ways to maximize net present value (npv) and return on investment (rio). storytelling can play a crucial role in strategy and achieve a different value proposition in its business modelling by integrating contextual, relational, and extensive temporal horizons into the firm’s business culture and transorganizational partners. this transorganizational and geo-ecological horizon addresses longer term social and ecological problems of the firm’s sustainability. for businesses to address climate change requires a change in the foundational storytelling and sensemaking apparatus as well as change in the political relations between organizations and its stakeholders at a deep business culture level, a change which extends throughout the transorganizational supply chain. this ethical approach to storytelling diffuses accountability to space, time, and matter throughout the enterprise. the next section presents a five worlds of the storytelling model that can be used to analyze and demonstrate the dynamics of eco-business modelling and which can help enact eco-business models in practice. five worlds of storytelling storytelling is often prompted by some crisis or loss of ground in the relations that persons or organizations have with the world (jackson, 2013: 37). storytelling thus involves re-storying experiences by constructing, relating, and sharing stories to restore viability. the turn to eco-business modelling from businessas-usual-modelling is initiated by such a crisis in the relations between organizations’ business models and the terrestrial conditions on which they stand. thus the storytelling model is by no means a model for surface change but involves deep pervasive re-storying. the 17 un sdgs are ethical markers that require re-storying business models in ways that integrate both sensemaking, politics, and sustainability. figure 2 below brings together narrative, antenarrative, and living story together in a five world storytelling model. the figure visualizes the complex relations between narratives, antenarrative, and living stories as well as between the past and the future involved when restorying business models. the deep challenges concerning new eco-business modelling are that such modelling implies building from the terrestrial principles of interdependence, multiplicity, and groundedness. as a consequence, the csr pyramid (carroll, 2016) for managing responsibility is reversed. climate is first, society second, and economy third (jørgensen & boje, 2020). restorying business models towards eco-business models involves such reflections and actions concerning how our business models can connect with these goals. we do not expect it to be easy. it is hard to do the right thing. business models can be complex and extended in time and space across many different legal, social, and economic contexts. they are held together by a complex set of relations that spans across organizational, institutional, and national boundaries. changing business models involves negotiations between the organization and the stakeholders which impact the perceived value of the business model (is the business model legitimate), the motivation of employees (do the employees find it meaningful to work in the organization), the organization’s employer brand (what kind of employees can the organization attract), and the organization’s brand in general (is the organization an attractive collaborative partner). such political processes as well as the ethical principles which they are submitted to are parts of the complex interplay illustrated by the five worlds of storytelling model. journal of business models (2020), vol. 8, no. 3, pp. 9-26 1616 the five worlds of storytelling are organized around ‘the antenarrative’ which contains the dynamics that shape future possibilities. this dynamic contains the ‘abstracting’ (petrified narrative-counternarrative) world (top), the ‘grounding’ (living stories-counterstories) world (below), the ‘rehistoricizing’ (diffracting many pasts) world (left), and the ‘futuring’ world (negation of the negation) (at right). antenarrative world is all about processes that are constitutive of the other worlds. every re-storying process involves exploring and re-storying the relationship with the past and the future and the relationship between the abstract and the grounded. with the ecological crisis of business modelling, there is a need for re-storying the relationship with the past, given that water, co2 emission, plastic, waste, and resource depletion were not at the center of attention in the past. for instance, this involves re-storying business relations with natural and material geographies. water, air, waste, or resource depletion are stories and material conditions that diffract the contemporary business modelling stories and create a need for the organization to reinvent its identity and hence its past and its future. boje, svane and gergerich (2016) and boje and rosile 2020) have come up with six questions that can help sort out the antenarrative world. these questions are summarized in figure 3. the abstracting world tries to fit history into a mold, a plot, a scenario. it’s political, and it ignores a lot of the living story world to make this happen. there is never a retrospective narrative, looking backwards at the past, without a bunch of counternarratives sprouting up to take issue with the grander more figure 2: five worlds of storytelling theory figure 2: five worlds of storytelling theory journal of business models (2020), vol. 8, no. 3, pp. 9-26 1717 ‘petrified’ narratives. petrified narratives are at the level of an organization, a culture, a nation, united nations, and so on. the narrative-counternarrative world is in a dominating relationship to the living story world. we are against it. narrative-counternarrative (n-cn) is too ‘abstracting’, missing all the salamanders, all of the important relations of life itself, all of the family dynamics, and the relation of humans to nature. the abstract is a business-asusual strategy: top-down, far-away, and blind to the relational dynamics that make places and spaces. often the abstract is squeezed into a simple beginning, middle, and end ‘emplotment’ that cuts across time-spaces and severs life-worlds in the most violent fashion. what n-cn worlds need to do is more ‘grounding’ and less ‘abstracting’. in the grounding world, we ground our living stories in relation to others (people and organizations) and with nature. living stories are always multiple, we can never tell just one; always interrupt to tell another and then one more after that. a living story has a place, a time, and a mind all of its own, because a living story is an aliveness. living stories include the untold stories of what we choose not to pay attention to but is happening all around us in the foreground, background, and in-between. we live and are aware of the sights, sounds, smells, touches, and tastes around us, and at other times, we are completely oblivious to how inseparable we are from nature, how we are part of nature, and how we change nature by our actions. we are therefore complicit in climate change. we suggest that eco-business modelling implies resituating the relationship between the abstracting and the grounding in a way in which grounding takes center stage while abstracting must be reduced to a minimum. grounding involves ‘rooting’ business models in terrestrial conditions. through restorying, the attempt is to emplace business models in the variable critical zones with which these business models become entangled. when business models become extended across timespaces, we need to re-story the meaning from these different grounds. otherwise, we as well as our business models lose our ground and place in the world. the rehistoricizing world is all about diffracting lots of different pasts that all come to light given what we notice in the present. we have illustrated four pasts (p1, p2, p3, and p4). say p1 is the past that fits predictions of the status quo, that we have solved many crises before, so why not this one. p2 is a pilling up of disaster after disaster that is catching up with us, and key tipping points (peak oil, peak water, hole in the ozone layer) have happened, and as the temperature rises more than 2 degrees, the 6th extinction is about to wipe out most of humanity. p3 is a change in how business is conducting itself and giving itself awards for its many feats of sustainability, mostly bogus, but it keeps the wheels of commerce turning. p4 is what prince charles is trying to tell trump. it’s time for action, to prepare in advance and soon but make a different future come about. the futuring world is a dialectical storytelling. the ‘negation of the negation’ is a different sort of dialectical pattern than the thesis-antithesis-synthesis of the narrative-counternarrative world. mostly it is a squabble, a polemical battle between political parties, between neo-liberal economists and environmentalists, or between democrats and republicans, two parties so far to the right that you cannot tell the difference between them anymore. in denmark and new zealand, there are coalition governments. that means lots of parties, and you have to negotiate to get a coalition and then get things done. notice figure 3: the six antenarrative world questions figure 3: the six antenarrative world questions journal of business models (2020), vol. 8, no. 3, pp. 9-26 1818 how far ahead new zealand and denmark are compared to trumpland. this says something about the difference between the living story world, which is much more dialogical (people having conversations, negotiating positions, but not just giving in), and the dialectics of the narrative-counternarrative world (with all its polemical dialectics). futuring world is a different kind of dialectical pattern, not really dialogical, and not about finding synthesis. we have put in a fractal image in futuring, a spiral rhizome. in fact, each of the images in the figure above is a different sort of fractal pattern: cyclic for the dialogical, interweaving for diffracting, oppositional for abstracting, and the spiral rhizomatic for futuring world. by starting with the antenarrative world, we can look at the dynamics involved for eco-business modelling both in terms of sensemaking as well as the political opportunities and challenges. we illustrate in figure 4 below how the six antenarrative questions are at the heart of business modelling. this is followed by a discussion of how a storytelling science approach can be designed for eco-business modelling. a storytelling science approach to business modeling a business model is a complex assemblage of material practices that combines actors, stakeholders, objects, and artifacts within and across historical, spatial, and material contexts. a business model is enacted and acted upon as it touches and is touched by many people, communities, institutions, and policies in the natural and material worlds. products, components, structures, perceived values (both tangible and intangible), customers, markets, management philosophies, structures, and collaborative figure 4: how antenarrative process questions relate to business modeling figure 4: how antenarrative process questions relate to business modeling journal of business models (2020), vol. 8, no. 3, pp. 9-26 1919 relations and norms between actors in the value chain are parts of the complexity gathered in the chronotope. such emplotment indicates that business models are held together by practices and relationships that make up some common ground for the business model to work. normally, in organization studies, strategies are seen as providing such emplotments. from the political point of view of storytelling, narrative strategies are usually too abstract and petrified and are blind to spontaneous and situated living stories that unfold along the chain of activities that make up the business model. business models need to contain some degree of flexibility as they are enacted through time and space, because many people potentially have something at stake in regard to the unfolding of the business model in practice. living story captures the between-ness of practices. it might refer to the between-ness of people but also to places, to nature, to the cosmos, and so forth. when business modelling is making a transition towards eco-business modelling, emplacement is an appropriate supplement to emplotment. it captures how business models need to be grounded in the living stories and be tied to a place, a community, a natural and material geography (jørgensen, 2020). thus, it is the living stories and their rootedness and belongingness to a place which hold the key to shape eco-futures of business modelling. living stories take place in multiple spaces that are scattered all over the activities in the business model, and they assemble managers, employees, suppliers, customers, politicians, institutions, and citizens and are conditioned on material practices as well as the multiple agencies embodied in terrestrials. making a transition towards eco-business modelling is an iterative and collaborative process that comprises actors from communities, public organizations, businesses, and stakeholders. the ultimate goals would be that communities embrace businesses and businesses embrace communities, so that a business does not perceive itself as a separate entity that has no other obligation to society than abiding the law. we suggest a ‘storytelling science’ approach (boje & rana, in review) to how ‘sustainable business modelling’ could be designed and implemented in ways going beyond disciplinary silos that underestimate the severity of the climate change crisis. this approach is reflexively designed to test multiple scenarios and go beyond current best-practice examples of circular economy, and triple bottom line case studies. a storytelling science should make small iterative steps along the business model value chain to implement sustainability goals. the un sdgs can provide the headlines for such work that can bring businesses and communities together towards the overall goals that we perceive as living well and healthy and producing and consuming in a durable and sustainable fashion. a ‘storytelling science’ method is a problem-based scientific approach designed towards making steps and aligning actors’ expectations and actions so that they re-story their stake in the business model toward eco-business model positions. by ‘storytelling science’ (little ‘s’), we suggest charles sanders peirce’s (1931-1960) self-correcting semiotics of abduction-induction-deduction. it contains three different types of reasoning (peirce, 1958: 8.385). • 1st deduction which depends on our confidence in our ability to analyze the meanings of the signs in or by which we think; • 2nd induction, which depends upon our confidence that a run of one kind of experience will not be changed or cease without some indication before it ceases; and • 3rd retroduction [aka abduction], or hypothetic inference, which depends on our hope, sooner or later, to guess at the conditions under which a given kind of phenomenon will present itself”. in contrast, karl popper (2008) developed a ‘zigzag’ scientific method which is appropriate for getting closer to sustainable solution approximations, given the super wicked complex problems of ‘sustainable business modelling’, knowing that we are never arriving at ‘absolute truth’ because of our own fallibilism. we propose doing refutations to attain popper’s (1956/1983: xxv) ‘metaphysical realism’ by being critical of the stories, narratives and antenarratives of a ‘small stories’ ‘storytelling science’ and their relation to ‘grand narratives’ [‘master narratives’ and ‘petrified narratives’] of ‘big s’ ‘science narratives’, in journal of business models (2020), vol. 8, no. 3, pp. 9-26 2020 other words, we organize business models in a multiplicity of interdisciplinary units and circles in pursuit of the ‘myth of the framework’ (popper, 1994), and of course ‘business models’ are seduced by the myth of the framework. peirce (1931/1960: 2.758-2.759) puts three kinds of induction in relationships: 1. crude induction: “future experience will not be utterly at variance with all past experience.” in storytelling, this is a retrospective sensemaking narrative making linear plots. 2. quantitative induction: “what is the ‘real probability ’ than in individual member of a certain experiential class, say the s’s, will have a certain character, say that of being p?” 3. qualitative induction: this is intermediate between crude and quantitative induction. “upon a collection of innumerable instances of equal evidential value, different parts of it have to be estimated according to our sense of the impression they make upon us.” this we first deduce from ‘abductive’ (or ‘retroductive’) hypothesis (terms he uses sometimes differently, other times interchangeably). the self-correcting approach to storytelling science involves successive attempts to refute abductive-hypotheses and deductive-theories by doing a series of inductive inquiries. in each iteration, the storytelling researchers document their abductivehypotheses and any deductive-theories and associated assumption sets. then, the inductive methods such as conversational interviews, participative observation, and field experiments are conducted along with attempts to test all three kinds of inferences. the theory-method-praxis of four successive self-correcting tests are shown below: 1. test one: try to dismiss or refute business model precepts. this is a self-reflexivity conversation to dismiss precepts that have a kind of framework fiction and if this is not workable, proceed to test two, 2. test two: ask other people about the business model assumptions. critical cross-disciplinary conversations with others. if several people concur, then the induction is conclusive, if not proceed to test three. 3. test three: use knowledge of laws of nature. understand scalability processes of nature in relation to business models. here we apply knowledge of nature by making business model assumptions consistent with observations of laws of nature. if that does not work, proceed to test four. 4. test four: do experiments (and practice interventions) to see if business model assumptions are illusory. do experiments and practice interventions to get closer to solutions to super wicked water and climate changes that are ushering in more and more crises which are larger and on larger scales. “all of these tests, however, depend upon inference” (peirce, 1931/1960: 2.143). they all depend upon a method of self-correction in which the inferences are not made post hoc and instead are antecedent to the observation predictions (abductive-hypotheses). the antenarrative ‘bets on the future’ are recorded in advance of doing the inductive observation inquiry. while ‘self-correcting’ is the aim of ‘little s’ storytelling science, we approach the topic with the humility of fallibilism, knowing fully, as popper (1956/1983: 50, 6) puts it, “scientific method does not exist” and there is no method of “finding a true theory” and the best one can get at is a ‘kind of criticism’ of the assumptions and the ‘isms’ so we get “closer approximation to the truth” by critically discussing” to show what is ‘not true” (popper, 1956/1983: 20, 23, 25). the ’storytelling science of self-correcting’ deploys the peircean abductioninduction-deduction cycles in several phases (shown here are phases i. to iv) of inquiry. each inquiry phase (i. to iv.) begins with an abductive hypothesis and deductions that are then studied by induction methods. conclusions as business modelling is making an ecological turn, it is important not to adopt superficial and shallow approaches. we have pointed out two examples of corporatized environmentalism, the triple bottom line (3bl) and the circular economy (ce). both reinforce a shallow approach to business modelling’s ecological turn. our article contributes a five world storytelling model as well as a longitudinal learning approach journal of business models (2020), vol. 8, no. 3, pp. 9-26 2121 called ‘self-correcting storytelling science’. this approach offers a way to go beyond inductive case analysis methods and sequential refutations of abductive assumptions and deductive assumptions in theory building. by 2050, the united nations predicts five billion people will be in fresh water shortage crises (see guardian article). the problem, as we see it, is that the kinds of solutions being proposed will be too little and too late to save the lives of most of humanity from the sixth extinction (aka anthropocene extinction, see website). unless we do something major to change our production and consumer habits, and real soon, the temperature will rise, the weather patterns will be more flood and more drought, the sea level will rise, the groundwater will be pumped dry, and that precious 1% of available drinkable fresh water will be mostly polluted. we can make the necessary changes, but it will be necessary to do so immediately. journal of business models (2020), vol. 8, no. 3, pp. 9-26 2222 references agrafioti, e., and diamadopoulos, e. (2012). a strategic plan for reuse of treated municipal wastewater for crop irrigation on the island of crete. agricultural water management, vol. 105, pp. 57-64. arendt, h. (1998). the human condition, chicago: chicago university press. arènes, a., latour, b., & gaillardet, j. (2018), giving depth to the surface: an exercise in the gaia-graphy of critical zones. the anthropocene review, 5(2), 120–135. https://doi.org/10.1177/2053019618782257 bakhtin, m. m. (1981), the dialogic imagination: four essays (edited by michael holquist), austin, university of texas press. banerjee, b. s. (1999), sustainable development and the reinvention of nature, paper presented at the critical management studies conference (environment stream) manchester, uk, july 14-16. accessed aug 10 2019 at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.199.8759andrep=rep1andtype=pdf bocken, n., boons, f., and baldassarre, b. (2016), sustainable business model experimentation by understanding ecologies of business models. journal of cleaner production, vol. 208, pp. 1498-1512. boje, d. m. (1991), the storytelling organization: a study of storytelling performance in an office-supply firm, administrative science quarterly, vol. 36, pp. 106–126. boje, d. m. (2001), narrative methods for organizational and communication research, london: sage. boje, d. m. (2008), storytelling organizations, london: sage. boje, d. m. (2019), storytelling in the global age: there is no planet b. singapore: world scientific books. boje, d. m., haley, u., and saylors, r. (2016), antenarratives of organizational change: the microstoria of burger king’s storytelling in space, time and strategic context. human relations, vol. 69, no. 2, pp. 391–418. boje, d. m., svane, m., & gergerich, e. m. (2016), counternarrative and antenarrative inquiry in two cross-cultural contexts. european journal of cross-cultural competence and management, 4(1), 55-84. boje, d. m. & rosile, grace ann. (2020), doing ‘storytelling science’ for your dissertation. ny: edwin elgar press. boje, d. m. & rana, m. b. (in review), defining sustainably-driven business modeling strategy with a ‘storytelling science’ approach, in markovic, s., sancha, c. and lindgreen, a. (eds.), handbook of sustainability-driven business strategies in practice, northampton, ma: edward elgar. business & sustainability development commission. (2017), better business, better world. united nations. carroll, a. b. (2016), carroll’s pyramid of csr: taking another look. international journal of corporate social responsibility, 1(3), 1–8. czarniawska, b. (1997), narrating the organization – dramas of institutional identity, chicago, chicago university press. journal of business models (2020), vol. 8, no. 3, pp. 9-26 2323 escobar, a. (1995), encountering development: the making and unmaking of the third world, 1945-1992, princeton, nj, princeton university press. european commission. (2018), european commission—press releases press release—plastic waste: a european strategy to protect the planet, defend our citizens and empower our industries. https://europa.eu/ rapid/press-release_ip-18-5_en.htm geissdoerfer, m., savaget, p., bocken, n. m., and hultink, e. j. (2017), the circular economy–a new sustainability paradigm? journal of cleaner production, vol. 143, 757-768. accessed aug 10 2019 at https://www.repository.cam.ac.uk/bitstream/handle/1810/261957/the%20circular%20economy%20-%20a%20new%20 sustainability%20paradigm_accepted%20version.pdf?sequence=1 gleason, t. (2019), towards a terrestrial education: a commentary on bruno latour’s down to earth. environmental education research, 25(6), 977–986. govindan, k., azevedo, s. g., carvalho, h., & cruz-machado, v. (2015), lean, green and resilient practices influence on supply chain performance: interpretive structural modeling approach. international journal of environmental science and technology, vol. 12, no. 1, pp. 15-34. guide, v., and van wassenhove, l. (2009), the evolution of closed-loop supply chain research. operations research, vol. 57, no. 1, 10-18. retrieved september 21, 2020, from http://www.jstor.org/stable/25614727 haraway, d. j. (2016), staying with the trouble: making kin in the chthulucene, durham, duke university press. jackson, m. d. (2013), the politics of storytelling: variations on a theme by hannah arendt, copenhagen, museum tusculanum press. joyce, a., and paquin, r. l. (2016), the triple layered business model canvas: a tool to design more sustainable business models, journal of cleaner production, vol. 135, pp. 1474-1486. jørgensen, k. m. (2020), storytelling, space and power: an arendtian account of subjectivity in organizations. organization june 2020. doi:10.1177/1350508420928522 jørgensen, k. m. and boje, d. m. (2010), resituating narrative and story in business ethics. business ethics: a european review, vol. 19, pp. 251-262. jørgensen, k.m. and strand, a.m.c. (2014), “material storytelling – learning as intra-active becoming”, in jørgensen, k.m. and largarcha-martinez, c. (eds.), critical narrative inquiry – storytelling, sustainability and power, new york: nova science publishers, hauppauge, ny, pp. 53–72. jørgensen, k. m., & boje, d. m. (2020), storytelling sustainability in problem based learning. in r. v. turcan & j. e. reilly (eds.), populism in higher education curriculum development. london: palgrave macmillan. jørgensen, k. m., strand, a. m. c., hayden, j., larsen, j., & sparre, m. (in review), gaia storytelling and the learning organization. the learning organization. jørgensen, k.m., svane, m. & boje, d.m. (forthcoming), a terrestrial ethics of storymaking for sustainable enterprise. in jørgensen, k.m (ed.), business storytelling and sustainability. world scientific. journal of business models (2020), vol. 8, no. 3, pp. 9-26 2424 latour, b. (2018), down to earth – politics in the new climatic regime, cambridge, polity press. lazarevic, d., and valve, h. (2017), narrating expectations for the circular economy: towards a common and contested european transition, energy research and social science, vol. 31, pp. 60-69. lewandowski, m. (2016), designing the business models for circular economy—towards the conceptual framework. sustainability, vol. 8, no. 1, 43. linstead, s., banerjee, b. (2009), managing sustainability, in linstead, s. fulop, l. and lilley, s. (eds.), management and organization: a critical text. 6thedition. new york: palgrave macmillan, pp. 239-276. mcateer, p. (2019), sustainability is the new advantage—leadership, change and the future of business. new york: anthem press. milne, m. j. (2005), “from soothing palliatives and towards ecological literacy: a critique of the triple bottom line.” accessed aug 1 2019 at https://ourarchive.otago.ac.nz/bitstream/handle/10523/1551/from_soothing_ palliatives_and_towards_ecological_literacy.pdf nielsen, c., montemari, m., paolone, f., massaro m., dumay j., and lund, m. (2019), business models: a research overview, london, routledge. norman, w. and macdonald, c. (2004), getting to the bottom of “triple bottom line”. business ethics quarterly, vol. 14, no. 2, pp. 243-262. pateli, a.g., giaglis, g.m. (2004), a research framework for analysing ebusiness models. european journal of information systems, vol. 13, pp. 302–314. peirce, charles sanders. (1931/1960), collected papers of charles sanders peirce. vol i principles of philosophy & vol ii elements of logic. edited by charles hartshorne & paul weiss, quotations according to volume and paragraph. cambridge, ma: the belknap press of harvard university press. peirce, c. s. (1958), collected papers: science and philosophy and reviews, correspondence, and bibliography (vol. 7) and reviews, correspondence, and bibliography (vol. 8). edited by arthur w. burks, quotations according to volume and paragraph. cambridge, ma: belknap press of harvard university press. popper, k. r. (1935/1959/1992/2000), the logic of scientific discovery. logik der forschung first published 1935 by verlag von julius springer, vienna, austria. first english translation by hutchinson & co. then 1992 by london: routledge, and again by routledge classics 2000, accessed online mar 6 2019 at http://strangebeautiful.com/other-texts/popper-logic-scientific-discovery.pdf and from http://www.math.chalmers.se/~ulfp/ review/logicscdis.pdf popper, k. (1956/1983), realism and the aim of science. london and new york: routledge rhodes, c., & brown, a. d. (2005), narrative, organizations and research. international journal of management reviews, 7(3), 167–188. https://doi.org/10.1111/j.1468-2370.2005.00112.x rockström, j., steffen, w., noone, k., persson, å., chapin iii, f. s., lambin, e. f., ... and nykvist, b. (2009), a safe operating space for humanity, nature, vol. 461, pp. 472-475. journal of business models (2020), vol. 8, no. 3, pp. 9-26 2525 sandoval, c. (2001), methodology of the oppressed, minneapolis, mn: university of minnesota press. stindt, d., and sahamie, r. (2014), review of research on closed loop supply chain management in the process industry. flexible services manufacturing journal, vol, 26, pp. 268–293.. https://doi.org/10.1007/s10696-0129137-4 strand, a. m. c. (2012), enacting the between: on dis/continuous intra-active becoming of/through an apparatus of material storytelling, phd thesis, aalborg: aalborg university. totschnig, w. (2017), arendt’s notion of natality—an attempt of clarification. ideas y valores, lxvi(165), 327–346. http://dx.doi.org/10.15446/ideasyvalores.v66n165.55202 vaara, e. and tienari, j. (2011), on the narrative construction of multinational corporations: an antenarrative analysis of legitimation and resistance in a cross-border merger, organization science, vol. 22, no. 2, pp. 370– 390. valenzuela, f., and böhm, s. (2017), against wasted politics: a critique of the circular economy, ephemera: theory and politics in organization, vol. 17, no. 1, pp. 23-60. accessed aug 1 2019 at http://irep.ntu.ac.uk/id/ eprint/30441/1/pubsub8234_valenzuela.pdf vallentin, s. (2011), afkastet og anstændigheden: social ansvarlighed i kritisk belysning, frederiksberg c: samfundslitteratur. vatter, m. (2006), natality and biopolitics in hannah arendt. revista de ciencia política, 26(2), 137–159. visvanathan, s. (1991), “mrs brundtland’s disenchanted cosmos”, alternatives, vol. 16, no. 3, pp. 377-384. weetman, c. (2016), a circular economy handbook for business and supply chains: repair, remake, redesign, rethink. london: kogan page publishers. weick, karl e. (1995), sensemaking in organizations, london, sage. wells, p. and seitz, m. (2005), business models and closed-loop supply chains: a typology, supply chain management, vol. 10, no. 4, pp. 249-252. https://doi.org/10.1108/13598540510612712 young-bruehl, e. (1977), hannah arendt’s storytelling. social research, 44(1), 183–190. jstor. https://www. jstor.org/stable/4097027 [1] climate.nasa.gov “why a half-degree temperature rise is a big deal (ju 29, 2016) by bob silberg, accessed jul, 2019 at https://climate.nasa.gov/news/2458/why-a-half-degree-temperature-rise-is-a-big-deal/ [2] vox.com this graphic explains why 2 degrees of global warming will be way worse than 1.5’ by david roberts (oct 7, 2018), accessed july 2019 at https://www.vox.com/energy-and-environment/2018/1/19/16908402/ global-warming-2-degrees-climate-change journal of business models (2020), vol. 8, no. 3, pp. 9-26 2626 about the authors david m. boje ph.d. is a professor at aalborg’s university business school he teaches qualitative storytelling science methods at cabrini university in philadelphia. boje gives invited keynote presentations on storytelling science, water crises, and the global climate crisis all around the world. boje is regents professor and professor emeritus at new mexico state university. he is a director of the european school of governance (eusg) where louis klein is dean. he is member of the editorial board of the ‘the systemic change journal’ that is an ongoing conversation about the ways of governing the anthropocene and helping to set up a sustainability storytelling lab. he created the field of “antenarrative” research. kenneth mølbjerg jørgensen phd is associate professor at aalborg university business school and guest professor at university west, trollhättan, sweden. his research interests comprise power, storytelling, ethics, and sustainability in organizations. he is currently involved in regional projects concerning sustainability. he is the director of the sustainable storytelling lab at the european school of governance (eusg). kenneth has authored, co-authored, and edited numerous books, articles and book chapters in, amongst others, the scandinavian journal of management, business ethics – a european perspective, cbs press, sage, and nova. 29 journal of business models (2021), vol. 9, no. 1, pp. 29-34 this paper is about contextual policy limitations which are said to restrict the applicability of open business models. in this view, the goal is to analyse the actionability of open business models in the context of european competition policy (eucomp). domains of eucomp are systematically reviewed to investigate such limitations ‘perspective’ in the application of open business models in europe. furthermore, the appropriateness of eucomp is reflected on in dealing with novel contribution models. in doing so, the paper can yield insights into policy improvement requirements. open business models’ actionability in europe eu competition policy analysis mehdi montakhabi1, shenja van der graaf1,2 please cite this paper as: montakhabi, m., graaf, s. v. d. (2021), open business models’ actionability in europe eu competition policy analysis,journal of business models, vol. 9, no. 1, pp. 29-34 keywords: open business model, collaboration, european competition policy acknowledgements: this work was supported in part by the flemish government through fwo sbo project snippet s007619. 1 imec-smit, vrije universiteit brussel, pleinlaan 9, brussels, 1050, belgium 2 university of twente, po box 217 7500 ae enschede the netherlands, mehdi.montakhabi@vub.be doi: https://doi.org/10.5278/jbm.v9i1.5909 abstract https://doi.org/10.5278/jbm.v9i1.5909 journal of business models (2021), vol. 9, no. 1, pp. 29-34 3030 introduction benefits of open business models tend to be discussed from the firm’s perspective. currently, research conducted under the open business model umbrella seems to frequently hail these benefits as well as are found to particularly address concepts of opening up innovation and ip management external to firm boundaries. business models can also be opened up to stakeholders in various ways, such as by incorporating customers in value creation and capture processes or sharing resources with partners (frankenberger, weiblen and gassmann, 2013; wirtz and daiser, 2018). considering the novelty of these collaborative models, it is not a surprise that they may be somewhat of a blind spot in existing policies, or that existing policies, arguably, may work as a barrier to unlock their potentials. applying open business models, however, might generate negative externalities (such as anti-competitive outcomes) which (also) may not be favoured by all stakeholders. in particular, research has shown that among the various stakeholder groups (vladimirova, 2019), interests of consumers tend to be at risk. eucomp (european competition policy) and gdpr (general data protection regulation) are two recent attempts by lawmakers to preserve consumers’ interests. the idea behind this strand of policies is to restrict behaviors which put consumers’ benefits at risk. the eucomp serves this purpose by clarifying anti-competitive collaborations. competition is assumed to be necessary to preserve the consumers’ interests (whish and bailey, 2015). eu competition policy, which is applicable in the european union (european union, 2007), promotes the maintenance of competition within the european single market by regulating anti-competitive conducts by firms or member states to ensure that their activities would not damage the interests of society (jones and sufrin, 2016). however, open business models, which make use of novel collaboration patterns for value creation and capture, did not exist (or were not prevalent) when competition policies were set in europe (ibáñez colomo, 2018). nevertheless, to date only little research has examined the implications of open (collaborative) business models, specifically what consequences they may carry for eu competition policy (geradin, 2018). one of the problems that must now be addressed is whether eucomp can be applied, perhaps with some modifications, to open (collaborative) business models, or whether new, parallel, or substitute policies are warranted (rinkinen and harmaakorpi, 2018). by analysing the actionability of open business models in the context of european competition policy, this paper contributes to open business model and eu policy literatures. the findings, on the one hand, assist companies to adjust their strategies (regarding collaborations) for the european market, to structure their collaborative activities better, anticipate key challenges, and develop relevant capabilities to benefit from collaborative models. on the other hand, it helps policy makes to incorporate new business models in the competition policy framework in order to unlock the potential benefits of collaboration. the paper is structured as follows. first, the concept of open business models, their drivers and benefits as well as eu competition policy and its elements are introduced. this is followed by the analysis of three main domains of eu competition policy and their relevance to open business models. then, the relevant domains of the current eu competition policy to open business models are discussed and key insights are listed. finally, implications and opportunities for further research conclude the paper. approach today, open business models are considered extremely useful tools (particularly) for companies to create and capture value in collaboration with external partners (holm, günzel and ulhøi, 2013). the term was initially used in the context of open innovation (chesbrough, 2003), the concept has received much scholarly attention since then and has increasingly been used more broadly to describe openness in all the aspects of the business model (sandulli and chesbrough, 2009). frankenberger, weiblen, and gassmann (2014) classify open business models as a type of business models in which “collaboration of the focal firm with its ecosystem is a decisive or novel element of value creation and capturing” (p. 175). journal of business models (2021), vol. 9, no. 1, pp. 29-34 3131 several definitions have been proposed for open business models in the literature (weiblen, 2014). open business model describes value creation and capturing by “systematically collaborating with outside partners” (osterwalder and pigneur, 2010: 109). gassmann, frankenberger, and csik (2017) define an open business model as a business model in which at least two parties, which divide the innovation work, are involved from invention to commercialization of an idea. ideas or their resulted technologies are sold, bought, licensed or transferred in other ways, at least one time through the process. nowadays, collaboration with partners is so common that some definitions for business models incorporate partners (weill and vitale, 2001), ecosystems (osterwalder, pigneur and tucci, 2005), and networks (zott et al., 2011). considering openness as a continuum (dahlander and gann, 2010) a business model is labelled as open if either openness is very essential for a business model’s success or it is novel compared with the organization’s old or industry ’s dominant logic (benyayer and kupp, 2017). the common element that can be distilled from the most often cited definitions is collaboration with stakeholders outside the firms’ boundaries. nowadays, several forces push organizations towards more open business models and make more collaborations with stakeholders, arguably, inevitable. growing division of labour, shorter product life cycles, rising cost of technology development (chesbrough, 2007), blurring of boundaries between industries, prevalence of other successful open business models (frankenberger et al., 2014), rise of business services, emergence of disruptive technologies (holm et al., 2013), and increasing willingness and ability of stakeholders to participate in firms’ activities (kortmann and piller, 2016) are just a few external drivers of open business models. the drivers may also be internal, such as the need to create and capture new value (frankenberger et al., 2014), firm size (smaller firms in fast-moving industries more prone to adopt open business models), technology characteristics (henkel, 2006; van der meer, 2007), and a shock or challenge to the status quo (e.g. a potential merger) (chesbrough, 2007). furthermore, organizations utilize open business models to generate economies of scale, generate shared knowledge, facilitating collective learning (rojas and azevedo, 2014), improve the utilization rate of resources, access to markets and knowledge easier (sandulli and chesbrough, 2009), access complementary assets (sandulli and chesbrough, 2009), and share risks (ehret and wirtz, 2010). the above-mentioned drivers and rewards of open business models highlight the importance of collaboration as a constructive element of business models in the future. amongst the important questions which arise in the european context are: how will (or do) european competition policy tackle new forms of collaborations? what policy improvements are required in europe in response to new collaborative models? european competition policy which aims to provide everyone in europe with better quality goods and services at lower prices, derives mostly from articles 101 to 109 of the treaty on the functioning of the european union (tfeu). the primary authority for applying competition law within the european union is the european commission (european commission, 2007). it guarantees fair competition amongst market actors in europe and encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality. the eu competition policy domain covers three main areas: antitrust, merger control, and state aid. the first element of the eu competition policy, antitrust, deals with anti-competitive practices and abuse of dominance. abuse of dominance might happen in i) horizontal agreements (e.g. price agreement, output restriction, market allocation, and bid rigging), ii) vertical agreements (e.g. exclusive supply agreement, tie-in, and resale price maintenance), iii) hub and spoke (e.g. horizontal anti-competitive practice through coordination via hub, and iv) exploitative practices (e.g. excessive pricing, discrimination, etc.) or exclusionary practices (e.g. predatory pricing, refusal to deal, etc). the second element of the eu competition policy, merger control, deals with anti-competitive collaborations. these might happen through i) horizontal journal of business models (2021), vol. 9, no. 1, pp. 29-34 3232 mergers involving competitors, ii) vertical mergers involving companies in the vertical supply chain, iii) conglomerate mergers involving firms in different lines of business, and iv) other types of concentration (e.g. acquisition, full function joint ventures, etc.). finally, the last element of the eu competition policy, state aid, deals with distorted states’ interventions. in order to investigate whether a practice is anticompetitive, eu competition policy makes use of economic models which mainly focus on the analysis of market shares of the actors in a market at a macro-level. while these models were appropriate in the past, the business world is experiencing new dimensions. not just the policies but the assumptions behind them require to be revisited in response. it is a simplistic assumption just to focus on anti-competitive collaborations between competitors with considerable market share as a threat for consumers’ benefits. hence, here, it is warranted to shed light on the link between open business models and appropriate competition policies. key insights 1. the eu competition policy is based on consumers’ perspective. it requires new angles to change the rules of game in a way that potential benefits of collaboration be unlocked, 2. modern policies are required which can endure at the same time more collaborations and preserve consumers’ interests in a way that the generated value being transferred to consumers, 3. infringement of the eu competition policy is more probable for big companies with considerable market share, thus small and medium enterprises are somehow out of the radar of eucomp but big companies should be conservative regarding openness, 4. first and second elements of the eu competition policy (antitrust and merger control) are main areas related to open business models, 5. there might be some collaborations which are not the case of eu competition policy, but their externalities are not on the benefits of consumers, other collaborations other than the ones between competitors should be studied in more detail. modern collaborations might threaten consumers’ benefits. discussion and conclusions this paper has presented a high-level analysis on the appropriateness of eu competition policy to deal with novelties of business models based on new collaborative methods. it systematically explores the applicability of open business models in europe vis-à-vis the current policy framework. by identifying the drivers of open business models and explaining the benefits which organizations pursue by utilizing collaborative models, the paper highlights the importance of collaborative models. to date, the literature on open business models tends to be mainly focused on a firm’s perspective, and hence, here a holistic view is offered which considers contextual policy limitations in the application of open business models. it elaborates how open business models might infringe on the current european competition policy. furthermore, by highlighting the limitations imposed by european competition policy (which restrict specific types of collaborations), the paper draws practical implications for organizations to consider when strategizing their activities in europe. considering the economic models behind the existing eu competition policy, an important implication for companies with considerable market shares is to be more cautious when planning their business model innovation through collaborations. the paper also provides a new perspective on novel collaboration patterns for policy makers. it discusses the requirement of modern policies which at the same time enable more collaborations and protect consumers’ interests. as a result, important questions have been raised about the appropriateness of the traditional policies to treat with innovative collaborative models. it would be fruitful to pursue further research about new models for investigating anti-competitive conducts. archetypes of ‘openness’ based on different involved stakeholders is another area for further research. journal of business models (2021), vol. 9, no. 1, pp. 29-34 3333 references benyayer, l. d. and kupp, m. (2017). responding to open business models. journal of business strategy. chesbrough, h. w. (2003). open innovation: the new imperative for creating and profiting from technology. harvard business press chesbrough, h. w. (2007). why companies should have open business models. mit sloan management review, 48(2). dahlander, l. and gann, d. m. (2010). how open is innovation?. research policy, 39(6), 699-709. ehret, m. and wirtz, j. (2010). ownership-value and the rise of the service economy. service science, 2(3), 136–145. european commission. (2007). making markets work better. luxembourg: office for official publications of the european communities. european union,  consolidated version of the treaty on the functioning of the european union, 13 december 2007, 2008/c 115/01, available at: https://www.refworld.org/docid/4b17a07e2.html [accessed 10 july 2020] frankenberger, k., weiblen, t. and gassmann, o. (2013). network configuration, customer centricity, and performance of open business models: a solution provider perspective. industrial marketing management, 42(5), 671–682. https://doi.org/10.1016/j.indmarman.2013.05.004 frankenberger, karolin, weiblen, t. and gassmann, o. (2014). the antecedents of open business models: an exploratory study of incumbent firms. r&d management, 44(2), 173–188. https://doi.org/10.1111/radm.12040 gassmann, o., frankenberger, k. and csik, m. (2017). geschäftsmodelle entwickeln: 55 innovative konzepte mit dem st. galler business model navigator. carl hanser verlag gmbh co kg. geradin, d. (december 12, 2018). what should eu competition policy do to address the concerns raised by the digital platforms’ market power? tilec discussion paper no. 2018-041, available at ssrn: https://ssrn.com/ abstract=3299910 or http://dx.doi.org/10.2139/ssrn.3299910 henkel, j. (2006). selective revealing in open innovation processes: the case of embedded linux. research policy, 35(7), 953–969. https://doi.org/10.1016/j.respol.2006.04.010 holm, a. b., günzel, f. and ulhøi, j. p. (2013). openness in innovation and business models: lessons from the newspaper industry. international journal of technology management, 61(3–4), 324–348. https://doi. org/10.1504/ijtm.2013.052674 ibáñez colomo, p. (2018). a contribution to ‘shaping competition policy in the era of digitisation’. available at ssrn: https://ssrn.com/abstract=3257998 or http://dx.doi.org/10.2139/ssrn.3257998 jones, a. and sufrin, b. (2016). eu competition law: text, cases, and materials. oxford university press. kortmann, s. and piller, f. (2016). open business models and closed-loop value chains: redefining the firmhttps://doi.org/10.1111/radm.12040 https://doi.org/10.1504/ijtm.2013.052674 https://doi.org/10.1504/ijtm.2013.052674 journal of business models (2021), vol. 9, no. 1, pp. 29-34 3434 consumer relationship. california management review, 58(3), 88–108. https://doi.org/10.1525/cmr.2016.58.3.88 osterwalder, a. and pigneur, y. (2010). business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons. osterwalder, a., pigneur, y. and tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of the association for information systems, 16(1), 1. rinkinen, s. and harmaakorpi, v. (2018). the business ecosystem concept in innovation policy context: building a conceptual framework. innovation: the european journal of social science research, 31(3), 333-349. rojas, e. and azevedo, a. (2014). pillars and elements to develop an open business model for innovation networks. ifip advances in information and communication technology, 434, 317–326. https://doi.org/10.1007/9783-662-44745-1_31 sandulli, f. d. and chesbrough, h. (2009). the two sides of open business models | open business models: las dos caras de los modelos de negocio abiertos. universia business review, 22, 12–39. van der meer, h. (2007). open innovation the dutch treat: challenges in thinking in business models. creativity and innovation management, 16(2), 192–202. https://doi.org/10.1111/j.1467-8691.2007.00433.x vladimirova, d. (2019). building sustainable value propositions for multiple stakeholders: a practical tool. journal of business models, 7(1), 1-8. weiblen, t. (2014). the open business model: understanding an emerging concept. journal of multi business model innovation and technology, 2(1), 35-66. weill, p. and vitale, m. (2001). place to space: migrating to ebusiness models. harvard business press. whish, r. and bailey, d. (2015). competition law. oxford university press, usa. wirtz, b. w. and daiser, p. (2018). business model development: a customer-oriented perspective. journal of business models, 6(3), 24-44. zott, c., amit, r. and massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019-1042. https://doi.org/10.1525/cmr.2016.58.3.88 https://doi.org/10.1111/j.1467-8691.2007.00433.x journal of business models (2019), vol. 7, no. 5, pp. 70-89 70 business model communication and financial performance in cross-national acquisitions margit malmmose1 and rainer lueg2 abstract purpose: the purpose of this study is to explore the link between external business model communication and financial performance for ten cross-national acquisitions by danish companies. methodology: we tie stakeholder and shareholder theory to magretta’s (2002) model, which capture a holistic approach to the analysis of newsletters and financial data. we further apply fairclough’s (1992) critical discourse analysis and regression analyses to analyze the communication process and the accounting data after the acquisition, respectively. findings: the study identifies a lack of business model communication in an acquisition process. furthermore, our analyses show that 15 years after the acquisitions, the acquirers have generally not established substantial links between their own business models and the business models of the acquired companies. as to the quantitative analyses, above average narrative communication has a weak link to company performance. antecedents of good communication are the number of stakeholders that have to be addressed, as well as the anticipated disruptive events after the acquisition. research limitations: the analytically indicated links between external communication and financial performance have limitations due to a small sample and due to the complex organizational set-up where the acquired organizations’ financial performance is quickly absorbed into the parent company. originality: this study is novel in its approach of applying a longitudinal qualitative as well as quantitative approach to business model identification in mergers and acquisitions. furthermore, it provides linkages and discussions of business model conceptualization with stakeholder and shareholder theories. please cite this paper as: malmmose, m. and lueg, r. (2019), business model communication and financial performance in cross-national acquisitions, vol. 7, no. 5, pp. 70-89 keywords: business model change; corporate communication; performance measurement; discourse analysis: comparative case study; denmark; mergers and acquisitions. 1 associate professor of managerial accounting at department of management, aarhus university. 2 professor of managerial accounting at leuphana university and university of southern denmark. journal of business models (2019), vol. 7, no. 5, pp. 70-89 71 introduction this study investigates the relationship between how a cross-national acquisition is conveyed officially and the different financial statement data. we explore the public newsletters of the event to see how the crossnational acquisition is communicated. we have special focus on the inherent business purpose of the acquisition and thus its influence on, as well as its presentation of, the company’s business model. the data is historical in the sense that it represents a time span with much focus on cross-national acquisitions in a danish context, namely 1998-99. it furthermore follows up on the existence of the companies after 2010. according to magretta (2002), the concept of ‘business model’ was a buzzword during the internet boom. therefore, although our sample does not consist of internet businesses, the late 1990s is of particular interest when investigating the actual application of business models in official statements, while at the same time comparing it to the financial state of both the mother company as well as the acquired company. we apply magretta’s (2002) model in this analysis since it precisely focuses on this time period and we seek to ‘tell a good story’ (p. 87), thus aiming at integrating stakeholders and financial results. in the particular event of an acquisition, the narrative supports the communicated value of the acquisition, whereas the financial data support a sustainable financial motive behind the acquisition. these two perspectives are interrelated and together they capture the platform of a business model which connects financial results with the underlying value creation (nielsen and roslender 2015). this becomes particularly essential during organizational changes such as an acquisition. numerous approaches exist to develop, sustain and analyze a company’s business model (magretta 2002; stahl 2004; osterwalder and pigneur 2005; zott et al. 2011), e.g. the business model canvas (osterwalder and pigneur 2010). however, no research has yet investigated the role of business models during acquisitions. since magretta’s (2002) model acts as a loose frame, her model proves viable in investigating such a scarce and unexplored area. acquisitions require careful planning and communication due to the changing elements involved. this study is original in the sense that it focuses on the specific circumstances of cross-national acquisitions capturing both a business model change during acquisition, but also a cross-national synergy attempt between two originally separate business models. in addition, we investigate a longitudinal success factor of the outcome of the acquisition. this demonstrates whether the original message and the business model have in fact turned out to be sustainable. thus, the paper investigates (1) how a business model is communicated externally at the time of acquisition? (2) how the story told correlates with the parent company’s financial results during and after the acquisition? and (3) how are the original acquisitions sustained 12 years after the acquisition? denmark represents an interesting setting with a boom in foreign acquisitions beginning from around 2000. denmark is a relatively small nation with a limited number of large companies. however, during the past 20 years, danish companies have built sustainable global competitiveness and reputation, as stated in the global competitiveness report 2011-2013: “the country benefits from what is one of the best-functioning and most transparent institutional frameworks in the world (5th) and an excellent infrastructure for transport as well as electricity and telephony. denmark also continues to receive a first-rate assessment for its higher education and training system, the positive result of a strong focus on education over recent decades” (the world economic forum 2011, p.2). the size of denmark along with the global growth makes denmark an interesting choice for representing foreign acquisitions. we chose ten mid-size/large danish companies that underwent mergers and acquisitions between 1998 and 1999. we adopted the list from the danish competition authority. the years 1998-1999 illustrate a period with attention on mergers and acquisitions, which fostered an increased focus from the danish competition authority. likewise, the late 1990s was a time following after the evolution of the information technology which changed the power structures in companies (ströh and jaatinen 2001; terreberry 1968; morgan 1997) and introduced the concept of ‘business models’ (magretta 2002). information became easily accessible for companies, particularly during the 1980s and 1990s resulting in a globalization boom, and thus forced organizations to legitimize themselves towards several stakeholders (meyer and rowan 1977; nørreklit and wit journal of business models (2019), vol. 7, no. 5, pp. 70-89 72 2001; madsen 2000; morgan 1997). we analyze the ten companies’ press releases accompanying their merger with other companies in order to investigate how the organizations handled the external communication. likewise, we investigated the financial statement data in the years following the acquisition, and compared the data to the quality of the external communication. the remainder of the paper is structured in the following way: first, we conduct literature reviews on m&as as well as on the role of stakeholders and shareholders in business model communication. second, we explain the methodology of our study. third, we present and discuss our results. the analysis is divided into three topics; the legal announcement communication; the correlation of communication to the financial results; and the definition of the current state of the acquired company within the parent company. literature review how messages are received and perceived can be crucial for organizational survival (clutterbuck 2001), and in cross-national acquisitions the urgency of communication increases. discourses are shaped through written and spoken language (fairclough 1992, 2001, 1995), and the meaning of the business model through discourses becomes vital. for example, apple has proven to be a dominant international success story in creating the true narrative, which has enabled sustaining power and thus financial success (bergvall-kåreborn and howcroft 2013; montgomerie and roscoe 2013). thus, legitimacy is a crucial part of communication, both through narratives and financial statements (durocher 2010; brown and forster 2013; holm and zaman 2012), and the company’s business model is a major part of legitimizing the internationalization process (johansson and abrahamsson 2014). the organization’s emphasis on communicating its international actions, such as an acquisition is crucial. it is challenging to assess the degree of legitimacy, as well as the presentation of the business model, through newsletters, fiscal reporting, and webpages. nevertheless, there are some pointers to what constitutes a well communicated message (fairclough 2001; ferguson 2000) as well as what characterizes a good usiness model (osterwalder and pigneur 2005; osterwalder 2004). despite an increased focus on communication, few studies have shown interest in this area (clutterbuck 2001). segars and kohut (2001) investigate the communication on financial performance to the shareholders through newsletters and ceo letters. their study examines the content of the ceo letters, searching for themes, and correlating the themes with the financial performance of the company. their findings suggest a classification of low and high performance organizations and their themes. this proposes a link between external communication of the organization and their accounting data exposed through their financial performance. adding the m&a dimension, a supplementary focus is on the post-merger integration phase where the ceo and the managers have often been identified as poor communicators at the time of the acquisition (clemente 2001). the central part of our study is the particular situation of acquiring a cross-national company. several elements are crucial in this setting. the processes of an organizational change are often challenging in various ways. it is of particular importance that emphasis is put on the legal announcement of the acquisition (cartwright and cooper 1996). this review will focus on the two angles of the study; the communication (narrative) part, and the financial performance identified through financial statement data, both of which are important elements of a business model and according to magretta (2002), they are two tests which should add up for a successful business model. additionally, we relate the narrative and the financial data with the business model change. many sources propose that the term business model change can be used interchangeably or as a supra/sub-concept (ahlgren ode and lagerstedt wadin 2019). we specifically use the term business model change in line with malmmose et al. (2014). they approach the business model change concept from a performance management perspective that assesses different states of business models. this perspective belongs to the general field in business models that emphasizes value creation, value capture, and a clear link to strategy (zott et al. 2011). this distinguishes us from other perspectives that focus on the processes instead of the outcomes of the business model change (kringelum and gjerding 2018; wirtz and daiser 2018, 2017). journal of business models (2019), vol. 7, no. 5, pp. 70-89 73 stakeholder theory and the story to be told according to magretta (2002), it is important to tell a good story when approaching the customer and wishing to add customer value. the idea is to emphasize the elementary importance of the organization’s existence. nielsen and roslender (2015) highlight that the business model adds to the understanding of how in particular relationships with customers are prerequisites for shareholder value. this has also appeared to be the driving force of apple which, on the contrary, has put little emphasis on a sustaining and balanced supplier relation (bergvall-kåreborn and howcroft 2013). however, according to a more traditional understanding of stakeholder theory, stakeholders are equally significant in a continuous legitimization of the organization’s existence. freeman and reed (1983) identified three groups of stakeholders; formal or voting, economic, and political. the formal group is the stockholders, the directors, and the minority interests. the economic group is the suppliers, the debt holders, the customers and the unions, and the political group is the government, the consumer groups, and others. magretta (2002) states that ‘a successful business model represents a better way than the existing alternatives’ (p. 88). thus, it becomes relevant to capture investors, employees, and other vital stakeholder groups in the narrative story of an acquisition situation. therefore, we document the inclusion of stakeholder groups in the legal announcement. another important stakeholder group is the competitors. the organization might want to withhold some information from the public and the external interest groups because it does not want the competitors to have access to internal strategic knowledge (li and sun 2012). the acquisition is often a competitive move, and therefore prior announcements are not made. legitimacy becomes even more vital in this discussion. accounting as well as business model research often integrate the role of legitimacy through the financial statements (durocher 2010; holm and zaman 2012; jan et al. 2017). the increased power and knowledge that the ordinary customer gains through the easy information access such as the internet has resulted in changes in the organizational strategies (ströh and jaatinen 2001; terreberry 1968; nichols 1998). this is also due to a widespread application of business models during a period where the personal computer and the internet emerged (magretta 2002). it is therefore significant for organizations to incorporate external legitimated structures, because the organization is built on a relationship with the external environment (morgan 1997; meyer and rowan 1977; nørreklit and wit 2001; svendsen and laberge 2005; magretta 2002). meyer and rowan (1977, p.346) comment that “organizations are structured by phenomena in their environments and tend to become isomorphic with them”. nørreklit and kølsen de wit (2001) speak of how “the firm itself does not act: its employees do”, “the company is not identical with the top management’s intentions and actions but is created through the synthesis of the actions performed by the individuals in the company”. in other words, several stakeholder groups, and in particular the employees, play an active role in the organizational identity. this highlights the need to extend the magretta (2002) framework by acknowledging other stakeholder groups in the business model change. legitimacy with the external environment has additionally led to programs such as the corporate social responsibility (csr). companies use such programs to gain good reputation and thereby competitive advantage (mcwilliams and siegel 2000; brown and forster 2013). a further attempt to measure the different stakeholders’ values has been made through organizational data mining. it is a tool to help managers spot patterns and trends that may help improve an organization’s strategic plan and corporate sustainability (ajami et al. 2003). similar performance measurement systems such as total quality management, balanced scorecard, quality circles, and various types of performance measurement packages (jakobsen et al. 2011b) have developed in order to handle the organization’s intangible assets. likewise, other studies have shown reported stakeholder management to be positively related to organizational financial performance (sonpar et al. 2008; choi and wang 2009; tse 2011). therefore, incorporating how the companies tell the stories of their business model is important (fielt 2013). the legal announcement of the acquisitions should reflect this; both in order to legitimize the organization but also in order to sustain value for stakeholders in the future. journal of business models (2019), vol. 7, no. 5, pp. 70-89 74 shareholder theory and the numbers to be counted another aspect of the magretta (2002) business model definition is the numbers. magretta (2002) focuses on tying the narrative to the numbers and thereby stating that there should be a balanced connection between the story of the organization and its financial performance. magretta (2002) further states that spreadsheets have made it possible to model businesses before they are launched, and they are therefore essential in establishing a positive return possibility. yet, financial performance found in accounting data is often seen as a sole measure for performance where value maximization is the goal. according to jensen (2002), the stakeholder theory makes managers unaccountable for their actions and makes the managers lose focus because they are so busy fulfilling different stakeholders’ interests. he believes in enlightened value maximization with stakeholders’ tradeoffs in mind. as several other authors state (nørreklit et al. 2008; tse 2011; sundaram and inkpen 2004), multiple performance measures limit the focus on the true value of the company. jensen (2002) argues that multiple objectives limits the core focus. a similar view is mentioned by friedman (1970) who argues that the organization’s social responsibility is to make a profit. friedman (1962) contends that the primary responsibility of a company is to maximize the wealth of its shareholders. by doing this, the company contributes to society’s social welfare by selling products thus creating employment and thereby growth in the economy. this is the classic view of value maximization and agent theory where the ultimate goal and belief is an ideal world (covaleski et al. 2003). the two methods of pursuing this goal is to generate future cash flows and to control costs (tse 2011). there is criticism that shareholder theory does not sufficiently incorporate or consider behavioral aspects of managers who are often not rational (tse 2011; de bondt et al. 2008). managers are risk takers focusing on maximizing their own gains and not that of the shareholders, especially when their performance is linked to an incentive scheme (low 2009). additionally, studies show that managers are overly confident, often overestimating their own abilities (shefrin 2007), and they have a so-called ‘better than average effect’ (russo and schoemaker 1992). this overconfidence and the link of performance to incentive schemes have been blamed for the recent financial crisis (tse 2011). though the financial numbers are important in a business model context, the critics of the shareholder theory – in the light of the financial crisis – support the argument that focus should be on other stakeholders as well, when pursuing the creation of organizational value. studies on linking shareholder value maximization to corporate social responsibility (martin et al. 2009) illustrate the possibility of connecting the shareholder perspective to business model numbers and its narrative. with the business model, we seek to capture the value drivers of the company in order to understand how to perform financially. both the stakeholder and the shareholder theories have the objective of creating a financially sustainable company. the approaches are different, but in a business model context, we can draw benefits from both views and thus enlighten and understand our aim of the business model creation. mergers and acquisitions the concern for stakeholders becomes increasingly complex in the situation of an m&a with two different corporate cultures, often with different nationalities, which makes a stakeholder perspective further relevant in order to legitimize the actual business acquisition. unfortunately, a high rate of m&as is unsuccessful. a study by sinetar (1981) shows that between 50 and 80% of all m&as are financially unsuccessful. this has recently been confirmed by an article by forbes claiming that approximately 50% of all mergers do not succeed (sher 2012). these unsuccessful m&as are often due to the neglect of post-closing integration of the different corporate cultures (lynch and lind 2002). tying this to a business model perspective, an m&a failure illustrates a failed business model. according to magretta (2002, p. 90) ‘when business models don’t work, it’s because they fail either the narrative test (the story doesn’t make sense) or the numbers test (the p&l doesn’t add up). most m&as are seen as having financial or value-maximizing motives mainly to maximize shareholders’ wealth (cartwright et al. 1995), which then would fail in the narrative test. the managers’ overconfidence has also been suggested to exist during m&as where managers feel that they have grander skills than others in extracting values from acquisitions leading to over-estimated synergies in acquisitions (doukas and petmezas 2007). achieving synergies may be even more challenging in international m&as. in addition to the different corporate journal of business models (2019), vol. 7, no. 5, pp. 70-89 75 cultures, international m&as also deal with two sets of national belief systems. in particular, subjective logic and social logic are challenging in larger international organizations. a model presented by nørreklit (2000) illustrates how only a small area of different subsidiaries in multinational organizations is based on common logic and assumptions. social logic arises from common ideas, interpretations, and patterns of thought used by a group, but only a fraction of this social logic is shared in cross-border operations (nørreklit 2000). therefore, planning and cross-cultural awareness are crucial when acquiring a foreign company. global organizations have to work especially hard to develop a strategy that will deliver the right message and thereby create circulating stories that are consistent with the corporate culture and vision (solomon 1999). harrington (1996) states that an ethical balance across stakeholders is ideal. thus to succeed financially in an m&a situation, it becomes even more urgent what the story is, who the story includes, and to whom the story is addressed. despite the challenges and complexities of m&as, international m&a activity is continuously increasing. in 1999, the year of this study’s acquisitions, crossborder m&a activity grew by more than one third, to a total value of $720 billion (child et al. 2000). there are also other advantages than merely shareholder maximization. an additional advantage of a foreign acquisition is a rapid entry into another market with access to distribution channels, existing management experience, established brand names, and reputation (douglas et al. 2001). this reputation is particularly important when establishing the business models of the foreign acquisitions. there is little extant literature, however, that specifically deals with foreign m&as and business model changes. in general, aversa et al. (aversa et al. 2017) suggest m&as as a legitimate mean to add to a company’s business model portfolio. yet, the authors believe that companies have not made use of m&as to the optimal extent. in their conceptual paper, sohl and vroom {, 2017 #6549} specifically conjecture how a high degree of relatedness of the acquired business model might positively affect the acquirer’s performance. this conjecture is not fully shared by the conceptual work of christensen et al. (christensen et al. 2016), there are thus no signals of consent in this scarce stream of literature. the authors argue that m&as with unrelated business models support companies in profitably disrupting the market, and that alignment of existing and acquired business models counteracts this end. methods and data various approaches exist to research the narrative presentation of the acquisition. this study seeks to analyze newsletters released at the legal announcement of the acquisition along with a longitudinal view of the external communication through webpages and an accounting focus through financial statements (abrahamsson et al. 2019). fairclough’s (1992) critical discourse analysis is applied and combined with a content analytical approach (phillips 2002). critical discourse analysis is a social semiotic tool that focuses on the social dimensions of the linguistic meaning in any media of communication and the production, the interpretation, and the implications in social processes as cause and effect of the ideology. fairclough (1995, p.65) says that “the representation of discourse in news media can be seen as an ideological process of considerable social importance […] and that the finer detail of discourse representation, which on the face of it is merely a matter of technical properties of the grammar and semantics of texts, may be tuned to social determinants and social effects”. thus the small technical linguistic details have a social effect and moreover reflect the larger social determinants, and therefore newspaper articles are highly suitable for analyzing business model themes and changes in the external communication. it is a flexible tool that allows the user to identify issues on different levels. furthermore, a discourse analysis focuses on the content of the text, and what the sender decides to communicate to external stakeholders. this type of content analysis is useful in examining trends and patterns in what corporations hold and value and it enables stakeholders to receive information on strategic preferences (ajami et al. 2003). the analysis addresses three different categories of information; (1) the information itself, the kind of information and the amount of information that the acquirer provides, (2) the language used, as in what types of words, grammar constellations, and the linguistic approach, based on fairclough’s critical linguistic discourse level of text analysis (fairclough 1992); and (3) the discursive practice which illustrates the first hand impression of the communicated text, such as the number of newsletters released, the journal of business models (2019), vol. 7, no. 5, pp. 70-89 76 availability, the length of information, the longitudinal persistence in information giving, and the inclusion of stakeholders. we compare the results from the discourse analysis to accounting data. the accounting data consist of stock prices before and after acquisition of the parent company, the revenues, the ebit, the assets, the number of employees, and the number of nations in which the parent company is represented. data we selected ten danish companies from a list of legal mergers and acquisitions (m&as) in denmark in 19981999, listed by the danish competition authority. the acquisitions happened in the same period. a single nation sample eliminates any confounding external factors in our analyses. we have gathered all publicly available written communication from the ten companies (electronically or on paper, according to availability) (abrahamsson et al. 2019). the time span stretched from the announcement of the m&a up to 15 years after the m&a. the written communication includes m&a-related news releases; publicly available company newsletters; company webpages; and the companies’ annual reports. we drafted a scorecard that maps the content and form of the news releases. it conveys how the speech genre unfolds, which stakeholders it includes, as well as whether or not the text is structured and informative. in addition, we collected financial information from the acquired company as well as the parent company both before and after the acquisition, along with a longitudinal examination of the development of these accounting data (abrahamsson et al. 2019). we accumulated the scores from the discourse analysis in order to compare them to the accounting data. the narrative scorecard we developed a scorecard in order to make the news releases comparable. this scorecard comprises fairclough’s three main analytical areas: information, language, and general impression. due to the general information availability, it is crucial that the organization is direct, accurate, and inclusive in its information giving (nye 1999; cartwright and cooper 2000). the indicators are chosen according to fairclough’s (1992), cartwright and cooper’s (2000), and dwyer’s (1999) recommendations while integrating business model reflections on the elements chosen. the scorecard encompasses and analyses information such as the exact time of acquisition, the price of the acquisition, the information on the acquired firm, the plans, the corporate and national cultural challenges, the continuous information during the acquisition (information level and frequency), the motivation, as well as the possibility for asking questions and giving feedback. while these elements mainly feature factual circumstances, the motivation relates to the ability of presenting, in a comprehensible manner, how ‘the pieces of the business fit together’ (magretta, 2000 p. 91). in other words, what is the interest in this acquisition? if the information is available and/or addressed, danish company acquired company (country) date on announcement of acquisition (newsletter) danisco sidlaw plc (uk) december 17th, 1999 icopal izolacja s.a. (polen) january 27th, 1999 danfoss woodley electronics group ltd (uk) january 1st, 2000 neg micon taim e’olica s.a. (spain) may 26th, 2000 radiometer proscience pty ltd (australia) july 26th, 2000 vest-wood sweedoor (sweden) december 22nd, 1999 dfds lisco (lithuania) april 23rd, 2001 gn great nordic resound corporation (us) may 10th, 1999 vestas italian wind technology s.r.l. (italy) july 21st, 2000 falck nederlandse veiligheidsdienst (holland) june 10th, 1999 table 1: company and acquisition information journal of business models (2019), vol. 7, no. 5, pp. 70-89 77 a score of 1 is given. if it is not available, a score of 0 is given. the language analysis and the scores are based on language importance highlighted by kaye (2010) and dwyer (1999) such as the kind of language used (positive, sympathetic, official, monologic), the style of the newsletter, the use of examples, the jargon, the clichés, or the metaphors along with the use of understating powerful words; for example whether the language is active or passive. the analysis focuses on the positive attributes of the language style, which is crucial to support the representation of a clear business model (fielt 2013). thus, the linguistic scores are set such that 1 illustrates a suitable communication language. for example, the use of a certain jargon is seen as a negative communication approach since it may be difficult for outsiders to comprehend (cartwright and cooper 2000; dwyer 1999). therefore the score of 1 is achieved by no use of jargon. the overall impression comprises the length of newsletter, the readability, the layout, the emphasis of main points, the clear message, that the newsletter is persuasive as well as being inclusive of the stakeholders, the employees, the shareholders, and the customers. this is particularly vital in communicating the business model. the presentation of why this acquisition is beneficial and thus better than the existing way is addressed by main points and an overall clear message (magretta, 2002, p. 88). in other words, it has to be communicated clearly how this acquisition creates value (fielt 2013). the different stakeholders are crucial in the legitimization of the business model and in particular the customers in relation to value creation (fielt 2013; magretta 2002). thus, the information and general impression reflect the narrative/the story told and the available financial numbers, whereas the language analysis is more technical and represents the supportive discursive part. we compare the comprised scores with the financial statement data and the organizational variables described above, in order to identify links between the financial performance and the communication during a foreign acquisition process. results firstly, we analyze the newsletters through a discourse analysis. secondly, we show the different financial organizational measures. we compare the two parameters to see if there are any links between them. finally, we follow the acquired company and its development during the next 15 years in order to get a longitudinal impression of the success of the acquisition and the business model change. the communicated narrative in the newsletters similarities exist as to how the companies score when it comes to information, whereas there are larger diversions regarding the linguistics and discursive practices. out of 33 possible points, the highest score is gn great nordic with 27 points. great nordic has a general inclusive flow when presenting information and using linguistics, which are stated as crucial parameters in communicating the company’s business purpose in the business model literature (fielt 2013). on the other hand, radiometer only scores 15 and generally has a poorly written statement. of the ten companies, seven are within some type of electronic or development industry, whereas the remaining three companies are in the industries of construction, logistics, or services. this factor alone shows a discursive practice that the electronic and development organizations are the most sophisticated (abrahamsson et al. 2019). they constantly improve their portfolio by, among other things, acquiring foreign companies during the years 1998-2000. the first distinctive feature of the newsletters is that three out of the ten newsletters are written in danish. considering that it concerns an acquisition of a foreign company, this does not give a good impression or inclusion of the acquired company and its stakeholders. the newsletter provides information on the location, the timing, and also e.g. on the size of the acquired company, and the number of employees. the acquisition price, however, appears in only half of the newsletters. likewise, only one newsletter reflects upon the cultural and corporate challenges, though with a solution oriented focus and a note of timing of the different parts of the integration. the other newsletters do not address this concern. finally, but most importantly, the newsletters generally lack the inclusion of the customers in their statements. only one company, danfoss, includes the customers in their presentation of an acquisition. this indicates a lack of innovative strategies stemming from external impulses, which are journal of business models (2019), vol. 7, no. 5, pp. 70-89 78 firm scorecard 1 2 3 4 5 6 7 8 9 10 danisco icopal neg micon radiometer vest-wood falck dfds gngreat nordic vestas danfoss information time of acquisition 1 1 1 1 1 1 1 1 1 1 price of acquisition 1 1 1 0 0 1 1 1 0 0 acquired firm information 1 1 1 1 1 1 1 1 1 1 future plans/strategy 1 1 1 1 1 1 1 1 1 1 corporate and national cultural challenges 0 0 0 0 0 0 0 1 0 0 continous information during the acquisition 1 1 0 0 1 0 0 1 0 0 motivation 1 1 1 1 1 1 1 1 1 1 feedback/further info 0 1 0 0 1 0 1 1 1 0 6 7 5 4 6 5 6 8 5 4 linguistics positive language 1 1 1 0 1 1 1 1 1 0 sympathetic language 0 0 0 1 0 1 1 1 0 0 non official language (not focused on law s and paragraphs) 0 1 0 0 0 1 1 1 1 1 non monological language (inviting for dialogue) 0 0 0 0 0 0 0 0 0 0 style match reader 1 1 0 0 0 0 1 1 1 0 use of metaphors 0 0 0 0 0 0 0 0 0 0 no use of jargon 1 1 1 0 0 0 0 1 1 1 no stock phrases 1 0 1 1 1 1 1 1 1 1 no cliches 0 1 0 1 1 0 1 0 1 1 no run on sentences 0 1 1 1 1 1 1 1 1 1 high affinity and intensifying adjucts (pow erful language) 1 0 0 1 1 1 0 1 0 1 no ambigous words 1 1 1 1 0 0 1 1 0 1 use of concreate nouns 1 1 0 0 1 0 0 1 0 1 active wording 1 1 1 1 1 1 0 1 1 1 spelling 1 1 1 1 1 1 1 1 1 1 no unknown abbreviations 1 1 0 0 0 1 0 1 1 1 10 11 7 8 8 9 9 13 10 11 discursive practice (first hand impression) length of newsletter 1 1 1 1 1 0 1 1 1 0 readability 1 1 1 0 0 0 1 1 0 1 layout 1 1 1 0 1 1 1 0 1 1 highlighting main points 0 1 0 0 1 1 0 0 0 0 clear message (direct discourse representation) 1 1 1 1 0 0 1 1 0 1 pursuasive and positive 1 1 1 0 1 1 1 1 0 1 stakeholder inclusion: employees 0 0 0 1 1 1 0 1 0 1 shareholders 1 1 1 0 1 0 0 1 0 0 customers 0 0 0 0 0 0 0 0 0 1 6 7 6 3 6 4 5 6 2 6 total score 22 25 18 15 20 18 20 27 17 21 table 2: assessment of business model communication with a discourse analysis scorecard journal of business models (2019), vol. 7, no. 5, pp. 70-89 79 typically driven by customers (malmmose et al. 2014). thus, the acquisitions are not mentioned to be driven directly by customer demands. the discursive practice generally indicates that the companies continuously inform during the acquisition process, that they use several types of information, that they consider the readability, and that they send a direct message to all stakeholders. all newsletters state the fact of the acquisition and therefore it may appear to contain authoritative language which is a closed unified language system, using static linguistic in a single voice (bakhtin 1986). it gives a neutral message, and then the receiver may decide for himor herself how to process the message. creating the possibility for the reader to give feedback or ask questions may add positive traits to the organization since it will signal interest in its surroundings and stakeholders (cartwright and cooper 2000; o’hair et al. 1998). five of the ten newsletters give the possibility of feedback or questions. stakeholder inclusion, however, is scarce. as mentioned above, only one newsletter includes the customer, a few include the employees, and half of the newsletters address the shareholders. however, all newsletters focus on sales and the financial consequences of the acquisition, highlighting the market growth, the sales increases, and the increase in assets. thus, indirectly, there can be purposes stemming from external (the customers) or internal (the employees) shareholders through knowledge sharing impulses, which have previously been documented to drive business model change (malmmose et al. 2014). the linguistics is overall positive which emphasizes opportunities, using words like “advantages” and “prospect”. however, these types of words mostly relate to financial figures, e.g.: “gn great nordic estimates that resound corporation has significant growth potential and considerable synergies will be realized both within production and sales” and “the acquisition is part of gn great nordic’s goal that group companies take leading positions with the highest profit margins in their respective sectors”. thus, we find a lack of narrative storytelling, and the use of sympathetic language is scarce. on the contrary, we detect a financial enthusiasm in most of the newsletters. restructuring and hiring/firing situations remain absent. except from gn great nordic, where the closest to a sympathetic language is: “during this period a number of obligations must be fulfilled according to the privatization agreement for lisco, amongst others related to the staff ”. this indicates a focus on the numerical aspects of the business models, whereas the narratives and the storytelling are infrequent. the text embeds social practice and social form to participate in constructing a social reality (fairclough 1992, 1995; wittgenstein 1953). therefore, the type of language used is vital when the organization wants to signal that the external stakeholders are involved. the authoritative speech genre suggests a general topdown communication line within the organization and a focus on the financial performance. it also neglects the business model as a total entity by disregarding the narrative story that tells about the company and its knowledgeable assets through the employees and the customer relations. the influence of the narrative communication on financial data we compare financial growth and employee information to the scores of the information level and the quality of the newsletters. information from the acquired subsidiaries has created obstacles due to different nationalities and the fact that, at the point of data collection, some of the parent companies had already fully integrated the acquired companies. however, with assistance from employees, whom we contacted, made it possible to get most of the information. in cases of non-official information, they provided us with an estimate. the information gathered is separated into information on the parent company and information on the acquired company. the parent company we study the following measures on the parent company: score m&a communication; the change in ebit; the change in assets; the number of countries; the number of employees; the share capital. we explain all variables in the footnote of table 3. the table shows the descriptive statistics, the result of the correlation analysis with score m&a communication with all other variables, and the variance explained between them (r2). since our sample consists of only ten companies, journal of business models (2019), vol. 7, no. 5, pp. 70-89 80 we opted for the non-parametric spearman correlation analysis. we could only identify large-size effects, because the statistical power of a ten-company-analysis is by definition low (cohen 1988). to avoid false negatives (i.e. stating a relationship is not significant even though it really is), we do not report p-values. instead, we analyze if the coefficients point into the most sensible directions. we measure the success of the acquisition by the development of ebit of the acquiring company two years after the acquisition. we deduct the development of ebit two years before the acquisition (difference in difference approach) as an appropriate benchmark of how the company performed previously (wooldridge 2009). while seven of the ten companies had an absolute positive development in ebit, only four of them outperformed their benchmark (which is what we measure). we find that good communication is positively related to the benchmarked ebit (r=0.159) and that it explains almost 10% of the ebit’s variance (r2=0.095). further factors than good communication explain the rest of the variance. we further tested four variables to check the validity of the ebit finding. we argue that above average communication on the acquisition purpose, indirectly presenting the business model change, is especially important during an acquisition if the company needs to convince a large number of stakeholders (including shareholders), all of which are considered crucial in business model innovation (malmmose et al. 2014; christensen et al.   comparison to "score m&a communication"   descriptive statistics variable name coefficient r squared   n mean standard deviation min max score m&a communication 1.000 n/a   10 20.400 3.688 15 19 change in ebit 0.308 0.095   10 -53.1% 1.435 -391% 145% change in assets 0.281 0.090   10 26.1% 0.298 -11.0% 77.2% number of countries 0.268 0.035   10 33.5 22.741 5 80 number of employees 0.410 0.043   10 26,461 66,392 1,700 215,000 share capital 0.171 0.028   10 611.3 533.0 6.0 1,502.8 we opted for an non-parametric correlation test with all variables and score m&a communication due to the small sample size. we report spearman’s rho as the correlation coefficient. we do not report significance levels, because with this small sample size, significance levels might lead to false negatives (cohen 1988). the variables in the table are defined as follows: score m&a communication is measured using a scoring system for the information, linguistics and discursive practices the acquiring company applies in its newsletter announcing the merger in either 1998 or 1999. change in ebit measures the change in ebit of the acquiring company in percentage points two years after the acquisition, net of the change in ebit two years before the acquisition in percentage points. thereby, we account for the benchmark the company has to beat with the acquisition (“”difference-in-difference-approach””). change in assets measures the increase in assets after the acquisition in percent. number of countries measures the number of countries in which the danish acquiring company is active. number of employees measures the full-time-equivalents of the danish acquiring company at the time of the acquisition. share capital measures the market capitalization in million danish kroner of the danish acquiring company at the time of the acquisition. table 3: relationship of business model communication on financial performance measures journal of business models (2019), vol. 7, no. 5, pp. 70-89 81 2016). as expected, we find that companies communicate better if they need support for growth (reflected in the change in assets; r=0.281; r2=0.090), are active in more countries (r=0.268; r2=0.035), have a higher number of employees (r=0.410; r2=0.043), and have a higher market capitalization, i.e. more shareholders (r=0.171; r2=0.028). these findings support the findings of abrahamsson et al. (2019) that the stock market awards the frequency of business model innovation which corresponds to the number of countries represented particularly. the number of nations where the organization is represented appear to be relevant, since the more experienced the organization is in different national contexts, the more likely it is that it would consider its mode of communication, and how it legitimizes itself with the different stakeholders across cultures (kostova and zaheer 1999). for example, icopal and danfoss have nicely written newsletters compared with many of the others, and both of these organizations are, at the time of the acquisition, represented in 50 nations or more. radiometer with the poorest drafted newsletters only operates in 14 nations. the number of employees within the organization is an alternative way to estimate the size and representation of the organization. 4.2.2 the acquired company we had access to the number of employees of the acquired company as well as to the revenue development of the previously independent companies one year after the acquisitions. as for the acquiring companies, we find that there is better communication if the acquisition target has many stakeholders, measured in the number of employees (not reported in a table; r=-0.236; r2=0.026). three out of the ten acquired companies develop a direct fall in revenue. interestingly, we find that decreasing revenues are related to above average communication (r=-0.281; r2=0.063). we conjecture that the acquiring companies anticipated this decrease and tried to prepare stakeholders for this by using strong communication. of course, this is only a tendency. as an opposing example, vestas acquired the largest company, italian wind technology s.r.l. with 7,000 employees. however, vestas did not communicate in any extraordinary mode in the newsletter, and it did not mention the employees or the particular situation of the acquisition and its influence on the employees in italy. the aftermaths: the acquisitions 15 years down the road the acquisitions took place around the turn of the millennium. we have analyzed all the parent companies’ annual reports, along with the acquired companies, 15 years later. danisco sold sidlaw again in april 2001 due to decreasing profits. danfoss shut down woodley electronics group from the uk. three other companies (neg micon, icopal and vestwood) became m&a targets themselves and now belong to venture capital companies. vestas bought neg micon. the parent companies radiometer, gn great nordic, and falck completely integrated their m&a targets sendx medical, resound corporation, and veiligheiddienst, respectively. the final two companies have sustained their names due to either branding or other local advantages of maintaining a degree of independence. however, they operate in the same fiscal accounts as the parent companies. the acquisition process is complex, and the analysis has shown various outcomes. some companies have been able to stay within their operating areas and thereby sustain a similar business model as before the acquisitions. other companies may have given the parent company a boost in its financial results the first couple of years, after which they seemed to disappear into the parent company’s core values, business areas and thereby changing to the business model of the parent company. only two acquired companies have been able fully to sustain the business provided through their original names; lisco, taken over by dfds, operates ferries under the original names and services, and italian wind technology s.r.l., taken over by vestas, retains statements in their name and locations in italy. in a long term perspective, it becomes clearer that the acquired companies go through company turnarounds and business model changes due to the acquisitions. the companies’ narratives vanish during or after the acquisitions. the companies’ financial numbers either decrease or disappear through integration into the parent company (alternatively: further takeovers, shutdown, liquidation), so after a few years, they cannot be analyzed separately. in two of the companies, the term business model is explicitly applied as a concept explaining the companies’ journal of business models (2019), vol. 7, no. 5, pp. 70-89 82 values and business. it is noteworthy that the two companies now belong to private equity funds. these equity funds operate within a more professional environment and with a different professional focus (robertson 2009). they have invested in the companies with the intention of selling them with profits in later years, which may explain this more focused professional approach. vest-wood even names their own model ‘the vest-wood model’, “an important cornerstone for continued controlled growth is a coherent process-oriented business model, the vest-wood model which expresses the ideal principles that will structure the organization” (from the corporate web-page). none of the other eight companies focus on their business model or the acquired company’s business model during the acquisition in their newsletter or later in the integration process and the final definition of the organization. this again suggests that the acquisitions have failed the narrative test (magretta, 2002, p. 90) and have rather focused on the financial value and not necessarily on any other type of business values such as for example well-educated employees, customer value, or market knowledge. it also aligns with the findings of abrahamsson et al. (abrahamsson et al. 2019) who suggest that stock markets only react positively to large and well-communicated business model changes. discussion and conclusions the aim of this study has been to provide insights into the presentation of the business model, focusing on narratives and financial results during a crossnational acquisition, comparing this communication with the financial results and how the acquisition has been sustained in a longitudinal perspective. while we are not able directly to determine the application of an internally applied business model in the acquisition process, we are able to discuss the external presentation of the business purpose of the acquisition which would demand that it is of crucial importance that innovative impulses are represented during a business model change, such as the customers and the employees as highlighted by malmmose et al. (2014). thus, in this discussion, we contribute to an unexplored business model area of external representation of business changes compared with financial data. we synthesize the theoretical narrative storytelling and the financial data presentation (magretta, 2002) mirrored in shareholder and stakeholder considerations. segars and kohut (2001) argue that a causal link exists between the quality of written communication and financial performance. in this study we have indicators of such a link. yet, it is not clear nor univocally since, we e.g. observe icopal where the external presentation of the business change was strong but the benchmarked performance was negative, and the opposite observation was found for radiometer with a weak external presentation of the acquisition, yet the financial results were positive. additionally, large discrepancies exist in the stakeholder attention, where most companies, except icopal and gn great nordic, devote little attention on stakeholders. thus, this study firmly identifies an intense complex setting where other factors influence the business model presentation through communication and financial success. one of the only consistent findings is the external presentation quality which is related to the number of stakeholders (the employees in the acquiring and target companies; the number of countries where the company is active; the size of the shareholder base) and the prospect of disruptive future events (growth in assets at the acquiring company or decline in revenues at the target company). yet, the reason for these consistent findings may be found in the fact that these organizations typically have in-house resources such as communication and human resource employees to support acquisition activities. from a business model perspective, a remarkable dominant discourse is the financial data in the newsletters. simultaneously, the narrative stories and the communication of the complete business model is to a large extent neglected. it may be discussed whether the business model belongs to a legal announcement in an acquisition newsletter, but according to osterwalder (2004, p.16) the business model should combine the organizational stakeholders and this forms the link between the business strategy, the business organization, and the information communication technology. it is also debatable to what extent the business model of the parent company should be aligned with the acquired company. however, the corporate business strategy has large elements of positioning the journal of business models (2019), vol. 7, no. 5, pp. 70-89 83 company and its subsidiaries in the market (porter 1980), and is therefore crucial in a specific organizational context change which most acquisitions represent, whether this is on corporate or subsidiary level. as magretta (2002, p.5) states “profits are important not only for their own sake but also because they tell you whether your model is working.” therefore, a business model is far more than financial indicators, and this was also emphasized recently by nielsen and roslender (2015). in case of an acquisition this appears to be a relevant notice. with the interrelatedness of narrative storytelling and financial performance, a hybrid emerges to stakeholder theory in this discussion. this study supports the notion that the communication process often neglects stakeholders. yet, they are still essential for the organization, in particular in recent years due to the financial crisis (tse 2011). the communication in the newsletters and the obvious aims of the acquisitions belong to the realm of shareholder theory, and in most cases revenue also increased. however, none of the stories told appeared to be strong narratives. this could have been the reason for the actual implications that the companies had to be sold again or even closed down indicating a lack of sustainability of the acquisition. the strong focus on financial performance undermined the importance of the intangible story telling which appears to be a continuous problem for many organizations (biondi and rebérioux 2012). in at least half of the cases, the acquisition did not become a financial success in terms of positive returns and increased assets, as often highlighted as the aim in the newsletters. this supports the need for a refocus on stakeholders and the core business model in specific situations such as organizational changes and acquisitions (shefrin 2007; russo and schoemaker 1992; tse 2011). the increased complexity in social practice due to technology advances, globalization, and information access (fairclough 1992; morgan 1997; ströh and jaatinen 2001) are additional reasons for an increased pressure of legitimacy where the organizational business model is pivotal. though this study identifies a lack of business model communication in an acquisition process, the analytically indicated links between external communication and financial performance have limitations due to a small sample and due to the complex organizational set-up where the acquired organizations’ financial performance is quickly absorbed into the parent company. despite its limitations, this study has entered an unexplored area of a stakeholder and shareholder view integrated in the business model change communication which calls for further future research. rich academic literature exists in both theoretical areas and would thus enable such research. moreover, future research on business models in more specific situational contexts, such as acquisitions, is called for, in order to add to the more scarce business model theoretical groundings. journal of business models (2019), vol. 7, no. 5, pp. 70-89 84 references abrahamsson, j., a. a. maga, and c. nicol. 2019. the effect of business model innovation announcements on share prices : a study of us listed technology firms. journal of business models online vol. 7, no. 2 (2019). ahlgren ode, k., and j. lagerstedt wadin. 2019. business model translation—the case of spreading a business model for solar energy. renewable energy 133:23-31. ajami, r. a., m. m. bear, and h. nørreklit. 2003. multinational corporate sustainability: a content analysis approach. in organizational data mining: leveraging enterprise data resources for optimal performance, edited by h. r. nemati and c. d. barko: idea group publishing. doi: 10.4018/978-1-59140-134-6.ch002, 9-24. aversa, p., s. haefliger, and d. g. reza. 2017. building a winning business model portfolio. mit sloan management review 58 (4):49. bakhtin, m. m., ed. 1986. speech genres and other late essays. edited by t. b. v. w. m. (1986). university of texas press. bergvall-kåreborn, b., and d. howcroft. 2013. the apple business model: crowdsourcing mobile applications. accounting forum 37:280-289. biondi, y., and a. rebérioux. 2012. the governance of intangibles: rethinking financial reporting and the board of directors. accounting forum 36:279-293. brown, j., and w. forster. 2013. csr and stakeholder theory: a tale of adam smith. journal of business ethics 112:301-312. cartwright, s., and c. l. cooper. 1996. managing mergers, acquisitions & strategic alliences integrating people and cultures: butterworth-heinemann reed elsevier plc group. ———. 2000. hr know-how in mergers and acquisitions: institute of personnel and development, london. cartwright, s., c. l. cooper, and j. jordan. 1995. managerial preferences in international merger and acquisition partners. strategic change 4:263-269. child, j., d. faulkner, and r. pitkethly. 2000. foreign direct investment in the uk 1985-1994: the impact on domestic management practice. journal of management studies 37:141-166. choi, j., and h. wang. 2009. stakeholder relations and the persistence of corporate financial performance. strategic management journal 30:895-907. christensen, c. m., t. bartman, and d. van bever. 2016. the hard truth about business model innovation. mit sloan management review 58 (1):31. clemente, m. n. 2001. a take-charge ceo to spearhead the m&a process. mergers & acquisitions: the dealermaker’s journal 36:35. clutterbuck, d. 2001. the communicating company. journal of communication management 6:70-76. journal of business models (2019), vol. 7, no. 5, pp. 70-89 85 cohen, j. 1988. statistical power analysis for the behavioral sciences. 2nd ed. hillsdale, nj: lawrence erlbaum associates. covaleski, m. a., j. h. evans iii, j. l. luft, and m. d. shields. 2003. budgeting research: three theoretical perspectives and criteria for selective integration. journal of management accounting research 15:3-49. de bondt, w., g. muradoglu, h. shefrin, and s. k. staikouras. 2008. behavoiural finance: quo vadis? journal of applied finance 18:1-15. douglas, s. p., s. c. craig, and e. j. nijssen. 2001. executive insights: integrating branding strategy across markets: building international brand architecture. journal of international marketing 9:97-114. doukas, j. a., and d. petmezas. 2007. acquisitions, overconfident managers and self-attribution bias. european financial management 13:531-577. durocher, s. 2010. standard-setting institutions’ user-oriented legitimacy management strategies. qualitative research in accounting & management 7:476-504. dwyer, j. 1999. communication in business strategies and skills: pearson education australia. fairclough, n. 1992. discourse and social change. cambridge: polity press. ———. 1995. critical discourse analysis the critical study of language. london: pearson. ———. 2001. language and power. edited by c. n. professor candlin. essex: pearson education limited. ferguson, s. d. 2000. researching the public opinion environment theories and methods. edited by r. l. heath and g. m. vasquez: sage publications inc. fielt, e. 2013. conceptualising business models: definitions, frameworks and classifications. journal of business models 1 (1):85-105. freeman, r. e., and d. l. reed. 1983. stockholders and stakeholders: a new perspective on corporate governance. california management review 25:88-106. friedman, m. 1962. capitalism and freedom: university of chigaco press. ———. 1970. the social responsibility of business is to increase its profits. the new york times magazine. harrington, l. k. 1996. ethics and public policy analysis: stakeholders’ interests and regulatory policy. journal of business ethics 15:373-382. holm, c., and m. zaman. 2012. regulating audit quality: restoring trust and legitimacy. accounting forum 36 (1):51-61. jakobsen, m., i.-l. johansson, and h. nørreklit. 2011a. an actors approach to management. copenhagen: djøf publishing. journal of business models (2019), vol. 7, no. 5, pp. 70-89 86 jakobsen, m., f. mitchell, and h. nørreklit. 2011b. constructing performance measurement packages. in review of management accounting research, edited by m. g. abdel-kader: palgrave macmillan. jan, m., g. rimmel, p. beusch, and k. jonäll. 2017. business model disclosures in corporate reports. journal of business models 5 (1):51-73. jensen, m. c. 2002. value maximization, stakeholder theory, and the corporate objective function. business ethics quarterly 12:235-256. johanson, j., and j.-e. vahlne. 1977. the internationalization process of the firm-a model of knowledge development and increasing foreign market commitments. journal of international business studies 8:23-32. johansson, m., and j. t. abrahamsson. 2014. competing with the use of business model innovation an exploratory case study of the journey of born global firms. journal of business models 2 (1):33-55. jones, t. m. 1995. instrumental stakeholder theory: a synthesis of ethics and economics. the academy of management review 20:404-437. kaye, m. 2010. communication management. 2nd ed: pearson australia. kostova, t., and s. zaheer. 1999. organizational legitimacy under conditions of complexity: the case of the multinational enterprise. the academy of management review 24:64-81. kotter, j. p., and j. l. heskett. 1992. corporate culture and performance. new york: the free press. kringelum, l., and a. n. gjerding. 2018. identifying contexts of business model innovation for exploration and exploitation across value networks. journal of business models online vol. 6, no. 3 (2018). li, z., and d. sun. 2012. acquisition and disclosure of operational information*. decision sciences 43:459-487. low, a. 2009. managerial risk-taking behavior and equity-based compensation. journal of financial economics 92 (3):470-490. lynch, j. g., and b. lind. 2002. escaping merger and acquisition madness. strategy and leadership 30 (2):5-12. madsen, e. k. 2000. legitimacy and the notion of social contracts for business: aarhus school of business. magretta, j. 2002. why business models matter. harvard business review 80:86-92. malmmose, m., r. lueg, s. khusainova, p. s. iversen, and s. b. panti. 2014. charging customers or making profit? business model change in the software industry. journal of business models 2 (1):19-32. martin, j., w. petty, and j. wallace. 2009. shareholder value maximization—is there a role for corporate social responsibility? journal of applied corporate finance 21:110-118. mcwilliams, a., and d. siegel. 2000. corporate social responsibility and financial performance: correlation or misspecification? strategic management journal 21:603-609. journal of business models (2019), vol. 7, no. 5, pp. 70-89 87 mcwilliams, a., d. s. siegel, and p. m. wright. 2006. corporate social responsibility: strategic implications. journal of management studies 43:1-18. meyer, j. w., and b. rowan. 1977. institutionalized organizations: formal structure as myth and ceremony. american journal of sociology 83:340-363. montgomerie, j., and s. roscoe. 2013. owning the consumer getting to the core of the apple business model. accounting forum 37:290-299. morgan, g. 1997. images of organizations: sage publications. nichols, p. 1998. unlocking shareholder value: thorogood publishing. nielsen, c., and r. roslender. 2015. enhancing financing reporting: the contribution of business models. the british accounting review 47:262-274. nye, s. 1999. mining for gold. london: communications international. nørreklit, h. 2000. controlling multinational companies an attempt to analyze some unresolved problems. international journal of accounting 35:415-430. nørreklit, h., m. jacobsen, and f. mitchell. 2008. pitfalls in using the balanced scorecard. journal of corporate accounting & finance 19:65-68. nørreklit, h., and c. k. d. wit. 2001. sustainable communication practices in management control are body and mind in conflict or convertion? hermes 27:9-29. o’hair, d., g. w. friedrich, and l. shaver. 1998. strategic communication in business and the professions. boston: houghton mifflin. osterwalder, a. 2004. the business model ontology a proposition in a design science approach, licencié en sciences politiques de l’université de lausanne, l’université de lausanne. osterwalder, a., and y. pigneur. 2005. clarifying business models: origins, present, and future of the concept. communications of ais:1-25. osterwalder, a., and y. pigneur. 2010. business model generation: a handbook for visionaries, game changers, and challengers: wiley. petersen, h., and a. k. lund. 2000. den kommunikerende organization: københavn samfundsliteratur. phillips, d. 2002. evaluating content counts. journal of communication management 6:77-92. porter, m. 1980. market signals. in competitive strategy. new york: new york free press. robertson, r. 2009. private equity funds. new political economy 14:545-555. russo, j. e., and p. j. h. schoemaker. 1992. managing overconfidence. sloan management review 33:7-17. journal of business models (2019), vol. 7, no. 5, pp. 70-89 88 segars, a. h., and g. f. kohut. 2001. strategic communication through the world wide web: an empirical model of effectiveness in the ceo’s letter to shareholders. journal of management studies 38:535-556. shefrin, h. 2007. behavioural corporate finance: decisions that create value. new york: mcgraw-hill. sher, r. 2012. why half of all m&a deals fail, and what you can do about it. forbes. sinetar, m. 1981. mergers, morale and productivity. personnel journal 60:863-867. solomon, c. m. 1999. communicating in a global environment. workforce 78:50. sonpar, k., a. e. o. laplume, and r. a. litz. 2008. stakeholder theory: reviewing a theory that moves us. journal of management 34:1152-1189. stahl, s. 2004. rethinking business models. informationweek 985:8. ströh, u., and m. jaatinen. 2001. new approaches to communication management for transformation and change in organisations. journal of communication managment 6:148-165. sundaram, a. k., and a. c. inkpen. 2004. the corporate objective revisited. organization science 15:350-363. svendsen, a. c., and m. laberge. 2005. convening stakeholder networks: a new way of thinking, being and engaging. the journal of corporate citizenship (19):91-104. terreberry, s. 1968. the evolution of organizational environments. administrative science quarterly 12 (4):590-613. the world economic forum. 2011. the global competitiveness report 2011-2012: country profile highlights. tse, t. 2011. shareholder and stakeholder theory: after the financial crisis. qualitative research in financial markets 3:51-63. wirtz, b. w., and p. daiser. 2017. business model innovation: an integrative conceptual framework. journal of business models 5 (1):14-34. ———. 2018. business model innovation processes: a systematic literature review. journal of business models 6 (1):40-58. wittgenstein, l. 1953. philosophical investigations. oxford: basil blackwell. wooldridge, j. m. 2009. introductory econometrics: a modern approach. boston, ma: south-western college pub. zott, c., r. amit, and l. massa. 2011. the business model: recent developments and future research. journal of management 37:1019-1042. journal of business models (2019), vol. 7, no. 5, pp. 70-89 89 margit malmmose is an associate professor of managerial accounting at department of management, aarhus university. her research focuses primarily on costing and performance measures in health care, both nationally but also comparative studies. additionally, she does research within other management accounting topics such as budgeting and business models. rainer lueg is a full professor of managerial accounting. he is affiliated with leuphana university and university of southern denmark. previously, he worked as a consultant for mckinsey & co. his current research revolves around strategic performance management systems with a specific focus on value-orientation and sustainability management. about the authors journal of business models (2013), vol. 1, no. 1 pp. 3-12 we give you the journal of business models (for free): the inaugural editorial christian nielsen1, colin haslam2 and romeo v. turcan3 “our business mission is to create an open source journal that is free of the ties that come along with a publisher. in turn we wish to develop a new type of profitable business model for an academic journal that sends more of the total value created back to the academic community and the strategic partners that enable its existence. this is a very clear value proposition.” please cite this paper as: “nielsen, c., c. haslam and r.v. turcan, 2013, we give you the journal of business models (for free): the inaugural editorial, the journal of business models, vol. 1, no. 1, pp. 3-12.” 1aalborg university, denmark, chn@business.aau.dk. 2queen mary university of london, united kingdom, c.haslam@qmul.ac.uk. 3aalborg university, denmark, rvt@business.aau.dk. 3 journal of business models (2013), vol. 1, no. 1 pp. 3-12 welcome to the journal of business models the research field of business models has gained a vast amount of momentum in the recent decade – a momentum that only looks to continue in strength in the coming years. hence, the mission of this journal is to support the growing interest of researchers in the business model phenomenon and provide a rigorous platform for which researchers can develop and disseminate their research-based insights to the world of business scholars and executive managers. up until now, business model research has found its home in numerous special issues in journals such as long range planning, journal of management and a forthcoming issue of strategic entrepreneurship journal, just to name a few. however, with the journal of business models we now have a dedicated journal that can serve as a multidisciplinary platform for researchers interested in the business model phenomenon from all possible academic perspectives and disciplines. the aim of the journal of business models is to disseminate the newest research-based insight on business models globally. the journal of business models will constitute a cross-disciplinary platform conveying multiple-type papers, i.e. both conceptual and empirical and also encouraging methodological pluralism. we plan to invite contributors in order to cover a wide array of the most popular perspectives on business models, like e.g. innovation, commercialization, entrepreneurship, internationalization, strategy, organization, accounting, performance measurement and finance. however, we also intend to provide space for less mainstream and alternative perspectives that may challenge existing practices of thought. the key audiences of this journal are academics and dedicated consultants. as this journal aims at pushing the knowledge of the field to a higher theoretical level, and to becoming a core discipline in due course, the rigorousness of the review process and the quality of the published papers naturally lend themselves to an expert audience. however, policy-makers, politicians, entrepreneurs and students with high academic aspirations will also benefit substantially from the mix of articles in this journal. the journal of business models does not have a preplanned publication schedule. this is one of the strengths of not being a part of a large publication corporation. our aim is to publish at least two issues a year and a maximum of five issues. rather than forcing papers through the submission process or leaving up to date knowledge sitting on the shelf waiting for critical mass, this journal can publish when the timing is best. therefore it is a good idea to register as a reader to this journal (http://journals.aau.dk/index.php/jobm/user/ register) while at the same time being a registered member of the business model community (see www. businessmodelcommunity.com) in order to receive timely information on new publications. the scope of the journal in this first issue, as well as the issues forthcoming in 2014, the papers are expected to cover a majority of the existing perspectives on business models and also to include a large number of major contributors to the field. the editorial panel is working hard to ensure that the literature provided and discussed covers varying perceptions of the field and how to progress the field of business models forward from this point. the various major disciplines or schools addressing business models, including strategy, management, organization, innovation, entrepreneurship, technology, internationalization, finance and communication, will all be covered during the first year and make lead way for a series of special issues digging deeper into such perspectives from a multi-method and interdisciplinary angle. the array of perspectives present in the literature on business models leads to the identification of a number of themes on which the journal of business models naturally will be focused. some of the subjects expected (but not limited to) in the journal are: • definitions and concepts of business models; including archetypes, typologies, key components and building blocks • defining what business models are about: the epistemological and conceptual roots of business models and their differences with strategy, strategic management, organization and business planning 4 http://journals.aau.dk/index.php/jobm/user/register http://journals.aau.dk/index.php/jobm/user/register www.businessmodelcommunity.com www.businessmodelcommunity.com journal of business models (2013), vol. 1, no. 1 pp. 3-12 • business model design: designing, rejuvenating, innovating and facilitating business models including the role of design thinking contra the business case • implementing business models and the execution process • commercialization and exploitation of ideas through business models: challenging entrepreneurial processes • seeking the true benefits of a globalized world: how internationalization of activities affects business models • the strategic partnerships of business models: roles and relationships within and among business models • business models and high-tech ventures • the performance of business models: dilemmas and paradoxes of performance measurement consequences • tools and techniques for analysing, designing, testing and implementing business models the business model of the journal of business models this journal is an open access journal that follows the creative commons attribution license version (http://creativecommons.org/licenses/by-nc-nd/3.0/) by this license authors retain the copyrights to their work and grant the journal the right of first publication with the work. at the same time, we believe in academic rigour and the value-added of a double-blind review process. the journal of business models runs on an open journal system platform that ensures the exact same work flow such as provided for example by the scholarone setup of manuscript central. there are well-established control mechanisms for ensuring anonymity of manuscripts as well as reviewers, and there is also a rating system on reviewers and their efforts. question: “so what is it precisely we are missing out on by not being part of a large publication house?” answer: “apart from using academic colleagues as free resources for profit-making purposes we don’t really know!” while it is clear that large publishing houses may be able to offer some professional services in relation to marketing a journal like ours, when it comes to services for authors, these are typically not for free anyhow. our hypothesis is that in this era of google-optimization it is possible to beat the existing marketing models of established publishing houses. we call this intelligent marketing. the following section analyses the potential business model of a journal doing just this. at the present the customers of a standard journal are the universities themselves through their affiliated libraries. so in effect university employees are working for free to publish in journals the very same university pays for access to. now that is a neat business model – at least if you are a publisher. with an open access journal, libraries are not charged. however, these open access journals typically do not have any marketing activities. therefore, we need you – the readers, authors and reviewers – to go to your library directors and recommend them putting this journal on their resource list. despite the journal of business models not having to send profit back to a publisher, there are still costs of running the business. most of these costs are associated with the activities of the submission system and the publishing process (even if we do count entirely on your marketing effort). our submission system is run by our strategic partner open journal systems, and the website is sponsored by aalborg university library. despite this, our business case estimates the costs of running the journal of business models at €25.00030.000 a year. we intend to launch an international case competition for the best business model for the journal of business models in the beginning of 2014. we hope you and your students will join in. the above illustrates that a journal like this is short of a strong marketing partner. let us take a look at how this could be solved. 5 http://creativecommons.org/licenses/by-nc-nd/3.0/ http://creativecommons.org/licenses/by-nc-nd/3.0/ journal of business models (2013), vol. 1, no. 1 pp. 3-12 let’s get a group on let’s get a group on – let’s get a groupon. this is a play with words for two reasons. firstly, it stipulates that there is a need to activate the group of scholars interested in the field of business models and to work with creating and sending enough value back to them to ensure that they will keep on sending manuscripts to the journal and help out reviewing the papers of their peers. the business model community can add value to the journal by submitting their best papers through the journal of business models, which in turn will leverage the impact factor of the journal for their own good. secondly, leaning on groupon as a metaphor of doing business, i.e. a business model, what we can learn from the above is that we have to be extremely intelligent in the way we take in strategic partners and utilize them in the value creation process of the journal. groupon’s business model is unique not only in the way that the company “creates markets” by becoming a platform for building consumer buying power. groupon’s business model is also unique because the potential buyers become the most important strategic marketing partners to the company. let us try to describe the journal of business models (jobm) in the light of this business model metaphor: • the central company, groupon, is the jobm editorial board and reviewers • the shops in the groupon concept are the university libraries and universities themselves as well as independent researchers in the jobm case • the customers are the authors and readers of jobm, including academics, corporate managers, policy-makers and students • we need to persuade the customers to perform the marketing for jobm • jobm then needs to set up a structure to do this (facebook button, linkedin button, twitter button, and direct mail to the library director) however, now comes the key question of how the jobm can make enough money to sustain its operations. we expect to require revenues of €25.000-30.000 a year to reach break-even for a journal with this level of activity. a number of revenue streams make themselves available, for example, a few large sponsors, a crowd-funding approach, adds, an annual conference, book promotions and paid book reviews from publishing houses, or print on demand services for libraries world-wide. the key question is therefore: which mix of these is the best combination with the value proposition and strategy of this journal? in reality, what we really need to facilitate is a strong academic and professional community around this journal. to do this, the journal of business models needs to obtain a strong impact factor and a good ranking. did we say chicken-and-egg problem? we go about this by insisting on a rigorous and constructive peer review process. the next step will no doubt be left in the hands of the audience, who needs to cite the published work and send in papers that develop earlier work. the audience also needs to discuss the papers at conferences, in blogs etc. in other words, we just gave you, the readers, the authors and the reviewers, full responsibility! don’t worry. we are confident in you. the journal of business models already has a vast potential audience and a strong community. at the business model community website there are close to 300 registered members at the present. the same goes for practitioners around the world and can be seen from the quantity of practitioner conferences and summits available. the editorial team in this initial phase of starting up the journal a big thank you goes out to the editorial advisory board and the editorial review board which have constituted the major part of the hard working reviewers on the papers that are either in the editing process or submission process at the present. the editors-in-chief also wish to thank the team at the editorial office and at aalborg university library for their commitment to the project, their professionalism as well as patience with a team of newly designated reviewers and editors getting used to the submission system. the organization of the journal is as follows: 6 journal of business models (2013), vol. 1, no. 1 pp. 3-12 editors-in-chief • christian nielsen, aalborg university, denmark • colin haslam, queen mary university of london, united kingdom • romeo v. turcan, aalborg university, denmark editorial advisory board • marco montemari, università politecnica delle marche, italy • robin roslender, university of dundee, united kingdom • poul kyvsgaard hansen, aalborg university, denmark • xavier lecocq, iae lille and ieseg school of management, france • jonas hedman, copenhagen business school, denmark • ales novak, university of maribor, slovenia • stefano zambon, university of ferrara, italy • petri ahokangas, oulu business school, finland editorial review board • hanno roberts, norwegian business school, norway • ivan butler, aalborg university, denmark • gunnar rimmel, jonkjöping business school, sweden • risto rajala, aalto university, finland • anders drejer, aalborg university, denmark • norman fraser, henley business school, united kingdom • yariv taran, aalborg university, denmark • margit malmmose, aarhus university, denmark • lars krull, aalborg university, denmark • rainer lueg, aarhus university, denmark • susan christine lambert, university of south australia, australia • kristina jonäll, university of gothenburg, sweden • langdon morris, innovationlabs, usa • peter seddon, the university of melbourne, australia • geoffrey lewis, melbourne business school, australia • michael rappa, north carolina state university, usa • taman powell, cardiff business school, uk editorial office • vibeke jørgensen, aalborg university, denmark • anja birch nielsen, aalborg university, denmark • jesper chrautwald sort, aalborg university, denmark • morten lund, aalborg university, denmark • janni preisler vilstrup , aalborg university, denmark • maria abildgaard haladyn, aalborg university library, denmark the inaugural edition in this inaugural issue we start to address the core themes that form the scope of the journal. however, we are humble towards the fact that it is difficult to come around all core themes in just one issue, also realizing that getting manuscripts that would fit into such a jigsaw puzzle would be difficult. therefore, we do not claim to cover all key topics in this issue. however, we urge those of you who feel “left out” to get in touch as soon as possible. furthermore, we urge you as readers and potential authors to consider the merits of forming some of these core themes into special issues that you would wish to be the guest editor(s) of. besides the already announced special issue from the nff conference in iceland, we have two other special issues in the pipeline at the present. one relates to the internationalization of business models, and the other to the financialization of business models. this issue will be divided into four sections as described below: section 1: definitions, concepts, schools and theory a natural place to begin is by addressing issues of defining the concept of business models. in the literature there are to our awareness more than 70 definitions of what a business model is. some of the most cited definitions include porter’s 2001 take that: “the definition of a business model is murky at best”, 7 journal of business models (2013), vol. 1, no. 1 pp. 3-12 and magretta’s 2002 neat and simplistic definition: “a business model is a story that explains how the enterprise works” bell and solomon (2002, xi) put a profit angle on the concept in stating that a business model is: “[a] simplified representation of the network of causes and effects that determine the extent to which the entity creates value and earns profits”, while other authors such as chesbrough and rosenbloom (2002) provided more comprehensible, albeit complex, definitions, here in the form of their six necessary steps that constitute the description of a business model: 1. articulate the value proposition, that is, the value created for users by the offering based on the technology 2. identify a market segment, that is, the users to whom the technology is useful and for what purpose 3. define the structure of the value chain within the firm required to create and distribute the offering 4. estimate the cost structure and profit potential of producing the offering, given the value proposition and value chain structure chosen 5. describe the position of the firm within the value network linking suppliers and customers, including identification of potential complementors and competitors 6. formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals in the middle of the last decade, it was almost as if every researcher needed to prove his/her right to contribute to the field by having his/her own definition of what a business model was. as such, one of the authors of this editorial also managed to jump onto that specific bandwagon stating that: “a business model describes the coherence in the strategic choices which facilitates the handling of the processes and relations which create value on both the operational, tactical and strategic levels in the organization. the business model is therefore the platform which connects resources, processes and the supply of a service which results in the fact that the company is profitable in the long term” (2006, reprinted in nielsen 2011). in recent years the definition by osterwalder and pigneur (2009) seems to encapsulate in a neat manner the focus of the field as it stands today: “a business model is the rationale of how an organization creates, delivers and captures value” in this issue the paper by bille discusses the developments of business model definitions. this recap leads us to question the necessity of having a clear definition of what a business model is, i.e. to define or not, and the value added of discussing details of definition. in much the same manner, in the last 10-15 years we have seen the development of numerous conceptualizations of business models, including frameworks for defining archetypes, typologies, key components and building blocks. morris contributes with a seminal account of how the business model becomes a competitive advantage in this rejuvenated 2013 version. with their business model canvas, osterwalder and pigneur provided a relatively fresh surge to the field in 2009. hence we are now seeing the same tendencies as with the definition game above that a lot of researchers and consultants are constructing their own canvasses. in this issue the paper by fielt takes the temperature on the concepts, models, canvasses and archetypes discussion. many of the definitions and concepts that constitute the discussions above illustrate how the field of business models is grounded in a variety of different academic perspectives and backgrounds. it can be argued that there are several different schools of thought in this field and these are described and discussed in the paper by ahokangas et al. here the temperature on the dispersion of the field is taken, and the diffusion of the concept from the early roots of strategy in the 1960’s and 1970’s over the e-business assimilation of the turn of the millennium towards the design school movement of the last few years is depicted. in a natural development from definitions, over con8 journal of business models (2013), vol. 1, no. 1 pp. 3-12 cepts to schools, the next step is to address the move towards theorization of business models. the paper by lueg et al. hypothesizes that the choice of business model may be more dependent upon the specific challenges a company is facing and the lifecycle phase it is in, and not so much the industry segment within which it competes. lueg et al. develop the notion of analysing the role of business models across the four phases of the business lifecycle in order to generate coherent business model theory and thereby the ability to provide prescriptive theories of action, design, and implementation. higher-level theories like this may provide a quantum leap for companies looking to optimize their business configurations and profit models. section 2: the influence of technology the creation of wealth and new industries is often seen as a combination of technological, organisational and societal factors, and much the same can be said for the advent of business models where new technologies and new knowledge make possible the deliverance of new and novel value propositions. however, the preparedness of customer segments to take on board such value propositions is also a necessity for success. this was evident in the dot.com bubble that also boosted research into business models. because e-business technologies were relatively young and customers not used to using the internet as a retail channel, many companies ended up with unprofitable business models. together with the prospects of business models as activity systems and cost/revenue architectures, zott et al. (2011) argue that e-business still is one out of three key issues in relation to business models that needs to be addressed. from a customer perspective the notion of e-business might merely be seen as a choice of distribution or communication channel, and therefore this research would need to explain the effects of e-business in relation to both value creation, value capture and value delivery. these aspects are covered by rappa in his revision of his very influential paper from 2001. the paper by chae and hedman articulates the interplay between the role of technology and a business model exemplified by the mobile payment ecosystem and illustrates how the lack of sustainable business models has led to slow market penetration. this paper offers a framework that allows practitioners and academics to study current and future mobile payment approaches and thus a platform from which to address business model innovation. relative to other types of innovations, taran and boer argue that little is known about business model innovation, let alone the process of managing the risks involved in that process. using the emerging enterprise risk management literature, they propose an approach through which risk management can be embedded in the business model innovation process and illustrate this through a case study. the results warrant continuation of the development of such a model and give rise to furthering the links between innovation models and models of doing business. this is taken one step further in lecocq and demil’s paper which introduces a tool to design and innovate business models. section 3: creating businesses and value while it is possible to imagine a company without innovation, leadership and explicit strategy, it may be argued that no company exists without a business model, some form of organisation and a business idea as a starting point. the field of business models is therefore intricately connected with creating new companies as well as with the understanding of value creation. from the perspective of entrepreneurship, verstraete and jouison-lafitte’s paper posits the role of business models and the application of business model design tools on start-up companies. commercialization and exploitation of ideas through business models and the challenging of entrepreneurial processes through this perspective receive a lot of interest in the natural and technical sciences and also from policy-makers seeking methods for increasing the probability that funding of the sciences leads to value creation. the notion of organisation and the role of strategic management to business models, the final paper in this section, by andersson et al., illustrates through the case of real estate investment trusts how business models are affected by financialization. the paper discusses the evolution of the case business model and the extent to which it is dependent upon favourable legal and accounting regulations. hence it raises aware9 journal of business models (2013), vol. 1, no. 1 pp. 3-12 ness of the intricacies of understanding profit models in more complex forms than previously suggested in the literature as merely being a term of cost/revenue models. further steps may entail theorization relating to the performance of business models, including analyses of the dilemmas and paradoxes of measuring their performance. section 4: strategy, and creating business model patterns around customer needs in this fourth section we expect a series of papers that address the interface between business models and strategy and how business model patterns emerge around the need of customers and other strategic partners such as suppliers. the first of these is seddon and lewis’ reprise of their seminal paper from 2004. this section will furthermore constitute a foresight section on the design of business models including aspects of designing, rejuvenating, innovating, testing and facilitating business models and business model execution. we expect to see some contributions that will enlighten the dichotomous roles of design-thinking contra business-case thinking evident at the present and thus discuss the epistemological and conceptual roots of business models and their differences with strategy, strategic management, organization and business planning. lastly, this section will address how companies, even sme’s, could and should be seeking the true benefits of a globalized world through international partnering and micro-multinational structures through unique business model configurations. references bell, t. & i. solomon. 2002. cases in strategic systems auditing. kpmg llp and the university of illinois at urbana champaign business measurement case development and research program. chesbrough, h. & r.s. rosenbloom. 2002. the role of the business model in capturing value from innovation: evidence from xerox corporation’s spin-off companies. industrial and corporate change, vol. 11, no. 3, pp. 529-555. magretta, j. 2002. why business models matter. harvard business review, vol. 80, no. 5 may, pp. 86-92. nielsen, c. 2011. when intellectual capital drives the business model, then ..., in m reddy & a lloyd (eds.), the human capital handbook 2011, 3rd edn, vol. 1, hubcap-digital, miltonkeynes, uk, pp. 26-31. osterwalder, a. and y. pigneur. 2009. business model generation. hoboken nj: john wiley and sons. porter, m.e. 2001. strategy and the internet. harvard business review, vol. 79, no. 3 march, pp. 62-79. zott, c., amit, r., & massa, l. 2011. the business model: recent developments and future research. journal of management, 37(4), 1019-1042. 10 journal of business models (2013), vol. 1, no. 1 pp. 3-12 about the authors christian nielsen, phd, is professor at aalborg university in denmark. he is director of crebs (center for research excellence in business models, www.crebs.aau.dk), the world’s first interdisciplinary research centre focusing on business models. christian has previously worked as an equity strategist and macro economist focusing specifically on integrating intellectual capital and esg factors into business model valuations. his phd dissertation from 2005 won the emerald/efmd annual outstanding doctoral research award, and in 2011 he received the emerald literati network outstanding reviewer award. christian nielsen has a substantial number of international publications to his record and his research interests concern analysing, evaluating and measuring the performance of business models. public profile available on http://www.linkedin.com/ in/christianhnielsen and http://personprofil. aau.dk/profil/115869#/minside colin haslam is professor of accounting and finance in the school of business and management at queen mary university of london. his research interests have helped to consolidate an accounting perspective on financialization and its impact on corporate strategy and governance. in recent years he has been an adviser to the european finance research advisory group (efrag) on their ‘disclosure proactive project’ and also helped provide research support to the efrag business models pro-active project. he is associate editor of the journal accounting forum and has recently published a text for routledge “redefining business models: strategies for a financialized world” and a number of journal articles that explore the viability of the banking business model and more recent research focuses on how a business model framework could enhance corporate disclosure and risk assessment. at queen mary he teaches undergraduate financial markets and institutions and on 11 http://www.linkedin.com/in/christianhnielsen http://www.linkedin.com/in/christianhnielsen http://personprofil.aau.dk/profil/115869#/minside http://personprofil.aau.dk/profil/115869#/minside journal of business models (2013), vol. 1, no. 1 pp. 3-12 the msc postgraduate course accounting for business models. public profile available at h t t p : / / w w w . b u s m a n . q m u l . a c . u k / s t a f f / hhaslamc.html romeo v. turcan is associate professor of international business and entrepreneurship at aalborg university in denmark. his research interests relate to legitimation of new ventures and new sectors, internationalization and de-internationalization, and cross disciplinary theory building. dr turcan co-ordinates the theory building research programme (www.tbrp.aau.dk) and a tempus funded project (www.euniam.aau.dk). prior to starting his academic career, dr. turcan worked as management consultant, project manager, deputy chief of party, and ceo in private and state companies that operated in various sectors of the economy such as high-tech military, oil production, telecom, power and non-for-profit. dr. turcan holds a diploma of mechanical engineer from air force engineering military academy, riga, latvia; an msc in international marketing and a phd in international entrepreneurship from the strathclyde university in glasgow, uk. public profile available at: http://personprofil.aau.dk/116727. 12 http://www.busman.qmul.ac.uk/staff/hhaslamc.html http://www.busman.qmul.ac.uk/staff/hhaslamc.html www.tbrp.aau.dk www.euniam.aau.dk http://personprofil.aau.dk/116727 journal of business models (2019), vol. 7, no. 2, pp. 64-81 64 value creation in business models is based on intellectual capital – and only intellectual capital! henrik dane-nielsen1 and christian nielsen2 abstract this chapter applies the lens of emergentism and emergent properties to the understanding of value propositions, value creation, value delivery and value realization. it argues that none of the building blocks typically asserted with business models are of any value without the underlying intellectual capital to apply them and furthers this understanding through a series of  case examples. this chapter enhances our understanding of the role of intellectual capital in the value creation of business models and argues that intellectual capital is the foundation of business models. please cite this paper as: dane-nielsen, h., & nielsen, c. (2019), value creation in business models is based on intellectual capital – and only intellectual capital!, vol. 7, no. 2, pp. 1-12 keywords: business models, intellectual capital, levels of organisation, emergent properties, theory building 1–2 aalborg university, denmark acknowledgements: published as: dane-nielsen, h., & nielsen, c. (2017). value creation in business models is based on intellectual capital – and only intellectual capital! in j. guthrie, j. dumay, f. ricceri, & c. nielsen (red.), the routledge companion to intellectual capital routledge. journal of business models (2019), vol. 7, no. 2, pp. 64-81 65 introduction this chapter offers a novel perspective on how intellectual capital can be applied to the notions of business models. our understanding of business models is that intellectual capital, present in different forms at all levels of organisation as described by nielsen and danenielsen (2010) and are the only real value drivers of any type of business model. a business model is thereby a description of how intellectual capital is used in the organisation to create value. nielsen (2011, p. 26) asserts that “a business model driven by intellectual capital may in some ways differ from business models driven primarily by other factors, such as financial capital or natural resources. when intellectual capital drives the business model of a company then competitive advantage may be particularly high, margins high and corporate flexibility good”. knowledge and intellectual capital are important for the creation of value in the knowledge-based. however, in this chapter we argue that any type of technological development through the ages has had intellectual capital at its core, right from the invention of the plow, gunpowder, steam engines and through to computers. in fact, any type of business or service is driven by the knowledge of how to do things. this is essentially because economic activities are driven by intellectual capital, and thereby we disagree with the arguments posed by nielsen (2011) above. one of the reasons for this is that business models are concerned with delivering a value proposition to users and/or customers, but the value proposition and the resources to back it up never stand alone because they need to be supported by other activities. the problem with contemporary frameworks for visualizing companies’ business models is that they often take the form of generic organisation diagrams illustrating the process of transforming inputs to outputs in a chain-like fashion. a good example of this is found in the integrated reporting framework (iirc, 2013) as well as in more management-oriented models such as the business model canvas (osterwalder and pigneur, 2010). the core of the business model description should be focused on the connections between the different activities being performed in the company, in a reporting context often found as separated elements in the companies’ reports. companies often report a lot of non-financial information (e.g. customer relations, distribution channels, employee competencies, knowledge sharing, innovation and risks) but this information may seem unimportant if the company fails to show how the various elements of the value creation collaborate and changes. this is where the intellectual capital perspective becomes imperative. current perceptions of relationships and linkages often reflect only tangible transactions (i.e. the flow of products, services or money). however, in analyzing the value transactions inside organisations (intra-organisational) and between an organisation and its partners (inter-organisational), there is a tendency to forget the often-parallel intangible transactions and interrelations that are appended (cf. montemari and nielsen, 2013). our hypothesis is therefore, that no organisation, regardless of the type of business model being leveraged, can function without the appropriate intellectual capital to make use of machinery, increase financial capital, conduct processes, management actions, etc. an organisation’s value drivers are always their intellectual capital. the remainder of this chapter is structured as follows: in section 2 we introduce the field of business models and the role of value drivers. for this purpose, we focus on the level of business model configurations as explained by taran et al. (2016) and nielsen et al. (2017). next we discuss intellectual capital and the relationship to value drivers by discussing how intellectual capital differs across varying levels of organisation using the framework developed by nielsen and dane-nielsen (2010). in the section 4, the notions of intellectual capital value drivers in business model configurations are illustrated using five examples. finally, the chapter is concluded and future research paths are provided. it is argued that the inherent difficulties of understanding the interdependencies of business models across companies as well as different levels of organisation can be traced to a lack of understanding of the differences between synergetic effects, causal relationships and emergent properties. business models and configuring value the concept of the business model offers a novel perspective from which to understand how companies become profitable, efficient, competitive and sustainable: the journal of business models (2019), vol. 7, no. 2, pp. 64-81 66 latter being interpreted as the ability to survive in the long-term. much current focus in the field of business models concerns definitions, delimitations and constructing frameworks for analysing business models (wirtz et al., 2016a) or innovating them (wirtz et al., 2016b; foss and saebi, 2016). despite lacking unified theoretical groundings, at least according to zott et al. (2011), many of these frameworks, ontologies or models, have proven to be successful in business and entrepreneurship practices. the most notable example of this is the business model canvas published in osterwalder and pigneur’s 2010 book, business model generation, which has sold over 1.200.000 copies to date and been translated into over 30 languages. in its wake, there are several other tools and frameworks that perform additional and complementary analyses to that of the business model canvas, like for example the value proposition canvas (osterwalder et al., 2014) and the kickass company concept (brøndum et al., 2015; nielsen et al., 2016). for a given company, it is important to be aware of the business model being applied for two reasons: 1) first, the business model is the platform for executing corporate strategy. therefore, if the business model is poorly configured or implemented, then the company will have difficulties in carrying through the strategy and ultimately then also meeting the non-financial and financial targets. 2) second, the business model affects the managerial processes of the organisation because it directs the focus of how the firm does business. if the business model of a given firm relies on close ties with customers and the continuous involvement of strategic partners, then the managerial focus is expected to differ drastically from a situation where all customer interaction is web-based and all functions are in-house. in a similar manner, mintzberg and van der heyden (1999) argued that different forms of organisation, or value configurations, carry different managerial foci, because the basis of value creation is different. positioning the business model baden-fuller and morgan (2010) argue that business models are distinct ways of doing business that can be distinguished from alternative modes of doing business and furthermore can be classified by the nature of how they are configured. in so speaking, baden-fuller and morgan (2010) argue that a business model may be described as a model of how the firm does business. sometimes the naming of the specific business model is done through the example of a well-known company. five good examples of this are the ebay business model, the dell business model, the ryanair business model, the gillette business model and the skype business model. however, as baden-fuller and morgan (2010, p. 157) note, behind most specific business model examples, the role models, there are scale models that “offer representations or short-hand descriptions of things that are in the world, while role models offer ideal cases to be admired”. the above examples would be the e-auction business model configuration (ebay), the disintermediation business model configuration (dell), the no-frills business model configuration (ryanair), the razors and blades business model configuration (gillette) and the freemium business model configuration (skype). a commonly applied business model definition that captures these notions of configuring a business is osterwalder and pigneur’s: “a business model describes the rationale of how an organisation creates, delivers, and captures value” (2010). in section 4 below, we apply these five cases to illustrate that intellectual capital is the key value driver of the value creation of a business model. notions of value the notion of value is important, because value creation is at the heart of understanding business models and this concept seems to introduce a new level of analysis, different from, but related to strategy, organisation and management. akin to tribalism, there are many opposing views on what the term “value” signifies. in accounting the debate between cash-based and accruals-based accounting exists and in strategy there is the debate between porter’s (1985) market-based view and barney’s (1986) resource-based view. another problem is that value is used as a catch-all term focused on value for the consumer and wealth for the organisation, which might be problematic. typically, value is treated as an outcome of business activity (conner, 1991) and furthermore, sirmon et al. (2007) argue that there is minimal theory explaining ‘how’ managers/ firms transform resources to create value. hence value is not only poorly defined but also poorly theorized. a way of resolving this confusion is to distinguish between “use value” and “exchange value”. use value is the benefit received from resources and capabilities journal of business models (2019), vol. 7, no. 2, pp. 64-81 67 and exchange value is the money that changes hands when resources, products, or services are traded (bowman & ambrosini, 2000). figure 1 below conceptualizes the relationships between concepts of value according to whether they are related to strategy, activities or the stakeholders affected by the organisation. central to the business model literature is the term value proposition, which expresses the characteristics of the offering which the customer favours; hence it has close resemblance to the term use value applied in resourcebased theory. the value proposition is an expression of uniqueness and differentiation of a product or service. another important value concept in the field of business models, is that of “value creation”. from a business model perspective, value creation expresses the business activities being performed and is closely related to and understanding of value-added (i.e. what extra value does the product/service have when it appears from the production process). an alternative way of understanding value creation is as cash flows, which are the ultimate liquidity (cash-based) effects of activities performed. cash flows may differ despite identical activities due to the company’s position and strength in the value chain. however, it can be argued that higher cash flows are a proxy of the strength and resilience of the business model.  beyond value creation comes the actual physical interaction between the company and its customers in the form of the delivery of value. here the packaging of the product is the subject of analysis. this relates not only to the delivery channel, but also to the combination of product, service, knowledge and financing included in the delivery. the notion of “value realization” refers to the effects of physical and monetary transactions between the company and its customers. through transactions, the company’s activities are transformed into cash and from this converted into profits or losses depending on the company’s ability to manage its activities and finances. from the business model perspective value realization is merely an element of the mode of competition. as such value realization leads to value outputs,  which are the effects on the total value of the company, in terms of the balance sheet and market value. there is an important distinction between shareholder value and value to the customer. the iirc (2013) introduced the idea of “value outcomes”  to represent a broader notion of corporate effects e.g. on the total set of stakeholders and also the way the company affects users, customers, partners and networks and vice versa. from this categorisation of value, we can distinguish between different types of value drivers and thereby also gain a better understanding of different types of value drivers in relation to the business model. the value drivers of business models an important question to ask is: how do companies create value? in this chapter, we argue in both for-profit and not for-profit organisations, it is only intellectual capital, for example in the form of knowledge of how to use resources that drive value creation. the resources themselves create nothing. the notion of value drivers has been applied in a series of related fields to that of intellectual capital (e.g. marr et al., 2004; cuganesan, 2005; carlucci and schiuma, 2007), such as r&d (pike et al. 2005), and customer relationship management (richards and jones, 2008). a business model is a description of an organisation’s value drivers as a whole. here, a value driver refers to any factor that enhances the total value created by an organisation (montemari and nielsen, 2013), which is, in turn, the value that can be delivered to the actors involved in the business model (amit and zott, 2001). value has different strategy value proposition (the business model) stream value creation value delivery value realization value outputs (business activities) (the packaging) (the transaction) (economic effects) stakeholders value outcomes (relationships with society and capital providers) figure 1: conceptualizations of value journal of business models (2019), vol. 7, no. 2, pp. 64-81 68 characteristics and can be split into several sub-dimensions (amit and zott, 2001; ulaga, 2003; cuganesan, 2005). one way of categorizing different perceptions of value and linking this to value drivers is provided by nielsen et al. (2017). their study identifies 251 different value drivers and categorizes them according to taran et al.’s (2016) five-dimensional framework: value proposition, value segment, value configuration, value network, and value capture. table 1 illustrates how intellectual capital can be related to the different types of value drivers of business models according to taran et al.’s (2016) five-dimensional framework. according to nielsen et al. (2017), business models are representations of internal value drivers, the intellectual capital in the organisation, and external value drivers, including relations to external partners. these are often interlinked, take for example the handling of external relationships, which is an important internal activity for many companies. intellectual capital can be in the form of relevant knowledge held by individuals employed in the organisation or knowledge acquired from outside the organisation for a specific functional purpose. take for example the value dimension “value proposition” above, where “accessibility” is a value driver. behind the value driver “accessibility” is knowledge about the customer’s preferred mechanisms of buying and receiving the company’s products, as well as logistics planning. but in addition to this, also externally acquired knowledge relating to setting up the distribution platform. in many cases, companies have strategic partners running their distribution networks, and hence intellectual capital relating coordination with distribution partners also becomes relevant. intellectual capital and value creation measures the typical break-down of intellectual capital follows edvinsson and malone’s (1997) ic-tree that divide intellectual capital into human capital, structural capital and relational capital. together with edvinsson’s (1997) skandia navigator this proposed disaggregation of intellectual capital can be perceived as standard method of categorizing intellectual capital (cf. sveiby, 1997; stewart, 1997; meritum 2002). human capital is viewed as everything the company cannot own, and structural capital is defined as: “…everything left at the office when the employees go home …unlike human value dimension examples of value drivers examples of underlying ic value proposition ease of use quality accessibility knowledge of competitors’ products (hc and cc) knowledge of customer needs (hc) logistics planning and distribution network (sc) value segment packaging distribution communication customer loyalty lock-in knowledge of market behaviour, consumer needs and wants (cc) knowledge of sales-triggers and buyer behaviour (hc and cc) value configuration material assets immaterial assets branding processes it-systems human resources / recruiting staff (hc) purchasing / the quality of raw materials (hc) manufacturing / building design, machinery, equipment, instruments (sc) logistics / the economy of storage (sc) technical solutions / technology (sc) value network partnerships contracts stakeholders / surrounding society (sc) value capture financial capital revenue models finance / shareholders (sc) table 1: value dimensions, value drivers and intellectual capital journal of business models (2019), vol. 7, no. 2, pp. 64-81 69 capital, structural capital can be owned and thereby traded” (edvinsson and malone 1997, p. 11). ultimately the creation of value comes from activities being performed by the company. all activities in an organisation and all activities outside the organisation involving inputs and outputs to and from the organisation can be characterised as being economic activities and all of these activities are controlled by structural intellectual capital in one form or another. lastly, is the category of relational capital which concerns the value imbedded in supplier relations, customer relations and strategic partnerships. figure 2 below illustrates the three subclasses of intellectual capital most commonly applied. intellectual capital human capital structural capital relational capital figure 2: the three generic classes of intellectual capital (adapted from edvinsson and malone, 1997) nielsen and dane-nielsen (2010) critique this type of disaggregation, arguing that the summing up between subclasses in an accounting-like fashion completely ignores the fact that intellectual capital has different characteristics according to the levels of organisation at which they are present. in similar fashion, mouritsen and larsen (2005) argue that it is the entanglement of the depicted subclasses of ic that create value and not the subclasses by themselves. the mechanism by which intellectual capital is enacted is through the organisation of activities, in a business model, in which the knowledge of the individual is utilized. this leads to propose that the value drivers in an organisation always are intellectual capital, and nothing else, because all economic activities are controlled by people who, ideally, have the necessary knowledge in order to manage or perform the activities. intellectual capital properties at different levels of organisation we use the notion of emergentism (emmeche et al., 1999) in the description of intellectual capital at the different levels of organisation. leaning on this, intellectual capital is represented throughout the organisation by emergent entities as emergent properties (nielsen and dane-nielsen, 2010) at different levels in the organisation. here, emergent entities are the carriers of the properties that create value and the properties of intellectual capital differ across levels of organisation (nielsen and dane-nielsen, 2010), both when a property has relations to a higher or a lower level of organisation. in moving between different levels organisation, completely different sets of properties emerge; in turn also affecting the units these are measured in (wilson, 2010). all activities relevant for the organisation are performed in functions with relations to other activities organised by the specific organisational structure, with emergent levels (seibt, 2009). the propensity to form an emergent structure is, metaphorically speaking, the dna of organisation. within the notion of mereology, which is concerned with the study of parts and wholes, we find the notion of emergentism (stephan, 2010) which originates from sociology (sawyer, 2010) and biology (potochnik, 2010; kim, 1999), where scholars describe how natural phenomena in nature and social communities among people and animals result from a dominating hierarchical structure in nature (rueger and mcgivern, 2010). it is important to emphasize that new emergent phenomena result in new entities (emmeche et al., 1999) which are carriers of new emergent properties on a different form. for example, knowledge of the individual employees in different functional departments can work together to form structural capital in the form of processes and technologies containing data about products, customers or markets. this notion of intellectual capital having different properties at different levels of organisation (nielsen and dane-nielsen, 2010) is equivalent to the relationship between the role of organ systems in an organism, as described within the field of medicine (potochnik, 2010). hence, emergentism brings order to a field of random disorder (rueger and mcgivern, 2010), because disconnected components are ordered in a hierarchical system with functional levels. we identify four levels of organisation in order to discuss the value of intellectual capital. the first level is the individual level, where individual knowledge is expressed. the second level, namely the group level, journal of business models (2019), vol. 7, no. 2, pp. 64-81 70 also known as functional departments, individuals are employed to perform tasks and here knowledge is a part of the functions and activities performed. the third level is the organisational level which consists of a number of functional departments. the output from the organisation is products or services. intellectual capital at the organisational level is embedded in the products and services. the fourth level, is the market level and there are two markets. there is the market for products and services and then there is the market for companies,e.g. the share market (the share value of the organisation include the value of intellectual capital within the company). activities create value for the organisation and activities at all different levels in the organisation are driven by the knowledge of how to do things. it is not the stock of raw materials that create value. it is not the machinery, which create value in the organisation. it is the knowledge of how to use the machinery and sophisticated equipment and how to make use of the raw materials that is creating value. the stock of raw materials has no value in the warehouse as long it just sits there. only when used in the production of items, raw materials or components, does the stock of materials become a means for value creation. same goes for buildings, financing, machinery, equipment, and prepared marketing materials etc. these capitals are worth nothing without the knowledge of how to utilize them. intellectual capital used in activities is the driving force behind value creation and knowledge of the organisation’s products and service is necessary for this value creation. customers do not create organisational value per se. rather, it is the knowledge of the customers, their wishes and requirements and the knowledge of how to sell, which ultimately creates value. long-term contracts with customers also carry value. however, behind the contracts lies knowledge of the market, knowledge of laws and regulations etc. thus, intellectual capital creates value when applied in activities in the organisation itself and in the transactions with other organisations. in this sense, value drivers can be seen as effects of the application of intellectual capital in concrete activities. these activities can take place on different levels of organisation in accordance with the specific relevant functional departments and they will result in emergent effects. next step performance measures mouritsen et al. (2003b) propose a model to analyze the interrelations of intellectual capital across two dimensions. the first is the type of intellectual capital and the second is whether the intellectual capital concerns resources, activities or effects. together with an understanding of the organisation’s strategy and the key management challenges facing the executive management, this model makes it possible to mobilize a series of questions to identify the key intellectual capital indicators. evaluating the effects of intellectual capital can therefore be done in a series of steps. first step is evaluating the identified indicators in a scorecard-like fashion in relation to a set of expected targets for each indicator. in a second step, the indicators can be evaluated in the analysis model (mouritsen et al. 2003b) presented below in figure 3 by asking which indicators affect each other. third, the analysis can be completed by asking whether some of the 12 boxes have missing indicators. finally, with the indicators at hand, management should ask themselves how figure 3: the analytical model (mouritsen et al., 2003b) journal of business models (2019), vol. 7, no. 2, pp. 64-81 71 they fit into the story of what the company does and how it is unique. in this manner, management is gradually moving closer to understanding the effects of intellectual capital on the value creation of the organisation. in order to assess if the composition, structure and use of the company resources are appropriate, it is necessary to consider the development of the indicators over time, and finally the company may pursue relative and absolute measures for benchmarking across time and across competitors. unlike an accounting system, the analysis model is not an input/output-model. there is no perception that any causal links between actions exist to develop employees and the effect in that area (e.g. increased employee satisfaction). the effect of such an action may appear as a customer effect. the employee becomes more qualified and capable of serving the customers better. the task of the analysis is thus to explain these ‘manyto-many relations’ in the model. the classification itself does not explain the relations, just as increased expenses for r&d alone do not lead to increased turnover in the financial accounting system. it is essential to support a company ’s business model story with performance measures. while it may be acceptable for some companies merely to state that one´s business model is based on mobilizing customer feedback in the innovation process, excellence would be achieved by explaining by what means this will be done, and even more demanding is proving the effort by indicating: 1) how many resources the company devotes to this effort; 2) how active the company is in this matter, and whether it stays as focused on the matter as initially announced; and 3) whether the effort has had any effect, e.g. on customer satisfaction, innovation output etc. according to bray, (2010, p. 6), “relevant kpis measure progress towards the desired strategic outcomes and the performance of the business model. they comprise a balance of financial and non-financial measures across the whole business model. accordingly, business reporting integrates strategic, financial and non-financial information, is future-performance focused, delivered in real time, and is fit for purpose”. from an accounting perspective, the question of how to capture value creation and value transactions when value creation to a large extent goes on in a network of organisations and not inside an organisation, as traditionally perceived, is problematic. also, from a management perspective, the question of how to produce decision-relevant information is seriously challenged by business model innovations and the advance of new types of business ecosystems, for example based on crowd funding, social communities, virtual collaboration networks and a competitive landscape based on business model “innovation-ability”. empirical examples of business models and intellectual capital in this section, we introduce five examples that illustrate how intellectual capital becomes the value driver of different types of business models. we use table 1 as a frame to illustrate how each business model has varying value drivers across the five dimensions introduced by taran et al. (2016). furthermore precisely which intellectual capital that lies behind those value drivers. in the articulation of the underlying intellectual capital behind the value drivers of each of the five dimensions, we have made note of the sub-class of intellectual capital according to edvinsson and malone’s classification scheme (1997). example 1: e-bay e-bay applies a business model configuration called “the mall”, or “e-mall” configuration. it was initially coined by timmers (1998) as a collection of shops or e-shops, usually enhanced by a common umbrella. the e-mall is similar to a physical mall; in that it consists of a collection of several shops in this case web-shops. a closely related examples to this way of doing business are the merchant model (rappa, 2001), one-stop low price shopping (linder and cantrell, 2000), and the shop in shop (gassmann et al., 2014). revenues are generated from membership fees to the platform, transaction fees, and advertising. the typical value proposition of this business model configuration is that the web-shops benefit from professional hosting facilities and thereby are able to lower their costs and the complexity of being on the internet. furthermore, suppliers and buyers enjoy benefits of efficiency/timesavings, no need for physical transport until the deal has been established, and global sourcing. table 2 illustrates that this business model configuration requires intellectual capital across a broad array journal of business models (2019), vol. 7, no. 2, pp. 64-81 72 of the sub-dimensions. the success of ebay is in part driven by its ability to create critical mass and global presence. therefore, the human capital relating to international contract law and the value proposition of convenience offered through the customer capital perspective might be the prime intellectual capital of this business model configuration. example 2: dell the business model configuration used by dell is called disintermediation. it cuts out the middlemen by delivering the offering directly to the customer through own retail outlets, sales force or internetbased sales rather than through intermediary channels, such as distributors, wholesalers, retailers, agents or brokers. related ways of doing business are the direct manufacturing model (rappa, 2001), direct to consumer model (weill and vitale, 2001), and direct selling (gassmann et al., 2014). dell had success by delivering directly to the customer a product or a service that had traditionally gone through an intermediary. they succeeded in modularizing their product, so that the customers could choose varying configurations of the computers they ordered, thus creating a feeling of custom-made despite the prices generally beating the market. this was possible because of the cost savings from the traditional intermediaries and because customers were prepared to buy at the website and wait for delivery instead of taking the computer home straight away from the shop. table 3 illustrates that the success of this business model configuration revolves around minimizing the challenges created by the lack of physical store. therefore, the intellectual capital behind the customer service, crm, and the logistics becomes of vital importance. while the ability to minimise the challenges is based on customer capital, logistics and modular manufacturing are related mainly to structural capital. 4.3 example 3: ryanair a typical low-cost airline, the irish aviation company ryanair applies the no-frills business model configuration (gassmann et al., 2014; taran et al., 2016). in this way of doing business, organisations offer a low-price, low service/product version of a traditionally high-end offering; in this case commercial aviation; and this is in line with christensen and overdorf’s (2000) characterisation of disruption (see also markides, 2006). similar labels for this way of doing business have been termed low touch (johnson, 2010), add-on (gassmann et al., 2014); low-price reliable commodity (linder and cantrell, 2000); standardization (johnson, 2010). the key value driver, low prices for low service is the value proposition put forth by ryanair. hence, customers buy the basic offering cheap, and pay for add-ons in the product/service offering. like for example, choice of seats, priority boarding and baggage. a more in-depth account of ryanairs business model and partnering with hotels, car rental services, airport transportation and bargaining power towards the, typically smaller, airports is offered value dimension examples of value drivers examples of underlying ic value proposition one-stop convenient shopping broad selection for consumers larger potential customer base a platform for marketing market knowledge (hc) marketing activities and databases (sc and cc) value segment automated internet-basedplatform customer/consumer segment vendors technical knowledge (hc and sc) customer behaviour intelligence (cc) retail function (sc) relationships to vendors (cc and sc) value configuration platform maintenance web-platform technical knowledge (hc) web supplier relations (cc) processes structures and ict (sc) value network supplier to platform activities link with courier services customer behaviour intelligence (cc) competitor intelligence (hc) value capture commission on vendor sales international contract law (hc) table 2: analysis of the e-mall business model configuration journal of business models (2019), vol. 7, no. 2, pp. 64-81 73 by casadesus-masanell and ricart (2010). in reality we might question who ryanair’s most important customers are: the consumers or the airports? ryanair 23achieves low costs at the smaller airports because they bring in high customer volumes and use this to bargain with. table 4 illustrates the intellectual capital of the nofrills business model applied by ryanair. for ryanair, efficiency is important wherefore structural capital related to operating procedures become prime intellectual capital behind the value drivers. however, in value dimension examples of value drivers examples of underlying ic value proposition traditional high-end offering at low price knowledge about competitors (sc) market knowledge (cc) value segment self service automated service web platform low and large base of the customer period customers with low purchasing power customer behaviour (cc) value configuration hr low-cost infrastructure standardized operating procedures (e.g. fast turnaround on the ground) marketing cost-control recruiting staff (sc) value network cost-effective supplier network suppliers of related services that gain from access to large customer base bargaining power (hc) value capture low cost of suppliers from scale of operations revenues based on add-on products and services supplier relations (cc) customer needs (cc) table 4: analysis of the no-frills business model configuration value dimension examples of value drivers examples of underlying ic value proposition same product at lower prices customized products superior customer service fast delivery modular design and manufacturing (hc and sc) technical knowledge (hc) ic for service departments and crm solutions (cc) consumer behaviour and needs (cc) value segment online channels segmented market mass market reach customer intelligence (cc) marketing activities (sc) value configuration modularization supply chain management logistics infrastructure management business economics and planning (sc) value network companies further back in the value chain market knowledge (cc) supplier relationships (cc) value capture not specified, but creating customer loyalty and next purchase marketing activities (sc) table 3: analysis of the disintermediation business model configuration journal of business models (2019), vol. 7, no. 2, pp. 64-81 74 addition to this, the human capital related to negotiating with airports and other types of strategic partners which ensures the conversion of critical mass in terms of customer numbers to lower costs is imperative to the survival of this particular company. example 4: gillette gillette is renowned for its use of the “bait and hook” business model configuration (osterwalder & pigneur, 2010). in this configuration companies seek to provide customers with an attractive, inexpensive or free initial offer that encourages continuing future purchases of related products or services. besides gillette, this is a much-used tactic in the printer business, take for example hp inkjet. this business model configuration is also known as razors and blades (linder and cantrell, 2000; johnson, 2010; gassmann et al., 2014) or lock-in (gassmann et al., 2014). the key of this configuration is the close link between the inexpensive or free initial offer and the follow-up items on which the company earns a high margin as well as related product/service accessories. the key value driver is the achievement of lock-in and thereby also continued revenue streams. table 5 illustrates that this particular way of doing business relies heavily on customer capital and structural capital. the key to success for gillette is the global presence of consistent and high-quality products and the ability of protecting the brand and the intellectual property. procter & gamble, who own the gillette series, are able to accomplish this because of their sheer size. the global presence coupled with the lock-in mechanism of the business model ensures that customers can turn their purchase of shaving equipment into a habit, regardless of where they are in the world. example 5: skype skype applies a freemium business model configuration. the term freemium was first coined by anderson (2009) and is in essence a business model that utilizes two types of customer segments. one segment is interested in a basic service for free, while the second, premium segment, is willing to pay for a more advanced product partly because the freemium segment provides critical mass to the business model. this way of doing business has similarities with the inside-out and no-frills business model configurations. the inside-out business model configuration (osterwalder & pigneur, 2010) is used by companies that sell their own developed r&d (i.e. intellectual properties or technologies which are under-used inside the company). table 6 shows that the structural capital of skype is important to the functioning of the platform service and that the human capital that came up with the idea value dimension examples of value drivers examples of underlying ic value proposition low price or free initial offer quality system market understanding (cc) marketing a consumer product (sc) value segment customers sensitive to initial offer world wide market (cc) the brand (sc) value configuration brand patents developing follow-up products and accessories quality control (sc) value network marketing production logistics retailing understanding retailers’ needs for brands (cc) value capture one-time low-margin sale followed by frequent high-margin sales consumer behaviour (cc) consumer loyalty (cc) consumer needs (cc) table 5: analysis of the bait and hook business model configuration journal of business models (2019), vol. 7, no. 2, pp. 64-81 75 was central. however, it also illustrates that the notion of the double-sided platform of free and premium customer segments in the form of customer capital are vital for the success of skype. this is because the most important aspect of the success is the ability to create the critical mass that allows the freemium model to flourish. it was clearly the human capital that formulated the go-to-market strategy that turned skype into the company it is today. the market traction created by the founders ensured that skype became synonymous with making phone calls over the internet, best exemplified by the expression: “let’s skype”! discussion and conclusions this chapter argues that intellectual capital is the platform of any business model and its value creation and that without intellectual capital there is no value creation. the examples applied above illustrate the relationship between each of these distinct business model configurations, their respective value drivers and the intellectual capital elements that drive them. these examples from five distinct business model configurations also illustrate that the value drivers of business models are intellectual capital entities at different levels of organisation. individuals have relevant knowledge and work with other staff members in functional departments. an organisation is made up of a number of interacting functional groups and departments, that together form the whole organisation. organisations, suppliers and buyers, act in a market and the price and volume of products are ultimately determined by the socalled market forces. all of these are results of an emergent process. through the organisation, right from the individual employee to the market level; novel properties emerge at each level with new dimensions of intellectual capital. hence, this chapter provides case study evidence to support the arguments of nielsen and dane-nielsen (2010). interaction and communication among individuals creates the output of the work done in the functional departments. further, cooperation between the necessary functional departments and groups will create the final output of the organisation that is valued by customers because it does a job for they are willing to pay for (osterwalder et al., 2014). however, the final monetary value dimension examples of value drivers examples of underlying ic value proposition market coverage/market reach of the web-platform (structural capital) free internet-based call-service cheap additional services market understanding (cc) find uncovered needs (hc) go-to-market strategy (hc) value segment knowledge about premium user service requirements (human capital) conversion rate of free customers to paying customers (customer capital) degree of self-service for customer enquiries (customer capital) connects friends on a common communication platform technical knowledge (sc) market knowledge (cc) user needs and behaviour (cc) value configuration platform management (structural capital) software development automated services hr (hc) technical knowledge (sc and hc) value network distribution partners online payment service partners phone companies handset/headset partners technical knowledge (sc and hc) infrastructure (sc) value capture subscription fees from premium customers (customer capital) revenues from advertising to free customers (customer capital) customer behaviour (cc) marketing activities (sc) table 6: analysis of the freemium business model configuration journal of business models (2019), vol. 7, no. 2, pp. 64-81 76 value of the output from an organisation is determined by the market in which the organisation is operating. this emergentist perspective is research perspective which can be applied to many fields of research. for example, the notion of emergentism is used as a research perspective within biology and medicine (kim, 1999) and also within philosophy (potochnik, 2010). emergentism is a discipline within mereology the study of parts and wholes. emergent phenomena within the social space have been studied within sociology since the 1920s (sawyer, 2010). this perspective argues that people, for example employees, act in collective manners to create new phenomena as collective knowledge and collective action which the individuals do not hold by themselves. this is the foundation for claiming that intellectual capital at higher levels in a hierarchical structure, for example an organisation, is different from the knowledge held by the individual staff members in the organisation. in doing so, this chapter offers a theoretically grounded lens for analysing and understanding business models by combining the perspectives of intellectual capital and emergentism from nielsen and dane-nielsen (2010). also our analyses uncovers several of relevant action points for future studies that should be undertaken in order to further our understanding of intellectual capital in action, as well as business models. this raises the question of the relationship between business models and different level of organisation. certainly, in our examples in section 4 we see that these business model configurations combine intellectual capital on several levels of organisation. but is that always the case? and can we talk of business models as organisational models or business model on an industry level. furthermore, we find relevant connections between the prevailing understanding of business models based on certain value propositions to customers and the market-level of our emergentist perspective. here there is a fruitful avenue to follow in combining business models and market perspectives, for example by viewing suppliers and buyers as non-managed organisations and markets as informal institutions. a practical contribution of this chapter, besides the inspiration for managers of how to relate intellectual capital to the value drivers of specific business model configurations (nielsen et al., 2017), is that business models as managerial concepts might serve different purposes. once the management team of a company has determined which business model configuration they are competing with, this information can be used for multiple purposes. one such purpose is a managerial agenda. it entails managing, leading and controlling the organisation and establishing relationships with key strategic partners. another purpose is communication. here a wide array of potential stakeholders comes into play including investors, employees, municipalities, customers and strategic partners, and the notions of business models have proven themselves successful for aligning the views among such stakeholder groups on how the company works. finally, there is also the business development purpose, also denoted as business model innovation. this perspective has received much attention form entrepreneurs in recent years but has also entered into the established business sector and the academic curriculum. the responsibility for managing, communicating and innovating firms and their business models ultimately lies with the management team and the board of directors, while the use of the resulting analyses should be applicable to the whole organisation. the application of business models may have implications on multiple time-horizons. on the short-term basis, the notions of business models can help to evaluate the efficiency with which a company engages with customers. in the medium-term business models help companies to decipher whether customers are willing to pay for delivered value and how well the company utilizes strategic partners. on a more long-term basis, business models can help companies in understanding how to improve their overall concept for making money. finally, it is evident that business models can serve a number of different “managerial agendas”. as seen above, business models might be concerned with managing, controlling and making the organisation efficient. however, business models might also serve purposes of managerial sensemaking in an innovation perspective (michea, 2016), or open up for new entrepreneurial possibilities (lund and nielsen, 2014). journal of business models (2019), vol. 7, no. 2, pp. 64-81 77 references amit, r. and zott, c. (2001), “innovation management measurement: a review”, international journal of management reviews, pp. 21-47. baden-fuller, c. and morgan, m. (2010), “business models as models”, long range planning, vol. 43 nos. 2-3, pp. 156-171. barney, j. b., 1991. firm resources and sustained competitive advantage. journal of management 17(1): 99–121. bowman, c. and ambrosini, v., 2000. value creation versus value capture: towards a coherent definition of value in strategy. british journal of management 11(1): 1–16. bray, m. (2010), the journey to better business reporting: moving beyond financial reporting to improve investment decision making. kpmg australia. brøndum, k., c. nielsen, k. tange, f. laursen & j. oehlenschläger (2015), ‘kickass companies: leveraging business models with great leadership’, journal of business models, vol. 3, no. 1, pp. 22-28. carlucci, d. and schiuma, g. (2007), “knowledge assets value creation map: assessing knowledge assets value drivers using ahp”, expert systems with applications, vol. 7, pp. 814-22. casadesus-masanell, r., & ricart, j. e. (2010). from strategy to business models and onto tactics. long range planning, 43(2), 195-215. christensen, c. m., & overdorf, m. (2000). meeting the challenge of disruptive change. harvard business review, 78(2), 66-77. conner, k. r. (1991) ‘a historical comparison of resource-based theory and five schools of thought within industrial organization economics: do we have a new theory of the firm?’, journal of management, 17 (1): 121-55. cuganesan, s. (2005), “intellectual capital-in-action and value creation. a case study of knowledge transformation in an innovation process”, journal of intellectual capital, vol. 6 no. 3, pp. 357-73. edvinsson, l. & m.s. malone. 1997. intellectual capital. london: piatkus edvinsson, l. (1997), developing intellectual capital at skandia, long range planning, vol. 30, no. 3, pp. 366-373. emmeche, c., køppe s., & stjernfelt f. (1999) explaining emergence. journal for general philosophy of science 28: 83-119 foss, n.j. and t. saebi (2016), fifteen years of research on business model innovation how far have we come, and where should we go?, journal of management. foss, n. j. and saebi, t. (2014), “business models and business model innovation: bringing organization into the field”, foss, n.j. and saebi, t. (eds.), chicago. gassmann, h., frankenberger, k. and csik, m. (2014), “the business model navigator”, pearson education limited, harlow. journal of business models (2019), vol. 7, no. 2, pp. 64-81 78 iirc (2013), “the international <ir> framework”, the international integrated reporting council, london, available at: www.theiirc.org. johnson, m.w. (2010), “seizing the white space: business model innovation for growth and renewal”, harvard business press. kim, j. (1999). making sense of emergence. philosophical studies 95: 3-36  casadesus-masanell, r., & ricart, j. e. (2010). from strategy to business models and onto tactics. long range planning, 43(2), 195-215. linder, j. and cantrell, s. (2002), “what makes a good business model anyway? can yours stand the test of change?”, outlook, available at: www.accenture.com. lund, m. and nielsen, c. (2014), “the evolution of network-based business models illustrated through the case study of an entrepreneurship project”, the journal of business models, vol. 2 no. 1, pp. 105-21. markides, c. (2006). disruptive innovation: in need of better theory. journal of product innovation management, 23(1), 19-25. marr, b., schiuma, g. and neely, a. (2004), “the dynamics of value creation: mapping your intellectual performance drivers”, journal of intellectual capital,vol. 5 no. 2, pp. 312-325. meritum. (2002), measuring intangibles to understand and improve innovation management, target socio-economic research, european commission, brussels. michea, a. (2016), enacting business models. phd dissertation, copenhagen business school mintzberg, h. & l. van der heyden. 1999. organigraphs: drawing how companies really work, harvard business review, september – october, pp. 87-94. montemari, m. and nielsen, c. (2013), “the role of causal maps in intellectual capital measurement and management”, journal of intellectual capital, vol. 14 no. 4, pp. 522-546. mouritsen, j. and larsen, h. t. (2005), “the 2nd wave of knowledge management: the management control of knowledge resources through intellectual capital information”, management accounting research, vol. 16 no. 3, pp. 371-394. mouritsen, j., bukh, p.n, johansen, m.r., larsen, h.t., nielsen, c., haisler, j. and stakemann, b. (2003b), “analysing intellectual capital statements”, danish ministry of science, technology and innovation, copenhagen, available at: www.vtu.dk/icaccounts. nielsen, c., & dane-nielsen, h. (2010). the emergent properties of intellectual capital: a conceptual offering. journal of human resource costing & accounting, 14(1), 6-27. nielsen, c., m. lund & p. thomsen (2017), killing the balanced scorecard to improve internal disclosure, journal of intellectual capital, vol. 18, no. 1, pp. 45-62.  nielsen, c., roslender, r., and schaper, s. (2016), “continuities in the use of the intellectual capital statement approach: elements of an institutional theory analysis”, accounting forum, vol. 40 no. 1, pp. 16-28. journal of business models (2019), vol. 7, no. 2, pp. 64-81 79 nielsen, c. (2011), “when intellectual capital drives the business model, then ..”, lloyd, a. and reddy, m. (eds.), human capital handbook, hubcap-digital, pp. 26–31. osterwalder, a. and pigneur, y. (2010), “business model generation: a handbook for visionaries, game changers, and challengers”, john wiley & sons. osterwalder, a., pigneur, y., bernarda, g. and smith, a. (2014), “value proposition design: how to create products and services customers want”, john wiley & sons. pike, s., roos, g. and marr, b. (2005), “strategic management of intangible assets and value drivers in r&d organizations”, r&d management, vol. 35 no. 2, pp. 111-24. porter, m.e. 1985. competitive advantage. new york: the free press. potochnik, a. (2010). levels of explanation reconceived. philosophy of science vol. 77, no. 1 pp. 59-72 rappa, m. (2001), “managing the digital enterprise business models on the web”, north carolina state university, available at: http://digitalenterprise.org/models/models.html (accessed september 2015). richards, k.a. and jones, e. (2008), “customer relationship management: finding value drivers”, industrial marketing management, vol. 37 no. 2, pp. 120-30. rueger, a. & mcgivern, p. (2010). hierarchies and levels of reality. synthese 176:379-397 sawyer, r. k. (2010). emergence in sociology: contemporary philosophy of mind and some implications for sociological theory. american journal of sociology volume 107 number 3 551-85 seibt, j. (2009). forms of emergent interaction in general process theory. synthese, february 2009, 166:479 sirmon, d., hitt, m., and ireland, r. d., 2007. managing firm resources in dynamic environments to create value: looking inside the black box. academy of management review 32(1): 273–292. stephan, a. (1999). varieties of emergentism. evolution and cognition vol. 5, no. 1 stewart, t.a. 1997. intellectual capital. london: nicolas brealey publishing. sveiby k.e. (1997), “the new organizational wealth: managing and measuring knowledge-based assets”, san francisco: berrett-koehler. taran, y., nielsen, c., thomsen, p., montemari, m., and paolone, f. (2016), “business model configurations: a five-v framework to map out potential innovation routes”, european journal of innovation management, vol. 19. no. 4, pp. 492-527. timmers, p. (1998), “business models for electronic markets”, journal on electronic markets, vol. 8 no. 2, pp. 3-8. ulaga, w. (2003), “capturing value creation in business relationships: a customer perspective”, industrial marketing management, vol. 32 no. 8, pp. 677-93. weill, p. and vitale, m.r. (2001), “place to space”, harvard business school press, boston. journal of business models (2019), vol. 7, no. 2, pp. 64-81 80 wilson, j. (2010). metaphysical emergence: weak and strong. draft 2010 wirtz, b.w., v. göttel and p. daiser (2016b), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1-28 wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016a) “business models: origin, development and future research perspectives.” long range planning, vol. 49, no. 1, pp. 36-54. zott, c., amit, r. and massa, l. (2011), “the business model: recent developments and future research”, journal of management, vol. 37 no. 4, pp. 1019-1042. journal of business models (2019), vol. 7, no. 2, pp. 64-81 81 christian nielsen, phd, is professor at aalborg university in denmark. he is the head of the department business and management at aalborg university. christian has previously worked as an equity strategist and macro economist focusing specially on integrating intellectual capital and esg factors into business model valuations. his phd dissertation from 2005 won the emerald/efmd annual outstanding doctoral research award, and in 2011 he received the emerald literati network outstanding reviewer award. christian nielsen has a substantial number of international publications to his record and his research interests concern analyzing, evaluating and measuring the performance of business models. public profile available on http://www.linkedin.com/ in/christianhnielsen and http://personprofil. aau.dk/profil/115869# henrik dane-nielsen about the authors 20 journal of business models (2021), vol. 9, no. 1, pp. 20-28 business model research often reflects an assumption of unlimited flexibility in how firms can expand or renew their business. we present a multiple case study of 21 companies in the danish container sea freight sector to show how firms embedded in highly integrated supply chains experience business model lock-in due to industry path dependency. business model implications of industry path dependency louise b. kringelum*1, jimmi normann kristiansen2, allan næs gjerding3 please cite this paper as: kringelum et al. (2021), business model implications of industry path dependency, journal of business models, vol. 9, no. 1, pp. 20-28 keywords: business models; path dependency; lock-in; acknowledgements: data collection has been conducted in collaboration with the center for logistics and collaboration. 1 aalborg university business school, fibigerstraede 11, 9220 aalborg oest, denmark, kringelum@business.aau.dk 2 aalborg university business school, fibigerstraede 11, 9220 aalborg oest, denmark, jimmi@business.aau.dk 3 aalborg university business school, fibigerstraede 11, 9220 aalborg oest, denmark, ang@business.aau.dk doi: https://doi.org/10.5278/jbm.v9i1.5866 abstract https://doi.org/10.5278/jbm.v9i1.5866 journal of business models (2021), vol. 9, no. 1, pp. 20-28 2121 introduction while innovation of business models has been an increasingly popular topic in business model research and practice, discussions of the inherent challenges are often limited to internal barriers affecting the process of business model innovation (das et al., 2018; mason and spring, 2011). business models cannot, however, be regarded as entities controlled by only one focal firm (berglund and sandström, 2013). rather, the business model is a “system of interdependent activities that transcends the focal firm and spans its boundaries” (zott and amit, 2010: 216). due to the intricate ties of resource dependency across both supply chains and value networks, firms do not have full control over their business models (berglund and sandström, 2013). consequently, a focal firm’s freedom to innovate its business model can be restricted. this paper explores how business model interdependencies can affect the process of business model innovation (foss and saebi, 2017). we illustrate how supply chain positioning impacts freedom to innovate for firms positioned “unfavorably” within their supply chains. the aim is to stimulate discussion on whether firms can innovate their business models at will or whether this is constrained by supply chain positioning. the following section presents a review of the research on business model interdependence, founded on existing theoretical perspectives of path dependency and lock-in (david, 1985; arthur, 1989). following the review, the case study methodology and settings are introduced. the case studies are all within the danish container sea freight sector, a sector characterized by fierce competition, overcapacity, and rapid technological development that creates new potentials for interconnection throughout the supply chain (danishshipping, 2017). this setting offers an opportunity to explore the connections between different actors in a supply chain and the challenges faced by the focal firm regarding business model innovation within that context. business model interdependence due to the intra-firm focus of most business model research, interdependence has mostly been addressed as the interplay between components in business model frameworks (johnson, christensen and kagermann, 2008), such as content, structure, and governance (amit and zott, 2012), or value creation, delivery, and capture (foss and saebi, 2017). maintaining an intra-firm focus on business models is problematic as a change in business model depends on actors outside the focal firm, and thus beyond the firm’s control (sandstrom and osborne, 2011). the most elaborate notion of business model interdependence is presented by casadesus‐masanell and ricart (2010). they argue that changes to the business model of a focal firm which affect the functioning of the business models of other stakeholders should be regarded as strategic interactions between business models. in making this argument, they emphasize the indirect effects of changing policies, assets, and governance structures, including the potential to increase the intensity of interdependence. sánchez and ricart (2010: 140) offer an operational definition of business model interdependence: “two different business models are interdependent if they are connected (i.e., they share some of their consequences). in this case, the firm’s performance not only depends on its own actions, but also on the actions performed by some other organization”. based on this definition, they argue that firms can change their degree of interdependence and work to mitigate negative interdependencies and foster positive ones as a process of changing their competitive positioning (sánchez and ricart, 2010). however, the intensity of interdependence is a result of the collective business model choices of all actors in the industry (casadesus‐masanell and ricart, 2010). while interdependence vis-à-vis specific stakeholders can be reconfigured, the collective effect of business model interdependence in a supply chain exists as an exogenous variable for the focal firm. as a result, as firms strive to mitigate the uncertainty of the environments in which their business models function, interdependence will govern the change process of business model innovation. the interdependence of business models in the supply chain thus creates challenges for business model innovation as the underlying path-dependent nature of journal of business models (2021), vol. 9, no. 1, pp. 20-28 2222 supply chains can impede changes in the business model of the focal firm (håkansson & ford, 2002; sandstrom and osborne, 2011). this type of path dependency, as well as the microfoundations of why such effects occur, are largely unexplored in the extant literature. to address this, the following section introduces the concepts of business model path dependency and lock-in in highly integrated supply chains. in the context of business model innovation, a highly integrated supply chain is one that in many instances can act as “one large organization” in scale and scope as well as in knowledge, as firms operate together to increase the speed and geographical coverage of global transport networks (hertz, 2001) business model path dependency and lock-in the effect of path dependency on business model change and innovation has received increasing attention in recent years (saebi, lien and foss, 2016). this has especially been emphasized by laudien and daxböck (2015), who transferred the concept of path dependency from the organizational level of analysis (cf. sydow, schreyögg and koch 2009) to the business model level. business model lock-in has generally been explored from a demand-side perspective, focusing on the competitive advantage of creating lock-in by configuring activity systems to “keep third parties attracted as business model participants” (zott & amit 2010: 221). in this framework, lock-in can occur due to the existence of switching costs or network externalities. however, when the bargaining power of the customer supersedes the supply-side business model, the lock-in can be reversed towards the focal firm and its existing business model, thus making business model innovation necessary. laudien and daxböck’s (2015) multiple case study explains that business model innovation can be triggered by path-breaking mechanisms. however, when an organization finds itself in a lock-in phase, endogenous changes to the business model are difficult to accomplish due to managerial limitations (laudien and daxböck, 2015). this suggests that path dependence is created endogenously as historicity and managerial logic shape the business model trajectory, which, when the lock-in phase is reached, can often only be dissolved by exogenous shocks. however, extant research does not address the question of whether differences in where a company is located in the supply chain can enable pathbreaking mechanisms. concurrently, the microfoundations of path-breaking mechanisms in business model innovation are still under-researched. we contribute to filling this gap by challenging the conventional notion that path dependency should be understood endogenously as a process created through technological competencies and managerial constraints. we argue that business model lock-in occurs because business model interdependence exists across organizational units. this is an alternative position which we aim to detail by exploring what happens between interlinked business models in a highly integrated supply chain. this approach can help determine if some firms are more favorably positioned than others to innovate their business models. approach an exploratory multiple case study was conducted in the danish container sea freight sector. the study included interviews with employees and managers at three types of companies in the supply chain: end customers, shipping agents, and main line operators. in total, 24 informants from 21 companies were interviewed between may 2015 and march 2016. all interviews were recorded and transcribed. subsequently, the research team analyzed the data to identify the business model of each company, the existing shipping solutions in use, and the parameters for selecting those solutions. the data were validated through two half-day seminars with industry experts and representatives from the companies included in the study. key insights in interviews, informants estimated that approximately 85% of freight orders were “controlled” by shipping agents; that is, information transactions concerning the needs and planning of the end cusjournal of business models (2021), vol. 9, no. 1, pp. 20-28 2323 tomers’ goods transportation were handled by shipping agents. shipping agents use internet portals and competing offers on behalf of end customers to find the lowest rates for sea freight, resulting in heavy price competition and the commoditization of main line operators. this is the result of a twodecade trend of decreasing levels of direct contact between end customers and main line operators. as explained by the managing director of a main line operator: “to spread out in the supply chain again is not possible, as the ‘value added services’ on the whole delivery was lost to the shipping agents 15 years ago. the big shipping agents do all that now. the main line operators did not manage to follow the development at that time, and you won’t come back to that again. if you would try that, the shipping agents would ‘freeze you out’. two decades ago, we [as a main line operator] had 80% [of shipment contracts] through end customers and 20% through shipping agents. today, it is 85% shipping agents and 15% end customers. and this is normal for the entire business. if you sit with the goods (information, ed.), you have the power. the shipping agents have been good at this.” an exemplification of this microfoundation of the interdependence between the actors in the supply chain in the danish sea freight sector is illustrated in figure 1 below. as illustrated, end customers, shipping agents, and main line operators have quite diverse business models in this supply chain context. in many cases, information flow is exclusively between an end customer and the shipping agent. similarly, the flow of physical goods is seen between trucking companies (which are sometimes owned by shipping agents) and main line operators, as well as between trucking companies and end customers. in the majority of cases, main line operators and end customers will never have any interaction. it can be argued that this is the result of the constant commoditization and increased efficiency of the industry over the last two decades, which has resulted in the lock-in of main line operators. end customer actions visible supply chain invisible supply chain support functions end customer transport need a contract with shipping agent shipping agent (key account mgr.) trucking companies ($ quote) it system trucking company payment of shipping solution receive goods in a shipping container customs (export) trucking company (denmark) trucking company (china) trucking company (china) dialogue with inbound materials provider producer of inbound materials b main line operators ($ quote) main line operators ship (shanghai hamburg) it system main line operator main line operators ship (hamburg– aalborg) contact shipping agent shipping agent (key account mgr.) shipping agent (web) it system shipping agent it system shipping agent information flow physical interaction or physical goods flow figure 1: example of import of goods through shanghai, china to aalborg, denmark. example is with shipping agents controlling information flow (85%). it display information flows and physical flow between end customers (ec), shipping agents (sa) and main line operators (mlo) as well as trucking companies (not that some sas have own trucks, others make partnerships with discrete trucking companies). payment terms would vary depending on contract terms. journal of business models (2021), vol. 9, no. 1, pp. 20-28 2424 table 1 below emphasizes these differences (with the context of supply chain goods delivery as a focal point). the arrow on the left side of table 1 indicates that the business model interdependence found in the current research is generated by a demand which ultimately comes from consumers (who are, in turn, served by, e.g., other businesses, wholesalers or retailers). it is this demand which has shaped the formation of the supply chain over the years to serve exactly the end customers’ need for access to products from all over the world, in an inexpensive and fast manner, allowing for flexibility in terms of delivery. these benefits are realized by end customers in their use of shipping agents as a key resource serving their logistics needs. shipping agents build relationships with end customers in order to maintain their business. these relationships are, in turn, driven by the price, flexibility, and delivery time required by the end customers. shipping agents thus activate their resource bases – that is, their infrastructural network of transportation providers, including main line operators. main line operators thus become a key resource for delivering shipping agents’ freight solutions to end customers, and can simultaneously be the channel through which the service that freight forwarders provide becomes physical (i.e., transportation of goods). the main line operators try to establish customer relationships with shipping agents as these have control over the information from end customers regarding goods transportation, directly affecting main line operators’ volume of business. this example demonstrates four core tendencies which establish the potential for business model table 1: key differences in business model configuration for the highly integrated supply chain of the sea freight sector emphasis put on features that concern logistics of enabling the value delivery. example of shipping agents controlling the goods. table 1. customer relationship key partners key resources channels end customers (b-2-b) (e.g. other businesses, wholesalers, retailers, consumers) (e.g. inbound logistics) shipping agents (b-2-b, own shops, wholesalers, other retailers) shipping agents end customers (e.g. customs, port authorities) main line operators, trucking companies main line operators, trucking companies main line operators shipping agents (e.g. traffic handlers and port authorities) (e.g. ship fleet) (ports) s upply c hain v isibility for e nd custom ers (b -2-b ) b us in es s m od el in te rd ep en de nc e fl ow (fi na l pu ll co m es fr om c on su m er ) journal of business models (2021), vol. 9, no. 1, pp. 20-28 2525 lock-in in such a highly integrated supply chain, particularly for main line operators: 1. the ultimate demand for transport solutions comes from consumers; end customers in the transportation supply chain or other businesses served by those end customers provide the interface between this demand and the transport supply chain. the main line operators are at the farthest distance from the ultimate demand. 2. there is a lack of supply chain visibility. as our informant noted in the interview excerpt above, in the majority of cases, there is no flow of information flow, physical contact or goods between the end customers and the main line operators. this provides little to no insight for main line operators in understanding end customers to provide differentiated services. 3. main line operators have very high capital expenses tied into their current value delivery. they balance high volumes with very low margins and continuously try to optimize operational expenses, to maintain a profitable business. this results in incredibly high switching costs for main line operators in the industry. 4. the market for container sea freight is highly commoditized, and our informants emphasized that supply supersedes demand in the industry1. it is surprisingly easy for agents or end customers to switch main line operators to serve the same purpose. should a main line operator attempt to “creep” into the supply chain by trying to expand their business into other levels of the supply chain, they can very easily be frozen out by the shipping agents. as main line operators are operating in a very high volume, low margin business with frequent turnaround, losing business, even in the short term, could have disastrous effects. 1 this is sometimes countered by main line operators making their ships “idle” to lower the overall supply. however, this has to be collectively agreed between different alliances in the industry and rarely leads to long-term price increases. price increases can, however, happen due to consolidations in the industry, which is an increasing trend. discussion and conclusions this research explains the impact of the highly integrated supply chain that has formed in the danish container shipping industry over several decades. as a result of this integration, main line operators in particular have lost bargaining power in the supply chain. this is coupled with high capital expenses and a high volume, low margin business that has been commoditized over time. main line operators have in many instances lost both the information and the physical connection to end customers (b-2-b), and this has put them in a situation where shipping agents can “pick” main line operators based on price and delivery conditions at will, without main line operators knowing the details of the end customers’ business needs. this, coupled with overcapacity in the market, has put main line operators in a very unfavorable position over time. this context and case example adds an additional dimension to the extant business model innovation literature (see, e.g., wirtz and daiser, 2017). as seen throughout the case study, the strategic interaction between firms affects the functioning of the business models of other stakeholders, creating business model interdependence (casadesus‐masanell and ricart, 2010). for this reason, the concept of path dependency should not just be considered on an organizational level but must increasingly be discussed in terms of the business model construct within and between firms (laudien and daxböck, 2015; saebi, lien and foss, 2016). understanding the potential interdependence of business models is pivotal when undertaking business model innovation (casadesus‐masanell and ricart, 2010) as it underlines how firms, due to resource dependency across both supply chains and value networks, do not have full control of the innovation process (berglund and sandström, 2013; wirtz and daiser, 2018). when the locus of value creation transcends organizational boundaries, reconfigurations create changes in the firm’s value network (kringelum and gjerding, 2018), and thus the process of business model innovation cannot be regarded as an isolated event unfolding in a single firm. in turn, this also means that a focal firm’s freedom to innovate its journal of business models (2021), vol. 9, no. 1, pp. 20-28 2626 business model can be restricted due to the structures inherent in the supply chain. disregarding the impact of and on external stakeholders – e.g., supply chain actors – constitutes an oversimplification that can potentially undermine the innovation process. while this study represents some aspects of business model path-dependency and lock-in in a specific context, there is still a need for more research to provide a detailed understanding of the microfoundations of what business model lock-in is and why it occurs. this presents an interesting avenue for future business model research. implications business model research and practice have left many company managers with the impression that they have significant freedom to innovate their companies’ business models. in this study, we have shown that supply chains that are highly integrated may create lock-in in part of the sector. in the context of our case study, large and powerful organizations (main line operators) have been put in an unfavorable position due to their limited access to end customers. this type of lock-in is reinforced if there is a dominant logic of key competitive aspects in the industry (such as price, which commoditizes the service). our findings clearly indicate that companies must understand their position in a supply chain when introducing new products or services, and be aware of the risk of lock-in due to price competition over time. the implication for practice is that firms must continuously question their position in the supply chain and the connections between their business models and those of other supply chain actors. this is especially relevant in sectors with changing flows of, e.g., information and goods as this can, as evident in the case of the danish container sea freight sector, create lock-in. limitations this case study reflects the context of the danish container sea freight sector, an industry challenged by changing parameters of competition, technology, and sustainability. the identification of mechanisms affecting the current status of business model path dependency and lock-in is specific to this context and this moment in time. however, it provides significant analytical generalizations based on the exploration of an empirical phenomenon (frederiksen and kringelum, 2020), and offers a point of departure for future studies of business model interdependence in other contexts to identify the effects for business model innovation both intraand inter-organizationally. in addition, the extensive technology advances made in the sector following the data collection process, e.g. the introduction of the tradelens blockchain (jensen, hedman and henningsson, 2019), highlight the challenges of business model lock-in even further. future research on both the danish sea freight sector and business model innovation should address these aspects further. conclusions this is one of the few studies critically addressing the notion of business model innovation. it examines a highly integrated supply chain and emphasizes how business model path dependency influences firms’ journeys to business model lock-in over time. using a multiple case study of 21 firms across three layers in a highly integrated supply chain, we show the microfoundation of how path dependency in an industry can ultimately “push” firms in the supply chain into unfavorable positions that are almost irreversible. in effect, this study adds new context and information to the literature on business model innovation which is relevant to understanding the microfoundations of business models in highly integrated supply chains. it also poses the question of whether all firms in a given supply chain have the same degree of freedom in terms of innovating their business model. the implication is that firms must carefully deliberate on their supply chain positions when they launch new products or services, as their choices in the context of their positions in the supply chain can have major impacts on their ability to innovate in their business models. journal of business models (2021), vol. 9, no. 1, pp. 20-28 2727 references amit, r. and zott, c. (2012) “creating value through business model innovation”, sloan management journal, 23(3), pp. 41–49. arthur, w. b. (1989) “increasing returns and path dependency in the economy”, the economic journal. ann arbor: university of michigan press., 99(394), pp. 116–131. berglund, h. and sandström, c. (2013) “business model innovation from an open systems perspective: structural challenges and managerial solutions”, international journal of product development, 18(3/4), pp. 274–285. casadesus‐masanell, r. and ricart, j. e. (2010) “competitiveness: business model reconfiguration for innovation and internationalization”, management research: journal of the iberoamerican academy of management, 8(2), pp. 123–149. doi: 10.1108/1536-541011066470. danishshipping (2017) danish shipping facts and figures. available at: https://www.danishshipping.dk/en/ publikationer/noegletal-og-statistik/. das, p. et al. (2018) “barriers to innovation within large financial services firms: an in-depth study into disruptive and radical innovation projects at a bank”, european journal of innovation management, 21(1), pp. 96–112. david, p. a. (1985) “clio and the economics of qwerty”, american economic review. american economic association, pp. 332–337. doi: 10.2307/1805621. foss, nicolai j. and saebi, t. (2017) “business models and business model innovation: between wicked and paradigmatic problems”, long range planning. elsevier ltd, pp. 1–13. doi: 10.1016/j.lrp.2017.07.006. foss, n. j. and saebi, t. (2017) “fifteen years of research on business model innovation: how far have we come, and where should we go?”, journal of management, 43(1), pp. 200–227. frederiksen, d. j. and kringelum, l. b. (2020) “five potentials of critical realism in management and organization studies”, journal of critical realism. taylor and francis ltd., pp. 1–21. doi: 10.1080/14767430.2020.1846153. hertz, s. (2001) “dynamics of alliances in highly integrated supply chain networks”, international journal of logistics, 4(2), pp. 237–256. doi: 10.1080/13675560110060009. jensen, t., hedman, j. and henningsson, s. (2019) “how tradelens delivers business value with blockchain technology”, mis quarterly executive, 18(4). johnson, m. w., christensen, c. m. and kagermann, h. (2008) “reinventing your business model”, harvard business review, 86(12), pp. 50–59. doi: 10.1111/j.0955-6419.2005.00347.x. kringelum, l. and gjerding, a. n. (2018) identifying contexts of business model innovation for exploration and exploitation across value networks, journal of business models. laudien, s. and daxböck, b. (2015) “path dependence as a barrier to business model change in manufacturing firms: insights from a multiple-case study”, journal of business economics, 86(6), pp. 611–645. doi: 10.1007/ s11573-015-0793-1. journal of business models (2021), vol. 9, no. 1, pp. 20-28 2828 saebi, t., lien, l. and foss, n. j. (2016) “what drives business model adaptation? the impact of opportunities, threats and strategic orientation”, long range planning. elsevier ltd, p. doi: http://dx.doi.org/10.1016/j. lrp.2016.06.006. sánchez, p. and ricart, j. e. (2010) “business model innovation and sources of value creation in low-income markets”, european management review, 7, pp. 138–154. doi: 10.1057/emr.2010.16. sandstrom, c. and osborne, r. g. (2011) “managing business model renewal”, international journal of business and systems research, 5(5), p. 461. doi: 10.1504/ijbsr.2011.042094. sydow, j., schreyögg, g. and koch, j. (2009) “organizational path dependence: opening the black box”, the academy of management review, 34(4), pp. 689–709. wirtz, b. d. and daiser, p. (2018) “business model innovation processes: a systematic literature review”, journal of business models, 6(1), pp. 40–58. doi: 10.1142/s0219877020500431. wirtz, b. w. and daiser, p. (2017) “business model innovation : an integrative conceptual framework identifying existing bmi”, journal of business models, 5(1), pp. 14–34. zott, c. and amit, r. (2010) “business model design: an activity system perspective”, long range planning. elsevier ltd, 43(2), pp. 216–226. doi: 10.1016/j.lrp.2009.07.004. 27 journal of business models (2020), vol. 8, no. 3, pp. 27-32 accounting and ecocentrism: some reflections costanza di fabio1 abstract this commentary on a ‘storytelling science’ approach making the eco-business modelling turn discusses ecocentrism in relation to accounting, providing an overview of the debate on the matter. some tools are suggested to provide organisations and research with food for thought in the perspective of creating higher awareness of value generated by ecosystems. introduction over the past ten years, increasing attention has been devoted to the practical implementation of business logics inspired by the circular economy (ce) and the triple bottom line (3bl), aiming at constructing an alternative to the dominant economic development model – i.e., the so-called “take, make and dispose” (ness, 2008) – and its negative consequences on the long-term sustainability of economies and the integrity of natural ecosystems (unep, 2013; ec, 2014). with the above context as a backdrop, the paper a ‘storytelling science’ approach making the eco-business modelling turn makes two essential points. first, it provides a critique of ce and 3bl and their narratives, explaining how these dominate with the effect of preventing an actual turn to eco-business modelling by putting economic bottom line interests before of equity and ecosystem issues. second, it refutes the idea of balancing profit, people, and the planet that underpins both ce and 3bl, and suggests an eco-centric approach to business modelling based on storytelling science. the paper’s approach in discussing ce and 3bl is highly realistic, and the proposed construction of an alternative storytelling roadmap for an ‘eco-revolution’ is political in nature. the current commentary adopts a similar approach focusing on issues relating to the accounting perspective of business modelling lato sensu, namely on the meaning of ecocentrism in the perspective of ‘account giving’ keywords: ecosystem accounting; accounting research; disclosure please cite this paper as: di fabio (2020), ’accounting and ecocentrism: some reflections vol. 8, no. 3, pp. 27-32 1 university of genoa, department of economics and business studies journal of business models (2020), vol. 8, no. 3, pp. 27-32 2828 to stakeholders. more specifically, the commentary adopts a realistic lens as it discusses the actual possibility for an accounting approach to be nowadays fully eco-centric and introduces the debate on the matter. this debate still remains incipient in the accounting field but already ongoing in the economic and ecological areas of research, which could fruitfully trigger the development in the accounting field as well. in addition, the commentary seeks to produce some actual changes by suggesting – in contrast with the paper – non-definitive solutions aimed at providing organisations and research with tools already able to increase the businesses’ awareness of the values generated by natural ecosystems. although these tools still represent a compromise between the economic logic and the ‘natural primacy ’ of ecosystems, they could represent an initial move towards a prospective eco-turn. from an eco-centric perspective, the ideas suggested in this commentary are not first-best solutions. these tools are conceived, indeed, as initial steps within a context in which organisations seem reluctant to engage seriously in sustainability disclosure and the eco-turn could be still far. they derive not only from reviewing the extant literature, but also from the actual engagement in interdisciplinary research projects with the main focus on the value added by ecosystem services to businesses and their outputs, and aimed at developing both reporting tools and the businesses themselves in a sustainable perspective. an eco-centric approach to accounting: some (critical) issues one of the paper’s main arguments is that, for business modelling purposes, the 2015 united nations’ sustainable development goals have been interpreted very differently. in some quarters, the approach to sustainability seems consistent with corporate social responsibility, thus refers to a balance between profit, people and the planet (mcateer, 2019). in contrast, the view supported by the authors is radically different and refutes the conceptual validity of this balance (considered as part of an out-of-thisworld climate denial narrative). indeed, it looks at the systems of productions as economic activities that jeopardise the ecosystem (latour, 2018). in the authors’ view, only rejecting production business models as a taken for granted allows rethinking business models in a way that shifts the focus from economic activity to the ecosystem. from an accounting perspective, the actual possibility to address such a change depends on the extent to which there is consensus on the object of reporting, the values to be represented and their presentation. in order to develop sustainable business models, it is an issue whether accounting should become ecocentric too, extending its focus well beyond the ‘traditional’ reporting entity to deal with values emerging from a broader context (i.e. the ecosystem/its parts), and with new and unusual solutions for presentation purposes (russell, milne and dey, 2017). while this debate within the accounting field is still in its infancy, there is an ongoing conversation involving ecologists and economists, triggered by the interest of global organisations in implementing effective systems of the so-called environmental accounting (millenium ecosystem assessment, 2005; teeb, 2010). in the economists’ perspective, environmental accounting focuses on economic activities at the aggregate level and also accounts for the environmental costs, intended as the exploitation of natural resources by these activities. specifically, environmental accounting represents a development of the system of national accounts (sna) (european commission et al., 2009) that addresses environmental concerns, as national accounting per se does not include an environmental dimension. the system of environmental economic accounting (seea) published in 1993 evolved in the seea central framework (seea-cf), which provides a system of satellite accounts building on stock and flow accounting of physical and monetary data to represent interrelationships between economy and the natural environment (united nations et al., 2014a). it incorporates relevant environmental information (natural inputs, residual flows and environmental assets) and provides a standardised structure for organising the information on the interactions economy/environment to support policymakers’ activity (vardon, burnet and dovers, 2016). this framework has been journal of business models (2020), vol. 8, no. 3, pp. 27-32 2929 further extended through experimental ecosystem accounting (seea-eea) (united nations et al., 2014b), that addresses the issue of how ecosystem services could have been included in a system in line with national accounting (banzhaf and boyd, 2012) given the role of ecosystem services to human activities (teeb, 2010). in contrast to this framework, which entails a compromises between the economic reality and the ecosystem, the ecological lobby refuses the compromise and reaffirms the ecosystem as the primary object of reporting. from this perspective economic reality and its parts (such as the enterprises) consists of pressures and damages inflicted to the ecosystem. many ecologists also refuse to compromise with an anthropocentric perspective and build on the idea of ‘strong sustainability ’, according to which development is sustainable if it maintains constant the capital stock or (at least) ecosystem services over time (costanza and daly 1992; de groot, wilson and boumans, 2002). this is the assumption underlying the ecological view of environmental accounting. based on this assumption, accounting consists in the assessment of natural stock together with the holistic consideration of flows generated by the stock and exploited by humans (costanza and daly, 1992). in this context, biophysical methods1 measuring natural resources through cost of production are used to perform valuations of natural capital impairment. it is to note that these methods adopt a ‘donor-side approach’, as they are mainly founded on the assessment of inputs (patterson, 1998) 2. what comes next? the paper effectively remarks that rhetoric characterising business-as-usual models has become self-referential. the authors propose alternative storytelling to construct eco-business models. however, it is to note that, in the continuum of solutions potentially leading to such a radical change, many intermediate steps can be individuated, especially in 1 examples of biophysical methods are embodied energy analysis, exergy analysis, ecological footprint, material flow analysis, and land-cover flow. 2 in contrast, a user-side approach focuses on outputs and on the identification of users that exploit them. terms of environmental accounts and non-financial disclosures. although it is true that “monetised environmental accounts have not taken off” (russell et al., 2017: 1435), experiments in this field are an opportunity to reflect on potential reporting solutions. as mentioned above, the seea-eea is an experimental step towards a statistical standard framework for ecosystem accounting (united nations et al., 2014b) that aims at representing interrelationships between the economy and the natural environment (see also edens and hein, 2013; cavalletti, di fabio, lagomarsino and ramassa, 2020). to this end, the framework incorporates relevant environmental information (natural inputs, residual flows and environmental assets) and provides a tabular structure to represent the interactions between the economy and the environment (vardon et al., 2016). in particular, the ecosystem accounts link ecosystems to human activities and provide information that can be aggregated and disaggregated based on units, namely spatial areas about which information is summarised in tables. the link between ecosystem assets and the benefits enjoyed by humans3 are ecosystem services. thus, the framework provides a definition and classification of ecosystem services, indications on their measurement in physical terms, and approaches to their monetary evaluation. based on this framework, experimental efforts have been made in designing ad hoc ecosystem-accounting systems for ecosystem services and geographical settings. besides, research has discussed classification issues related to ecosystem services’ definition, the methodological issues on biophysical assessment and measurement of ecosystems, valuation challenges, and indicators expressing degradation of ecosystems (edens and hein, 2013; remme, schroter and hein, 2014; suwarno, hein and sumarga, 2016; cavalletti et al., 2020). if the challenge opened up by ecosystem accounting has prompted experimental research, the field of non-financial disclosures provides interesting 3 these are both the products of economic units and the benefits accruing to individuals but not produced by economic units. journal of business models (2020), vol. 8, no. 3, pp. 27-32 3030 opportunities for account-giving purposes. for instance, it can be particularly useful considering that the six capitals flow diagram incorporated within the international <ir> framework (iirc, 2013) has been complemented in recent experiences by information derived from natural capital accounting nca (i.e., the methods used to take account of businesses’ impacts and dependencies on natural capital assets) to enable more effective management of natural capital (dickie, royle and anderson, 2016). although the integrated reporting (ir) approach can be criticised as ’old wine in new bottles’ (see roslender and nielsen, 2020), complementing ir through information derived from nca can represent a sound practice. while ir promotes connectivity of information concerning value creation through financial, manufactured, intellectual, human, social and relationships, and natural capital, nca measures businesses’ impact and dependence on the ecosystem providing the goods/ services exploited by business activities and seeks to measure the value generated by the ecosystem. in the perspective of a revolution towards reporting for sustainable business models, non-financial disclosure is still “focused on the central organising tendencies of economic entities” (russell et al., 2017: 1436) and this would make it an obsolete tool, and in theory – i agree – only a second-best solution. in practice, however, many businesses still do not fully accept the business case for taking better account of natural capital, so a timely evolution of business models and their inherent logics into eco-business modelling could be rather unlikely, at least for now. research highlights that companies often adopt a superficial approach to the disclosure of business models’ sustainability, despite its relevance to value creation processes (bini, bellucci and giunta, 2018). thus, working to provide reliable environmental information to be integrated into decision making and reporting practices could represent a preliminary but necessary step to work towards an eco-turn. starting from this point, reporting that adopts an integrated approach could evolve into giving accounts of the extent to which ecosystem services benefit businesses by enabling them to increase the value delivered to customers. overall, this effort could represent an initial attempt to produce information of interest not only to investors considering traditional financial disclosures no more sufficient to evaluate the overall businesses’ sustainability, but also to the community as a whole, i.e., the public interest, broadly defined (stuebs and wilkinson, 2014). journal of business models (2020), vol. 8, no. 3, pp. 27-32 3131 references banzhaf, h. s., and boyd, j. (2012). the architecture and measurement of an ecosystem services index. sustainability, 4(4): 430-461. bini, l., bellucci, m., and giunta, f. (2018). integrating sustainability in business model disclosure: evidence from the uk mining industry. journal of cleaner production, 171: 1161-1170. cavalletti, b., di fabio, c., lagomarsino, e., and ramassa, p. (2020). ecosystem accounting for marine protected areas: a proposed framework. ecological economics, 173: 106623. costanza, r., and daly, h. e. (1992). natural capital and sustainable development. conservation biology, 6(1): 37-46. de groot, r. s., wilson, m. a., and boumans, r. m. (2002). a typology for the classification, description and valuation of ecosystem functions, goods and services. ecological economics, 41(3): 393-408. dickie, i., royle, d. and anderson, s. (2016). integrated reporting and natural capital accounting. jncc report, no. 587. jncc, peterborough. edens, b., and hein, l. (2013). towards a consistent approach for ecosystem accounting. ecological economics, 90: 41-52. european commission – ec (2014). memo, questions and answers on the commission communication “towards a circular economy” and the waste targets review. available at: http://europa.eu/rapid/press-release_ memo-14-450_en.htm european commission, international monetary fund, organisation for economic cooperation and development, united nations, the world bank (2009). system of national accounts 2008. united nations, new york. iirc (2013). international <ir> framework. available at: http:// integratedreporting.org/resource/international‐ir‐framework latour, b. (2018). down to earth – politics in the new climatic regime, cambridge, polity press. mcateer, p. (2019), sustainability is the new advantage—leadership, change and the future of business. new york: anthem press. millennium ecosystem assessment, 2005. ecosystems and human well-being: synthesis. the millennium ecosystem assessment series island press, washington dc. ness, d. (2008). sustainable urban infrastructure in china: towards a factor 10 improvement in resource productivity through integrated infrastructure systems. international journal of sustainable development & world ecology, 15(4): 288-301. patterson, m. (1998). commensuration and theories of value in ecological economics. ecological economics, 25(1): 105-125. journal of business models (2020), vol. 8, no. 3, pp. 27-32 3232 remme, r. p., schröter, m., and hein, l. (2014). developing spatial biophysical accounting for multiple ecosystem services. ecosystem services, 10: 6-18. roslender, r., and nielsen, c. (2020). accounting for the value expectations of customers: re-imagining the integrated reporting initiative. critical perspectives on accounting, (in press). russell, s., milne, m. j., and dey, c. (2017). accounts of nature and the nature of accounts. accounting, auditing & accountability journal, 30(7): 1426-1458. stuebs, m., and wilkinson, b. (2014). professionalizing the tax accounting profession: fulfilling public-interest reporting responsibilities. in mintz, s. (ed). accounting for the public interest. perspectives on accountability, professionalism and role in society, pp. 27-50, berlin: springer. suwarno, a., hein, l., and sumarga, e. (2016). who benefits from ecosystem services? a case study for central kalimantan, indonesia. environmental management, 57(2): 331-344. teeb (2010). the economics of ecosystems and biodiversity: mainstreaming the economics of nature: a synthesis of the approach, conclusions and recommendations of teeb. united nations environment programme unep (2013). resource efficiency: economics and outlook for china. available at: http://www.unep.org/pdf/china_resource_efficiency_in_english_2013.pdf united nations, european commission, food and agricultural organization of the united nations, organisation for economic co-operation and development, the world bank (2014a). system of environmentaleconomic accounting 2012 – central framework. new york. united nations, european commission, food and agricultural organization of the united nations, organisation for economic co-operation and development, the world bank (2014b). system of environmentaleconomic accounting 2012 – experimental ecosystem accounting. new york. vardon, m., burnett, p., and dovers, s. (2016). the accounting push and the policy pull: balancing environment and economic decisions. ecological economics, 124: 145-152. 67 journal of business models (2021), vol. 9, no. 1, pp. 67-76 platform-based business models are increasingly relevant. scholars mainly focus on the strategic dimension, but what are the tactics to build and evolve digital platforms? this article proposes a novel framework, which assists in subdividing the scope of possible activities of digital platform sponsors in a temporal and contextual manner. the framework comprises four context dimensions (platform attributes, core product, governance, ecosystem) and four lifecycle phases (birth, expansion, leadership, renewal). in particular, three key insights emerge regarding the critical role of the leadership phase (in terms of institutional and regulatory influence and the need to build a defense) as well as a lack of studies in the renewal phase. digital platform tactics: how to implement platform strategy over time matthias trischler1, philip meier2, daniel trabucchi3 please cite this paper as: trischler et al. (2021), digital platform tactics: how to implement platform strategy over time, journal of business models, vol. 9, no. 1, pp. 67-76 keywords: digital platform tactics; strategic implementation; platform business model 1 centre for technology entrepreneurship; technical university denmark; kgs. lyngby; denmark, mattri@dtu.dk 2 alexander von humboldt institute for internet and society; berlin; germany 3 school of management; politecnico di milano; milan; italy doi: https://doi.org/10.5278/jbm.v9i1.5908 abstract https://doi.org/10.5278/jbm.v9i1.5908 journal of business models (2021), vol. 9, no. 1, pp. 67-76 6868 introduction digital platforms play a dominant role in the global economy (gawer, 2020; parker and van alstyne, 2018). this is evident in the high valuations for platform-based corporations and start-up “unicorns”. well-known examples include airbnb, amazon, alibaba, or uber, and more broadly those companies that “use digital technologies and connectivity to exploit and control digitized resources that reside beyond the scope of the firm, creating value by facilitating connections across multiple sides, subject to cross-side network effects” (gawer, 2020, p. 1). these digital platforms have not only acquired economic dominance, they are also attracting increasing academic attention. in a recent literature review, rietveld and schilling (2020) have taken stock of the existing scholarly work and outlined four prevalent themes in digital platform research, one of which focuses on the platform sponsor and its dominant role in business ecosystems. the platform sponsor, sometimes also referred to as platform provider, hub or keystone firm, is the individual, organization, or consortium that owns, controls and promotes the platform. this short conceptual paper builds on this theme. we collected findings on platform sponsors from different strands of literature, such as information systems (e.g. parker and van alstyne, 2018), management studies (e.g. helfat and raubitschek, 2018) and economics (e.g. zhu, 2019). however, two shortcomings were identified in the literature that cut across disciplines. first, we agree with other authors in criticizing the current literature for treating competitive outcomes as static, although platforms are fundamentally dynamic in nature (mcintyre et al., 2020a; de reuver et al., 2018; gawer, 2020). in other words, we are dealing with one of the fastest evolving phenomenon in management history (trabucchi et al., 2019), yet the vast majority of literature is studying it statically. second, we bemoan the overly narrow focus on discrete attributes of platform competition and align with scholars who urge to build a more holistic, unified perspective on digital platform strategies (de reuver et al., 2018; rietveld and schilling, 2020). suitably, gawer (2020) encourages scholars to develop more complete and dynamic models of digital platform behavior. to address these gaps, this paper builds on the unified model connecting a firm’s strategy, business model and tactical activities (tactics) proposed by casadesus-masanell and ricart (2010). tactics, in this context, are a set of choices available to a firm based on its business model that determine how much value the firm creates and captures (casadesus-masanell and ricart, 2010). the strategic decision to develop and implement a digital platform business model thus determines the tactical scope of the platform sponsor. we introduce the term digital platform tactics, which is defined as implementation activities available to digital platform sponsors. despite its importance, the strategic management and business model literature mostly neglects these implementation activities when it comes to digital platforms (for notable exceptions see trabucchi, 2020; karhu et al., 2020 or van andel, 2019). therefore, the next section introduces a novel framework for platform sponsors that assists in subdividing the scope of possible activities of digital platform sponsors in a temporal and contextual manner, which is further used as an interpretive lens to identify and map platform tactics in the existing platform literature. approach this paper adopts a pragmatic interpretation of the strategy concept. strategy is then about the fundamental decisions a company has to make in order to position itself in a competitive market. tactics, on the other hand, refer to these decisions and describe the concrete actions to implement them (mackay and zundel, 2017). in line with our pragmatic view, casadesus-masanell and ricart (2010) offer an integrated model to describe the interplay between a company ’s strategic choices, business models, and tactical activities. here, strategy refers to “the choice of business model through which the firm will compete” (p. 196). the chosen business model then spans the boundaries for tactical activities as a modality for strategy implementation. in order to address the aforementioned call for a more dynamic classification and holistic understanding of platforms, this paper focuses on how firms tactically implement strategic decisions to journal of business models (2021), vol. 9, no. 1, pp. 67-76 6969 build and operate platform business models. however, this article argues that tactical activities as proposed by casadesus-masanell and ricart (2010) require further differentiation because the model describes them as unidimensional sequences of competitive choices without a temporal or contextual classification. this falls short, as platform business model boundaries tend to change over time and in scope (gawer, 2020). their model therefore does not allow for the development of a granular understanding of tactical implementation activities given the time and context dimension. to address this, a framework is introduced for undertaking a temporal and contextual classification of tactical activities tailored to digital platform business models. the model builds on teece (2017), by introducing the lifecycle phases birth, expansion, leadership, and renewal. according to teece (2017), in the birth phase, a value proposition is devised to capture value from an innovation. during expansion, the business is scaled and refined while closing out rivals. leadership entails keeping customers and partners engaged while maintaining a controlling position within the ecosystem. finally, in the renewal stage, the platform sponsor brings in new ideas into the ecosystem in order to initiate new value generation. for the purposes of contextual classification, the model distinguishes between tactical activities in the realms of platform attributes, the core product, governance mechanisms, and the surrounding ecosystem (helfat and raubitschek, 2018). platform attributes refers to the technical architecture, including a stable core and a modular periphery (mcintyre et al., 2020b). the core product describes a manifestation of the platform’s value proposition in a product or service (sorri et al., 2019). governance, in our model, refers to the setting and enforcing of rules or collective action on the platform (rietveld and schilling, 2020), and, lastly, ecosystem relates to autonomous actors linked to the platform with a shared interest in value creation and distribution (jacobides et al., 2018). the resulting framework is a four-by-four matrix (see figure 1). besides adding the two new dimensions to the tactical activities concept, we break down and arrange platform firms’ strategic implementation activities by means of the new framework. in particufigure 1: digital platform tactics framework journal of business models (2021), vol. 9, no. 1, pp. 67-76 7070 lar, we revisit existing literature on digital platforms, extract platform tactics as interpretative synthesis from case study descriptions (rauch et al., 2014; gawer, 2020) and allocate them in our framework (see figure 2). to enhance the reliability of our findings, two authors initially mapped the tactics in the framework, which then was discussed and refined with the third author. webster and watson’s (2002) approach guided the selection of relevant articles by suggesting starting at a leading journal in the field and extending the analytic scope “backward” and “forward”. concretely, the literature search started with the recent special issue in the strategic management journal (kretschmer et al., forthcoming) on “platform ecosystems as meta-organizations” and continued until a level of saturation – i. e. repetition of tactics – was reached. key insights this short paper introduces the concept of digital platform tactics and a novel framework that can assist in subdividing the scope of possible activities of digital platform sponsors in a temporal and contextual manner. figure 2 provides an overview of over 20 first-order tactics as well as three indicative insights (i, ii, and iii, in figure 2), which will be discussed below. importantly, a first-order tactic can accommodate multiple second-order tactics. to give one example, the first-order tactic assure quality complements encompasses several second-order tactics including institute stratified platform access policy, implement screening/certifying system, and provide first-party content, amongst others. a comprehensive overview of all identified second-order tactics (over 100) is out of scope for this short paper. first, the model reveals an interesting activity cluster in the ecosystem context at the leadership stage (i, in figure 2). here, a trend was noticed whereby platform sponsors’ focus shifts from a platform’s core product and the technological infrastructure during early maturity phases, toward tactics to implement protective positioning on an ecosystem level. for example, platform sponsors seek to actively shape regulations and institutions (first-order tactic). to do so, they rely on a set of second-order tactics. some, for instance, expand the team of lobbyists, as illusfigure 2: first-order digital platform tactics and critical insights journal of business models (2021), vol. 9, no. 1, pp. 67-76 7171 trated by big tech-firms – such as google, amazon or apple who have considerably increased their lobbying budgets in brussels by 510% since 20141. others invest in infrastructure deficits, as exemplified by google’s ambitious project loon, which aims to connect the unconnected in the developing world. similarly, the free distribution of laptops to schools also carried out by google to promote the use of digital services in education across the board is a suitable example. another second-order tactic in this regard relates to actively shaping the socio-cultural context. uber, for example, sent out emails to customers in chicago proclaiming “keep chicago uber!” to put pressure on law-makers after experiencing regulatory pressure. this interplay of digital platform leadership and institutional and regulatory aspects has been identified as a highly relevant area of research (rietveld and schilling, 2020; kretschmer et al., forthcoming). a second insight emerged around some first-order tactics spanning several (or all) contextual dimensions but appearing to be dominant in only one temporal dimension. the opposite, i.e. several temporal phases and one contextual phase, has not been found. one example for a “multi-dimensional” first-order tactic is building a defense, which prevails across all contextual dimensions in the leadership stage (ii, in figure 2). existing research on digital platforms emphasizes a platform sponsor ’s general drive to maintain a controlling position by building entry barriers against rivals and newcomers (gawer, 2020; teece, 2017). however, through the proposed framework, practitioners and scholars can develop a more granular understanding of the tactical activities of platform sponsors across various contextual dimensions. from a platform attribute perspective, platform sponsors build a defense by selectively closing platform boundaries to weaken rivals (mcintyre et al., 2020b). a prominent example concerns facebook, which disallowed vine’s access to its api after vine was acquired by facebook’s rival twitter (gawer, 2020). facebook’s tactic to weaken vine paid off as twitter abandoned 1 according to an analysis conducted by transparency international vine in 2016. another second-order tactic is to invest heavily in technological r&d to drive out rivals (gawer & cusuamo, 2008). this tactic refers to what has been labelled “tipping” and encompasses the development of unique, compelling features that are hard to imitate. a good example can be found in the early days of the web browser market, where microsoft internet explorer replaced the first browser developed by netscape as the dominant market player. besides being in an advantageous position of having a strong market presence with its windows software, microsoft also had much greater resources to continue investing in browser r&d – thereby winning the standard war against rivals and effectively building a defense (gawer and cusuamo, 2008). regarding the core product, platform sponsors consider vertical integration to build a defense. content consumption devices, such as amazon’s fire tv, fire stick, kindle or alexa drive users to the platform, enhance generativity, but also create strong lock-in effects (aversa et al., 2020). another tactic that relates to building a defense in the core product dimension is the facilitation of learning investments and co-specialization (rietveld and schilling, 2020). an example of a platform sponsor applying this tactic is alibaba, which regularly invites complementors to join socalled “dream trips and orange success camps”. the goal of these initiatives is for complementors to learn and master the use of the alibaba platform, which in turn creates incentives to remain a complementor in the future. from a governance perspective, a closely related tactic is then to prevent the transferability of the acquired knowledge to another platform. a common practice for platforms is to allow both sides to develop a reputation and trustworthiness through a reciprocal rating mechanism (mcintyre et al., 2020b). in the case of uber, for instance, both drivers and passengers are able to rate the service and experience. but uber prevents the transferability of the drivers’ and passengers’ overall ratings to its competitor lyft. any complementor or user that changes the platform will then have to start building a new reputation on the competing platform. another secondorder tactic to build a defense in the governance dimension relates to rules that regulate interaction on journal of business models (2021), vol. 9, no. 1, pp. 67-76 7272 the platform. in other words, what are members of the different sides allowed to do? platform sponsors can allow users access to multiple online services, which is reported to have a similar effect to an all-you-caneat dining experience (aversa et al., 2020). prominent examples include google or amazon, which allow users access to various online services, creating strong lock-in effects. finally, in the ecosystem dimension, as part of their defense, platform sponsors continuously search for complementors that can threaten their central position in the ecosystem. google’s android operating system, for instance, spurred explosive global adoption, yet it also enabled other firms, including direct competitors, to build proprietary platforms ‘on top’ of it (pon et al., 2014). to guard against this, google actively scans the ecosystem to seek out potential threats. similarly, platform sponsors need to screen the industry for ‘copy cats’ – entrepreneurial teams that try to imitate the platform and gain some of its market share (mcintyre et al., 2020b; cennamo, 2019). the berlin-based internet company rocket internet, for example, is notorious for its approach of imitating successful platform business models. interestingly, the first (i) and second (ii) insights are highly related and show how the challenges of creating a successful digital platform also prevail after the critical expansion phase. to dominate in their respective industry, digital platform sponsors need to prove themselves able to build a proper defense across all contextual dimensions, while managing institutional and regulatory aspects that – after the expansion – become even more relevant. a third insight relates to the relative paucity of digital platform tactics during the renewal phase, across all contextual dimensions (iii, in figure 2). any advantage a platform sponsor may have during the leadership phase may disappear overnight should a competitor devise a superior business model (morris, 2013). a set of tactics for self-renewal can thus be key and firms should therefore seek them well in advance. however, most existing work focuses on big, successful digital platform cases, such as airbnb, uber, google, facebook, or apple, which tend to seamlessly renew their platform (teece, 2017). research on successful renewal of less-known digital platforms in ‘niche markets’, which have to go through more radical shifts due to technological advancements or market changes, is limited although highly relevant as it is during this critical evolution where many platforms fail (gawer, 2020). discussion and conclusion in this short paper, we follow cuc (2019) and others who encourage strategic management scholars to devote more attention to platform business models. understanding the dynamics of platform competition is a strategic imperative for managers (mcintyre et al., 2020b). yet, a gap exists in the literature concerning holistic and dynamic models of digital platform behavior. our work contributes to this gap in three ways. first, this paper expands the concept proposed by casadesus-masanell and ricart (2010) by adding platform business models as a potential strategic choice and introducing and defining digital platform tactics. second, this paper extends the unidimensional view of tactical activities as proposed in the original model by presenting a novel framework encompassing a temporal and contextual dimension (see figure 1). third, the resulting four-by-four matrix was used to review the current digital platform literature and to identify and map over 20 first-order, leading to three indicative insights (see figure 2). this work has further theoretical implications for the wider digital platform strategy literature. through the analysis and mapping of implicitly derived tactics from existing publications, the proposed framework helps scholars to cluster the contributions of different platform literature streams and to identify sparsely studied domains, as in the case of the renewal phase. in this way, it can help us to develop a holistic understanding of the complex platform phenomenon and to examine existing findings for generalizability (taeuscher and rothe, 2020). understood as a part of the broader management research, our work holds theoretical implications for the literature on dynamic capabilities (teece, 2017). authors have repeatedly criticized the under-specification of the dynamic capabilities construct, leading to frustration amongst scholars and practitioners (schilke et al., 2018). we argue that our framework can contribute to a more nuanced journal of business models (2021), vol. 9, no. 1, pp. 67-76 7373 understanding of dynamic capabilities for digital platform business models. capabilities are generally defined as the capacity to undertake activities (helfat and raubitschek, 2018) and our framework provides an overview of dozens of specific activities that digital platform sponsors undertake. the missing link is the question of which dynamic capabilities are needed to perform and implement these activities. this area provides fertile grounds for further research. for managers and practitioners, the platform tactics model offers guidance into the range of activities necessary to implement and competitively operate digital platform business models. by subdividing the scope of possible activities in a temporal and contextual manner, the framework provides practitioners with a guide to classifying their own company or to planning future business activities. the illustrative examples of the platform tactics mentioned further serve practitioners as inspiration for action and possible food-for-thought for the development of alternative approaches to overcome for example the defensive tactics of dominant platforms in a given segment. our work does not come without limitations. we discuss digital platforms as general phenomena. it has been noted, however, that platforms can be distinguished into different types, for example transaction or innovation-oriented platforms (gawer, 2020). similarly, scholars emphasize that not all platform markets are the same – there is a distinction between “winner takes all” and “distinctiveness” markets (cennamo, 2019). further research could add these factors to our framework of digital platform tactics. finally, from a strategic point of view, de reuver et al. (2018) argue that a decomposition of “necessary” and “nice-to-have” conditions could enhance our understanding of digital platform competition. applying this logic to digital platform tactics in our framework would allow us to distinguish between critical and less-critical tactics for platform operators. here, more empirical work is needed to test the context and conditions under which a tactic becomes more or less critical. in conclusion, this paper provides a theoretical framework that classifies the tactical activities used to implement strategic decisions, with a focus on platform business models. the temporal classification is intended to meet the need for a more dynamic description of digital platforms, while the contextual classification supports a more holistic understanding of them. we believe that this short paper marks the beginning of a relevant and insightful endeavor, which hopefully inspires other scholars and practitioners to contribute to the debate around digital platform tactics. journal of business models (2021), vol. 9, no. 1, pp. 67-76 7474 references aversa, p.; haefliger, s.; hueller, f. & reza, d. r. (2020), customer complementarity in the digital space: exploring amazon’s business model diversification, long range planning, in press, https://doi.org/10.1016/j. lrp.2020.101985. casadesus-masanell, r. & ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, pp. 195-215. cennamo, c. (2019). competing in digital markets: a platform-based perspective. academy of management perspectives. https://doi.org/10.5465/amp.2016.0048 cuc, j. e. (2019), trends of business model research: a bibliometric analysis, journal of business models, vol. 7(5), pp. 1–24. https://doi.org/10.5278/ojs.jbm.v7i5.2981. de reuver, m.; sørensen, c. & basole, r. c. (2018), the digital platform: a research agenda, journal of information technology, vol. 33, pp. 124-135. gawer, a. (2020), digital platforms’ boundaries: the interplay of firm scope, platform sides, and digital interfaces, long range planning (forthcoming), https://doi.org/10.1016/j.lrp.2020.102045. gawer, a. & cusuamo, m. a. (2008), how companies become platform leaders, mit sloan management review, magazine winter 2008 helfat, c. e. & raubitschek, r. s. (2018), dynamic and integrative capabilities for profiting from innovation in digital platform-based ecosystems, research policy, vol. 47(8), pp. 1391–1399. jacobides, m. g.; cennamo, c. & gawer, a. (2018), towards a theory of ecosystems, strategic management journal, vol. 39(8), pp. 2255–2276. https://doi.org/10.1002/smj.2904. karhu, k.; gustafsson, r.; eaton, b.; henfridsson, o. & sørensen, c. (2020), four tactics for implementing a balanced digital platform strategy, mis quarterly executive, vol. 19(2), pp. 105-120. kretschmer, t.; leiponen, a.; schilling, m. & vasudeva, g. (forthcoming), platform ecosystems as metaorganizations: implications for platform strategies, strategic management journal, n/a (n/a). https://doi. org/10.1002/smj.3250. mackay, d. & zundel, m. (2017), recovering the divide: a review of strategy and tactics in business and management, international journal of management reviews, vol. 19(2), pp. 175–194. https://doi.org/10.1111/ijmr.12091. mcintyre, d. p.; srinivasan, a. & chintakananda, a. (2020a), the persistence of platforms: the role of network, platform, and complementor attributes, long range planning, (forthcoming), https://doi.org/10.1016/j.lrp.2020.101987. mcintyre, d. p.; srinivasan, a.; afuah, a.; gawer, a. & kretschmer, t. (2020b), multi-sided platforms as new organizational forms, academy of management perspectives, in press. morris, l. (2013), business model warfare: the strategy of business breakthroughs, journal of business models, vol. 1(1). https://doi.org/10.5278/ojs.jbm.v1i1.617 https://doi.org/10.1016/j.lrp.2020.101985 https://doi.org/10.1016/j.lrp.2020.101985 journal of business models (2021), vol. 9, no. 1, pp. 67-76 7575 parker, g. & van alstyne, m. (2018), innovation, openness, and platform control, management science, vol. 64(7), pp. 3015-3032. pon, b.; seppälä, t. & kenney, m. (2014), android and the demise of operating system-based power: firm strategy and platform control in the post-pc world, telecommunications policy, vol. 38(11), pp. 979–991, https://doi. org/10.1016/j.telpol.2014.05.001. rauch, a.; van doorn, r. & hulsink, w. (2014), a qualitative approach to evidence–based entrepreneurship: theoretical considerations and an example involving business clusters, entrepreneurship theory and practice, vol. 38(2), pp. 333-368, https://doi.org/10.1111/etap.12093. rietveld, j. & schilling, m. a. (2020), platform competition: a systematic and interdisciplinary review of the literature, journal of management, forthcoming, https://doi.org/10.1177/0149206320969791 schilke, o.; hu, s. & helfat, c. e. (2018), quo vadis, dynamic capabilities? a content-analytic review of the current state of knowledge and recommendations for future research, academy of management annals, vol. 12(1), pp. 390–439, https://doi.org/10.5465/annals.2016.0014. sorri, k.; seppänen, m.; still, k. & valkokari, k. (2019), business model innovation with platform canvas, journal of business models, vol. 7, no. 2, pp. 1-13. taeuscher, k. & rothe, h. (2020), optimal distinctiveness in platform markets: leveraging complementors as legitimacy buffers, strategic management journal, forthcoming, https://doi.org/10.1002/smj.3229 teece, d. j. (2017), dynamic capabilities and (digital) platform lifecycles, entrepreneurship, innovation, and platforms, advances in strategic management, vol. 37, emerald publishing limited, pp. 211-225, https://doi. org/10.1108/s0742-332220170000037008. trabucchi, d. (2020), let’s get a two-sided platform started: tactics to solve the chicken and egg paradox, journal of business ecosystems, vol. 1(1), pp. 63-77, doi:10.4018/jbe.2020010104. trabucchi, d.; talenti, l. & buganza, t. (2019), how do big bang disruptors look like? a business model perspective, technological forecasting and social change, vol. 141; pp. 330-340, https://doi.org/10.1016/j. techfore.2019.01.009. van andel, w. (2019), tactical shapeshifting in business modeling, journal of business models, vol. 7(4), pp. 53-58. webster, j. & watson, r. (2002), analyzing the past to prepare for the future: writing a literature review, mis quarterly, vol. 26(2), pp. xiii-xxiii. zhu, f. (2019), friends or foes? examining platform owners’ entry into complementors’ spaces, journal of economics & management strategy, vol. 28(1), pp. 23–28, https://doi.org/10.1111/jems.12303. https://doi.org/10.1016/j.techfore.2019.01.009 https://doi.org/10.1016/j.techfore.2019.01.009 journal of business models (2021), vol. 9, no. 1, pp. 67-76 7676 matthias trischler is a phd student at the centre for technology entrepreneurship, technical university of denmark. his research interest is on the digitalization of small and medium-sized enterprises with particular focus on business model innovation. in collaboration with the danish design centre, he is examining the role of (digital) innovation labs in the transformation of incumbents. at the centre, he is a member of the tech4impact steering group, which aims to incorporate impact thinking in the form of the un’s sustainable development goals into all research and educational activities. matthias is active as a lecturer in various courses at dtu, including a course on digital trends for entrepreneurs for the msc. in technology entrepreneurship. he holds a msc. in business and development studies from copenhagen business school and has worked as a strategy consultant for several years prior to his phd project. philip meier joined hiig in march 2018 and since then has been a researcher in the sme 4.0 project, which is funded by the german federal ministry of economics and energy. within the project, philip conducts a study on the application of digital technologies in smes and develops need-based qualification formats on the basis of the gathered insights. he is a doctoral student at the institute for electronic business under prof. dr. dr. thomas schildhauer. as part of his dissertation, philip is investigating governance and business model development of digital platforms in b2b markets. philip has been invited as a guest researcher to the university of st. gallen (2018) and stanford university (2019). prior to his research at hiig, philip gained practical experience in the group digitalization department at volkswagen in wolfsburg, where he was responsible for business model development in the context of industry 4.0. daniel trabucchi is an assistant professor at the school of  management of politecnico di milano, where he serves as a researcher of  leadin’lab, the laboratory for leadership, design and innovation. his research  interests are focused in innovation management. in  particular, he has been  working on digital two-sided platforms and their peculiarities (focusing on how they can create and capture value and the related data driven business models), moreover he focuses on the human side of innovation, exploring engagement mechanisms in innovation through the research platform ideals. his research has been published in peerreviewed journals such as journal of product innovation management, technological forecasting and social change,  internet  research, research-technology management, creativity and innovation management,  technology analysis and strategic  management and european journal of innovation  management; he is also a reviewer for many of these journals. about the authors 1 journal of business models (2021), vol. 9, no. 4, pp. 1-12 this article suggests that the definition of a business model depends on the application context: products, platforms, or ecosystems. building on existing literature and illustrative examples, the paper clarifies the business model construct by emphasizing the context of analysis. the article presents three different approaches for evaluating business models in different settings and delineating the context-specific characteristics for each business model. also, the paper strengthens the explanatory power of the business model concept beyond the boundaries of a focal firm, offering clarity to complex settings without a clear division between a supplier and a customer. what is a business model – for products, platforms, or ecosystems? esko hakanen1 please cite this paper as: hakanen, e. (2021), what is a business model – for products, platforms, or ecosystems?, journal of business models, vol. 9, no. 4, pp. 1-12 keywords: business models, platforms, ecosystems acknowledgments: i would like to thank the members of batcircle (business finland) for their support ) and atarca (eu h2020 grant no. 964678) for their support. i thank associate editor marco montemari and two anonymous reviewers for their helpful suggestions. 1 aalto university, finland, esko.hakanen@aalto.fi doi:https://doi.org/10.5278/jbm.v9i4.6475 issn: 2246-2465 abstract http://: https://doi.org/10.5278/jbm.v9i4.6475 https://doi.org/10.5278/jbm.v9i4.6475 journal of business models (2021), vol. 9, no. 4, pp. 1-12 22 introduction the business model of a firm has become an established concept in management research for describing the activities of firms in the middle ground between their strategies and operations (e.g., casadesus-masanell and ricart, 2010; massa et al., 2017). the concept has been used to describe a firm’s business mainly from the supplier’s perspective and intended to outline the focal firm’s offering and activities with its customers (priem et al., 2018). put differently, the business model has been considered as the manager’s or the focal firm’s conjecture about who their customers are, what those customers want, and how the firm can deliver value to these customers with a profit (foss and saebi, 2017; teece, 2010). however, as value creation is taking increasingly networked, dynamic, and complex forms, such approaches that focus on a focal firm’s actions are becoming limited (massa et al., 2018). consider, for example, the linux open-source software community, where the customer is not a clearly defined group of actors, nor the provider is a sole organization. since the community members provide different contributions and have various reasons or incentives for partaking, it is practically impossible to delineate the value proposition for each contributing member or action with the traditional approach, in which the business model is conceived unidirectionally from the provider’s perspective. moreover, novel decentralized technologies have enabled solutions without intermediary actors, offering new premises for economic and social systems (mas et al., 2020). thus, managers or firms looking to build a community–or an ecosystem of interdepended partners who contribute toward a shared goal (adner, 2017; shipilov and gawer, 2020)–require a different approach to outline the business model of such complex systems of activities that span the boundaries of the focal organization (massa et al., 2018). the purpose of this paper is to amend the current thinking of business models by suggesting a context-specific approach for the conceptualization of the business model. since a common understanding of the essence of business models is still largely missing (wirtz and daiser, 2018), this article highlights how the context of analysis influences the persistent question of “what actually is a business model?” (belussi et al., 2019). we offer examples of viable conceptualizations of business models for products, platforms, and ecosystems and argue that the exact articulation of the concept should depend on the context of analysis. building on existing literature and illustrative examples, we show how the different approaches help delineate the typical characteristics of the transactions associated with the various business model elements in distinct contexts. in so doing, we address recent calls to provide a common language for scholars and practitioners addressing the business model concept in different contexts (e.g., belussi et al., 2019; massa et al., 2018; wirtz and daiser, 2018). we contribute to theory by adding coherence to the dispersed literature. moreover, as the popularity of different business model definitions builds on essentially distinctive factors, we complement the existing literature by suggesting the most viable setting for the said approach. next, after a short overview, we will present three approaches to business models suitable for products, platforms, and ecosystems, respectively. approach despite numerous attempts, the academic literature has been rather far from finding a commonly agreed definition for a business model (belussi et al., 2019; foss and saebi, 2017; massa et al., 2017; ritter and lettl, 2018). for instance, belussi et al. (2019) noted considerable differences in the level of abstraction in the past research, ranging from models and frameworks to meta-models and activity systems. the more concrete representations outlined different elements and frames for business models, whereas more abstract ones combined micro individual processes with broad themes (e.g., novelty, complementarities, lock-ins). similarly, massa et al. (2017) identified three common interpretations of business models: formal descriptions of organization’s functions; attributes of real firms impacting the business operations; or cognitive/linguistic schemas held by the managers. despite the merits of these classifications, a demand to reduce the variety of the presented typologies remains (belussi et al., 2019). in particular, scholars have rarely instructed how the context of analysis should be accounted for when analyzing business models. journal of business models (2021), vol. 9, no. 4, pp. 1-12 33 to address this deficiency, our main argument in this paper is that different approaches in the business model literature are suited for delineating the business models in specific analytical contexts. subsequently, we suggest that the context of analysis should be acknowledged when defining what a business model is. table 1 summarizes our conceptual arguments, including the context of analysis, the illustrative examples we address in this paper, typical transaction relationships and partners, the table 1. context of analysis products platforms ecosystems illustrative examples provided iphone traditional value chain robot vacuum selling idle computing power iphone appstore apps: uber, spotify apple continuity tracey fishery data intelligent goods with smart contracts open-source community (linux) typical transaction relationships and partners dyads, firms (e.g., customer-provider) triads, sides (e.g., in multisided markets) activities, members (e.g., complements & complementors) business model elements value proposition value creation activity system value constellation value sharing (economic and/or social) value capture key references (richardson, 2008; teece, 2010; yunus et al., 2010) (casadesus-masanell and zhu, 2013; demil et al., 2015; zhu and furr, 2016) (amit and zott, 2015; massa et al., 2018; zott and amit, 2010) suggested readings (bocken et al., 2014; foss and saebi, 2017; osterwalder and pigneur, 2010; reim et al., 2015; teece, 2018) (casadesus-masanell and ricart, 2010; choudary, 2015; parker et al., 2016; priem et al., 2018; thomas et al., 2014) (adner, 2012, 2017; jacobides et al., 2018; kapoor, 2018; marttila et al., 2019; rajala et al., 2018; shipilov and gawer, 2020) table 1: different approaches for analyzing business models and the suggested business model elements to consider depending on the context of analysis journal of business models (2021), vol. 9, no. 4, pp. 1-12 44 different business model elements and their interrelation, and some key references and additional readings to support our argumentation. overall, the three alternative approaches to defining business models have different reasons for their popularity. thus, these views should be regarded as complementary rather than alternatives, as different analytical perspectives may provide additional insights if applied in the same context of analysis. first, for analyzing product-centric transactions, it might be useful to identify and differentiate the key elements for a business model. most commonly, these elements state “the firm’s value proposition and market segments, the structure of the value chain required for realizing the value proposition, the mechanisms of value capture that the firm deploys, and how these elements are linked together in an architecture” (foss and saebi, 2017, p. 202). more distinctively, this perspective summarizes a business model through three key elements, value proposition, value constellation, and value sharing, in which the value constellation refers to how the value proposition is realized (yunus et al., 2010), and value sharing refers to how the created value is distributed among the different participants (svejenova et al., 2010). thus, value sharing incorporates the aspects of profit and revenue models of the firm (richardson, 2008) and provides the financial translation of the other two elements, including non-economic measures (yunus et al., 2010). while there might be slight differences in terminology, many authors share the conceptual model of describing the chosen architecture for value proposition, value creation and delivery, and value capture (e.g., bocken et al., 2014; reim et al., 2015; richardson, 2008; teece, 2010). second, different platforms rely on facilitating value-creating interactions between their members (choudary, 2015; parker et al., 2016; thomas et al., 2014). such an approach resonates with the stream of business model research that originates back to the rise of e-commerce when the business model became the tool to describe the “content, structure, and governance of transactions designed to create value,” accompanied by a revenue model that “refers to the specific modes in which a business model enables revenue generation” (amit and zott, 2001, pp. 511–515). such thinking follows a popular option to describe a business model as the value creation and capture mechanisms of a firm (demil et al., 2015; massa et al., 2017; zhu and furr, 2016). platforms leverage network effects by mediating the interactions between their members (choudary, 2015; thomas et al., 2014), thus connecting the value proposition (i.e., the suggested benefit) and the means to realize the proposed value (i.e., value constellation) tightly to the interactions facilitated through the platform. in many cases, it is difficult–if not impossible–to separate the value proposition from the value constellation, making it more relevant to address these jointly as the mechanisms for creating value. furthermore, since the value is created through interactions that are facilitated by the platform and, typically, a part of that value is–directly or indirectly–captured by the platform provider as compensation (casadesusmasanell and zhu, 2013; choudary, 2015; zhu and furr, 2016), such twofold approach to business models lays out a fitting foundation for analyzing platform businesses. third, for analyzing the business models in ecosystems, a different perspective may be needed. an ecosystem, often defined as “a set of actors with varying degrees of multi-lateral, non-generic complementarities that are not fully hierarchically controlled” (jacobides et al., 2018, p. 2264), can make the business model analysis challenging, especially if one tries to delineate the different elements or the dyadic transactions that take place in this setting. [1] luckily, a stream of business model research has been approaching the concept as a set or system of interlinked activities necessary for some value to be realized (amit and zott, 2015; massa et al., 2018; zott and amit, 2010). while these activity systems may 1 while many alternative definitions for the ecosystem exist, all of them are complicated from the business model perspective. consider, for instance, the descriptions by adner (2017): “ecosystem is defined by the alignment structure of the multilateral set of partners that need to interact in order for a focal value proposition to materialize” or kapoor (2018): “an ecosystem encompasses a set of actors that contribute to the focal offer’s user value proposition” and whether it would be possible to identify how the focal firm delivers value to the customers, attracts payments and converts those payments to profits (cf. teece, 2010). moreover, different views on ecosystem governance may differentiate between open and closed ecosystems, complicating the issue further (see jacobides et al., 2018). journal of business models (2021), vol. 9, no. 4, pp. 1-12 55 vary in the level of complexity, all of them can be described as an integrated whole of different interacting components (massa et al., 2018). this approach does not differentiate between the various elements or parts of a business model but emphasizes how all the different activities are ultimately interlinked and multilateral. the definition is relatively abstract and may not be practical, for instance, to delineate transactional agreements typical in a product-centric context. however, the growing interest in ecosystems within the business context calls for employing such a holistic view (e.g., rajala et al., 2018; shipilov and gawer, 2020; de vasconcelos gomes et al., 2018). next, we will elaborate on these three contexts of analysis using illustrative examples. key insights to outline the approaches in detail, we will start from the most concrete product offerings, then discuss multisided transactions in platforms, and end with the most abstract view of interlinked ecosystems. for an illustration of the applicability of the presented definitions, consider apple. the company illustrates all three approaches in its operation. moreover, these approaches relate simultaneously to a single offering. we present three examples from the company: iphone as a product, apps (for iphone) as platforms, and apple’s continuity feature that integrates different operating systems as an ecosystem.[2] also, we complement our argumentation with other examples, including the widely-known platforms of uber and spotify, and perhaps less-known ecosystems for fishery catch and trade data (marttila et al., 2019) and intelligent goods (rajala et al., 2018). product manufacturing relies on dyadic transactions in supply chains first, consider the (physical) product perspective–the iphone. it is a classical representation of supply chain manufacturing. the whole process is very strictly controlled and hierarchically governed. transaction prices are set with fixed and thin margins. the supply chain aims for zero deviation within the single product class. despite the different generations (such as iphone 8, 12, or xs) and specifica2 continuity: all your devices. one seamless experience https:// www.apple.com/macos/continuity/ tions (64, 256, or 512 gb of storage), the whole purpose is that two units with the same specifications are identical. the value that apple communicates to its potential customers relates heavily to technical aspects. this focus can be seen easily from the company web pages, filled with technological specifications, lists of new features that the current product enables, and so forth. clearly, the focus is on delineating why the iphone is a good product. there are different stages in materializing the offering. the first step is to convince the customer that this is the product to buy (i.e., what is their value proposition to what kind of customers). after that decision has been achieved, the customer is directed to the practicalities, such as where to buy, whether online from apple or locally from some retailer. this part links to the value constellation. third, the customer considers and compares the prices, delivery times, or payment agreements between the alternative suppliers, and the value sharing stage initiates. ultimately, this third step impacts how the created value is distributed among the different participants and defines the value sharing of each product sale (svejenova et al., 2010). these three business model elements might not always be temporally distinctive phases, but they are different facets that need to be sorted out for making the sale. in addition, such product-centric, dyadic transaction relationships may also be identified as a part of more complex structures, similar to how apple’s iphone sales feed to the growth of their appstore platform and the functionality of their continuity feature. platforms facilitate interactions for value creation and capture second, consider appstore for iphones. the majority of iphone’s success as a market disruptor has been accredited to this solution for developing and distributing the software–or apps–to the end customers’ phones (adner, 2012; gawer and cusumano, 2014; parker et al., 2016). such an approach, which effectively leverages the available network effects, has been described as “platform thinking” (choudary, 2015) or even “platform revolution” (parker et al., 2016). in general, platform business models may not focus on creating tangible products but rather enable value by curating and governing interactions https://www.apple.com/macos/continuity/ https://www.apple.com/macos/continuity/ journal of business models (2021), vol. 9, no. 4, pp. 1-12 66 between different members (choudary, 2015; massa et al., 2017). the platforms offer an architecture for connecting and mediating interactions between different sides, while the providers of those platforms “leverage a shared trading platform to create and appropriate value from both sides of the market” (thomas et al., 2014, p. 110). thus, from a business model perspective, a significant change is that, in platforms, value proposition and value constellation have become intertwined. the value that is communicated to potential customers is heavily focused on usage. therefore, platform thinking is not targeted traditional manufacturing of physical products nor supply chains. the marketing material–or description pages in appstore–include phrases such as “download now for free” or “you’ll find all the necessary tools to get you started.” the digital content is readily downloadable, and, in many cases, the pricing follows the freemium principle (cf. teece, 2010) or “sponsor-based business models” (casadesus-masanell and zhu, 2013). for any provider, it is surmountable that the value creation happens by leveraging the resources and infrastructure of the platform (thomas et al., 2014), feeding to the platform’s scale and growth through positive network effects (choudary, 2015; parker et al., 2016) so, even though the different elements may be inseparable, each offering includes aspects of value creation (i.e., what you can do with the app) and value capture (i.e., download for free, improve with in-app purchases). the platform provider acts as an intermediary between the connected sides and can utilize this position by setting a commission for each transaction. similar thinking applies to other popular platform companies, such as uber. as the disruptor of the taxi industry, uber may be offering their customers cheaper rides, ease of use, or integrated payments. still, all these benefits are only available through using their proprietary platform if the customers and providers (i.e., riders and drivers) agree on uber’s pricing policy. similarly, spotify provides a clear example of how value creation is tied to its platform. the different subscription plans impact the price of the service (i.e., value capture) and the available value-creating elements.[3] thus, 3 spotify premium: https://www.spotify.com/us/premium/ in platforms, value creation and value capture are ultimately defined by the tools and rules set by the platform provider (choudary, 2015).[4] ecosystems are based on dynamic systems of interlinked activities the third perspective is best suited to the current trend of open systems, driven by complementarity in consumption and production. from a business model perspective, when there is a feature that supports and improves the use of other products or services but has no apparent solution for monetizing this benefit, we suggest analyzing that setting from an ecosystem perspective.[5] as an example, apple improves the usability of their different products with the “continuity” feature. continuity offers seamless integration between apple’s various operating systems–ios for handheld devices and macos for computers–by which the user can, for instance, begin writing an email with their iphones, but once near their laptop, they can simply click an offered icon to continue writing that same message on a computer. the same philosophy is applied when apple announces on its web pages how “your favorite apps are even better with icloud,” thus supporting the overall value proposition of their product line, including the iphone. in these settings, it may remain ambiguous what is truly offered to the customers or how apple improves the user experience with these features. moreover, all of the benefits are offered free of charge. 4 the platform provider has a powerful position in controlling the interaction between the participants. indeed, apple’s recent announcement to offer a reduced commission rate of 15% (in contrast to 30%) for small businesses underlines the controlling power of the platform providers: no negotiation was needed; simply an announcement of the new policy was sufficient. https://developer.apple.com/app-store/small-business-program/ 5 while business model research has acknowledged the role of activities as the base of understanding what a business does, there is often implicit guidance toward efforts that can be monetized, since: “these activities only make economic sense when they follow logics of value creation and value capture” (ritter and lettl, 2018, p. 4). monetization is more straightforward in consumer product markets (teece, 2018) or in situations where the activities can be decomposed into bilateral relationships, such as in a supplier-provider relationship or when a platform provider acts as an intermediary between the sides (e.g., when uber conducts transactions separately for drivers and riders). in fact, adner (2017, p. 53) argues that the ecosystem construct is not needed in these situations: “ecosystems matter when the multilateral relationships that underlie a value proposition are not decomposable into multiple bilateral relationships.” https://www.spotify.com/us/premium/ https://developer.apple.com/app-store/small-business-program/ https://developer.apple.com/app-store/small-business-program/ journal of business models (2021), vol. 9, no. 4, pp. 1-12 77 for a more elaborate example, consider the tracey ecosystem,[6] which brings together a company called tx, wwf philippines, and unionbank, and utilizes blockchain solutions for documenting and verifying fishery catch and trade data. tx is a consultancy partner of streamr, which in turn is a distributed opensource software project, an organizational form that is rarely in the focus of business model research. however, since “every organization has some business model” (casadesus-masanell and ricart, 2010, p. 206), we have to conclude that one can be drawn for the tracey ecosystem as well. the project aims to facilitate reliable and traceable catch and trade data while incentivizing the fisherfolk to provide the data by creating direct and indirect rewarding schemes for their actions (marttila et al., 2019). the ecosystem brings together various stakeholders, with different objectives and incentives for participation: for wff, the main goal might be to get reliable, timely, and electronic catch and trade data to replace unreliable paper documentation; for unionbank, it may be to explore new technologies and attract new customers to their services; for the fishers, it is to secure their livelihood by preventing overfishing or getting access for bank loans; and for tx, it might be to showcase streamr’s decentralize data marketplace technology or perhaps simply the admin fee for developing the solution. altogether, the project relies on a complex activity system and utilizes many digital platforms but differs from a platform business model. since the tracey app is a decentralized application (dapp), as it builds on streamr’s decentralized, open-source data ecosystem, there is no focal orchestrator who mediates the interactions between the members, and, subsequently, no one cannot implement complete hierarchical control over other project partners at any stage. discussion and conclusions this paper offered three perspectives to business models to analyze products, platforms, or ecosystems. to illustrate our main arguments, we provided several examples to support our argumentation. in addition, we emphasized how the three alternative approaches to defining business models all draw 6 tx project: tracey: “how the tracey ecosystem works” https:// tx.company/projects/tracey/ from a long tradition of research and have different reasons for their popularity. we sought to increase coherence between the differing views among business model scholars by suggesting a contextual setting most applicable for each business model definition. most importantly, as the different analytical perspectives complement one another, it might be valuable to apply multiple views in a single context of analysis. acknowledging the context of analysis is particularly important in complex settings with multilateral interdependencies and nested hierarchies (massa et al., 2018). with new technological solutions, such as the blockchain and smart contracts (dal mas et al., 2020), we face more and more situations where the different approaches to business models become tightly intertwined. for example, rajala et al. (2018) presented an ecosystem based on interchangeable electric vehicle battery packs as intelligent goods utilizing smart contracts. the battery pack could perform a trend analysis on electricity market price, utilize additional computing power from nearby smart devices (e.g., other vehicles or a robot vacuum cleaner), and pay for these resources in cryptocurrencies. each member in this setting will have their own goals, incentives, and justifications for partaking. the underlying, complex activity system relies on a new infrastructure for transactions and illustrates a business model in an ecosystem context: each participant can flexibly contribute to the system as they see fit, assuming different roles and interacting with other members, ultimately strengthening the emerging ecosystem (adner, 2017; jacobides et al., 2018; shipilov and gawer, 2020). yet, many of the activities can be regarded as dyadic transactions, for which a more specific product-centric business model can be defined. for instance, the smart contract between the battery pack and a robot vacuum cleaner may outline what is offered (computing power), how the offering will be delivered (granting access through an api), and how much it will cost (payable in cryptocurrency). nevertheless, this one transaction is only part of a much larger, encompassing ecosystem and needs a vibrant community to make it relevant or worthwhile. similarly, the tracey ecosystem may contain dyadic agreements, for instance, when the data is sold or bought in the https://tx.company/projects/tracey/ https://tx.company/projects/tracey/ journal of business models (2021), vol. 9, no. 4, pp. 1-12 88 streamr data marketplace. as these examples illustrate, the different aspects of the larger ecosystem build on various activities that are easier to understand when dissected at the proper level of analysis. another reason why the context of analysis may become increasingly relevant is when value creation and value capture become decoupled. in particular, ecosystems may exhibit such decoupling, complicating the business model analysis and also differentiating ecosystems from platforms. such distinction can also be seen in the ecosystem literature, as “business ecosystem” research has focused on value capture, whereas “innovation ecosystem” has emphasized value creation (de vasconcelos gomes et al., 2018). the tracey ecosystem illustrated this decoupling, as it comprised many vital activities for value creation in the ecosystem (e.g., facilitating the data flows) that did not directly link to a financial reward (or other means of compensation). [7] instead, the tracey ecosystem illustrated how value capture might often rely on indirect mechanisms, without the possibility to ensure the size of the reward for a member’s contribution to the ecosystem. the defining features of ecosystems–interdependence, com7 see also “data and revenue flows for the tracey project” https://streamr.network/case-studies/tracey/ plementarity, and modularity (adner, 2012; jacobides et al., 2018; kapoor, 2018; shipilov and gawer, 2020)–explain how a system of interlinked activities can help to create more value. however, there is no guarantee that an entity that helps to create a flourishing ecosystem will benefit financially from doing that (teece, 2018). this dilemma may explain the highly expected benefits of collaborative ecosystems, including in the traditional fields such as manufacturing supply chains (rajala et al., 2018), but the relatively slow pace for realizing these possibilities. in conclusion, we suggest that scholars and practitioners should pay closer attention to the context of analysis when defining business models. such an approach allows us to study various business models with higher distinction and better acknowledge the unique elements for each setting. in particular, table 1 and the suggestion to focus on the said context (a product, a platform, or an ecosystem) may prove highly valuable to managers who wish for support in understanding the business models as they face the transition from linear value chains to complex ecosystems. it also helps to extend the explanatory power of the business model concept outside the boundaries of a focal firm, offering clarity to complex settings with no clear division between a supplier and a customer or where value creation is fundamentally decoupled from value capture. https://streamr.network/case-studies/tracey/ https://streamr.network/case-studies/tracey/ journal of business models (2021), vol. 9, no. 4, pp. 1-12 99 references adner, r. (2012), the wide lens: a new strategy for innovation, penguin. adner, r. (2017), ecosystem as structure: an actionable construct for strategy, journal of management, vol. 43 no. 1, pp. 39–58. amit, r. & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22 no. 6–7, pp. 493–520. amit, r. & zott, c. (2015), crafting business architecture: the antecedents of business model design, strategic entrepreneurship journal, vol. 9, pp. 331–350. belussi, f., orsi, l. & savarese, m. (2019), mapping business model research: a document bibliometric analysis, scandinavian journal of management, elsevier, vol. 35 no. 3, p. 101048. bocken, n.m.p., short, s.w., rana, p. & evans, s. (2014), a literature and practice review to develop sustainable business model archetypes, journal of cleaner production, elsevier ltd, vol. 65, pp. 42–56. casadesus-masanell, r. & ricart, j.e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43 no. 2–3, pp. 195–215. casadesus-masanell, r. & zhu, f. (2013), business model innovation and competitive imitation: the case of sponsor-based business models, strategic management journal, vol. 34 no. 4, pp. 464–482. choudary, s.p. (2015), platform scale, 1st ed., platform thinking labs, boston. demil, b., lecocq, x., ricart, j.e. & zott, c. (2015), introduction to the sej special issue on business models: business models within the domain of strategic entrepreneurship, strategic entrepreneurship journal, vol. 9 no. 1, pp. 1–11. foss, n.j. & saebi, t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management, vol. 43 no. 1, pp. 200–227. gawer, a. & cusumano, m.a. (2014), industry platforms and ecosystem innovation, journal of product innovation management, vol. 31 no. 3, pp. 417–433. jacobides, m.g., cennamo, c. & gawer, a. (2018), towards a theory of ecosystems, strategic management journal, vol. 39 no. 8, pp. 2255–2276. kapoor, r. (2018), ecosystems: broadening the locus of value creation, journal of organization design, journal of organization design, vol. 7 no. 1, p. 12. marttila, j., nousiainen, m., sheppard, b., malka, m. & karjalainen, r. (2019), tracey – your traceability and trade data companion. mas, f.d., massaro, m., verde, j.m. & cobianchi, l. (2020), can the blockchain lead to new sustainable business models? journal of business models, vol. 8 no. 2, pp. 31–38. journal of business models (2021), vol. 9, no. 4, pp. 1-12 1010 massa, l., tucci, c.l. & afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11 no. 1, pp. 73–104. massa, l., viscusi, g. and tucci, c. (2018), business models and complexity, journal of business models, vol. 6 no. 1, pp. 59–71. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons ltd., hoboken, nj. parker, g.g., van alstyne, m.w. & choudary, s.p. (2016), platform revolution: how networked markets are transforming the economy and how to make them work for you, w. w. norton & company, new york. priem, r.l., wenzel, m. & koch, j. (2018), demand-side strategy and business models: putting value creation for consumers center stage, long range planning, elsevier ltd, vol. 51 no. 1, pp. 22–31. rajala, r., hakanen, e., seppälä, t., mattila, j. & westerlund, m. (2018), how do intelligent goods shape closedloop systems?, california management review, vol. 60 no. 3, pp. 20–44. reim, w., parida, v. & örtqvist, d. (2015), product-service systems (pss) business models and tactics a systematic literature review, journal of cleaner production, vol. 97, pp. 61–75. richardson, j. (2008), the business model: an integrative framework for strategy execution, strategic change, vol. 17 no. 5–6, pp. 133–144. ritter, t. & lettl, c. (2018), the wider implications of business-model research, long range planning, elsevier ltd, vol. 51 no. 1, pp. 1–8. shipilov, a. & gawer, a. (2020), integrating research on inter-organizational networks and ecosystems, academy of management annals, vol. 14 no. 1, pp. 92–121. svejenova, s., planellas, m. & vives, l. (2010), an individual business model in the making: a chef’s quest for creative freedom, long range planning, elsevier ltd, vol. 43 no. 2–3, pp. 408–430. teece, d.j. (2010), business models, business strategy and innovation, long range planning, elsevier ltd, vol. 43 no. 2–3, pp. 172–194. teece, d.j. (2018), profiting from innovation in the digital economy: enabling technologies, standards, and licensing models in the wireless world, research policy, elsevier, vol. 47, pp. 1367–1387. thomas, l.d.w., autio, e. & gann, d.m. (2014), architectural leverage: putting platforms in context, academy of management perspectives, vol. 28 no. 2, pp. 198–219. de vasconcelos gomes, l.a., facin, a.l.f., salerno, m.s. & ikenami, r.k. (2018), unpacking the innovation ecosystem construct: evolution, gaps and trends, technological forecasting and social change, elsevier inc., vol. 136, pp. 30–48. wirtz, b.w. & daiser, p. (2018), business model development: a customer-oriented perspective, journal of business models, vol. 6 no. 3, pp. 24–44. journal of business models (2021), vol. 9, no. 4, pp. 1-12 1111 yunus, m., moingeon, b. & lehmann-ortega, l. (2010), building social business models: lessons from the grameen experience, long range planning, elsevier ltd, vol. 43 no. 2–3, pp. 308–325. zhu, f. & furr, n. (2016), products to platforms: making the leap, harvard business review, vol. 94 no. 4, pp. 72–78. zott, c. & amit, r. (2010), business model design: an activity system perspective, long range planning, elsevier ltd, vol. 43 no. 2–3, pp. 216–226. journal of business models (2021), vol. 9, no. 4, pp. 1-12 1212 about the authors esko hakanen, dsc (tech), is a postdoctoral researcher in the areas of business models, digitalization, services, and value networks. his work builds on an interdisciplinary background and combines multiple perspectives for analyzing digital transformation as a socio-technical change. dr. hakanen is affiliated with the department of industrial engineering at aalto university, finland. 112 journal of business models (2021), vol 9, no 4, pp. 112-124 the covid-19 crisis has undermined and disrupted several business fields. organizations are called to address the new challenges by rethinking their business models. employing an efte (estimate, feedback, talk, estimate) approach, the paper highlights 50 paradoxes to be taken into consideration in the strategic transformation process. business models beyond covid-19. a paradoxes approach carlo bagnoli1, francesca dal mas2, helena biancuzzi3, and maurizio massaro4 please cite this paper as: c. bagnoli, f. dal mas, h. biancuzzi and m. massaro (2021), business models beyond covid-19. a paradoxes approach, journal of business models pp. 112-124. keywords: paradoxes, post-pandemic business models, covid-19 1 full professor of business policy and strategy at the department of management, ca’ foscari university of venice. 2 senior lecturer in strategy and enterprise at the lincon international business school of the university of lincoln, uk. 3 independent researcher, ipazia observatory on gender research, rome, italy. 4 associate professor in accounting, digital management, and control, department of management of the ca’ foscari university of venice. issn: 2246-2465 doi: https://doi.org/10.5278/jbm.v9i3.6419 abstract https://doi.org/10.5278/jbm.v9i3.6419 journal of business models (2021), online first 113 introduction the covid-19 pandemic and related healthcare emergency at the beginning of 2020 disrupted several businesses worldwide (who, 2020). non-pharmaceutical interventions forced many enterprises to close their doors to clients and visitors. half of the world’s population was quarantined. however, paradoxically, pandemics and natural disasters, in general, have also proved capable of changing the course of history, triggering the innovation of religious, political, economical but also technological systems. to explain this co-existence of harmful and propitious effects, the etymology of the term paradox comes to our aid, according to which something, which apparently contradicts common opinion (παρά-against and δόξα-opinion), proves to be valid instead. the fundamental characteristic of the paradox is, in fact, the co-existence of two opposing poles: one does not exclude the other. the crisis triggered by the current pandemic is, therefore, paradoxically, a significant threat but, at the same time, also an excellent opportunity to innovate the whole society and, more specifically, individual companies. the real challenge is to use the paradoxical method to stimulate people to review their lifestyle, work and consumption habits and, companies, to rethink their existing business model (bagnoli, massaro, et al., 2018; nielsen et al., 2018; osterwalder and pigneur, 2010), developing strategic innovation. it is necessary to identify the strategic paradoxes that the current crisis has brought out and try to “manage” them, not solve them, by innovating the business model. the business strategies that lead to choosing one of the (apparently) opposing poles that characterize a paradox (e.g. work from the office or remotely) hide the competitive context’s real complexity, resulting, therefore, not very useful for winning the competition. a paradox is characterized by only apparently opposing poles (bagnoli et al., 2021). it is “manageable” only by adopting an approach that leads to uniting, through a circular process, the two poles themselves, which end up acting as an attractor for the other, thus generating a balanced dynamic and supporting the creative creation of new business models (bagnoli et al., 2021). the paper adopts a scientific approach based on the management, not elimination, of paradoxical choices to deepen the strategic handling of a crisis. following an efte (estimate, feedback, talk, estimate) approach, the article aims to provide organizations with a methodology to recognize and address the paradoxes that can impact the single building blocks of the business models, following the pandemic restrictions, legal constraints, and new consumer habits. the ambition is not to provide valid erga omnes answers, but to stimulate the individual company to ask itself the correct questions to be addressed, according to the situation. the acceptance of a paradoxical approach leads to rejecting the artificial simplification of the complexity that characterizes real contexts and, therefore, the use of a process for the management of the linear crisis that leads to dichotomous solutions of the “black or white” type or, however, to compromises of “grey.” instead, it leads to the use of a process for the management of the circular crisis to arrive at paradoxical solutions of the “black and white” type. starting from these premises, it is essential to combine the activities to be carried out “during” and “after” the crisis with those to be carried out “before” and “beyond” the crisis itself. approach an efte (estimate, feedback, talk, estimate) approach (nelms and porter, 1985) was employed. the methodology allowed to gather experts’ opinion on a particularly complex situation, like the one on covid-19 possible post-pandemic business models. nine experts coming from academia and the business consulting sector were involved in the analysis. the experts were selected based on their specific expertise. more precisely, the aim was to gather people with a multidisciplinary background, coming from sociology, business strategy, innovation, engineering and business processes, sustainability, marketing and communication, and public policies. experts were selected and invited within the network of the nine universities shaping the “smact competence center,” one of the eight highly specialized industry 4.0 competence centers born in italy on the initiajournal of business models (2021), online first 114 tive of the ministry of economic development. the smact competence center stands as a public-private body that systematizes the skills in the industry 4.0 field of research, technology providers and early adopter companies (smact, 2021). the protocol described by nelms and porter (1985) was employed during the investigation and observation, namely following these steps: 1. experts were given background information to be used in making opinion judgments; 2. experts gathered face-to-face in an e-conference room. questions regarding the background information were resolved by an appointed delphi manager, who also acted as the principal investigator of the study. discussion among the participants was encouraged. still, eventual problems of social interaction were avoided due to the different competencies of the participants. dedicated translation tools (bagnoli et al., 2021; dal mas et al., 2020; secundo et al., 2019) were employed to facilitate the dialogue, the sharing, and the creation of new knowledge. 3. a delphi questionnaire was given to each expert, which later needed to be filled and returned to the delphi leader. 4. the questionnaire results were summarized and shared within the group. 5. the feedback results were discussed freely in the group, still maintaining the anonymity of each individual’s survey response. 6. the processes terminated once sufficient stability was found, and a report was created (bagnoli et al., 2020), to summarize the results. key insights the strategic transformation of the business model a strategic transformation or innovation takes the form of creating a new market by developing a unique value proposition and, therefore, of a new business model (bagnoli et al., 2019; bagnoli, bravin, et al., 2018; nielsen et al., 2018; osterwalder and pigneur, 2010). the latter can be achieved through the development of: • innovative products (goods and/or services), presented or combined in a new way, to create a radically different experience in customers, involving them also on an emotional, intellectual and/or spiritual level; • innovative processes for the production and/ or distribution of existing or new products that may lead to the acquisition of new customer groups; • innovative value chains, to create a new market space which, making the competition irrelevant, allows for an increase in the value for both the company and the customer (klewitz and hansen, 2014; schneider and spieth, 2013; teece, 2010). in general terms, one of the first challenges that companies need to overcome is the classic paradox between pursuing a competitive strategy of differentiation, increasing the value perceived by the customer and, therefore, the selling price of the product, or cost leadership, by lowering the cost of producing the product, leveraging a lower offer, in whole or in part, to that of competitors. most of the companies resolve the paradox by trying to compromise the two opposing poles, meaning to invest in products that can be appreciated and valued by the target customers, still with an eye on cost reduction to keep a fair or moderate price. the process for implementing a strategic transformation may consist of four steps. step 1. mapping the current business model using the business model canvas. the starting point is defined for the (re)design of the business model, considering the company ’s strengths and weaknesses. the organization should identify the essential elements that distinguish each of the building blocks (value proposition, suppliers and supply channels, resources, internal and external processes, products and distribution channels, customers, and society). such an analysis should be conducted by filling in the single building blocks of journal of business models (2021), online first 115 the business model canvas. while the more traditional and well-known approach by osterwalder and pigneur (2010, 2012) would for sure fit the purpose, we would recommend using the revised version by biloslavo and colleagues (2018), as it includes the social dimension as a central element of today ’s most successful organizations, allowing to consider sustainability into the picture and develop sustainable business models (buser and carlsson, 2020; cosenz et al., 2020; glinik et al., 2020; lozano, 2018; lüdeke-freund et al., 2020). the business model canvas allows imagining what the characteristics of the future and desired business model will be, in this case, once the pandemic caused by covid-19 has passed or come to a “new normal” (cobianchi et al., 2020). the following figure 1 shows a possible framework for the analysis. step 2. identifying the uncertainties arising from the crisis by developing a scenario-planning process a scenario planning process allows identifying and connecting the socio-economic and technological variables that will drive the change and determine the new post-crisis reference context. more precisely, this step describes a specific collection of uncertainties, varying “realities” of what might happen in the future. the areas of reflection must cover all the aspects of the uncertainty: e.g. economic, political, social, legal, environmental. examples of the uncertainties developed during the study and the pandemic era have been: • political: e.g., the role of the european union (e.g. disintegration of the eu market and schengen area) and the brexit effect; • economic: e.g., economic recession following the pandemic and mandatory closure of businesses (carnevale and hatak, 2020); • social: e.g., the duration of the social distancing enforced measures and the consequent change in consumers’ and people’s habits (carnevale and hatak, 2020); • technological: e.g., use of devices like the internet of things iot for people tracing (wang et al., 2020) and of social media networks to communicate with the population (massaro et al., 2021); • environmental: e.g., “green waves” and new consumer habits; • legal: e.g., protectionism to support and boost local productions. step 3. evaluating the possible impacts of the identified uncertainties on the individual building blocks once the existing business model has been mapped and once the sector scenarios have been defined, it will be possible to identify the impacts on the single figure 1. the business model canvas framework (adapted from biloslavo et al. (2018)) journal of business models (2021), online first 116 building blocks, namely, which processes or actors may be more affected by the pandemic, the environmental changes, the enforced measured, and the new consumer habits. the building blocks which end up more impacted by the new scenarios should lead to new strategic choices, considering how to compromise among opposing options or interests. step 4. redesigning the business model to exploit the opportunity of the crisis last but not least, it is necessary to reflect on how to move from a diagnosis phase to a response phase to identify the projects that can guide the change in the business model. before deciding on any significant changes in the business model, it is essential to think about how the crisis will affect the existing performance metrics. the following table 1 illustrates the paradoxes, as identified by the expert panel, that companies should take into consideration in their analysis before the strategic choices are made. some examples can be reported (bagnoli et al., 2020). table 1 # phases and building blocks paradoxes 1 paradoxes for all the phases of the crisis all the phases practical experience vs theoretical knowledge 2 phase “before”: before the crisis scenario planning vs antifragility 3 prevention vs assurance 4 phase “throughout”: during the crisis keeping what is existing vs experimenting new solutions 5 phase “after”: to a new normal temporary vs permanent 6 continuous vs intermittent 7 phase “beyond”: strategic transformation once the crisis is over coming back to a “new normal” vs strategic transformation 8 waiting vs acting 9 contingent vs structural table 1. 50+ paradoxes to rethink post-pandemic business models journal of business models (2021), online first 117 table 1 # phases and building blocks paradoxes 10 paradoxes for all the building blocks society open vs closed 11 linear economy vs circular economy 12 global vs local 13 private vs public 14 shareholders vs stakeholders 15 sharing vs exclusivity 16 digital transformation vs human touch 17 leadership through gurus vs through sergeants 18 suppliers short supply chains vs long supply chains 19 concentrated supply chains vs extensive supply chains 20 partnerships vs markets 21 resources just in time vs safety stocks 22 human resources vs cyber-physical systems 23 workers vs it technicians table 1. 50+ paradoxes to rethink post-pandemic business models (continued) journal of business models (2021), online first 118 table 1 # phases and building blocks paradoxes 24 paradoxes for all the building blocks resources physical offices vs virtual offices 25 local staff vs worldwide talents 26 cash or guarantees 27 internal processes offshoring vs reshoring 28 office work vs remote work 29 isolated productive cells vs humanless production systems 30 production systems oriented to efficient flexibility vs redundant flexibility 31 external processes advertising image vs reassuring truth 32 offline vs streaming events 33 physical stores vs e-stores 34 sanitized "hand" deliveries vs automated deliveries 35 products offline vs online services 36 shared products vs personal ones 37 good looking vs safe packaging table 1. 50+ paradoxes to rethink post-pandemic business models (continued) journal of business models (2021), online first 119 table 1 # phases and building blocks paradoxes 38 self-sanitizing materials vs materials easy to sanitize 39 safety through innovation vs regulation 40 quality assurance vs safety assurance 41 low-cost goods vs sustainable goods 42 traditional vs smart appliances 43 products to support physical and virtual interaction with people vs robots 44 clients and markets “made-in” push markets vs covid-19-pull ones 45 global vs local markets 46 traditional market segments vs new consumer tribes 47 traditional market vs e-marketplace 48 essential needs vs transcendental aspirations 49 new necessities vs new habits 50 value proposition strengthening the culture and corporate identity vs changing to adapt to the new context table 1. 50+ paradoxes to rethink post-pandemic business models (continued) journal of business models (2021), online first 120 the mandatory closure of several non-essential factories and offices has had the effect of interrupting many enterprises’ production, causing the interruption of the supply by the global suppliers, especially the big ones located in china. such a disruption, referring to the “suppliers” building block, imposes companies to question whether short supply chains should replace long ones (paradox #18 of table 1). organizations will need to compromise between the need to stock up on global procurement markets and use local suppliers, even supporting the national economy ’s recovery. while the first option seems more convenient from a purely economic perspective, it highlights the risk to suffer one more supply interruption for health or political reasons. therefore, the pandemic has underlined the vulnerability of global supply chains, starting from the chinese one. again, the enforced closure of many factories and offices has had the effect of interrupting the production even of many western and local companies. therefore, they stopped the supplies to their customers, impacting the “resources” building block. to prevent disruptions in the availability of resources and goods, companies should then think of the best strategy to compromise the “just in time” stock management versus having enough safety stocks (paradox #21 of table 1). while, on the one hand, there is the need to encourage production philosophies that aim to optimize the entire production process, inventories may be essential to maintain the business. new “just in case” stock strategies may support to compromise between the two competing needs. still considering the “resources” building block, new frontiers emerge about human resource management. therefore, the opportunities and tools provided by the smart and remote work allow the company to think about whether to invest in local people or to open up to worldwide talents, who would not need to reside in the proximity of the firm’s plants or offices (paradox #25 of table 1). pre covid-19, the location of the corporate headquarters in a large and preferably world metropolis appeared as a decisive factor in attracting the best talents, thanks to the possibility of quickly reaching the workplace by train or subway. this might not be more true if companies moved their offices in the countryside, in healthier and cheaper contexts, allowing their employees to work remotely, enhancing the wellbeing and supporting the work-life balance. the closure of almost all public places like shops, theatres, cinemas, auditoriums, restaurants, gyms, and fitness centres, had that effect of replacing physical interactions with virtual ones, maximizing the use of e-stores and digital platforms and impacting the “external processes” building block. companies should then think if the pandemic has led to the definitive affirmation of e-commerce and home delivery or if there is still room for customers to enjoy the physical experience of purchase and/or consumption (paradox #33 of table 1). in china, the clerks of many chain stores (ex: red dragonfly) have been transformed into online vendors and restaurant waiters in food-delivery porters (e.g. ele.me, 7fresh of jd.com and meituan). new “ghost kitchens” were born; namely, restaurants aimed exclusively at delivery or takeaway, while deliveroo has announced its intention to invest in home shopping. discushesions and conclusions the covid-19 crisis impacts the individual business model’s building blocks and the relationships among them and, therefore, on the entire business model of several organizations. the possible choices at the level of the various elements of the business model should be consistent with each other. the main takeaway message of our study is the approach described in the paper, which should push organizations to identify the strategic paradoxes that the current crisis has brought out in their business model’s building blocks. the big challenge is mapping and understanding the most affected building blocks, recognizing the potential paradoxes suggested by the crisis, and rethinking the strategic choices to compromise between the opposing poles, needs, and interests. paradoxes can hardly be “fixed.” still, companies should try to “manage” them, not solve them, taking the chance to innovate their business model. innovating the strategy means, first of all, overcoming the paradox between increasing the value offered and lowering the cost of production, through a new journal of business models (2021), online first 121 value proposition, within a new market space. the pandemic crisis will probably lead to the destruction of many established markets, in some cases by accelerating (e.g. digital transformation) and in others slowing down (e.g. globalization) developments that were already underway in the competitive context. the pandemic crisis, therefore, has stressed the need for all companies to redefine their business model. some can limit themselves to polishing it. still, most organizations, namely the smaller, more fragile, and less digital ones and those operating in the sectors most affected by the constraints and consequences of covid-19 (like travels and tourism), are forced to change or rethink it radically. these reflections suggest a final strategic paradox to be faced for a company but, perhaps, first in importance, as regards its deep essence, the starting point necessary to redefine the business model consistently. the expert panel involved in the study identified the 51st paradox as the durability vs adaptation of corporate identity. a possible way to manage this strategic paradox is to refer to the concept of continuity. in this perspective, the central aspects of the corporate identity remain nominally the same, assuming, however, substantially, over time and space, different meanings to allow the company to adapt to the changed reference context. being an innovative company, for example, is an identity feature that can take on substantial and very different meanings over time and space, which require equally different action programs to be implemented. for example, today, developing products with self-sanitizing materials has become a central innovative element during the covid-19 crisis, which can lead to competitive advantage. before, this topic was yes present, still not central. persistence in expressing the corporate identity is also functional to reassure the organization members regarding business continuity, a critical aspect not to lose the best human resources due to the crisis. journal of business models (2021), online first 122 references bagnoli, c., biazzo, s., biotto, g., civiero, m., cucco, a., lazzer, g.p., massaro, m., et al. (2020), business models beyond covid-19 50+1 paradossi da affrontare per l’efficace gestione strategica di una crisi, venezia, available at:https://doi.org/10.13140/rg.2.2.22301.95202. bagnoli, c., bravin, a., massaro, m. and vignotto, a. (2018), business model 4.0, edizioni ca’ foscari, venezia. bagnoli, c., dal mas, f., lombardi, r. and nucciarelli, a. (2021), “translating knowledge through business model tensions. a case study.”, international journal of management and decision making, vol. 20 no. 2, pp. 182–197. bagnoli, c., dal mas, f. and massaro, m. (2019), “the 4th industrial revolution: business models and evidence from the field”, international journal of e-services and mobile applications, vol. 11 no. 3, pp. 34–47. bagnoli, c., massaro, m., dal mas, f. and demartini, m. (2018), “defining the concept of business model. a literature review”, international journal of knowledge and systems science, vol. 9, pp. 48–64. biloslavo, r., bagnoli, c. and edgar, d. (2018), “an eco-critical perspective on business models: the value triangle as an approach to closing the sustainability gap”, journal of cleaner production, vol. 174, pp. 746–762. buser, m. and carlsson, v. (2020), “developing new strategies towards environmental sustainability: small constructions companies experimenting with business models”, journal of business models, vol. 8 no. 2, pp. 101–114. carnevale, j.b. and hatak, i. (2020), “employee adjustment and well-being in the era of covid-19: implications for human resource management”, journal of business research, vol. 116 no. august, pp. 183–187. cobianchi, l., pugliese, l., peloso, a., dal mas, f. and angelos, p. (2020), “to a new normal: surgery and covid-19 during the transition phase”, annals of surgery, vol. 272, pp. e49–e51. cosenz, f., rodrigues, v.p. and rosati, f. (2020), “dynamic business modeling for sustainability: exploring a system dynamics perspective to develop sustainable business models”, business strategy and the environment, vol. 29 no. 2, pp. 651–664. dal mas, f., garcia-perez, a., sousa, m.j., lopes da costa, r. and cobianchi, l. (2020), “knowledge translation in the healthcare sector. a structured literature review”, electronic journal of knowledge management, vol. 18 no. 3, pp. 198–211. glinik, m., rachinger, m., ropposch, c., ratz, f. and rauter, r. (2020), “exploring sustainability in business models of early-phase start-up projects: a multiple case study approach”, journal of business models, no. in press. klewitz, j. and hansen, e.g. (2014), “sustainability-oriented innovation of smes: a systematic review”, journal of cleaner production, vol. 65, pp. 57–75. lozano, r. (2018), “sustainable business models: providing a more holistic perspective”, business strategy and the environment, vol. 27 no. 8, pp. 1159–1166. lüdeke-freund, f., rauter, r., pedersen, e.r.g. and nielsen, c. (2020), “sustainable value creation through journal of business models (2021), online first 123 business models: the what, the who and the how”, journal of business models, vol. 8 no. 3, pp. 62–90. massaro, m., tamburro, p., la torre, m., dal mas, f., thomas, r., cobianchi, l. and barach, p. (2021), “nonpharmaceutical interventions and the infodemic on twitter: lessons learned from italy during the covid-19 pandemic”, journal of medical systems, vol. 45 no. 50, available at:https://doi.org/https://doi.org/10.1007/ s10916-021-01726-7. nelms, k.r. and porter, a.l. (1985), “efte: an interactive delphi method”, technological forecasting and social change, vol. 28 no. 1, pp. 43–61. nielsen, c., lund, m., montemari, m., paolone, f., massaro, m. and dumay, j. (2018), business models: a research overview, routledge, new york. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, vol. 30, book, , available at:https://doi.org/10.1523/jneurosci.0307-10.2010. osterwalder, p. and pigneur, y. (2012), business model generator: a handbook for visionaries, game changes, and challengers, john wiley & sons inc. schneider, s. and spieth, p. (2013), “business model innovation: towards an integrated future research agenda”, international journal of innovation management, vol. 17 no. 1, p. 1340001. secundo, g., del vecchio, p., simeone, l. and schiuma, g. (2019), “creativity and stakeholders’ engagement in open innovation: design for knowledge translation in technology-intensive enterprises”, journal of business research, elsevier, no. april 2018, pp. 0–1. smact. (2021), “smact competence center”, what is smact competence center?, available at: https://www. smact.cc/ (accessed 20 february 2021). teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43 no. 2–3, pp. 172–194. wang, c.j., ng, c.y. and brook, r.h. (2020), “response to covid-19 in taiwan: big data analytics, new technology, and proactive testing.”, jama, vol. 323 no. 14, pp. 1341–1342. who. (2020), “coronavirus disease (covid-19) pandemic”, health topics, available at: https://www.who.int/ emergencies/diseases/novel-coronavirus-2019 (accessed 8 april 2020). journal of business models (2021), online first 124 carlo bagnoli msc, phd is a full professor of business policy and strategy at the department of management, ca’ foscari university of venice. he received a phd in business economics at ca’ foscari university of venice. he was visiting research fellow at the university of florida. he is the proponent and the scientific coordinator of the strategy innovation hub. he is also the founder and scientific director of strategy innovation srl: a ca’ foscari university spin-off focused on action research. his research interests include knowledge management, competitive strategy, and business model innovation. he is a member of the editorial advisory board of jobm. francesca dal mas msc, jd, phd is a senior lecturer in strategy and enterprise at the lincon international business school of the university of lincoln, uk. her research interests include the impact of new technologies on sustainable business models, knowledge management, and knowledge translation. she is a member of the editorial advisory board of jobm. helena biancuzzi jd, is completing her master degree in business economics. in 2018-19, she was a research fellow at the department of economics and statistics of the university of udine, italy. she is a member of ipazia, the observatory on gender research. in 2019 and 2020, she was the winner of the european grant digitahealtheurope in the context of digital single market strategy. she authored several papers in the field of public management, particularly in the healthcare sector, co-production processes, and knowledge translation. maurizio massaro msc, phd is an associate professor in digital management and control at the department of management of the ca’ foscari university of venice. his research interests include the impact of new technologies on sustainable business models, innovation, and knowledge management. he is the scientific chief of the mike – most innovative knowledge enterprise award for italy. about the authors 77 journal of business models (2021), vol. 9, no. 1, pp. 77-90 it is not only new trends and technologies that are currently disrupting and changing the way we do and think business. global geopolitical stability is deteriorating, leading to rising uncertainty for international trade. climate change is fostering the need for inclusiveness in business and for an increase in sustainability to the zero-impact level. in addition, we face exogenous shocks such as the covid-19 pandemic. although none of these factors are unforeseen, their magnitude and recurrence have provided a platform for a massive refocusing of business and research priorities since the beginning of 2020. therefore, the fifth stage of business model research will be known as “the role of business models in times of uncertainty”. in this paper we discuss the role of business models in times of uncertainty and provide new venues for further research and progression of business models as we know them. the fifth stage of business model research: the role of business models in times of uncertainty annabeth aagaard1 and christian nielsen2 please cite this paper as: aagaard, a. and nielsen, c. (2021), the fifth stage of business model research: the role of business models in times of uncertainty, journal of business models, vol. 9, no. 1, pp. 77-90 1 aarhus university, department of business development & technology, interdisciplinary centre for digital business development, herning, denmark 2 aalborg university business school, aalborg, denmark doi: https://doi.org/10.5278/jbm.v9i1.4246 abstract https://doi.org/10.5278/jbm.v9i1.4246 journal of business models (2021), vol. 9, no. 1, pp. 77-90 7878 introduction globalisation, open innovation ecosystems, digital technologies, and shared-economy services not only create new venues for delivering and capturing value, but also challenge traditional ways of defining and understanding business models and business model innovation. companies are increasingly required to adapt their business models (bms) to fit all the changing conditions of doing business today (teece, 2010; battistella et al., 2017). in doing so, firms are challenged to rethink their strategies and to transform parts (berman, 2012) or the entirety of their business models (weill & woerner, 2013). consequently, the ability to reconfigure bms can determine a firm’s survival and success (achtenhagen et al., 2013; battistella et al., 2017). today the concept of business models is a popular subject of interpretation and is recognized for its strategic importance in businesses (zott and amit, 2013). there are many perspectives on what roles business models should fulfil, such as “the business model as a blueprint of how a business creates and captures values” (osterwalder and pigneur, 2013), “the business model as a good story of how enterprises work” (magretta, 2002), “the business model as a framework” (chesbrough et al., 2002) and “the business model as an architecture and design of the businesses value-creation mechanisms” (teece, 2010). among the most debated characteristics of business models is how they interact with their surrounding environment(s), including strategic partners other stakeholders, and equally how the replacement or rejuvenation of business models within a company can be accomplished (doz and kosonen, 2010). to summarize, a business model represents the simplification and aggregation of a company ’s relevant activities (wirtz et al., 2010), and it defines the business’s value proposition and its approach to creating, delivering and capturing value (velu and stiles, 2013). the current global business temperature sets these aspects into a new context. a company may combine its approach to earning money through a set of activities and resources, creating a business model, and from that identify a viable strategy (casadesusmasanell and zhu, 2010). this means that, with each business model, the company chooses a specific way of competing (velu and stiles, 2013). it is through a dynamic process of experimentation, reconfiguration and change in business logic that managers can make use of business models as tools to address change and innovation (demil et al., 2015). however, the deterioration of global geopolitical stability is currently leading to rising uncertainty for international trade. climate change is fostering the need not only for inclusiveness in business but also to bring sustainability to the zero-impact level. in addition, there are exogenous shocks such as the covid-19 pandemic. thus, the objective of this paper is to depict and discuss how these game-changing trends can impact business model innovation while creating new pathways for research, business and university-industry interaction. our intention is to pose key questions for the new research directions and venues of business model innovation that are in their infancy in the fifth-stage literature currently in evidence, however without providing definitive answers. what does uncertainty do to companies? in exploring the notions of uncertainty, a distinction between risk and uncertainty must be made. this distinction is important in relation to business success. this is because risk can be quantified using probabilities, including conditional probabilities. however, uncertainty cannot be quantified: the unknowns are unknown. this requires very different management responses, coping mechanisms and entrepreneurial proclivities (teece & leih, 2016). according to giones et al. (2020), a shock like the covid-19 pandemic and its effects on conducting business requires a rebalancing of entrepreneurial action through internal frugal mechanisms as well as external (to the company) support mechanisms. due to uncertainties, companies will make different decisions than they otherwise would. in times of uncertainty, companies will seek safe-haven markets journal of business models (2021), vol. 9, no. 1, pp. 77-90 7979 that are not affected by current circumstances. traditionally, this would mean looking at high-growth areas or looking for customers in stable markets such as pharmaceutical and consumer staples. a second perspective is that companies will seek to adjust their cost and debt structures. in times of uncertainty, ridding yourself of debt and fixed costs is an advantage. however, in the current business environment, interest rates are so low that we might see companies repositioning to higher debt levels despite global uncertainty. the third aspect interlinks with the cost perspective. from a business model perspective, we expect to see companies partner up to a much greater extent. utilizing strategic partnerships, as nielsen and lund (2018) illustrate in their scalable business model patterns, reduces the risk of fixed costs and simultaneously encompasses the goal of increasing the value proposition to customers. why not be innovative? the different types of uncertainty listed above provide vastly differing challenges for companies. bartik et al. (2020) show that smes were able to adapt faster than larger companies. in describing six different types of crisis impacts on business models, ritter and pedersen’s (2020) evidence suggests very different impacts of the crisis following the covid-19 pandemic on business-to-business firms, and that understanding these differences is important for strategizing during the crisis but also for navigating successfully into the future. clearly, different industrial sectors are affected differently by uncertainties such as the global pandemic. global supply chains are affected by insecurities and regulations, as well as by the resulting global contraction. with regard to other types of uncertainties, such as those relating to sustainability, consumer involvement and the airing of consumer concerns will affect companies that do not live up to benchmark performance on, for example, emissions. according to giones et al. (2020), in times of higher uncertainty it is important to rebalance entrepreneurial action and managerial mindsets from a frugal perspective and to apply such lines of thinking to the frequency, intensity and formality of business planning in order to increase preparedness and resilience. in addition, companies should consider how uncertainties may create opportunities for business-model innovation. understanding how to deal with uncertainty in your current bm and in innovating your bm some studies provide insight into how decisionmakers cope with uncertainty in ambiguous contexts (schneckenberg et al. 2017, brillinger et al. 2020). various coping mechanisms assist decisionmakers in acting in strategic and entrepreneurial contexts that are subject to environmental unpredictability and variability (lanivich, 2015). for example, zhang and doll (2001) have examined the role of coping mechanisms for dealing with uncertainty in firm-level innovation processes. they found that managers deploy coping strategies of strategic orientation, directive management styles, and intense customer and supplier engagement to handle uncertainty. brillinger et al. (2020) present a set of 28 bm risk and uncertainty-factor groups structured according to the four areas of the bm canvas. as such, bm risk management can help to identify risk and uncertainty factors in existing business models and adapt or innovate them accordingly (girotra & netessine, 2011). however, schnenberg et al. (2017) stress that the investigation of coping mechanisms in innovation studies does not explain how managers cope with complexity and uncertainty in business model innovation. in this regard, nielsen (2020) indicates that the way a given company should address its bmi processes is dependent upon the strategic maturity of the management team and the company as a whole. a clear case for implementing adaptive mindsets seems to be developing. sosna et al. (2010) and martins et al. (2015) emphasize the importance of adaptive firm behaviour in phases of business-model development. in addition, taran et al. (2019) explore how the risk associated with the innovativeness of a business model, an organization’s risk appetite, and its risk management approach, interact to affect the success or failure of a business-model innovation process. their findings show that the company ’s risk appetite, the risk associated with the radicality, reach and complexity of the business model innovation, the company ’s awareness of these risks and their management, and above all the association bejournal of business models (2021), vol. 9, no. 1, pp. 77-90 8080 tween these factors, are central to bmi success and failure. yet, none of these studies address the role of coping mechanisms in handling uncertainty in decision making. business model innovation as response to external pressure one particular concern is that business models have to adapt and innovate in response to changes in the business environment or new technologies, or in order to leverage emerging opportunities (morris et al., 2005). such changes may require the innovation of existing business models, but could lead to the necessary establishment of completely new business models. as foss and saebi (2017) point out, the evolution of the bm literature can be categorized into three streams of research: 1) business models as classifications of business, 2) business models as antecedents of business performance and 3) business models as units of innovation. focusing on extending our knowledge in relation to business models as units of innovation is important. however, despite the fact that a positive relationship between business model renewal and performance is expected (teece, 2010), the exploitation of business model innovation often remains untapped (foss & saebi, 2018). according to frankenberger et al. (2013), the process of business model innovation can be defined as a process that deliberately changes the core elements of a company and its business logic. however, given that the nature of business models is recognized as being of strategic importance to businesses, the process of business model innovation remains an ambiguous concept (bucherer et al., 2012). the timing and requests for research on new venues for business model innovation has never been more extensive, as the need for game-changing business models is prevalent in the current air of disruption. consequently, the aim of this article is to explore models and theories related to business model innovation, and to contribute to the knowledge of how companies, organizations and networks can rethink, redesign, innovate and implement business models within rising contemporary issues such as companies’ digitalization and sustainability. these subjects have recently been described as under-researched by a number of authors (cf. wirtz and daiser, 2018; foss and saebi, 2018). in this normative contribution it is our intention to push the business model innovation (bmi) discussion into new territories and to indicate key or crucial trajectories for the development of the bmi field beyond 2030, with the intent to encourage reflection on the current and future research directions of bmi and the crucial process of enhancing the potential impact of bmi over the next decades. this is important for society as a whole, because while technology may solve problems, value is created through the immersion in viable and scalable business models that live up to the norms and standards expected in today ’s world. current developments and their impact on bmi current research has revealed many details about developments in bmi and its antecedents, from the early work of alt and zimmerman (2001) and teece (2007), to more recent works by foss & saebi (2017), wirtz and daiser (2017), and nielsen et al. (2018). in this paper bmi is viewed from the perspective of multiple individual disciplines such as technology, management and innovation. as noted by nielsen et al. (2018), contributions in the field of business model design and the innovation of business models typically revert to a singular disciplinary perspective towards an otherwise multidisciplinary construction. however, global trends and developments pose complications that call for far more cross-disciplinary developments relating to bmi, and developments that can factor in multiple stakeholder interests. there is a need for visionary lines of thought to guide future research as well as managerial decisions. this need for cross-disciplinarity is evident in three current research streams in the field that we wish to highlight below: 1. sustainability and bmi a timely special issue in the journal of business models addresses the fostering of crossdisciplinary business-model research, with the journal of business models (2021), vol. 9, no. 1, pp. 77-90 8181 aim of bridging sustainability issues and mainstream innovation for the sake of performance. sustainability and circular-economy priorities include customer-driven requests for sustainable innovations. sustainable business models stress other, more emotional, “values”, which may differ from individual to individual and from customer to customer. after all, who really defines what is considered sustainable? furthermore, the political focus in a circular economy does impact how value is dispersed in all the loops. in the conventional bm and bmi frameworks, only closed-loop consumptions are considered (linder & willander, 2017). important questions for a future research agenda relate to how circularity affects our existing understanding and models of a bm and how bmi is (re) created – also over time, and through different loops or cycles. 2. servitization and bmi in service-oriented business models, sustainable service-offerings are often co-created, and thus the customer’s perception of sustainable value plays a key part in (co-)creating and delivering value in these types of business models (aagaard & ritzen, 2019). with the rising focus on servitization in the last decade, research has also been conducted on service business models and product-service systems (bitner & brown, 2008). significant differences exist between product innovation and service innovation (lusch & nambisan, 2015), and numerous researchers have stressed the need for newer sets of theories and models of service innovation (e.g., edvardsson & olsson, 1996; fitzsimmons & fitzsimmons, 2000; sheehan, 2006), especially because the seminal bmi frameworks were developed from a product-centric perspective (hertog et al., 2010). hence, we may need to ask how the concept of servitization, and the creation, delivery and capture of value through a service-centric perspective, impacts existing bm models and our understanding of bmi. 3. digitalization and bmi in relation to industry 4.0 and digitalization of businesses, completely new ways of doing business and innovating businesses by using data to drive bmi (remane et al. 2017) have emerged. the exponential adoption of digital technologies in businesses has resulted in significant improvements in many business processes, and it plays a significant role in the field of bm and innovation (e.g., yoo 203 et al. 2012; holmstrom and partanen 2014; hylving 2015). for this reason, companies are moving from stand-alone organizations to multi-firm networks that perform collaborative innovation with partners, suppliers and customers in what are commonly referred to as open or collaborative environments. digital technologies and iot play key roles as enablers of communication and in the exchange of high-quality and timely information, in the sharing, storing and protection of knowledge, and in providing new platforms for developing existing businesses and totally new digital bms (aagaard, 2019a). consequently, established companies are progressively undertaking digital transformations not only to rethink what customers value but also to create operating models that take advantage of recent technological developments that enable competitive differentiation (berman 2012). 4. grand challenges and bmi over the past two decades, the notion of “grand challenges” (gcs) has gained increasing importance in management and organization studies. in this context we view gcs as “complex problems with significant implications, unknown solutions, and intertwined and evolving technical and social interactions” (eisenhardt et al. 2016, p. 1115). such gcs are focused on solving the complex, large-scale problems and challenges the world is facing such as climate change, war, poverty and migration (colquitt and george 2011; ferraro et al. 2015; george et al. 2016). for such problems, organizations bear the responsibility of both potentially causing and having the power to solve them. system-wide problems like gcs extend the boundaries of a single organization or community, and in which numerous diverse actors have multiple competing interests and journal of business models (2021), vol. 9, no. 1, pp. 77-90 8282 objectives (jarzabkowski et al., 2019). therefore, it becomes increasingly important to understand how organizations attempt to navigate the context of gcs, trying to understand and address them (colquitt and george 2011; george et al. 2016), but also how to develop new business models as industrial transformations as global grand challenges demand continuous innovations in products, programs, business processes, and strategies (ferraro et al., 2015). these four research streams provide examples of complex scenarios and problems that traditional, silo-based thinking is unable to solve. because the conduct of bmi research needs to contribute to the rethinking of value creation in an ever more complex business environment, where consumers have a voice through technologies and communication platforms, and where the applications of technology and resource use affect global energy-grids and ecosystems across international borders, a multidisciplinary point of departure is needed. therefore, the current understanding of these game-changing developments may be far too narrow. globalisation has been shown to create vulnerability, in response to which bmi is necessary to enhance value propositions and value capture. hui (2014) notes that when value creation in the traditional product-mindset shifts from solving existing needs in a reactive manner to addressing real-time and emerging needs in a predictive manner, filling out well-known frameworks and streaming established bms will not be sufficient to sustain competitiveness moving forward. therefore, when gut feeling is no longer the basis for business development decisions, and data suddenly drives bmi – how does that change the way we understand and conduct bmi (weill & woerner, 2013)? can our existing bm frameworks and theories fully capture the business potential of big data and digital technologies like ai, machine learning, algorithms etc.? and what about the roles of ethics, privacy and security in data-driven bmi? do these concepts have to be included in a version 2.0 of bmi frameworks to fully explore the business potential, as well as the barriers, in digital bmi? new streams of bmi contributions are required the questions above underline the potential for new streams of research and further innovative developments in the current understanding of bm and bmi. these are often advanced by global trends. current global awareness highlights a number of high-level trends such as globalization, democratization, digitalization and sustainability, as well as their effects and consequences for society, companies and collaboration, that need to be factored into the future business model innovation agenda – the fifth stage of business model research. globalization and grand challenges first, globalization is concerned with the liberalization and global integration of markets. from a business perspective it is therefore not just about outsourcing and outplacement, nor about internetbased commerce, but rather about understanding that new markets pose different relational challenges to companies. for example, one very timely and unintended challenge caused by globalization is the extremely fast and global spread of the coronavirus. when comparing this with the sars virus that was detected 20 ago, we see how over 20 years the vast increase in globalization and global travel has increased not only the world’s connectivity, but also its vulnerability, not just from a supply-chain perspective, but also in relation to the “export” of health and societal issues. so how do we ensure globalization and the internationalization of businesses and business model innovation in a sustainable way? these challenges may require working across disciplinary boundaries to solve technical problems, and engaging in political action to resolve social ones. furthermore, this literature invites us to think about tentative, temporal and fragmentary solutions to such grand challenges (martí, 2018). so what is the role of transformative business models in partially or radically transforming lived realities and in addressing important societal grand challenges? leveraging grand challenges through bmi has significantly broadened the conceptualization of what business models are and entail (hart et al. 2016). journal of business models (2021), vol. 9, no. 1, pp. 77-90 8383 democratization and the role of bottom of the pyramid markets the second perspective, democratization, as we understand it here, is related to creating vibrant democracies in the third world and engaging with the bottom of the pyramid (bop) markets that will drive entrepreneurship and growth as political equality is followed by economic equality. however, this may impede sustainability in the short term, if it is not addressed with care and included in relevant policies. here the notion of creating strategic partnerships where there is a reciprocal, positive value creation can be an important business model innovation mechanism (aagaard, 2019b). in the context of bmi through bop markets, more scholars reframe the value construct and extending the one-dimensional shareholder logic of profit maximization to more stakeholders and levels of attention (upward and jones 2016; pedersen et al. 2016; schaltegger et al. 2016). one example hereof is fairtrade. in supporting the institutionalization of fairtrade, companies indirectly reduce poverty and asymmetries between suppliers and retailers though sustainable consumption. although the prerequisite for companies in developing fair trade engagements is access to ngo resources and capabilities related to, for example, training activities aimed at small local farmers in developing countries (senge et al. 2006), there is some evidence in the literature on business-ngo collaborations that these collaborations sometimes emerge from ngo pressures and activism in a similar vain to regulative innovations (argenti 2004; linton 2005; perez-alemann and sandilands 2008). however, in most bop articles poverty is still “viewed predominantly through an economic lens” (nahi 2016, p. 426). yet, there might be an illusory celebration of how different business models contribute to alleviating it solely through market mechanisms (nahi 2016). this is addressed with the bmi distinctions made by schaltegger et al. (2012) of defensive, accommodative and proactive bmis, and the distinction between isolated and interactive business models, as emphasized by sánchez and ricart’s (2010). summarizing, this line of research highlights the potentials of business models to transform the quality of life of the poor, the disenfranchised, the marginalized, and even nonhuman stakeholders (duke, 2016). data-driven business third, digitalization is not just about increasing the speed and reach of communication. machine learning, artificial intelligence and big data algorithms (katsamakas and pavlov, 2020) will also play an important part in bmi decisions and ml-based business models. with intelligent devices becoming interconnected, new developments have created associated infrastructure and an expanding knowledge base, and these innovative combinations are being reflected in enterprise as data-driven or digital business models (kiel et al., 2016). el sawy and pereira (2013) emphasize how, over time, the role of it in business has changed from a connectivity view (it as a communication channel) through an immersion view (it as an operating environment) to a fusion view (it as fabric), where modular digital platforms are adapted and interconnected in different ways. these digital ecosystems enable the possibility of combining data and capabilities across boundaries into innovative new offerings and solutions to create and capture also new types of value. westerlund et al. (2014) developed the value design model as a new approach toward data-driven business modeling, while proposing a shift from a vendor-centric to a network-centric view. this requires companies to make a radical mental shift from the conventional way of thinking about bmi. thus, where the value design model proposes a holistic view of the business modeling building blocks by identifying the value flows between the dimensions, the most applied bmi framework, business model canvas, by osterwalder and pigneur (2010) isolate the building blocks. we therefore argue that the complexity of data-driven value (co-)creation and bmi (e.g. across digital platform systems) is not supported and covered by existing bmi frameworks. the main criticism is the absence of the technical features of the iot architecture, as these bmi framework models were invented when the concept of data-driven bmi and the internet-of-things had not been coined yet. this arguably makes it challenging for users to stimulate ideation of iot driven business model innovations (aagaard, 2019). thus, further research and new bmi frameworks need to identify, incorporate and support new data-driven and digitally enabled bmi. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8484 sharing economy finally, sustainability is not just about efficiency of resource use and the circular or shared economy. in the longer term, it must also encompass notions of value dispersion amongst stakeholders (lüdekefreund et al., 2020). in current economic systems in industrialized market economies, the dominant logic of a manufacturing company is that it delivers its product in exchange for money. in a circular economy this logic has to be changed, emphasizing the need to focus on value delivery instead of product delivery (ritzén, 2019). the detachment of economic growth from consumption of natural resources requires larger shifts in society than that of manufacturing firms merely detaching their businesses from delivering physical goods (kirchherr et al., 2017). thus, in the traditional bm literature, business models are generally perceived from “a value creation perspective that focuses on satisfying customer needs, economic return and compliance” (bocken et al. 2015: 70). however, recent attempts to uncover value destroyed, value missed, and value co-created point towards a more holistic view of value that integrates social and environmental goals, while examining the value created for all actors involved (pedersen et al. 2018; schaltegger et al. 2012, 2016). the new models of sharing, swapping, trading, and lending, labelled as the “sharing economy” (botsman and rogers 2010) have sparked the public debate about the potential of sharing organizations’ contribution to social, ecological, and economic goals. one line of research views the sharing economy as a key contributor in achieving social and ecological values and in supporting the transformation of the economy towards sustainability (heinrichs 2013). another stream of research addresses the potentially negative impacts of sharing models on society that may lead to “hyper-capitalism” and a “neoliberal nightmare” (martin 2016; scholz 2016). however, as the sharing economy is an emerging field characterized by a number of unsettled debates, more research is needed on the comparison of value propositions with actual effects of sharing organizations and the development of sharing categories in fields over time (wruk et al., 2019). concluding remarks in conclusion, bmi is important, bmi is difficult, and to complicate it even further, bmi needs to innovative to stay relevant in the light of current global trends. hence, we feel that bmi needs a visionary platform that reaches beyond current states and frameworks. we hope to provide this in a series of contributions to an edited palgrave macmillan book publication, with an introduction and discussion to contemporary issues that require new research directions, understanding, methods and models of transformative business model innovation fit for the next decades; and the application of ante-narratives to bmi that will help envisage future states. further research and future trajectories could, for example, envisage 1) bmi that embraces the financing of growth and focuses on the importance of embedding financialization into the bmi process, 2) bmi for technology development, that feeds back to technology and product development, 3) the role of bmi in tackling grand challenges and in developing truly sustainable business, 4) bmi for data-linked services such as smart cities and iot-based business models, and ecosystem perspectives that go beyond jacobides’ understandings, and 5) bmi for and from open innovation in sustainable ecosystems across the globe: how is trans-industrial bmi facilitated, and how does circularity affect our bmi frameworks; what are the mechanisms, necessary transactions and types of contracting? the requests for new ways of viewing the concept of value, the role of business, and the interconnectivity of ecosystems, society and the environment are obvious theoretically and empirically, and so is the need for change in how we conduct and develop our businesses for the future and future generations. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8585 literature aagaard, a. (ed.) (2019a). digital business models – driving transformation and innovation. palgrave macmillan. aagaard, a. (ed.) (2019b) sustainable business models innovation, implementation and success. palgrave macmillan. aagaard, a. & ritzén, s. (2019). the critical aspects of co‐creating and co‐capturing sustainable value in service business models. creativity and innovation management, 29(2). achtenhagen, l., melin, l. & naldi, l. (2013). dynamics of business models – strategizing, critical capabilities and activities for sustained value creation. long range planning, 46, 427-442. alt, r., & zimmermann, h. d. (2001). preface: introduction to special section–business models. electronic markets, 11(1), 3-9. argenti, p.a. 2004. collaborating with activists: how starbucks works with ngos. california management review 47 (1): 91-116. bartik, a. w., bertrand, m., cullen, z., glaeser, e. l., luca, m., & stanton, c. (2020). the impact of covid-19 on small business outcomes and expectations. proceedings of the national academy of sciences, 117(30), 17656-17666. battistella, c., de toni, a. f., de zan, g. & pessot, e. (2017). cultivating business model agility through focused capabilities: a multiple case study. journal of business research, 73, 65-82. berman, s. j. (2012). digital transformation: opportunities to create new business models. strategy & leadership, 40, 16-24. bitner, m. j., & brown, s. w. (2008). the service imperative. business horizons, 51, 39– 46. bocken, n., rana, p., & short, s. w. (2015). value mapping for sustainable business thinking. journal of industrial and production engineering, 32(1), 67–81. botsman, r., & rogers, r. (2010). what’s mine is yours: the rise of collaborative consumption. new york: harperbusiness. brillinger, a., els, c., schäfer, b. & bender, b. (2020) business model risk and uncertainty factors: toward building and maintaining profitable and sustainable business models. business horizons, 63(1), 121-130. bucherer, e., eisert, u., & gassmann, o. (2012). towards systematic business model innovation: lessons from product innovation management. creativity and innovation management, 21(2), 183-198. casadesus-masanell, r. & zhu, f. (2010). strategies to fight ad-sponsored rivals. management science, 56, 1484–1499. chesbrough, h., & rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin‐off companies. industrial and corporate change, 11(3), 529-555. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8686 colquitt, j. a., & george, g. (2011). publishing in amj: topic choice. academy of management journal, 54, 432–435. demil, b., lecocq, x., ricart, j. e., & zott, c. (2015). introduction to the sej special issue on business models: business models within the domain of strategic entrepreneurship. strategic entrepreneurship journal, 9, 1–11. doz, y. l., & kosonen, m. 2010. embedding strategic agility: a leadership agenda for accelerating business model renewal. long range planning, 43, 370–382. duke, d. (2016). why don’t bop ventures solve the environmental problems they initially set out to address? organization and environment, 29(4), 508–529. edvardsson, b., & olsson, j. (1996). key concepts for new service development. the service industries journal, 16(2), 140–164. eisenhardt, k. m., graebner, m. e., & sonenshein, s. (2016). grand challenges and inductive methods: rigor without rigor mortis. academy of management journal, 59(4), 1113–1123. el sawy, o.a., and f. pereira. 2013. digital business models: review and synthesis, chapter 2 in business modelling in the dynamic digital space: an ecosystem approach, 13–20. new york: springer. ferraro, f., etzion, d. & gehman, j. (2015). tackling grand challenges pragmatically: robust action revisited. organization studies 36(3) 363-390. fitzsimmons, j. a., & fitzsimmons, m. j. (2000). new service development: creating memorable experiences. thousand oaks, ca: sage. foss, n. j., & saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43, 200–227. foss, n. j., & saebi, t. (2018). business models and business model innovation: between wicked and paradigmatic problems. long range planning, 51(1), 9-21. frankenberger, k., weiblen, t., csik, m. & gassmann, o. (2013). the 4i-framework of business model innovation: a structured view on process phases and challenges. international journal of product development, 18(3/4), 249-273. george, g., howard-grenville, j., joshi, a., tihanyi, l. (2016). understanding and tackling societal grand challenges through management research. academy of management journal 59(6). giones, f., brem, a., pollack, j. m., michaelis, t. l., klyver, k., & brinckmann, j. (2020). revising entrepreneurial action in response to exogenous shocks: considering the covid-19 pandemic. journal of business venturing insights, 14, e00186. girotra, k., & netessine, s. (2011). how to build risk into your business model? smart companies design their innovations around managing risks. harvard business review, 89(5), 100-105. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8787 hart, s., sharma, s., & halme, m. (2016). poverty, business and sustainable development. organization and environment, 29(4), 401–415. heinrichs, h. (2013). sharing economy: a potential new pathway to sustainability. gaia-ecological perspectives for science and society, 22(4), 228–231. hertog, d. p., van der wietze, a., & de jong, m. w. (2010). capabilities for managing service innovation: towards a conceptual framework. journal of service management, 21, 490– 514. holmström, j., and j. partanen. 2014. digital manufacturing-driven 655 transformations of service supply chains for complex products. supply chain management: an international journal 19 (4): 421–430. hui, g. 2014. how the internet of things changes business models. harvard business review 92: 1–5. hylving, linder, m. & williander, m. (2017). circular business model innovation: inherent uncertainties. business strategy and the environment, 26, 182–196. jarzabkowski, p., bednarek, r., chalkias, k. & cacciatori, e. (2019) exploring inter-organizational paradoxes: methodological lessons from a study of a grand challenge. strategic organization 17 (1), 120-132. katsamakas, e. and pavlov, o (2020), ai and business model innovation: leverage the ai feedback loops, journal of business models, vol. 8, no. 2, pp. 21-30 kiel, d., arnold, c., collisi, m., voigt, k. i. (2016). the impact of the industrial internet of things on established business models. in proceedings of the 25th international association for management of technology (iamot) conference, orlando, florida, usa, may 15-19. kirchherr, j., d. reike, and m. hekkert. (2017). conceptualizing the circular economy: an analysis of 114 definitions. resources, conservation and recycling 127: 221-232. lanivich, s.e. (2015) the rich entrepreneur: using conservation of resources theory in contexts of uncertainty. entrepreneurship theory and practice, 39, 4, 863–894. linder, m. & williander, m. (2017). circular business model innovation: inherent uncertainties. business strategy and the environment, 26, 182–196 linton, a. (2005). partnering for sustainability: business ngo alliances in the coffee industry. development in practice 15 (3-4): 600-614. lüdeke-freund, f., r. rauter, e.r.g. pedersen and c. nielsen. (2020), sustainable value creation through business models: the what, the who and the how, journal of business models, vol. 8, no. 3, pp. 62-90 lusch, r. f., & nambisan, s. (2015). service innovation: a service‐dominant logic perspective. mis quarterly, 39, 155– 176. magretta, j. (2002). why business models matter. harvard business review, boston, 80(5), 86-92. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8888 martí, i. (2018). transformational business models, grand challenges, and social impact journal of business ethics, 152, 965–976 martin, c. j. (2016). the sharing economy: a pathway to sustainability or a nightmarish form of neoliberal capitalism? ecological economics, 121, 149–159. martins, l.l., rindova, v.p., and greenbaum, b.e. (2015) unlocking the hidden value of concepts: a cognitive approach to business model innovation. strategic entrepreneurship journal, 9, 1, 99–117. morris, m., schindehutte, m., & allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research, 58(6), 726-735. nahi, t. (2016). cocreation at the base of the pyramid: reviewing and organizing the diverse conceptualizations. organization & environment, 29(4), 416–437. nielsen, c., montemari, m., paolone, f., massaro m., dumay j. and m. lund. (2018). business models: a research overview. london, routledge. nielsen, c., & lund, m. (2018). building scalable business models. mit sloan management review, 59(2), 65-69. nielsen, c.  (2020).  er i modne til at arbejde med forretningsmodeller?  aalborg university business school, working paper. osterwalder, a., & pigneur, y. (2013). designing business models and similar strategic objects: the contribution of is. journal of the association for information systems, 14, 237–244. pedersen, e., gwozdz, w., & hvass, k. k. (2018). exploring the relationship between business model innovation, corporate sustainability, and organisational values within the fashion industry. journal of business ethics, 149, 267–284. perez-batres, l., doh, j., miller, v. & pisani, m. (2012). stakeholder pressures as determinants of csr strategic choice: why do firms choose symbolic versus substantive self-regulatory codes of conduct? journal of business ethics 110 (2): 157-172. remane, g., hanelt, a., nickerson, r. c., & kolbe, l. m. (2017). discovering digital business models in traditional industries. journal of business strategy, 38, 41–51. ritter, t., & pedersen, c. l. (2020). analyzing the impact of the coronavirus crisis on business models. industrial marketing management, 88, 214-224. ritzén, s. (2019). managing innovation for circular industrial systems. in sustainable business models innovation, implementation and success. palgrave macmillan. sánchez, p., & ricart, j. e. (2010). business model innovation and sources of value creation in low-income markets. european management review, 7, 138–154. schaltegger, s., hansen, e., & lüdeke-freund, f. (2016). business models for sustainability: origins, present research, and future avenues (editorial). organization & environment, 29(1), 3–10. journal of business models (2021), vol. 9, no. 1, pp. 77-90 8989 schaltegger, s., lüdeke-freund, f., & hansen, e. (2012). business cases for sustainability: the role of business model innovation for corporate sustainability. international journal of innovation and sustainable development, 6(2), 95–119. scholz, t. (2016). platform cooperativism—challenging the corporate sharing economy. new york: rosa luxemburg stiftung. schneckenberg, d., velamuri, v. k., comberg, c. & spieth, p. (2017). business model innovation and decision making: uncovering mechanisms for coping with uncertainty. r&d management, 47(3), 404-419. senge, p.m., dow, m. & neath, g. (2006). learning together: new partnerships for new times. corporate governance 6 (4): 420-430. sheehan, j. (2006). understanding service sector innovation. communications of the acm, 49( 7), 43– 47. sosna, m., trevinyo-rodrıguez, r.n., and velamuri, s.r. (2010) business model innovation through trial-and error learning: the naturhouse case. long range planning, 43, 2, 383–407. taran, y., goduscheit, r. c. & boer, h. (2019). business model innovation – a gamble or a manageable process? journal of business models, 7(5), 90-107 teece, d. j. (2007). explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. strategic management journal. 28, pp. 1319-1350 teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43, 172–194. teece, d. & leih, s. (2016). uncertainty, innovation, and dynamic capabilities: an introduction. california management review, 58(4), 5-12. upward, a., and p.jones. (2016). an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science. organization and environment 29 (1): 97-123. velu, c., & stiles, p. (2013). managing decision-making and cannibalization for parallel business models. long range planning, 46, 443–458. weill, p., & woerner, s. l. (2013). optimizing your digital business model. mit sloan management review, 54, 71. westerlund, m., s. leminen, and m. rajahonka. 2014. designing business models for the internet of things. technology innovation management review, 4(7): 5–14. wirtz, b. w., schilke, o., & ullrich, s. (2010). strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43, 272–290. wirtz, b., & daiser, p. (2017). business model innovation: an integrative conceptual framework. journal of business models, 5(1), 14-34. wirtz, b.w. and p. daiser (2018), business model innovation processes: a systematic literature review, journal of business models, 6(1), 40-58 journal of business models (2021), vol. 9, no. 1, pp. 77-90 9090 wruk, d., oberg, a., klutt, j. & maurer, i. (2019. the presentation of self as good and right: how value propositions and business model features are linked in the sharing economy. journal of business ethics, 159, 997–1021. yoo,y., boland, r. j., lyytinen, k. and majchrzak, a. (2012). organizingfor innovation in the digitized world. organization science 23 (5): 1398–1408. zhang, q. and doll, w.j. (2001) the fuzzy front end and success of new product development: a causal model. european journal of innovation management, 4(2), 95–112. zott, c., & amit, r. 2013. the business model: a theoretically anchored robust construct for strategic analysis. strategic organization, 11, 403–411. i journal of business models (2021), vol. 9, no. 4, pp. i-ii editorial it is especially pleasing to be able to able to publish a second standard issue of the journal of business models in 2021, a year in which covid-19 returned with a vengeance to further disrupt just about every aspect of our daily lives. as i write this editorial there are signs that some countries are contemplating reintroducing measures designed to contain worrying increases in the incidence of the virus. at the same time we now have a number of vaccines that have proven effective in combatting its severity amongst populations. these vaccines are complemented by a growing range of administrative arrangements designed to further contain the transmission of the virus, one of which is the development of digital vaccination certificates. it is fitting, therefore, that one of the papers in this issue, contributed by liina joller, documents the development of a vaccination certificate using the platform business model framework. the issue contains a further three full length papers, together with three short papers. there is also the first book review to be published in the journal, raphael amit and christoph zott’s business model innovation strategy, published in 2021 by john wiley and sons. we aim to publish further reviews in coming issues. in june we learned that the journal had been listed on the academic journal guide (ajg) for the first time. formerly referred to as the abs (association of business schools) list, in recent years the ajg has become increasingly influential across business and management disciplines as they pursue reliable indicators of academic publication quality. this listing has been achieved after only eight years of activity as a locally-funded, open-source outlet for work in the business model field. we are particularly happy to see that the ajg identifies us within its strategy sub-list, alongside many long-established and widely recognised journals. many thanks to everyone who has contributed to the progress we have achieved over the past eight years. as we approach 2022, we do so with a recently established expanded editorial structure. two new associate editors have been recruited: annabeth aagaard will assume responsibility for the development of a thematic section focused on digitalisation and business models; and florian ludeke-freund who will be responsible for the development of a thematic section focused on the sustainability and business models. marco montemari continues as the associate editor for short papers and the business model conference special issue, with irina atkova now looking after the publication of an increased number of special issues. mette rasmussen also continues as managing editor alongside myself and christian nielsen in our existing roles. it is envisaged that further associate editors may be recruited as the business model field continues to develop. as the scale of activity has increased, and hopefully will continue to do so, we have become conscious doi: https://doi.org/10.5278/jbm.v9i4.7014 issn: 2246-2465 https://doi.org/10.5278/jbm.v9i4.7014 journal of business models (2021), vol. 9, no. 4, pp. 112-113 iiii that we need to improve the review and throughput process to provide a better service to our various stakeholders. the present submission guidelines are under review, with the intention of ensuring that all submissions are sufficiently well developed to enter the existing double-blind peer review process. members of both the editorial advisory board and editorial board are being invited to commit to undertaking more reviews in the future, while the database of ad hoc reviewers will initially be slimmed down. the editorial team has also begun to identify colleagues who they believe should be invited to become associated with the journal as we seek to enhance its present academic status. the journal’s website will be amended to reflect all of these changes. following a very successful business model conference 2021 in copenhagen in early october, we took the decision to strengthen the link between the journal and the conference. three issues of collected short papers submitted to previous conferences have been published, with a collection from the copenhagen conference presently under development for publication in early 2022. previous conferences have also provided papers for special issues. we feel the link could now be beneficially further highlighted, thereby attracting a wider level of interest and in turn a higher quality of submissions to the journal. information regarding the 2022 conference, to be held in lille next june, will feature this process. further initiatives to strengthen the profile of the journal are also under discussion. a fuller use of the communication technologies now available the academic and business model communities will soon become evident. again, many thanks to everyone who has contributed to the progress that the journal of business models has made since its launch in 2013. on behalf of the editorial team, i hope you find the content of the present issue valuable and that it encourages you to continue your association with the journal. robin roslender, editor-in-chief aalborg university business school december 2021 i journal of business models (2021), vol. 9, no. 1, pp. i-v editorial: introduction to the special issue based on papers submitted at the business model conference 2020 the covid-19 pandemic has caused many events around the world to be cancelled, including the business model conference 2020. the conference chairs, the scientific committee, and the conference committee discussed the possibility of hosting an online conference but thought that meeting virtually would not have provided participants with the same sense of community feeling experienced in previous years, when the business model conference brought together international academics and practitioners from a multitude of disciplines to discuss the latest research and innovative teaching methods. therefore, the decision was made to cancel the 2020 conference. despite this, the editorial board of the journal of business models did not want the papers submitted to be a wasted effort; thus, it selected and reviewed the 11 papers included in this special issue. originality, significance, and rigor were the three criteria that guided the selection and the review process, leading to a mix of papers that tackle business model issues from different angles and employ different research methods. let me briefly introduce these papers by focusing mainly on their objectives and respective contributions. bini et al. (2020) discuss the relevance of investigating how preparers and users of corporate reporting understand and consider the business model concept in order to provide insights on the underlying reasons for, and antecedents of, the current disclosure levels. as a matter of fact, different conceptualizations of the business model might lead preparers and users to consider different items as part of the business model or to assign different meanings to the concept. the authors argue that there are at least two main issues that could be considered potential sources of “meaning gaps” in relation to the business model concept: first, the lack of a unique and common definition of the business model and its main components and second, the relationships between the business model concept and related management concepts, like corporate strategy and value chains. such a gap reduces the effectiveness of the information flow because the message intended by the issuer changes meaning once it reaches the recipient. this discussion underscores the challenges that actors involved in the regulation process need to overcome to avoid future failures of regulatory initiatives. please cite this paper as: : montemari m. (2021), editorial: introduction to the special issue based on papers submitted at the business model conference 2020, journal of business models, vol. 9, no. 1, pp. i-v doi: https://doi.org/10.5278/jbm.v9i1.6613 https://doi.org/10.5278/jbm.v9i1.6613 journal of business models (2021), vol. 9, no. 1, pp. i-v iiii da silva (2020) investigates the mechanisms, elements, and processes of business model innovation and change. in particular, the author starts from the consideration that companies may change their business models by importing analogies from other contexts; this leads him to explore how managers within one industry can leverage interorganizational collaborations to create a new business model. through an inductive case study of an automotive gps navigation company, the author demonstrates that organizations can enact three practices: the first one is activation, which entails a clash between familiar and unfamiliar knowledge; the second one is combining, which fosters a socially constructed projection of the future; and the third one is calibration, through which an alignment of interests among partners is reached. golzarjannat et al. (2020) explore business model configurations and components for digitalized ecosystem contexts. through the analysis of the ecosystem elements (outcomes, structure, processes, contingencies) and the 4c business model typology (connection, content, context, commerce), the authors map and shed light on the main features of a port ecosystem, i.e., an example of a context where a group of interconnected players work fruitfully together to create value and gain benefits. the findings indicate that a shift in port ecosystem goals is expected to take place as modern network communication, and computing technologies offer opportunities for trustworthy mobile connectivity, data storage, transfer, and analytics, with external services and resource optimization in the port. overall, these elements are expected to improve the revenues of the whole ecosystem. kringelum et al. (2020) explore how business model interdependencies can affect the process of business model innovation. while business model research often reflects an assumption of unlimited flexibility in how firms can expand or renew their business, a company ’s freedom to innovate its business model can be restricted. through an exploratory multiple case study conducted in the danish sea freight container sector, the paper illustrates how a company ’s position in a given supply chain impacts how easily it can innovate, especially if positioned “unfavorably”. in particular, the paper shows how firms embedded in highly integrated supply chains can experience business model lock-in due to industry path dependency, thus showing that all companies do not have the same degree of freedom in terms of innovating their business model. the implication is that firms must carefully consider their supply chain positions when they launch new products or services, as their choices can have a major impact on their ability to innovate in their business models. montakhabi and van der graaf (2020) offer an analysis of the actionability of open business models in the context of european competition policy. despite open business models being considered extremely useful for companies to create and capture value in collaboration with external partners, there may be something of a blind spot in existing policies because of their novelty, or existing policies may work as a barrier to unlocking their potential. the analysis developed in the paper can, on the one hand, assist companies to adjust their collaboration strategies for the european market, structure their collaborative activities better, anticipate key challenges, and develop relevant capabilities to benefit from collaborative models. on the other hand, the analysis supports policy makers wanting to incorporate new business models in the competition policy framework in order to unlock the potential benefits of collaboration. novikova (2020) investigates the business model transformation of a service provider on a sharing economy platform using a dynamic business model perspective. despite these providers playing a critical role within the context of the sharing economy, little is known about the features of their business models or about how they develop their business models over time. through a single case study of a “host” on the peer-to-peer accommodation platform airbnb, the author documents its process of business model transformation along four dimensions: resource structure, organization structure, value proposition, and process dimension. overall, the paper demonstrates that the service provider adopted a discovery driven approach in the process of business model transformation, thereby embracing the interplay of “trial-and-error experimentation” with emerging opportunities and exercising “entrepreneurial judgement” in carrying out new combinations of resources. journal of business models (2021), vol. 9, no. 1, pp. i-v iiiiii ropposch et al. (2020) explores whether the business ideas of digital entrepreneurs develop within the opportunity discovery or the opportunity creation context and what digital levels their business models have in this context. within the first, opportunities exist unrelated to a person’s activities and are simply waiting to be discovered and used. in the opportunity creation context, opportunities do not yet exist but are created if an entrepreneur develops them in an iterative process of acting and reacting. in order to address this issue, the authors conducted ten semi-structured interviews with digital entrepreneurs, and they show that an extreme level of digitalization is more likely in companies operating in the discovery context than in companies operating in the creation context. this happens because entrepreneurs in the creation context devote greater energy to developing their business idea than to dealing with the issue of the company ’s appearance and operations with regard to digitalization, while entrepreneurs in the opportunity discovery context focus more strongly on digitalization, since more information about their customers and competition is already available. roslender and sort (2020) reflect on some of the main issues pertaining to the discussion regarding business models, accounting, and reporting. starting from the continuing failure of accounting to prioritize an engagement with the business model literature, the paper explores why managerial accounting has, to date, been no more enthused about the business model concept than financial accounting and reporting. by analyzing the evolution of managerial accounting techniques and approaches, the authors suggest that accounting for some elements of the business model has already been examined by the accounting profession, largely unsuccessfully. in order to address this issue, the authors identify a promising approach consisting in letting companies document their ambition to do business in the form of an outcome “story” of value creation, delivery, and capture. this approach enables business model elements and related key value drivers to be identified, enabling management accountants to supply the narrative, i.e., the account. sort et al. (2020) employ the business model configuration theoretical lens to propose a framework that facilitates theoretical and practical understanding of how re-internationalized firms identify and pursue appropriate international growth trajectories by re-configuring their business models, as a response to their previous de-internationalization decisions. such a framework can be considered one of the first attempts to link “de” and “re” internationalization challenges and opportunities with business model configuration literature. thus, it represents a practical, strategic learning toolkit available to firms, not only help them understand the aftermath of their deinternationalization experience but also to inspire them with a list of different avenues that could kickstart their future international growth strategies. trischler et al. (2020) start from the consideration that researchers mainly focus on the strategic dimension of platform-based business models, while tactics to build and evolve them require, and deserve, additional attention. in order to address this issue, the authors propose a framework for platform tactics covering four context dimensions (platform attributes, core product, governance, ecosystem) and four lifecycle phases (birth, expansion, leadership, renewal). from a theoretical perspective, the framework helps scholars to cluster and categorize the contributions of different platform literature streams, thus providing a holistic understanding and mapping of the tactics proposed in literature along a temporal and contextual dimension. from a practical point of view, the framework offers guidance on the range of activities that are necessary to implement and competitively operate platform-based business models. nielsen and aagaard (2020) discuss the role of business models in times of uncertainty and provide new venues for further research. the global geopolitical instability, the increasing attention to sustainability and   digitalization,  as well as exogenous shocks, such as the covid-19 pandemic, are currently disrupting and changing the way companies  do and think business. thus, these factors, as well as their effects and consequences for society, companies and collaboration, need to be factored into the future business model innovation agenda – journal of business models (2021), vol. 9, no. 1, pp. i-v iviv the fifth stage of business model research. following along these lines, the authors pose key questions and identify new research directions of business model innovation along four streams: globalization and grand challenges, democratization and the role of  bottom-of-the-pyramid  markets, data-driven business, and sharing economy. allow me to emphasize that this is a special issue composed of short papers, an innovative publication format adopted by the editors of the journal of business models, designed to fast-track the publishing process and thereby accelerate the development of business model research. this objective is reached thanks to a very lean template and a standard content that ensures a faster editorial journey and review process than those of standard papers. let me underscore that the production of this special issue proves the resilience of the business model community which, over the years, has grown up around the business model conference. despite the covid-19 pandemic putting heavy and unforeseen pressures on all sectors, academia included, business model researchers are not giving up and are proving able to adapt to the new challenges that this scenario is posing, which this special issue clearly demonstrates. the scientific committee and the conference committee are already at work organizing a business model conference 2021. they seek to build on the high standards evident at the three previous conferences and within the pages of the journal of business models. five influential keynote speakers have already been lined up: professor marcel bogers (university of copenhagen, denmark), professor benoit demil (university of lille, france), professor oliver gassmann (university of st. gallen, switzerland), professor xavier lecocq (university of lille, france) and professor christopher tucci (imperial college london, uk). further details will be announced on the journal website as quickly as possible. prospective contributors might also consider submitting short papers, irrespective of what might eventually be possible with regard to the conference. in closing, i hope that the reader will find the short papers included here of value. from when the business model conference was first launched, i have been a member of the scientific committee of the conference and this has provided me with the on-going opportunity to remain abreast of the research directions in which business model researchers are taking their efforts. i must admit that this is, indeed, a privilege. i would like to thank all of the members of the editorial board who have contributed their time and effort to the selection and review process for the papers included in this special issue. my special thanks go to professor robin roslender and professor christian nielsen, for their support during the production of this special issue, and to mette hjorth rasmussen, for her excellent, conscientious editorial assistance. marco montemari editor journal of business models  – short paper section  journal of business models (2021), vol. 9, no. 1, pp. i-v vv references bini l., giunta f., nielsen c., schaper s., simoni l. (2020), business model reporting: why the perception of preparers and users matters, journal of business models, vol., n., pp.1-7 da silva c. (2020), from one context to another: how business models emerge, journal of business models, vol., n., pp.8-12 golzarjannat a., ahokangas p., matinmikko-blue m., yrjölä s. (2020), a business model approach to port ecosystem, journal of business models, vol., n., pp.13-19 kringelum l.b., kristiansen j.n., gjerding a.n. (2020), business model implications of industry path dependency, journal of business models, vol., n., pp.20-28 montakhabi m., van der graaf s. (2020), open business models’ actionability in europe eu competition policy analysis, journal of business models, vol., n., pp.29-34 nielsen c., aagaard a. (2020), the fifth stage of business model research: the role of business models in times of uncertainty, journal of business models, vol., n., pp.35-42 novikova o. (2020), business model transformation of a service provider on a sharing economy platform, journal of business models, vol., n., pp.43-51 ropposch c., gubik c., stiegler e. (2020), digital entrepreneurs and the origin of their business models, journal of business models, vol., n., pp.52-59 roslender r., sort j. (2020), business models, accounting and reporting – two steps forward, one step back?, journal of business models, vol., n., pp.60-66 sort j., taran y., turcan r.v. (2020), business model configuration view for realizing a re-internationalization strategy, journal of business models, vol., n., pp.67-76 trischler m., meier p., trabucchi d. (2020), digital platform tactics: how to implement platform strategy over time, journal of business models, vol., n., pp.77-90 journal of business models (2019), vol. 7, no. 5, pp. 90-107 90 business model innovation – a gamble or a manageable process? yariv taran1, rené chester goduscheit2 and harry boer3 abstract purpose: any business model innovation process involves a certain level of uncertainty, complexity and, in effect, risk. a sloppy approach towards the management of risk may result in catastrophic, sometimes even fatal, consequences to a company’s core business. although risk, risk appetite and risk management are relatively wellestablished concepts, their role in business model innovation is not well understood. the objective of this paper is to investigate how the risk associated with the innovativeness of a business model innovation, an organization’s risk appetite, and its risk management approach interact to affect the success or failure of a business model innovation process. design: retrospective case studies of business model innovations undertaken by three industrial companies provide the empirical basis for this paper. these companies were selected based on their relatively successful, yet somewhat different, business model innovation experiences over the years, and focused on the, in total four, cases in which they failed to implement their new business model attempts successfully. the reasons that led to these failures are discussed. findings: important factors explaining the business model innovation failure of these cases, appear to be the company’s risk appetite, the risk associated with the radicality, reach and complexity of the business model innovation, the company’s awareness of these risks and their management, and especially the association between these factors. originality: there are many lessons to be learned from the aftermath of a failed attempt in terms of what not to do and what to improve a next time. the cross-case analysis produced six testable propositions that enhance our understanding of business model innovation success/failure, with particular focus on the characteristics of the business model innovation, overall innovation management, risk, risk awareness, risk appetite and risk management, and the interaction and fit between these six constructs. please cite this paper as: taran, y., goduscheit, r. c., and boer, h. (2019), business model innovation – a gamble or a manageable process?, vol. 7, no. 5, pp. 90-107 keywords: business model innovation; risk management; retrospective case studies. 1 department of business and management, aalborg university, denmark, e-mail: yariv@business.aau.dk 2 department of business development and technology, aarhus university, denmark 3. center for industrial production, aalborg university, denmark; & department of logistics and supply chain management, corvinus university of budapest, hungary mailto:yariv@business.aau.dk journal of business models (2019), vol. 7, no. 5, pp. 90-107 91 introduction business model innovation is risky business. many business model innovation attempts result in an innovation failure (e.g. christensen, bartman and van bever 2016). especially if a company follows a first mover strategy, arguing from a “no risk no reward” aphorism, a sloppy implementation approach towards business model innovation may result in catastrophic or even fatal consequences to the company’s core business (e.g. taran 2011). thus, managers should recognize that taking risks, while at the same time controlling them, is fundamental to the successful development and implementation of a sustainable business model. however, although there is a considerable body of literature on risk management, particularly in relation to project management (e.g., chapman and ward 2004; kendrick 2003) and product innovation management (e.g., keizer, halman and song 2002); keizer and halman 2007), it has not yet been fully incorporated into other core business decision-making processes (deloitte erm survey 2008), including business model innovation. this paper seeks to enhance the understanding of the potential interaction between risk, risk appetite and risk management in the context of business model innovation. literature review risk, risk management and risk appetite the term risk refers to “uncertainty of outcome” (chapman and ward 2004). risk management has been defined as “the systematic application of management policies, procedures and practices to the tasks of communicating, consulting, establishing the context, identifying, analyzing, evaluating, treating, monitoring and reviewing risk” (iso/iec guide 73 2003). although companies have successfully adopted risk management in their internal audit, treasury, insurance, health and safety, and legal functions, it has not yet been fully incorporated into core business processes related to future growth, such as strategic planning, capital allocation, and performance management (deloitte & touche 2008). this seems to imply that unrewarded risks, in the sense that no premium is obtained from managing them – only the potential for loss is reduced, are the main driver in today’s risk management practices. apparently, managing rewarded risks, which are part and parcel of decisionmaking processes associated with future growth, is not yet fully embedded in organizational change and innovation processes, including business model innovation. furthermore, even if companies attempt to manage rewarded risks systematically, for example, in project management (e.g. kendrick 2003; chapman and ward 2004) or product innovation management (e.g. keizer and halman 2007), they essentially assume that those risks can be managed in isolation from the rest of the system. organizations tend to perceive risk merely in terms of technical and market uncertainty and not in terms of a more comprehensive understanding of the organization and the resources that are available (dillon, lee and matheson 2005). recent surveys and studies (e.g. taplin 2005; deloitte and touche 2008), however, have shown that a growing percentage of managers worldwide are interested in applying risk management more proactively and holistically. yet, despite the benefits gained by applying risk management to enhance risk responsiveness (e.g. coso 2004) and strategic decision-making (e.g. hoyt and liebenberg 2011), an over-abundance of risk management processes may be problematic as well, in the sense that it may overload the organization with too much time-consuming control and bureaucracy (cf. taran, boer and lindgren 2013). thus, although risk management is important, finding the right balance between risk and risk management is a serious challenge. risk appetite is “the total impact of risk an organization is prepared to accept in the pursuit of its strategic objectives” (kpmg 2009, p. 3). hm treasury (2006, p.3) developed a risk appetite scale, which aims at helping companies to map various possible impact categories (e.g. reputation and credibility; operational and policy delivery; financial and legal/regulatory compliance) and to determine their corporate risk appetite on a scale ranging from: 1. averse – avoidance of risk and uncertainty is a key objective. 2. minimalist – low degree of inherent risk, but with a limited potential of reward. journal of business models (2019), vol. 7, no. 5, pp. 90-107 92 3. cautious – preference for safe options that have a low degree of residual risk. 4. open – willing to consider all options and choose the one that is most likely to result in successful delivery. 5. hungry – eager to be innovative and to choose options based on potentially higher rewards. a business model innovativeness scale 1 through the years, essentially three approaches have been proposed to measure innovativeness. the first approach, associated with business model innovation radicality, considers business model innovation as a radical change in the way a company does business (chesbrough 2007, linder and cantrell 2000). linder and cantrell in particular clearly attempt to draw a line in suggesting what can and cannot be defined as business model innovation. the second approach defines innovativeness in terms of, what might be called, the reach of the innovation (e.g., rogers 1983, garcia and calantone 2002). a suitable scale measures the degree to which an innovation in terms of “new to whom”, which could range from new to the company, via new to the market and new to the industry, to new to the world. the third approach considers measuring the innovativeness of a new business model through its complexity, where any change in any of the (core) building blocks or the relationships between them could be considered as a form of business model innovation (amit and zott 2001; osterwalder, pigneur and tucci 2004; magretta 2002). in line with abell (1980) and skarzynski and gibson (2008), business model innovation could then be considered in terms of the number of building blocks that are changed simultaneously: any change in one of the building blocks would constitute a simple innovation, while simultaneous changes in all of the building blocks would be the most complex form of business model innovation. if these three approaches are combined, a threedimensional space, first proposed by taran, boer and lindberg (2008) and later published in taran et al. 1 most of this section is from taran, boer and lindgren (2015), with permission from the authors. (2015), emerges, which helps in qualifying the innovativeness of a new business model (figure 1): • radicality – how new (incremental vs. radical) is each building block (see table 1 for different examples). • reach – to whom is the innovation new? • complexity – number of building blocks changed simultaneously. figure 1: a three-dimensional (business model) innovativeness scale (source: taran et al. 2015) reach radicality firm market industry world low medium high 1 2 3 5 4 7 6 complexity figure 1: a three-dimensional (business model) innovativeness scale (source: taran et al. 2015) in this space, any business model innovation can be positioned in terms of its degree of radicality, reach and complexity. some changes are more radical and/ or complex than others, and some (e.g. radical product innovation, incremental process improvement) are better understood than others (e.g. a holistic, new to the world departure from all business models known so far). research objective the basic assumption behind this paper is that the risks involved in business model innovation increase with the radicality, reach and complexity of the innovation. while risk, risk appetite, risk management and, to a certain extent, business model innovativeness and innovation management are relatively well-established constructs, their role and interaction in business model innovation processes are not well understood. the objective of this paper is to investigate how these constructs interact to affect the eventual outcome of a business model innovation process, in terms of its “success” or “failure”. journal of business models (2019), vol. 7, no. 5, pp. 90-107 93 research design case studies description four retrospective case studies of business model innovation processes undertaken by three industrial companies (table 2) provide the empirical basis for this paper. the companies were selected based on their relatively successful, yet somewhat different, business model innovation experiences over the years, and focused on the, in total four, cases in which they failed to implement their new business model attempts successfully. data gathering techniques given the exploratory nature of this research, the case study methodology was adopted (yin 2003). multiple qualitative data gathering methods were used to ensure the validity and reliability of the research. the desk research involved gathering of information through books, articles, websites, as well as documents received from the three companies. the field research consisted of semi-structured interviews (for interview guide see appendix a), e-mail correspondence and company visits. the questionnaire used to guide the interviews covered all six constructs (business model innovativeness, innovation management, risk, risk appetite, risk management, success/failure) plus contextual variables (e.g. company background, strategy, open/network-based innovation) and was semi-structured in order to allow the respondents maximum freedom to explain their views on the new business model and their understanding of the innovation process, and the researchers the possibility to discover unexpected yet relevant issues. the interviews were held with the companies’ middle managers (e.g. technology/innovation, product, project or marketing managers). building block incremental innovation “do what we do but better” radical innovation “do something different” value proposition offering “more of the same” offering something different (at least to the company) target customer existing market new market customer relationship continuous improvements of existing channels new relationship channels (e.g. physical/virtual, personal/peers/ mass awareness) value chain architecture exploitation (e.g. internal, lean, continuous improvements) exploration (e.g. open, flexible, diversified) core competences familiar competences (e.g. improvement of existing technology) disruptive new, unfamiliar, competences (e.g. new emerging technology) partner network familiar (fixed) network new (dynamic) networks (e.g. alliance, joint-venture) profit formula existing processes to generate revenues followed-by/or incremental processes of (cost) retrenchments new processes to generate revenues followed-by/or disruptive processes of (cost) retrenchments table 1: incremental and radical orientation to each building block (source: taran et al. 2015) alpha beta gamma large global company, which is specialized in developing, manufacturing and marketing (for the most part) professional audio products large global company, specialized in developing, manufacturing and marketing flexible electrical/electronic control and instrumentation solutions within power production, marine and offshore large it company, which is specialized in providing it solutions for primarily public organizations two failure cases (a and b) one failure case (c) one failure case (d) table 2: company descriptions journal of business models (2019), vol. 7, no. 5, pp. 90-107 94 in alpha, 18 hours of interviews were conducted, and in beta seven hours of interviews in total. in gamma, the interviewees represented the eleven organizations involved in that company’s business model innovation. more than 25 hours of interviews were recorded. analytical focus the cross-case analysis focused on identifying and analyzing the similarities and differences between the four focal business model innovation experiences. in order to increase the credibility of the research, the data gathering and analysis of all cases focused on the following, theory based, criteria: • characteristics of the business model innovations, in terms of radicality (how new?), reach (new to whom?) and complexity (table 1 and figure 1). • overall innovation management. here, the innovation process of each company was analyzed using tidd and bessant’s (2009) innovation model of “search-select-implement”. • risk, risk appetite and risk management, including the analysis of: 1) both strategic and operational risks occurring, 2) the risk appetite of each company over the years, and 3) the way risks were managed (e.g. explicitly, implicitly, stage-gate oriented). • fit. looking for the interaction between the business model characteristics, overall innovation management, risk, risk appetite, risk management and the outcomes (success/failure) of the business model innovation process, the analysis particularly focused on the “fit” between these constructs, reasoning that the higher the risk appetite of a company, the higher the likelihood that it will pursue a more innovative business model, which will involve greater risk which, in turn, needs to be managed more tightly in order for the new business model to be realized and become a success. given the exploratory character of the case studies, additional criteria emerging from the case studies were also actively sought, but not found. data gathering results table 3 summarizes the case study data gathered. as that table illustrates, the cross-case analysis focused on the selection of dimensions describing similarities and differences between the three companies’ experiences (e.g. eisenhardt 1989). cross-case analysis and proposition development the cross-case analysis produced six propositions, which are organized according to the four criteria formulated above. characteristics of the business model innovation and success rate company alpha: throughout the years, company alpha engaged in seven business model innovations. four cases were very successful2, one case partly succeeded, and in two cases, the company failed to succeed (cases a and b). the successful cases involved the exploitation of existing technology, or the development and exploitation of new technology-based products, together with a partner, in a market segment new to company alpha. the two failure cases, presented here, were attempts to outsource marketing and sales (case a) and production (case b), respectively, to a third party. two factors caused their failure. first, the partner did not match the company’s high quality standards. second, they realized in a later phase (particularly case a) that the market was too small to play a significant part in the company’s turnover (i.e. low reach). company beta: over the years, this company engaged in three business model innovations experiences, two of which became a success, while one attempt failed (case c). the successful cases involved the application of existing, and the development of new, competences and technologies for a new market segment, followed by an acquisition. these innovations were rather risky for the company, both in terms of investment as well as time constraints, and involved the development and exploitation of new technology for a new market segment. in case c, a failure, the company “pushed” a self-developed radically new product into the market in an attempt to exploit a new emerging technology, 2 the success of the business model innovations was measured by their profitability, where successful cases were highly profitable for the company, partly successful cases were the ones with small profit margins, and failure cases were those who failed to bring any profits, or worse. see taran et al. (2015) for more information on the successful cases of companies alpha and beta. journal of business models (2019), vol. 7, no. 5, pp. 90-107 95 alpha beta gamma the four failure business model innovation cases • case a – new business unit offering existing technology-based products to a new market (studios), plus outsourcing of marketing and sales to a partner (low radicality, low reach, high complexity). • case b – outsourcing the manufacturing of one of the products – failure (low radicality, low reach, high complexity). • case c – new technology-based product, aimed at serving existing and potential new customer segments. after one year of heavy investment in the product, the project was terminated due to incongruity with customer demands (product shape and size; price – too expensive) – (low radicality, low reach, high complexity). • case d – new it solution based on approaching shift in technological opportunities within metering utility consumption. the project was terminated due to strategic shift within the company and lack of believe in customer demand (high radicality, high reach, high complexity, given the difficulty in network structure among the participating organizations). overall innovation management search processes no search process in any of the cases. “it was just something that came up along the way”. one project was managed proactively in search of a radically new business model (case b). otherwise, it was internal competences chosen to be used elsewhere. selection and implementation processes following a stage-gate model, radical innovation ideas are handled with extra awareness. a slower process, which always starts with small steps and then grows slowly. radical ideas follow gates similar to those of incremental ideas. the difference is, though, that it takes more time to move from gate to gate. search processes – recognized as one of the weaknesses of the company. they do not really have any systematic processes to manage radical, or even incremental, innovation ideas. it is something that usually just “pops up”. they give more attention to ideas that come from their main customers. selection and implementation processes a stage-gate model is used to move the business concept idea through a maturity roadmap and development process. many complaints about the fact that there is not enough market research behind ideas proposed. in effect, lacking understanding of the potential market and sales volume. search processes – initial idea developed by area director of the company. in continuation of this initial idea, ten additional organizations were involved into the further development of the business idea and the business model underlying the project. selection and implementation processes – an open, network-based approach to develop and test the business idea. a development process, which was marked by a substantial number of iterations and radical shifts in the overall business model. risk, risk appetite and risk management used to be between “open” and “hungry”. currently moving towards “open” – “cautious”, and taking fewer risks. intending to move to ‘hungry’ again in future. no explicit risk management processes, but rather a project culture and a project/ innovation model that is structured by many gates aimed at continuity and reducing the risks throughout the innovation process. it is not an advanced risk management model, or one that applies a risk assessment method, but nonetheless a very sufficient model to reduce many risks through the innovation process. used to be between “cautious’ and “open”. moving towards “open” and “hungry”. willing to take chances and aim high, but aware of the risks involved in that. no explicit risk management processes were identified. however, their innovation processes are highly controlled, to insure that strategic decisions made at the gates are being implemented adequately at the stages throughout the innovation process, and, the company considers those control processes as a form of risk reduction. mostly “averse” but moving towards an “open” approach. focusing on a new market position in the aftermath of a privatization process. no explicit risk management processes were identified. yet, they perceived the openness approach as a form of risk mitigation and sharing, by opening up both the business model and its innovation process, which would be the fundament of the project. the company stated that the project was not so much an internal development project, but rather something, in which all the participating organizations should be able to mirror themselves (i.e. risk sharing). fit none none none table 3: summary of the case data journal of business models (2019), vol. 7, no. 5, pp. 90-107 96 without any idea of how customers would respond. the market place failed to pick up the new product. company gamma: this company was very eager to meet the new challenges of a post-privatization period (during the innovation project the ownership of company gamma shifted from a number of different public organizations to an investment fund). the company had little experience with business model innovation, since it had always relied on a familiar and fixed group of customers within the public sector. actually, the target customers of the company were to a large extent also the company’s owners. consequently, case d actually concerned a fundamental innovation experimentation for company gamma. table 4 provides more details on the data gathered by visualizing the business model innovation cases through their degrees of innovativeness in terms of radicality, reach and complexity. on the aggregate scale combining radicality, reach and complexity, cases a, b and c were low in radicality and reach. case d, however, was high in radicality and reach. all cases were highly complex. case a involved the establishment of a new business unit offering incremental improvements to existing products, combined with outsourcing of marketing and sales to a partner. case b concerned outsourcing of manufacturing to a partner which, however, failed to result in a competitive product. alpha was a highly competent design company, pushing new products into the marketplace and with a successful history of collaborative technology development. however, they seemed to have underestimated the complexities involved in establishing a successful operational collaboration through outsourcing. in beta, new product development activities were usually based on market-pull. case c failed because the company “pushed” a radically new product into the market without any idea of how customers would respond. gamma’s case d was a radical and new to the industry innovation, which went far beyond the company’s previous innovation experiences. moreover, the case studies suggest that business model innovation failures are situated at the “extremes” of: 1) low radicality and reach, and 2) high radicality and reach. proposition 1: even if the radicality and reach of a business model innovation are low, companies may underestimate its complexity, particularly if the innovation does not build on the company’s experiences with previous innovations. proposition 2: if a company does not have the disruptive exploration capabilities and commitment required to support a radically new and high reach business model innovation, the innovation process is likely to fail. yet, however tempting it may be to propose that companies best stay away from the extremes, the more compelling reason for these failures seems to be the lack of prior related knowledge (cohen and levinthal 1990). alpha was a technology developer, without any experience with operational collaboration. beta understood how to translate market requirements into new products, but did not understand how to push new technology into the market place. gamma overplayed its hand by trying to accomplish a new to the industry innovation, which went far beyond its previous experiences. case radicality (to the core business) reach complexity (to the core business) alfa case –a low: vp; pn low: new to the company high: vp; tc; vc; pn; cr; pf case – b low: vc; pn low: new to the company high: vp; tc; vc; cc; pn; pf beta case – c low: vp; tc low: new to the company high: vp; tc; cc; vc; pn; cr; pf gamma case – d high: vp; tc; vc; pn high: new to the industry high: vp, tc, vc, pn, pf vp=value proposition; tc=target customer; vc=value chain; cc=core competences, cr=customer relation; pn=partner network; pf=profit formula. table 4: radicality, reach and complexity of the four cases journal of business models (2019), vol. 7, no. 5, pp. 90-107 97 overall innovation management company alpha: in most business model innovations ventured by this company, there was never a search process for new business models. rather, ideas were slowly developed along the way based on the company’s existing core competences (e.g. technologies, know-how). the company simply considered it obvious that existing competences would give them relatively easy access to other industrial settings. it seems that the company had a prevalence for generating an idea, testing it first internally, starting with a low scale production process, and considering growth in due course (e.g., through a joint venture, or a new business unit). this inside-out replication of previous business model innovation processes seemed to be a winning formula for the company, and was expected to work in any (future) business model innovations. however, in cases a and b, one of the key challenges for the company was to find the right partner to work with, and here the company failed. company beta: just like company alpha, company beta never implemented a formal search process for new business models. radically new ideas emerged in the course of time, either through existing technological development capabilities, cost reduction programs, or as a reaction to emerging  competitors’ technologies, which was the trigger of case c. the failure of case c, caused by a pure “technology push” strategy, made the management team even more aware of the need to understand customer demands as a basis for selecting future innovation ideas. company gamma: the innovation process was marked by a rather wide and creative search for new business models. at an early stage, company gamma realized that the developed concept would be marked by a significant level of complexity, which would go beyond the complexity of the products and services the company had produced hitherto. the entire network of organizations involved in the project was invited to a co-creation process in order to enable them to mirror themselves in the final outcome of the process. the two project managers of company gamma (there was a shift during the process) and the area director who initiated the project, explicitly stated that the intention was to invite everybody into the process. both project managers were willing to accept the inherent risks of this open innovation (cf. bogers, chesbrough, heaton and teece 2019) process experimentation (e.g. the risk of knowledge spill-over to potential competitors; the risk of one of the participating organizations to be inspired and develop their own solutions without the participation of company gamma). sadly, though, this high level of inherent risk acceptance did not work to their benefit. the business model innovation failed and in the aftermath company gamma chose to reduce its network and be more cautious, i.e. accept less risk. in all three cases, results indicate that experimentation, learning from previous experiences and using the lessons learned, have significant impact on the success (or failure) of business model innovation. proposition 3: insufficient experimentation and lack of learning from failures increase the likelihood of business model innovation failure. risk, risk appetite and risk management company alpha: the company’s risk appetite used to be “hungry”, but they gradually took fewer risks and moved towards “cautious”. in the past, the company was more willing to take risks, and experimented with new, rather than “more of the same”, products and business models. however, due to a significant downturn in the company’s profits during the last couple of years, which was partly related to the financial crisis and resulted in the hiring of a new ceo, the strategy of the company changed significantly and, with that, also its risk appetite. the innovation process of the company was very structured and followed many gates. the process and gates were the same for all innovations. the company did not apply any explicit risk assessment/management processes. rather, they considered the gates as (implicit) risk reduction processes: all ongoing business development projects had to meet each requirement at each gate before green light was given to proceed to the next stage. an additional mechanism used to reduce risks was associated with time. that is, despite the fact that the innovation process and the gates remained the same for all types of innovations, the time taken to move from gate to gate increased as the level of journal of business models (2019), vol. 7, no. 5, pp. 90-107 98 radicality, reach and/or complexity increased. this gave the company the flexibility to proceed with more caution and to terminate projects that were expected to be unsuccessful without too many consequences. yet, it was also apparent to the management team that despite the fact that the decision-making and implementation processes were well designed for technological success, the company did not really possessed adequate processes to predict the possible success in the market place, that is, commercial success. consequently, the management team was very keen to search for new, more structured ways to deal with risk-benefit projections and increase the likelihood of commercial success of future innovations. those new processes, according to the company’s innovation director, are not meant to increase control but rather to reduce uncertainty as regards future sales. company beta: the company used to focus on electronics and instruments that were used in switchboards in factories. it was very traditionally oriented, and had relied upon north europe as its sales market. the company’s risk appetite used to lay somewhere between “cautious” and “open”, but had grown significantly since the early nineties and was leaning towards “open” and “hungry” at the time of the study. this is partly due to a replacement of the senior management, but also because sales volume had grown and new technologies had emerged that opened up new opportunities for the company. willing to take chances, the company was aiming high, even though they were aware of the risks involved. company beta did not have an explicit risk management process in place. instead, with each gate, the company set a high level of control requirements. in doing so, decision makers did not question the risks involved the innovation process, but rather insured that decisions made will be efficiently executed (e.g. investments, resources, time). thus, unlike company alpha, which gave the innovation team the flexibility to manage the stages freely from gate to gate, in company beta, the control processes were very formal, continued also through the stages from gate to gate, but did not consider any risks. according to one of the managers, the innovation processes involved a lot of paperwork and forced the innovation team to spend a lot of time on completing checklists instead of managing the process forward, which, however, had very little impact on output effectiveness. in its technological innovation projects, company beta used scenario planning. performed by the business intelligence unit, this method involved the development of three sales forecast scenarios: an optimistic, a realistic, and a conservative scenario. these scenarios used to assist the company with analyzing the actual “as-is” business progress (e.g. better than expected, as-planned, worse than expected). however, those scenarios were not applied in any of the business model innovation processes. company gamma: historically, this company serviced a substantial number of customers within the public sector. the strategic focus was not to expand the market or to innovate products and services. instead the primary goal of the company was to stick to the current customers, products and services. this risk-averse approach to business modeling and innovation was revised as a consequence of the privatization of company gamma. the privatization process ran in parallel with the innovation project and drove the initial stages of the project in terms of involving external organizations in the innovation process and the development of the business model. company gamma did not have an explicit risk management process in place either. yet, unlike the other two companies, the company was willing to accept, that is, to tolerate, a substantial risk during the entire innovation process. they saw the involvement of some of the potential customers (the utility companies) as a way to minimize the risk if a failure outcome should occur. furthermore, it was very important for the company to have the customers “on board” to ensure market fit to the project objective. in effect, here too, risk mitigation activities were only partly and, then, implicitly initiated. the area director addressed this issue by stating that the endresult of this open innovation process could potentially result in little to no positive impact to the organization overall and possibly even with an (affordable) loss. this “all-in” gambling by the company was often mentioned during the network meetings, and the project managers as well as the area director emphasized that the project should not be perceived as a “gamma project” but rather as a “network project”, which consisted of all the organizations involved. the project was closed down as a journal of business models (2019), vol. 7, no. 5, pp. 90-107 99 consequence of a strategic shift within company gamma. a new area director sought to get an overview of the various projects within the business area. he did not see any potential in this particular project, nor a fit between this project and the newly-planned overall strategy, closed down the project and fired the project manager. in all three companies, the top management risk appetite had a strong but different impact on the company’s corporate risk appetite. while the replacement of the ceo in company beta, and the privatization process that took place in company gamma turned both companies to be risk hungrier in their pursuit of new business opportunities, alpha’s experience made the company more risk averse. proposition 4: the top management has great influence on the risk appetite of the company. fit between the corporate strategy of a company and top management’s risk appetite should be one of the selection criteria for top managers. however, in none of the three companies an explicit risk management program was in place. risks were managed implicitly, that is, embedded in the innovation stage-gate process design (companies alpha and, to a lesser degree, beta), or not managed at all (company gamma). in effect, problems continued to manifest themselves in different ways. at the time, many of these problems seemed to have a tolerable impact along the process, e.g. unexpected but solvable surprises; goals and objectives that required redefinition during the process; accepted solutions that were rejected in a later phase; implemented solutions that were less effective or glamorous than anticipated; and/ or schedule and budget overruns. yet, the cumulative effect resulted in the business model innovation project to fail in all four cases. clearly, the companies were unhappy with their risk mitigation processes, but none of them had any solution – they did not really know, and never learned, how to optimize the process and, particularly, how to manage risk proactively. proposition 5: the absence of dedicated risk management program to a business model innovation initiative increases the likelihood of the initiative to fail. the interaction between risk, risk appetite, risk management, and the role of risk awareness on an aggregate level, the four failure cases indicate that risk (due to the business model innovativeness), risk appetite and risk management and, more importantly, the interaction between these constructs, play a significant role in the success or failure of business model innovation initiatives. the concept of interaction or “fit” plays a central role in various theories, including manufacturing strategy (e.g. skinner 1985), organization theory (e.g. mintzberg 1979) and innovation theory (e.g. boer and during 2001), but has not been used so far to understand the relationships between business model innovation and risk management. miles and snow (1994), for example, discuss the dynamics of internal-external fit. they argue that “minimal fit” is necessary to ensure a company’s survival, “tight fit” frequently results in excellent administration, while “early fit” may enable a company to sustain an unusually high level of performance over an extended period of time. yet, they were also aware of the fact that “fit” has its limitations as well – even “hall of fame” companies may suffer from downturns in performance (e.g. due to unexpected external hazard impact). in cases a, b and c, companies alpha and beta were “open” to take risk, but although the business model innovations they pursued were relatively complex, they were also rather incremental and new to the company only, i.e. low reach (table 4) and, in effect, low risk initiatives. neither company applied any risk management mitigation activities. in case d, it was company gamma’s limited risk awareness that seems to have led to complacency when it ran a highly innovative (radical change, new to the industry, complex; table 4), i.e. a high-risk, initiative. in effect, the company did not apply any risk management either. in short, the companies’ risk appetite and awareness, the innovativeness of, and, consequently, risk associated with, the business model innovations pursued and, finally, the effort the companies put into risk management, did not fit together. although it can be argued that a perfect fit between risk, risk appetite, risk awareness, risk management journal of business models (2019), vol. 7, no. 5, pp. 90-107 100 and business model innovativeness will not automatically ensure business model innovation success (and vice versa), it will increase the probability of success substantially. both alpha and beta had multiple successful business model innovation experiences in their past, and it has been observed (e.g. taran et al. 2015) that fit, particularly between the companies’ risk appetite and the business models’ innovativeness and associated risks, was much better in the successful cases than in the failure cases. for example, in its successful attempts (e.g. a new joint venture; new business unit development), company alpha built slack (e.g. galbraith 1973) into the process by taking more time to get from gate to gate as the level of radicality, reach and/or complexity increased. this gave the company the flexibility to proceed with more caution and to terminate those projects that were expected to be unsuccessful without too many consequences. in addition, company alfa also mapped each innovation project’s timetable as red, yellow or green to illustrate both its readiness to meet the next gate requirements deadline, as well as the sense of urgency for its process completion. the results indicate that compared to incremental, low reach and simple business model innovations, the importance of ensuring alignment between a company’s risk appetite, risk awareness and risk management approach increases in more radical, higher reach and more complex business model innovations. proposition 6: the likelihood of launching a successful new business model increases if the company’s risk appetite, risk awareness, the innovativeness of the new business model, and the risk management approach adopted, align with the risks associated with the intended innovation. conclusion despite two decades of intense research, business model innovation still lacks a solid theoretical basis, particularly with respect to the antecedents, contingencies, and outcomes (foss and saebi 2017). in this paper, we focused on how the risks associated with the innovativeness of a business model innovation initiative, an organization’s risk appetite, and its risk management approach interact to affect the success or failure of a business model innovation process. contribution the cross-case analysis produced six testable propositions. together, these propositions seem to suggest the following picture. risk appetite and risk awareness seem to play a significant role in business model innovation decision-making. the top management’s personality, risk appetite, and assessment of the company’s economic position and outlook overall, tend to have great influence on selecting new business model innovation initiatives. as such, it is imperative for companies to consider whether the various internal stakeholders’ and also external partners’ risk appetites and awareness are aligned, in order to reduce the likelihood of future conflicts when designing the company’s innovation portfolio. this proposition is also confirmed by, for example, rogers (1983), who argued for the important role that key stakeholders’ perceptions have in “setting the innovation stage”. additionally, it is vital to consider the strategic aggressiveness as part of business model innovation decisionmaking. top management perception greatly affects its appreciation of the nature of the innovation, and may lead to underestimation of the difficulties involved, even, or perhaps especially, at the two business model innovation extremes of: • incremental (radicality), new-to-the-company only (reach), but highly complex business model innovations initiatives. risk-averse managers may have the impression (possibly, illusion) of “safe enough” business model experimentation, but may risk that the innovation will have little or no positive impact in the market place. • radical, new-to-the-industry or new-to-the-world (reach), highly complex business model innovations, which in most cases depart from the company’s previous strategy and do not, consequently, allow building on experiences with previous innovations. although the likelihood of failure seems to be largest at these extremes, they are fundamentally different, so that it is quite important to distinguish between journal of business models (2019), vol. 7, no. 5, pp. 90-107 101 the two. the first can be considered to reflect a reactive strategy (cases a, b, and c), whereas the second is a much more proactive initiative (case d). being too defensive and, in effect, unambitious may lead to failure, while pursuing a proactive initiative requires managers to appreciate the high uncertainties and the consequent risks inherent in the process, which in many cases go beyond the scope of the company ’s existing core competences and capabilities and requires non-prior related knowledge (cf. cohen and levinthal 1990). companies should not overlook the importance of learning from failure either. there are many lessons to be learnt from the aftermath of a failed attempt in terms of what not to do and what to improve on for a next time. sadly, the cases presented here indicate that due to locked-in path dependency trajectories (nelson and winter 1982), companies tend to “simply” repeat successful business model innovation processes and to, equally “simply”, drop unsuccessful approaches, rather than learning from them.  the inherent danger is that a company fails to learn how to approach innovations that are essentially new to the company, which, in turn, may decrease its growth potential significantly. taking a risk management and alignment perspective, even if 1) a company’s risk appetite and awareness fits its economic position and outlook, and 2) the company estimates the nature and characteristics (radicality, complexity, reach) of the intended innovation correctly, and 3) the company is prepared, if necessary, to learn new approaches, business model innovation is still loaded with risks. hence, risk management and, more importantly, its alignment with the other key constructs (i.e. the actual risk associated with the innovativeness of the business model innovation and the company’s risk appetite) is of paramount importance in any business model innovation process. furthermore, it appears that adopting a widely used approach such as the stage-gate process (cooper 1993) to manage a business model innovation process is not enough. the three companies’ experiences suggest that incorporating dedicated risk management processes (chapman and ward 2004) in a business model innovation process, whether that process is stage-gate driven or not, can help reduce the likelihood of innovation failure. moreover, as case c suggests, risk management can also potentially facilitate meeting customer demands. too much focus on technological aspects combined with insufficient attention for commercial aspects and, possibly, a “push” strategy, may lead to technical success but commercial failure (cf. e.g. voss 1988). further research the empirical investigation performed in this research involved four retrospective case studies, based on mostly qualitative data. there are several well-documented advantages to this methodology, such as richness and depth, but also weaknesses related to, amongst others, generalization. accordingly, the case study results and propositions developed here should be tested on a larger scale, using a mix of comparative and longitudinal case studies as a first step, aimed at enriching, sharpening and adding to the propositions presented here. thereafter a larger case or questionnaire-based survey may be used to test and generalize the propositions developed. journal of business models (2019), vol. 7, no. 5, pp. 90-107 102 references abell, d.f. (1980), defining the business: the starting point of strategic planning, englewood cliffs: prentice hall. amit, r. and zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6-7, pp. 493-520. boer, h. and during, w.e. (2001), innovation. what innovation? a comparison between product, process and organizational innovation, international journal of technology management, vol. 22, no. 1-3, pp. 83-107. bogers, m., chesbrough, h., heaton, s. and teece, d.j. (2019), strategic management of open innovation: a dynamic capabilities perspective, california management review, vol. 62, no. 1, pp. 77–94 chapman, c.b. and ward, s.c. (2004), project risk management. processes, techniques and insights, chichester: john wiley and sons. chesbrough, h. (2007), open business models. how to thrive in the new innovation landscape, boston: harvard business school. christensen, c. m., bartman, t., and van bever, d. (2016), the hard truth about business model innovation, mit sloan management review, vol. 58, no. 1, pp.31-40. cohen, w.m. and levinthal, d.a. (1990), absorptive capacity: a new perspective on learning and innovation, administrative science quarterly, vol. 35, no. 1, pp. 128-153. cooper, r.g. (1993), winning at new products: accelerating the process from idea to launch, boston: addison-wesley. deloitte & touche (2008), enterprise risk management benchmark survey, perspectives on erm and the risk intelligent enterprise, deloitte & touche llp. dillon, t.a., lee, r.k. and matheson d. (2005), value innovation: passport to wealth creation, research technology management, vol. 48, no. 2, pp. 22-36. eisenhardt, m. k. (1989), agency theory: an assessment and review, academy of management review, vol. 14, no. 1, pp. 57-74. foss, n. j. and saebi, t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, vol. 43, no. 1, pp. 200-227. galbraith, j.r. (1973), designing complex organizations, reading: addison-wesley. garcia, r., and calantone, r. (2002), a critical look at technological innovation typology and innovativeness terminology: a literature review, journal of product innovation management, vol. 19, no. 2, pp. 110-132. hm treasury (2006), thinking about risk. managing your risk appetite: good practice examples, london: the stationery office. hoyt, r.e. and liebenberg, a.p. (2011), the value of enterprise risk management, the journal of risk and insurance, vol. 78, no. 4, pp. 795-822. iso/iec guide 73 (2003), risk management: vocabulary, guidelines for use in standards, http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html, retrieved 7 june 2015. http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html journal of business models (2019), vol. 7, no. 5, pp. 90-107 103 keizer, j.a., halman, j.i.m., and song, m. (2002), from experience: applying the risk diagnosing methodology, the journal of product innovation management, vol. 19, no. 3, pp. 213-232. keizer, j.a. and halman, j.i.m. (2007), diagnosing risk in radical innovation projects, research technology management, vol. 50, no. 5, pp. 30-36. kendrick, t. (2003), identifying and managing project risk: essential tools for failure-proofing your project, new york: amacom. kpmg (2009), understanding and articulating risk appetite, https://www.kpmg.com/cn/en/issuesand insights/ articlespublications/documents/risk-appetite-o-200806.pdf, retrieved on 15 july 2009. linder, j. and cantrell, s. (2000), changing business models: surfing the landscape, accenture institute for strategic change, canada. magretta, j. (2002), why business models matter? harvard business review, vol. 80, no. 5, pp. 86-92. miles, r.e. and snow, c.c. (1994), fit, failure, and the hall of fame. how companies succeed or fail, new york: free press. mintzberg, h. (1979), the structuring of organizations, englewood cliffs: prentice-hall. nelson, r. and winter, s. (1982), an evolutionary theory of economic change, boston: harvard university press. osterwalder, a., pigneur, y., and tucci, l.c. (2004), clarifying business models: origins, present, and future of the concept, communications of ais, vol. 16, pp. 1-25. rogers, e.m. (1983), diffusion of innovations, new york: the free press. skarzynski, p., and gibson, r. (2008) innovation to the core, boston: harvard business school publishing. skinner, w. (1985), manufacturing: the formidable competitive weapon, new york: john wiley & sons. taran, y., boer, h. and lindberg, p. (2008), rethinking the business model concept. a bursting bubble or a fundamental shift in change management thinking? proceedings of the 9th international cinet conference, radical challenges for innovation management, valencia, spain, 5-9 september, pp. 775-786. taran, y. (2011), rethinking it all: overcoming obstacles to business model innovation, phd thesis, center for industrial production, aalborg: aalborg university. taran, y., boer, h. and lindgren, p. (2013), incorporating enterprise risk management in the business model innovation process, journal of business models, vol. 1, no. 1, pp. 38-60. taran, y., boer, h. and lindgren, p. (2015), a business model innovation typology, decision sciences, vol. 46, no. 2, pp. 301-331. taplin, r. (2005), risk management and innovation in japan, britain and the united states, london: routledge. https://www.kpmg.com/cn/en/issuesand insights/articlespublications/documents/risk-appetite-o-200806.pdf https://www.kpmg.com/cn/en/issuesand insights/articlespublications/documents/risk-appetite-o-200806.pdf journal of business models (2019), vol. 7, no. 5, pp. 90-107 104 tidd, j. and bessant, j. (2009), managing innovation. integrating technological, market and organizational change, chichester: john wiley & sons. voss, c.a. (1988), implementation – a key issue in manufacturing technol ogy: the need for a field of study, research policy, vol. 17, pp. 55-63. yin, r. (2003), case study research. design and methods, thousand oaks: sage publications. journal of business models (2019), vol. 7, no. 5, pp. 90-107 105 appendix a: interview guide only the questions relevant to this paper are listed here. company information (e.g., location, size, structure, products, and markets) were inferred from company documents and checked with the interviewees. core constructs interview questions characteristics of the business model innovation: 1. how many business model innovations did the company experiment with over the past couple of years? 2. from a business model perspective, what did these innovations involve, i.e. which building blocks were changed? 3. please map each of the business model innovation initiatives according to the three-dimensional innovativeness space (figure 1 in the paper). overall innovation management: 4. how many of those business model innovations were successful, partly successful or a failure? 5. why did you choose to engage in each of these business model innovations? was it a response to some kind of threat (reactive), or did you take advantage from an emerging opportunity (proactive)? which of the innovations would you rate as ‘idea push’, which as ‘market pull’? 6. who made the choice for each of those innovations (e.g. r&d manager, management team, stakeholders)? 7. the rationality of choices: based on what data analysis did you make the choice (e.g. cost-benefit financial analysis, business plan, “gut feeling”)? 8. did you apply similar innovation processes to all innovations (incremental/radical) or different ones? risk, risk appetite, risk management and interactions between constructs: 9. based on the table below, how would you characterize the company? how [risk] hungry is the company? description averse we never take risks minimalist preference for extra safe options that have a low, or no, degree of risk and only have a potential for limited reward. cautious preference for somewhat safe options that have a low degree of risk and may only have limited potential for reward. open willing to consider all options and choose the one that is most likely to result in successful delivery while also providing an acceptable level of reward (despite medium level of risks that we need to take through the innovation process). hungry eager to be innovative and to choose options based on potential higher rewards (despite greater risk). hm treasury (2006) 10. how, if at all, were risk management processes used through the business model innovation process? 11. to what extent did you consider through the innovation process the interaction between the level of risk, and the way you chose to organize for each business model innovation? 12. what did you learn from that experience for next time? in case the innovation process involved open/network-based innovation: 13. how do you experience your organization's attitude / openness to formal / informal networks? 14. what did you perceive as the theme of the network (how clearly it was formulated)? 15. based on what criteria were partners selected (past relationships, brand new partners, strategic options / limitations, customer base, partners' existing technology)? 16. who was leading the network – how (positive/negative) did you experience his/her role? 17. what was your overall experience of the network meetings progress/non-progress? 18. if you look back on the course of the network – can you point to any key times, meetings, events, etc. where the network/innovation project took a decisive turn? journal of business models (2019), vol. 7, no. 5, pp. 90-107 106 dr. yariv taran is an associate professor in innovation and organization at the department of business and management at aalborg university, denmark. he received a bsc in management and sociology from the open university of israel, and an msc in economics and business administration from aalborg university, from where he also received his phd in business model innovation. his research focuses on the management of risk and uncertainty in business model innovation processes. other areas of research interests include decision-making, knowledge management, entrepreneurship and regional systems of innovation. he has published his research in a number of international journals including decision sciences, international journal of entrepreneurship and innovation management, journal of green engineering, journal of business models, and european journal of innovation management. dr. rené chester goduscheit is professor at the department of business development & technology at aarhus university, denmark. his main research interests concern open innovation (user-involvement, inter-organizational network-based innovation and organizational innovation), technology-transfer between knowledge institutions and industry, and business model innovation. he has published his research in a number of international journals including research policy, journal of product innovation management, industrial marketing management, creativity and innovation management, international journal of technology management and international journal of innovation management. about the authors journal of business models (2019), vol. 7, no. 5, pp. 90-107 107 dr. harry boer is a professor of strategy and organization at the center for industrial production at aalborg university, denmark, and an honorary professor of corvinus university of budapest, hungary. he holds a bsc in applied mathematics and an msc and phd both in management engineering, all from twente university, the netherlands. he has published on subjects such as organization theory, flexible automation, manufacturing strategy, and continuous improvement/innovation in the international journal of operations & production management, the journal of production innovation management, decision sciences, the journal of manufacturing technology management, creativity and innovation management, production planning & control, and the international journal of technology management. his research interest is in continuous innovation, the effective interaction between day-to-day operations, incremental change, and radical innovation. about the authors journal of business models (2020), vol. 8, no. 2, pp. 73-91 73 relationship building in iot platform models the case of the danfoss group dr. svend hollensen1,*, dr. pernille eskerod2 and dr. anna marie dyhr ulrich3 abstract purpose: this paper investigates the implications for a manufacturer’s relationship building towards b2b customers and suppliers as a consequence of internet-of-things (iot) platform models. design/methodology/approach: explorative single case study with embedded sub-cases. qualitative research approach. semi-structured interviews. findings: the paper identifies two ways of doing relationship building when it comes to iot platform models. relationship building can take place through a classic relationship iot platform model (characterized by low complexity) or a new relationship iot platform model (characterized by high complexity). in both models, the manufacturer aims for high stickiness towards the customers. in the new relationship model, however, low stickiness towards suppliers is aimed for in order to enable the manufacturer to orchestrate the stakeholder constellation dynamically. in addition, a driver for the low stickiness aim towards suppliers can be found in a motive to outsource risks to suppliers in iot markets characterized by high degrees of turbulence and growth. research limitations/implications: the study points to the fact that a manufacturer should consider how the new technology iot gives opportunities for different ways of relating to stakeholders, e.g. customers and suppliers, in the business model. originality/value: based on primary data collection the research shows how strategic relationship building can help a manufacturer create value with customers and suppliers within iot platform models. the paper expands the business model literature by investigating consequences of a new technology, i.e. iot. please cite this paper as: hollensen, s. eskerod, p. and ulrich, a.m.d (2020), relationship building in iot platform models the case of the danfoss group, vol. 8, no. 2, pp. 73-91 keywords: iot, iot platform model, platform stickiness, manufacturer, relationship building, business models. acknowledgements: we acknowledge the support by danfoss a/s, dk-6430 nordborg. 1 dept. of entrepreneurship and relationship management, university of southern denmark, faculty of social science, alsion 2, dk-6400 sønderborg, denmark, email: svend@sam.sdu.dk 2 dept. of business and management, webster vienna private university, palais wenkheim, praterstr. 23, a-1020 vienna, austria. 3 dept. of entrepreneurship and relationship management, university of southern denmark, faculty of social science, alsion 2, dk-6400 sønderborg, denmark. * corresponding author mailto:svend@sam.sdu.dk journal of business models (2020), vol. 8, no. 2, pp. 73-91 74 introduction the current digital transformation, called industry 4.0 and representing the fourth industrial revolution in manufacturing and industry, influences production of goods and services as well as value chains and business models. automation, big data, ai (artificial intelligence) and iot (internet-of-things) are technologies within industry 4.0 that create so-called smart factories “allowing the manufacturer to control the entire production from one platform” (danish institute of industry, n.d.). in the future, iot will play a central role in everyday life (gershenfeld & vasseur, 2014), and it will open new business and market opportunities (miorandi, sicari, de pellegrini & chlamtac, 2012) as well as it will give market actors room for being active creators (alvarez & barney, 2007). a british technology pioneer, kevin ashton, introduced the term iot in 1999 (ashton, 2009), and today it describes “a network of entities that are connected through any form of sensor, enabling these entities to be located, identified and even operated upon without any human interference” (falkenreck & wagner, 2017, p. 1). opportunities for changing and sharing digital data give companies options for creating additional value for their customers (kannan & hongshuang, 2017) and for maintaining relationships in new ways. lately, classical manufacturers have been transforming themselves from selling products and add-on services towards integrated service solutions packages, with combinations of products, services and software/data. fast technological development, fierce competition and ’plug-and-play’ opportunities through iot create fastchanging and dynamic b2b market conditions. the iot technology is radically changing the way manufacturers are creating value for their customers and offering new opportunities for iot services to form a more substantial part of the company’s business model and profits. accordingly, there is a need to shift research focus from enabling technologies to a business platform model, where joint efforts are considered for value creation and capture among all stakeholders. in the context of iot platform technology, business models are concerned with how technological potential can be translated into how organizations create and capture value (iivari, ahokangas, komi, tihinen & valtanen, 2016). on an iot platform, several stakeholders will participate, and the platform offers the opportunity for the single company to develop its own iot service solutions in accordance with the overall iot business model (ionut pirvan, dedehayir & le fever, 2019). therefore we refer to ‘iot business models’ and ‘iot platforms’ as interchangeably. the transformation from a product to a service dominant business model (woodside & sood, 2017) is described by the term service-dominant logic (vargo & lusch, 2008; vargo & lusch, 2017). the service-dominant logic can be helped underway by iot solutions by which b2b companies in a partner network can align their total offerings to support customers’ value creation processes, rather than selling products through an arm’s length market transaction. an iot platform is seen as a configuration design for products, services and infrastructure, facilitating stakeholders’ (e.g. suppliers, platform owners, customers) interaction (löfberg & åkesson, 2018). the value co-creation process is complex and the iot platform needs to reflect this complexity, in form of advanced combination of physical products and software (service solutions). stakeholder theory can be applied when studying iot platforms as it suggests that any business should be seen as an interconnected and interdependent system, where all stakeholders must contribute in order to flourish collectively (freeman, phillips & sisodia, 2020). on an iot platform, the constellation of stakeholders can change over time. the various stakeholders have potential for adding value or harming value creation, depending on the alignment of stakeholder capabilities and expectations (savage, bunn, gray, xiao, wang, wilson & williams, 2010). to become successful within the context of iot platforms it is necessary to figure out how to add value through explicit strategic decisions about relationships to stakeholders involved in the value creation process (ulrich, hollensen & eskerod, 2019). the strength of a relationship can be expressed through the term stickiness. the term ‘platform stickiness’ refers to “[the] central actor’s [i.e. a focal company’s] ability to continuously attract new and maintain existing stakeholders within a platform through the effective orchestration of value co-creation” (laczko, hullova, needham, rossiter & battisti, 2019, p. 216). we allow ourselves to replace the term ‘ability’ with ‘aim’ in our research as we think this gives the concept more relevance in a strategic context. https://en.wikipedia.org/wiki/united_kingdom journal of business models (2020), vol. 8, no. 2, pp. 73-91 75 iot provides the opportunity to create a number of different business models (boehmer, shukla, kapletia & tiwari, 2020; iivari et al., 2016). platforms face the challenging task to balance openness and ‘stickiness’ in such a way that the right set of suppliers and complementary service providers are matched to the right set of customers using the right selection of product categories and channels. a research gap exists on how a manufacturer relates to its core stakeholders, e.g. customers and suppliers, under these changed market conditions. examples of suppliers are firms offering complementary products and services as well as installers. this leads us to the following research question: how do manufacturers build relationships, in the form of stickiness, with its customers and suppliers on iot platforms in b2b markets? the research question is addressed by literature studies as well as empirical studies. our contribution is to determine a company’s aimed level of iot platform ‘stickiness’ towards suppliers and customers, depending on the market complexity. the research involves explorative, qualitative, embedded case studies (eisenhardt, 1989; eisenhardt & graebner, 2007: yin, 2017). the case company is the danfoss group (www.danfoss.com), a danish traditional manufacturer that has worked with iot platforms for 10+ years, in order to transform themselves to a more service-oriented company. the paper is organized as follows: in the next section, we present the theoretical framework, which is built on platform theory as well as stakeholder theory. hereafter, we present the research methodology. the section includes a presentation of the case company. afterwards, we present findings from the empirical study. the paper concludes with a discussion and conclusion section that answers the research question as well as it points to a future outlook. theoretical framework the theoretical framework of the research draws on an integration of platform theory and stakeholder theory. a platform is defined as a configuration design for products, services and infrastructure, facilitating stakeholders’ interaction (löfberg & åkesson, 2018). an organization’s stakeholders can be defined as “those groups without whose support the organization would cease to exist”(stanford research institute cited in freeman, 1984, p. 31) and “those groups to whom the firm owes an obligation based on their participation in the cooperative scheme that constitute the organization and makes it a going concern” (harrison & wicks, 2013, p. 102). in this paper, we allow ourselves to change the word ‘organization’ with ‘platform’ implying that the platform stakeholders are the ones that are necessary for the platform’s continuous existence and at the same time the ones for which, in our case, the manufacturer has an obligation. a platform is used for sharing data and other resources that can be used by all stakeholders. some platforms have led to significant disruption in the way of doing business, e.g. the retailing platform amazon, the accommodation platform airbnb, the communication platform facebook, and the transportation platform uber. four different platform types exist (smedlund, 2012): leading platforms (e.g. the ones mentioned above), open platforms (e.g. open source applications), closed platforms (e.g. for logistic transactions across companies) and internal platforms (e.g. company-wide). each type of platform has its own characteristics, tasks and challenges. in an open platform, the end user of the offerings may not be known, whereas a closed platform requires a conscious decision from one or more decision makers on whom to invite to the platform. based on a literature review, smedlund & faghankhani (2015) propose that successful platforms are characterized by 1) co-creation of value, 2) interdependency and complementarity of components, 3) surplus value for the whole system (i.e. synergy) and 4) evolutionary growth. stakeholder theory builds on a systems perspective, implying that the value created by a system (or we can also say a network of stakeholders) is dependent on the contributions provided by each stakeholder (rhenman, 1968). each stakeholder involved must benefit from participating in the system in order to ensure its long-run viability (see e.g. freeman, 1984; freeman et http://www.danfoss.com journal of business models (2020), vol. 8, no. 2, pp. 73-91 76 al., 2020). this is due to the fact that participation in the system is voluntary as stakeholders whether it is customers, suppliers or platform partners producing products and services have ‘the freedom of choice’ (barnard, 1938) to continue the relationship or not. the various stakeholders have potential for both promoting and harming the value creation, depending on the alignment of the stakeholder capabilities and expectations (savage et al., 2010). as the need for the individual stakeholder’s contribution can vary, it is a strategic task of the focal organization which is leading the value creation system to decide how to relate to each stakeholder. tuominen (1995) proposes the concept ‘ladder of stakeholder loyalty’ to describe the relationship between the focal organization and the stakeholders within the value creation system. the author differentiates between neutral, cooperative and allied stakeholders, whereas allied stakeholders are on top of the stakeholder loyalty ladder (tuominen, 1995). the underlying idea is that “... it may not be possible, desirable or efficient to position every positively oriented stakeholder on the top of the ladder, i.e. to have a true allied relationship with every stakeholder. … [it] may not be an effective utilization of resources” (polonsky, schuppisser & beldona, 2002, p. 122). multiple diverse stakeholders on both the supply and the demand sides are involved (constantiou, marton & tuunainen, 2017), and the value created depends on the so-called value constellation (normann & ramirez, 1993; ceccagnoli, forman, huang & wu, 2012), i.e. the specific constellation of stakeholders involved in the creation of a specific offering for a customer. in the platform literature, two roles are defined: orchestrators and offering builders (ulkuniemi, pekkarinen, bask, lipponen, rajahonka & tinnilä, 2011; eloranta & turunen, 2016). due to the dynamic nature of platforms, orchestration challenges exist for a central actor (nambisan & sawhney, 2011), i.e. the orchestrator that facilitates the co-creation of value by providing interaction possibilities for value-adding offerings and transactions among the core stakeholders (suppliers, platform partners, customers). a multi-sided platform is mediating different groups of stakeholders. digital platforms are often multisided, providing interfaces with and among two or more groups of economic actors on different ‘sides’ of the platform, including providers of complementary assets. in our case, the platform operates on two-sided markets. the popularity of platforms on two-sided markets has increased radically in recent years (parker, van alstyne & choudary, 2016; de reuver, sørensen & basole, 2018). on two-sided markets, groups on both the supplier and customer side interact with each other through a common platform. the two-sided market platform is a business ecosystem, which is being made up of coevolving interdependent and interconnected stakeholders: customers, suppliers, agents and channels, sellers of complementary products and services, and the platform owner (salmela & nurkka, 2018). in our two-sided platform case, the ecosystem consists primarily of the suppliers: customers:platform: a b c d e f x figure 1: multiple diverse stakeholders on both the supply and the demand sides journal of business models (2020), vol. 8, no. 2, pp. 73-91 77 suppliers, the platform partners and the customers, see figure 1. fehrer, woratschek & brodie (2018) differentiate between the following business model platforms: firm-centered networks (which builds on porter’s (1980; 1985) philosophy, in which a company chooses an attractive market, enters this market and holds a competitive position there); solution networks (which could be a typical b2b network, which includes a limited number of stakeholders that aims to exploit a business opportunity); and open networks (which include the large scale b2c multi-sided platforms, like airbnb and uber). the platform business models emphasize value creation between stakeholders, rather than value being created within the boundaries of a single firm. this can only be done if the trust between stakeholders on the platform is built, and consequently the transaction costs between the multiple stakeholders on the platform are being reduced. as mentioned in the introduction, a central concept for this article is ‘platform stickiness’, meaning “[the] central actor’s ability [which we replace with aim in our research] to continuously attract new and maintain existing stakeholders within a platform through the effective orchestration of value co-creation” (laczko et al., 2019, p. 216). in contrast to ‘stickiness’ the concept of ‘platform openness’ indicates how easy it is to access a platform. more specifically, we define ‘platform openness’ as the extent to which the platform owner places many or few restrictions on participation, development or use across the distinct roles related to the platform, whether for supplier or customer (broekhuizen, emrich, gijsenberg, broekhuis, donkers & sloot, 2020). research methodology research approach the research involves literature reviews as well as an explorative, qualitative, single case study with embedded sub-cases (eisenhardt, 1989; eisenhardt & graebner, 2007: yin, 2017). the aim is to contribute to the conceptual understanding of relationship building with core stakeholders in the context of iot platforms in b2b markets by applying an abductive approach (dubois & gadde, 2002). in an abductive approach, empirical observations and concepts from existing literature are systematically combined in an evolving manner in order to develop descriptive theory propositions through observation, categorization, and association (christensen, 2006). abduction starts from individual observations and the aim is to reach the perceived ‘best explanation’ from those observations. a guiding principle based partly on intuition and partly facts is created at the beginning of the research (dubois & gadde, 2002). it is typical for the abductive logic that relevant theories are identified along the way due to the fact that unexpected findings are an essential part of this logic. the empirical data and the theories are in continuous dialogue during the research. the premises do not guarantee the conclusion, but inference to the perceived best explanation with the inputs at hand (christensen, 2006). selection of case an important part of a case study approach is to select a case that can be powerful and rich for analysis of the conceptual problem at hand (siggelkow, 2007). as a powerful and rich case company for this research, a danish manufacturer, the danfoss group (www.danfoss.com), was selected. the company, which is one of the largest industrial companies in denmark, is in digital transformation and have used iot platforms for 10+ years. danfoss group is a family-owned, globally leading component supplier. 80% of its sales is on the b2b market, where it operates as a classical oem sub supplier (danfoss, n.d.). see figure 2. in 2019, the danfoss sales was eur 6.3 billion. the operating profit (ebit) amounted to eur 771 million, leading to an ebita margin of 12.3%. from 2018 to 2019 net profit improved 8% to eur 502 million. in 2019 danfoss had 27,871 employees (danfoss, n.d.). in 2015, decision makers within danfoss asked themselves strategic questions about which positioning and future role(s) related to iot platforms that would be attractive for the company’s fields (interview, december 2018), while acknowledging that “[in popular terms] the intelligence moves from what we call advanced components to the cloud; … a part of the revenue should come from innovative services; .. and we should have a clear opinion about where our role is in the control system” (interview, may 2019). http://www.danfoss.com http://www.danfoss.com journal of business models (2020), vol. 8, no. 2, pp. 73-91 78 the danfoss group has a number of iot platform initiatives (involving customers and suppliers from around the world), which makes it possible to do comparative studies of sub-cases (danfoss, n.d.). danfoss is chosen as the case, because the company provides a variety of possible sub-cases in the b2b iot area. after interviews with different divisions in danfoss (e.g. cooling), the authors have chosen to work with two sub-cases within the heating division, because they represent different levels of complexity and market turbulence, so different levels of ‘stickiness’ could be expected in these two cases. data collection and analysis two iot platforms within the danfoss group were selected for embedded sub-case studies, i.e. the danfoss-leanheat iot platform and the the danfoss-schneider-somfy iot alliance platform. both sub-cases are current strategic initiatives under the attention of top management. both involve collaboration with more suppliers, as well as they address non-domestic customers on b2b markets. the cases were expected to have both similarities and differences and thereby being suitable for sharpening the view and enabling conceptual sensitivity in the analyses. primary and secondary data were collected through interviews with seven iot directors and employees in danfoss heating, cooling and drives, and through online sources and internal documents. semi-structured interview guides were applied. an interview protocol facilitated that similar procedures were followed in all interviews (yin, 2017). the semi-structured nature ensured that relevant topics were covered, yet still allowed for flexibility. in all interviews at least two researchers acted as interviewers, and each interview took 1.5-2 hours. interview transcriptions and field notes were produced. to ensure validity of data, faceto-face interviews and secondary data were compared. this process reduced data misunderstanding, increased the validity of the findings and validated the information received from various sources. in table 1 an overview of the interviews is visualized. for data analysis, patterns, similarities and differences were identified. all three researchers undertook individual analysis before comparing findings and reflections. ceo kim fausing + rest of danfoss group executive team global services corporate functions danfoss power solutions danfoss cooling danfoss drives danfoss heating segments regions north america latin america central europe russsia north europe eastern europe china turkey, middle east & africa south europe asia pacific india global accounts figure 2: the danfoss group (march, 2020) – based on www.danfoss.com journal of business models (2020), vol. 8, no. 2, pp. 73-91 79 within-case and cross-case analyses (eisenhardt, 1989; eisenhardt & graebner, 2007) were conducted. findings in the following sub-sections, we offer findings from within-case and cross-case analyses of the two iot platforms sub-cases. within-case analysis: the danfoss-leanheat iot platform in 2016, danfoss acquired a 23 percent stake in the finnish company leanheat oy, which was started up in 2011. in 2018, danfoss’ shareholding increased to 46 percent. in may 2019, danfoss took over the full ownership of leanheat. leanheat has continued operations as a separate business unit headed by its present ceo, jukka aho. from 2016 to 2019, leanheat increased its number of employees from 12 to 50 (leanheat, n.d.). leanheat uses ai (artificial intelligence) and machine learning to generate thermodynamic models of buildings on a closed platform. leanheat software is installed to monitor and control energy consumption and improve the indoor climate for the residents. the company offers a digital user-interface, where the local real estate service providers can see the real-time temperature and relative humidity. in addition to indoor sensor data, leanheat’s system relates to weather data and district heat data. the interface gives the building administrators a very good overview of the apartments and is an easy way to control the heating. this has helped them to manage the temperature imbalances in each apartment and react much faster than before. after installing the leanheat system, the customers, i.e. finnish building owners, reduced energy consumption by 20 percent during peak hours, and their overall energy costs dropped by 10 percent (interview, may 2019). the leanheat solution has been installed in more than 100,000 apartments, primarily in finland, with pilots ongoing in denmark, sweden, germany, poland and norway. but there is also potential outside europe as is currently being demonstrated in a number of pilots with district heating companies in china. leanheat software presently controls fifteen heating circuits at eight sites in the city tianjin (leanheat, n.d.). when it comes to platform approach, leanheat positions itself as a domain specialist (within heating) and a platform orchestrator that works independently from other domain specialists serving the customers, like e.g. manufacturers of light control products. a common iot platform across the various domains, however, may come. it is impossible to say when though (interview, may 2019). the danfoss-leanheat platform influences the company’s interactions with its customers, and the company welcomes these new opportunities. whereas danfoss used to be a component supplier for which the interaction with the customers was finalized when the buying transaction was carried out, the digitalization and the platform allow for an ongoing dialogue with the customers. when customers buy a platform-related product they pay for the installation, and hereafter they pay a running service fee. the basis for the continuous dialogue and the service fee is that leanheat, based on information from the system, now can debate how the company position danfoss division month, year city, country president cooling dec, 2018 nordborg (hq), denmark director digital business & iot heating dec, 2018 hamburg, germany director digital business & iot cooling dec, 2018 hamburg, germany director business development heating dec, 2018 hamburg, denmark vice president, product & segments heating may, 2019 silkeborg, denmark head of iot drives aug, 2019 vaasa, finland marketing director heating sep, 2019 sonderborg, denmark table 1: interviews 2018-19 journal of business models (2020), vol. 8, no. 2, pp. 73-91 80 heating system works and how to optimize it. instead of only dealing with the customer’s procurement department, more stakeholder groups have become relevant, e.g. facility managers in buildings and district heating representatives. the information provided by the system as well as the ongoing dialogue with more stakeholder groups form the basis for an effective orchestration of value co-creation with existing and new customers, i.e. a high platform stickiness (interview, may 2019). when it comes to suppliers, e.g. installers, danfossleanheat is still working with the same ones as before implementing the iot platform. as stated by one of danfoss’ iot-managers: “trust and respect are crucial and elementary values when selecting and working with suppliers.” (interview, aug. 2019) danfoss has a developed network of specialists and no plans for letting other stakeholders take over this task (interview, may 2019). we interpret this as an aim for high platform stickiness with the supplier-partners, see figure 3. in sum, danfoss is aware that the way of doing business is changing, i.e. going from pure product-selling to a product-service focus, and communicates that suppliers that do not manage to develop themselves in this direction will be replaced. as stated by a danfoss manager: ”our suppliers need to understand: if they want to be an important partner in the future, then they must develop their business” (interview, sep. 2019). within-case analysis: the danfoss-schneidersomfy iot alliance platform in 2018, danfoss entered into a partnership with the french companies schneider electric and somfy, aimed at accelerating the adoption of connectivity in the residential, mid-size building and hotel markets on a closed, leading platform. the purpose of the alliance was to develop a ‘connectivity ecosystem’, primarily for smart hotel rooms and secondly for general smart homes and buildings. lars tveen, president of danfoss’ heating segment, commented: “controlling lighting, heating, and shutters together in one system is a real expertise that we can now jointly offer by combining more than 300 years of industry leadership, all backed by our extensive professional installer networks.” (danfoss, n.d.). danfoss heating & leanheat customers e.g. building owners supplier supplier e.g. installers supplier supplier supplier supplier supplier supplier supplier h igh degree of stickiness domain specialist & platform owner e.g. security domain specialist & platform owner figure 3: danfoss-leanheat’s relationships with various stakeholders journal of business models (2020), vol. 8, no. 2, pp. 73-91 81 in developing a ‘smart building’ iot platform solution, each of the three partners can supplement and integrate their core competences into one smart solution: danfoss: danish company, leading position within residential heating and indoor climate, #1 position in district energy solutions, strong installer network spanning across europe, russia and china. schneider: french company, schneider electric is among the global leaders in the digital transformation of energy management and automation in homes, buildings, data centers, infrastructure and industries. global presence in over 100 countries. somfy: french company, world leader in the automatic control of openings and closures (shutters) in homes and buildings. present in 60 countries with 125 subsidiaries. as one of the first customer priorities, the alliance wants to approach hotel chains around the world. the integration of systems provides a guest experience, while saving energy without impacting customer comfort and health. the solution also allows hotel facility managers to control everything through a single integrated system and at the same time save energy (schneider, n.d.). the three companies use schneider’s platform. the thought behind the alliance is that the three companies should stay independent and not interfere with the development of each other’s products and services. the offerings will still be sold individually through schneider’s electricians, danfoss’ plumbers and somfy’s specialist installers and they are not supposed to install each other’s products even though they all can be connected to the common platform and operated by a single user-interface device. instead the idea is as a first step that each company should introduce their customers to the other companies’ products and services if the customers have needs in more domains, e.g. for optimization of heating and openings and closures of blinds. the attractiveness for the customers of the alliance should then be that they are ensured that the two partners of the one, they are in contact with, also are global market leaders, meaning that quality products and services (instead of competing on price) can be offered and seamlessly connected at the platform, also at a later point of time. this is supposed to give a high platform stickiness on the customer side. danfoss is very aware of the role they have in the partnership, their main focus is to develop their competences within heating, and not to be a developer of the platform. as an iot-expert at danfoss phrased it: “we are very good at meeting the customers’ requirements and needs [within heating] … but to develop a platform i never think we will” (interview, sep. 2019). as many companies can offer platforms, e.g. microsoft and google, the idea is as a second step – to undertake innovations together so that the three companies can get a competitive advantage by providing offerings that are even more value-adding than ‘just’ information of each other’s products and services as well as seamless connection to the common platform. a danfoss manager expressed it this way: “where the real value creation comes is where you start to think [the product] together to a higher extent… [and] also get the optimization advantage, because we actually have aligned the thought about energy savings” (interview, may 2019). the aim for both the first and the second step, as described above, makes the platform stickiness between the three alliance partners high. as an iotmanager said: “if we manage to develop our services and be attractive enough, then we will continue to be interesting to the platform and as a partner. if not, you will be replaced. it is important to always to be in front in your domain” (interview, sep 2019). when it comes to other suppliers, firms offering products and services from complementary domains like door locks and installations, the three alliance partners are not ready now to invite them to take part of the alliance or have high stickiness. it builds too much complexity when it comes to coordination, as well as it gives lower flexibility for setting the optimal value constellation i.e. choice of stakeholders, see figure 4. journal of business models (2020), vol. 8, no. 2, pp. 73-91 82 but when the alliance has become more mature it will be natural to expand the collaboration with more platform partners (i.e. domain specialists). as stated in two of the interviews: ”with this new project approach we have stopped thinking about our own danfoss products we need to take a customer solution approach, which requires that we also include products and services from non-danfoss suppliers” (interview, dec 2019) “in the future we will be more focused on teaming up with more partners” (interview, sep 2019). one of the key drivers for the formation of future alliances is ‘time-to-market’ one of the interviewees emphasized this: “today’s focus is on ’time-to-market’. for this you need to cooperate. we look to others and reach out instead of developing solutions ourselves” (interview, dec 2019) cross-case analysis of the two sub-cases the empirical studies of the danfoss leanheat iot platform and the danfoss-schneider-somfy iot alliance platform suggest that different strategies can be sought when it comes to building up relationships with core stakeholders on iot platforms. for both cases, high platform stickiness was sought in the relationship with the customers. this is illustrated by this quotation from an interview with a danfoss representative: “in [specific] segments we believe that we have a position where we can play a role [in an iot-context] and where we said we would deliver more than products. we [do] deliver products. our strategy is that we stand on advanced products. this is where we come from. this is our legacy. this is where we are strong. however, new ways to optimize exist. …. buildings will be ‘smart’. less than two percent of the current buildings are ‘smart’… in 2015, we decided for a strategy to create more stickiness through a discussion with our current customers. today, the problem .. is that when we leave [after having sold the product to a procurement department] we are kind of done. it is difficult to get an ongoing dialogue with them… we would like to have that”. (interview, may 2019) danfoss has the latest years also experienced changes in some of the bigger customers’ preferences, they are getting more and more interested in integrated service solutions. the possibilities within iot provides new opportunities for the manufactures to offer the customers integrated service solutions in cooperation with new or existing alliance partners, and “we are just in the beginning of that development process”. (interview, sep. 2019) in the two cases, it can be seen that the manufacturers aim for building up long term relationships with customers on iot platforms in b2b markets. “setting up an iot solution is anyway an effort, and as customers see the benefits, they want to benefit more. this means that we learn about things that are valuable to this customer, and it is easier for us to fulfil the requirements of this customer”. (interview, aug. 2019) somfy danfoss heating domain specialistschneider platform partners high degree of stickiness supplier e.g. installers supplier supplier supplier supplier low degree of stickiness customers e.g. hotels h igh degree of stickiness figure 4: danfoss-schneider-somfy iot alliance’s relationships with various stakeholders journal of business models (2020), vol. 8, no. 2, pp. 73-91 83 when we compare the danfoss-leanheat case with the danfoss-schneider-sompfy case it can be noticed that the manufacturer in the first case is aiming for building up long term relationships with a few core partners (i.e. high platform stickiness) in contrast to the latter case where the focus is to build up close relationship to the other domain partners on the platform and then applying, what we could call, a ‘pick-and-choose’ approach to the suppliers. this low level of stickiness towards suppliers was underlined by one of the interviewees: “our official software partner is microsoft, but we may also choose google as partner it all depends on the project requirements and the customer solution” (interview, dec. 2018). the examples of both high and low platform stickiness towards the suppliers will be discussed further in the next section. discussion, conclusion and future perspectives discussion and propositions the empirical study illustrated that an iot platform gives opportunities for creating stickiness on the customer side and for co-creating added value due to e.g. the information of system performance. the frequency of interaction on both the supplier and the customer side is increasingly seen as a means to measure loyalty (rong, xiao, zhang & wang, 2019). as a platform owner gains more knowledge about customers’ preferences and behavior, it can personalize its offer to specific customers. this will create incentives to stick with the platform because abandoning the platform in favor of a rival platform would also mean leaving the value that the platform is able to deliver to the customer though learning effects over time. one way for the platform owner to increase switching costs and create lock-in effects on both the supplier and customer side is to make the platform incompatible with rival platforms. the level of compatibility with rival platforms is a strategic choice, sometimes desirable and sometimes undesirable from the platform owner’s perspective (tiwana, 2014). more attractive customers make it more attractive for suppliers (e.g. software or app developers) to enter the platform and offer their digital services to the customers through the platform. prior research in the b2b industrial buying process identifies risk and complexity as two of the key determinants of how much time and effort that are involved in the upstream buying process. higher risk and complexity motivates buying centers to let more managers and resources be involved in the buying process (johnston & lewin, 1996). however, osmonbekov & johnson (2018) find that use of iot can decrease the human-to-human (h2h) communication and let the platform software make very fast side-be-side comparisons of performance information from different suppliers. in this way, the iot platform software can more or less automatically choose the first and best supplier that would fulfill pre-determined criteria. at least this could be the case for products and services that are well-known to the platform owner. for ‘new task’ situations, the buying process would require more h2h communication (osmonbekov & johnston, 2018). referring to the ‘ladder of stakeholder loyalty’ framework, it seemed clear that the iot platform enabled a strategy for developing an allied relationship, i.e. the highest level on the ladder, with the customers. for a manufacturer like danfoss which previous had challenges on keeping a dialogue with the customers after the sales transaction (as the customer didn’t need it) this was welcomed and makes us propose: p1: to sustain and grow the business, manufacturers in b2b markets desire high iot platform stickiness with customers. when it concerns the suppliers the picture was more complex. in the danfoss-leanheat case, the company aimed at co-creating value with their existing suppliers, i.e. the plumbers, whereas they did not intend (in the short run) to co-create value with other domain experts. we call this ‘the classical way’ of relation building, as it seems to continue the patterns of doing business that existed before the application of iot technology, intending for a high platform stickiness with their ‘usual’ partners but not with new ones in terms of someone from other domains as they did not want to expand their business in this direction. journal of business models (2020), vol. 8, no. 2, pp. 73-91 84 in the danfoss-schneider-somfy alliance, it was clear that the three companies intended to develop into allied partners in order to ensure long term innovation and optimization of the value co-creation. however, they preferred to have other suppliers on the iot platform as cooperative or neutral partners in the terminology of the stakeholder loyalty ladder, as it gave more sense to select a supplier in light of the specific situation, we call this a “pick-and-choose” strategy, than to build up allied relationships. this is a result of the fact that an iot platform potentially is dynamic, meaning that the constellation of stakeholders easily can be changed, which can be utilized to maximize the value constellation. we call this ‘the new way’ of relation building. this makes us propose: p2: to ensure continuous innovation, manufacturers in b2b markets desire high iot platform stickiness with a few partners. p3: to ensure optimization in a high complexity context through a dynamic stakeholder constellation, manufacturers in b2b markets desire low iot platform stickiness with the majority of suppliers. when it comes to degree of aimed-for stickiness, two fundamentally different business models were identified, coined the classic relationship iot platform model (characterized by low complexity) and the new relationship iot platform model (characterized by high complexity). in both business models, the manufacturer desires high stickiness with customers. in the new relationship model, however, low stickiness with suppliers is preferred in order to enable the manufacturer to orchestrate the stakeholder constellation dynamically, see scheme 1. the low stickiness towards suppliers is in line with broekhuizen et al. (2020) showing that in new turbulent markets, which is the case with use of iot in hotels (eskerod, hollensen, morales-contreras & arteaga-ortiz, 2019) as in the danfoss-schneider-somfy alliance, platforms often choose to open up (‘low stickiness’ towards suppliers) and stimulate supplier-led innovation, thereby shifting the risk to invest to suppliers. when shifting from the market growth to the maturity phase (as with the case of danfoss leanheat), knowledge becomes more readily available and platform differentiation becomes more difficult to achieve. in such a situation, platform owners may compensate for lack of platform differentiation by increasing the supplier stickiness and give them greater authority and more benefits, or by acquiring them, as we also saw in the case with danfoss leanheat. managerial implications generally, iot has far-reaching managerial implications beyond what has been presented here. in most companies, the current state of iot is a collection of fragmented networks of things, using the internet and other technologies to transfer data to and from each sector’s cloud service. consequently, the full potential of the stickiness ‘upstream’ (towards suppliers) stickiness ‘downstream’ (towards customers) classic relationship iot platform model (case: danfoss leanheat) new relationship iot platform model (case: danfoss-schneidersomfy) high high low high ‘low complexity’ ‘high complexity’ scheme 1: platform stickiness in b2b iot platform models journal of business models (2020), vol. 8, no. 2, pp. 73-91 85 iot-era has not yet materialized, so the future opportunities in internet-related industries are unlimited. specifically, when it comes to customers, the implications seem straightforward, where companies try to build up relationships, and stickiness, to their key customers through key account management (kam) and other relationship tools (scheme 1). however, the implications in relationships and stickiness to supplier-partners seem more complex, as described in the following: as shown in scheme 1, ‘complexity’ is a key indicator for the degree of stickiness with supplier-partners. if several alliance partners are involved on the platform (as with the danfoss-schneider-somfy platform), more coordination is needed and ‘complexity’ increases. consequently, higher level of ‘orchestration capability’ is needed for coordination of the different stakeholders’ contribution to value creation. as an alternative, the company and its alliance partners can try to simplify operations and compensate for high complexity by setting up specific requirements for a supplier’s product and service contribution to the iot platform. the first supplier that will fulfill the specific requirements for the solution will be chosen a kind of ‘pick-and-choose’ selection strategy with relatively low transaction costs, as the answer to the increasing complexity on iot platforms. following the notion of ng & wakenshaw (2017, p. 9): ”physical products can now be designed to be changeable, for example through an application interface that allows customizability upon use to respond to emergent contextual situation”, it means that products and services from suppliers can learn adaptation to the iot platform and customer solution very fast. consequently, platform owners will increasingly require that suppliers are offering potential digital ‘plug-and-play’ solutions, which will then be coupled together with other suppliers’ solutions to a total customer solution. research contributions the research contributes to the existing literature in three ways. first of all, the research provides an empirical example of two orchestration strategies by referring from the two embedded sub-cases within the danish leading manufacturer, danfoss. secondly, the empirical study identified two ways of dealing with stakeholder relationships in an iot context, coined by us as the classic relationship iot platform model and the new relationship iot platform model. fundamental for both models is the aim for high platform stickiness (long-lasting bonds) with the customers. novel in this research is that in the new relationship iot platform model, low stickiness with suppliers is preferred in order to enable the manufacturer to orchestrate the stakeholder constellation dynamically to enhance value creation. hereby (and our third contribution) our research shows that iot platform orchestration can be seen as an important aspect of platform capabilities, where the orchestrator must take advantage of the external resources and not only focus on own resource ownership. limitations and future perspectives this study involves one company (danfoss) studied regarding handling of two-sided platforms in the heating of buildings. a more systematic comparison of several companies’ iot platform strategies could reveal more insight into how different industry and firm contexts would influence the level of intended platform stickiness and the capabilities needed. several different company cases could represent different levels of complexity, which according to our research is one of the decisive factors for explaining ‘intended stickiness’ level. it is also likely that different industries would differ in terms of their competitive intensity and technological turbulence and this would probably also have an effect on the ‘intended stickiness’. further research might take the next steps be exploring the necessary actions in order to fulfill the ‘intended journal of business models (2020), vol. 8, no. 2, pp. 73-91 86 stickiness’ on iot platforms. a future research framework could guide platform owners on when to apply certain stickiness activities rather than others. these activities could also be differentiated between upstream (towards suppliers) and downstream (towards customers) activities. journal of business models (2020), vol. 8, no. 2, pp. 73-91 87 references alvarez, s.a. & barney, j.b. (2007), discovery and creation: alternative theories of entrepreneurial action, strategic entrepreneurship journal, vol. 1, no. 1-2, pp. 11-26. ashton, k. (2009), that ‘internet of things’ thing, rfid journal, vol. 22, no. 7, pp. 97-114. barnard, c.i. (1938), the functions of the executive, harvard university press, cambridge. boehmer, j.h., shukla, m., kapletia, d. & tiwari, m.k. (2020), the impact of the internet of things (iot) on servitization: an exploration of changing supply relationships, production planning & control, vol. 31, no. 2-3, pp. 203-219. broekhuizen, t.l.j., emrich, o., gijsenberg, m.j., broekhuis, m., donkers, b. & sloot, l.m. (2020), digital platform openness: drivers, dimensions and outcomes. journal of business research, in press. ceccagnoli, m., forman, c., huang, p. & wu, d.j. (2012), cocreation of value in a platform ecosystem! the case of enterprise software, mis quarterly, vol. 36, pp. 263-290. christensen, c.m. (2006), the ongoing process of building a theory of disruption, journal of product innovation management, vol. 23, no. 1, pp. 39-55. constantiou, i., marton, a. & tuunainen, v.k. (2017), four models of sharing economy platforms, mis quarterly executive, vol. 16, no. 4, pp. 231-251. danfoss (n.d.), available at: https://www.danfoss.com/en/ (accessed 20 may 2020). danish institute of industry 4.0 (n.d.), an introduction to industry 4.0, copenhagen, 2016, available at: www.dii4.dk (accessed 31 march 2020). de reuver, m., sørensen, c. & basole, r.c. (2018), the digital platform: a research agenda, journal of information technology, vol. 33, no. 2, pp. 124-135. dubois, a. & gadde, l.e. (2002), systematic combining: an abductive approach to case research, journal of business research, vol. 55, no 7, pp. 553-560. eisenhardt, k.m. (1989), building theories from case study research, academy of management review, vol. 14, no. 4, pp. 532-550. eisenhardt, k.m. & graebner, m.e. (2007), theory building from cases: opportunities and challenges, academy of management journal, vol. 50, no. 1, pp. 25-32. eloranta, v. & turunen, t. (2016), platforms in service-driven manufacturing: leveraging complexity by connecting, sharing, and integrating, industrial marketing management, vol. 55, pp. 178-186. eskerod, p., hollensen, s., morales-contreras, m.f. & arteaga-ortiz, j. (2019), drivers for pursuing sustainability through iot technology within high-end hotels an exploratory study, sustainability, vol. 11, no. 19, p. 5372. falkenreck, c. & wagner, r. (2017), the internet of things–chance and challenge in industrial business relationships, industrial marketing management, vol. 66, pp. 181-195. fehrer, j.a., woratschek, h. & brodie, r.j. (2018), a systemic logic for platform business models, journal of service management, vol. 29, pp. 546-568. https://www.danfoss.com/en/ file:///c:\users\svend\appdata\local\microsoft\windows\inetcache\content.outlook\bey18fpc\www.dii4.dk journal of business models (2020), vol. 8, no. 2, pp. 73-91 88 freeman, r.e. (1984), strategic management: a stakeholder approach, pitman series in business and public policy, pitman, boston. freeman, r.e., phillips, r. & sisodia, r. (2020), tensions in stakeholder theory, business & society, vol. 59, no, 2, pp. 213-231. gershenfeld, n. & vasseur, j.p. (2014), as objects go online: the promise (and pitfalls) of the internet of things, foreign affairs, vol. 93, no. 2, pp. 13-14. harrison, j.s. & wicks, a.c. (2013), stakeholder theory, value, and firm performance, business ethics quarterly, vol. 23, no. 1, pp. 97-124. iivari, m.m., ahokangas, p., komi, m., tihinen, m. & valtanen, k. (2016), toward ecosystemic business models in the context of industrial internet, journal of business models, vol. 4, no. 2, pp. 42-59. ionut pirvan, c., dedehayir, o. & le fever, h. (2019), industry platforms as facilitators of disruptive iot innovations, journal of technology management & innovation, vol. 14, no. 3, pp. 18-28. johnston, w.j. & lewin, j.e. (1996), organizational buying behavior: toward an integrative framework, journal of business research, vol. 35, no. 1, pp. 1-15. kannan, p.k. (2017), digital marketing: a framework, review and research agenda, international journal of research in marketing, vol. 34, no. 1, pp. 22-45. laczko, p., hullova, d., needham, a., rossiter, a.m. & battisti, m. (2019), the role of a central actor in increasing platform stickiness and stakeholder profitability: bridging the gap between value creation and value capture in the sharing economy, industrial marketing management, vol. 76, pp. 214-230. leanheat (n.d.), available at: https://leanheat.com/ (accessed 20 may 2020). löfberg, n. & åkesson, m. (2018), creating a service platform how to co-create value in a remote service context, journal of business & industrial marketing, vol. 33, pp. 768-780. miorandi, d., sicari, s., de pellegrini, f. & chlamtac, i. (2012), internet of things: vision, applications and research challenges, ad hoc networks, vol. 10, no. 7, pp. 1497-1516. nambisan, s. & sawhney, m. (2011), orchestration processes in network-centric innovation: evidence from the field, academy of management perspectives, vol. 25, no. 3, pp. 40-57. ng, i.c. & wakenshaw, s.y. (2017), the internet-of-things: review and research directions, international journal of research in marketing, vol. 34, no. 1, pp. 3-21. normann, r. & ramirez, r. (1993), from value chain to value constellation: designing interactive strategy, harvard business review, vol. 71, no. 4, pp. 65-77. osmonbekov, t. & johnston, w.j. (2018), adoption of the internet of things technologies in business procurement: impact on organizational buying behavior, journal of business & industrial marketing, vol. 33, pp. 781-791. parker, g.g., van alstyne, m.w. & choudary, s.p. (2016), platform revolution: how networked markets are transforming the economy? and how to make them work for you, ww norton & company, new york. https://leanheat.com/ journal of business models (2020), vol. 8, no. 2, pp. 73-91 89 polonsky, m.j., schuppisser, d.s.w. & beldona, s. (2002), a stakeholder perspective for analyzing marketing relationships, journal of market-focused management, vol. 5, no. 2, pp. 109-126. porter, m.e. (1980), competitive strategy techniques for analyzing industries and competitors. free press, new york. porter, m.e. (1985), competitive advantage creating and sustaining superior. free press, new york. rhenman, e. (1968), industrial democracy and industrial management, tavistock publications, london. rong, k., xiao, f., zhang, x. & wang, j. (2019), platform strategies and user stickiness in the online video industry, technological forecasting and social change, vol. 143, pp. 249-259. salmela, e. & nurkka, n. (2018), digital market capture in platform business–how to pass the valley of death?, nordic journal of business, vol. 67, no. 2, pp. 90-113. savage, g.t., bunn, m.d., gray, b., xiao, q., wang, s., wilson, e.j. & williams, e.s. (2010), stakeholder collaboration: implications for stakeholder theory and practice, journal of business ethics, vol. 96, no. 1, pp. 21-26. schneider (n.d.), available at: https://www.schneider-electric.com/ (accessed 20 may 2020). siggelkow, n. (2007), persuasion with case studies, academy of management journal, vol. 50, no. 1, pp. 20-24. smedlund, a. (2012), value cocreation in service platform business models, service science, vol. 4, no. 1, pp. 79-88. smedlund, a. & faghankhani, h. (2015), “platform orchestration for efficiency, development, and innovation”, in proceedings of the 2015 48th hawaii international conference on system sciences ieee, pp. 1380-1388. tiwana, a. (2014), platform ecosystems aligning architecture, governance and strategy, elsevier, morgan kaufmann, waltham. tuominen, p. (1995), relationship marketing a new potential for managing corporate investor relations, in nasi, j. (ed.), understanding stakeholder thinking, lsr-publications, helsinki, pp. 165-183. ulkuniemi, p., pekkarinen, s., bask, a., lipponen, m., rajahonka, m. & tinnilä, m. (2011), framework for modularity and customization: service perspective, journal of business & industrial marketing, vol. 26, pp. 306-319. ulrich, a.m.d., hollensen, s. & eskerod, p. (2019), “iot and platform stickiness in b2b markets the case of danfoss group”, in proceedings of the nordic academy of management (nff) 2019, 22-24 august, vaasa, finland. vargo, s.l. & lusch, r.f. (2008), service-dominant logic: continuing the evolution, journal of the academy of marketing science, vol. 36, no. 1, pp. 1-10. vargo, s.l. & lusch, r.f. (2017), service-dominant logic 2025, international journal of research in marketing, vol. 34, no. 1, pp. 46-67. woodside, a.g. & sood, s. (2017), vignettes in the two-step arrival of the internet of things and its reshaping of marketing management’s service-dominant logic, journal of marketing management, vol. 33, no. 1-2, pp. 98-110. yin, r.k. (2017), case study research and applications: design and methods, sage publications, thousand oaks. https://www.schneider-electric.com/ journal of business models (2020), vol. 8, no. 2, pp. 73-91 90 dr. svend hollensen (svend@sam.sdu.dk) is ph.d. and associate professor of international marketing at the university of southern denmark (sønderborg). his research interests are within global/international marketing, globalization, internationalization of companies, relationship marketing and social media marketing. he has published articles in wellrecognized international journals like california management review. furthermore, he is the author of globally published textbooks, e.g.  ’global marketing’ (8th edition, pearson education), ’marketing management’ (4th edition, pearson education), and social media marketing (4th edition, together with philip kotler and marc opresnik). through his company, hollensen aps, svend has also worked as a business consultant for several multinational companies, as well as global organizations like world bank. dr. pernille eskerod is ph.d. and professor of management and organizational behavior at webster vienna private university. her research interests are within stakeholder engagement, project management, change management, sustainability and strategic management. she has published several articles within the leading journals of her main field, i.e. international journal of project management and project management journal. pernille has acted as journal guest editor, published more books, journal articles and book chapters on project stakeholder management. furthermore, she has attracted funding from competitive applications for international research projects. in 2020, she conducts research on engagement of community stakeholders in infrastructure projects, stakeholder engagement in rural tourism in austria and serbia, internet-of-things (iot) and sustainability within the hotel industry, and managerial implications of iot. about the authors mailto:svend@sam.sdu.dk journal of business models (2020), vol. 8, no. 2, pp. 73-91 91 dr. anna marie dyhr ulrich is ph.d. and associate professor of b2b marketing at the department of entrepreneurship and relationship management at the university of southern denmark (sønderborg). her research interests are within b2b marketing, international marketing, globalization, iot and relationship marketing. anna marie has published articles within these topics in well-recognized international journals and books. she has a long national and international teaching and research experience. she has practical experience from jobs as project manager, owner of her own consultancy business and as senior consultant in the international department of the confederation of the danish industry, copenhagen. about the authors journal of business models (2021), vol. 9, no.2, pp. 87-108 87 dedicated business models: connecting firms’ values with the systemic requirements of sustainability sophie urmetzer1 abstract purpose: the concept of dedicated business models is drafted to bridge the gap between the micro-level value frameworks of individual firms and the macro-level systemic requirements of sustainability transformations. design: three theoretical concepts are drawn on to describe the potential relations between firms’ strategies and the normative orientation of economic systems: dedicated innovation systems to represent the macro-level and their innovation paradigms as the connection to the micro-level which is represented by business models employed by the individual firms. then, the scientific literature is reviewed systematically and three propositions are developed that conceptualize dedicated business models. findings: business models that contribute to an increased dedication to sustainability in innovation systems take effect on the paradigmatic level and can be expected to feature: (i) an explicit commitment to sustainability-related values; (ii) the active creation and exploitation of new networks to gain access to untapped material, technological, intellectual, and institutional resources that promise higher levels of sustainability; and (iii) mechanisms to nurture and reinforce changed demands of consumers and suppliers in terms of sustainability principles. limitations: the paucity of relevant literature limits the substantiation of the theoretical argument. it also lacks an empirical verification, which is beyond the scope of this conceptual paper. originality: the study contributes to the growing scholarship on business models by highlighting their potential effect on innovation paradigms. please cite this paper as: urmetzer, s. (2021), dedicated business models: connecting firms’ values with the systemic requirements of sustainability, journal of business models vol. 9, no. 2, pp. 87-108 keywords: sustainable business model, dedicated business model, innovation system, dedicated innovation system, innovation paradigm, sustainability transformation 1 department of innovation economics, university of hohenheim, germany. sophie.urmetzer@uni-hohenheim.de acknowledgements: i am grateful to my dissertation adviser andreas pyka for the inspiration to write this article. furthermore, i would like to thank the organizers of the nbm conference 2019 in berlin, especially the valuable feedback by my session chairman jan jonker on the presentation of an earlier version of this paper. doi: https://doi.org/10.5278/jbm.v9i2.3459 https://doi.org/10.5278/jbm.v9i2.3459 journal of business models (2021), vol. 9, no.2, pp. 87-108 88 introduction scholars increasingly acknowledge that the global sustainability challenges such as climate change, ecological degradation, the accumulation of waste in the environment, or poverty are interconnected issues that must be explored and addressed from a systems perspective (murphy, 2012; steffen et al., 2015; swart et al., 2004). the rising awareness of the complexity of societal, environmental, and economic problems and the acknowledgement of their systemic interrelations have revived systems thinking and respective notions of governance (abson et al., 2017; meadows, 1999; voß et al., 2006). in contrast, private firms’ efforts to take account of sustainability issues in business are often based upon a rather narrow and disconnected understanding of sustainability (whiteman et al., 2013). reporting on economic, social, and environmental performance has become the credentials for corporate sustainability (milne and gray, 2013) rendering these three domains competitors rather than acknowledging them as inseparable and synergistic contributors to the creation of value (fiksel, 2003). with its exclusive focus on quantitative, direct indicators, this approach to sustainability — also referred to as the triple bottom line (elkington, 2013) — ignores more qualitative and structural as well as indirect and systemic impacts of businesses. does a car manufacturer using bioplastic for interior paneling contribute sufficiently to the solution of problems originating from the drastic increase in private transport, greenhouse gas emissions, and air pollution? notwithstanding improvements in integrating sustainability in corporate performance reporting (e.g., via integrated reporting supported by the global reporting initiative), sustainability reporting in general premises a firm-centered (inside-out) perspective grounded on economic efficiency and encourages management to make incremental improvements along business-as-usual trajectories (alexander and blum, 2016; dyllick and muff, 2016). yet, to achieve fundamental and systemic change firms must develop an understanding of the surrounding socioeconomic system and — by adopting an outside-in perspective — contribute to its continuous innovation and improvement (dyllick and muff, 2016; fiksel, 2003). one well-established framework to analyze systems in the context of progress and innovation is the notion of systems of innovation or innovation systems (is) (dosi et al., 1988; freeman, 1987; lundvall, 1992). it considers innovation as a collective output of the systemic interplay among scientific, political, and business actors who continuously exchange knowledge according to given rules and structures. it has been widely acknowledged that the configuration and functioning of is generally affects the dynamic characteristics and the development of its elements (i.e., firms, research and political institutions, etc.) (dantas and bell, 2011; lundvall, 2007; motohashi, 2005). however, the specific effect – vice versa – of individual management decisions within firms on the setup and outcome of the is has not been explored very well. this results in a very vague conceptualization of the role of the firm in is generally, which also holds for the characterization of the established firms’ contributions to sustainability transitions. while literature about motivations and incentives for firms to engage in sustainability abounds (see, e.g., ariely et al., 2009; bossle et al., 2016; dangelico and pujari, 2010; hahn and scheermesser, 2006; mahoney et al., 2013), it is generally agreed that the dominant economic systems in their present form do not naturally promote such behavior (hawken et al., 2013; jackson, 2009; porter and kramer, 2011; schweickart, 2009). therefore, transitions researchers have commonly framed currently successful firms as part of the problem that must be overcome in order to destabilize present unsustainable regimes (geels, 2014). accordingly, relatively recent conceptual advancements of is for sustainability (lindner et al., 2016; pyka, 2017; urmetzer and pyka, 2021) also neglect the potential contribution of currently powerful private actors in realizing normative improvements of the system. this underestimation is worrying considering the influence, power, and sheer number of incumbents that can hardly be entirely substituted before long (wells and nieuwenhuis, 2012). luckily, the first studies of the transformative role of firms in sustainability transitions (andersen and markard, 2017; augenstein and palzkill, 2016; hansen and coenen, 2017; loorbach and wijsman, 2013) have started to bridge the observed disconnection between regime-conforming firms and transition endeavors. from the micro-level perspective, a useful conceptual approach to address the effect of corporate strategies on the systemic surroundings is the sustainable business model framework, which connects the firm level with the systems level (bocken et al., 2014; stubbs and journal of business models (2021), vol. 9, no.2, pp. 87-108 89 cocklin, 2008). accordingly, it has been shown in several studies that the systems context of a firm, in terms of natural, social, institutional, industry, and technologyspecific systems, influences the design and content of sustainable business models (morioka et al., 2017). the same holds for impacts of is on business models (bm) (ahlstrom et al., 2018; hannon et al., 2015). however, little research has been done to address influences in the opposite direction, i.e., the question in which way bm innovation impacts is configuration. consequently, the evolutionary impact of bm on is has remained rather unspecific. against the backdrop of the urgent systemic sustainability challenges, however, it may be crucial to understand in which way the design of bm can support the fundamental changes required in the structure, the dynamics, and the outcomes of the surrounding is. this gap is addressed in the article at hand by posing the following research question: what are the characteristics of business models that have the potential to contribute to an entire innovation system’s dedication to sustainability? the business model perspective is adopted to link the micro-level orientation within firms to the mechanisms and configurations that determine outcomes on the systems level. this perspective promises insights into an individual actor’s potential to contribute to systemic change. therefore, the article does not focus on sustainable innovation (as output of an is) as such, but explores opportunities of firms to contribute to a reconfiguration of present is in a way that their overall capacity to produce more sustainable outcomes increases. in other words, the research at hand focuses on ways how firms can prompt a system-wide change towards a stronger systemic dedication to sustainability instead of exploring their (obviously quite limited) transformative possibilities within current is. it provides pathways towards the better linking of concepts of management sciences with theories of innovation economics, thus contributing to the fostering of interdisciplinary bm research, which is the expressed aim of this special issue. the following section serves as a short introduction to dedicated innovation systems and systems thinking in general, carves out the central role of paradigmatic search heuristics in innovation-driven transformation processes, and introduces sustainable business models. section 3 presents the procedure and results of a systematic literature review on the coevolution of business models and is. together with the theoretical frameworks introduced in section 2, these are used to reflect on possible bm characteristics that increase firms’ systemic effect on dedicated innovation systems in section 4. three propositions summarize the discussion and facilitate further research on ‘dedicated business models’. section 5 concludes. conceptual background dedicated innovation systems an innovation system (is) consists of “interacting private and public firms (either large or small), universities, and government agencies aiming at the production of science and technology …” (niosi et al., 1993: 212). this is achieved by the continuous creation and flow of new knowledge which is eventually introduced “into the economy in the form of innovations, [and diffused and transformed] into something valuable, for example, international competitiveness and economic growth” (gregersen and johnson, 1997: 482). due to their history and application, is have a strong (often implicit) focus on technological innovation, competitiveness, and economic development (schlaile et al., 2017). lately, however, is research has started to also consider innovation as a source of the required radical changes in response to global sustainability challenges. this calls for an expanded framing of is beyond the incubator of technological remedies by incorporating a system-wide dedication to the continuity and resilience of social and ecological systems, interand intra-generational justice, and quality of life (daimer et al., 2012; lindner et al., 2016; schlaile et al., 2017; tödtling and trippl, 2018; urmetzer and pyka, 2021; warnke et al., 2016; weber and truffer, 2017). such reframing has been accomplished on a theoretical level by the conceptualization of dedicated innovation systems (dis). dis are understood as is that “explicitly go beyond technological innovation and economic growth and allow for paradigmatic change towards sustainability: they are ‘dedicated’ to foster the joint search for transformative innovations” (pyka, 2017: 3). a dedication towards sustainability can be understood as a very specific innovation paradigm journal of business models (2021), vol. 9, no.2, pp. 87-108 90 that determines the rate and direction of innovative activity towards sustainable outcomes. based on and expanding dosi’s evolutionary notion of technological paradigms (dosi, 1982), such dedication will become manifest in changed search heuristics shared by the actors of an is. this will influence the definition of the ‘relevant’ problems, the knowledge claimed necessary to solve them, as well as the common understanding of what progress or ‘success’ means. simply put, the conception of ‘business-as-usual’ changes in dis and innovation that promotes more sustainable production and consumption patterns is no longer regarded the exception, but the rule. while dosi himself recognizes “the selective and focussing effect [on the selection and emergence of new paradigms] induced by various forms of stricto sensu non-economic interests” (dosi, 1982: 160), it has not been explored so far how such noneconomic interests like the preservation of ecosystems or the well-being of current and future generations actually influence paradigms and who will be in the position to intentionally do so. since the dis approach “targets radical transformations of existing institutions …” (pyka, 2017: 3), the powerful incumbent industries have so far not been expected to be the ones taking the lead. due to their embeddedness in the system, firms have for a long time been regarded as incapable of influencing market structure, consumer demand, institutions, and infrastructures towards more sustainable configurations (smith et al., 2005). firms that are currently successful naturally focus on the exploitation of existing procedures and infrastructure (schaltegger et al., 2016), thus rather supporting the continuation of current paradigms. consequently, throughout a major part of the literature, incumbents play quite a passive role in that they only change their innovation logics under severe pressure from civil society, governments, and consumers (penna and geels, 2015), incentivized by imminent creative destruction from external forces (kivimaa and kern, 2016) or by rewarding public policy programs (jacobsson and bergek, 2011). sustainability challenges are generally considered as negative externalities of production processes which are traditionally taken care of by the public sector. likewise, social and environmental development beyond business interests is regarded to be the responsibility of the government (kieft et al., 2017; málovics et al., 2008; steward, 2012). consequently, corporate sustainability endeavors have usually not departed from dominant innovation paradigms in their continuing reliance on linear growth, increasing consumption, and maximized shareholder wealth (sharma and lee, 2012). in the conventional concept of is such behavior is in full accordance with what is expected from incumbent private firms. in dis, by contrast, that role might (have to) change. but how can we conceive a way of corporate behavior that is mindful to dosi’s noneconomic interests and contributes to an overall systemic dedication to sustainability? connecting collective and individual levels from a systems perspective it is not easy to make out individual patterns of action that will collectively lead to a desired outcome of the whole. instead, quite often the diverging aims of subunits together effectuate systemic outcomes that have not been intended by any of them. as donella meadows points out, “one of the most frustrating aspects of systems is that the purposes of subunits may add up to an overall behaviour that no one wants” (2008: 15). consequently, if private and public organizations, universities, and government agencies each pursue their isolated, particular sustainability goals, this will hardly contribute to an overall system with the purpose of producing transformative innovations dedicated to sustainability. we know little of the systemic role of the various micro-processes within is subsystems in innovation processes, a fact that makes the planning of deliberate intervention in systems towards desired outcomes extremely difficult if not impossible. strong and instrumental links have been built between the is literature and sustainability before (see urmetzer and pyka, 2021 for an overview), but these concepts hardly illuminated those individual orientations and mindsets necessary to afford the required transformation (urmetzer et al., 2018). figure 1 illustrates the relation of is subsystems, innovation paradigms, and is outcomes as conceptualized for this research. it pictures innovation paradigms as one central lever for the different is actors to influence the way the is functions and thus the kind of innovation it produces. the figure highlights the reciprocal interference between the elements shown: while the various subsystems in an is collectively influence the innovation paradigm (thereby determining the rate and direction of the innovative output), the paradigm itself journal of business models (2021), vol. 9, no.2, pp. 87-108 91 in turn affects the innovative activity of the subsystems as well as is outcomes. for the individual subsystems in is to instigate paradigmatic change and become motors of innovation dedicated to sustainability they must (i) frame the innovation challenge as systemic and sustainability related (in dosi’s terms: define the relevant problem), (ii) explore alternative heuristics and sources of knowledge production and use (in dosi’s terms: define the knowledge required to solve the problem), and (iii) change the general perception of success from (pure) profit maximization towards societal desirability (in dosi’s terms: define the meaning of progress). an example: the automobile industry’s (representing the is) paradigmatic turn towards sustainability would require from an individual dedicated automobile company (representing a corporate subsystem) to (i) understand and reconsider its individual role in the societal challenges connected to congestion, air pollution, and climate change (what dyllick and muff (2016) term the outside-in perspective). consequently, the company would have to (ii) open up and use their expertise to find solutions that provide mobility instead of combustion engines. the respective new search heuristics would probably require, for instance, experimentation with alternative mobility concepts and extraneous technologies, collaboration with public transport enterprises, competitors, consumer associations and citizens’ initiatives, as well as adapted procurement policies. accordingly, (iii) progress or ‘success’ would need to be redefined from ‘faster, safer, more comfortable’ to, for instance, ‘cleaner, smarter, more convenient.’ beyond corporate sustainability: the business model perspective this systemic perspective on businesses’ contribution to sustainability transformations has been argued to be in stark contrast to specific, incremental change initiatives such as traditional notions of corporate social responsibility or the triple bottom line (miller gaither innovation system outcomes innovation paradigm corporate subsystem sociopolitical subsystem scientific subsystem figure 1: interrelation of the corporate subsystems (firms) with innovation paradigms and is outcomes as conceptualized in the context of the study. (please note that this article explores corporate subsystems only, which is why examples of other important is subsystems are only insinuated.) journal of business models (2021), vol. 9, no.2, pp. 87-108 92 et al., 2018; milne and gray, 2013; schaltegger and burritt, 2018). for “reporting progress on sustainability influences stakeholders’ perceptions and is therefore an important tactic, but on its own it does not appear to be a significant driver of sustainability” (stubbs and cocklin, 2008: 115). but even without insinuating greenwashing, against the backdrop of the overall aim to transform the is, these endeavors must be regarded as being too narrow in focus. in its current form, corporate social responsibility actually runs the risk of contributing to the manifestation of unsustainable system configurations instead of putting the firm in “the broader context of necessary structural and systemic change that stands beyond the reach of mainstream corporate responsibility initiatives” (waddock and white, 2007: 42; see also bocken et al., 2014; dyllick and muff, 2016; hart, 1997; sharma and lee, 2012). to open up towards this broader context, a suitable unit for the analysis of a firm’s capacity to become a system (co-)builder of a dis is the business model (bm). according to teece, a bm “describes the design or architecture of the value creation, delivery and capture mechanisms employed” by a firm (2010: 179). the concept also offers great insights into businesses’ roles in sustainability transformations because it ultimately reflects the way a company ‘does business’ (amit and zott, 2008). it does so by combining the firm level with the systems perspective (bocken et al., 2014; bocken, 2019; boons and lüdeke-freund, 2013; schaltegger et al., 2016; stubbs and cocklin, 2008) and encapsulating the belief system of a company – a fundamental driver of corporate decision-making and, subsequently, action (martins et al., 2015; massa et al., 2017; tikkanen et al., 2005). these characteristics prompted a new line of research investigating how the underlying principles guiding the technological and social innovation of a firm can be aligned with system-level sustainability via sustainable bm (also referred to as bm for sustainability, or sustainability bm) (bocken et al., 2015; boons and lüdeke-freund, 2013; schaltegger et al., 2016; stubbs and cocklin, 2008). sustainable business models (sbm) “draw on economic, environmental, and social aspects of sustainability in defining an organization’s purpose, use a triple bottom-line (people, profit, planet) approach in measuring performance, consider the needs of all stakeholders rather than giving priority to shareholder expectations, treat ‘nature’ as a stakeholder and promote environmental stewardship, and encompass a system, as well as a firm-level perspective” (bocken, 2019: 1). the contribution of sbm to system-wide sustainability is mainly seen in a direct effect on the systemic outcomes, such as a reduced resource impact through circular production or through the provision of a service instead of a product. while such concrete outcomes are indeed necessary and as innovative ideas most welcome, we must suspect that a diffusion of such bm will be slow to reach scale and momentum will not necessarily be created (bocken et al., 2014). coming back to what has been argued before, one of the reasons may be that sbm can be expected to occur within established paradigms. bm for dis, by contrast, aim for a paradigmatic change by introducing a dedication to sustainability as normative direction in innovation processes across the entire (innovation) system. in other words, sbm change individual configurations and isolated outcomes in socio-technical systems, whereas bm for dis are expected to change the innovation paradigms thus influencing the inner logic of innovation across the system. coming back to the example of the automobile industry of the previous section, an sbm would be restricted to the given problem definition (e.g., combustion engines fuel climate change), the known solution space (e.g., technological alternatives to combustion engines or increased efficiency in resource use), and the agreed definition of success (mostly measured in economic terms). to sum up, i have chosen the bm perspective as a suitable unit for exploring the potential power of firms to change the paradigmatic underpinnings of innovation in is towards a dedication to sustainability. dosi’s notion of technological paradigms is expanded to provide a framework that connects individual actors’ orientations (as expressed by a specific bm) with the systemic outcomes produced by the is via modifications in the innovation paradigm (as expressed by an understanding of what problems need to be solved, what solutions need to be picked, and how success needs to be defined, shared across the is) (see figure 2). although notions and usage of bm vary widely across literature and practice, the following three fundamental elements are generally seen to make up a bm (bocken et al., 2014) and shall serve as the baseline for journal of business models (2021), vol. 9, no.2, pp. 87-108 93 exploring the systemic relationship between bm and dis: (1) value proposition (the way to describe the product or service offered), (2) value creation and delivery (the way new business opportunities are created and realized), and (3) value capture (the way revenues are earned from the provision of goods or services). the following section presents a systematic review of the literature to map the coevolutionary relationships between bm and is discovered and described by earlier research. the findings will serve as a basis for developing three propositions for outlining the contours of dedicated bm. business models in innovation systems an increasing number of studies have explored the role of bm in socio-technical systems transitioning to sustainability (bocken et al., 2014; bocken and short, 2016; boons and lüdeke-freund, 2013; schaltegger et al., 2012, 2016; stubbs and cocklin, 2008). in the following, i will zoom in on the intricate relationship between (changes in) the corporate innovation rationale (as embodied in bm) and the introduction of a dedication towards sustainability across the is. methodology and data to explore the literature on bm in the context of is, a systematic literature review was carried out (kivimaa et al., 2019; petticrew and roberts, 2008). a scientific literature repository search based on keywords was conducted using scopus – a database which has been proven to excel in covering literature in social sciences and outcompeting other repositories, such as web of science (bartol et al., 2014; gavel and iselid, 2008; mongeon and paul-hus, 2016). it was explicitly searched for research contributions at the interface of bm and is to gain insights into conceptual work on innovation system outcomes innovation paradigm corporate subsystem sustainable business models business models for dis modify (impact) impact figure 2 the different modes of action of sbm (right) and bm for dis (left): while the former impacts is outcomes on the basis of a given paradigm, the latter is expected to operate through actively modifying paradigms (via redefining problems, solutions, and success), thus potentially affecting is outcomes indirectly. journal of business models (2021), vol. 9, no.2, pp. 87-108 94 the coevolutionary relation of the two. the selection of articles was completed in four steps. first, the database was browsed combining the search terms “business model” and (“innovation system” or “system of innovation”) in the title/abstract/keywords fields, which yielded 74 items. the publication had to be (1) a peer-reviewed piece of academic work in the field of social science and business studies and (2) indexed in scopus as of april 4, 2019. second, the respective article abstracts were carefully analyzed using the following exclusion criteria: (3) articles that used one of the search terms in a fundamentally different sense were excluded (i.e., the term “business model” needed to be used in the sense of design or architecture of the value creation, delivery, and capture employed by a firm (teece, 2010), whereas “innovation system” needed to refer back to the evolutionary framework as described by the fathers of the concept (e.g., freeman, 1987; lundvall, 1998)); (4) articles that treated the two focal key concepts only superficially or separately without addressing their interplay were excluded from the analysis. abstract reading resulted in a selection of 37 articles, of which 22 were omitted based on reading the full papers (exclusion criteria 3 and 4), resulting in 15 articles feeding into the next step. this involved searching the reference lists of the selected 15 articles for earlier relevant contributions, also considering terms with similar meaning. this “backward citation snowballing” added two articles to the analysis. the “cited by” option in google scholar helped to carry out a “forward citation snowballing” for each of the 17 articles. the resulting list of citing articles was then scanned according to the above exclusion criteria. this offered an additional set of three new articles. the final list of articles considered in the systematic review numbered 20. all the articles were read and coded according to the following criteria: the type of is covered (is in general, technological, national, regional, or sectoral is), the business/industrial sector studied, the consideration of sustainability (yes or no), the bm element in focus, the bm definition, the question addressed by bm (what, how, for whom), the empirical field explored, the relation of bm and is (which influencing which), proposed points of intervention, the research question, the formulation and addressee of recommendations, the focus (economics, business administration, or politics), the related theories covered, and central statements (citations). results the way business models operate in is and how specific is configurations and functions affect business models has rarely been studied. the number of studies has increased over time though, with four of the articles published between 2000 and 2009 and 16 between 2010 and 2019. this approximately concurs with the period during which the two concepts evolved (klein and sauer, 2016; massa et al., 2017). most of the articles either refer to national is (six articles) or to technological is (six articles), while three studies explore regional is, one a sectoral is, and the remainder just use is as a general approach without specifying a particular level of analysis. the types of industry studied vary greatly, from low-tech fields (agriculture, gardening) to hightech sectors (nanotechnology, biotechnology) and typical “transitions industries” such as the energy or the mobility sector. nine publications – and since 2014 almost all of them – explicitly consider the contribution of bm to sustainability in is. this observation and the fact that also the sustainability transition community is increasingly discovering bm research (bidmon and knab, 2018) confirms the general suitability of this concept to explore long-term systemic transitions from a micro perspective (arevalo et al., 2011). the notion of the term bm varies across the publications, ranging from encompassing certain innovation and marketing strategies of the focal firm (casper, 2000), an “interplay between innovation strategies and resources” (markard and truffer, 2008: 460), the organizational method of how the firm does business (kalvet, 2010), to how it creates, proposes, and/ or captures value (adams et al., 2016; breznitz, 2007; grin et al., 2018; hannon et al., 2015; provance et al., 2011; sarasini and linder, 2018). not surprisingly, those authors who stress the value creation element of bm also appear to be the ones that ascribe to bm an active role in shaping the is (grin et al., 2018; kishna et al., 2017; yun et al., 2017). from this perspective, firms no longer only respond to the demands and interests of customers, policy, or competitors, but partake in defining what is of value. about half of the selected studies describe the relation between bm and is as being purely unidirectional, in that the authors do acknowledge the influence of different is configurations and specifications on the journal of business models (2021), vol. 9, no.2, pp. 87-108 95 emergence of certain bm but not vice versa. some of those scholars, for instance, show how national institutional frameworks influence organizational structures and innovation strategies of individual firms (ahlstrom et al., 2018; casper, 2000) or whole industries (breznitz, 2007) (figure 3, left). the remaining eleven papers of the set of publications either describe the mutual relationship of bm and is (adams et al., 2016; bidmon and knab, 2018; grin et al., 2018; kishna et al., 2017; planko et al., 2017; sarasini and linder, 2018) or explicitly scrutinize different ways of how business models have been found to change the configuration or behavior of is (chiaroni et al., 2008; laukkanen and patala, 2014; markard and truffer, 2008; mccall, 2013; yun et al., 2017) (figure 3, right). of this latter half, three studies (laukkanen and patala, 2014; markard and truffer, 2008; planko et al., 2017) analyze the effect of bm according to their ability to drive is processes, conceptualized by various scholars as functions of technological innovation systems (bergek et al., 2008; hekkert et al., 2007; jacobsson and bergek, 2004). the functions offer a validated concept to break down overall is performance and thus provide the theoretical foundation for empirical studies on the interface between the system and the actors. markard and truffer (2008), for example, consider the is as composed of a variety of actor groups each contributing a specific set of resources and innovation activities necessary to fulfil the basic functions of the is (knowledge creation, guidance of the search, supply of resources, the creation of positive externalities, and market formation). although in their analysis the authors do not explicitly consider bm, they do come close to the concept by distinguishing three different corporate innovation strategy types: leading, learning, and image shaping. they conclude that firms adopting a leading innovation strategy can actively shape is trajectories by (strongly) influencing all system functions, especially the direction of innovation (function: guidance of search). the two other studies that draw on systems functions (laukkanen and patala, 2014; planko et al., 2017) use the concept rather to describe different setups of is while not further elaborating on the potential impact of bm on the fulfilment of the is functions. one recurrently identified role of firms in shaping is via bm is that of system builders (adams et al., 2016; grin et al., 2018; musiolik et al., 2012) or network and cluster creators/changers (adams et al., 2016; bidmon and knab, 2018; kishna et al., 2017; musiolik et al., 2012; yun et al., 2017). musiolik and colleagues (2012) analyze the potential of individual organizations and formal networks to pool their abilities, influence, and endowments (referred to as resources) to strategically change 1. ahlstrom d., yang x., wang l., wu c., 2018 2. atteridge a., weitz n., 2017 3. segers j.-p., 2016 4. hannon, m. j., foxon, t. j., & gale, w. f., 2015 5. laukkanen m., patala s., 2014 6. provance m., donnelly r.g., carayannis e.g., 2011 7. kalvet t., 2010 8. breznitz d., 2007 9. casper s., 2000 1. bidmon, c.m., knab, s.f., 2018 2. grin j., hassink j., karadzic v., moors e.h.m., 2018 3. sarasini s., linder m., 2018 4. kishna, m., negro, s., alkemade, f., hekkert, m., 2017 5. planko j., cramer j., hekkert m.p., chappin m.m.h., 2017 6. yun j.j., won d., park k., yang j., zhao x., 2017 7. adams, r., jeanrenaud, s., bessant, j., denyer, d., overy, p., 2016 8. mccall t., 2013 9. musiolik, j.; markard, j.; hekkert, m., 2012 10. chiaroni d., chiesa v., de massis a., frattini f., 2008 11. markard, j., truffer, b., 2008 innovation system business model figure 3 the relation between bm and is: while nine publications describe an effect of is on bm (single arrow, to the left), eleven studies explicitly refer to an effect of bm on is or a mutual relationship (double arrow, to the right). journal of business models (2021), vol. 9, no.2, pp. 87-108 96 the is they are part of. in a literature review, adams and colleagues (2016) find evidence that establishing more sustainable systems requires firms to proactively and radically change their philosophy and behavior, be creative, acquire new knowledge, redefine their purpose in society, and collaborate with peers, government, and ngos. the latter requirement, i.e. to collaborate with others in order to increase the business’s impact on systemic outcomes, is brought up by six studies examined (adams et al., 2016; grin et al., 2018; mccall, 2013; musiolik et al., 2012; planko et al., 2017; sarasini and linder, 2018). a few interesting additional points are made by mccall (2013), who emphasizes the important role of collaboration to increase a firms’ success. working together with others helps to strengthen regional competitiveness, facilitate long-term planning among traditionally rather short-term considerations of single firms, and share and improve knowledge and competences. further possibilities for businesses to shape is include the creation of legitimacy and new markets (grin et al., 2018; planko et al., 2017), the creation and diffusion of knowledge relevant for systems change (including, e.g., consumer awareness campaigns or technical knowhow) (chiaroni et al., 2008; grin et al., 2018; mccall, 2013; planko et al., 2017), an open communication of alternative visions and paradigms (grin et al., 2018; laukkanen and patala, 2014), and the active destruction of current institutions (e.g., practices or regulations) (grin et al., 2018; yun et al., 2017). an overview of the possibilities of firms to influence is via their bm is given in table 1. discussion: business models for dedicated innovation systems the literature on the potential impact of bm on the functioning of is is scarce and lacks concrete implications for research as well as for practice. against the conceptual background of dis and the expected nature of bm in dis as unraveled in section 2, a concrete indication of an iswide paradigm-changing effect of bm is missing. the findings, however, do provide insights that help us to better understand the potential of incumbents to introduce a dedication to sustainability into the entire is by changing their bm in a certain way. this section will discuss some of the findings and use them to conceptualize the elements of bm effective in dis. with reference to what has been deducted in section 2, the introduction of a dedication in is must be conceptualized as paradigmatic change through the alteration of the search heuristics. the literature analyzed suggests that is influence the development and behavior of firms and are at the same time influenced by firms and other important subsystems, such as policy, science, and civil society. furthermore, it has been acknowledged that bm can be understood as an internal agreement of a firm on how business is done. as such, potential bm effects that impact is references 1. open communication of new visions and paradigms laukkanen and patala, 2014; grin et al., 2018 2. networking with peers and other allies yun et al., 2017; adams et al., 2016; kishna et al., 2017; bidmon and knab, 2018; musiolik et al., 2012; mccall, 2013; planko et al., 2017; sarasini and linder, 2018 3. collaboratively aligning existing institutions grin et al., 2018; yun et al., 2017 4. reconfiguring supply chains kishna et al., 2017; laukkanen and patala, 2014; bidmon and knab, 2018; sarasini and linder, 2018; musiolik et al., 2012 5. stakeholder involvement adams et al., 2016; laukkanen and patala, 2014 6. educating consumers and suppliers chiaroni et al., 2008; mccall, 2013; planko et al., 2017; grin et al., 2018 7. creating legitimacy and new markets grin et al., 2018; planko et al., 2017 table 1 bm effects observed to actively influence the is they are part of as found in the literature reviewed. journal of business models (2021), vol. 9, no.2, pp. 87-108 97 bm of firms in an is collectively cocreate (together with other important is subsystems that are not considered here) the baseline of its innovation paradigms, which means that the collective of bm in an is determine its problem definition (in the following referred to as dosi i), its search heuristics (including what to search and where to search, in the following referred to as dosi ii), as well as its definition of what successful innovations are (in the following referred to as dosi iii). businesses are thus capable of changing innovation paradigms, for instance towards more sustainable modes of production, by innovating their bm. the research question posed at the outset of this article regarding the characteristics of bm that contribute to an is’s dedication to sustainability shall be answered by the following discussion of the results and the successive formulation of propositions to guide further research. the propositions are summarized in the subsequent figure 4. value proposition the fundamental philosophy behind a firm’s business is reflected in the way how and in relation to whom it proposes the value it intends to create. a proactive shift in an incumbent firm’s value proposition, e.g., away from pure profit maximization towards attending societal goals, must thus be regarded crucial for a firm intending to shape is towards a dedication to sustainability. one possible expression of the commitment of a firm to such change is the exposition of innovation behavior that takes on a leading position within an industry. albeit not in a sustainability context, markard and truffer (2008), for instance, substantiate the power of firms that adopt a leading innovation strategy to actively shape an is’s paradigm by (strongly) influencing all system functions, especially the direction of innovation (function: guidance of search). the empirical evidence points to the power of a changed value proposition to co-determine innovation paradigms – a potential with strong implications for the dissemination of a dedication to sustainability (see also schaltegger et al., 2012). some authors bring to mind that such changes in value proposition relating to the core business logic are systemically most effective when undergone in collaboration with peers (adams et al., 2016; grin et al., 2018; vargo et al., 2015), since “the ultimate objectives of sustainability lie beyond the individual capacity of firms to achieve” (adams et al., 2016: 193). such bm innovation concerning the value proposition can be regarded the decisive link between firmlevel dedication and its proliferation throughout dis: it extends the decision-making basis for innovation strategies traditionally comprising cost, risk, margin, reputation, and innovative capability (schaltegger et al., 2012) towards sustainability-related value propositions ranging from the reduction of social and environmental harm to an increase of positive impact or solving societal challenges (bocken et al., 2014). following this and based on reflections of other scholars (abdelkafi and täuscher, 2016; miller gaither et al., 2018; schaltegger et al., 2012; schaltegger and burritt, 2018), it seems that the degree of dedication of corporate sustainability endeavors, as reflected in bold value propositions, correlates with their potential effect on the is-wide innovation paradigm. that way, firm-specific value propositions hold the power to contribute to the is’s dedication towards alternative values that, for instance, promote more sustainable systemic outcomes. the literature review has shown that open communication of such extended visions and paradigms is essential if is are to be affected (grin et al., 2018; laukkanen and patala, 2014) (see table 1, no. 1). proposition 1: the value proposition of a bm that contributes to is’ dedication towards sustainability reflects a firm’s commitment to sustainability-related values and open communication of the same. this way a firm can act upon the is-wide problem definition (dosi i: problem definition). value creation and delivery it has been suggested that firms which make a conscious decision regarding the business opportunity they aim to seize by emphasizing the value creation and delivery element in their bm tend to have a strong influence on the evolution of the surrounding is (grin et al., 2018; kishna et al., 2017; yun et al., 2017). in fact, value creation is seen as being “at the heart of any business model” (bocken et al., 2014: 43). in the context of shaping alternative paradigms, changes in the operational aspects of business, such as the determination of key activities, resources, stakeholders, and technologies bear a special meaning. this is the part of the bm where decisions regarding the search heuristics for innovative activity become manifest. for subordinating one’s innovation activity to an alternative paradigm, it journal of business models (2021), vol. 9, no.2, pp. 87-108 98 can, for instance, be fundamental to determine new sources of knowledge (outside the traditional expertise and suppliers) by seeking new collaboration partners. this could improve the success of the adoption of whole new value creation concepts as provided, for instance, by a circular business model disrupting the traditional take-make-waste industrial logic (the ellen macarthur foundation, 2013). for a reduction of uncertainty in innovative endeavors for the value creation and delivery, various authors recommend the involvement of the surrounding is by networking with peers and other allies (adams et al., 2016; bidmon and knab, 2018; kishna et al., 2017; mccall, 2013; musiolik et al., 2012; planko et al., 2017; sarasini and linder, 2018; yun et al., 2017) to collaboratively align existing institutions (grin et al., 2018; yun et al., 2017) and to eventually reconfigure traditional supply chains (bidmon and knab, 2018; kishna et al., 2017; laukkanen and patala, 2014; musiolik et al., 2012; sarasini and linder, 2018) (see table 1, no. 2, 3, and 4). proposition 2: the value creation and delivery of a bm that contributes to is’ dedication towards sustainability draws on unprecedented linkages within the is that provide access to new material, technological, and intellectual resources to reach higher levels of sustainability. this way a firm can act upon the diffusion of alternative directions of search across the is to reach a critical mass (dosi ii: search heuristics). value capture the impact that modified value capture strategies of a firm have on the degree of dedication within an is has not been studied much. as long as value is interpreted in purely monetary terms, strategies for its capture can be expected to be a barrier rather than a driver of bm innovation towards dis. bocken and short (2016) present a few cases where firms accommodate their sustainability engagement by charging a premium price for a more durable product and/or a better after-purchase service. such bm innovation, albeit not paradigm-breaking in itself, indeed has the potential to instigate paradigmatic change in is, for instance by introducing the sufficiency principle to the logic of innovation. this could also motivate other firms to shift towards the provision of robust and long-lasting products, taking advantage of and reinforcing consumers’ preference for high-quality products or of the benefits of consuming a service instead of owning a product. at the same time, it would change the definition of innovation success, and of progress for that matter. an innovative product would feature, for instance, characteristics such as a prolonged lifetime, easier accessibility, and smart resource usage. along these lines, the product service systems (pss) hold some potential for dedicated bm innovation. a pss has been defined as “a system of products, services, supporting networks and infrastructure designed to be competitive, satisfy customer needs and have lower environmental impact than traditional business models” (mont, 2002: 239). the sustainable pss concept offers an approach to value capture which takes account of the ability of producers to influence supply and/or consumption and thus altering innovation paradigms. by offering services in connection to products, firms have the chance to persistently alter producer and consumer practices in a way that reduces material input and increases utility (mylan, 2015). accordingly, value capture innovations effective on the is level have generally been found to require the capacity to involve a broad array of stakeholders (adams et al., 2016; laukkanen and patala, 2014), to educate consumers and suppliers (grin et al., 2018), and thus create legitimacy and new markets (grin et al., 2018; planko et al., 2017) (see table 1, no. 5, 6, and 7). proposition 3: the value capture of a bm that contributes to is’ dedication towards sustainability nurtures changed demands of consumers and suppliers who acknowledge sustainability principles, such as the superiority of quality over quantity or utility over ownership. this way a firm can act upon the general perception of innovation success among is subsystems (dosi iii: definition of success). journal of business models (2021), vol. 9, no.2, pp. 87-108 99 conclusion it has been argued that enterprises can only be considered sustainable when the system of which they are part is sustainable (jennings and zandbergen, 1995). following the arguments made in this article, however, this fact does not release incumbent firms from their responsibility to contribute to sustainability transformations. a systematic review of related literature together with a conflation of several strands of theory has revealed linkages between individual strategic decision-making (as expressed by bm) and the paradigmatic underpinnings of innovation across the entire is. it has been shown that firms have the potential to contribute to the dedication of is by (1) redefining the ‘relevant’ problems and acknowledging their role in them; (2) opening up their search heuristics to gain the knowledge claimed necessary to solve these problems; and (3) propagating a common understanding of what ‘success’ means in this context. firms will however only be successful in collaboration with other is actors (government, consumers, civil society, entrepreneurs, competitors, academia). this is how they will be able to distribute the burden of risk, create legitimacy, and contribute to changing market paradigms. combining the findings of this study with how bocken and colleagues frame sustainable bm (bocken et al., 2014: 44), the following definition of a bm that contributes to the dedication of is towards sustainability or dedicated business model is proposed: “a business model that significantly changes the innovation paradigm of the entire innovation system towards the principles of sustainability, through describing and disseminating the way the organization and its value-network define, create, deliver, and capture value.” the concept of dedicated bm originates from the idea that for deliberately transforming a system, a change in individual parameters (e.g., via the substitution of a certain production input) or isolated linkages (e.g., via direct marketing) offers a lower degree of leverage than changes in the logic or the paradigm according to which the system functions (e.g., via a redefinition of problems, solutions, and success factors across an entire system or sector). much alike (and inspired by) innovation paradigm innovation system problem definition search heuristics definition of success d ed ic at io n value capture nurturing changed demands of consumers and suppliers who acknowledge sustainability principles, e.g., the superiority of quality over quantity and utility over ownership. value creation & delivery unprecedented linkages within the is that provide access to new material, technological, and intellectual resources to reach higher levels of sustainability. value proposition commitment to sustainability-related values and open communication of the same. figure 4 overview of the elements of bm that potentially contribute to is’ dedication towards sustainability by changing the innovation paradigm. journal of business models (2021), vol. 9, no.2, pp. 87-108 100 donella meadows’ concept of leverage points (1999), such intentional paradigmatic changes are rare and far harder to implement than changes at lower levels of intervention. this is presumably why concrete empirical examples of dedicated bm are yet to be discovered. the limitations of the study are twofold. firstly, the line of argument is complemented by a relatively small sample of literature reviewed, which is owed to the fact that the mutual relation between bm and is has not been researched much so far. the second limitation arises from a lack of explanatory power by a ‘theory of the dedicated firm,’ which neglects the incentives and barriers for firms to change their bm. discussions of these issues with sustainability leaders of large incumbent enterprises reveal various ontological issues, such as the heterogeneity within corporate management, uncertainties regarding future sociopolitical developments, and the volatility of societal values (see also garst et al., 2019). these are some of the reasons why the paper comes up with rather generic implications that are not yet mature enough to guide dedicated management endeavors. increasing the practical relevance and refining the conceptual base of bm innovation towards dis will require further research, e.g., by testing the propositions posed above in empirical cases. future conceptual research could inquire into the impact of bm on individual is functions (building on markard and truffer, 2008) or explore the suitability of dedicated bm to complement bocken and colleagues’ sbm archetypes (2014). moreover, empirical substantiation is required to test the concept against what is presently available and potentially feasible under realworld circumstances. journal of business models (2021), vol. 9, no.2, pp. 87-108 101 references abdelkafi, n. and täuscher, k. (2016). business models for sustainability from a system dynamics perspective. organization & environment 29(1), 74–96. abson, d.j., fischer, j., leventon, j., newig, j., schomerus, t., vilsmaier, u., wehrden, h. von, abernethy, p., ives, c.d., jager, n.w. and lang, d.j. (2017). leverage points for sustainability transformation. ambio 46(1), 30–39. adams, r., jeanrenaud, s., bessant, j., denyer, d. and overy, p. (2016). sustainability-oriented innovation: a systematic review. international journal of management reviews 18(2), 180–205. ahlstrom, d., yang, x., wang, l. and wu, c. (2018). a global perspective of entrepreneurship and innovation in china. multinational business review 26(4), 302–318. alexander, d. and blum, v. (2016). ecological economics: a luhmannian analysis of integrated reporting. ecological economics 129, 241–251. amit, r. and zott, c. (2008). creating value through business model innovation. in: mit (ed) sloan management review: top 10 lessons on strategy. andersen, a.d. and markard, j. (2017). innovating incumbents and technological complementarities: how recent dynamics in the hvdc industry can inform transition theories. working papers on innovation studies. arevalo, j.a., castelló, i., colle, s. de, lenssen, g., neumann, k. and zollo, m. (2011). introduction to the special issue: integrating sustainability in business models. journal of management development 30(10), 941–954. ariely, d., bracha, a. and meier, s. (2009). doing good or doing well? image motivation and monetary incentives in behaving prosocially. american economic review 99(1), 544–555. augenstein, k. and palzkill, a. (2016). the dilemma of incumbents in sustainability transitions: a narrative approach. administrative sciences 6(1), 1. bartol, t., budimir, g., dekleva-smrekar, d., pusnik, m. and juznic, p. (2014). assessment of research fields in scopus and web of science in the view of national research evaluation in slovenia. scientometrics 98(2), 1491–1504. bergek, a., jacobsson, s., carlsson, b., lindmark, s. and rickne, a. (2008). analyzing the functional dynamics of technological innovation systems: a scheme of analysis. research policy 37(3), 407–429. bidmon, c.m. and knab, s.f. (2018). the three roles of business models in societal transitions: new linkages between business model and transition research. journal of cleaner production 178, 903–916. bocken, n. (2019). sustainable business models. in: leal filho, w., azul, a., brandli, l., özuyar, p. and wall, t. (eds) decent work and economic growth. springer, cham. bocken, n., rana, p. and short, s.w. (2015). value mapping for sustainable business thinking. journal of industrial and production engineering 32(1), 67–81. bocken, n. and short, s.w. (2016). towards a sufficiency-driven business model: experiences and opportunities. environmental innovation and societal transitions 18, 41–61. journal of business models (2021), vol. 9, no.2, pp. 87-108 102 bocken, n., short, s.w., rana, p. and evans, s. (2014). a literature and practice review to develop sustainable business model archetypes. journal of cleaner production 65, 42–56. boons, f. and lüdeke-freund, f. (2013). business models for sustainable innovation: state-of-the-art and steps towards a research agenda. journal of cleaner production 45, 9–19. bossle, m.b., dutra de barcellos, m., vieira, l.m. and sauvée, l. (2016). the drivers for adoption of eco-innovation. journal of cleaner production 113, 861–872. breznitz, d. (2007). industrial r&d as a national policy: horizontal technology policies and industry-state co-evolution in the growth of the israeli software industry. research policy 36(9), 1465–1482. casper, s. (2000). institutional adaptiveness, technology policy, and the diffusion of new business models: the case of german biotechnology. organization studies 21(5), 887–914. chiaroni, d., chiesa, v., de massis, a. and frattini, f. (2008). the knowledge-bridging role of technical and scientific services in knowledge-intensive industries. international journal technology management 41(3/4), 249–272. daimer, s., hufnagl, m. and warnke, p. (2012). challenge-oriented policy-making and innovation systems theory: reconsidering systemic instruments. in: koschatzky, k. (ed) innovation system revisited: experiences from 40 years of fraunhofer isi research, pp. 217–234. fraunhofer isi, karlsruhe. dangelico, r.m. and pujari, d. (2010). mainstreaming green product innovation: why and how companies integrate environmental sustainability. journal of business ethics 95(3), 471–486. dantas, e. and bell, m. (2011). the co-evolution of firm-centered knowledge networks and capabilities in late industrializing countries: the case of petrobras in the offshore oil innovation system in brazil. world development 39(9), 1570–1591. dosi, g. (1982). technological paradigms and technological trajectories: a suggested interpretation of the determinants and directions of technical change. research policy 11(3), 147–162. dosi, g., freeman, c., nelson, r.r., silverberg, g. and soete, l. (eds) (1988). technical change and economic theory. pinter, london. dyllick, t. and muff, k. (2016). clarifying the meaning of sustainable business. organization & environment 29(2), 156–174. elkington, j. (2013). enter the triple bottom line. in: elkington, j. (ed) the triple bottom line, pp. 23–38. routledge. fiksel, j. (2003). designing resilient, sustainable systems. environmental science & technology 37(23), 5330–5339. freeman, c. (1987). technology policy and economic performance: lessons from japan. pinter, london. garst, j., blok, v., branzei, o., jansen, l. and omta, o.s.w.f. (2019). toward a value-sensitive absorptive capacity framework: navigating intervalue and intravalue conflicts to answer the societal call for health. business & society, 000765031987610. journal of business models (2021), vol. 9, no.2, pp. 87-108 103 gavel, y. and iselid, l. (2008). web of science and scopus: a journal title overlap study. online information review 32(1), 8–21. geels, f.w. (2014). regime resistance against low-carbon transitions: introducing politics and power into the multi-level perspective. theory, culture & society 31(5), 21–40. gregersen, b. and johnson, b. (1997). learning economies, innovation systems and european integration. regional studies 31(5), 479–490. grin, j., hassink, j., karadzic, v. and moors, e. (2018). transformative leadership and contextual change. sustainability 10(7), 2159. hahn, t. and scheermesser, m. (2006). approaches to corporate sustainability among german companies. corporate social responsibility and environmental management 13(3), 150–165. hannon, m.j., foxon, t.j. and gale, w.f. (2015). ‘demand pull’ government policies to support product-service system activity: the case of energy service companies (escos) in the uk. journal of cleaner production 108, 900–915. hansen, t. and coenen, l. (2017). unpacking resource mobilisation by incumbents for biorefineries: the role of microlevel factors for technological innovation system weaknesses. technology analysis & strategic management 29(5), 500–513. hart, s.l. (1997). beyond greening: strategies for a sustainable world. harvard business review 75(1). hawken, p., lovins, a.b. and hunter lovins, l. (2013). natural capitalism. routledge. hekkert, m.p., suurs, r.a.a., negro, s.o., kuhlmann, s. and smits, r.e.h.m. (2007). functions of innovation systems: a new approach for analysing technological change. technological forecasting and social change 74(4), 413–432. jackson, t. (2009). prosperity without growth. routledge, london. jacobsson, s. and bergek, a. (2004). transforming the energy sector: the evolution of technological systems in renewable energy technology. industrial and corporate change 13(5), 815–849. jacobsson, s. and bergek, a. (2011). innovation system analyses and sustainability transitions: contributions and suggestions for research. environmental innovation and societal transitions 1(1), 41–57. jennings, p.d. and zandbergen, p.a. (1995). ecologically sustainable organizations: an institutional approach. academy of management review 20(4), 1015–1052. kalvet, t. (2010). business models of the largest enterprises in a small country context: the case of estonia. administrative culture 11(1), 128–151. kieft, a., harmsen, r. and hekkert, m.p. (2017). interactions between systemic problems in innovation systems: the case of energy-efficient houses in the netherlands. environmental innovation and societal transitions 24, 32–44. kishna, m., negro, s., alkemade, f. and hekkert, m. (2017). innovation at the end of the life cycle: discontinuous innovation strategies by incumbents. industry and innovation 24(3), 263–279. journal of business models (2021), vol. 9, no.2, pp. 87-108 104 kivimaa, p., boon, w., hyysalo, s. and klerkx, l. (2019). towards a typology of intermediaries in sustainability transitions: a systematic review and a research agenda. research policy 48(4), 1062–1075. kivimaa, p. and kern, f. (2016). creative destruction or mere niche support? innovation policy mixes for sustainability transitions. research policy 45(1), 205–217. klein, m. and sauer, a. (2016). celebrating 30 years of innovation system research: what you need to know about innovation systems. available online at: https://www.econstor.eu/bitstream/10419/147305/1/871710765.pdf (accessed 20 april 2019). laukkanen, m. and patala, s. (2014). analysing barriers to sustainable business model innovations: innovation systems approach. international journal of innovation management 18(06). lindner, r., daimer, s., beckert, b., heyen, n., koehler, j., teufel, b., warnke, p. and wydra, s. (2016). addressing directionality: orientation failure and the systems of innovation heuristic. towards reflexive governance. fraunhofer isi discussion papers-innovation systems and policy analysis (52). loorbach, d. and wijsman, k. (2013). business transition management: exploring a new role for business in sustainability transitions. journal of cleaner production 45, 20–28. lundvall, b.-å. (ed) (1992). national systems of innovation: towards a theory of innovation and interactive learning. pinter, london. lundvall, b.-å. (2007). national innovation systems analytical concept and development tool. industry and innovation 14(1), 95–119. mahoney, l.s., thorne, l., cecil, l. and lagore, w. (2013). a research note on standalone corporate social responsibility reports: signaling or greenwashing? critical perspectives on accounting 24(4-5), 350–359. málovics, g., csigéné, n.n. and kraus, s. (2008). the role of corporate social responsibility in strong sustainability. the journal of socio-economics 37(3), 907–918. markard, j. and truffer, b. (2008). actor-oriented analysis of innovation systems: exploring micro–meso level linkages in the case of stationary fuel cells. technology analysis & strategic management 20(4), 443–464. martins, l.l., rindova, v.p. and greenbaum, b.e. (2015). unlocking the hidden value of concepts: a cognitive approach to business model innovation. strategic entrepreneurship journal 9(1), 99–117. massa, l., tucci, c.l. and afuah, a. (2017). a critical assessment of business model research. academy of management annals 11(1), 73–104. mccall, t. (2013). transitions in regional development policy: comparative to competitive advantage. in: kinnear, s. (ed) regional advantage and innovation: achieving australia’s national outcomes, pp. 73–98. springer, heidelberg. meadows, d.h. (1999). leverage points: places to intervene in a system. the sustainability institute, hartland. meadows, d.h. (2008). thinking in systems: a primer. earthscan, london. https://www.econstor.eu/bitstream/10419/147305/1/871710765.pdf journal of business models (2021), vol. 9, no.2, pp. 87-108 105 miller gaither, b., austin, l. and schulz, m. (2018). delineating csr and social change: querying corporations as actors for social good. public relations inquiry 7(1), 45–61. milne, m.j. and gray, r. (2013). w(h)ither ecology? the triple bottom line, the global reporting initiative, and corporate sustainability reporting. journal of business ethics 118(1), 13–29. mongeon, p. and paul-hus, a. (2016). the journal coverage of web of science and scopus: a comparative analysis. scientometrics 106(1), 213–228. mont, o. (2002). clarifying the concept of product–service system. journal of cleaner production 10(3), 237–245. morioka, s.n., bolis, i., evans, s. and carvalho, m.m. (2017). transforming sustainability challenges into competitive advantage: multiple case studies kaleidoscope converging into sustainable business models. journal of cleaner production 167, 723–738. motohashi, k. (2005). university–industry collaborations in japan: the role of new technology-based firms in transforming the national innovation system. research policy 34(5), 583–594. murphy, r. (2012). sustainability: a wicked problem. sociologica 2. musiolik, j., markard, j. and hekkert, m. (2012). networks and network resources in technological innovation systems: towards a conceptual framework for system building. technological forecasting and social change 79(6), 1032–1048. mylan, j. (2015). understanding the diffusion of sustainable product-service systems: insights from the sociology of consumption and practice theory. journal of cleaner production 97, 13–20. niosi, j., saviotti, p., bellon, b. and crow, m. (1993). national systems of innovation: in search of a workable concept. technology in society 15(2), 207–227. penna, c.c. and geels, f.w. (2015). climate change and the slow reorientation of the american car industry (1979– 2012): an application and extension of the dialectic issue lifecycle (dilc) model. research policy 44(5), 1029–1048. petticrew, m. and roberts, h. (2008). systematic reviews in the social sciences: a practical guide. john wiley & sons. planko, j., cramer, j., hekkert, m.p. and chappin, m.m. (2017). combining the technological innovation systems framework with the entrepreneurs’ perspective on innovation. technology analysis & strategic management 29(6), 614–625. porter, m.e. and kramer, m.r. (2011). creating shared value: how to reinvent capitalism and unleash a wave of innovation and growth. harvard business review. provance, m., donnelly, r.g. and carayannis, e.g. (2011). institutional influences on business model choice by new ventures in the microgenerated energy industry. energy policy 39(9), 5630–5637. pyka, a. (2017). dedicated innovation systems to support the transformation towards sustainability: creating income opportunities and employment in the knowledge-based digital bioeconomy. journal of open innovation: technology, market, and complexity 3(27), 1–18. journal of business models (2021), vol. 9, no.2, pp. 87-108 106 sarasini, s. and linder, m. (2018). integrating a business model perspective into transition theory: the example of new mobility services. environmental innovation and societal transitions 27, 16–31. schaltegger, s. and burritt, r. (2018). business cases and corporate engagement with sustainability: differentiating ethical motivations. journal of business ethics 147(2), 241–259. schaltegger, s., lüdeke-freund, f. and hansen, e.g. (2012). business cases for sustainability: the role of business model innovation for corporate sustainability. international journal of innovation and sustainable development 6(2). schaltegger, s., lüdeke-freund, f. and hansen, e.g. (2016). business models for sustainability: a co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation. organization & environment 29(3), 264–289. schlaile, m.p., urmetzer, s., blok, v., andersen, a.d., timmermans, j., mueller, m., fagerberg, j. and pyka, a. (2017). innovation systems for transformations towards sustainability? taking the normative dimension seriously. sustainability 9(12), 1–20. schweickart, d. (2009). is sustainable capitalism an oxymoron? perspectives on global development and technology 8(2-3), 559–580. sharma, a. and lee, m.-d.p. (2012). sustainable global enterprise. journal of management inquiry 21(2), 161–178. smith, a., stirling, a. and berkhout, f. (2005). the governance of sustainable socio-technical transitions. research policy 34(10), 1491–1510. steffen, w., richardson, k., rockström, j., cornell, s.e., fetzer, i., bennett, e.m., biggs, r., carpenter, s.r., vries, w. de, wit, c.a. de, folke, c., gerten, d., heinke, j., mace, g.m., persson, l.m., ramanathan, v., reyers, b. and sörlin, s. (2015). planetary boundaries: guiding human development on a changing planet. science 347(6223). steward, f. (2012). transformative innovation policy to meet the challenge of climate change: sociotechnical networks aligned with consumption and end-use as new transition arenas for a low-carbon society or green economy. technology analysis & strategic management 24(4), 331–343. stubbs, w. and cocklin, c. (2008). conceptualizing a “sustainability business model”. organization & environment 21(2), 103–127. swart, r., raskin, p. and robinson, j. (2004). the problem of the future: sustainability science and scenario analysis. global environmental change 14(2), 137–146. teece, d.j. (2010). business models, business strategy and innovation. long range planning 43(2-3), 172–194. the ellen macarthur foundation (2013). circular economy. available online at: https://www.ellenmacarthurfoundation.org/ (accessed 17 may 2019). tikkanen, h., lamberg, j.-a., parvinen, p. and kallunki, j.-p. (2005). managerial cognition, action and the business model of the firm. management decision 43(6), 789–809. tödtling, f. and trippl, m. (2018). regional innovation policies for new path development – beyond neo-liberal and traditional systemic views. european planning studies 26(9), 1779–1795. https://www.ellenmacarthurfoundation.org/ https://www.ellenmacarthurfoundation.org/ journal of business models (2021), vol. 9, no.2, pp. 87-108 107 urmetzer, s. and pyka, a. (2021). innovation systems for sustainability. in: leal filho, w., azul, a.m., brandli, l., lange salvia, a. and wall, t. (eds) encyclopedia of the un sustainable development goals: decent work and economic growth, pp. 600–611. springer, cham. urmetzer, s., schlaile, m., bogner, k., mueller, m. and pyka, a. (2018). exploring the dedicated knowledge base of a transformation towards a sustainable bioeconomy. sustainability 10(6), 1694. vargo, s.l., wieland, h. and akaka, m.a. (2015). innovation through institutionalization: a service ecosystems perspective. industrial marketing management 44, 63–72. voß, j.-p., bauknecht, d. and kemp, r. (eds) (2006). reflexive governance for sustainable development. edward elgar publishing, cheltenham. waddock, s. and white, a. (2007). on ceres, the gri and corporation 20/20: sandra waddock talks to allen white. journal of corporate citizenship 26, 38–42. warnke, p., koschatzky, k., dönitz, e., zenker, a., stahlecker, t., som, o., cuhls, k. and güth, s. (2016). opening up the innovation system framework towards new actors and institutions. fraunhofer isi discussion papers-innovation systems and policy analysis (49). weber, k.m. and truffer, b. (2017). moving innovation systems research to the next level: towards an integrative agenda. oxford review of economic policy 33(1), 101–121. wells, p. and nieuwenhuis, p. (2012). transition failure: understanding continuity in the automotive industry. technological forecasting and social change 79(9), 1681–1692. whiteman, g., walker, b. and perego, p. (2013). planetary boundaries: ecological foundations for corporate sustainability. journal of management studies 50(2), 307–336. yun, j.j., won, d., park, k., yang, j. and zhao, x. (2017). growth of a platform business model as an entrepreneurial ecosystem and its effects on regional development. european planning studies 25(5), 805–826. journal of business models (2021), vol. 9, no.2, pp. 87-108 108 sophie urmetzer graduated from the university of applied sciences eberswalde and the university of aberdeen in international forest ecosystem management (bsc). she received her second degree in sustainable resource management (msc) at the technical university of munich (tum) specializing in renewable resources and environmental economics. between 2005 and 2011 she was employed as scientific coordinator in study management at tum. in 2013, she commenced her position as research assistant at the chair of innovation economics at the university of hohenheim, where she obtained her phd degree in 2020. she is engaged in research on national innovation systems and explores the particularities of transformation paths towards a knowledge-based, sustainable bioeconomy. about the authors journal of business models (2015), vol. 6, no. 1, pp. 1-00 109109 107 journal of business models (2020), vol. 8, no. 3, pp. 107-125 towards a new business model canvas for platform businesses in two-sided markets kyllikki taipale-erävala1, erno salmela2 and hannele lampela3 abstract the ambition of this paper is to increase the understanding of digital platform businesses and business model innovation in the context two-sided markets. a proposal for an instructive new business model canvas is developed by combining abductive reasoning with insights from a case study. the case was a unique driving school platform under the employee and professional service platforms. the proposed canvas builds upon scholten’s canvas for platform businesses, complementing it with changes in terminology and the addition of new elements. the contribution of the paper derives from the insights provided by the case study and the identification of a new tool that can help platform businesses innovate in two-sided markets. introduction digital platforms in two-sided markets are capturing the market from incumbent companies by challenging the present structures, services and business models (cusumano, kahl and suarez., 2015; parker, van alstyne and choudary, 2016; salmela and nurkka, 2018). a platform business is based primarily on innovative business models that create greater value for stakeholders than traditional models do (parker et al., 2016; scholten and scholten, 2012). a two-sided platform business differs from a traditional one-sided value chain business. in a two-sided platform business, growth does not come from vertical and horizontal integration but from network orchestration that results in network effects. instead of owning resources, the focus is on using external resources. in a two-sided platform business, the user ecosystem is a source of competitive advantage (parker et al., 2016). osterwalder and pigneur (2010) originally developed the widely embraced business model canvas (bmc) to support the innovation of digital business models. however, their canvas focuses on traditional value chains. the platform keywords: digital platform; two-sided market; business model innovation; canvas; driving school. please cite this paper as: taipale-erävala, k., salmela, e., and lampela, h. (2020), towards a new business model canvas for platform businesses in two-sided markets, vol. 8, no. 3, pp. 107-125 1,3 university of oulu, finland 2 lappeenranta university of technology journal of business models (2021), vol. 8, no. 3, pp. 107-125 108108 business models in two-sided markets differ from the business models of value chains in one-sided markets, which led us to examine whether a different business model canvas should be used for the innovation of platform businesses in two-sided markets. in our literature search we encountered scholten’s (2016) modified business model canvas for platform businesses in two-sided markets, which he has tested on a few platform cases. the case study that informs this paper resulted in suggesting improvements to scholten’s modified canvas for digital platform businesses in two-sided markets, and aims to answer the following research question: what kind of business model canvas is most suitable for the innovation of platform business models in two-sided markets? the choice of scholten’s modified canvas as a key focus for this study was supported by the research results of parker et al. (2016). their study examined the platform business in detail and incorporated the same elements as scholten’s canvas. wortmann, ellermann and dumitrescu. (2020) have also analysed digital platforms and utilised scholten’s canvas as one example of a potential tool. in order to pursue the present study, an abductive approach and a case study were combined to suggest improvements for the current business model canvas (dubois and gadde, 2002) by comparing the canvases and presenting development ideas. the empirical case that informs the present paper is the finnish digital driving school, ratti. fi (hereafter ratti), which matches people who require driving licences with people who provide driving instruction. ratti competed against traditional driving schools, which operate in one-sided markets. unfortunately, the company ceased operations in 2018 due to a change in legislation. this paper is structured as follows: section 2 presents the relevant prior theoretical knowledge, while section 3 describes the study’s research design, including an overview of the case company. in section 4 ratti’s business model is subjected to a comparative analysis. section 5 the findings of the research are discussed leading to the identification of a new canvas to be used for platform businesses operating in twosided markets. finally, section 6 considers the main conclusions of the study and offers some brief suggestions for further research. theoretical overview of platform business and business model canvases business models and platform businesses a business model is a visualisation describing how an enterprise operates, who is the customer, what does he/she value, and how to make money in the course of business (magretta, 2002; drucker, 1994). to create, deliver and capture value, a business model is a summary of how the company plans to redeem its value proposition to profitably serve its customers by leveraging its own and its partners’ resources. a value proposition guides the creation of a new business model (jaakkola and hakanen, 2013; nenonen and storbacka, 2010; osterwalder and pigneur, 2010). after the value offering has been created for customers, further elements of the business model are created and verified. with those elements, the solution is made available to potential customers at a suitable price. furthermore, cost-effective manufacturing and delivery are created (osterwalder and pigneur, 2010; furr and dyer, 2014). this paper focuses on platform businesses. a platform is based in the digital technology environment, including the internet infrastructure, with services being constructed on it (gawer, 2009). there are various types of business platforms such as employee and service platforms, of which uber and airbnb are the most famous examples. a platform makes money through capturing the value from the network effect, for example, by taking part of the transactions for itself and charging for the use of the platform. (parker et al., 2016; scholten, 2016). platform businesses can be divided into one-sided and two-sided markets. a one-sided market is related to a traditional value chain business where bilateral exchanges follow a linear path as firms purchase material, manufacture components and assemble them into products that are sold to customers. in a two-sided platform business, interaction follows a triangular relationship as stakeholders first affiliate with the platform and then connect or trade using platform resources. the two sides are usually labelled customers and producers (eisenmann, parker and van alstyne, 2006; hagiu and wright, 2015; parker and van alstyne, journal of business models (2021), vol. 8, no. 3, pp. 107-125 109109 2016). a two-sided market differs from a traditional value chain business in that the platform can receive revenue from both producers and customers (parker et al., 2016; scholten, 2016). business models of platforms differ from those of traditional value chains in one-sided markets. platforms are crucial to creating a cost-effective user experience and organising resources. the fundamental roles of a platform are to minimise transaction costs by matching customers and producers and to enable value creating exchanges that would not take place otherwise. a digital platform helps to scale business more efficiently than does a physical one (evans, hagiu and schmalensee, 2006; järvi and kortelainen, 2011; parker et al., 2016). platforms capture the market from traditional operators thanks to their positive network effects. a two-sided network effect occurs when an increase in the number of people in a single user group increases the number of people in the other group. the growing number of people makes better matching possible; in other words, the customers’ needs and the provider’s offerings are more likely to meet. the more users, the more connection options between them. negative network effects between different sides arise when demand and supply are not balanced or matching is difficult due to the heterogeneity of the user community. if there are too many negative effects, then people will reject or reduce the use of the platform (parker et al., 2016). in a two-sided platform business, the platform typically does not own some crucial physical resource. this connects the platform business to the sharing economy (parker et al., 2016; vogelsang, 2010). the goal of business model innovation is to create and validate a strategy to go to the market being a source of competitive advantage (teece, 2010) and enabling a long-term success (bucherer, eisert and gassmann, 2012). business model innovation may examine existing parts of a company ’s business model or visualise a new business model for to satisfy customer needs. business model canvases are commonly used tools to innovate business models. the business model canvas (bmc) to visualise a company ’s or product’s value proposition, osterwalder (2004) proposed a business model ontology for digital businesses. subsequently osterwalder and pigneur (2010) refined this model to create the bmc, which incorporates various elements to be defined when considering a company ’s business: value propositions; customer segments; channels; customer relationships; revenue streams; key resources,; key activities; key partners; and cost structures. these elements form a holistic model as illustrated in figure 1. � figure 1: the business model canvas (osterwalder & pigneur, 2010). journal of business models (2021), vol. 8, no. 3, pp. 107-125 110110 each of these components is now briefly outlined. the value proposition is that the bundle of products and services that create value for a specific customer segment. by means of a value proposition, a business endeavours to solve a customer problem or satisfy a customer need in a way that is different from competing value propositions. customer segments define the different groups of customers a business aims to reach and serve. when a company has identified its target customers, the appropriate business model requires to be based in a sound understanding of their customers’ needs. via channels, the value propositions are delivered to customers through distribution, sales channels and communication forming a company ’s interface with the customers. the customers get to know company ’s products and services through channels, which in turn help customers to evaluate a company ’s value proposition. customer relationships relate to the types of relationships a business has identified are required by specific customer segments. customer relationships are usually connected to boosting sales, customer acquisition and retention. customer relationships are intended to influence the overall customer experience. the element of revenue streams symbolizes the cash a company generates from each customer segment. if a company has many customer segments, a company needs to specify what value each customer segment is willing to pay. key resources makes a business model to work. key resources enable a company to create and offer a value proposition, to reach markets, attend to relationships with customer segments, and earn revenues. while the key resources make the business model to work, key activities are those actions that enable the business to operate successfully. when determining key activities, the requirement of value proposition, distribution channels, customer relationships and revenue streams are highlighted as important elements together with the designated key resources. key partnerships are formed through the network of supplier and partners making the business model to work. partnerships have become important parts of companies’ business models, and therefore, the companies establish different collaborations and cooperation to acquire resources, reduce risks, or optimize business models and its operations. the final element is termed cost structure. the cost structure describes all the costs caused in a particular business model. the cost structure depends on the type of business model, and costs should be minimized in every business model. scholten’s two-sided platform business model canvas osterwalder and pigneur’s bmc provides a tool for innovating business models for value chains or pipelines. however, this canvas is not applicable to the innovation of business models for digital platforms in a two-sided market (scholten, 2016). to address this, scholten (2016) proposed a modified canvas (figure 2) to enable the creation of platform business models. he appears to combine the results of parker et al.’s (2016) platform business research and the bmc created by osterwalder and pigneur (2010). in scholten’s modified canvas, producers and customers are the main user groups in a two-sided market. this platform offers these groups value. role changes are also possible. the customer can periodically be a producer and vice versa (eckhardt, houston, jiang, lamberton, rindfleisch and zervas, 2019; scholten, 2016; parker et al., 2016, gabriel, korczynski and rieder, 2015). when designing a platform, it is important to first identify the core interaction, value unit (e.g., airbnb’s list of rental homes) and key user groups. the core interaction must be simple, attractive and value generating for users. platforms encourage producers to create useful, relevant and interesting value units for customers. the platform does not necessarily create any value units at all. it also has no control over the production process of a product or service, which is a major difference from traditional value chain business (parker et al., 2016; scholten, 2016). partners, filters, rules, and tools and services enable a successful core interaction. partners provide additional services related to the core interaction. filters help to match customers and producers – they journal of business models (2021), vol. 8, no. 3, pp. 107-125 111111 bring together the most suitable parties to create a successful interaction. for example, only relevant producers and their value units are shown for a particular customer. this prevents information overflow and facilitates decision making. data and algorithms are used to match customers and producers. tools and services are data-based tools that can create, for instance, loops of community feedback. the constant flow of interesting value units will bring people back and increase the number of users by creating a new value. user feedback helps to control the quality of interactions. in addition, users can recommend the platform to others. facilitation tools help producers create and deliver high-quality outputs to customers as well as assist in producing marketing material (parker et al., 2016; scholten, 2016). the rules are used to orchestrate the ecosystem and guide people’s behaviour. they determine who participates in the ecosystem, how the value is shared and how conflicts are resolved. in the platform economy, the platform partners create a significant part of the value, so the profits must be fairly shared. this is not easy because different user groups may have different interests. there will inevitably be conflicts, something clearly evident in facebook’s privacy policy. in addition, sanctions are defined if users act against the rules (parker et al., 2016; scholten, 2016). in the platform business, revenues can be made in the following main ways: 1) by charging a transaction fee, which is a percentage of the price or fixed fee; 2) by charging producers for access to customers or vice versa; 3) by charging for improved access to the platform (e.g., better targeted or more attractive messages for customers); or 4) by charging for higher quality than normal (e.g., offering exceptionally reliable child caregivers). the ‘freemium business model’ is also common (parker et al., 2016). the pricing element of the canvas describes the need to define how much customers or producers are willing to pay for the relevant services. the cost structure presents the fixed and variable costs required to operate a business. channels refer to how and where a product is distributed and sold and how users are attracted to and engaged in the platform. the customer journey involves the customer’s every interaction or touchpoint with the platform, product, service and brand before ordering, during the order-delivery process and after delivery. a comprehensive experience is formed when the customer is satisfied with the whole journey. the producer journey is like the customer journey but from the producer’s point of view (scholten, 2016; osterwalder and pigneur, 2010; kim and mauborgne, 2005). � � figure 2: business model canvas for digital platforms in two-sided markets (scholten, 2016). journal of business models (2021), vol. 8, no. 3, pp. 107-125 112112 research design a case study approach (saunders, lewis and thornhill, 2007) was chosen because it allows a broad and in-depth examination of a single instance of the phenomenon of interest (collis and hussey, 2003), enhancing understanding of the case by describing the phenomenon in its real context (yin, 2003) and binding the case by time and activity (stake, 1995). in this research, the phenomenon under examination is the two-sided platform business. ratti, the case company informing this study, exhibits a business model in a two-sided market. ratti was chosen because it was an innovative newcomer to the driving school sector and an illustrative example of a two-sided digital platform business. ratti is an employee and professional service platform; this type of platform was chosen because such platforms can significantly change work life and people’s earning possibilities (parker et al., 2016). the use of ratti as a single case is justified because it is a unique digital driving school platform (yin, 2003). empirical data from ratti were collected from public information found on the company website (www.ratti.fi), together with other digital information sources and from newspapers. an abductive approach was used to suggest improvements for the existing business model canvas. abduction is understood as systematised creativity or intuition in research designed to create novel knowledge (taylor, fisher and dufresne 2002) and to escape already known constructs (kirkeby, 1990). intuition may result from an unexpected observation that cannot be explained using an existing theory (andreewsky and bourcier, 2000). for researchers, an abductive approach is useful for discovering other variables and relationships (dubois and gadde, 2002). an abductive approach is possible when observations are connected to a main idea or clue, and existing theory models alternate in the researchers’ thinking (tuomi and sarajärvi, 2002) to refine existing theories rather than invent new ones (kovács and spens, 2005). kovács and spens (2005) described the abductive research process as a continuous movement between empirical and theoretical issues. in the present study, empirical data about the digital driving school business model and theoretical knowledge of business model canvases provided the sources of inspiration to refine and combine existing theory. the main phases of the abductive research process are illustrated in figure 3. the discontinuous arrows represent the movements in canvas development. in this study, we conducted four phases (0–3) of the abductive process to suggest improvements for the existing canvas, repeating phases 1 and 2 twice to refine the match between real-life observation and theoretical knowledge. the research process embedded in the abductive approach may begin with real-life observation (alvesson and sköldberg, 1994) or prior theoretical knowledge (kovács and spens, � �� figure 3: the abductive process of research applied in this study (modified from kovács and spens, 2005). journal of business models (2021), vol. 8, no. 3, pp. 107-125 113113 2005). as doctoral-level academic professionals in the fields of engineering and management, we had prior theoretical knowledge about business models in general and about their significance, which corresponds to phase 0 in the abductive process. this study started with real-life observation (phase 1) when the digital driving school ratti entered the driving school business in finland and aroused our interest in whether it would succeed in the markets. the platform business model of ratti was entirely different from those of traditional driving schools. in our search for theoretical knowledge, we initially acknowledged osterwalder and pigneur’s bmc as developed for digital businesses. the business model of ratti was compared with their canvas. however, their canvas was designed for one-sided markets and is thus not suitable for two-sided platform businesses as we found out after testing. in the theory search, we discovered scholten’s modified canvas, developed for two-sided platform businesses, and compared it with the ratti business model (phase 2). in the comparison and analysis, we noticed an incomplete match between scholten’s theoretical model and ratti’s empirical business model (phase 1). this incomplete match led us to a second loop of theory matching in which we searched for novel theoretical elements to complement the existing canvas (phase 2). after identifying the differences and similarities of existing business model canvases in comparison with ratti business model, the research process ended with a theory suggestion in the form of improvement propositions for business model canvas for two-sided platform markets (phase 3). the ratti.fi case this study began by gaining an understanding of the business logic of the finnish driving school platform ratti (officially “driving teacher brokerage service”), which was established in 2015 to compete against traditional driving schools. the platform took advantage of finnish legislative reforms, which made it possible for teachers to teach three non-family students during three years. in the beginning, the platform operated in the finnish market although the business had the ambition to evolve into an international operation. there are 70,000 driving school students in finland each year, and ratti was targeting half of the €120 million finnish driving school market. the ratti platform match-makes driving teachers (producers) and students (customers), as shown in figure 4. for students seeking a driving licence, ratti’s operations offered a value proposition for about half the price of a traditional driving school. a cheaper option naturally interests them. teachers offer driving lessons for students and make money this way. the driving lessons are offered by teachers using own cars. ratti pays teachers a fee for driving lessons. if a teacher teaches the maximum number of three students outside her family, she can earn €960 over a three-year period. unfortunately this did not attract enough teachers, being ratti’s greatest problem, as a consequence of which many students did not receive a local driving teacher sufficiently rapidly. this reduced the students’ willingness to join the platform. hence, the network effect was negative. figure 4: ratti.fi platform two-sided market. journal of business models (2021), vol. 8, no. 3, pp. 107-125 114114 ratti also offered theory lessons for students and, if necessary, also for teachers through the digital platform. additionally, ratti offered other services for teachers. teachers can therefore be both producers and customers at the same time. because of this, the figure 2 shows money flows in both directions regarding teachers. ratti believed that the legislative limit of three students would be removed in a short time, which would provide instructors with more opportunities to earn money. if this limitation had been removed, teachers could have earned almost €3,000 per month by teaching 150 hours. this would have proved more attractive teachers. however, the opposite happened with the teaching of non-family students becoming banned through changes in legislation. unfortunately, as a result, ratti ceased operations in 2018. a comparative analysis of ratti’s business model with extant alternative visualisations this section presents a number of observations regarding the business model in use by ratti. first, differences between ratti’s business model and the traditional driving school model are presented. second, the ratti business model´s fit with osterwalder and pigneur ’s bmc is examined. finally, ratti is analysed using scholten’s platform business model canvas. differences between ratti’s business model and that of the traditional driving school there are some significant differences (table 1) between the business models of traditional driving schools and that of ratti. the identified differences are based on a content analysis of text descriptions about ratti business model. ratti has outsourced the critical resources of traditional driving schools serving private individuals, namely driving instructors and cars. it also has no physical teaching and staff facilities. for these reasons, ratti has considerably less fixed and investment costs, which permits a lower price for its customers. on the other hand, it does not have professional instructors and the quality of car supply is varied. compared to a traditional driving school ratti has to attract a critical mass of instructors other than through a fixed salary. teaching individuals to drive is just a source of additional income for instructors. in traditional driving schools the permanent staff receive a fixed salary. in consequence, teachers are usually quickly available for students. furthermore, driving schools do not have the student quantity limitations that ratti’s teachers have. in addition to service producers, instructors are also customers who buy services from ratti, such as theory lessons for themselves. ratti does not have its own quality control or a traditional management structure for monitoring instructors. students who complete their driving license provide quality control insights through the feedback mechanism. almost any person can become a driving instructor with ratti, and is not required to exhibit the values and culture of a traditional driving school. for some students this provides an attractive option. however, for the majority of students, as well as their parents, a traditional driving school that has a history both as a way of working and also as a company offers a preferable alternative. as a new venture, ratti is only able to rely on a relatively small stock of user experiences of the service. in addition, the absence of a bricks-and-mortar business estate is a concern for some potential clients. a new business model with low demand and little feedback causes doubts in people. a major attraction of ratti, however, is that it offers a more flexible way to obtain a driving license because of the independence of time and place. there are no eight to four working hours and no need to go to driving school for theory classes. ratti differentiated itself from traditional driving schools through its novel, youth-oriented marketing approach. in summary, the core functions of a traditional driving school are to get customers and teach, while the core functions of ratti is to achieve positive network effect and match-making; in other words, to create a critical and balanced mass of teachers and students, and to provide a local instructor for students. however, ratti is not a pure platform for a two-sided market because it has its own theory teaching. ratti also does not provide students with a list of instructors journal of business models (2021), vol. 8, no. 3, pp. 107-125 115115 but selects the teacher itself. because of the differences in business models between traditional driving schools and the ratti platform, the question arose as to whether osterwalder and pigneur’s bmc could be used for innovation exercises within a platform business such as ratti. interfacing ratti and the business model canvas the bmc was developed to support digital business innovation (osterwalder and pigneur, 2010) but at that time the object of innovation was value chain streamlining in one-sided markets. we examined how the traditional canvas fits with the two-sided platform business of ratti. based on this analysis, the traditional canvas would not appear to facilitate the innovation of two-sided platform business even if it can somehow describe that kind of business (figure 5). the traditional canvas focuses on creating value within a company, while in two-sided market value is created outside the company. in other words, platforms do not themselves create value but table 1. factor ratti.fi platform traditional driving school critical resources (driving teachers and cars) outsourced to citizens owned by driving school physical facilities no need for them for staff and theory teaching costs mainly variable mainly fixed salary for teachers additional income main income student quantity limitations for teacher yes no customers students and teachers students quality control external users driving school independence of place and time yes no core functions positive network affect and matchmaking of student and teacher obtain customers (students) and teach driving and theory for them. table 1: comparison of ratti.fi platform and traditional driving school. journal of business models (2021), vol. 8, no. 3, pp. 107-125 116116 concentrate on matchmaking of customers and producers. furthermore, producers are often private individuals rather than companies. thus, there is a big difference in business logic, and it should also show up in the canvas. scholten has also recognized this difference and developed a modified business model canvas for platform business of two-sided markets (scholten, 2016). ratti in relation to scholten’s two-sided platform modified business model canvas within his modified canvas visualisation, scholten emphasizes match-making between customers and producers. that is why he places core interaction in the centre of the canvas (see figure 2 above). scholten also emphasizes the importance of filters, rules, and tools and services. thus we sought to examine how scholten´s modified canvas would help to innovate a business model like ratti (table 2). when comparing ratti’s business model with scholten’s modified canvas, we identified a series of improvement needs, which are discussed in following section. building on scholten’s canvas to better facilitate business model innovation based on the insight presented in the previous section, there are significant differences between the logic of osterwalder and pigneur’s bmc and scholten’s modified canvas when applying them to a two-sided platform business such as the ratti case. there are also some limitations or omissions in both canvases that are noted in earlier literature. according to upward (2013), the bmc overemphasises economic value instead of paying attention to environmental and social value. neither osterwalder and pigneur’s canvas nor scholten’s modified canvas pay attention to the business environment, which plays a significant role in the success of a platform business. for example, a platform business is not appropriate in a heavily regulated industry (parker et al., 2016). in addition, coes (2014) observes that a crucial limitation of osterwalder and pigneur’s bmc is that it excludes competition. coes (2014) also notes that the value proposition building block is too abstract in osterwalder’s original business model canvas and does not consider � figure 5: ratti.fi in traditional business model canvas. journal of business models (2021), vol. 8, no. 3, pp. 107-125 117117 table 1. elements of canvas empirical data: business model of ratti.fi core interaction matchmaking of a driving teacher and student filter helps in finding a teacher from the same locality where the student lives rules teachers at least 25 years old, driving licence min 3 years and no major traffic offences. a maximum of three non-family students can be taught for 3 years. driving teaching at least 18 hours per student. money-back guarantee. tools & services transparent pass-through rates. theory teaching and exams for teachers and students. brake pedal installation and vehicle inspection for teachers. partners platform provider, brake pedal installers, vehicle inspectors, authorities and organisers of the driving test value proposition for producers additional incomes by teaching producer segments citizen teachers pricing for producers standard price for teaching. theory teaching, exam, brake pedal installation and car inspection fees. channels for producers ratti.fi platform and social media producer journeys from marketing to aftermarket mainly on the internet. face-to-face contact with students in driving lessons. value proposition for customers cheaper and different way to get a driving licence. to find a local driving teacher. customer segments students and their parents, who usually pay for driving school or part of it table 2: ratti.fi in platform business model canvas journal of business models (2021), vol. 8, no. 3, pp. 107-125 118118 how a business satisfies the customers’ needs. osterwalder, pigneur, bernada and smith (2014) attempted to rectify this by adding the ‘value proposition canvas’, formerly called ‘the customer value map v.0.8’. this allowed the alignment between customer needs and a value proposition could be analysed more efficiently. based on the findings of our research, neither the osterwalder and pigneur bmc nor scholten’s modified canvas is of much use when innovating platform business models for two-sided markets. the matchmaking activity in the two-sided markets differs remarkably from traditional value chain business. the elements of core interaction, filters, tools and rules are important canvas elements in supporting innovation for two-sided markets. without these elements, innovation would focus only on enhancing the efficiency of traditional value chains. nevertheless, scholten’s modified canvas does not seem to support innovation in an optimal way in platform business for two-sided markets, because it either lacks essential elements or elements are misleadingly named. in order to address these limitations, the following suggestions are designed to further enhance scholten’s canvas: • when designing a platform, it is important to first identify the core interaction and then design the participants, value units, and filters that will allow for a successful core interaction. (parker et al., 2016). scholten’s canvas lacks a value unit (e.g. in ratti this is a list of local teachers). • scholten’s canvas does not pay attention to the network effect, i.e., how to attract actors to both sides of the platform and make the first interaction, which leaves such a good experience that they want to come again. (parker et al., 2016). therefore, we propose adding to canvas an element of network effect tactics. table 1. elements of canvas empirical data: business model of ratti.fi pricing for customers registration and driving licence fee channels for customers ratti.fi platform and social media customer journeys from marketing to delivery mainly on the internet. face-to-face contact in driving lessons. cost structure payments for driving teachers, authority fees, slippery weather training fees (total approx €755 eur per license). in addition, other service fees for partners (e.g. marketing and platform) and wages for own personnel. revenues €855 per driving licence, about €100 of which is commission. additional revenues, such as theoretical education of teachers. table 2: ratti.fi in platform business model canvas (continued) journal of business models (2021), vol. 8, no. 3, pp. 107-125 119119 • scholten’s canvas lacks an element to identify the key resources to be outsourced. in other words, what part of the business in the industry entails a lot of fixed and investments costs and could citizens or some other party provide this part with sufficient quality. • in scholten’s canvas, the term producer does not adequately describe the role of the players, because they may also be customers at the same time. therefore, the concept of prosumer can work better in the two-sided markets context (eckhardt et al., 2019; gabriel et al., 2015) • the lower part of scholten’s canvas (cost structure and revenues) is not precise because there is also income from producers (prosumers). figure 6 incorporates the above suggestions to fabricate an enhanced business model canvas for platform business models. furthermore, we recommend the following steps when applying the novel canvas for creating new platform business models. step 1 involves planning the core interaction where the platform matchmakes a prosumer and a customer to create and deliver value. central to this phase are also the definition of the value unit (what customers buy), user groups (who are prosumers and customers), filter (how to match-make prosumer and customer), network effect tactics (how to increase the number of users on both sides of the markets) and the critical resource to be outsourced (what fixed and investment cost resources could be provided by prosumers). first versions of value proposals (what new value platform could deliver compared to existing offerings) for prosumers and customers should also be made at this phase in order to attract the users to the first experiment. step 2 is termed value validation in which business potential is identified. in this phase, an experiment is carried out. for the experiment, a so-called rapid platform prototype is created. the purpose of the prototype is to concretize the platform idea and provide a user experience so that the value created for � figure 6: suggested new canvas for two-sided platform business model innovation. journal of business models (2021), vol. 8, no. 3, pp. 107-125 120120 different parties can be determined. rapid prototype means the minimum version at which a user experience can be generated. for example, the filters are not automated algorithms, since a human takes care of match-making a prosumer and customer. the first experiment can be done with a very limited number of users even with a single prosumer and customer. the experiment is repeated several times if necessary. between experiments, some element (for example, value unit) is changed to achieve a better result in other words, more value for platform, costumer and prosumer. on the other hand, if inadequate value seems to be created for all parties, the platform idea should be abandoned. if the value is significantly higher than in the industry´s existing solutions, then in step 3 the platform business should be further developed. at this stage, support services are developed and suitable partners sought, as well as rules and tools to promote value creation. in addition, value propositions are specified and pricing and earnings logic are built. network effect tactics are particularly important to lure and engage a critical mass of users on both sides of markets. for example, channel selections, value propositions and pricing principles are closely related to this. at this time, several experiments are needed to attract users. when the critical mass has been reached, step 4 requires the operation to be intensified and streamlined e.g., by creating automated processes, the main goal being to move towards a profitable business. at the final step, the customer and prosumer journeys are examined in order to find new potential core interactions and value units to create additional value. after this, the process repeats, starting with step 1. concluding observations this paper sought to increase the understanding of digital platform businesses and business model innovation in two-sided markets. the findings of the research undertaken revealed that two-sided platform businesses require a further reconstructed business model canvas; thus, we proposed a novel platform business model canvas that supports the innovation of platform business models in two-sided markets. in answer to the research question: what kind of business model canvas is most suitable for the innovation of platform business models in two-sided markets?, we conclude that the following elements are needed in a business model canvas: • defining a value unit • defining the key resources to be outsourced • planning network effect tactics • renaming producers as prosumers • paying attention to revenues also from the producer/prosumer side these refinements will enable innovating two-sided platform business models with higher accuracy and details corresponding the real-life situation, and also highlight the differences of traditional and platform business models. the contributions of made in this paper can be recognized from multiple theoretical viewpoints. first, the paper contributes to the platform business discussion in the literature by providing empirical understanding of platform businesses derived from a case example. second, the paper contributes to the growing literature on business models and especially how they might be successfully innovated. although extant business model canvases have been found to be an effective tool for this purpose, as a result of our study we are proposing some improvements to the existing canvases to better take into account the differences between two-sided platform business models and traditional business models. in addition, the abductive research process applied in this study can generate new knowledge for digital markets. the proposed canvas can help practitioners to systematically develop their business models and to create new platform business models for two-sided markets. it will assist managers to identify the core elements for value creation from both customer and producer sides and enables focusing on the critical aspects of business model creation. the proposed model was created by studying an employee and journal of business models (2021), vol. 8, no. 3, pp. 107-125 121121 professional service platform but it can also be used in innovating other types of platforms in different industries or even in the public sector services. the canvas tool can also be utilized for comparisons between different business models. the proposed canvas was developed with the help of abductive logic and the case study of ratti a business that incorporated an employee and professional service platform. the new canvas could be applicable to analyse these kind of business platforms. however, more research is needed to gain greater insights into possible canvas applications, which entails applying the proposed canvas in practice. in addition, the applicability of the new business model canvas should be tested on other types of online platforms in future studies and the implementation process of the proposed canvas improvements should be tested in a follow-up study. as this study covered one case example in one industry, and was carried out employing one methodological approach, there are many possibilities for further research by broadening the scope of empirical cases and by including multiple complementary methods such as systematic literature review, survey or interviews. possible topics for future research are the changes in people’s values and analysing other environmental issues – for example, how well existing services respond to changing appreciations and how e.g. new technology could be used within the context of these changing appreciations. journal of business models (2021), vol. 8, no. 3, pp. 107-125 122122 references alvesson, m. and k. sköldberg. (1994). tolkning och reflektion. vetenskapsfilosofi och kvalitativ metod.” (interpretation and reflection, philosophy of science and qualitative method). lund: studentlitteratur. andreewsky, e. and d. bourcie. (2000). “abduction in language interpretation and law making.” kybernetes 29(7/8): 836‐845. bucherer, e., u. eisert, and o. gassmann. (2012). “towards systematic business model innovation: lessons from product innovation management,” creativity innovation management, 21(2): 183–198. coes, d.h. (2014). critically assessing the strengths and limitations of the business model canvas. master’s thesis, university of twente, netherlands. collis, j. and r. hussey. (2003). business research. london: palgrave macmillan. cusumano, m.a., kahl, s.j. and suarez, f.f. (2015). “services, industry evolution, and the competitive strategies of product firms.” strategic management journal, 36(4): 559-575. drucker, p.f. (1994). “the theory of the business.” harvard business review, 72(5): 95-106. dubois, a. and l.-e. gadde. (2002) “systematic combining: an abductive approach to case research.” journal of business research 7(4): 553-560. eckhardt, g.m., m. b. houston, b. jiang, c. lamberton, a. rindfleisch and g. zervas. (2019). “marketing in the sharing economy.” journal of marketing 83(5): 5-27. https://doi.org/10.1177/0022242919861929. eisenmann, t., g. parker and m.w. van alstyne. (2006). “strategies for two-sided markets.” harvard business review, 84(5): 92-101. evans, d.s., a. hagiu and r. schmalensee. (2006) invisible engines – how software platforms drive innovation and transform industries.” cambridge, ma: mit press. furr, n. and j. dyer. (2014). the innovator’s method: bringing the lean startup into your organization, boston, ma: harvard business review press. gawer, a. (2009). platforms, markets, and innovation. cheltenham: edward elgar. gabriel, y., m. korczynski and k. rieder. (2015). “organizations and their consumers: bridging work and consumption.” organization, 22(5): 629-643. https://doi.org/10.1177/1350508415586040 hagiu, a. and j. wright. “multisided platforms.” international journal of industrial organization 43: 162-174. jaakkola, e. and t. hakanen. (2013) “value co-creation in solution networks.” industrial marketing management, 42(1)): 47-58. journal of business models (2021), vol. 8, no. 3, pp. 107-125 123123 järvi, k. and s. kortelainen. (2011). “the dynamism of the two-sided application store market.” international journal of technology marketing, 6(1): 57-71. kim, w.c. and r. mauborgne. (2005). blue ocean strategy: how to create uncontested market space and make the competition irrelevant, boston, ma: harvard business review press. kirkeby, o.f. (1990). ”abduktion”, in h. andersen (ed): ”vetenskapsteori och metodlära. introduction.” lund, sweden: studentlitteratur. kovács, g. and k.m. spens. (2005) “abductive reasoning in logistics research.” international journal of physical distribution & logistics management 35(2): 132-144. magretta, j. (2002). “why business models matter”, harvard business review 80(5): 86-92. nenonen, s. and k. storbacka. (2010). ”markkinamuotoilu. johdatko markkinoita vai johtavatko markkinat sinua?” (market design. are you leading the market or do the market lead you?). helsinki: wsoypro. osterwalder, a. (2004). the business model ontology: a proposition in a design science approach.” phd thesis, university of lausanne, switzerland, 2004. osterwalder, a. and y. pigneur. (2010). business model generation: a handbook for visionaries, game changers, and challengers, hoboken, nj: john wiley & sons, inc. osterwalder, a., pigneur, y., bernarda, g. and a. smith. (2014). value proposition design, hoboken nj: john wiley and sons, inc. parker, g. and m. van alstyne. (2016). “platform strategy” in m. augier and d.j. teece the palgrave encyclopedia of strategic management. london: palgrave parker, g.g., m.w. van alstyne and s.p. choudary. (2016) platform revolution: how networked markets are transforming the economy and how to make them work for you, new york: w.w. norton & company. salmela, e. and n. nurkka. (2018). “digital market capture in platform business – how to pass the valley of death?” nordic journal of business 67(2): 90-113. saunders, m., p. lewis and a. thornhill. (2007). research methods for business students, 4e, london: prentice hall, 2007. scholten, r. (2016) new business model canvas for digital platforms. linkedin: https://www.linkedin.com/pulse/ new-business-model-canvas-two-sided-digital-platforms-scholten/ (accessed 5 august 2019). scholten, s. and u. scholten. (2012). “platform-based innovation management: directing external innovational effort in platform ecosystems.” journal of knowledge economy 3(2): 164-184. stake, r.e. (1995). the art of case study research, california ca: sage, 1995. taylor, s.s., d. fisher, and r.l. dufresne. (2002). “the aesthetics of management storytelling: a key to organizational learning.” management learning 33(3): 313‐330. journal of business models (2021), vol. 8, no. 3, pp. 107-125 124124 d. j. teece (2010). “business models, business strategy and innovation,” long range planning 43(2/3): 172–194. tuomi, j. and a. sarajärvi. (2002) ”laadullinen tutkimus ja sisällönanalyysi.” (qualitative research and content analysis.) helsinki: kustannusosakeyhtiö tammi. upward, a. (2013). towards an ontology and canvas for strongly sustainable business models: a systemic design science exploration, toronto, on: york university, 2013. vogelsang, m. (2010). “dynamics of two-sided internet markets”, international economics and economic policy 7(1): 129-145. wortmann, f., k. ellermann, a. kuhn and r. dumitrescu. (2020). “ideation for digital platforms based on a companies’ ecosystem.” procedia cirp 91: 559-564. yin, r.k. (2003). case study research: design and methods, california, thousand oaks: sage, 2003. journal of business models (2021), vol. 8, no. 3, pp. 107-125 125125 about the authors dr. kyllikki taipale-erävala works as a post-doctoral researcher and a project manager in the microentre research team at the kerttu saalasti institute, university of oulu, finland. her research expertise is competencies enabling business survival in micros and smes in changing business environments. she is also interested in developing micro enterprises, innovation, business models, knowledge management, and advanced services. additionally, dr. taipaleerävala is evolved in entrepreneurial education and training over 10 years. she has experience of personal entrepreneurship, in the field of training and education in several school levels, supervision of apprenticeships, and hpa and energy technology. dr. erno salmela is post-doctoral researcher and project manager at lappeenrantalahti university of technology. his research focusses on innovation management, business ecosystems, digital platforms, entrepreneurship, experimental innovation, e-sports and supply chain management. he has 20 years’ experience in collaborative university-industry research and development projects. dr. salmela is also a serial entrepreneur; from digital platforms to current e-sports business. dr. hannele lampela is a senior research fellow in industrial engineering and management research unit at the university of oulu, finland. she has more than 15 years of experience in university teaching and research, with diverse topics in information and knowledge management such as networked value creation, innovation management, distributed knowledge work, competence management, inter-organizational learning, and product lifecycle information management. her current research interests focus on information and knowledge-driven transformation in different industries, ecosystems and platforms. in addition to her teaching and research experience, dr. lampela has extensive project experience by being involved in several eu and nationally funded research projects. journal of business models (2021), vol. 9, no. 3, pp. 1-7 1 teaching business models: approaches and success criteria christina m. bidmon copernicus institute of sustainable development utrecht university anna b. holm department of management aarhus school of business and social sciences guest editors please cite this paper as: bidmon, c. m. and holm, a. b. (2021), teaching business models: approaches snd success criteria, vol. 9, no. 3, pp. 1-7 acknowledgements: the uncertainty around work, teaching and personal health created by the covid-19 pandemic put extra strain on authors, reviewers, as well as the editorial team and the journal management. we are therefore grateful to everyone involved; without their continuous work and perseverance in extraordinarily difficult times this special issue on teaching business models would not exist. introduction teaching business models (bm) and business model innovation (bmi) in universities and business schools has become a common practice. academia has acknowledged that despite the very normative nature of the concept, business model thinking unites and synergistically binds the very fundamental decisions about a business, i.e., how to create, deliver and capture value. naturally, programmes in entrepreneurship, strategy and innovation have widely developed and adopted bm and bmi curricula, and educators have invested a great deal of time and effort in designing courses and supportive tools. however, their valuable experiences and insights into what works well in classrooms are difficult to share through the traditional academic channels. to facilitate knowledge exchange, we initiated and organised a series of teaching-related workshops, which then turned into a regular teaching forum at the annual business model conference1 organised by the business model community. we experience that the topic of teaching business models is one that sparks debate and curiosity in the community and attracts great attention at the conference. teaching business models is by no means an easy task; it requires the establishment of a connection between consumption and production, the physical aspects of producing and delivering a product as well the more subtle dynamics of understanding customer needs and willingness-topay (charles baden-fuller in holm et al., 2019). the success of the teaching forum has also created a need to record and further disseminate the valuable knowledge of teaching bms and bmi. this is how the idea of a special issue on teaching bms arose. the 1 see http://www.businessmodelconference.com doi: https://doi.org/10.5278/jbm.v9i3.6911 issn 2246-2465 journal of business models (2021), vol. 9, no. 3, pp. 1-7 2 first call for papers was issued in late 2018 and quickly caught attention of the community. we received well over thirty submissions from educators all over the world who were eager to share their approaches, insights, and tools. deeply humbled and impressed by the authors’ openness as well as the usefulness of their contributions, we decided to split the special issue into two volumes to accommodate bigger number of papers. ultimately, we selected 19 prospective papers that each present hands-on guidance from educators, for educators. volume 1 was published in 2019 and included 12 papers. when working on the second volume, the covid-19 pandemic rendered many in-class approaches and tools irrelevant for an unknown time. therefore, the release of volume 2 was postponed until educators return to classrooms. however, if anything, the covid19 pandemic has demonstrated that the discussion of novel and innovative teaching approaches is very much alive. educators all over the world set out to develop and implement engaging learning methods for teaching students online. many of the contributions in the special issue address this need; they present digital platforms, elaborate on the principles of hybrid learning strategies or give advice on creating moocs (massive open online courses). while the authors created these approaches in pre-pandemic times, making them accessible to a broader audience now seems to be more relevant than ever. in so far, our aspiration for this special issue remains as it started: it is our hope that this special issue on teaching business models will not only fuel the debate on innovative teaching approaches in contemporary business education, but also be of practical use for young teachers who need inspiration on their first course designs, help experienced teachers to improve their teaching as well as inspire coaches and accelerator units that try to help founders and corporate entrepreneurs to master the art of business modelling (holm et al., 2019). with this brief introductory paper, we pursue three main objectives: (i) to provide an overview of the content of the 19 papers included in the entire special issue, (ii) to reflect on commonalities and ‘success criteria’ becoming apparent across the approaches authors present, and (iii) to present the seven papers included in volume 2. the content of the special issue on teaching business models some of the papers in the special issue present an entire course, others present a specific tool or a course component. some focus on large audiences, others on teaching executive students or practitioners. what all papers have in common though is that they provide information such as course schedules, exercises, and instructions. figure 1 provides an index that can guide the reader to relevant papers. the teaching approaches exhibit several similarities. this leads us to speculate that there are formats and techniques especially relevant in the context of teaching bms. three ingredients for a successful business model course perusing the 19 approaches presented in the special issue, we observe commonalities in the formats and techniques that educators use to teach business models. so, what makes a successful business modelling course? based on the papers included in volume 1 and volume 2, we have distilled three ingredients for success in bm and bmi teaching. experiential learning experiential learning is a very salient feature of the teaching approaches presented in this special issue. experiential learning refers to learning through reflection on doing (kolb, 1984). it is often contrasted with academic learning, which relates to more abstract and classroom-based techniques of knowledge transfer. in contrast, experiential learning seeks to engage a learner in a concrete experience. experiential learning components that the authors in this special issue have included in their teaching range from real-life cases over digital simulations to board games. for instance, massiera (2021) presents a sophisticated structure that allows to scout and facilitate projects that bring together local entrepreneurs with student groups to work on live challenges. others discuss historic or fictitious cases in the classroom, and simulations are also frequently used to involve learners in a concrete experience related to business modelling. gamification the introduction of game elements into a non-game situation – is a commonly used journal of business models (2021), vol. 9, no. 3, pp. 1-7 3 technique by the authors in this special issue to facilitate experiential learning. for instance, rumble (2019) presents the ‘start-up jungle’ as a sand table approach that requires learners to make decisions and think through various scenarios while modelling their way through the business landscape. thomsen et al. (2019) let students work with booster cards, mosig et al. (2021) use lego serious play, and stenkjær et al. (2019) dedicate their entire paper to the use of digital gamification in the context of business modelling. moreover, authors find creative ways to foster reflection in learners. reflection is also a crucial part of the experiential learning process, and like experiential learning itself, it can be facilitated or independent (kolb, 1984; veine et al., 2020). bitetti (2019) has students write a course blog and learning diary to reflect on their experiences. other authors make the reflection on different frameworks and modelling languages an integral part of their course design (e.g., henike & hölzle, 2019; stadtländer et al., 2021) and thereby tackle the challenging question how to teach about the cognitive processes involved in business modelling. social learning social learning refers to people learning in a social context (bandura, 1977), and social learning theory states that acquisition of social competence happens exclusively or primarily in a social group. 18 out of 19 papers included in the special issue have group work as a central design principle of their course or teaching approach. even authors presenting a mooc that has generated over 70,000 participants (de reuver et al., 2019) integrate forum discussions and peer reviews in the online interaction between participants. a frequent form of collaboration is the assignment of learners to smaller groups, such as entrepreneurial student teams, which work together on the creation and/or implementation of a business model (e.g., spaniol et al., 2019; margolina & bohnsack, 2019; lehmann & bidmon, 2021). at times, the format of collaboration is intensive such as in hackathons or bootcamps (jonker & faber, 2019). what is striking is that, even in large courses, educators find ways to introduce elements of collaboration and interaction between learners, often via the new possibilities offered by digital technologies. for instance, szopinski (2019) explains the integration of videobased peer-feedback and its grading for the use in large classroom settings (200+ students). furthermore, figure 1. journal of business models (2021), vol. 9, no. 3, pp. 1-7 4 multiple authors present formats and techniques to involve practitioners, either permanently or at certain points, in their courses so that students can observe the reception of their ideas and extract knowledge (e.g., jonker & faber, 2019; massiera, 2021; sort & brøndum, 2021; stenkjær et al., 2021). importantly, many authors also provide valuable tips and tricks on the challenges of facilitating and grading elements of peer feedback (sort & holst, 2019; szopinski, 2019) or performance evaluations by practitioners and case companies (e.g., massiera, 2021). guided learning guided learning is a term we use to refer to the strong facilitation and intense interaction between educator and student. strong facilitation was a final commonality we observed across the approaches included in the special issue. in their learnings and reflections, authors unanimously agree that teaching students about business models, especially in experiential formats, requires frequent exchange and sparring between lecturers and students. for instance, et al. (2021) describe how they involve multiple lecturers in their course to enable an intense sparring of the students in small groups. spaniol et al. (2019) explain the benefits of having individual feedback moments between student group and lecturer in addition to peer feedback. many authors present smart ways to transfer academic learning to the self-study of learners to free-up time in class for sparring and discussion (e.g., bitetti, 2019; margolina & bohnsack, 2019). this, however, does not mean that strong facilitation and guidance solely relate to student-teacher interaction. the games and digital learning formats presented in this special issue are highly scripted, meaning they provide learners with clear instructions for how to play (thomsen et al., 2019; rumble, 2019), perform calculations (lehmann & bidmon, 2021), or have digital guides help learners to model a business model step-by-step on an online platform (margolina & bohnsack, 2019). papers in volume 2 the seven papers included in volume 2 present a range of innovative teaching formats. like the papers included in volume 1, they go beyond the traditional lecture format and provide creative techniques to incorporate blended or gamified elements. moreover, several of these papers target specific audiences such as learners particularly interested in business modelling in sustainability-related or engineering contexts. in the paper “teaching business models through student consulting projects”, philippe massiera presents an educational programme that connects 200 to 250 bachelor students with local entrepreneurs for a period of five weeks. over this timeframe, students help these entrepreneurs to validate their business model. the paper provides in-depth insights into the organisation of the consulting process including information on selecting the entrepreneurial projects, preparing students to enter the companies or the coordination of the student-practitioner-teacher interaction over the course of projects. in their paper “on the back of a beer coaster – simple estimates for costs and revenues in business modelling”, christian lehmann and christina bidmon present a simple method to get students at any level in touch with the financial aspects to modelling a business. the ‘business coaster’ they offer is a playful, non-threatening way that allows learners to perform simple estimates for the costs and revenues of a business model. the authors provide a sample calculation and practical tips as well as rules-of-thumb that instructors can use to support learners when working with the coaster. in the article ‘experiences from a decade: a universal approach to business model teaching’, jesper c. sort and kristian brøndum present their universal five-step approach to developing business model competencies. the approach is based on the teaching principles of case-based teaching, learning-by-doing and problembased learning. it provides the participants with the ability to apply the tools/theories/frameworks theoretically as well as practically. the authors assure that the approach has proven successful in a variety of settings across disciplines and can be used as a general guide to teaching bms in an engaging way (sort & brøndum, 2021). in the paper from “invention to innovation: teaching business models to manufacturing researchers”, antonio maffei and eleonora boffa present an interesting structure to teach doctoral students enrolled in production engineering programmes about business models and equip them with business modelling competencies. they do not only provide lots of practical information journal of business models (2021), vol. 9, no. 3, pp. 1-7 5 on the learning goals, course structure and readings in their course, but they also reflect on the unique needs of this rather productionthan consumption-oriented audience. thereby, they provide valuable insights how to educate future business leaders and academics who know how transform invention into innovation. in their article ‘developing impactful entrepreneurial teaching using a business model framework’,kenneth stenkjær, kristian brøndum, jesper c. sort and morten lund present their insights from a course on new venture creation. the course is designed to support students in the process of searching for a repeatable and scalable business model and its careful market validation. the authors observe that the course strengthens students’ entrepreneurial competencies. however, they also point at some limitations in applying the business model canvas (osterwalder & pigneur, 2010) and lean start-up methodology (blank, 2013) in contexts that require a high degree of creativity. therefore, the course was enhanced with creativity training to stimulate the flow of ideas and develop students’ creative competencies (stenkjær, brøndum, sort & lund, 2021). in the paper “teaching sustainable business models a modeling-driven approach”, maren stadtländer, thorsten schoormann and ralf knackstedt describe how they use experimentation with different modelling languages to make learners reflect on the suitability of these languages in the context of sustainability. using problem-based group assignments, they make students experience where customizations and adjustments are needed when trying to model a business that does not only understand ‘value’ in economic terms. moreover, the course they describe offers interesting insights into the repertoire of frameworks and languages available to instructors who teach business modelling. finally, tim mosig, wafa said mosleh and claudia lehmann present a business model course for executives in the context of smart cities. the course they describe in their paper ‘designing smart cities: a participatory approach to business model teaching’ relies on the scandinavian participatory design approach (sanders & stappers, 2008). as part of the learning process, course participants complete six different stages, and the article describes the details of those six stages. the authors explain how the participatory design approach makes participants engage in the given tasks playfully, and how it encouraged the exchange of different perspectives and supported learning as a social activity (mosig, mosleh & lehmann, 2021). we thank all the contributors, reviewers and journal editors for their trust and good collaboration. enjoy the special issue, and happy business model teaching! journal of business models (2021), vol. 9, no. 3, pp. 1-7 6 references bandura, a. (1977), social learning theory, prentice-hall, oxford, uk. bitetti, l. (2019), activate business model learning through flipped classroom and backward design, journal of business models, vol. 7, no. 3, pp. 100-110. blank, s. (2013), why the lean start-up changes everything, harvard business review, vol. 91, no. 5, pp. 64-73. de reuver, m., cligge, m. & haaker, t. (2019), online courses on business model innovation for practitioners in smes, journal of business models, vol. 7, no. 3, pp. 12-23. henike, t. & hölzle, k. (2019), cognitive exploration strategies and collective decision-making in entrepreneurial business modelling, journal of business models, vol. 7, no. 3, pp. 67-76. holm, a., bidmon, c. m., henike, t., bosbach, k.e. & baden-fuller, c. (2019), teaching business models: introduction to the special issue, journal of business models, vol. 7, no. 3, pp. 1-11. jonker, j. & faber, n. (2019), insights from teaching sustainable business models using a mooc and a hackathon, journal of business models, vol. 7, no. 3, pp. 57-66. kolb, d. (1984), experiential learning: experience as the source of learning and development, prentice hall, englewood cliffs, nj. lehmann, c. & bidmon, c. m. (2021), on the back of a beer coaster – simple estimates for costs and revenues in business modelling, journal of business models, this issue maffei, a. & boffa, e. (2021), invention to innovation: teaching business models to manufacturing researchers, journal of business models, this issue margolina, a. & bohnsack, r. (2019), teaching business models via blended-learning, journal of business models, vol. 7, no. 3, pp. 24-37. massiera, p. (2021), teaching business models through student consulting projects, journal of business models, this issue mosig, t., mosleh, w.s., & lehmann, c. (2021), designing smart cities: a participatory approach to business model teaching, journal of business models, this issue müller, c., poandl, e. m. & glinik, m. (2019), developing a viable business model for start-ups at the gruendungsgarage, journal of business models, vol. 7, no. 3, pp. 47-56. osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, wiley, hoboken, nj. rumble, r. (2019), the startup jungle: four-dimensional business modelling, journal of business models, vol. 7, no. 3, pp. 119-130. sanders, e.b.-n. & stappers, p.j. (2008), co-creation and the new landscapes of design, codesign, vol. 4, no. 1, pp. 5–18. journal of business models (2021), vol. 9, no. 3, pp. 1-7 7 sort, j. c. & brøndum, k. (2021), experiences from a decade: a universal approach to business model teaching, journal of business models, this issue sort, j. c. & holst, p. m. (2019), using digital gamification in the context of business models, journal of business models, vol. 7, no. 3, pp. 38-46. stenkjær, k., brøndum, k., sort, j.c. & lund, m. (2021) developing impactful entrepreneurial teaching using a business model framework, journal of business models, this issue spaniol, m., bidmon, c. m., holm, a. b. & rohrbeck, r. (2019), five strategic foresight tools to enhance business model innovation teaching, journal of business models, vol. 7, no. 3, pp. 77-88. stadtländer, m., schoormann, t. & knackstedt, r. (2021), teaching sustainable business models a modeling-driven approach, journal of business models, this issue szopinski, d. (2019), squaring the circle: business model teaching in large classroom settings, journal of business models, vol. 7, no. 3, pp. 89-99. thomsen, p., sort, j. c. & brøndum, k. (2019), booster cards: a practical tool for unlocking business model innovation, journal of business models, vol. 7, no. 3, pp. 131-142. veine, s., kalvig anderson, m., haugland andersen, n., espenes, t.c., bredesen søyland, t., wallin, p. & reams, j. (2020), reflection as a core student learning activity in higher education insights from nearly two decades of academic development, international journal for academic development, vol. 25, no. 2, pp. 147-161. yrjölä, m. (2019), teaching value propositions as part of the business model, journal of business models, vol. 7, no. 3, pp. 111-118. 135 journal of business models (2021), vol. 9, no. 4, pp. 135-137 book review business model innovation strategy: transformational concepts and tools for entrepreneurial leaders. by raphael amit and christoph zott, john wiley and sons, inc., hoboken new jersey reviewed by professor robin roslender for journal of business models please cite this paper as: roslender, r. (2021), book review off “ amit, r., zott, c., business model innovation strategy: transformational concepts and tools for entrepreneurial leaders. john wiley and sons, inc., hoboken new jersey”., vol. 9, no. 4, pp. 1-3 issn: 224-2465 doi: https://doi.org/10.5278/jbm.v9i4.7020 when two of the founding figures in a field decide to author a textbook, readers’ expectations are inevitably extremely high. in this instance these expectations are not simply met, they are greatly exceeded in an addition to the business model literature that both managers and entrepreneurs, and students and their teachers will find of great value. the authors are able to draw on two decades of their own research, some of which has achieved seminal status, skilfully combining it with the broader business model literature to produce an readily accessible volume that delivers a continuous stream of insights on business model innovation strategy. the book is divided into three parts, the first of which is entitled “foundation and mindset for business innovation”. its four chapters document the broad foundation for the business model innovation topic, doing so by reviewing three sets of theoretical underpinnings: on understanding business models; on the value creation interface; and on the substance of the business model mindset, which together are identified as the prerequisite for successful business model innovation. in chapter 1 the authors set out their preferred definition of a business model as an activity system or “system of independent activities that are performed by a focal firm and by its partners and the mechanism that link these activities to each other.” (p13). following this the authors discuss the “what, how, who, and why” conceptual framework they have developed in the course of their own research careers and which is employed throughout the whole book. chapter 2 sets out the relationship which exists between the business model concept and the traditional foci of strategy thinking, arguing that the former offers a new means of creating value. the necessity for developing a business model mindset is explored in some depth in chapter 3. the authors conclude part 1 by drawing together these insights to provide a detailed overview of the busi https://doi.org/10.5278/jbm.v9i4.7014 journal of business models (2021), vol. 9, no. 4, pp. 1-3 136136 ness model innovation topic together with a formal definition of it. while these chapters are the most theoretical in emphasis, it would be misleading to represent them as constituting the theory chapters, since in common with the whole text use is made of a portfolio of empirical cases and insights to illustrate the various points. each chapter offers a concise summary of what are regarded to be its key takeaways together with a list of references that readers are encouraged to explore. part 2 is entitled “strategic design and evaluation of business model innovation” and is composed of five chapters. the content of these five chapters is marginally more practical in content than that evident throughout part 1 but for the most part the style of its presentation is not discernibly different. the authors themselves identify what is on offer in chapter nine as an essential “toolkit”, a designation which also arguably neatly characterises all five of these chapters. in chapter five the authors argue that in designing innovative business models, managers and entrepreneurs can learn much from engaging with the design literature and embracing a design approach. they direct attention to six business model design drivers, captured in the design acronym, each of which resonates with key design concepts. those responsible for designing novel business models in particular initially require to recognise the deployable resources that are available to them and the external environment in which the business seeks to operate. the third design driver is that of stakeholders’ activities performed within the business model. incumbent templates, or established business models in use within an industry provide the fourth design driver, the final pair of design drivers are identified as a firm’s goals and customers’ needs. complementing these drivers as determinants of successful business model innovation is a concern with mindfulness and robustness. chapters six and seven provide an introduction to a number of extant methods of business model design. designing a new business model using a dynamic design approach focused on process is explored in chapter six. within such an approach the work of the ideo design firm plays a central role. originally the ideo design company developed a design process for use in new product design, its insights subsequently being incorporated into the design process of both new services and new businesses. the authors explain how it might be further adapted for the purpose of designing new business models. the three fundamental stages within the ideo approach now become bmideate, bmiterate and bmimplement, with the bmi designation intimating business model innovation as a possible outcome. building on the ideas set out in the chapter, chapter 7 provides an overview of three complementary design methodologies that are widely used by entrepreneurs in their business model innovation activities. each is characterised by a simple strapline. discovery-driven planning permits a business to “fail soon, and fail fast”; effectuation is underpinned by the imperative to “just do it”; and the lean startup methodology requires users to “test, test, test” in the pursuit of a low-cost indication of possible feasibility. throughout this pair of chapters there is evidence of extensive borrowing of insights from across the business and management literature, thereby reinforcing the strong theoretical credentials of the text previously acknowledged. chapter eight focuses on the core concept of business model thinking, the value proposition, identifying a more complex construct than is often identified in the literature. initially the authors argue that when talking about value propositions it is necessary to refer to stakeholders as opposed to the more conventional customer focus. in this way sustainable business models should offer a value proposition to all the stakeholders that are involved in the business model and not simply customers. it is then possible to distinguish between the value proposition of a product and the value proposition of a business model, which itself is separate from but complementary to the former value proposition. the value proposition of a service is much less distinguishable from the value proposition of a business model, with the pair of them combining to provide the total value proposition to the customer, as represented in exhibit 8.1. as a consequence of this, the co-creation of value process identified in recent marketing management literature assumes a more complex nature that is presently understood. in the second half of the chapter the nice framework is discussed. the framework identifies four generic journal of business models (2021), vol. 9, no. 4, pp. 1-3 137137 drivers of value, which in combination maximise the value created for stakeholders. these drivers of value are designated novelty, lock-in, complementarities and efficiency, each of which is discussed by the authors. in the final chapter of part 2 the authors detail a 13-item toolkit for business model analysis, which they see to form a complement to the content of the previous eight chapters. in introducing this toolkit the authors make reference to the business model canvas and business model navigator, both of which have provided the focus for two of the most influential volumes within the extent business model literature. the third and final part of the text is entitled “making business model innovation happen”, and comprises three chapters. these chapters the most practically oriented in the book, and provide a neat balance with its prior content. they focus on the inherent challenges associated implementing business models and business model innovation, and provide an overview of how it is possible to successfully overcome them. chapter ten examines how business model innovation might be implemented in established organisations, initially identifying resistance from participants and organisational inertia as fundamental obstacles to affecting change, both of which might be engaged by a variety of mechanisms. a comprehensive and robust change management programme should always be in place complemented by the visible involvement of top management. business model innovation in “young” undertakings provides the focus for chapter 11. in such cases a different set of obstacles are often encountered, in addition with a range of generic risks that all start-ups face, including leadership and governance issues. the authors discuss a series of risk mitigation strategies that have been identified as contributing to a successful launch of new ventures. the concluding chapter provides a synthesis of the various contents of the text by rehearsing the case for adopting a well-conceived business model innovation strategy that is designed to easily complement the various other elements of an organisation’s corporate strategy. the authors seek to impress upon readers that the existence of such a business model innovation strategy has become increasingly necessary in the digital age and will present a continuing challenge to those who they designate “entrepreneurial leaders”. in addition to the highly useful end-of-chapter summaries and reference lists, the text incorporates an integrated index, combining concepts, cases and authors. at a length of 20 pages, it readily merits the description of being comprehensive, and serves to further increase the accessibility that characterises the whole volume, which will surely quickly become a must-read for anyone interested in the business model field, and much beyond. robin roslender, aalborg university business school. 125 journal of business models (2021), vol 9, no 4 pp 125-134 purpose: how is it possible to systematically develop business model innovations for different domains? this paper provides a novel answer, using a methodological approach called business model matrix (bmm), and addresses business model threats with appropriate strategies and concepts to develop innovative and comprehensive business models. design/methodology/approach: this paper addresses the idea of a pattern-based development of business models and merges different approaches to offer a business model construction kit for systematic development. findings: the approach demonstrates how business models can be developed using relevant issues of a business model that need to be answered (business model questions) with appropriate proposals or patterns that are able to tackle the issues raised (business model answers). research limitations / implictions: the method presented here is primarily aimed at modelers who have developed at least a basic concept of a business model and are looking for systematic ways to innovate the developed concept transparently. originality/value: the added value of the presented approach lies in the fact that both a holistic structure for considering all relevant aspects of a business model and suitable choices for each business model aspect are provided. the business model matrix: a kit for designing and innovating business models nedo bartels1 please cite this paper as: bartels, n. (2021), the business model matrix: a kit for designing and innovating business models, journal of business models, pp. 125-134 keywords: business model innovation, business model patterns, business model dimensions, construction kit 1 fraunhofer iese, fraunhofer-platz 1, 67663 kaiserslautern, germany; nedo.bartels@iese.fraunhofer.de doi: https://doi.org/10.5278/jbm.v9i3.6239 issn: 2246-2465 abstract mailto:nedo.bartels@iese.fraunhofer.de https://doi.org/10.5278/jbm.v9i3.6239 journal of business models (2021), vol. 9, no. 3, pp. 14-23 126126 introduction since the late 1990s, various definitions, conceptualizations, frameworks, and perspectives have been presented regarding the meaning and understanding of business models. content-related aggregations and reflections about the different approaches can be seen in centobelli et al. (2020), biloslavo et al. (2018), wirtz et al. (2016), nielsen & lund (2014a), and (2014b). moreover, ritter & lettl (2018), ivari et al. (2016), groth & nielsen (2015), and lambert (2015) showed that the theory of business models is even more diffuse when it comes to a commonly accepted classification, taxonomy, and terminology. due to this heterogeneous and fragmented understanding, many ambiguities exist. on the other hand, a shared understanding and consent are argued by jensen (2013) regarding three core business model dimensions: value creation, value delivery, and value capture. these dimensions can be found in many definitions and conceptualizations; see, for instance, the business model framework of amit & zott (2021), the value triangle model of biloslavo et al. (2018), or the “magic triangle” model of gassmann et al. (2014). consequently, a business model represents the underlying logic of its business; i.e., to create, deliver, and capture value. apart from the domain or the market-specific requirements, each business model has to clarify these aspects in order to remain successful on the market (fielt, 2013; ovans, 2015; osterwalder et al., 2005). the approach presented in this paper uses the identified business model dimensions in combination with some of the most prevalent tools for the development of business models: business model canvas (bmc) and the business model navigator (bmn) (amit & zott, 2021; gassmann et al., 2014; osterwalder & pigneur, 2010). bmc provides nine innovative business model blocks with relevant key questions to guide the user by structuring ideas and thoughts (question-oriented triggers). in comparison, bmn provides 55 innovative business model patterns that demonstrate strategies and concepts of successfully established business models as a source of inspiration (answer-oriented triggers). the combination of the guidance questions of bmc and the innovative business model strategies and concepts of bmn leads to the core approach presented in this paper: a construction kit for the systematic and transparent development of business model innovations. the added value and uniqueness of the presented approach lies in the fact that both a holistic structure for considering all relevant aspects of a business model and suitable choices for each business model aspect are provided. the method presented here is called business model matrix (bmm)1 and is primarily aimed at modelers who have developed at least a basic concept of a business model and are looking for systematic ways to innovate the developed concept transparently. approach design of bmm bmm addresses the idea of lüttgens & diener (2016) for pattern-based development of business models. the approach presented by lüttgens & dieler (2016) offers the idea of allocating the 55 business model patterns identified by gassmann et al. (2014) to related business model dimensions (value proposition, value creation, and value capture). therefore, business models can be created by rearranging and composing existing business model patterns. according to gassmann et al. (2014), 90 percent of business model innovation is based on a recombination of existing business models. a framework that addresses this pattern-based development should combine (a) relevant issues of a business model that need to be answered (business model questions) with (b) appropriate proposals or patterns that are able to tackle the issues raised (business model answers). to offer this kind of tooling, a construction kit has been developed based on the approaches shown in figure 1. 1 this paper provides a novel answer, using a methodological approach called business model matrix (bmm). journal of business models (2021), vol. 9, no. 3, pp. 14-23 127127 the approach shown in figure 1 is based on four methodical components, (1) (4), which are described as follows: 1. business model dimensions of stähler, (2002) a. explanation: stähler described a business model based on three key business model dimensions to address the creation, delivery, and capture of value: ■ value proposition: this describes the added value a business promises its customers with a certain product or service. without a clear added value, there is no consumption incentive. ■ architecture of value creation: this describes how value has to be created through the business. moreover, this dimension contains three additional dimensions: ● product or service design: width and depth of the product or service offered. ● internal value creation: structure and arrangement of the core business activities, especially in terms of own effort and relationships to partners. ● external value creation: design of distribution, sales, and marketing channels. ■ profit model: this describes how the created value can be used to generate profit using an appropriate payment, billing, and pricing model. b. usage for bmm: bmm is based on these key dimensions of a business model that define the overall frame of the model: [1] value proposition, [2] architecture of value creation, and [3] profit model. 2. original business model canvas of osterwalder & pigneur (2010) a. explanation: bmc is a strategic tool that facilitates the development of business models. for this purpose, the framework provides nine building blocks with 35 appropriate trigger questions: (q1) value propositions, (q2) key activities, (q3) key partnerships, (q4) key resources, (q5) customer relationships, (q6) channels, (q7) customer segments, (q8) cost structure, and (q9) revenue streams. examples of these key questions are (osterwalder & pigneur, 2010): ■ key partnerships: ‘which key activities do partners perform?’ ■ revenue stream: ‘for what value are our customers really willing to pay?’ b. usage for bmm: inspired by the questionoriented structure of bmc, bmm uses 20 business model questions to address relevant aspects within the three key business model dimensions defined by stähler. 3. business model navigator of gassmann et al. (2014) a. explanation: bmn is a method that offers 55 descriptions of unique business model patterns that can be used generically to trigger business model innovations for diffigure 1: methodological composition of bmm journal of business models (2021), vol. 9, no. 3, pp. 14-23 128128 ferent areas within a business model. examples of these patterns are (gassmann et al., 2014): ■ #34 orchestrator: ‘within this model, the company ’s focus is on the core competencies in the value chain. the other value chain segments are outsourced and actively coordinated […]’ ■ #35 pay per use: ‘[…] the customer pays on the basis of what he or she effectively consumes […]’ b. usage for bmm: bmm uses the business model patterns to enable innovative answers to the questions raised. the overall model offers 108 business model answers to address all 20 questions. this means that on average, five answers are offered per question. furthermore, 38 business model patterns can be selected directly as business model answers. the remaining 17 business model patterns that cannot be selected directly result from combinations of several answer choices. example: ‘supermarket’ (#49) is composed of a large range of different product variants and a large range of different product types offered. consequently, the pattern ‘supermarket’ cannot be selected directly in bmm, but the breadth and depth of the product range can be set. 4. morphological box of zwicky (1966) a. explanation the morphological box is a one-dimensional classification system for the categorized representation of problem areas and corresponding solution ideas. through the systematic combination of the different solution ideas within the respective areas, original and novel concepts can be developed. b. usage for bmm: the overall model of bmm is structured in the form of a morphological box. accordingly, all 20 business model questions (inspired by bmc) within each of stähler’s three business model dimensions can be answered by a combination of the 108 business model answers inspired by bmn. usage of bmm bmm is primarily aimed at modelers who have already worked out a basic concept of a business model and are looking for appropriate inspirations to trigger business model adaptations. we recommend that the user should already have used a methodology like bmc (or something similar) to ensure a basic understanding of the considered business model. since the 22 bmm questions are inspired by the 35 bmc questions, results from bmc can be addressed well with the framework of bmm. therefore, an individual business model can be developed or adjusted by selecting a single business model answer for a business model question of bmm – similar to a construction kit, the modeler can first get inspired by a range of choices and then choose a suitable variant. an excerpt of bmm’s 20 business model questions and 108 associated business model answers can be seen in table 1. for each business model question, answers, including business model patterns, are provided in order to get topic-specific inspiration on how to solve the considered business model issue. according to mettler & eurich (2012), a business model pattern can be described as an archetypal design solution of a successful business model. therefore, business model patterns have a reusable and generic character. in this paper, a business model pattern is defined as a proposal or source of inspiration to generate ideas aimed at finding successful ways to solve specific business model issues. here is an example to illustrate this: in response to question 2 in figure 1: how do we develop new products/services?, the modeler can consider whether it makes sense for the business model to primarily outsource r&d activities regarding external development (a11.1), to run internal r&d (a11.2) activities, or to use an alternative approach (a11.3-a11.7). this modular approach allows the user to gradually develop and adapt business models. key insights as already shown, bmm is an approach that allows addressing relevant business model issues with appropriate strategies and concepts. for this purpose, the bmm approach assumes that certain components of the 55 business model patterns can be journal of business models (2021), vol. 9, no. 3, pp. 14-23 129129 table 1. question #3: what kind of value do we deliver to the customer? a3.1: functional value a3.2: economic value a3.3: simplifying value a3.4: hedonistic value a3.5: symbolic value question #5: how many different variants of a single product or service are offered to the customer? a5.1: single variant a5.2: small range a5.3: large range a5.4: long tail (#28 pattern) question #11: how do we develop new products or services? a11.1: external development a11.2: internal r&d a11.3: user-designed (pattern #54) a11.4: reverse engineering (pattern #42) a11.5: reverse innovation (pattern #43) a11.6: open business model (pattern #32) a11.7: open source (pattern #33) question #15: how are we reaching our customers? a15.1: word-of-mouth a15.2: cross selling (pattern #7) a15.3: direct selling (pattern #12) a15.4: ingredient branding (pattern #22) a15.5: affiliation (pattern #2) a15.6: influencer barter deal (pattern #5) a15.7: freemium (pattern #18) question #18: how often is the payment made? a18.1: one-time a18.2: subscription (pattern #28) table 1: example of bmm’s business model questions and answers journal of business models (2021), vol. 9, no. 3, pp. 14-23 130130 matched with key areas of a business model, called business model dimensions. therefore, only a total set of dimension-related answers will lead to a comprehensive description of a business model. first insights can be seen in figure 2, which shows a simplified version of bmm for the example of netflix. the complete bmm model in the latest version can be found in bartels (2019). figure 2 illustrates the allocation between business model questions and business model answers and clarifies the core idea of bmm, meaning the gradual development and adaptation of certain business models. the model shows that the business model of netflix is characterized by a number of different intersections within the business model answers. the presented composition of netflix is based on the description according to bmi lab (2020) (author’s spin-off from bmn) and was simply transferred for this representation: • a3.3: netflix’s offering is available 24/7 (= #20 guaranteed availability). • a5.4: netflix offers a wide variety of content on its platform. • a11.1: netflix content in the form of movies, shows, etc. is usually produced externally (although they started producing their own shows and movies as well). • a15.1: netflix gains viewers by word-of-mouth promotions (fagerjord & kueng, 2019). • a18.2: the netflix streaming service operates on a monthly subscription model. it can be seen that the business model of netflix can potentially be better understood and compared when using bmm. the individual development trajectory of each business model represented within the matrix can be used for a transparent and objective evaluation. bmm is able to provide a structured model that enables unique insights in terms of the allocation of business model innovations. modelers who want to design a business model from scratch can use bmm to get a detailed overview of relevant business model fields and innovative answers to overcome business model threats. modelers who have already developed a business model but want to adapt it, can use bmm to get appropriate (and topic-related) patterns to trigger new ideas for assigned business model dimensions. therefore, bmm can be used primarily to (1) extend existing business models but also to (2) create new ideas for business model innovations. business model questions (inspired by the original bmc and its 35 questions) … … question #3: what kind of value do we deliver to the customer? a3.1: functional value a3.2: economic value a3.3: simplifying value a3.4: hedonistic value a3.5: symbolic value … … … … question #5: how many different variants of a single product or service are offered to the customer? a5.1: single variant a5.2: small range a5.3: large range a5.4: long tail (pattern #28) … … … … question #11: how do we develop new products or services? a11.1: external development a11.2: internal r&d a11.3: user-designed (pattern #54) a11.4: reverse engineering (pattern #42) a11.5: reverse innovation (pattern #43) a11.6: open business model (pattern #32) a11.7: open source (pattern #33) … … … … question #15: how are we reaching our customer? a15.1: word-ofmouth a15.2: cross selling (pattern #7) a15.3: direct selling (pattern #12) a15.4: ingredient branding (pattern #22) a15.5: affiliation (pattern #2) a15.6: influencer barter-deal (pattern #5) a15.7: freemium (pattern #18) … … … … question #18: how often is the payment made? a18.1: one-time a18.2: subscription (pattern #28) … … business model dimensions (inspired by stählers definition) business model answers (inspired by 55 business model patterns of bmn) a rc hi te ct ur e of v al ue c re at io n e xt er na l v al ue c re at io n pr of it m od el pr od uc t o r se rv ic e d es ig n v al ue p ro po si tio n in te rn al v al ue c re at io n figure 2: presentation of an excerpt from bmm using netflix as an example journal of business models (2021), vol. 9, no. 3, pp. 14-23 131131 discussion and conclusions the bmm approach described in this paper is an attempt to demonstrate the idea of pattern-based development of business models in terms of a combination of a question-based framework (inspired by bmc) with innovative triggers (using bmn). based on this systematic usage of a pattern-based approach, the overall development effort can be reduced, as can the risk of developing dysfunctional business models. the modeler can react more precisely to changing conditions through the transparent representation of the modeled pattern combinations (lüttgens & dieler, 2016). future work needs to focus on the improvement and guidance of bmm – a new version of bartels (2019) is currently being revised. moreover, the allocation between patterns and dimensions has to be critically reviewed and improved, especially regarding the fact that sophisticated business model patterns such as ‘digitalization’ (#11) mix different aspects – depending on the point of view, a novel business model can target various digitalization aspects, such as the digitalization of current sales channels, broad payment infrastructure, or single product features. the same applies to other patterns with different issues, like ‘open business model’ (#32) or ‘e-commerce’ (#13). future work should extract these aspects in order to represent them separately in bmm. another aim is to modify the model so that only one selection can be made per subdimension. in the future, the developed bmm model could offer a generic business model kit that enables fully transparent and understandable business model development and reproduction of existing business models to enable cross-industry innovations. journal of business models (2021), vol. 9, no. 3, pp. 14-23 132132 references amit, r. & zott, c. (2021), business model innovation strategy: transformational concepts and tools for entrepreneurial, john wiley & sons, hoboken. bartels, n. (2019), “geschäftsmodellmatrix – ein ansatz zur strukturierten entwicklung und analyse von geschäftsmodellen im kontext digitaler ökosysteme“, master’s thesis, university of applied sciences kaiserslautern, zweibrücken; national university of the littoral, santa fe, 08 august. biloslavo, r., bagnoli, c. & edgar, d. (2018), an eco-critical perspective on business models: the value triangle as, journal of cleaner production, 174, pp. 746-762 bmi lab (2020), “business model navigator: netflix”, available at: https://businessmodelnavigator.com/casefirm?id=70 (accessed 13 september 2020). centobelli, p., cerchione, r., chiaroni, d., vecchio, p. & urbinati, a. (2020), designing business models in circular economy: a systematic literature review and research agenda, business strategy and the environment, vol. 29, no. 4, pp. 1734-1749 fagerjord, a. & kueng, l. (2019), mapping the core actors and flows in streaming video services: what netflix can tell us about these new media networks, journal of media business studies, vol. 16, no. 3, pp. 166-181 fielt, e. (2013), conceptualising business models: definitions, frameworks and classifications, journal of business models, vol. 1, no. 1, pp. 85-105 gassmann, o., frankenberger, k. & csik, m. (2014), the business model navigator: 55 models that will revolutionise your business, pearson plc, london. groth, p. & nielsen, c. (2015), constructing a business model taxonomy: using statistical tools to generate a valid and reliable business model taxonomy, journal of business models, vol. 3, no. 1, pp. 4-21 iivari, m., ahokangas, p., komi, m., tihinen, m. & valtanen, k. (2016), toward ecosystemic business models in the context of industrial internet, journal of business models, vol. 4, no. 2, pp. 42-59 jensen, a. (2015), do we need one business model definition?, journal of business models, vol. 1, no. 1, pp. 61-84 lambert, s. (2015), the importance of classification to business model research, journal of business models, vol. 3, no. 1, pp. 49-61 lüttgens, d. & diener, k. (2015), business model patterns used as a tool for creating (new) innovative business models, journal of business models, vol. 4, no. 3, pp. 19-36 mettler, t. & eurich, m. (2012), a “design-pattern”-based approach for analyzing e-health business models, health policy techno, vol. 1, no. 2, pp. 77-85 nielsen, c., & lund, m. (2014a). an introduction to business models. in nielsen, c. & lund, m. (eds.) the basics of business models, bookboon, copenhagen, pp. 2-11 https://businessmodelnavigator.com/case-firm?id=70 https://businessmodelnavigator.com/case-firm?id=70 journal of business models (2021), vol. 9, no. 3, pp. 14-23 133133 nielsen, c., & lund, m. (2014b). a brief history of the business model concept. in nielsen, c. & lund, m. (eds.) the basics of business models, bookboon, copenhagen, pp. 22-28 osterwalder, a. & pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, wiley: john wiley & sons, new jersey. osterwalder, a., pigneur, y. & tucci, c. (2005), clarifying business models: origins, present, and future of the concept, communications of the association for information systems, vol. 16, no. 5, pp. 1-25. ovans, a. (2015), “what is a business model?”, harvard business review, available at: https://hbr.org/2015/01/ what-is-a-business-model (accessed 13 september 2020). ritter, t., & lettl, c. (2018), the wider implications of business-model research, long range planning, vol. 51, no. 1, pp. 1-8. stähler, p. (2002), geschäftsmodelle in der digitalen ökonomie: merkmale, strategien und auswirkungen, 2nd ed., eul verlag, cologne. wirtz, b., göttel, v. & daiser, p. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 1, pp. 1-28 zwicky, f. (1966), entdecken, erfinden, forschen im morphologischen weltbild, 2nd ed., baeschlin verlag, munich. https://hbr.org/2015/01/what-is-a-business-model https://hbr.org/2015/01/what-is-a-business-model journal of business models (2021), vol. 9, no. 3, pp. 14-23 134134 nedo bartels is a researcher at fraunhofer iese. his research interests include business models, digital ecosystems, morphological analysis, and digital innovation design. in 2019, he obtained his double degree in international management and finance from the university of applied sciences kaiserslautern and the national university of the littoral. about the authors journal of business models (2021), vol. 9, no. 2, pp. 44-71 44 the role and value of data in realising circular business models – a systematic literature review päivi luoma1, anne toppinen2, and esko penttinen3 abstract purpose: a systematic review of the literature on circular business models was performed, for synthesis of what it reveals about the role and value of data in those models. the increasing quantity of supply-chain and life-cycle data available has potential to be a significant driver of circular business models. the paper describes the current state of knowledge and identifies avenues for further research related to use of various forms of data in the models. design: a systematic review of literature on the use of data in circular business models was carried out, to inform understanding of the state of knowledge and provide a firm foundation for further research. findings: the literature reviewed points to fragmented understanding of the role and value of data in circular business models. nonetheless, scholars and practitioners commonly see data as a driver and enabler of circular economy. the article identifies two distinct approaches to value for data as presented in the corpus and discusses what types of data seem to be valuable in a circular business-model context. among the further research opportunities are work on data as a source of business-model innovation and on collaboration in capturing the value of data in circular business models. value: the study provides new insight on the nexus of circular business models and data, and it represents one of the first comprehensive reviews addressing data’s value in a networked circular-economy context. please cite this paper as: luoma, p., toppinen, a., and penttinen, e. (2021), the role and value of data in realising circular business models – a systematic literature review, journal of business models, vol. 9, no. 2, pp. 44-71 keywords: business models, circular economy, value of data, data-driven, sustainability 1 faculty of agriculture and forestry, dept. of forest sciences, university of helsinki, finland, paivi.luoma@helsinki.fi 2 faculty of agriculture and forestry, dept. of forest sciences, helsinki institute of sustainability science, university of helsinki, finland 3 school of business, department of information and service economy, aalto university, finland acknowledgements: luoma’s part of the work has been funded by a grant from metsämiesten säätiö foundation for her doctoral dissertation. doi: https://doi.org/10.5278/jbm.v9i2.3448 https://doi.org/10.5278/jbm.v9i2.3448 journal of business models (2021), vol. 9, no. 2, pp. 44-71 45 introduction scarcity of natural resources is among the most significant factors defining the landscape where today’s companies do business and create value. population growth and climate change create rising pressure related to the use of natural resources (ipcc, 2019) and call for intelligent decisions for efficient allocation, use, and conservation of valuable resources. for companies, resource scarcity is not only a source of risk and concern (e.g., gaustad et al., 2018) but, through circular business models, also an opportunity to pursue new revenue streams and market segments, along with enhanced customer experience (e.g., lüdeke-freund et al., 2019; stahel, 2016; tukker, 2015). in the context of circular economy, new innovative business models are needed for closing resource loops, slowing the cycle, and narrowing the loops, by such means as extended customer experience, longlife goods, product-life extension, recycling, reuse of materials, and resource-efficiency (e.g., bocken et al., 2016). circular business models are aimed at resolving environmental sustainability challenges by turning linear resource flows into loops (stahel, 1997). the goal is to get more value from the resources and simultaneously improve the sustainability of production and consumption. at the same time, the burgeoning availability of data is transforming how businesses operate, and data’s utility in generating knowledge and insight to improve decision-making is seen as a potentially powerful source of creation of both economic and social value (grover et al., 2018). more efficient use of data can serve as a significant driver and enabler of circular economy (frishammar and parida, 2019; gupta et al., 2018; stahel, 2016), and interesting examples of datadriven circular business models, such as performance contracts, sharing models, and digital marketplaces for resources and waste streams, are already emerging (ellen macarthur foundation, 2019; world economic forum, 2016). circular economy requires better understanding of (often complex) flows and loops of resources, their value, and environmental impacts in contexts of complex value chains and networks. at the same time, these phenomena extend across borders between technologies, actors, and industries and over the full lifetime of products and services. particularly in light of this complexity, data might be of help in considering how to realise circular economy. recent years have witnessed growing interest in sustainable business models and related innovations (e.g., dentchev et al., 2018; wirtz et al., 2016), with circular business models being no exception (e.g., brown, 2019; lüdeke-freund et al., 2019; manninen et al., 2018; pieroni et al., 2019). however, previous studies have not specifically considered the role and value that the wealth of data can have at the core of circular business models and related decision-making. research on the intersection of data and circular business models has remained scarce (for exceptions, see bressanelli et al., 2018; tseng et al., 2018), and more insight into this nexus is needed, for understanding of how data can support creation of sustainable business. accordingly, we identified two research questions, formulated thus: 1) in what ways does literature on circular business models inform about the role and value of data in this set of models? 2) through a review, can one identify possible paths for further research related to the use of various forms of data in circular business models? the presentation of the systematic review begins in section 2, laying out the conceptual background with regard to circular business models and the value of data therein. then, section 3 describes the research design and section 4 presents the findings from the literature review. we conclude the paper by offering final thoughts and identifying further research opportunities. conceptual background circular business models the aim in employing circular business models is to address environmental sustainability challenges by transforming linear resource flows into loops, giving them circular form (bocken et al., 2016; stahel, 2016; tukker, 2015). the goal is to obtain greater value from the resource use and increase the sustainability of production and consumption. in circular business models, value is created in three ways: closing resource loops through reuse and recycling of materials, slowing the journal of business models (2021), vol. 9, no. 2, pp. 44-71 46 loops by designing long-life goods and extending products’ service life, and narrowing the resource flows via resource-efficiency (bocken et al., 2016). to move from linear business models to circular ones, companies must redesign their value-creation logic, covering value propositions, the value-creation infrastructure, and the value-capture models (hofmann, 2019). for this paper, a business model is defined as describing the logic or design of how a business creates value and delivers it to the customers while also outlining the architecture of the revenues, costs, and profits associated with the company delivering that value (teece, 2010). it is seen to include the following components: the value offered to customers (the value proposition), how the value is created and delivered to customers (value’s creation and delivery), and how profit is generated (value capture) (bocken et al., 2014; richardson, 2008; teece, 2010). however, the concept of the business model is versatile, and it is defined and conceptualised in numerous ways (e.g., al-debei and avison, 2010; lüdeke-freund et al., 2019; zott et al., 2011). at base, such a model provides an abstract understanding of the relevant organisation’s business logic in a somewhat descriptive manner (al-debei and avison, 2010). in practice, business models are systems that exhibit complex interdependencies among these elements (massa et al., 2018). they are often industry-specific and depend also on the company context and business maturity in how they are designed to yield competitive advantage for the organisation in question. in this paper, a circular business model is defined as a business model that helps companies to create value by means of using resources in multiple cycles, thus reducing both waste and consumption (lüdeke-freund et al., 2019). in the context of circular business models, several approaches have been taken to apprehend the core of the model, with reasoning based on various taxonomies of the value-creation rationale (ellen macarthur foundation, 2015), strategies (bocken et al., 2016), and patterns (lüdeke-freund et al., 2019) represented by the business models. for this paper, the classification of circular business patterns developed by lüdekefreund et al. (2019) was used for categorisation of the literature in the circular business model context. in this classification, the following six patterns are considered: repair and maintenance, reuse and redistribution, refurbishment and remanufacturing, recycling, cascading and repurposing, and organic feedstock. the value expected to arise via circular business models encompasses not just economic value and direct value created for the customer (through means such as savings on production costs and materials and greater ‘value-in-use’) but also societal value (lüdeke-freund et al., 2019; stahel, 2016). as a concept, circular economy has strong connections with sustainability, and this concept is evolving, manifesting various definitions, boundaries, principles, and associated practices as it does so (merli et al., 2018). that said, from a sustainability point of view, the concept has, in general, been claimed to be more environmentally driven, with only a tenuous link to social sustainability (e.g., d’amato et al., 2017). likewise, the value is characterised as created primarily on foundations of an environmental value proposition (manninen et al., 2018), and some have argued that circular business models might not always be able to capture the full scale of sustainability (geissdoerfer et al., 2018). in these models, the value is often co-created over the entire supply chain: customers, suppliers, manufacturers, retailers, etc. (manninen et al., 2018; urbinati et al., 2017). although not unambiguously defined or conceptualised, circular business models facilitate reflection on how companies can reach sustainability objectives in a way that makes good business sense. hence, the insights from the review presented here are clearly relevant not only for academia but also for companies striving for circular-economy objectives. business models and innovation in them have been subject to increasing research efforts in recent years (e.g., foss and saebi, 2017; massa et al., 2018; nielsen et al., 2018), and, their conceptual fuzziness notwithstanding, they have turned out to be a helpful tool for understanding how companies do business and create value. paying attention to business models can aid in rethinking and redesigning how companies reach their goals, understanding new types of innovation, and drawing attention to creation of social and environmental value alongside the economic (massa et al., 2018). there is a growing body of research on sustainable business models and related innovations (e.g., dentchev et al., 2018; wirtz et al., 2016) – of which examination of journal of business models (2021), vol. 9, no. 2, pp. 44-71 47 circular business models forms a key part (e.g., brown, 2019; lüdeke-freund et al., 2019; manninen et al., 2018; pieroni et al., 2019) – and on what kinds of inherent uncertainties these entail (linder and williander, 2017). while a few authors have cited data as a potential driver and enabler of circular economy and related business models (e.g., frishammar and parida, 2019; gupta et al., 2018), the role and value of data in circular business models remains largely uncharted territory. understanding the value of data growth in the volume of data is changing how businesses operate, and the power of data in generating insight to support better decision-making is seen as a potentially vast source of customer, economic, and social value (grover et al., 2018), where one can define data as objective facts about events and observations about the state of the world (davenport and prusak, 1998) or as symbols that represent properties of objects, events, and their environments (ackoff, 1989). said data may be either structured or unstructured, although the application of analytics to extract value from data usually assumes availability of sufficiently structured data – normalised records in a database with a rigid and regular structure (abiteboul, 1997; mccallum, 2005). however, vast volumes of data are being generated in unstructured form, such as humangenerated e-mail messages and their attachment files, photos, videos, voice recordings, and social-media content. this limits the direct applicability of traditional analytics. through data’s integration, discovery, and exploitation (e.g., miller and mork, 2013), one can turn data into valuable information and knowledge. that insight holds promise for improving decisions and yielding such results as better utilisation of assets, greater operation efficiency, cost savings, and extended customer experience (e.g., chen et al., 2015; günther et al., 2017). through data’s potential contribution to uncovering hidden patterns and heretofore unknown correlations (chen et al., 2015), this resource could aid in increasing understanding of circular phenomena and in realising circular economy. in this paper, we focus on which circular business models and strategies are seen as specifically benefiting from data and how the data may be conceptualised as a source of value under circular business models. more efficient use of data may help to turn the visions behind these models into reality by refining the valuecreation logic, including decisions on how value is created, offered, and delivered to customers and how profit is generated. those classes of business models that rely on data may be termed data-driven business models (hartmann, 2016). however, data might not always represent the world accurately, as it is easier to capture data from readily quantifiable phenomena (jones, 2018). structured and quantifiable data might be more readily available, as well as more attractive to use, than unstructured and non-quantifiable data. data that could yield understanding of often complex circular phenomena might not be available, at least in relevant form, and a less accurate view of the phenomena might be produced. such a picture may have much less value in decision-making. in addition, value may be lost through delays in extracting data, transforming the data into usable information, and deciding how to act on the information (pigni, 2016). for example, either the absence of data indicating a need for maintenance or non-response to such data can lead to equipment breakdowns, production downtime, and other waste. also, some use of data can have adverse impacts, which may run counter to circular-economy objectives. even if handled responsibly and well, exploitation of data often requires extensive investments in management, technology, and other capabilities (akter et al., 2016). general rationales related to data-driven value creation may be applicable in circular business models. more efficient use of data can add value by affording transparency of information and greater access to it, discovery and experimentation, prediction and optimisation, rapid adaptation and learning, customisation of products and services, and deeper understanding of customers (chen et al., 2015). value can be extracted from data streams through initiation of action on the basis of real-time data or via merging of multiple data streams (pigni, 2016). for example, real-time data on products’ use and performance can prompt initiation of predictive maintenance measures, and demand for journal of business models (2021), vol. 9, no. 2, pp. 44-71 48 ride-sharing services can be forecast from considering weather data in combination with details of mobility demands. data can be accumulated for information services, refined into insights and decision support, aggregated to inform existing services and enable new ones, and utilised for tracking and optimising operations and performance (pigni, 2016). better use of data can lead to innovation in product, service, and business models and thereby transform businesses’ operations (grover et al., 2018; hartmann, 2016). reaping the full benefits of data often demands a change in business model, however (buhl et al., 2013). prior research offers insight pertaining to data-driven business models and the benefits and value of data in general (e.g., chen et al., 2015; grover et al., 2018; hartmann, 2016). yet, while some authors have identified data as a potential driver and enabler of circular economy (de mattos and de albuquerque, 2018; frishammar and parida, 2019; gupta et al., 2018; tura et al., 2019), little work has addressed the role and value of data specifically in relation to circular business models (for exceptions, see bressanelli et al., 2018; tseng et al., 2018). nonetheless, further research addressing it is seen as important (alcayaga et al., 2019; rajala et al., 2018). this area represents a significant gap in scholarly understanding of data’s potential to support development of circular economy. the research design to understand what the existing body of research indicates about the role and value of data in realisation of circular business models, we identified, reviewed, and formed a synthesis of the relevant literature. the literature review represents a method suited to systematic understanding of an existing body of knowledge and to providing a firm foundation for further research (levy and ellis, 2006). the search was limited to peer-reviewed scholarly articles found in academic databases (scopus and ebsco business source complete) and published in this millennium. for emphasis on the business context, the search used the term ‘circular’ in combination with either ‘business model’ or ‘value creation’, in the title, abstract, key words, or subject (stemming and boolean operators were used thus: ‘circular’ and ‘business model*’ or ‘value creat*’), where ‘data’ was used in any of the text. these search terms had been identified as having appropriate breadth and depth for answering our first research question (levy and ellis, 2006; okoli, 2015). additional criteria were used to screen the literature: publication language (english) and publication date (1.1.2000–30.8.2019). after removal of duplicates, the total number of articles was 147, and 39 papers from this set were identified as relevant for understanding the role and value of data in circular business models. to be deemed relevant, the content had to speak to the research questions. there were no criteria related to research design or the context of the research. this search was complemented with forward and backward searches because the key words taken as search terms might have a limited ‘lifetime’ and alternative terms may have been used (levy and ellis, 2006). the forward and backward search yielded five further articles. therefore, the final sample consisted of 44 articles. the full text of each article selected was systematically reviewed with regard to the theoretical, conceptual, and empirical contribution to answering research question 1. relevant material was collected manually and documented systematically in excel sheets. the perspective of the articles on data and data’s value was assessed and the link to circular business models identified. the type and sources of data dealt with, the nature of the data-driven activities considered, and the benefits and impacts of data identified as expected and/or realised were identified as the main themes in the course of the analysis. this enabled classifying and comparing the content of the articles and systematically synthesising the findings within a conceptual framework. the development of our conceptual framework was based on the results of the literature review and reflects the conceptual background for our work also. finally, further research opportunities were identified on the basis of the outcomes from the literature review. figure 1 summarises the research design. journal of business models (2021), vol. 9, no. 2, pp. 44-71 49 results of the literature review in the corpus, data and related information technologies, services, and platforms are commonly presented as drivers and enablers of circular economy (e.g., de mattos and de albuquerque, 2018; tura et al., 2019), and lack of data is often cited as a barrier to circular business models (e.g., saidani et al., 2018; vermunt et al., 2019). a summary table covering all 44 articles is presented in annex 1, and annex 2 lists the context of each piece, its perspective on the relevant data, and the business models and strategies discussed. all the articles matching the criteria used for our review are quite recent, published between 2016 and 2019. this attests to a strong upswing of attention to the subject, with growing interest in understanding the nexus of circular business models and digital technologies. in total, the sources feature 340 articles published on circular business models and value creation during the time span considered, so about 10% of the model-related papers deal with the role of data in one way or another. as a whole, the body of literature reviewed indicates that the state of understanding of the intersection of circular business models and data is highly fragmented. the articles show wide variety in the circular business models addressed. in addition, diverse contexts and industries, among them manufacturing, waste management, and digitalisation, are covered. in some articles, the data or related factors are at the core of the discussion, while they are presented as a minor issue in others. perspectives on the data were found to vary too, from perceiving the data as input to modelling, through applying life-cycle assessment of information flows in the supply chain, to expressing more general views on unlocking the potential of circular economy. below, we discuss the ways in which the literature on circular business models informs us about circular business models’ relationship with data (including the associated strategies for exploitation of data) and what specific use data may have in circular business models. in addition, we identify two approaches to value of data that were articulated in the corpus and discuss which sorts of data seem the most valuable in this context. connecting circular business models to the role and value of data the articles reviewed cover a broad spectrum of circular business models. table 1 presents examples of this breadth with regard to the potential role and value of data, reflecting the various circular business model patterns introduced by lüdeke-freund et al. (2019). many of the articles show connections with several business-model patterns, not least because roughly half of the papers express a general perspective on circular business models, without considering any specific ones. many of the models discussed in the literature represent a high-level strategy or approach rather than a ready-to-apply model that could easily be classified as a specific business-model pattern. several articles cite opportunities in servitization and product–service systems, providing customers with service and performance rather than products (alcayaga et al., 2019; bressanelli et al., 2018; frishammar and parida, 2019; khan et al., 2018; pialot et al., 2017; spring and araujo, 2017). while this prominence might a literature search of academic databases: scopus and ebsco business source complete was limited to peer-reviewed articles (in english) published on 1.1.2000-30.8.2019 search terms using the term ‘circular’ with either ‘business model*’ or ‘value creat*’ and also ‘data’ resulted in 147 articles identification of 39 articles as relevant five additional articles yielded, in total, 44 articles systematic review of the articles for their theoretical, conceptual, and empirical contribution, for answering the research question conclusion and identification of future research opportunities on the basis of the results of the litrature review 1 2 3 4 5 figure 1: the research design for the literature review journal of business models (2021), vol. 9, no. 2, pp. 44-71 50 circular business model pattern (lüdeke-freund et al., 2019) potential role and value of data examples from the literature repair and maintenance through repair and maintenance services, companies can extend product life. this necessitates customer-centred services, expertise in the products, ability to solve problems ‘on the fly’, and corresponding forward and reverse logistics. • end-to-end product and service data, real-time and historical, are needed for design support and for provision of long-life products and their repair and maintenance. both understanding of customers’ behaviour and preferences and the real-time visibility of the usage of a product seem crucial for increasing value for the customer. • there is potential value in data on the use, status, condition, location, and operation of products and services. both real-time and historical data for the products or services’ full service life and on customers’ behaviour and preferences could be relevant. the data may be either useror product-generated. • several articles point to opportunities for product– service systems to provide customers with service and performance instead of products. these can extend companies’ ownership of products over the full service life. this potential encourages companies to optimise the design, maintenance, and service-life management. product–service systems’ creation requires good understanding and evidence of customer behaviour and preferences. alcayaga et al. (2019) bressanelli et al. (2018) pialot et al. (2017) spring and araujo (2017) zhang et al. (2017) reuse and redistribution through reuse and redistribution, customers can be given access to used products, possibly with minor enhancement or modifications. this might require evaluating the products’ market value and creating suitable marketplaces. • product lifetime data is a pre requisite for supporting the design and provision of long-life products that can be reused and redistributed. digital platforms could serve as marketplaces. both understanding of customers’ behaviour and preferences and clarity as to the usage of a product seem crucial. • data on the use, status, condition, location, and operation of products and services may be of value. both real-time and historical data for their full lifetime and details on customers’ behaviour and preferences may be relevant. the data may be either useror product-generated. alcayaga et al. (2019) nascimento et al. (2019) saidani et al. (2018) refurbishment and remanufacturing refurbishing and remanufacturing products – e.g., repairing or replacing components – can extend product life. this requires combining repair and maintenance capacity with reuse and redistribu tion capabilities in various ways, including reverse and forward logistics and applying technical expertise about products and their refurbishment and remanufacturing. • data for the products’ full lifetime performance can be used to adjust design, operation, and disposal strategies for refurbishment and remanufacturing. tools for product design can assist with assessing refurbishment and remanufacturing potential but might demand prohibitive quantities of product data. for a summary of potentially valuable data, see ‘repair and maintenance’ and ‘reuse and redistribution’, above. favi et al. (2019) jensen et al. (2019) khan et al. (2018) matsumoto et al. (2016) table1: the potential role and value of data in circular business models journal of business models (2021), vol. 9, no. 2, pp. 44-71 51 circular business model pattern (lüdeke-freund et al., 2019) potential role and value of data examples from the literature recycling used materials can be converted into materials of lower value or into higher-quality materials for improved functionality. this requires knowledge of product design, material sciences, and the materials’ physical and chemical properties, along with solid ability to arrange reverse logistics. • data on material flows and on waste streams are of potential value. in addition, product-design data and data covering the entire service life (from the materials used to end-of-life contamination) are of importance for understanding recyclability and the recovery options. alcayaga et al. (2019) de mattos and de albuquerque (2018) favi et al. (2019) mishra et al. (2018) niero and olsen (2016) cascading and repurposing organisations can apply iterative use of the energy and materials within physical objects, including biological nutrients. exploiting this pattern demands facilitating material flows and supporting industrial symbiosis networks. • real-time and historical data on the whole life cycle and details of material flows, environmental impact, performance, etc. are seen as relevant. valuable data may pertain to condition, operation, status, location, use, and the surrounding system. information flows in the supply chain appear crucial. • articles referring to closed-loop systems and industrial symbiosis are classified as articulating a cas cading and repurposing business model, as they often focus on facilitating material flows and sup porting industrial symbiosis net works. however, they may be crucial for any of the models in enabling forward and reverse logistics. aid et al. (2017) fisher et al. (2018) rajala et al. (2018) tseng et al. (2018) organic feedstock this pattern involves processing organic residuals, via biomass conversion or anaerobic digestion, for use as production inputs or safe disposal in the biosphere. corresponding reverse flows, alongside conversion, must be arranged and managed. material compositions might be complex and the residues contaminated. • the articles reviewed do not specifically address a business model based on organic feedstock. however, some do focus on cloud manufacturing, the sharing of manufacturing capabilities and resources on a cloud platform, which might be valuable in this context. among the potential benefits are greater process resilience and improved waste reduction, reuse, and recovery. fisher et al. (2018) lindström et al. (2018) table1: the potential role and value of data in circular business models (continued) be connected with the popularity of these models in writings on circular business models, it also ties in with the role that data could take specifically in such systems. product–service systems of this nature show links to several business models (repair and maintenance, reuse and redistribution, refurbishment and remanufacturing, and recycling). exploiting data for product–service systems should encourage companies to optimise their products’ design, maintenance, and lifetime management to support a long service life, easy reuse, and recyclability, alongside other circulareconomy-related objectives. several articles refer to closed-loop supply chains and product systems (aid et al., 2017; de mattos and de albuquerque, 2018; mishra et al., 2018; niero and olsen, 2016; rajala et al., 2018; tseng et al., 2018), bringing in discussion of cross-industry networks needed for reverse logistics, with links to many of the business models. said articles are classified as representing a cascading and repurposing business model (just as the articles dealing with industrial symbiosis are), although networks of this sort may offer value under any of the models presented. these papers indicate that data could be of particular value with regard to orchestrating journal of business models (2021), vol. 9, no. 2, pp. 44-71 52 resources and activities in circular business ecosystems. since flows and loops of resources often cross boundaries among a host of actors in complex value chains, there is good reason to deem associated data valuable for this component of circular business models. most of the papers reviewed place emphasis on manufacturing, the goods domain, and related issues such as product design and managing the supply chain or waste, while the corpus concentrates less on some other sets of businesses (such as companies in the service industry). the material points also to an uneven spread of attention across the various families of circular business models and strategies. for instance, there is relatively little focus on extending product value via such mechanisms as sharing-oriented platforms and collaborative consumption (for further details, see, for instance, moreno et al., 2016), even though use of data holds potential for significant contributions in these contexts too. it appears that the role/value of data varies less from one business-model pattern to another than it does with the activity those data can support. this makes sense in that several models may incorporate a given general activity, whether that is orchestrating the necessary resources and activities, extending product lifetime through the product design, enabling effective forward and reverse logistics, or providing a service instead of products. collaboration in collecting and sharing data is portrayed as crucial for capturing the value of data in a networked circular-economy context, as is efficient flow of information along the supply chain (e.g., brown, 2019; gupta et al., 2018; rajala et al., 2018). while existing circular business models vary in their degree of openness (frishammar and parida, 2019), a shift over time seems evident: toward a more collaborative approach to datasharing (rajala et al., 2018). nonetheless, data discrepancies, gaps, and confidentiality issues still hamper collaboration somewhat (tseng et al., 2018), and sharing of data requires ample trust (gupta et al., 2018; rajala et al., 2018). the possibility of lock-in to unproductive partnership relationships is to be considered also, since it may be difficult for a company to shift to employing circular business models if its partners are ‘unwilling to make the required investments and adjustments’ (lahti et al., 2018). in circular-economy-driven collaboration, collection and sharing of data could be the first joint step (brown et al., 2019) and a way to align the value chains’ actors at the outset (lopes de sousa jabbour et al., 2018). also highlighted in the corpus is that service providers specialising in software or data analytics might be needed, to boost the total value of the offer, provide access to knowledge resources, and render the solutions more innovative (frishammar and parida, 2019). at the same time, companies may find their data to exceed their own needs and be more valuable to others (spring and araujo, 2017), thereby opening collaboration opportunities and possibly representing sources of additional revenue. the specific use of data in circular business models numerous types of data, such as product, service, and system data of various sorts (from design to disposal), can be valuable in the context of circular business models. more precisely, the data may represent the volume, characteristics, use, transactions, location, state and operation, condition, history, and surroundings related to products, services, systems, and associated material flows (lopes de sousa jabbour et al., 2018; rajala et al., 2018). whether real-time or historical, user-generated or product-generated, structured or unstructured in form, said data holds potential to offer insight into, for example, how customers are actually using the products (bressanelli et al., 2018) or how supply-chain logistics could be optimised (hopkinson et al., 2018). there are limitations, though. details for the entire service life are not always accessible (alcayaga et al., 2019), so more general material-flow data (e.g., on waste streams) may be used in their stead for mapping the current state and baseline (gupta et al., 2018) or identifying circular-economy opportunities (aid et al., 2017). also, the data type and collection frequency demanded by any given use vary; for example, continuous flow of data may be needed for maintenance purposes while irregular input might suffice for other purposes (alcayaga et al., 2019). in circular business models, as characterised by the literature reviewed, data can be used for product design, extension of products’ life span, product and service innovation, and enhancement of customer experience. in product design, both userand product-generated journal of business models (2021), vol. 9, no. 2, pp. 44-71 53 data may hold value (zheng et al., 2018) in affording insights into customers’ usage patterns (spring and araujo, 2017). one can use data to extend product life (bressanelli et al., 2018); evaluate the life-cycle performance of products (matsumoto et al., 2016); improve recyclability (favi et al., 2019); and adjust the design, operation, and disposal strategies over the life cycle in line with said data (khan et al., 2018). the importance of data for better product design is emphasised by several articles specifically in the case of product–service systems and long-life products. product-design tools can be used to assess product-specific disassembly and recycling potential and to provide redesign suggestions (favi et al., 2019). data-mining tools can be employed to uncover hidden patterns and knowledge via realtime and historical life-cycle data for improving the product design, optimising the production process, and honing the recovery strategy (zhang et al., 2017). however, many design tools require significant quantities of technical data on the products (matsumoto et al., 2016) such as material and mass for each component and the contamination potential of all the materials, down to the coatings and adhesives (favi et al., 2019). through the notion of digital identity introduced by rajala et al. (2018), information could be made available on each product’s composition, the process parameters used by all actors involved, and the instructions for processing and sorting – preferably without a need for add-on sensors or monitoring devices. in any case, this could lead to product and service innovation, in such forms as product–service systems and performance services wherein companies retain ownership of the products while the relevant data are used to optimise performance and expand service offerings (e.g., alcayaga et al., 2019; frishammar and parida, 2019). integration of data into the systems and implementation of data-driven services might enable richer and longer customer relationships (spring and araujo, 2017), personalisation of the customer experience, and greater user involvement (e.g., bressanelli et al., 2018; khan et al., 2018). in addition, data can be used for improving operational performance and optimising assets’ utilisation, maintenance, and the end-of-life activities. smart systems and embedded intelligence produce data on condition, operation, status, location, use, history, and surrounding systems, which enable any necessary real-time monitoring and control of systems and material flows (lopes de sousa jabbour et al., 2018; rajala et al., 2018). these data can be used for optimising processes and supply chains (zhang et al., 2017), reducing waste in production systems between supply chains (lopes de sousa jabbour et al., 2018), finding hidden patterns and correlations that could inform systems’ optimisation (gupta et al., 2018), and conducting fault diagnostics (zhang et al., 2017). data use can assist in identifying failures; monitoring, controlling, and intervening in the operations; planning the maintenance; and optimising delivery routes (jabbour et al., 2019). it can also enable sophisticated maintenance activities, including preventive, predictive, and prescriptive maintenance and the automation of these activities (alcayaga et al., 2019; bressanelli et al., 2018), alongside optimisation of end-of-life activities – reuse, remanufacturing, recycling, etc. (bressanelli et al., 2018). data can be of use in judging the environment-related performance of circular business models too (e.g., jensen et al., 2019; manninen et al., 2018), though assessing the impact of large integrated systems may be difficult (aid et al., 2017). in addition, some significant differences exist between branches of industry in data’s use and interpretation (tseng et al., 2018). approaches to obtaining value from data in circular business models proceeding from the literature review, we identified two approaches to gaining value from data under circular business models: an outward-oriented one and an inwardly focused one. examining the outwardfocused approach, we found reference to utilisation of data as enhancing the customer experience in respect of circular-economy objectives through good product and service design, extension of product life, stronger user involvement, and building of product–service systems. taking this approach necessitates possessing data-based information and knowledge pertaining to not only products’ and services’ performance over their entire life cycle but also customers’ behaviour and preferences. when used in support of circular design principles such as reliability and durability, trust in products and attachment to them, extended product life, and non-material products (these circular design principles are based on the work of moreno et al., 2016), data can play a significant part in encouraging longer use lives for products and slowering resource flows. journal of business models (2021), vol. 9, no. 2, pp. 44-71 54 among the relevant business activities in the context of enhancement to customer experience are improving product and service design, attracting the target customers, monitoring and tracking product-related activity, providing technical support (including preventive and predictive maintenance), optimising use, upgrading the products, and enhancing renovation and endof-service-life activities (e.g., bressanelli et al., 2018; rajala et al., 2018; zheng et al., 2018). for example, giving customers access to data from products’ realworld use can enable them to tune their usage patterns better, dissuade from careless use behaviour, and guide them toward suitable preventive and predictive mainte nance; such data also can be utilised for provision of personalised advice and of mutually beneficial sharing-based business models (bressanelli et al., 2018). in work representing the second approach, the inwardfocused approach, one finds data serving as input to optimising the economic and environmental performance of circular systems and supply chains at a more technical and operations-oriented level. in this approach, the value is seen as lying in real-time and historical data on system or process performance and on related flows (of materials, energy, etc.). for this approach, use of data possesses vast potential to aid in narrowing the streams of resource flows by ‘tightening up’ various production steps or links in the value chain, ‘lightweighting’ the products, optimising yield and eliminating losses, and reducing material use (again, principles rooted in work by moreno et al., 2016). relevant business activities in the context of managing circular systems, supply chains, and value networks encompass managing the supply chains, optimising operation performance, improving assets’ utilisation, managing waste, monitoring and tracking activity, and gauging environment-related performance (gupta et al., 2018; hopkinson et al., 2018; lopes de sousa jabbour et al., 2018; rajala et al., 2018; zhang et al., 2017). these two approaches to value from data are not entirely separate. rather, they overlap. they can be mutually supportive in slowing cycles, closing loops, and narrowing resource flows. for both approaches, the literature identifies potential for circular business models’ application in which significant customer, business, and societal value is created and captured by means of data. the idea of these two approaches is close to what urbinati et al. (2017) pinpoints as so significant in creating new circular business models: a customer value proposition that involves extensive co-operation with the customers and a value network that encompasses reverse supply-chain activities and collaboration with the supply chain’s other actors. this is in line with what zolnowski et al. (2016) describe as the source of datadriven business innovations – customer-centred or cooperative value innovation and company-centred or co-operative productivity improvements. types of data with specific value for circular business models with regard to circular business models, the literature review points to awareness of potential value in the following data categories especially: customer behaviour, use throughout the life cycle, system performance, and material flows. these are detailed in table 2, below. the first category, consisting of data on the customers’ behaviour, habits, and preferences, offers insight into, for example, how customers use products. secondly, data covering the full life cycle of goods or services help us understand such factors as how usage has affected the reuse value of the materials. the performance category refers to data on the operation of larger technical or organisational systems, and its use can aid in, for example, optimising supply chains. finally, data on flows of materials through various production, consumption, and end-of-life-manage ment systems can stimulate insight into, for instance, waste streams that could be avoided. these four classes of potentially valuable data are highly interlinked, and these too can support closing the resource loops, slowing their cycle, and narrowing their flows. to be valuable for circular business models, the abovementioned data on customer behaviour, products’ and services’ full life, performance of systems, and material flows must be exploited in efforts to direct customer experience, supply chains, and value networks toward circular economy (e.g., alcayaga et al., 2019; khan et al., 2018; zheng et al., 2018). thus, data must be transformed into information and knowledge that guides decision-making toward closing resource loops through journal of business models (2021), vol. 9, no. 2, pp. 44-71 55 data category definition description of a specific use of data in circular business models references customer behaviour data on the customers’ behaviour, habits, and preferences the data can yield insight into how customers use various products and services and into how their needs can be met resourceefficiently. this insight enables companies to provide a service rather than a mere product and may help them extend their ownership of the products to the full service life. that, in turn, can encourage optimisation of products’ design, maintenance, and lifetime management to support a long service life, ease of reuse, recyclability, and meeting of other circular-economy objectives. bressanelli et al., (2018); khan et al., (2018) product and service lifetime data on the full service life of a product – raw materials to post-use life this data type can inform insight into how product life could be extended or how use has affected the reuse value of the component materials. with such insight, companies can extend their products’ service life through such means as long-life products, maintenance, and product upgrades. in addition, the most suitable design, operation, and disposal strategies can be chosen in light of the full life cycle, and these choices contribute to reducing consumption of resources. khan et al., (2018); spring and araujo, (2017); zheng et al., (2018) system performance data on the operation and performance of systems and value networks – devices, processes, activities, and value chains this type of data can afford insight into how to improve operations’ performance and optimise asset-utilisation, maintenance, and end-of-life activities throughout the systems and the supply chains. such insight enables optimising systems’ resource use by such means as finding and exploiting hidden patterns and correlations or applying data-driven initiation of predictive maintenance actions, thereby averting the risk of subsequent failure and large waste volumes. gupta et al., (2018); lopes de sousa jabbour et al., (2018); tseng et al., (2018); zhang et al., (2017) material flows data on flows of materials through various production, consumption, and end-of-life systems the data can yield insight into the volume, characteristics, and geographical location of various material flows, waste streams among them. this insight can inform efforts to reduce the use of resources and to avoid unnecessary waste streams or build business activities that exploit the relevant streams. aid et al., (2017); mishra et al., (2018); nascimento et al., (2019); rajput and singh, (2019) table 2: examples of the specific use of particular data types in circular business models reuse and recycling of materials, slowing the looping by such means as designing long-life goods and extending the service life, and narrowing resource streams via resource-efficiency. circular-economy objectives might be well in line with the general potential identified in data – for better utilisation of assets, higher-efficiency operations, a fuller and longer customer experience, and transparency of information (chen et al., 2015; günther et al., 2017). however, data might not always reveal an accurate picture of circular phenomena, irrespective of the potential for novel data-analysis tools and models (artificial-intelligence applications among them) to unveil patterns and correlations that may advance understanding of circular phenomena further (e.g., jabbour et al., 2019). the detectability, measurability, and interpretability of the event determine whether the associated data supplied can be of value for decisionmaking (pigni, 2016). lack of access to relevant data that could inform understanding of often complex circular phenomena could lead to underutilised value for decision-making. in summary, companies moving from linear business models to circular ones must simultaneously develop their capabilities, processes, and activities throughout the value’s creation, delivery, and capture (frishammar and parida, 2019). companies have to possess the ability to identify data streams journal of business models (2021), vol. 9, no. 2, pp. 44-71 56 that can generate value, the capacity to use appropriate tools and technologies to tap these streams, ability to orchestrate the skills and resources required, and the necessary mindset (pigni, 2016). for reaping the full sustainability potential of circular strategies, systems thinking is needed (bocken et al., 2016; brown, 2019; lewandowski, 2016). to this end, data could be of great help in solving unstructured, exploratory, and wicked problems (surbakti et al., 2019) connected with circular economy or with sustainability-related challenges more broadly. discussion and conclusions our review, aimed at creating new insight into the nexus of circular business models and data, is one of the first comprehensive surveys addressing the value of data in a networked circular-economy context. we sought greater understanding of the use and perceived utility of data in realisation of circular business models, and we identified which circular business models and strategies typically appear to benefit from data. in addition, the two distinct approaches to value from data were clarified, as were the types of data found to be valuable in the context of circular business models. awareness of these directions can aid in further improving both practical and scientific expertise in the field. our primary goal with regard to informing practice was to provide business-relevant decision-supporting insight into how data may be conceptualised as a source of value under circular business models. the corpus reviewed indicates that current understanding of the role and value of data in circular business models is fragmented but also that improved access to data is commonly seen as a driver and enabler of circular economy. diverse business models and strategies identified in the literature can take advantage of data at the core of the value creation. in the outward-focused approach to value from data that we pinpointed, data sources are utilised for directing the customer experience toward circular-economy objectives via more suitable product design, longer service life, greater user involvement, and product–service systems. at the same time, there was attention to an inward-focused approach, wherein real-time and historical performance and material-flow data etc. are used to optimise the economic and environmental performance of circular systems and supply chains. while the literature points to benefits from both approaches, understanding of the route from data to circular business models and onward to circular impacts (or the other way around) remains weak. another question considered is whether the role and value of data as conceptualised in relation to circular business models differs from data’s role and value under other business models. in general, joint use of circular business models and data gets justified in terms of potential environmental benefits. however, environment-linked benefits may be gained also when, for example, one seeks supply-chain cost savings without having specific circular-economy objectives. while such data-driven optimisation of business activities might dovetail with environmental sustain ability objectives, more comprehensive circular-economy value-creation rationales are likely to demand comprehensive understanding of circular-economy phenomena and objectives. business models and also data’s potential role and value can be highly context-specific and dependent on the business and its ecosystem’s conditions for exploiting data in pursuit of circular benefits. the material reviewed discusses neither the possibly quite substantial investments in capabilities and technology that exploiting data may demand nor other obstacles and constraints to realising data-focused circular business models. also, the vast increase in the volume of potentially valuable but unstructured and non-quantifiable data should be kept in mind, as should the possible non-existence of relevant data. in addition, discussion of whether data-driven circular business models capture the full scale of sustainability was beyond the scope of our study. nonetheless, it is clear that many of the conceptual mechanisms identified can be expected to display delayed, non-linear, and feedback-related effects, bound up with risks of adverse consequences connected with sustainability. our approach has its limitations, most prominently that this stage of evaluation was confined to examining the understanding displayed in the articles reviewed and the research designs reported. clearly, not all research that could assist in understanding the role and value of data journal of business models (2021), vol. 9, no. 2, pp. 44-71 57 could be identified through our review method, and the literature examined might be unevenly distributed. another factor is that both the concept of circular business models and that of data-driven approaches are showing strong develop ment over time. the concepts and definitions are still evolving as studies accumulate from a host of disciplines (e.g., the fields of strategy, business models, management studies, information systems, operations management, engineering, and sustainability research). hence, this review should be taken in its temporal context and as offering a starting point for scholarship of this nature. it represents a perspective gained via a systematic approach to describing the current state of understanding of data’s role and value in circular business models. opportunities for further research we will now discuss the key opportunities for further research that were revealed through examination of the literature. these fall into three areas: data as a driver of innovation in development of circular business models, the role of collaboration in capturing value from data, and ways of creating value jointly with customers. as we discuss each of these in turn, we refer to both the state of the art, as evidenced by our review, and the research gaps indicated. proposition 1: data can inform circular business models’ development our review of the 44 articles showed that data and related information technologies, services, and platforms are commonly seen as drivers and enablers of circular economy and as possessing potential to act as key inputs to a variety of circular business models (the state of the art). while the literature highlights potential opportunities for using data in circular business models, there is less systematic assessment or empirical evidence of data’s role and value in these models, showing a gap. data may clearly exhibit potential to enable and accelerate the development of innovative, even transformative, circular business models, but systemic understanding of circular phenomena and the context in which innovative business models are to be introduced remains necessary (another gap). the path from data to circular business models and, in turn, to circular impacts or, vice versa, from circular impacts and business models to valuable data is still little understood (a gap). in a final gap, fuller insight into strategies for designing data-driven circular businessmodel innovation and how to facilitate the emergence of such business-model innovations in a networked circular-economy context is needed. contributions from specialists in data-driven value creation and business models would, therefore, be beneficial for filling gaps by taking research on the impacts and benefits of data in circular-economy context further. further empirical and conceptual research is needed if we are to understand the role and value of data in circular business models and specify the understanding more fully. our finding of a need for further research is in line with conclusions from previous studies (e.g., alcayaga et al., 2019; rajala et al., 2018), which have identified, for example, a need to increase understanding of closed-loop business models based on platforms with multiple actors (rajala et al., 2018) and of technologies’ impact on product design and circular strategies (alcayaga et al., 2019). proposition 2: collaboration is needed for capturing data’s value in circular business models in the articles reviewed, collaboration in collecting and sharing data and simultaneous efficient flow of information in the value networks are portrayed as crucial for capturing data’s value in a networked circular-economy context. however, there remains a need to better under stand how inter-organisation collaboration can contribute to data-driven circular business-model innovation and how such collaboration could be enhanced. interesting matters include companies’ strategic decisions on openness levels in creating and sharing data and the business models used to capture value from collaborative value propositions. circular economy is seen as inherently collaborative, and inter-organisation innovation is needed for sustainability impacts (e.g., lewandowski, 2016; lüdeke-freund et al., 2019). circular value creation takes place throughout the supply chain and the network formed of suppliers, manufacturers, retailers, customers, and other potential partners (lewandowski, 2016; manninen et al., 2018). there is growing interest in how companies can collaboratively create circular value propositions and system-level business models (brown, 2019). the need for collaboration in exploiting the value of data is journal of business models (2021), vol. 9, no. 2, pp. 44-71 58 consistent with what is visible for more general datadriven business models and the related notion that value of data is produced in activities involving other stakeholders in the data ecosystem (bharadwaj et al., 2013; thomas and leiponen, 2016). in circular business models, the impetus for collaboration can arise from such angles as a need to understand complex crosscutting systems, such as global supply chains, along with shared risks, critical leverage points, and technical barriers (brown, 2019). company reluctance to share data for reason of privacy, security, or competitiveness concerns is not specific to circular business. digital trust is necessary between any collaboration partners (rajala et al., 2018), and data access may be controlled via formal contracts or selling of data alongside explicit specification of data ownership and rights (günther et al., 2017). proposition 3: data can yield insight on how to co-create value with customers the literature shows that several types of circular business model are aimed at changing the role of the customer in the value creation. this may occur, for example, when one provides the customer with service, access, or performance instead of product ownership. as evidenced by the literature, the middle stretch of a product’s life (i.e., the use of products and services) is receiving growing interest. there is awareness also that data on customers’ behaviour and preferences and lifelong data on products and services can be of great value for understanding how to design circular products, services, and business models that all extend service life or how to provide a personalised offering that reduces users’ consumption of resources. however, a gap is visible with regard to research into the customer’s changing role in circular business models and how data can be used in response. circular business models, when extending a company’s responsibility for the ownership of products over their entire life, increase interaction with customers (lewandowski, 2016). the interactions are a possible source for additional valuable data, of use for enhancing customers’ experience and customer relations. getting more involved in the product-use phase can lead companies to rethink their relationship with customers and consumers (hofmann, 2019) and to make customers a significant part of the value co-creation. such developments represent new opportunities for circular business models. journal of business models (2021), vol. 9, no. 2, pp. 44-71 59 references ackoff, r. (1989). from data to wisdom, journal of applied systems analysis 16: 3–9. aid, g., eklund, m., anderberg, s. and baas, l. (2017). expanding roles for the swedish waste management sector in inter-organizational resource management, resources, conservation and recycling 124: 85–97. akter, s., wamba, s. f., gunasekaran, a., dubey, r. and childe, s. j. (2016). how to improve firm performance using big data analytics capability and business strategy alignment?, international journal of production economics 182: 113–131. al-debei, m. m. and avison, d. (2010). developing a unified framework of the business model concept, european journal of information systems 19(3): 359–376. alcayaga, a., wiener, m. and hansen, e. g. (2019). towards a framework of smart-circular systems: an integrative literature review, journal of cleaner production 221: 622–634. bharadwaj, a., sawy, o., pavlou, p. and venkatraman, n. (2013). digital business strategy: toward a next generation of insights, mis quarterly 37(2): 471–482. bocken, n., de pauw, i., bakker, c. and van der grinten, b. (2016). product design and business model strategies for a circular economy, journal of industrial and production engineering 33(5): 308–320. bocken, n., short, s. w., rana, p. and evans, s. (2014). a literature and practice review to develop sustainable business model archetypes, journal of cleaner production 65: 42–56. bressanelli, g., adrodegari, f., perona, m. and saccani, n. (2018). exploring how usage-focused business models enable circular economy through digital technologies, sustainability (switzerland) 10(3). brown, p. (2019). why do companies pursue collaborative circular oriented innovation?, sustainability (switzerland) 11(3). buhl, h., röglinger, m., moser, f. and heidemann, j. (2013). big data, business & information systems engineering 5(2): 65–69. chen, d., preston, d. and swink, m. (2015). how the use of big data analytics affects value creation in supply chain management, journal of management information systems 32(4): 4–39. d’amato, d., droste, n., allen, b., kettunen, m., korhonen, j., lähtinen, k., leskinen, p., matthies, b. and toppinen, a. (2017). green, circular, bio economy: a comparative analysis of sustainability avenues, journal of cleaner production 168(c): 716–734. davenport, t. h. and prusak, l. (1998). working knowledge: how organizations manage what they know, boston, ma: harvard business school press. de mattos, c. and de albuquerque, t. (2018). enabling factors and strategies for the transition toward a circular economy (ce), sustainability (switzerland) 10(12). journal of business models (2021), vol. 9, no. 2, pp. 44-71 60 dentchev, n., rauter, r., johannsdottir, l., snihur, y., rosano, m., baumgartner, r., nyberg, t., tang, x., van hoof, b. and jonker, j. (2018). embracing the variety of sustainable business models: a prolific field of research and a future research agenda, journal of cleaner production 194: 695–703. ellen macarthur foundation. (2015). delivering the circular economy a toolkit for policymakers. retrieved from https://www.ellenmacarthurfoundation.org/assets/downloads/publications/ellenmacarthurfoundation_policymakertoolkit.pdf ellen macarthur foundation. (2019). artificial intelligence and the circular economy ai as a tool to accelerate the transition. retrieved from https://www.ellenmacarthurfoundation.org/assets/downloads/artificial-intelligenceand-the-circular-economy.pdf favi, c., marconi, m., germani, m. and mandolini, m. (2019). a design for disassembly tool oriented to mechatronic product de-manufacturing and recycling, advanced engineering informatics 39: 62–79. fisher, o., watson, n., porcu, l., bacon, d., rigley, m. and gomes, r. l. (2018). cloud manufacturing as a sustainable process manufacturing route, journal of manufacturing systems 47: 53–68. foss, n. and saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management 43(1): 200–227. frishammar, j. and parida, v. (2019). circular business model transformation: a roadmap for incumbent firms, california management review 61(2): 5–29. gaustad, g., krystofik, m., bustamante, m. and badami, k. (2018). circular economy strategies for mitigating critical material supply issues, resources, conservation & recycling 135: 24–33. geissdoerfer, m., vladimirova, d. and evans, s. (2018). sustainable business model innovation: a review, journal of cleaner production 198: 401–416. grover, v., chiang, r., liang, t. and zhang, d. (2018). creating strategic business value from big data analytics: a research framework, journal of management information systems 35(2): 388–423. günther, w., rezazade mehrizi, m., huysman, m. and feldberg, f. (2017). debating big data: a literature review on realizing value from big data, the journal of strategic information systems. gupta, s., chen, h., hazen, b., kaur, s. and santibañez gonzalez, e. (2018). circular economy and big data analytics: a stakeholder perspective, technological forecasting and social change. hartmann, p. (2016). capturing value from big data – a taxonomy of data-driven business models used by start-up firms, international journal of operations & production management 36(10): 1382–1406. hofmann, f. (2019). circular business models: business approach as driver or obstructer of sustainability transitions?, journal of cleaner production. hopkinson, p., zils, m., hawkins, p. and roper, s. (2018). managing a complex global circular economy business model: opportunities and challenges, california management review 60(3): 71–94. ipcc. (2019). climate change and land. retrieved from https://www.ipcc.ch/report/srccl/ journal of business models (2021), vol. 9, no. 2, pp. 44-71 61 jabbour, c., jabbour, a., sarkis, j. and filho, m. (2019). unlocking the circular economy through new business models based on large-scale data: an integrative framework and research agenda, technological forecasting and social change. jensen, j., prendeville, s., bocken, n. and peck, d. (2019). creating sustainable value through remanufacturing: three industry cases, journal of cleaner production 218: 304–314. jones, m. (2018). what we talk about when we talk about (big) data. khan, m., mittal, s., west, s. and wuest, t. (2018). review on upgradability – a product lifetime extension strategy in the context of product service systems, journal of cleaner production 204: 1154–1168. lahti, t., wincent, j. and parida, v. (2018). a definition and theoretical review of the circular economy, value creation, and sustainable business models: where are we now and where should research move in the future?, sustainability (switzerland) 10(8). levy, y. and ellis, t. (2006). a systems approach to conduct an effective literature review in support of information systems research&nbsp;, informing science: the international journal of an emerging transdiscipline volume 9: 18–212. lewandowski, m. (2016). designing the business models for circular economy-towards the conceptual framework, sustainability (switzerland) 8(1): 1–28. lewandowski, mateusz. (2016). designing the business models for circular economy-towards the conceptual framework, sustainability 8(1): 43. linder, m. and williander, m. (2017). circular business model innovation: inherent uncertainties, business strategy and the environment 26(2): 182–196. lindström, j., hermanson, a., blomstedt, f. and kyösti, p. (2018). a multi-usable cloud service platform: a case study on improved development pace and efficiency, applied sciences 8(316): 1–14. lopes de sousa jabbour, a., jabbour, c., godinho filho, m. and roubaud, d. (2018). industry 4.0 and the circular economy: a proposed research agenda and original roadmap for sustainable operations, annals of operations research 270(1): 273–286. lüdeke-freund, f., gold, s. and bocken, n. (2019). a review and typology of circular economy business model patterns, journal of industrial ecology 23(1): 36–61. manninen, k., koskela, s., antikainen, r., bocken, n., dahlbo, h. and aminoff, a. (2018). do circular economy business models capture intended environmental value propositions?, journal of cleaner production 171: 413–422. massa, l., viscusi, g. and tucci, c. (2018). business models and complexity, journal of business models 6(1): 70–82. matsumoto, m., yang, s., martinsen, k. and kainuma, y. (2016). trends and research challenges in remanufacturing, international journal of precision engineering and manufacturing green technology 3(1): 129–142. merli, r., preziosi, m. and acampora, a. (2018). how do scholars approach the circular economy? a systematic literature review, journal of cleaner production 178: 703–722. journal of business models (2021), vol. 9, no. 2, pp. 44-71 62 miller, h. (2013). from data to decisions: a value chain for big data, it professional 15(1): 57–59. mishra, j., hopkinson, p. and tidridge, g. (2018). value creation from circular economy-led closed loop supply chains: a case study of fast-moving consumer goods, production planning & control 29(6): 509–521. moreno, m., de los rios, c., rowe, z. and charnley, f. (2016). a conceptual framework for circular design, sustainability 8(9): 937. nascimento, d., alencastro, v., quelhas, o., caiado, r., garza-reyes, j., lona, l. and tortorella, g. (2019). exploring industry 4.0 technologies to enable circular economy practices in a manufacturing context, journal of manufacturing technology management 30(3): 607–627. nielsen, c., montemari, m., paolone, f., massaro, m., dumay, j. and lund, m. (2018). business models: a research overview, routledge, london. niero, m. and olsen, s. (2016). circular economy: to be or not to be in a closed product loop? a life cycle assessment of aluminium cans with inclusion of alloying elements, resources, conservation and recycling 114: 18–31. okoli, c. (2015). a guide to conducting a standalone systematic literature review, communications of the association for information systems 37(1): 879–910. pialot, o., millet, d. and bisiaux, j. (2017). “upgradable pss”: clarifying a new concept of sustainable consumption/ production based on upgradablility, journal of cleaner production 141: 538–550. pieroni, m., mcaloone, t. and pigosso, d. (2019). business model innovation for circular economy and sustainability: a review of approaches, journal of cleaner production 215: 198–216. pigni, f. (2016). digital data streams: creating value from the real-time flow of big data, california management review 58(3): 5–25. rajala, r., hakanen, e., mattila, j., seppälä, t. and westerlund, m. (2018). how do intelligent goods shape closedloop systems?, california management review 60(3): 20–44. rajput, s. and singh, s. (2019). connecting circular economy and industry 4.0, international journal of information management. richardson, j. (2008). the business model: an integrative framework for strategy execution, strategic change 17(5– 6): 133–144. saidani, m., yannou, b., leroy, y. and cluzel, f. (2018). heavy vehicles on the road towards the circular economy: analysis and comparison with the automotive industry, resources, conservation and recycling 135: 108–122. spring, m. and araujo, l. (2017). product biographies in servitization and the circular economy, industrial marketing management 60: 126–137. stahel, w. r. (1997). the functional economy: cultural and organizational change, in d. richards (ed.), the industrial green game: implications for environmental design and management, national academies press, pp. 91–100. stahel, w. r. (2016). the circular economy, nature 531(7595): 435–438. journal of business models (2021), vol. 9, no. 2, pp. 44-71 63 surbakti, f., wang, w., indulska, m. and sadiq, s. (2019). factors influencing effective use of big data: a research framework, information & management 57(1): 103146. teece, d. j. (2010). business models, business strategy and innovation, long range planning 43(2–3): 172–194. retrieved from http://linkinghub.elsevier.com/retrieve/pii/s002463010900051x thomas, l. and leiponen, a. (2016). big data commercialization, ieee engineering management review 44(2): 74–90. tseng, m., tan, r., chiu, a., chien, c. and kuo, t. (2018). circular economy meets industry 4.0: can big data drive industrial symbiosis?, resources, conservation and recycling 131: 146–147. tukker, a. (2015). product services for a resource-efficient and circular economy a review, journal of cleaner production 97: 76–91. tura, n., hanski, j., ahola, t., ståhle, m., piiparinen, s. and valkokari, p. (2019). unlocking circular business: a framework of barriers and drivers, journal of cleaner production 212: 90–98. urbinati, a., chiaroni, d. and chiesa, v. (2017). towards a new taxonomy of circular economy business models, journal of cleaner production 168: 487–498. vermunt, d., negro, s., verweij, p., kuppens, d. and hekkert, m. (2019). exploring barriers to implementing different circular business models, journal of cleaner production 222: 891–902. wirtz, b., göttel, v. and daiser, p. (2016). business model innovation: development, concept and future research directions, journal of business models 4(1): 1–28. world economic forum. (2016). intelligent assets unlocking the circular economy potential. retrieved from https:// www.weforum.org/reports/intelligent-assets-unlocking-the-circular-economy-potential zhang, y., ren, s., liu, y., sakao, t. and huisingh, d. (2017). a framework for big data driven product lifecycle management, journal of cleaner production. zheng, p., lin, t., chen, c. and xu, x. (2018). a systematic design approach for service innovation of smart productservice systems, journal of cleaner production. zolnowski, a., christiansen, t. and gudat, j. (2016). business model transformation patterns of data-driven innovations. zott, c., amit, r. and massa, l. (2011). the business model: recent developments and future research, journal of management 37(4): 1019–1042. journal of business models (2021), vol. 9, no. 2, pp. 44-71 64 summary of the articles reviewed years of publication 20 15 10 5 0 2016 2017 2018 2019 number of articles no relevant articles were published before 2016. the bar for 2019 covers the months from january to august. journals 0 5 10 15 journal of cleaner production resources, conservation and recycling sustainability california management review journal of industrial ecology technology forecasting and social change other journals number of articles the ‘other journals’ category covers advanced engineering informatics, annals of operations research, annual review of materials research, applied sciences, autonomous agents and multi-agent systems, industrial marketing management, international journal of information management, international journal of management cases, international journal of precision engineering and manufacturing – green technology, journal of manufacturing systems, journal of manufacturing technology management, management decision, marine policy, production planning & control, and social sciences, with one article each. annex 1: summary of the literature reviewed journal of business models (2021), vol. 9, no. 2, pp. 44-71 65 summary of the articles reviewed research methods case study 41% other 9% interview 7% modelling 11% literature review 31% the other research methods were action research, questionnaire-based surveys, preparation of perspective papers, and multi-method approaches. authors title journal year method context perspective on the data business models and strategies discussed aid, g., eklund, m., anderberg, s., & baas, l. ‘expanding roles for the swedish waste management sector in inter-organizational resource management’ resources, conservation and recycling 2017 interviews waste management material flow and environmental impact data industrial symbiosis alcayaga, a., wiener, m., & hansen, e. ‘towards a framework of smart-circular systems: an integrative literature review’ journal of cleaner production 2019 literature review smart circular systems products’ lifetime data product–service systems; maintenance; reuse; remanufacturing; recycling asif, f., lieder, m., & rashid, a. ‘multi-method simulation based tool to evaluate economic and environmental performance of circular product systems’ journal of cleaner production 2016 modelling circular product systems data as input to a software tool circular product systems bressanelli, g., adrodegari, f., perona, m., & saccani, n. ‘exploring how usage-focused business models enable circular economy through digital technologies’ sustainability 2018 case study circular economy; digital technologies digital technologies servitized business models camacho-otero, j., boks, c., & pettersen, i. ‘consumption in the circular economy: a literature review’ sustainability 2018 literature review circular economy; consumption customer data no specific model or strategy annex 1: summary of the literature reviewed (continued) annex 2: articles included in the literature review journal of business models (2021), vol. 9, no. 2, pp. 44-71 66 authors title journal year method context perspective on the data business models and strategies discussed cezarino, l., liboni, l., oliveira stefanelli, n., oliveira, b., & stocco, l. ‘diving into emerging economies bottleneck: industry 4.0 and implications for circular economy’ management decision 2019 literature review circular economy; industry 4.0 opportunities and limitations connected with industry 4.0 no specific model or strategy de mattos, c., & de albuquerque, t. ‘enabling factors and strategies for the transition toward a circular economy (ce)’ sustainability 2018 case study circular economy data as a key aspect of circular business models industrial symbiosis; extending resource value; reverse supply chain favi, c., marconi, m., germani, m., & mandolini, m. ‘a design for [a] disassembly tool oriented to mechatronic product de-manufacturing and recycling’ advanced engineering informatics 2019 modelling disassemblability and recyclability data as input to a software tool disassemblability; recyclability fisher, o., watson, n., porcu, l., bacon, d., rigley, m., & gomes, r. l. ‘cloud manufacturing as a sustainable process manufacturing route’ journal of manufacturing systems 2018 literature review cloud manufacturing cloud manufacturing as a mechanism to share and exploit data automation, process resilience, waste reduction, reuse, and recovery frishammar, j., & parida, v. ‘circular business model transformation: a roadmap for incumbent firms’ california management review 2019 case study circular business transformation the potential role of software and data-analytics specialists product–service systems garcia-muiña, f., gonzález-sánchez, r., ferrari, a., & settembre-blundo, d. ‘the paradigms of industry 4.0 and circular economy as enabling drivers for the competitiveness of businesses and territories: the case of an italian ceramic tiles manufacturing company’ social sciences 2018 case study circular economy; industry 4.0 industry 4.0 in support of collecting, storing, and processing of data no specific model or strategy gilbert, p., wilson, p., walsh, c., & hodgson, p. ‘the role of material efficiency to reduce co 2 emissions during ship manufacture: a life cycle approach’ marine policy 2017 modelling life-cycle analysis data as input to life-cycle analysis material-efficiency gupta, s., chen, h., hazen, b., kaur, s., & santibañez gonzalez, e. ‘circular economy and big data analytics: a stakeholder perspective’ technology forecasting and social change 2018 interviews circular economy; big data analytics big data as a facilitator of circular economy no specific model or strategy heyes, g., sharmina, m., mendoza, j., gallego-schmid, a., & azapagic, a. ‘developing and implementing circular economy business models in service-oriented technology companies’ journal of cleaner production 2019 case study circular business models data’s monitoring and analysis as an attractive business model for it companies data’s monitoring and analysis hofmann, f. ‘circular business models: business approach as driver or obstructer of sustainability transitions?’ journal of cleaner production 2019 literature review circular business models digital technologies supporting circular business models no specific model or strategy hopkinson, p., zils, m., hawkins, p., & roper, s. ‘managing a complex global circular economy business model: opportunities and challenges’ california management review 2018 case study circular business models asset-tracking tools; real-time visibility no specific model or strategy annex 2: articles included in the literature review (continued) journal of business models (2021), vol. 9, no. 2, pp. 44-71 67 authors title journal year method context perspective on the data business models and strategies discussed jabbour, c., lopes de sousa jabbour, a., sarkis, j., & filho, m. ‘unlocking the circular economy through new business models based on large-scale data: an integrative framework and research agenda’ technology forecasting and social change 2019 literature review circular economy; big data big data in unlocking the potential of circular economy ‘regenerate, share, optimize, loop, virtualize, exchange’ jensen, j., prendeville, s., bocken, n., & peck, d. ‘creating sustainable value through remanufacturing: three industry cases’ journal of cleaner production 2019 case study sustainable remanufacturing data in assessment of environmental and economic performance remanufacturing khan, m., mittal, s., west, s., & wuest, t. ‘review on upgradability – a product lifetime extension strategy in the context of product service systems’ journal of cleaner production 2018 literature review upgrading; extending products’ service life data to support designing of upgradable services product–service systems leising, e., quist, j., & bocken, n. ‘circular economy in the building sector: three cases and a collaboration tool’ journal of cleaner production 2018 case study circular economy information flow in the supply chain no specific model or strategy lieder, m., asif, f., & rashid, a. ‘towards circular economy implementation: an agentbased simulation approach for business model changes’ autonomous agents and multi-agent systems 2017 modelling circular business models data as input to understanding customers’ behaviour and preferences no specific model or strategy lindström, j., hermanson, a., blomstedt, f., & kyösti, p. ‘a multi-usable cloud service platform: a case study on improved development pace and efficiency’ applied sciences 2018 case study cloud service platforms data collection and analytics in big data operations no specific model or strategy lopes de sousa jabbour, a., jabbour, c., godinho, f., & roubaud, d. ‘industry 4.0 and the circular economy: a proposed research agenda and original roadmap for sustainable operations’ annals of operations research 2018 literature review circular economy; industry 4.0 industry 4.0’s technologies to collect, analyse, and act on data ‘regenerate, share, optimize, loop, virtualize, exchange’ lüdeke-freund, f., gold, s., & bocken, n. ‘a review and typology of circular economy business model patterns’ journal of industrial ecology 2019 literature review circular business models’ design identifying equipment databases as an example of auxiliary services no specific model or strategy manninen, k., koskela, s., antikainen, r., bocken, n., dahlbo, h., & aminoff, a. ‘do circular economy business models capture intended environmental value propositions?’ journal of cleaner production 2018 case study circular business models lack of data for verifying the environmental benefits of circular business models no specific model or strategy matsumoto, m., yang, s., martinsen, k., & kainuma, y. ‘trends and research challenges in remanufacturing’ international journal of precision engineering and manufacturing – green technology 2016 literature review remanufacturing design tools as requiring significant quantities of product data remanufacturing merli, r., preziosi, m., & acampora, a. ‘how do scholars approach the circular economy? a systematic literature review’ journal of cleaner production 2018 literature review circular economy linking of big data and the internet of things to circular economy no specific model or strategy annex 2: articles included in the literature review (continued) journal of business models (2021), vol. 9, no. 2, pp. 44-71 68 authors title journal year method context perspective on the data business models and strategies discussed mishra, j., hopkinson, p., & tidridge, g. ‘value creation from circular economy-led closed loop supply chains: a case study of fast-moving consumer goods’ production planning & control 2018 case study closed-loop supply chains integration of material data with supply-chain databases and systems closed-loop supply chains, reverse material flows, and reverse logistics nascimento, d., alencastro, v., quelhas, o., caiado, r., garza-reyes, j., lona, l., & tortorella, g. ‘exploring industry 4.0 technologies to enable circular economy practices in a manufacturing context’ journal of manufacturing technology management 2019 interviews circular economy; industry 4.0 the value of data in collection and sorting of waste selective waste collection; sorting of waste niero, m., & olsen, s. ‘circular economy: to be or not to be in a closed product loop? a life cycle assessment of aluminium cans with inclusion of alloying elements’ resources, conservation and recycling 2016 modelling life-cycle assessment life-cycle data a closed product loop niero, m., hauschild, m., hoffmeyer, s., & olsen, s. ‘combining eco-efficiency and eco-effectiveness for continuous loop beverage packaging systems: lessons from the carlsberg circular community’ journal of industrial ecology 2017 case study life-cycle assessment life-cycle data circular industrial systems oghazi, p., & mostaghel, r. ‘circular business model challenges and lessons learned – an industrial perspective’ sustainability 2018 case study circular business models lack of tools to handle products’ lifetime data no specific model or strategy pialot, o., millet, d., & bisiaux, j. ‘“upgradable pss”: clarifying a new concept of sustainable consumption/production based on upgradablility’ journal of cleaner production 2017 action research product–service systems; upgradability using data to achieve upgradability product–service systems planing, p. ‘will digital boost circular? evaluating the impact of the digital transformation on the shift towards a circular economy’ international journal of management cases 2017 literature review digital transformation focus on digital transformation no specific model or strategy rajala, r., hakanen, e., mattila, j., seppälä, t., & westerlund, m. ‘how do intelligent goods shape closed-loop systems?’ california management review 2018 case study intelligence of goods in closed-loop ecosystems intelligent goods; traceability; digital identity closed-loop business models; digital platforms rajput, s., & singh, s. ‘connecting circular economy and industry 4.0’ international journal of information management 2019 survey circular economy; industry 4.0 enabling and challenging factors within industry 4.0 no specific model or strategy reuter, m., van schaik, a., gutzmer, j., bartie, n., & abadías-llamas, a. ‘challenges of the circular economy: a material, metallurgical, and product design perspective’ annual review of materials research 2019 literature review circular economy data needed for assessing the circular benefits no specific model or strategy saidani, m., yannou, b., leroy, y., & cluzel, f. ‘heavy vehicles on the road towards the circular economy: analysis and comparison with the automotive industry’ resources, conservation and recycling 2018 multimethod approach end of life insufficiency of data for understanding the end-of-life options end-of-life perspective annex 2: articles included in the literature review (continued) journal of business models (2021), vol. 9, no. 2, pp. 44-71 69 authors title journal year method context perspective on the data business models and strategies discussed spring, m., & araujo, l. ‘product biographies in servitization and the circular economy’ industrial marketing management 2017 literature review circular economy; servitization potential of internet of things solutions and smart connected products, along with product biographies servitization tseng, m., tan, r., chiu, a., chien, c., & kuo, t. ‘circular economy meets industry 4.0: can big data drive industrial symbiosis?’ resources, conservation and recycling 2018 perspective paper industry 4.0; big data; industrial symbiosis the nexus of industry 4.0 and circular economy no specific model or strategy tura, n., hanski, j., ahola, t., ståhle, m., piiparinen, s., & valkokari, p. ‘unlocking circular business: a framework of barriers and drivers’ journal of cleaner production 2019 case study circular economy enhanced information management technologies, services, and platforms as drivers for circular economy no specific model or strategy veleva, v., & bodkin, g. ‘corporate–entrepreneur collaborations to advance a circular economy’ journal of cleaner production 2018 case study circular economy; collaboration lack of data for assessing circular economy’s performance no specific model or strategy vermunt, d., negro, s., verweij, p., kuppens, d., & hekkert, m. ‘exploring barriers to implementing different circular business models’ journal of cleaner production 2019 case study circular business models lack of information and data, as a barrier to circular business models no specific model or strategy zhang, y., ren, s., liu, y., sakao, t., & huisingh, d. ‘a framework for big data driven product lifecycle management’ journal of cleaner production 2017 case study big data; product life-cycle management big-data-driven product life-cycle management product life-cycle management annex 2: articles included in the literature review (continued) journal of business models (2021), vol. 9, no. 2, pp. 44-71 70 päivi luoma is an experienced professional in strategy and business development, new business concepts, and innovation strategies. she has 20 years of experience on working with impact-driven companies and their innovations globally. she has a background in environmental economics and corporate responsibility. lately she has focused on sustainable business models, co-creation and clean technologies, as well as commercialising circular innovations. currently she is working on her phd on the role and value of data in circular economy business and ecosystems. anne toppinen is professor of forest economics and marketing at university of helsinki and the leader of helsinki institute of sustainability science (helsus). toppinen’s expertise is on sustainability transformations and business economics and markets in the context of circular bioeconomy. she has also studied policy coherence and diffusion of sustainability practices in the natural resource context, as well as related sustainable business models. she has published over 130 scientific peer review journal articles and supervised 14 doctoral theses. for more information of her projects and publications, see https://www.helsinki.fi/en/researchgroups/ forest-bioeconomy-business-and-sustainability about the authors https://www.helsinki.fi/en/researchgroups/forest-bioeconomy-business-and-sustainability https://www.helsinki.fi/en/researchgroups/forest-bioeconomy-business-and-sustainability journal of business models (2021), vol. 9, no. 2, pp. 44-71 71 esko penttinen is professor of practice in information systems at aalto university school of business in helsinki. he holds a ph.d. in information systems science and a m.sc. in economics from helsinki school of economics. esko leads the real-time economy competence center and is the co-founder and chairman of xbrl finland. he studies the interplay between humans and machines, organizational implementation of artificial intelligence, and governance issues related to outsourcing and virtual organizing. his main practical expertise lies in the assimilation and economic implications of interorganizational information systems, focusing on application areas such as electronic financial systems, government reporting, and electronic invoicing. esko’s research has appeared in leading is outlets such as mis quarterly, information systems journal, journal of information technology, international journal of electronic commerce, and electronic markets. about the authors 30 journal of business models (2022), vol. 10, no. 1, pp. 30-41 capability framework implementing pay-per-outcome business model in equipment manufacturing companies veli-matti uski1, prasanna kumar kukkamalla2, hannu kärkkäinen3, and karan menon4 abstract the primary objective of this paper is to enhance our understanding of the capabilities necessary for implementing a pay-per-outcome business model and how equipment manufacturing companies can successfully implement such a business model. based on systematic literature research, we analysed 12 research publications that discussed pay-per-outcome capabilities in the equipment manufacturing industry. we identified 36 capabilities and formulated a capability framework for pay-per-outcome business models in the equipment manufacturing industry. we also identified that pay-per-outcome business models require specific capabilities related to customer relationship and contracting, compared with other service-based business models (such as pay-per-use business models). since earlier studies have failed to distinguish the capabilities necessary for payper-outcome business models from those for other types of product–service system business models or focused on some specific required capabilities for the former business models, we contribute to current business model literature by uncovering the unique characteristics of pay-per-outcome business models in the equipment manufacturing industry. keywords: pay-per-outcome, capabilities, equipment manufacturing acknowledgements: this work was funded from business finland 33250/31/2020 bf/future spaces. please cite this paper as: uski et al. (2022), capability framework implementing pay-per-outcome business model in equipment manufacturing companies, vol. 10, no. 1, pp. 30-41, 1–4 tampere university issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6785 https://doi.org/10.54337/jbm.v10i1.6785 journal of business models (2022), vol. 10, no. 1, pp. 30-41 3131 introduction in recent years, sustainable business models such as pay-per-x (ppx) business models (bms) have gained interest among the equipment manufacturing industry (emi) as companies try to increase their profitability and find competitive advantage by shifting from product-orientated towards serviceorientated business (cuc, 2019; gebauer et al., 2017). in ppx bms, the customer pays depending on equipment usage, such as by used hours (pay-per-use), kilometres (pay-per-output) or produced outcomes (pay-per-outcome), rather than buying the equipment (menon et al., 2019). in ppx bms, consumers pay for the unit of service (e.g. clothes wash) without gaining product ownership, and thus they are often linked to increased environmental performance (tunn et al., 2020). ppx bms are reasonably popular in the energy industry where the customers does not own e.g. solar panels but pay only based on how much energy the panels generate (xu et al., 2018). another example may be a compressed air and vacuum products manufacturer offering customers a fixed price per cubic meter of compressed air. ppx services require the value proposition to be reconfigured from products (input-orientated) to services (output-orientated) (cusumano et al., 2015). ppx bms allow the customer to move capital costs to operational costs, while the supplier carries the operational risks. this risk transfer is priced, and thus central in ppx bms (adrodegari et al., 2015). payper-outcome bms are the most advanced version of ppx bms; there are various terms for these in the literature, such as outcome-based contracts (ng et al., 2009), performance-based contracts (liinamaa et al., 2016) and result-orientated product–service systems (möller and shahnavaz, 2020). furthermore, the meaning of a pay-per-outcome bm varies among authors, and some do not even distinguish between pay-per-use and pay-per-outcome bms (grubic and jennions, 2018). in pay-per-outcome bms, the customer pays for the results the product/service provides, rather than for usage of products, while the ownership of product and maintenance responsibilities remains with supplier (gebauer et al., 2017). the customer pays a fee, which depends on the achievement of a contractually set result in terms of product performance or outcome of its usage (for instance, the final output quality) (adrodegari et al., 2015). for example, with independent power producer contracts, the customer neither buys the energy facility nor leases it but commits to buying a fixed amount of energy (mwh) at a pre-defined price. thus, the provider (or third party) owns the facility, and if the provider can produce excess energy, it gains the profits from that. if it cannot produced the agreed level of energy, however, it will have to buy the necessary energy from the markets (korkeamäki and kohtamäki, 2019). despite, the popularity of pay-per-outcome bms, their implementation has been difficult due to significant risks and technological challenges (gebauer et al., 2017). these difficulties may prevent the implementation of such bms in equipment manufacturing companies. michelin, for example, had endured many years challenges to attain a commercially successful pay-per-kilometre service; it finally succeeded only after it was able to develop new monitoring and service development capabilities (gebauer et al., 2017). to successfully implement a pay-per-outcome bm, a company needs to reconfigure its current capabilities (teece, 2018) and develop new ones (grubic and jennions, 2018). the needed capabilities related product–service systems as wider concept have already been researched (annarelli et al., 2021), but only a few studies have considered the capabilities needed specifically for ppx bms (gebauer et al., 2017; möller and shahnavaz, 2020; sousa-zomer et al., 2018; story et al., 2017). however, these studies do not take into account the specific capabilities needed for pay-per-outcome bms such as those related to customer co-production (schaefers et al., 2021) or legal–technical capabilities related to contracting (ng and nudurupati, 2010). hence the primary objective of this paper is to fill this gap related to the capabilities required for payper-outcome bms and to understand how equipment manufacturing companies can successfully implement such models. thus, we aim to answer the following research question: rq: what kind of new capabilities are needed for implementing pay-per-outcome business models in the equipment manufacturing industry? journal of business models (2022), vol. 10, no. 1, pp. 30-41 3232 to answer the research question, we have used a systematic literature review approach. based on the articles, we have identified the necessary capabilities and formulated a capability framework for payper-outcome bms in the emi. since earlier studies have either failed to distinguish the capabilities required for pay-per-outcome bms from other types of product–service system bms or focused on some specific capability required for pay-per-outcome bms, we contribute to current bm literature by uncovering the unique characteristics pay-per-outcome bms in the emi. approach this study adopted a systematic literature approach (kitchenham, 2004). in research carried out during june 2021, we searched only for journal articles written in english and published in the scopus and web of science databases. as our research topic was capabilities of pay-per-outcome bms in the emi, we used the following keywords and search string: (“pay per output” or “pay per outcome” or “outcome-based” or “performance-based” or “performance-based logistics” or “performancebased contract” or “product service systems” or “product service systems business model” or “result-oriented” or “servitization” or “advanced service”) and (“manufacturing” or “manufacture” or “manufacturer” or “machine builder” or “equipment”) and (“capabilities” or “capability” or “competencies” or “competences”). in total, we identified 260 articles from scopus and 236 from web of science; after removing duplicates, we were left with 327 journal articles. after screening records by title and/ or abstract, we reduced the amount to 32 articles that specifically discussed pay-per-outcome bms in emi. these articles were studied carefully, and from them we finally identified 9 articles eligible for our study. in addition, we complemented the identified articles with a search by google scholar and a backward search from references that revealed 2 articles and 1 conference paper published in a procedia cirp special issue. the conference paper was included due to its interesting viewpoint on co-production and financing. thus, we commenced our review with 12 articles (see table 1). table 1. article journal perspective for capabilities reference 1. outcome-based contracting from the customers' perspective: a means-end chain analytical exploration industrial marketing management service development and customer relationship perspective (schaefers et al., 2021) 2. the role of servitization in the capabilities–performance path competitiveness review digitalisation and organisational capability perspective (manresa et al., 2021) 3. to outcomes and beyond: discursively managing legitimacy struggles in outcome business models industrial marketing management co-production perspective (korkeamäki and kohtamäki, 2020) table 1: selected articles (continued) journal of business models (2022), vol. 10, no. 1, pp. 30-41 3333 table 1: selected articles table 1. article journal perspective for capabilities reference 4. ecosystem of outcome-based contracts: a complex of economic outcomes, availability and performance procedia cirp co-production and financing perspective (korkeamäki and kohtamäki, 2019) 5. investigating risks of outcome-based service contracts from a provider’s perspective international journal of production research customer relationship and contracting perspective (hou and neely, 2018) 6. the path to outcome delivery: interplay of service market strategy and open business models technovation service development perspective (visnjic et al., 2018) 7. servitization through outcome-based contract – a systems perspective from the defence industry international journal of production economics customer relationship and value network perspective (batista et al., 2017) 8. performance-based and functional contracting in value-based solution selling industrial marketing management contracting perspective (liinamaa et al., 2016) 9. servitized manufacturing firms competing through remote monitoring technology: an exploratory study journal of manufacturing technology management digitalisation perspective (grubic and peppard, 2016) 10. pricing strategies of service offerings in manufacturing companies: a literature review and empirical investigation production planning & control financing perspective (rapaccini, 2015) 11. outcome‐based service contracts in the defence industry – mitigating the challenges journal of service management customer relationship and value network perspective (ng and nudurupati, 2010) 12. outcome-based contracts as a driver for systems thinking and servicedominant logic in service science: evidence from the defence industry european management journal organisational capability perspective (ng et al., 2009) journal of business models (2022), vol. 10, no. 1, pp. 30-41 3434 the thematic analysis was used to identify capabilities from the literature (corbin and strauss, 2008). it was conducted in two stages: in the first stage, we identified the necessary resources, activities and knowledge described in the articles, and in the second phase, we categorised these thematic items into capabilities (day, 1994). for example, according to rapaccini (2015), complex services such as payper-outcome services should be priced based on the value they provide for the customer rather than on the costs they generate. we interpret from this that pay-per-outcome bms require ‘capability to quantify the value provided by the offer’. key insights we identified 36 capabilities that we divided to seven dimensions, thus creating the framework (table 2). the dimensions were based on business activities–derived servitisation frameworks found in the literature (sousa-zomer et al., 2018; story et al., 2017), but they were modified to address the key characteristics of pay-per-outcome bms, such as customer relationship and digitalisation, which were emphasised in the identified capabilities. in the following sub-sections, we describe each of these dimensions in more detail. table 2. dimension capabilities differences compared to pay-per-use bm customer relationship − capability to establish trustworthy relationships with customers (korkeamäki and kohtamäki, 2020) − capability for transparent interorganisational communication (korkeamäki and kohtamäki, 2020) − capability to co-develop with customers (schaefers et al., 2021) − capability for co-production with customers (schaefers et al., 2021) − capability to communicate new roles and responsibilities among customers’ bms (hou and neely, 2018) − understanding customer needs (hou and neely, 2018; visnjic et al., 2018) − in-depth understanding of customer processes (korkeamäki and kohtamäki, 2020; schaefers et al., 2021) − capability to convince customers about the value of non-ownership bm (korkeamäki and kohtamäki, 2020; schaefers et al., 2021) − capability for coproduction with customer (schaefers et al., 2021) − understanding customer needs (hou and neely, 2018; visnjic et al., 2018) − in-depth understanding of customer processes (korkeamäki and kohtamäki, 2020; schaefers et al., 2021) value network − capability to identify and analyse relevant partners (ng et al., 2013) − capability to evaluate partner's performance (hou and neely, 2018) − capability to orchestrate the value network of partners (hou and neely, 2018) − capability to evaluate partner’s performance (hou and neely, 2018) digitalisation − capability for remote monitoring (grubic and peppard, 2016) − capability to convince the customer to share data (grubic and peppard, 2016) − capability to translate data into value (grubic and peppard, 2016) − capability to ensure data privacy and security (grubic and peppard, 2016) − capability to simulate equipment performance (grubic and peppard, 2016) − capability to simulate equipment performance (grubic and peppard, 2016) table 2: pay-per-outcome business model (bm) capability framework. (continued) journal of business models (2022), vol. 10, no. 1, pp. 30-41 3535 table 2. dimension capabilities differences compared to pay-per-use bm organisation and governance − service-orientated attitude (ng et al., 2009) − capability to quantify, control and monitor risks (ng et al., 2009) − capability to quickly react to fast-changing situations (ng et al., 2009) − capability to establish a continuous learning culture (ng et al., 2009) − leadership (ng et al., 2009) − teamwork (ng et al., 2009) − technical competencies for marketing personnel (schaefers et al., 2021) − technical competencies for marketing personnel (schaefers et al., 2021) contracting and legal − legal–technical capabilities (ng and nudurupati, 2010) − capability to negotiate value-based contracts (liinamaa et al., 2016) − capability to manage intellectual property and tacit knowledge (liinamaa et al., 2016) − capability for functional contractual techniques (liinamaa et al., 2016) − legal–technical capabilities (ng and nudurupati, 2010) − capability to manage intellectual property and tacit knowledge (liinamaa et al., 2016) − capability for functional contractual techniques (liinamaa et al., 2016) service development − capability to quantify the value provided by the offer (liinamaa et al., 2016; rapaccini, 2015) − definition of logistics and distribution processes (korkeamäki and kohtamäki, 2019) − definition of installation and maintenance services procedures (korkeamäki and kohtamäki, 2019) − capability to develop processes for reverse logistics and remanufacturing (schaefers et al., 2021) − understanding of service design (schaefers et al., 2021) − capability to anticipate potential causes of product failure (schaefers et al., 2021) − capability to anticipate potential causes of product failure (schaefers et al., 2021) financing − capability to finance non-ownership bm (rapaccini, 2015) − capability to calculate life-cycle cost of product–service systems (rapaccini, 2015) − capability to convince financial partners (korkeamäki and kohtamäki, 2019) − capability to convince financial partners (korkeamäki and kohtamäki, 2019) table 2: pay-per-outcome business model (bm) capability framework. journal of business models (2022), vol. 10, no. 1, pp. 30-41 3636 customer relationship in pay-per-outcome bms, the provider’s profitability is dependent on the outcome of the customer’s process (korkeamäki and kohtamäki, 2019). hence, the role of the customer relationship is emphasised, and without mutual trust between the provider and customer, the pay-per-outcome bm is doomed to fail (korkeamäki and kohtamäki, 2020). the trust is built on fairness and honesty (korkeamäki and kohtamäki, 2020), which can be ensured through deep partnership with the customer and fair profit-sharing (korkeamäki and kohtamäki, 2019). sometimes it can be beneficial to reveal the weak points of an offering, to give the customer a feeling of openness and honesty (schaefers et al., 2021). in addition, mutual expectations should be realistic and possible to keep (ng and nudurupati, 2010). above all, to prove the credibility of the service, references have a significant role in pay-per-outcome bms (schaefers et al., 2021). furthermore, capability for co-production is crucial in pay-per-outcome bms, since performance increases can only be achieved that way. for example, one interviewee in schaefers et al.’s (2021) study remarked that if they notice that the customer is not committed on co-production, it is no worth pursuing (schaefers et al., 2021). similarly, liinamaa et al. (2016) showed how one company failed to deliver a profitable pay-per-outcome service because it could not adapt to its customer’s processes. the provider did not gain access to the customer’s business data and knowledge that it would have needed to improve its process performance (liinamaa et al., 2016). however, when the complexity of the process and number of parties involved in it increase, it is not uncommon for the ownership of many of the activities to become unclear (batista et al., 2017). thus, defining clear roles and responsibilities for each party is also essential in pay-per-outcome bms (hou and neely, 2018). proving the value for the customer in pay-per-outcome bms is difficult, and to do that, the provider must understand the customer’s needs (hou and neely, 2018; visnjic et al., 2018), how its business works and how decisions in the customer’s organisation are made (liinamaa et al., 2016). when the provider and the customer do not understand each other, the customer might start to demand more things for the contract until the contract ends up being too complicated to be implemented (hou and neely, 2018). furthermore, hou and neely (2018) showed that customer demands might vary between and even within countries and regions depending on business environment and business drivers. for example, in a case study introduced by liinamaa et al. (2016), the customer’s earning logic was such that any performance increase would not have benefited the customer but its partners, which thereby would not encourage the customer to buy the service as such. thus, understanding the customer’s unique needs is crucial for the success of a pay-per-outcome bm. however, to understand the value its equipment creates, the provider must have an in-depth understanding of the customer’s processes (korkeamäki and kohtamäki, 2020); it must understand the role in its process the offering plays (korkeamäki and kohtamäki, 2020) and how the whole system works together (schaefers et al., 2021). without understanding the entire process, it would be hard to make the best out of it. both korkeamäki and kohtamäki (2020) and schaefers et al. (2021) emphasised that even salespeople must have a technical understanding of the process, so that they can credibly communicate the value created by the equipment. value network the performance of a system can be improved internally only up to a certain point. after that, it becomes essential to collaborate with other value network parties (korkeamäki and kohtamäki, 2020). in payper-outcome bms, collaboration with partners quite often becomes inevitable because earning logic is based on improvements in the system. to get the most out of this kind of such partnerships, all the parties must be able to efficiently share knowledge and resources with each other as well as align their bms, which might not always be easy (korkeamäki and kohtamäki, 2020). thus, successful pay-peroutcome bms usually need partnering capabilities, such as to identify and evaluate partners. furthermore, incorporating third parties for delivering a value proposition constitutes a risk because if journal of business models (2022), vol. 10, no. 1, pp. 30-41 3737 some partner cannot deliver what it has promised, it might compromise the outcome of the entire offering (hou and neely, 2018). thus, it is also necessary for the provider to have the capability to orchestrate the partner network and mitigate possible risks related to it. digitalisation in pay-per-outcome bms, equipment requires remote monitoring capability and data connection (grubic and peppard, 2016) for example, monetisation is based on performance improvements, and remote monitoring capabilities are needed to measure that. thus, the provider must be able to convince the customer to share data and do so in a secure way (grubic and peppard, 2016). secondly, the provider must be able to estimate performance improvements in advance so that it can define the proper risk premium for its offering. without that, it cannot price the offering or provide guarantees related to performance (liinamaa et al., 2016). therefore, simulation capability is emphasised especially in pay-per-outcome bms (liinamaa et al., 2016; rapaccini, 2015). however, investment in simulation capability may be costly, since the provider should be able to take into account, for example, market conditions, business environment and the customer’s activities while estimating performance (liinamaa et al., 2016). organization and governance the role of human capacity and capability is significant in complex service systems (ng et al., 2009). therefore, the success of pay-per-outcome bms is also dependent on organisational capabilities (manresa et al., 2021). a company implementing a payper-outcome bm needs organisational capabilities such as coordinating and leading people in a changing environment, working in teams and forming relationships, quantifying, controlling, and monitoring risks, reacting quickly to fast-changing situations and establishing a continuous learning culture (ng et al., 2009). furthermore, an organisation must be able to define and communicate clear roles for both its own personnel and interorganisational personnel. it must also be able to reduce uncertainty and the feeling of loss of control while organisational boundaries fade between the provider and customer (ng and nudurupati, 2010). lastly, pay-per-outcome bms require the removal of silos and broken borders within an organization (korkeamäki and kohtamäki, 2020). engineers need to have soft skills such as teamwork and leadership (ng and nudurupati, 2010), and marketing personnel must have technical skills to be able to convince customers about the performance potential of the offering (schaefers et al., 2021). contracting and legal the successful implementation of a pay-per-outcome bm is highly dependent on contracts (liinamaa et al., 2016). pay-per-outcome contracts are complex, and negotiating them requires a new kind of legal–technical capability (ng and nudurupati, 2010); thus, many companies fail to implement payper-outcome bms (liinamaa et al., 2016). according to liinamaa et al. (2016), the contract should be considered a key sales object, and salespeople should have the capability to negotiate value-based contracts (liinamaa et al., 2016). negotiating pay-per-outcome contracts takes a lot of time, and even years (korkeamäki and kohtamäki, 2020, 2019). the contract should be clear, unambiguous and verifiable, and it should contain the responsibilities of both parties (liinamaa et al., 2016). however, korkeamäki and kohtamäki (2020) remarked that a contract that is too may might decrease ‘goodwill-based trust’ between the customer and provider. earnings in pay-per-outcome bms are based on exceeding pre-defined performance levels. defining this baseline is a crucial activity in contract negotiation (liinamaa et al., 2016); however, it is far from easy. the baseline should be defined mathematically in consideration of the risks, customer environment (korkeamäki and kohtamäki, 2019), equipment capabilities, market conditions and value created for the customer (liinamaa et al., 2016). therefore, negotiating the contract requires technical capabilities among the all negotiating partners (schaefers et al., 2021). journal of business models (2022), vol. 10, no. 1, pp. 30-41 3838 above all, managing intellectual property (ip) and tacit knowledge in pay-per-outcome bm delivery is crucial because performance improvements are quite often based on these. for example, liinamaa et al. (2016) showed how the case company was forced to reveal its technical plans to prove the value of its service, and the customer used this opportunity to forward this knowledge to the case company ’s competitor to get the same service for a lower price (liinamaa et al., 2016). without proficient ip management capabilities, there is nothing to restrict the customer from exploiting this knowledge (korkeamäki and kohtamäki, 2020). thus, liinamaa et al. (2016) proposed that the company should have a contracting technique whereby the ownership of ip rights is negotiated before it reveals more detailed technical plans. service development according to rapaccini (2015), complex services such as pay-per-outcome services should be priced based on the value they provide for the customer rather than costs they generate. for example, liinamaa et al. (2016) argued that most ppx types of bm in the literature, such as rolls-royce’s powerby-the-hour, are rather simple and based on used hours alone rather than the actual value they provide. hence, in a pay-per-outcome bm, the company needs the capability to quantify the value it provides for the customer. secondly, as in pay-per-outcome bms, when the provider is responsible for equipment throughout its lifecycle, the life-cycle costs are emphasised (schaefers et al., 2021). the company must be able to anticipate potential equipment failures, understand the processes for reverse logistics and remanufacturing and know how to optimise equipment life-cycle costs so it can price the service correctly (schaefers et al., 2021). maintenance activities in particular are crucial in pay-per-outcome bms, and with well-defined maintenance, logistics and distribution processes, the company can create a competitive advantage (korkeamäki and kohtamäki, 2019). financing pay-per-outcome bms always have a financial risk due to the upfront investments the provider must make, and realising the value is usually a lengthy process (hou and neely, 2018). thus, the company must have the financial capability to carry out this upfront investment and undertake the risk that the outcome might not always be realised. in addition, specific pricing capabilities are needed, since the pay-per-outcome bm is based on pricing possible performance increases and the related risk premium (rapaccini, 2015). the provider does not always need to carry the entire financial risk alone, and it can outsource it to financial partners (korkeamäki and kohtamäki, 2019) however, in that case, the provider must have the capability to convince financial partners about the profitability of the pay-per-outcome bm and communicate it in financial terms (korkeamäki and kohtamäki, 2019). discussion and conclusions this study provides evidence about the new capabilities needed for implementing pay-per-outcome bms. we identified 36 capabilities and grouped them to 7 dimensions to show that there are indeed differences between pay-per-use and pay-per-outcome bms. with this, we contribute to the existing bm innovation and ppx literature by showing that payper-outcome bms do need additional capabilities compared with more traditional pay-per-use types of bm. we showed that although customer relationships have a significant role in pay-per-use bms (gebauer et al., 2017; möller and shahnavaz, 2020; sousa-zomer et al., 2018; story et al., 2017), such bms require an even closer relationship with the customer and much more in-depth understanding of its processes and business, since the provider’s revenues are dependable on improvements in the customer’s process. close relationship with customer enable gaining the customer data (luoma et al., 2021) which is necessity for the pay-per-outcome business models. in addition, we showed that payper-outcome bms require a new kind of capabilities related to contracting, as pay-per-outcome contracts are much more complex and require technical journal of business models (2022), vol. 10, no. 1, pp. 30-41 3939 definitions of accepted performance levels. thus, it is important for pay-per-outcome bms to be studied separately from pay-per-use bms rather than being grouped together as similar bms. secondly, even though previous studies (gebauer et al., 2017; möller and shahnavaz, 2020; sousa-zomer et al., 2018; story et al., 2017) have created capability frameworks for ppx bms, they have failed to distinguish between the different types of ppx bm. as the capabilities of these models differ in essential ways, it is necessary to have a pay-per-outcome–focused capability framework that emphasises its peculiarities. thus, we contribute by developing a capability framework specifically for pay-per-outcome bms in the emi. the study also has a practical contribution. we identified the capabilities that a company requires to implement a pay-per-outcome bm and provided insight into why these capabilities are so important and what a lack of them can lead to. practitioners can utilise the presented framework while developing such bms. finally, as in any study, this one has its own limitations. the most obvious relates to the selected methodology, which is a systematic literature review. the capability framework was developed based on existing literature that might not have identified all the required capabilities. in addition, it is always possible that we have missed some literature during our review process. however, the current study was able to create a quite extensive but generic capability framework that should be tested with empirical data through future research. secondly, as we tried to create an overall picture of the required capabilities, we could not focus too deeply on individual dimensions. this creates fertile ground for future research to study how companies should develop such individual capabilities. journal of business models (2022), vol. 10, no. 1, pp. 30-41 4040 references adrodegari, f., alghisi, a., ardolino, m., saccani, n., 2015. from ownership to service-oriented business models: a survey in capital goods companies and a pss typology. procedia cirp 30, 245–250. https://doi. org/10.1016/j.procir.2015.02.105 annarelli, a., battistella, c., costantino, f., di gravio, g., nonino, f., patriarca, r., 2021. new trends in product service system and servitization research: a conceptual structure emerging from three decades of literature. cirp j. manuf. sci. technol. 32, 424–436. https://doi.org/10.1016/j.cirpj.2021.01.010 batista, l., davis-poynter, s., ng, i., maull, r., 2017. servitization through outcome-based contract – a systems perspective from the defence industry. int. j. prod. econ. 192, 133–143. https://doi.org/10.1016/ j.ijpe.2016.12.005 corbin, j., strauss, a., 2008. analyzing data for concepts, in: basics of qualitative research (3rd ed.): techniques and procedures for developing grounded theory. sage publications, inc., 2455 teller road, thousand oaks california 91320 united states. https://doi.org/10.4135/9781452230153 cuc, j.e., 2019. trends in business model research: a bibliometric analysis. j. bus. models 7, 24. cusumano, m.a., kahl, s.j., suarez, f.f., 2015. services, industry evolution, and the competitive strategies of product firms. strateg. manag. j. 36, 559–575. https://doi.org/10.1002/smj.2235 day, g.s., 1994. the capabilities of market-driven organizations. j. mark. 58, 17. https://doi.org/10.2307/1251915 gebauer, h., saul, c.j., haldimann, m., gustafsson, a., 2017. organizational capabilities for pay-per-use services in product-oriented companies. int. j. prod. econ. 192, 157–168. https://doi.org/10.1016/j.ijpe.2016.12.007 grubic, t., jennions, i., 2018. do outcome-based contracts exist? the investigation of power-by-the-hour and similar result-oriented cases. int. j. prod. econ. 206, 209–219. https://doi.org/10.1016/j.ijpe.2018.10.004 grubic, t., peppard, j., 2016. servitized manufacturing firms competing through remote monitoring technology: an exploratory study. j. manuf. technol. manag. 27, 154–184. https://doi.org/10.1108/jmtm-05-2014-0061 hou, j., neely, a., 2018. investigating risks of outcome-based service contracts from a provider’s perspective. int. j. prod. res. 56, 2103–2115. https://doi.org/10.1080/00207543.2017.1319089 kitchenham, b., 2004. procedures for performing systematic reviews, version 1.0. empir. softw. eng. 33, 1–26. korkeamäki, l., kohtamäki, m., 2020. to outcomes and beyond: discursively managing legitimacy struggles in outcome business models. ind. mark. manag. 91, 196–208. https://doi.org/10.1016/j.indmarman.2020.08.023 korkeamäki, l., kohtamäki, m., 2019. ecosystem of outcome-based contracts: a complex of economic outcomes, availability and performance. procedia cirp 83, 170–175. https://doi.org/10.1016/j.procir.2019.02.142 liinamaa, j., viljanen, m., hurmerinta, a., ivanova-gongne, m., luotola, h., gustafsson, m., 2016. performancebased and functional contracting in value-based solution selling. ind. mark. manag. 59, 37–49. https://doi. org/10.1016/j.indmarman.2016.05.032 journal of business models (2022), vol. 10, no. 1, pp. 30-41 4141 luoma, p., toppinen, a., penttinen, e., 2021. role and value of data in circular business models – a systematic literature review. j. bus. models 9, 44-71 pages. https://doi.org/10.5278/jbm.v9i2.3448 manresa, a., prester, j., bikfalvi, a., 2021. the role of servitization in the capabilities – performance path. compet. rev. int. bus. j. 31, 645–667. https://doi.org/10.1108/cr-01-2020-0017 menon, k., kärkkäinen, h., mittal, s., wuest, t., 2019. impact of iiot based technologies on characteristic features and related options of nonownership business models, in: fortin, c., rivest, l., bernard, a., bouras, a. (eds.), product lifecycle management in the digital twin era, ifip advances in information and communication technology. springer international publishing, cham, pp. 302–312. https://doi.org/10.1007/978-3-030-42250-9_29 möller, h., shahnavaz, t., 2020. use-oriented business model for consumer durables: an exploratory case study on business model capabilities. ng, i.c.l., ding, d.x., yip, n., 2013. outcome-based contracts as new business model: the role of partnership and value-driven relational assets. ind. mark. manag. 42, 730–743. https://doi.org/10.1016/j.indmarman.2013.05.009 ng, i.c.l., maull, r., yip, n., 2009. outcome-based contracts as a driver for systems thinking and servicedominant logic in service science: evidence from the defence industry. eur. manag. j. 27, 377–387. https:// doi.org/10.1016/j.emj.2009.05.002 ng, i.c.l., nudurupati, s.s., 2010. outcome‐based service contracts in the defence industry – mitigating the challenges. j. serv. manag. 21, 656–674. https://doi.org/10.1108/09564231011079084 rapaccini, m., 2015. pricing strategies of service offerings in manufacturing companies: a literature review and empirical investigation. prod. plan. control 26, 1247–1263. https://doi.org/10.1080/09537287.2015.1033495 schaefers, t., ruffer, s., böhm, e., 2021. outcome-based contracting from the customers’ perspective: a means-end chain analytical exploration. ind. mark. manag. 93, 466–481. https://doi.org/10.1016/j.indmarman.2020.06.002 sousa-zomer, t.t., magalhães, l., zancul, e., cauchick-miguel, p.a., 2018. exploring the challenges for circular business implementation in manufacturing companies: an empirical investigation of a pay-per-use service provider. resour. conserv. recycl. 135, 3–13. https://doi.org/10.1016/j.resconrec.2017.10.033 story, v.m., raddats, c., burton, j., zolkiewski, j., baines, t., 2017. capabilities for advanced services: a multiactor perspective. ind. mark. manag. 60, 54–68. https://doi.org/10.1016/j.indmarman.2016.04.015 teece, d.j., 2018. business models and dynamic capabilities. long range plann. 51, 40–49. https://doi. org/10.1016/j.lrp.2017.06.007 tunn, v.s.c., van den hende, e.a., bocken, n.m.p., schoormans, j.p.l., 2020. digitalised product-service systems: effects on consumers’ attitudes and experiences. resour. conserv. recycl. 162, 105045. https://doi. org/10.1016/j.resconrec.2020.105045 visnjic, i., neely, a., jovanovic, m., 2018. the path to outcome delivery: interplay of service market strategy and open business models. technovation 72–73, 46–59. https://doi.org/10.1016/j.technovation.2018.02.003 xu, y., ahokangas, p., reuter, e., 2018. eaas: electricity as a service? j. bus. models 6, 23. 50 journal of business models (2022), vol. 10, no. 1, pp. 50-57 a business model approach to smart city governance sari perätalo1, mahmoud mohamed2, and marika iivari3 abstract in transitioning from hierarchal corporate governance to platform governance mechanisms, smart cities need to develop new models for managing the dynamics of platform governance between city divisions. by conceptualizing smart cities as a platform of platforms, this paper uses the business model approach to develop a platform governance framework in the smart city context. the contribution of this paper is to illustrate how the business model approach can enhance better communication between different layers of smart cities and thus improve smart city development. keywords: business model, smart cities, platform governance please cite this paper as: perätalo, s., mohamed, m., and iivari, m. (2022), a business model approach to smart city governance, vol. 10, no. 1, pp. 50-57 1–4 university of oulu, oulu business school, martti ahtisaari institute, finland issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6786 https://doi.org/10.54337/jbm.v10i1.6786 journal of business models (2022), vol. 10, no. 1, pp. 61-68 5151 introduction smart cities emerged as a concept to explain the integration of ict in the provisioning of city services and urban development (walravens, 2015). in this study, we view smart cities as a system of systems, which comprises all systems involved in providing a better life for the citizens. the smart city comprises all dayto-day services accessed by its citizens, including infrastructure systems, healthcare systems, education systems, transportation and mobility systems, water, energy, and waste management systems (timeus et al, 2020). hence, when cities try to integrate all these smart systems to provide one unified system for their citizens to interact and deal with, they run into the platform of platforms dynamics (kretschmer et al., 2020), where the data exchange and knowledgesharing, governance, and coopetition between different city departments take place in such setting (cusumano et al., 2020; fenwick et al., 2019). governance has been identified as one of the main components of smart cities and their development (e.g., perätalo & ahokangas 2018), but several angles of smart governance remain unexplored. in particular, the history of rural and regional politics-driven governance models has been identified as the main cause of performance challenges in smart city development (honeybone et al. 2018). according to bolívar and meijer (2016), smart city governance is about collaboration in which the role of governance is to enhance the communication and collaboration among different actors and encourage improvement and new innovations. cities are becoming aware that they need new tools to transform and deliver services to their citizens, but they are equally challenged in how to estimate the value of those services to their citizens (kuk and janssen, 2011). previous research (e.g., bolívar & meijer, 2016) has also defined six elements of smart governance, which are (1) the use of ict, (2) the decision-making process, (3) the government’s ability to collaborate with citizens online and deliver services to them online, (4) the ability to achieve collective goals through internal collaboration, (5) the ability to collaborate externally, and (6) the ability to achieve social inclusion of citizens in public services. the evolving city context has opened new opportunities and innovative business models using digital solutions as a response to challenges in the city (e.g., walravens & ballon, 2013; perätalo & ahokangas, 2018). city developers have recognised the importance of smart city ecosystems in order to chart plans for the future (perätalo and ahokangas, 2018). conceptualizing smart city ecosystems as platforms can thus help cities to identify the points of governance in the collaborative creation and capture of opportunities, value, and advantages that are based on smart city systems. however, little is known in extant research about the tensions that arise during the transition process from traditional hierarchical governance mechanisms to platform governance mechanisms (koo and eesley, 2021). contributing to this gap in our current knowledge, we argue that using the business model approach that embraces the key concepts of value, opportunity, and advantage (e.g., demil & lecocq, 2010; perätalo & ahokangas, 2018), cities can respond to the ever-growing pressure to advance effectiveness and quality of life and develop new ways of operating to make their cities smarter. accordingly, the purpose of this paper is to conceptualize smart cities as platforms and how, in this context, the business model approach can accordingly address issues related to the governance of smart cities. we ask “how could smart city governance benefit from the business model approach?” we first discuss the main literature on the intersection of smart cities, governance, and platforms, and we then present our framework and end with a discussion and conclusion. approach in this conceptual paper, we combine two main themes from extant literature: smart cities and platform governance. in this chapter, we discuss previous research on smart cities as platforms, then business models, and smart cities and platforms governance. smart cities as multi-sided platforms the smart city as a concept includes a strategic course that emphasises the increasing importance of ict (innovation and communication technologies) journal of business models (2022), vol. 10, no. 1, pp. 61-68 5252 in social and societal regional and urban development (e.g., walravens, 2015). smart cities also attempt to prioritise their ecosystems to aim for social and environmental sustainability via urban planning. smart cities can be viewed as platform ecosystems that are evolving as meta-organisations, including multiple platforms working together and known as the platform of platforms (cusumano et al., 2020; kretschmer et al., 2020). likewise, smart cities nowadays are incorporating various platforms to work together and migrating from hierarchal corporate governance to platform governance mechanisms (fenwick et al, 2019). hence, smart cities often emerge around customer-centric platform ecosystems. in that, the hierarchal models are divided into multi-layered modular platforms working together within the same ecosystem (iivari & ahokangas, 2021). according to tilson et al. (2012), a digital platform can be defined as a sociotechnical constitution including technical elements and associated organisational standards and processes. digital platforms integrate products, services, and companies using private networks or the internet, and they concern many business functions (teece, 2018). these two descriptions represent well the smart city business platforms. in practice, the smart city platforms are continuously evolving due to different services that are changing citizens’ daily lives and behaviour, as well as those of businesses, in an urban context in which modern technologies open new possibilities to multiple business models applied to public services in smart cities (díaz-díaz et al., 2017). the paradox of smart city platforms is that in a public context, there is a need to both be stable and have control in order to keep a solid foundation for further development, but also to be flexible to be able to support growth and new innovations (tilson et al., 2012). as in a multi-sided platform setting, the city is in the centre of the platform, because it must both provide services to the citizens as platform owners and facilitate access to services provided by third parties. for example, the city must coordinate and provide financial capital to create a structure for the business ecosystem it aims to create (teece, 2018). the latest technological developments offer cities new ways to create value, which requires new business models (díaz-díaz et al., 2017). that is why it is necessary to design innovative business models for smart city platforms. furthermore, the business model and its three anchoring concepts of opportunity, value, and advantage become relevant in the context of cities. business models and smart city governance previous research has shown that governance can use business model logic as a tool to address change (e.g., nielsen & aagaard, 2021). in a fast-developing context, governance should loosen its mindset and move towards a more entrepreneurial way of working, to increase the resilience and preparedness of the organisation. in other words, it is important to understand and recognise how change creates new business opportunities (nielsen & aagaard, 2021). smart cities can create competitive advantages through business model thinking. in practice, this means that business model thinking can act as an instrument to build synergies between different stakeholders in the ecosystem, and thus define how the ecosystem innovates. the three core concepts of business models are opportunity, value, and advantage (e.g., amit & zott, 2001). opportunity can be defined as something positive to be reached (holm et al., 2015), and opportunity is strongly dependent on the external context (atkova, 2018, p. 20). in other words, the business model can help to recognise and exploit opportunities that exist in the external environment (atkova 2018). according to business model thinking, value creation can be a source of competitive advantage, and competitive advantages are needed by organisations to become and remain competitive (demil & lecocq, 2010). a competitive advantage enables the creation of greater value for the organisation, shareholders, and stakeholders, and thus, it gives a competitive edge related to competitors. the scalability of technical solutions and economic sustainability are also denominators of the business model, but they can also be regarded as important outcomes for the smart city (alusi et al., 2011). smart city platform governance governance in a platform ecosystem refers to the design roles created by the platform owner to control journal of business models (2022), vol. 10, no. 1, pp. 61-68 5353 the platform ecosystem (e.g., deciding on the degree of openness/closedness of the platform), to govern complementary interactions with the platform owner and other stakeholders (zhang et al, 2020; koo and eesley, 2021). according to tiwana et al. (2010), a platform has to be governed not only by the platform provider but also by other actors, to be able to take advantage of the platform’s collaborative and open infrastructure and to have a functioning platform business model. together, technological infrastructure and governance are the key characteristics of platform business models. if a platform ecosystem remains ungoverned, it can create imbalance, with some players dominating the platform ecosystem, which makes it less attractive for new complementors to join the platform and develop smart offerings (wareham et al., 2014). the governance aspect also addresses how those players that complement the platform owner comply with the platform goals and objectives (wareham et al., 2014). platform governance is the main key in the stakeholders’ heterogenous incentives to join and contribute to the growth of the platform ecosystem. however, among all governance mechanisms, the key goal in platform governance is to offer stakeholders the opportunity to balance their heterogeneous interests to work together (zhang et al., 2020). platform governance has been addressed by strategic management researchers from two perspectives. first, granting authority mechanisms have been found to strategically divide the decisionmaking process between the platform owner and stakeholders. this ensures that the overall platform ecosystem makes the best use of the value creation and capture process (tiwana et al., 2010). second, the compliance mechanism in the platform ecosystem ensures alignment of the various incentives of stakeholders to ensure the establishment of the coopetition framework within the platform ecosystem (zhang et al., 2020; wareham et al., 2014). further, the extant research has proven that the platform owner, namely the city, can shape stakeholders value creation activities through platform governance roles (zhang et al., 2020), as platform owners define how information can be shared between stakeholders and how they interact with each other (tiwana et al., 2010; zhang et al., 2020). governance is hence important especially in a smart city context, as governance impacts the overall sustainability and survival of the platform ecosystem as a whole, where city organisations act as platform owners. key insights in this chapter, we illustrate how the business model as an approach can be applied to governing smart cities as platforms. what does a business model approach bring to the governance of smart cities? we apply a 4c business model framework in the analysis of smart city platform governance. wirtz et al. (2010) suggested a 4c model for classifying digital-age business models, but their classification can also be used in a smart city context. the 4c model covers most of the classical internet-based business activities, consisting of (1) connection, (2) content, (3) context, and (4) commerce layers, which each have their own value proposition (wirtz et al., 2010; yrjölä et al., 2015; iivari & ahokangas, 2021). in the smart city context, the 4c model can be described as a layered platform structure in which the lower layers are needed to enable the existence of the higher-level business models (yrjölä et al., 2015). hence, the 4c model is manifested in how cities as platform owners may provide their services and how citizens can use those services, as illustrated in figure 1 below. the ultimate goal for cities is always the provision of better services for their citizens. the role of smart governance is therefore to control and foster communication and collaboration among different city units for service utilisation and provisioning for the citizens and also for the businesses providing those services (1). however, to make this possible, cities also need to facilitate the socio-technical integrations and synergies, both on a large scale in between different sectors and within specific sectoral services, meaning contexts (2), such as transportation, education, healthcare, and so on. therefore, context can be further journal of business models (2022), vol. 10, no. 1, pp. 61-68 5454 defined as situation or location-based, as cities are always bound to a certain physical location. hence, in smart cities, the context layer contributes especially to the government’s ability to deliver city services, irrespective of location, via online interfaces. so that the creation and facilitation of different innovative city services can take place, city governance also needs to manage the vast amount of data and information related to different systems and services, meaning content (3). taking advantage of different types of data for decision-making, in particular, can be acknowledged as one of the key factors in fostering the competitiveness of cities. nevertheless, none of the above layers can exist without information and communications technologies. connection (4) is the backbone of digitalization and smart cities, and therefore smart city governance needs to pay specific attention to the control and alignment of the physical infrastructure and the key enabling ict technologies (such as the internet, mobile network communications, and iot technologies), as together these provide the smart city infrastructure upon which all the upper layers are built. as a whole, the layered 4c platform perspective of smart city governance results, then, in the city authorities’ ability to make informed decisions, for example, regarding the city ’s ability to achieve the collective goals of wellbeing and sustainability by fostering collaboration and openness among cities as platform owners and different stakeholders such as businesses and citizens. these layers can therefore be considered as the foundations of novel smart opportunities and value for cities, improving their competitiveness with digital technologies. discussion and conclusions in the transition from corporate governance to platform governance, smart cities need to develop new models for managing the dynamics of platform governance between city divisions. by conceptualizing smart cities as a platform of platforms, new insights can be created for developing a smart city platform governance framework. identifying the 4c platform business model layers and their contents can help smart city governance to appreciate specific characteristics of smart cities and use these insights when planning and implementing governance decisions. digital technologies have opened new opportunities and helped to create platforms through which citizens, companies, also public utilities, and cities can share their products and services. thus, the question of opportunities, values, and advantages figure 1: 4c platform governance framework for smart cities journal of business models (2022), vol. 10, no. 1, pp. 61-68 5555 in the context of a wider public good is vital for understanding digital platform economies and planning a business model framework that works in practice. we have seen that both the business model and smart city development have moved towards a collaborative and cooperative way, and thus the business model can act as a tool for city development (perätalo & ahokangas, 2018) in breaking sectoral silos and bridging the different layers of smart cities together. by viewing smart cities from a layered rather than sectoral perspective, enables us to pinpoint key issues that smart city developers need to acknowledge when steering and governing their cities. in answering the research question of how smart city governance could benefit from the business model approach, we suggest city governance to: • consider if the physical infrastructure can respond to the increased phase of digitalization and collaborative networks at the connection layer • be aware of the key services that can be built upon those infrastructures, and what should be enabled at the content layer • evaluate how the context of services determines the governance model for individual sectors • consider the role of multi-sided platforms in engaging citizens in value creation at the commerce level as this study is conceptual in nature, these aspects give rise to future research opportunities. for example, nielsen and aagaard (2021) identified that business model innovation can provide solutions and highlight the challenges by reassessing value creation in an intricate business environment in which technology and different platforms play an important role. we call for further research in the context of smart cities. demil et al. (2018) argue that business ecosystems are becoming the dominant level of analysis in strategic management, and recently, discussions about business models are also related to increased discussions on platform models (e.g., walravens & ballon, 2013). here, especially the innovation ecosystem approach to smart cities in the context of platforms could increase our understanding of public–private types of platforms, as digital ecosystems and platforms enable us to combine data and capabilities across boundaries into new, effective, innovative solutions that not only create but also capture new sorts of value (nielsen & aagaard, 2021). this paper aimed to provide some conceptual and theoretical tools to apply the platform business model approach to smart cities and give preliminary ideas on what a smart city platform business model approach needs to include from a governance perspective. as the governance of smart cities has not been extensively studied in prior research, we conclude that the business model approach can bring novel insights regarding the intersection of platforms and business models. journal of business models (2022), vol. 10, no. 1, pp. 61-68 5656 references alusi, a., eccles, r. g., edmondson, a. c., & zuzul, t. (2011). sustainable cities: oxymoron or the shape of the future? harvard business school organizational behavior unit working paper, (11-062), 11-062. atkova, i. (2018). from opportunity to business model – an entrepreneurial action perspective. doctoral dissertation, acta universitatis ouluensis. bolívar, m. p. r., & meijer, a. j. (2016). smart governance: using a literature review and empirical analysis to build a research model. social science computer review, 34(6), 673–692. cusumano, m.a., yoffie, d.b. and gawer, a., 2020. the future of platforms. mit sloan management review, 61(3), pp.46-54. demil, b. and lecocq, x. (2010). business model evolution: in search of dynamic consistency, long range planning 43, pp. 227-246. demil, b., lecocq, x. and warnier, v. (2018). “business model thinking”, business ecosystems and platforms: the new perspective on the environment of the organization, m@n@gement, vol. 21(4), pp. 1213-1228. díaz-díaz, r., muñoz, l. and pérez-gonzález, d. (2017). the business model evaluation tool for smart cities: application to use cases, energies 2017, vol. 10, no. 3, doi:10.3390/en10030262 fenwick, m., mccahery, j.a. and vermeulen, e.p., 2019. the end of ‘corporate’ governance: hello ‘platform’ governance. european business organization law review, 20(1), pp.171-199. honeybone, p., cosgrave, e., collins, b., & barnes, k. (2018). little book of governing the city. imagination lancaster. iivari m & ahokangas p (2021) platforms, convergence and modularity: case of broadcasting industry. paper presented in the international conference on transformations and innovations in business and education (ictibe), june 19-20th 2021, nanjing, china koo, w.w. and eesley, c.e., 2020. platform governance and the rural–urban divide: sellers’ responses to design change. strategic management journal. kretschmer, t., leiponen, a., schilling, m. and vasudeva, g., 2020. platform ecosystems as meta‐organizations: implications for platform strategies. strategic management journal. kuk, g., & janssen, m. (2011). the business models and information architectures of smart cities. journal of urban technology, 18(2), 39-52. nielsen, c., & aagaard, a. (2021). the fifth stage of business model research: the role of business models in times of uncertainty. journal of business models, 9(1), 77-90. perätalo, s. and ahokangas, p. (2018). toward smart city business models, journal of business models, vol. 6, no. 2, pp. 65-70 journal of business models (2022), vol. 10, no. 1, pp. 61-68 5757 teece, d. j. (2018). profiting from innovation in the digital economy: enabling technologies, standards, and licensing models in the wireless world. research policy, 47(8), 1367–1387. https://doi.org/10.1016/ j.respol.2017.01.015 tilson, d., sørensen, c. and lyytinen, k. (2012). change and control paradoxes in mobile infrastructure innovation: the android and ios mobile operating systems cases, in: 45th hawaii international conference on system science (hicss 45), maui, hi. timeus, k., vinaixa, j. and pardo-bosch, f., 2020. creating business models for smart cities: a practical framework. public management review, 22(5), pp.726-745. tiwana, a., konsynski, b. and bush, a.a., 2010. platform evolution: coevolution of platform architecture, governance, and environmental dynamics (research commentary). information systems research, 21(4), pp.675687. walravens, n. (2015). qualitative indicators for smart city business models: the case of mobile services and applications, telecommunications policy 39, pp. 218–240. walravens, n., & ballon, p. (2013). platform business models for smart cities: from control and value to governance and public value. ieee communications magazine, 51(6), 72-79. wareham, j., fox, p.b. and cano giner, j.l., 2014. technology ecosystem governance. organization science, 25(4), pp.1195-1215. wirtz, b. w., schilke, o., & ullrich, s. (2010). strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43(2-3), 272-290. yrjölä, s., ahokangas, p., & matinmikko, m. (2015, september). evaluation of recent spectrum sharing concepts from business model scalability point of view. in 2015 ieee international symposium on dynamic spectrum access networks (dyspan) (pp. 241-250). ieee. zhang, y., li, j. and tong, t.w., (2020). platform governance matters: how platform gatekeeping affects knowledge sharing among complementors. strategic management journal. https://doi.org/10.1016/j.respol.2017.01.015 https://doi.org/10.1016/j.respol.2017.01.015 52 journal of business models (2021), vol. 9, no. 1, pp. 52-59 in recent time discussion has gone back and forward regarding the topics of business models, accounting and reporting. in this paper we reflect on some of the main issues pertinent to this discussion as a preamble to identifying a promising way forward. business models, accounting and reporting– two steps forward, one step back? jesper c. sort1 and robin roslender2 please cite this paper as: sort, j. c. and roslender, r. (2021), business models, accounting and reporting–two steps forward, one step back?, journal of business models, vol. 9, no. 1, pp. 52-59 keywords: business models, accounting, reporting 1 -2 aalborg university business school doi: https://doi.org/10.5278/jbm.v9i1.6614 abstract https://doi.org/10.5278/jbm.v9i1.6614 journal of business models (2021), vol. 9, no. 1, pp. 52-59 5353 introduction in an earlier paper roslender and nielsen examined the continuing failure of financial accounting and reporting to prioritise an engagement with the business model (bm) literature despite the concept’s pivotal role within integrated reporting, a development regarded in some quarters to promise a much-needed renaissance in the fortunes of that discipline (roslender and nielsen, 2019a; see also roslender, nielsen and bentzen 2019). the main thrust of their observations was that financial accounting and reporting practitioners may regard what is being offered to them entails too radical a step since it is likely to require a wholesale abandonment of the cost and value calculus on which their jurisdiction has been successfully built over several generations. this will come as no surprise to many outside of the financial accounting and reporting community given the conservatism that has traditional been associated with it. managerial accounting’s engagement with the bm literature continues to be even more limited. this is puzzling given that managerial accounting quite spectacularly rejected the cost and value calculus, and thereby effective subordination to financial accounting and reporting (johnson and kaplan, 1987), three decades ago. in their initial advocacy of bm thinking in relation to enhancing financial reporting, nielsen and roslender (2015) argue that managerial accounting had already begun to engage with the bm in the context of the strategy map, intellectual capital statement and, more provocatively, eva. nielsen and roslender (2015) readily acknowledged that the greater part of managerial accounting practitioners may not be aware that they had done so, their principal motivation being to encourage interested financial accounting and reporting practitioners to venture into this part of the new management accounting literature. this also spurred the call for a more performative approach in the field of bms (nielsen et al., 2018; roslender and nielsen, 2019b) unfortunately, to date this does not appear to have happened, while integrated reporting’s hot topic status has also dimmed somewhat. the present paper explores why managerial accounting has, to date, been no more enthused about the bm concept than financial accounting and reporting. it is based on the premises that i) managerial accounting should find it easier to embrace the bm concept that financial accounting and reporting; and ii) there are significant benefits that could accrue to managerial accounting should it be prepared to embrace the bm concept. approach the era of the new management accounting was between the middle 1980s until the millennium during which time managerial accounting experienced a major rejuvenation. the period saw the emergence of many new techniques with activity-based costing (abc) the most widely known and influential. target costing, sometimes viewed as japan’s equivalent of abc, has also proved to be influential along with value chain analysis, the core element of strategic cost management (scm) (shank and govindarajan, 1993). all three developments exemplify a significant emphasis on cost management, understood as an alternative to more traditional concerns with cost reduction and cost control. at the extreme, cost management is understood to constitute a generic competitive strategy (cf porter, 1985). not every new technique became an established constituent of the new management accounting, however. some were only moderately influential, e.g., throughput accounting, competitor costing and whole-life costing, while others are no longer widely recalled, e,g., attribute costing, backflush costing, break-even time. several further developments also merit a mention, although not techniques as such. these include benchmarking, beyond budgeting and total quality management. strategic management accounting (sma) was also visible as an aspect of the new management accounting. the term itself, together with a challenging concrete conceptualisation, predates kaplan’s own initial excursions into how managerial accounting might be rejuvenated. simmonds (1981) coined the term to name what he viewed as a strategic approach to accounting to management that would require management accountants to become familiar with and incorporate ideas from both marketing journal of business models (2021), vol. 9, no. 1, pp. 52-59 5454 management and strategy theory. subsequently, bromwich and bhimani (1989, 1994) explored sma’s overlap with target costing, although never ruling out some alignment with both marketing management and strategy theory. in this way they distinguished themselves from shank and govindarajan’s contemporaneous scm development which, while also being externally oriented was ultimately characterised by an emphasis on accounting numbers of some description. some years later roslender and hart returned to a sma concept more akin to that envisaged by simmonds, in time placing greater emphasis on customers and branded market offerings before exiting the field (roslender and hart, 2002a,b; 2003; 2006; 2010). thereafter, interest in sma became more focused on what the concept entails in practice rather than as a practical management accounting approach(es). sma differs from both ab(c)m and scm, eschewing the pursuit of information that would be recognised as accounting numbers. although customer profitability analysis (cpa), often identified as an exercise in customer accounting, makes extensive use of such information, it would be wrong to view it as an example of sma. more correctly it is abc applied to customers. from the outset, simmonds was persuaded that sma must make use of a range of different information that will provide the basis for sounder commercial (strategic?) decision-making. this might include information on sales volumes, market shares, cash flows and resource utilisation, as well as costs and prices. crucially such information should be identified for both a business and its competitors. bromwich and bhimani (1989, 1994) were arguably less provocative in this regard, although their attribute costing technique encompassed a range of different information sets. roslender and hart (2002a,b; 2003; 2006; 2010) consistently avoided the temptation to translate insights on brands, customers, markets, products, etc., into financial numbers. instead they commended the use appropriate metrics, not least those that existed in abundance within marketing management. beyond these numbers or metrics roslender and hart (2002a,b; 2003; 2006; 2010) were attracted to the use of a degree of narrative material (customer self-accounts) that would allow customers to articulate what it was about particular products or branded offerings that attracted them. equally they were unpersuaded by concerns about information overload concluding, like simmonds before them, that in principle the more information that is made available, the better, albeit on the assumption that only relevant information is reported. key insights: performance management and reporting the relatively limited impact of many new management accounting techniques should not be allowed to overshadow the fact that it facilitated managerial accounting to decouple itself from the cost and value calculus, as well as a means to identify itself as a standalone discipline. many of the new management accounting’s constituent developments focused attention on the beneficial consequences of pursuing measurement metrics of a non-financial nature. sma is an excellent example of what might be possible in this direction, despite its continued failure to greatly impact practice (cf langfield-smith, 2008). it is not the case that financial metrics are of no value in accounting to management, rather that they should no longer be regarded as the only measurement metrics that management accountants are reliant on. an example of a pm system deriving kpis from bms was recently discussed in montemari, chiucchi and nielsen (2019). more broadly, accounting should not restrict itself to practices that entail counting using financial numbers. in parallel accounting practitioners are now challenged to recognise that there is more to their stock of practices that financial counting. arguably the second most widely influential development within the new management accounting is the balanced scorecard (bs). in its initial formulation the bs was identified as a means of reporting the performance of a business using a combination of financial and non-financial metrics, with the latter predominating. this was evident in the structure of the bs, which in its generic formulation combined a financial perspective with customer, internal business process and learning and growth perspectives (kaplan and norton; 1992, 1993, 1996). the bs promised a comprehensive journal of business models (2021), vol. 9, no. 1, pp. 52-59 5555 statement of the performance of a business utilising a range of relevant metrics, or key performance indicators (kpis), perhaps extending to 20 in total being used to populate the four perspectives. subsequently the bs concept was uprated by kaplan and norton, becoming commended as a contribution to the development of strategic management theory, and giving rise to the strategy map development some years later (kaplan and norton; 2001, 2003, 2004). accounting has been ambivalent about the bs development for several reasons. although a managerial accounting innovation, it is not a technique, a characteristic of the greatest part of the managerial accounting portfolio. from the perspective of financial accounting and reporting, the bs might qualify as a reporting framework but it lacks the attributes usually associated with procedural frameworks. the absence of any agreed format for a bs is similarly problematic, the four box structure providing a guide to what might be developed in the name of a bs. nor is the bs as an exclusive development since its successful implementation is reliant upon securing inputs from other business functions. finally, there is the issue of the quality of the information content communicated by the numbers themselves. accounting practitioners perceive that their traditional stocks-in-trade are extremely robust and able to withstand detailed scrutiny. by contrast the many ‘softer’ numbers suitable to populate an organisation’s performance scoreboard often have an air of subjectivity or partiality about them, notwithstanding the observation that there is a strong case for being nearly right as opposed to being absolutely wrong. developments building on the bs’s performance measurement and reporting aspects have been relatively few in number, however. the most evident work has been evident in the context of the various scoreboard reporting frameworks developed to document the growth of a business’s stocks of intellectual capital (ic) assets. the increased importance of such assets from the early 1990s posed a major challenge to the accounting profession. many had been developed within the organisation, as a consequence of which it was not possible to identify financial valuations that could be incorporated within a balance sheet or amortisation charges that might reported in an income statement. the two most influential ic reporting scoreboards, edvinsson’s (1997) navigator and sveiby ’s (1997) intangible asset monitor closely resemble the bs (edvinsson, 1997; sveiby, 1997). a series of less well-known developments can also be identified (see andriessen, 2004; starovic and marr, 2004). a radically different approach was presented in the intellectual capital statement (ics) (dati, 2000; mouritsen et al., 2003; nielsen, roslender and schaper, 2017). its knowledge management underpinnings resulted in it being predominantly narrative in content. in this way the ics set out (an episode of) the story of business by means of a knowledge narrative, management challenges and initiatives. the ics also incorporated a scoreboard element, often overlooked in relation to its narrative attributes. by the time the danish guideline project, the origin of the ics, had concluded in late 2002, interest in researching ic reporting had begun to decline, continuing to do so for the following decade. mainly due to the efforts of a relatively small number of researchers the topic has evidenced a growth in interest in recent times. ic provides a major focus within the international integrated reporting council’s integrated reporting (ir) development, where it is identified as three of the six “capitals” that serve as both inputs and outcomes of the “value creation” process (iirc, 2013: 13). it is within this context that ic is explicitly linked with the bm concept, being portrayed by iirc as any business’s visualisation of how it either actually creates, delivers and captures value, or is proposing to do so. in this way it is possible to identify a line of continuity between the emergence of the new management accounting and a possible formulation of what might be designated the new corporate reporting. the financial accounting and reporting community remains lukewarm about ir despite the observation that it continues to privilege the interests of shareholders via its emphasis on value capture (roslender et al., 2019). the most likely explanation of this reticence is that embracing ir is likely to require too great a degree of re-learning for practitioners. in our view it seems as though this should not be such a threatening or onerous process for their counterparts within managerial accounting. from the outside, at least, journal of business models (2021), vol. 9, no. 1, pp. 52-59 5656 many practitioners would seem to be more familiar with alternative ways of performance measurement and reporting, and less immersed within the cost and value calculus. conversely, it may be that the heady days of the new management accounting have been little more than a challenging interlude, with ‘normal service’ now resumed. discussion and conclusions from our perspective, there is a hint of unfinished business in respect of the development of performance measurement and reporting as this is understood here. it may be that kaplan’s affirmation that “what gets measured, gets managed” was sufficient for practitioners to take on board. a more challenging observation, that “what can be measured, (very often) gets managed”, is perhaps a step too far. between these two views a third can be identified, to the effect that “what needs managed, needs measured”. in the context of ir, what needs managed is the value creation process, understood as: “the process that results in increases, decreases or transformations of the capitals caused by the organization’s business activities and outputs.” (iirc, 2013: 33). or more correctly, what needs managed is the implementation of the specific bm, or combination of bms, that a business has embraced to accomplish its strategic objectives. viewed in this way, ir becomes even more disturbing for financial accounting and reporting practitioners, while simultaneously throwing down a challenge to their counterparts in the managerial accounting discipline. accounting practitioners across the discipline are largely comfortable to be told how they should set about taking specific phenomena into account. within financial accounting and reporting a voluminous compendium of prescriptions has evolved over time, while managerial accounting is heavily populated with numerical techniques. accounting for the value creation process as characterised above will be a multifocus task, some elements of which have already been encountered by the accounting profession, largely unsuccessfully. for example, accounting for human capital can be traced back almost six decades to when researchers set about identifying a means to ‘put people on the balance sheet’ (flamholtz, johanson and roslender, 2020). environmental and sustainability accounting evidence a similar provenance, although with a much fuller literature that is more assured about how such accountings should not be pursued rather than with sound procedures. the remaining pair of ‘new’ capitals – intellectual capital and social and relationship capital – portend more of the same. unfortunately, it seems unlikely that extant approaches to accounting for physical capital and manufactured capital can be relied upon to furnish the necessary insights on the value creation process. for us, some form of scoreboard measurement and reporting framework suggests itself. the four perspective generic bs model is insufficiently detailed to meet the challenge, as acknowledged in kaplan and norton’s own recognition of the need for extensive customisation. the same objection also holds for ic reporting frameworks. the temptation to construct a framework that provides information on each of a business’s six capitals, possibly in relation to their increase, decrease or transformation within specified time periods risks promoting a mechanistic mindset and the emergence of an alternative balance sheet format, albeit devoid of both financial numbers and any ‘balance’ (although it could be recognised as a ‘balanced’ visualisation). a simpler, more feasible framework might be constructed around insights on value creation, value delivery and value capture. a framework with this structure might be further informed by a tri-partite division of stakeholders: customers; shareholders; and society. a more ambitious approach would be that of identifying an individual business’s bm constituents and within them the key value drivers of the value creation, delivery and capture process. what this approach would permit is for an individual business to document the success (or otherwise) of its ambition to do business in the form of an outcome ‘story ’ of value creation, delivery and capture. as with the bs, and before it the focus on critical success factors and key performance indicators, it is senior management who are tasked to identify the story they wish to tell. their management accountants supply the narrative (=the account). journal of business models (2021), vol. 9, no. 1, pp. 52-59 5757 references andriessen, d. (2004). making sense of intellectual capital: designing a method for the valuation of intangibles, amsterdam: elsevier butterworth-heinemann bromwich, m. and a. bhimani. (1989). management accounting: evolution not revolution. london: chartered institute of management accountants. bromwich, m. and a. bhimani. (1994). management accounting: pathways to progress. london: chartered institute of management accountants. dati. (2000). a guideline for intellectual capital statements: a key to knowledge management. copenhagen: danish agency for trade and industry. edvinsson, l. (1997) “developing intellectual capital at skandia”, long range planning, 30(3): 366-373. flamholtz, e. g., johanson, u. and r. roslender. (2020). “reflections on the progress of accounting for people and some observations on the prospects for a more successful future”, accounting, auditing and accountability journal, 33(8): 1791-1813. iirc. (2013). the international <ir> framework, international integrated reporting council, www.iirc.org. johnson, h.t. and r. s. kaplan. (1987). relevance lost: the rise and fall of management accounting. boston ma: harvard business school press. kaplan, r. s. and norton, d.p. (1992). “the balanced scorecard: measures the drive performance”, harvard business review, 70(1): 61-66. kaplan, r.s. and d.p. norton. (1993). “putting the balanced scorecard to work”, harvard business review, 71(5): 134-147. kaplan, r.s. and d.p. norton. (1996). the balanced scorecard: translating strategy into action, boston ma: harvard business school press. kaplan, r.s. and d.p. norton. (2001). the strategy-focused organization: how balanced scorecard companies thrive in the new business environment. boston ma: harvard business school press. kaplan, r.s. and d.p. norton. (2004). strategy maps: converting intangible assets into tangible outcomes. boston ma: harvard business school press. kaplan, r.s. and d.p. norton. (2005). alignment: using the balanced scorecard to create corporate synergies. boston ma: harvard business school press. langfield-smith, k. (2008). “strategic management accounting: how far have we come in 25 years?”, accounting, auditing and accountability journal, 21(2): 204-228. http://www.iirc.org journal of business models (2021), vol. 9, no. 1, pp. 52-59 5858 montemari, m., chiucchi, m. s., & nielsen, c. (2019). designing performance measurement systems using business models. journal of business models, 7(5), 48-69. mouritsen, j., bukh, p.n, flagstad, k., thorbjørnsen, s., johansen, m.r., kotnis, s., larsen, h.t., nielsen, c., kjærgaard, i., krag, l., jeppesen, g., haisler, j. and b. stakemann. (2003). intellectual capital statements – the new guideline, copenhagen: danish ministry for science, technology and innovation. nielsen, c., lund, m., thomsen, p., brøndum, k., sort, j., byrge, c., ... & simoni, l. (2018). depicting a performative research agenda: the 4th stage of business model research. journal of business models, 6(2), 59-64. nielsen, c. and r. roslender (2015). “enhancing financial reporting: the contribution of business models”, british accounting review, 47(3): 262-274. nielsen, c. roslender, r. and s. schaper. (2017). “explaining the demise of the intellectual capital statement in denmark”, accounting, auditing and accountability journal, 30(1): 38-64. porter, m. e. (1985). competitive advantage: creating and sustaining superior performance. new york: the free press. roslender, r. and s. hart. (2002a). “integrating management accounting and marketing in the pursuit of competitive advantage: the case for strategic management accounting”, critical perspectives on accounting, 13(2), 255-277. roslender, r. and s.j. hart. (2002b). marketing and management interfaces in the enactment of strategic management practices: an exploratory investigation, london: chartered institute of management accountants. roslender, r. and s.j. hart. (2003). “in search of strategic management accounting: theoretical and field study perspectives”, management accounting research, 14(3), 255-279. roslender, r. and s. hart. (2006). “interfunctional co-operation in progressing accounting for brands: the case of brand management accounting”, journal of accounting and organizational change, 2(3): 229-247 roslender, r. and hart, s.j. (2010). “taking the customer into account: transcending the construction of the customer through the promotion of self-accounting”, critical perspectives on accounting, 21(7): 739-753 roslender, r. and c. nielsen. (2019a). “accounting for customer value expectations: re-imagining integrated reporting”, mimeo, business design centre, aalborg university. roslender, r. and c. nielsen. (2019b). “performative research in the business model field”, journal of business models, 7(2), 31-36. roslender, r., nielsen, c. and j. sorensen. (2019). “financial reporting through the business model: recognising the centrality of the customer”, mimeo, business design centre, aalborg university. shank, j.k. and v. govindarajan. (1993). strategic cost management: the new tool for competitive advantage, new york: the free press. journal of business models (2021), vol. 9, no. 1, pp. 52-59 5959 simmonds, k. (1981). “strategic management accounting”, management accounting (uk), 59(4), 26-29. starovic, d. and b. marr. (2004). understanding corporate value: managing and reporting intellectual capital, london: chartered institute of management accountants. sveiby, k-e. (1997). the new organizational wealth: managing and measuring knowledge-based assets, san francisco, ca: barrett-kohler 42 journal of business models (2022), vol. 10, no. 1, pp. 42-49 ecosystem legitimacy challenges in the platform, data, and artificial intelligence business models julia helena zhang1, oxana gisca2, rashid sadeghian dehkordi3, and petri ahokangas4 abstract digitalisation lays the groundwork for the emergence of novel business models taking advantage of modern technologies. simultaneously, the new business models face an array of legitimacy challenges. this paper proposes an integrated framework for studying legitimacy challenges through the lens of managerial choices and consequences of the business model at the ecosystemic level. it combines and elaborates on essential legitimacy aspects connected to digitalisation, reflecting on stakeholders at the business, individual and ecosystemic level. the value of the paper is based on providing a comprehensive and ecosystemic view of studying the legitimacy challenges connected to the platform, data, and artificial intelligence (ai). keywords: ecosystem legitimacy, business model, digitalisation acknowledgments: the authors acknowledge lnetn project from the european union’s horizon 2020 research and innovation programme under the marie skłodowska-curie grant agreement no. 860364 and the 6g flagship program at the university of oulu, grant no. 318927. please cite this paper as: zhang, j., gisca, o., sadeghian, r., ahokangas, p. (2022), ecosystem legitimacy challenges in the platform, data, and artificial intelligence business models, vol. 10, no. 1, pp. 42-49 1 doctoral researcher, martti ahtisaari institute, oulu business school, university of oulu 2 doctoral researcher, martti ahtisaari institute, oulu business school, university of oulu 3 rashid sadeghian dehkordi, doctoral researcher, martti ahtisaari institute, oulu business school, university of oulu 4 petri ahokangas, professor of future digital business at martti ahtisaari institute, oulu business school, university of oulu issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6794 https://doi.org/10.54337/jbm.v10i1.6794 journal of business models (2022), vol. 10, no. 1, pp. 42-49 4343 introduction digitalisation building on the use of platforms, data and artificial intelligence provides an impetus for the emergence of novel business models that enable increased efficiency, greater flexibility, and the individualisation of services (mishra & tripathi, 2020). however, cutting-edge technology alone is insufficient to ensure effective value capture (fountaine et al., 2019) and legitimacy (dehler-holland et al., 2021). digitalisation exposes an array of diverse legitimacy challenges related to rapid technological change, increased complexity, changing customer preferences, and legal requirements (rachinger et al., 2018). legitimacy is often defined as a “generalised perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, beliefs, and definitions” (suchman, 1995, p. 574). entrepreneurs, innovators, users, and policymakers are among the actors with different decision-making and behavioural principles, and whose perception contributes to the formation of legitimacy. as legitimacy can be considered a “proxy-indicator” for assessing the complex institutional dynamics that influence the embedding of a new industry in relevant structures (bergek et al., 2008), it can be seen as a prerequisite for the effective adaptation of business models built on new technologies. while the extant literature explores the concept of legitimacy from the stakeholder/actor perspective, recent studies have started to consider legitimacy from the ecosystem perspective (thomas and ritala, 2022). the ecosystem can be viewed as a dynamic, multilayer social network that consists of actors with different attributes, decision principles and beliefs (tsujimoto et al., 2017) characterized by high complexity, interdependence, and cooperation (ilvari et al., 2016). the ecosystem participants interact with each other and the external environment, together driving ecosystem legitimacy (thomas and ritala, 2022). applying an ecosystemic view to the study of the legitimacy challenges of digitalisation-enabled business models therefore appears relevant, given the high degree of newness and disparate change that affect the various actors who commonly contribute to legitimacy attainment. the business model enables companies to understand the sources of value, and how a company operates in general (zott et al., 2011). it connects the firm and its external business environment, customers, competitors, and society in exploiting business opportunities (zott and amit, 2010). in the context of digitalisation, the business model literature elaborates on platform business models, data business models, and ai business models. although the relationship between the platform, data, and ai is multifaceted, most of the existing literature approaches the business models built on ai, data, and platforms in isolation, meaning that platform-, data-, and aidriven business models are often researched without highlighting their interconnectedness. in considering the above, this paper’s contributions are as follows. the study contributes to the existing body of knowledge by presenting an exploratory framework for identifying ecosystem legitimacy challenges in the context of digitalisation. it takes a holistic approach in referring to the digitalisation layers of data, platform, and ai and their respective legitimacy challenges. the provided framework depicts managerial choices and consequences (casadesus-masanell and ricart, 2010) of the business model regarding legitimacy challenges under a single integrated framework. the results of this study increase the understanding of the complex issues revolving around business model legitimacy, with the illustrated framework providing high empirical value to the managers. approach this paper aims to propose a holistic framework for researching the ecosystem legitimacy challenges of digital business models that comprise platforms, data, and ai. business model thinking is mirrored as managerial choices in opportunity (o), value (v), and advantage (a), and consequences in scalability (s), replicability (r), and sustainability (s) (casadesusmasanell and ricart, 2010; ritter and lettl, 2018). the choices aim to depict on what basis and how a business operates, while the consequences answer why, where, and when the business is done. the business model choices thus refer to the concrete journal of business models (2022), vol. 10, no. 1, pp. 42-49 4444 choices made by management, while consequences address the implications of such choices (casadesus-masanell and ricart, 2010). adopting business model thinking helps integrate the digitalisation layers of platform, data, and ai into a single ecosystemic framework to assess the legitimacy challenges. the success of any business model is determined not only by whether value creation/capture can provide a competitive advantage but also by the legitimacy received from the institutional environment and social acceptance (dehler-holland et al., 2021). a consideration of stakeholders’ perspectives, particularly those of individuals, businesses, and the ecosystem, therefore appeared essential to underline the most prominent legitimacy challenges connected to the digitalisation layers. digitalisation allows the emergence of novel ecosystemic business models by combining an increasing number of iot sensors, vast amounts of data, and more efficient, effective, and comprehensive ai or machine learning (ricart, 2020). ai applications should not be considered in isolation as a mere technological infrastructure (zamora, 2020) but coupled with data and the platform (figure 1), because connected data constitute both the input and output for the ai algorithms. in such a configuration, the platform functions as a tool to “extract and harness immense amounts of data that allow them to operate as critical intermediaries and market makers” (rahman and thelen, 2019, p. 178). the data collected from multiple points are incorporated into a largescale information infrastructure that fuels the ai algorithms and is further deployed in various settings for various purposes across multiple actors that allow the application of novel ai solutions. ai, data, and connectivity platforms therefore play a vital role in new opportunities for digitalisation (ahokangas et al., 2021) and the transformation of business models (ricart, 2020). platform: converging platforms play an essential role in digitalising different sectors of society (ahokangas et al., 2021). they provide value to all actors within the ecosystem while turning a profit for the organisation that created and maintains it through different business models. the digital platforms handle an end-to-end business process necessary to achieve an improved experience for customers, employees, and partners. data: during the last decade, the world has witnessed an immense growth of data volumes and the advent of new data streams, leading to ubiquitous quantification (sareen et al., 2020). that growth is expected to continue, driven by the ongoing business needs to capture and utilise the unstructured data across all the dimensions of the business operations, such as customer data, supply chains, or social media interactions (gil-gomez et al., 2020). furthermore, the unprecedented speed of data generation and data availability from numerous touchpoints parallels unprecedented computing power, ai and data processing capabilities (sareen et al., 2020). such data integration and exploitation may turn into valuable information and knowledge, becoming a source of value for novel business models (luoma et al., 2021). ai: ai changes the rules of competition between industries worldwide. it can be seen as intelligent systems created to use data, analysis, and observations to perform certain tasks without being programmed to do so (antonescu, 2018). as a result, ai redefines the decision-making principles in organisations, making business practices simpler and leaner, and thus becoming one of the essential modern technologies, with implications for businesses worldwide (canals and heukamp, 2020).� � � � figure 1: the approach to researching legitimacy challenges in the digitalization context. journal of business models (2022), vol. 10, no. 1, pp. 42-49 4545 key insights to achieve this study ’s objectives, the ecosystem legitimacy challenges are presented in table 1. the digitalisation layers – platform, data, and ai, with the business model choices (ova) and consequences (srs) – allow us to present the legitimacy challenges of the emerging business models. the identified challenges presented in table 1 have been derived based on the authors’ understanding of legitimacy in the context of emerging technologies and trends, issues related to personal data management, smart energy, and societal changes. the provided theoretical framework emphasises a new way of studying legitimacy challenges. platforms, data, and ai are intertwined concepts at the ecosystem level as firms’ business models in the ecosystem can be built on any combination of platforms, data and ai. the ecosystem legitimacy challenges illustrated in the framework above are discussed in two blocks (choices and consequences) related to three digitalisation layers (ai, data, platform) to provide a comprehensive yet clear overview. as legitimacy challenges connected to digitalisation concern multiple stakeholders, certain considerations at the individual, business, and ecosystem levels are reflected in each block. this is because legitimacy is a social evaluation made by multiple actors such as individuals, organisations, the media, or regulators that constitute a collective legitimacy judgement (bitektine and haack, 2015). the managerial choices regarding the ecosystem participants’ limited understanding of the previously unconsidered behaviours and reservations concerning the unknown must be addressed to pursue the market opportunity. in particular, educating, facilitating, and accommodating the real needs of the end user appears essential for legitimacy attainment. raising awareness of the value arising from technical innovation and facilitating human–machine interaction is vital for value recognition. the advantages derived from digitalisation must be diligently managed by establishing optimal ratios of human intervention.� � � � figure 2: integrated framework for exploring legitimacy challenges. journal of business models (2022), vol. 10, no. 1, pp. 42-49 4646 the interdependent risks of multi-agent environments and effective collaboration between ecosystem participants are essential from the legitimacy perspective. clear data ownership rules, and robust and secure data structures must be established and communicated internally and externally to cope with data-related legitimacy vulnerabilities. as the digital environment is characterised by the dominant role of the data operator, the platform provider as the ecosystem orchestrator must ensure data management practices are not only built on existing rules and regulations, but also sufficiently communicated to the users to avoid raising legitimacy concerns. the potential data management structure fragilities must be continuously monitored to avoid data breaches, and the promotion of participant responsibility and the interoperability of actors in the ecosystem because of its diverse audiences must be ensured. the legitimacy challenges assessed in the context of digitalisation indicated specific concerns at each layer. at the platform level, the essential aspect refers to obtaining high-quality data necessary for accurate and credible ai predictions and outputs. this can be obtained by providing the users with a trusted and secure environment that does not raise legitimacy concerns. it can be addressed through ux (user experience) design elements that increase the credibility and proper communication of a company ’s data management practices. data quality assurance must be prioritised. in addition, novel features that are not essential from the users’ perspective (for example, when operating in the backend) must be hidden to avoid raising unnecessary concerns. the building of ai literacy in the organisation and the public due to ai software’s black box nature is depicted as another legitimacy challenge. from the consequences’ perspectives, we can underline particularities tailored to each layer related to legitimacy challenges. to foster sustainability, the focus should be directed at geopolitical standardisation and the implementation of regulatory policies with the aim of secure data management practices. equally, agile strategies that allow changes in market conditions and the implementation of new strategies quickly and decisively when necessary must be followed. because of the limiting of human involvement, the effectiveness of ai in interactions with the users must be monitored. cultural and country-specific standards and customs and the accommodation of the different needs and expectations of various stakeholders are vital for addressing the legitimacy challenges connected with business model replicability. as the above discussion indicates, platforms, data and ai are interdependent. the identified ecosystem legitimacy challenges influence not only the key stakeholders’ business models but the whole ecosystem in which the firms are active. therefore, making choices and managing their consequences need to be considered both at business model and ecosystem levels of analysis. discussion and conclusion the theoretical framework developed in this paper provides a holistic view of the study of the legitimacy challenges for emerging business models. the findings highlight the necessity of applying the ecosystemic perspective in discussing the legitimacy of digitalisation-driven business models. this has been claimed, because legitimacy challenges involve multiple ecosystem participants that ensure ecosystem viability (thomas and ritala, 2021). a multiparticipant environment requires considerations of different collaborative methods, including the unambiguous determination of data ownership, assurance of interoperability, common growth, and profitability that are directly related to the attainment of legitimacy. although the proposed framework showcases the significant legitimacy challenges of emerging business models, it is essential to note that the ecosystem cannot strive for the status quo, because continuous innovation requires constant evolution over time (lehto et al., 2013). assessing and mitigating the legitimacy challenges must therefore be an ongoing process rather than a one-time task. this paper’s academic contribution lies in combining the business model and ecosystem legitimacy literature, first, by apprehending the layers of digitalisation – ai, data, and platforms – and second, by examining them through the lens of managerial choices and consequences as a business model journal of business models (2022), vol. 10, no. 1, pp. 42-49 4747 thinking framework for analysing legitimacy challenges. this study underlines the necessity of understanding the nature of legitimacy challenges through the co-dependent lens of business model thinking that helps us integrate the context of the digitalisation layers. the originality of this research is thus related to expanding the business model and legitimacy literature from an ecosystemic perspective. it further highlights the emphasis on business ecosystems and stakeholder interaction identified in the recent stream of business models literature (golzarjannat et al., 2021). furthermore, the approach applied in this paper constitutes a key conceptual contribution, because it combines the digitalisation elements of the platform, data, and ai within a single integrated framework. regarding the practical implications, this study was conducted to present the legitimacy challenges in digital application and pave the way for managers in their considerations and decision making concerning the legitimacy attainment of emerging business models. the issues around data management, ai, the expansion of agile strategies, and the promotion of financial inclusion must be considered and addressed to overcome the liability of the newness of the emerging business models. cultural and local standards and customs must be understood and adequately addressed, as well as the laws and regulations when considering the business models’ broader adaptation, scalability, and replicability. managerial intervention also relies on educating and facilitating the adoption of newness across various audiences. it is noteworthy that the interconnected nature of digitalisation means the inadequate addressing of legitimacy challenges determined at one layer may negatively affect the overall business model. a holistic approach that combines multiple aspects of the digital business model thus mimics the reality and facilitates reflections on fragile points in legitimacy attainment. despite the intriguing framework provided in this paper, the study has certain limitations, laying the groundwork for future research. although the proposed framework has reflected on the legitimacy challenges in the overall context of digitalisation, some business models may require extra contextspecific variables when determining the particularities of the legitimacy challenges. as legitimacy is an audience-dependent construct, certain stakeholders and audiences may have specific needs that may have been overlooked within the proposed framework, and which must be addressed in some scenarios. future studies could test the empirical relevance and improve the provided framework. additional research into how to facilitate the process of legitimation in business models is required. journal of business models (2022), vol. 10, no. 1, pp. 42-49 4848 references: ahokangas, p. et al. (2021), platform configurations for local and private 5g networks in complex industrial multi-stakeholder ecosystems, telecommunications policy, vol. 45, no.5. doi: 10.1016/j.telpol.2021.102128. antonescu, m. (2018), are business leaders prepared to handle the upcoming revolution in business artificial intelligence?, quality – access to success, vol. 19, pp. 15–19. bergek, a., jacobsson, s., & sandén, b. (2008), legitimation’ and ‘development of positive externalities’: two key processes in the formation phase of technological innovation systems. technology analysis & strategic management, vol. 20, pp. 575-592. doi: 10.1080/09537320802292768. bitektine, a., & haack, p. (2015), the “macro” and the “micro” of legitimacy: toward a multilevel theory of the legitimacy process. academy of management review, vol. 40. pp. 49-75. doi: 10.5465/amr.2013.0318. canals, j., & heukamp, f. (2020), the future of management in an ai world. edited by j. canals and f. heukamp. cham: springer international publishing. doi: 10.1007/978-3-030-20680-2. casadesus-masanell, r., & ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, vol.43, no. 2–3, pp. 195–215. doi: 10.1016/j.lrp.2010.01.004. dehler-holland, j., okoh, m., & keles, d. (2021), the legitimacy of wind power in germany. doi: 10.5445/ ir/1000128597. fountaine, t., mccarthy, b., & saleh, t. (2019), building the ai-powered organisation. harvard business review, july–august 2019. gil-gomez, h. et al. (2020), customer relationship management: digital transformation and sustainable business model innovation, economic research-ekonomska istraživanja, vol.33, no. 1, pp. 2733–2750. doi: 10.1080/1331677x.2019.1676283. golzarjannat et al. (2021), a business model approach to port ecosystem. journal of business models, vol.9, no. 1, pp. 13-19. doi: 10.5278/jbm.v9i1.4261. ilvari, m. et al. (2016), toward ecosystemic business models in the context of industrial internet, journal of business models, vol. 4, no.2, pp. 42–59. doi: 10.5278/ojs.jbm.v4i2.1624. lehto, i., hermes, j., ahokangas, p., & myllykoski, j. (2013), collaboration in cloud businesses – value networks and ecosystems. luoma, p. et al. (2021), the role and value of data in realising circular business models a systematic literature review. journal of business models, vol.9, no.2, pp. 44-71. mishra, s., & tripathi, a. (2020), literature review on business prototypes for digital platform. journal of innovation and entrepreneurship, vol. 9, no. 23. doi: 10.1186/s13731-020-00126-4 rachinger, m., rauter, r., müller, ch., vorraber, w., & schirgi, e. (2018), digitalization and its influence on business model innovation. journal of manufacturing technology management, vol. 30, no. 8. journal of business models (2022), vol. 10, no. 1, pp. 42-49 4949 rahman, k. s., & thelen, k. (2019), the rise of the platform business model and the transformation of twentyfirst-century capitalism, politics & society, vol. 47, no. 2, pp. 177–204. doi: 10.1177/0032329219838932. ricart, j. e. (2020), the ceo as a business model innovator in an ai world, in the future of management in an ai world. cham: springer international publishing, pp. 185–203. doi: 10.1007/978-3-030-20680-2_10. ritter, t., & lettl, c. (2018), the wider implications of business-model research, long range planning, vol. 51, no.1, pp. 1–8. doi: 10.1016/j.lrp.2017.07.005. sareen, s., saltelli, a., & rommetveit, k. (2020), ethics of quantification: illumination, obfuscation and performative legitimation, palgrave communications, 6(1). doi: 10.1057/s41599-020-0396-5. suchman, m. c. (1995), managing legitimacy: strategic and institutional approaches, academy of management review, vol. 20, no. 3, pp. 571–610. doi: 10.5465/amr.1995.9508080331. thomas, l. d. w., & ritala, p. (2022), ecosystem legitimacy emergence: a collective action view. journal of management, vol. 48, no. 3, pp. 515–541. https://doi.org/10.1177/0149206320986617 tsujimoto, m., kajikawa, y., tomita, j., & matsumoto, y. (2017), a review of the ecosystem concept — towards coherent ecosystem design. technological forecasting and social change. doi. 136. 10.1016/j.techfore.2017.06.032. zamora, j. (2020), managing ai within a digital density framework. the future of management in an ai world. cham: springer international publishing, pp. 205–235. doi: 10.1007/978-3-030-20680-2_11. zott, c., & amit, r. (2010), business model design: an activity system perspective, long range planning, vol. 43, no. 2–3, pp. 216–226. doi: 10.1016/j.lrp.2009.07.004. zott, c., amit, r., & massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019–1042. doi: 10.1177/0149206311406265. 129 journal of business models (2022), vol 10, no 2, pp. 129-138 teaching the alignment of business model components: the use of the movie la la land florence krémer1 et thierry verstraete2 abstract using cinema in the pedagogy of entrepreneurship can be useful to illustrate the process and dynamics of the business model in a limited time. here, the movie la la land is used as a case study to analyze the links and the alignment between the value proposition and the other components of the bm, particularly the stakeholders. keywords: entrepreneurship education, movie, business model, customer value proposition please cite this paper as: krémer, f. and verstraete, t. (2022), teaching the alignment of business model components: the use of the movie la la land, journal of business models pp. 129-138 1 professor, university of bordeaux (iae bordeaux, university school of management), university of bordeaux entrepreneurship research team – irgo (institut de recherche en gestion des organisations) – grp lab, corresponding author : florence.kremer@ubordeaux.fr 2 full professor, university of bordeaux (iae bordeaux, university school of management), university of bordeaux entrepreneurship research team – irgo (institut de recherche en gestion des organisations) – holder of the entrepreneurship chair of the university of bordeaux foundation – head of grp lab (social innovation center) : http://grp-lab.com, thierry.verstraete@u-bordeaux.fr issn: 2246-2465 doi: https://doi.org/10.5278/jbm.v10i2.6663 mailto:florence.kremer@u-bordeaux.fr mailto:florence.kremer@u-bordeaux.fr http://grp-lab.com mailto:thierry.verstraete@u-bordeaux.fr https://doi.org/10.5278/jbm.v10i2.6663 journal of business models (2022), online first 130130 introduction the business model (bm) has become a dedicated tool for designing entrepreneurial projects and supporting entrepreneurs and an integral part of entrepreneurship pedagogy (massa et al., 2017; szopinski, 2019). the issue of journal of business models dedicated to bm pedagogy (journal of business models, 2019) testifies to the diversity of angles taken and practices used to teach the bm, whether it is to examine the tool itself (the artifact) or to study bms (content framed by the artifact). one of the main difficulties of teaching the bm is thus to combine these two approaches: the container (the artifact with its components) and the content (the concrete cases studied), as the bm should not be presented as a mere juxtaposition of these components. one way to overcome this difficulty is to work on the dynamic links between the components of the bm, since its relevance lies essentially in its systemic and evolving nature (massa et al., 2018). in reality, entrepreneurs are confronted with these dynamic links from the outset in the implementation of their projects. this brings us back to szopinski’s (2019, p. 90) statement: “teaching bmi should therefore not only convey the business model concept itself, but also how to think and act as an entrepreneur ». however, the links between the components of a bm are not easy to grasp. holm et al. (2019, p.2) highlighted this difficulty when they pointed to one of the key problems in teaching the bm: “business-model design often starts with a feasible customer value proposition (cvp) that addresses essential customer problems. similarly, a firm’s resources and value-chain partners need to be aligned in such a way as to create and deliver the cvp as economically as possible”. this alignment questions the evolution of the components and the links between them. teachers should therefore show their students the dynamic underpinnings of the bm as early as possible (yrjölä, 2019), before they are fully engaged in setting up their own projects. to this end, we tried to find a pedagogical form that would shed light on this aspect. our goal is to evaluate the use of a film in the examination of these connections. following verstraete, krémer and néraudau (2018), who conducted a pedagogical action research using a film to help students understand why conventions matter when designing a bm, our aim is to use cinema to immerse learners in fiction. by watching films, learners may live an experience within a circumscribed time frame, which compensates for the long periods of time often needed to learn by doing. in learning by doing, project leaders need to combine theoretical knowledge learnt from models and empirical knowledge derived from social situations, thus learning the process by experiencing it (cope ad watts, 2000; neck, greene and brush, 2014; hyamsssekasi and caldwell, 2018). although it is a very interesting process, one of the drawbacks of this method lies in the time it requires, as it follows the speed of real-life projects. of course, simulations on fictitious projects can be limited to a few days or even a few hours (with formulas such as “24h to undertake”), but it may be difficult to make people understand the scope of the interaction with the stakeholders and their role in the construction of the project. our aim was to raise awareness of the role played by stakeholders at an earlier stage, going beyond the mere provision of resources which students often settle for. the use of movies seen through the lens of the bm contributes to this insight. it is also a way of combining theory and practice, as the chosen film shows the entrepreneurial experience of the protagonists. the film we chose to work with as a case study is la la land (2017). it features entrepreneurs acting in the entertainment industry and tells the story of the two main protagonists as well as the evolving relationship between their professional motivations/ambitions and the realization/ evolution of their entrepreneurial project. in doing so, it tackles the dynamics of the bm as the itinerary of the two characters may be used as a springboard for thinking about the components of a bm and their links. in particular, the viewer sees the value proposition of the project carried by the hero evolving according to his interactions with the various stakeholders. the movie was thus presented to reveal the links between this central component of the productive project and the other components of the bm, particularly the stakeholders and the essential place of the entrepreneur. journal of business models (2022), online first 131131 methodological approach how can cinema be used in the pedagogy of entrepreneurship? the value of using cinema in management courses (champoux 1999; huczinsky and buchanan, 2004; mathews, fornaciari and rubens, 2012; rajendran and andrew, 2014; ayikoru and park, 2019) and entrepreneurship courses (van gelderen and verduyn, 2003; verstraete, krémer and néraudau, 2018) has received considerable attention. table 1 summarizes the main benefits that entrepreneurship teachers can derive from using movies in an educational context. among the arguments promoting their use, there is the ability to show students the “accelerated” construction of a bm (the movie lasts two hours, whereas the action spreads over several years), in a context full of emotions and interactions with the stakeholders. table 1. expected benefits authors cinema appeals to young people, who are familiar with images. watching a movie is perceived as entertaining and increases their motivation to learn. fontenot and fontenot (2008), proserpio and giaoia (2006), verstraete et al. (2018) watching a film allows for better retention of information. through its techniques (visual effects, sound effects, special effects, close-ups), cinema is a lively and emotional experience that captures attention in a powerful way. by combining verbal and non-verbal elements, cinema offers learning opportunities while accommodating various learning styles (visual and auditory/verbal). mathews et al. (2012), rajendran and andrew (2014), ambrosini et al. (2009), van gelderen and verduyn (2003), ayikoru and park (2019) cinema makes theories understandable by portraying them in real life. movies thus encourage students to make connections between theory and practice (even if this practice is fiction). this is particularly interesting for complex or processual theories. rajendran and andrew (2014), ambrosini et al. (2009), huczinsky et buchanan (2004), verstraete et al. (2018) a movie contextualizes actions and decisions. using cinema and fiction thus opens young people up to a world that is potentially different from their own and exposes them to an experience they do not yet have. champoux (1999), rajendran and andrew (2014), verstraete et al. (2018) movies can trigger debate in the classroom, especially when the main characters face moral dilemmas and experience strong emotions, accentuated by many social interactions. critical thinking is thus promoted. macy and terry (2008), champoux, (1999), huczinsky and buchanan (2004), ayikoru and park (2019), van gelderen and verduyn (2003), neck et al. (2007) table 1: impact of using movies in pedagogy (management and entrepreneurship education) journal of business models (2022), online first 132132 about the film and the choice of the la la land case la la land was the subject of an instrumental case study. we used it as a medium for discussing a theoretical perspective, although it has its own intrinsic interest and may be studied for its own sake (stake, 1994). la la land is a movie that has been acclaimed by critics and viewers alike. it received six oscars, including best director for damien chazelle. the movie is presented as a romantic musical comedy, paying tribute to the golden age of hollywood studios and mythical musicals such as singin’ in the rain. it stars a young woman, mia (emma stone), and a young man, sebastian (ryan gosling), both at the dawn of their artistic careers and in search of professional recognition. mia is a waitress in a hollywood restaurant but she dreams of becoming an actress. one night, she falls for sebastian, a pianist with a passion for jazz, in the piano bar where he reluctantly performs, frustrated at not being able to fully express his talent. while the screenplay tells the love story between these two characters against a backdrop of retro melodies and choreography, the film also contains very interesting material on entrepreneurship. indeed, the two characters share the particularity of fulfilling their dream and living their profession as artists by becoming entrepreneurs: mia, by creating a one-woman show and sebastian, by opening his own jazz club. it is on this backdrop that la la land reveals its pedagogical potential in the light it sheds on the contingencies to the value proposition of a bm. in particular, it demonstrates that the value proposition is under the contingency of the other components of the bm, sometimes in an unusual way by taking into account the emotions, motivations and aspirations of the project leaders. here, our aim was to focus on the role of the entrepreneur and that of the stakeholders in the design of the value proposition. to this end, the case study comprised the following phases: − concerted choice of a recent film, whose main character(s) has/have entrepreneurial projects, recognized both by the public and the critics; − choice of the bm as an artifact, or a reading grid for analyzing the entrepreneurial projects undertaken by each of the two characters in the movie. among the various representations of the bm in terms of components, we chose the grp bm, which includes a wide range of components such as: the entrepreneur, the ecosystem and the conventions (see figure 1). table 1: this is a table showing something that is really awesome and interesting. 3 figure 1. the grp bm components as a reading grid for coding source: verstraete et jouison-laffitte (2009, 2011a, 2011b) source: verstraete and jouison-laffitte (2009, 2011a, 2011b) figure 1: the grp bm components as a reading grid for coding journal of business models (2022), online first 133133 − viewing of the movie by the two researchers separately, with manual coding and breakdown of the sequences according to the components of the grp bm. this coding is theoretical as the categories are based on a pre-existing theory (miles and huberman, 1994). for each bm component, the researchers let the movie speak for itself, thus allowing new sub-categories and links to emerge; − comparison of the results between the two researchers and highlighting the richness of the movie in order to understand the value proposition and its links with the other components, particularly the entrepreneur and the stakeholders. key insights the component-based analysis of the grp bm reveals the importance of the alignment between the value proposition, the expectations of the entrepreneurs and those of the stakeholders. although the analysis remains focused on this alignment, it inevitably touches on other components, particularly the “ecosystem” component and the “conventions” component. the film shows several situations that question the adequacy between the value proposition as conceived by the entrepreneur and the expectations of the stakeholders. it warns entrepreneurs against neglecting the expectations of the consumers or, on the contrary, totally complying with them at the risk of forgetting their own desires. however, the final scenes of the movie show that it is possible to align the value proposition with the consumers’ demands if the entrepreneur pays attention to the market and to himself. fundamentally, the trajectory of each character/entrepreneur shows how integrating stakeholders’ expectations into the value proposition and into their own evolution regarding their projects ultimately leads to a saving dynamic. stakeholders’ expectations: a constraint for the value proposition? market law seems to be merciless for artists who want to make it in the hollywood show-business ecosystem. without an audience, there is no artistic entrepreneurial project. the loneliness of the misunderstood artist who is cut off from his audience (or his target as an entrepreneur) is highlighted by a scene featuring sebastian. in a piano bar, sebastian plays his own compositions instead of the christmas songs that his boss and customers expect him to play. in a dream, he pictures himself on stage in the spotlight. however, no one in the room seems to see or hear him, except mia. sebastian is fired for breaking the conventions: those of his contract and of the musical atmosphere in the piano bar at christmas time. here, the entrepreneur-artist refuses to understand the context that may or may not be receptive to his creations. in this scene, the rejection by the stakeholders (customers and employer) is total (see table 2, time 1). sebastian has a purist side, by which he excludes the uninitiated. he may even appear contemptuous of the public by making no effort whatsoever to reach out to them. this translates into his intention to call his future jazz club “chicken on a stick”. this is an allusion to charlie parker whose nickname was bird, a musical reference only the initiated would understand. the protagonist yearns for artistic recognition but he does not want to make concessions on his art by taking into account the public’s point of view and expectations, thus neglecting the market orientation (narver and slater, 1990). this scene thus illustrates the notion of supply marketing, as the character starts with his or her own needs and only opens up to the market in a second phase, without any iteration with the market or consideration of its needs. the movie shows that this approach can easily seduce entrepreneurs in the creative sector, while also being very risky. on the other hand, being entirely guided by demand to define one’s offer can also lead to entrepreneurial failure, as the market leads the entrepreneur to deny his/her own values. by making extreme concessions to fashionable musical trends, sebastian abandons jazz for pop-rock music and becomes successful. his new band is served by the intuition of its leader who complies with the expectations of the public and the rules of the ecosystem with a certain level of opportunism: choice of a production company, electro music, revisiting jazz for the general public, winks to his young hysterical fans. the band fills concert halls, goes on tour and knows how to play journal of business models (2022), online first 134134 time 1: lack of alignment between the cvp and the stakeholders entrepreneur customer value proposition stakeholders (customers) stakeholders (employer) conventions in the sector x christmas carols want to hear christmas carols pays a pianist to play christmas carols bars play christmas carols at christmas time the employment contract stipulates christmas carols wants to play his own jazz music because to him, jazz overrates any style of music unknown jazz music x x x at first, sebastian plays christmas carols but he gets bored. he takes it upon himself to play jazz to align the cvp with his own beliefs, thereby losing alignment with stakeholders’ expectations and conventions. as a result, he gets fired. time 2: lack of alignment between the cvp and the entrepreneur’s needs and beliefs entrepreneur customer value proposition stakeholders (partners) stakeholders (customers) stakeholders (producers) conventions in the sector ecosystem wants to concentrate on good music (elitist jazz), remains discreet a jazz band x x x x x x a pop-rock group for teenagers want to be successful, famous and rich listen to pop music, act like fans singers must show up to sell more records singers must be fashionable, and imitate successful bands a lot of competition between bands sebastian does not manage to convince the other members of the band to opt for a jazz style. he bends to the codes of teenage bands to satisfy the expectations of all the stakeholders (partners, record company, consumers). the cvp is aligned with the market but by doing so, the entrepreneur denies himself. time 3: alignment between cvp and bm components leads to success entrepreneur customer value proposition stakeholders (customers) conventions in the sector ecosystem wants to play his own jazz music evolution: jazz can be shared with non-experts a trendy jazz club on a busy street with a name that doesn't exclude the uninitiated want to listen to good music in a nice place, and discover jazz bars have a cosy and warm atmosphere bars are concentrated in busy and trendy streets table 2: aligning the customer value proposition with others bm components journal of business models (2022), online first 135135 with the sometimes vulgar codes of show business. the photo shoot scene is a good example. in order to please his fans and be a “fashionable singer”, sebastian agrees to pose like a rapper with a ridiculous cap and fake smiles that make him feel totally ill-atease. on the surface, he seems to have achieved his goal of being listened to and making a living from his music, but he is recognized neither for what he likes nor for what he is. here, the movie tackles the issue of inadequacy between the project leader, the value proposition and the balance in value exchanges. the project no longer brings enough value to the leader. although the pop-rock band brings material comfort and fame, it affects his personal life and contradicts his values. the fact of marketing one’s product is represented as a compulsory step to comply with demand, however far off it may be from the personality of the entrepreneur, who sells his soul to the devil (see table 2, time 2). finding an alignment between the value proposition and the other bm components the links between the entrepreneur, the value proposition and the target are more optimistic in the second part of the movie. the end of la la land offers a constructive vision of the conciliation between the entrepreneur’s value proposition and his encounter with the public. five years after his break-up with mia, sebastian has opened his dream jazz club on a busy los angeles street. the public is there, the club is packed and it is a huge success. sebastian has made a concession: he has given up the name he originally wanted, “chicken on a stick”, to call his club “seb’s” like mia, a jazz neophyte representative of the majority of potential consumers, had suggested to him. he has also used the logo she had created: a sober and efficient design, which combines his first name and a musical note, expressing his identity and passion in an accessible way for the customers (see table 2, time 3). with an educational aim, this scene echoes the interest of a qualitative study task given to young student-entrepreneurs in training: to think about a logo and a brand name and test its acceptability by a target public, while remaining faithful to its original values. the scene shows that the initial idea needs to be worked on and that it has been improved by submitting it to the opinion of others, in a context of listening, dialogue and iteration with the market. sebastian has finally found a balance between his passion and the public’s expectations. the concessions he previously accepted or had to put up with in the past (playing in a fashionable band in contradiction with his values, losing his girlfriend because of touring) have helped him raise the capital to open his club and learn how to communicate with the public. they were therefore not in vain. this observation underlines the temporal dimension of conciliation between the entrepreneur’s value proposition and those for whom it is intended. this conciliation may require a learning phase or sufficient time to gather the appropriate resources. conclusion in order to teach the bm and show the links and alignment between its various components, we suggest using cinema as a teaching medium. a movie is a narrative that tells a story with events that lead to others (huczynski and buchanan, 2004). in entrepreneurial pedagogy, movies seem particularly relevant to us to show how the bm (project artifact) is constructed temporally, i.e. the ways in which the project leader learns over time how to gain collective support around him. cinema thus allows learners to see a fast-paced, process-based experience in a context that includes emotions and social interactions and a time frame that is compatible with the volume of a student course. indeed, a film offers the advantage of contracting both time and space. in our opinion, la la land was a relevant choice to teach the dynamic character of the bm, notably through the definition of the value proposition and how it is interwoven with stakeholders’ expectations (holm et al., 2019; yrjölä, 2019): those of the clients and those of other parties encountered in the film (the production company, the other members of the rock band, the owners of bars and theaters), as well as those of the entrepreneur himself and the ecosystem, while dealing with the conventions of the social environments concerned. one of the limitations of this article is that we do journal of business models (2022), online first 136136 not present the results of a pedagogical action research that would show how students react to this case. this analysis could be pursued by discussing the many other aspects of entrepreneurship theory present in la la land, whether they are related to stakeholders (support of the love partner, pygmalion effect), the entrepreneurial process (career incidents and learning) or to female entrepreneurship. these dimensions are an opportunity for a rich pedagogical case that could be empirically tested with a group trained in entrepreneurship. this research also contributes to revealing cinematographic works as a pedagogical medium that can be used to facilitate the bm’s learning/teaching process. future research using cinema in bm pedagogy could also lead to practical and pedagogical evolutions, such as the creation of a platform hosting related resources: films or scenes with entrepreneurs acting. it would then be a matter of adding to the database the media identified as relevant or tested pedagogical cases combining entrepreneurship, pedagogy and cinema. references ambrosini, v., billsberry, j. and collier, n. (2009). teaching soft issues in strategic management with films: arguments and suggestions, international journal of management education 8(1). ayikoru, m. and park, h. (2019), films and critical pedagogy in management education: a tourism studies context, academy of management learning & education, 19 (3), 414-432. champoux, j. (1999). film as a teaching resource. journal of management inquiry, 8(2), 206-217. journal of business models (2022), online first 137137 cope, j. and watts, g. (2000), learning by doing – an exploration of experience, critical incidents and reflection in entrepreneurial learning. international journal of entrepreneurial behavior & research, 6 (3), 104-124. fontenot, m. and fontenot, k. (2008). incorporating film into the research paper. business communication quarterly, focus on teaching,71(1), 55-58. holm, a., bidmon, c., henike, t., bosbach, k. and baden-fuller, c. (2019), teaching business models: introduction to the special issue. journal of business models, 7(3), p1-11. huczynski, a. and buchanan, d. (2004). theory from fiction: a narrative process perspective on the pedagogic use of feature films. journal of management education, 28, 702-726. hyams-ssekasi d., caldwell, e.f. (2018), experiential learning for entrepreneurship theoretical and practical perspectives on enterprise education, springer international publishing. macy, a. and terry, n. (2008). using movies as a vehicle for critical thinking in economics and business. journal of economics and economic education research, 9(1 ), 31-51. massa, l., viscusi, g. and tucci, c. (2018). business models and complexity. journal of business models, 6 (1), 59-71. massa, l., tucci, c.l. and afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11 (1), 73-104. mathews, c., fornaciari, c. and rubens, a. (2012). understanding the use of feature films to maximize student learning. american journal of business education, 5(5), 563-574. miles, m. b., and huberman, a. m. (1994). qualitative data analysis: an expanded sourcebook. thousand oaks, ca: sage publications. narver j. and slater, s. (1990), the effect of a market orientation on business profitability. journal of marketing, 54, 20-35. neck, h., gerde, v., neck, c. (2007), teaching entrepreneurial mindset: lessons from dead poets society. international journal of entrepreneurship education, 5, 175-192. neck, h. m., greene, p. g. and brush, c. g. (2014). teaching entrepreneurship: a practice-based approach. cheltenham: edward elgar publishing. osterwalder, a. and pigneur, y. (2010). business model generation. john wiley and son inc. proserpio, l. and gioia, d. (2007). teaching the virtual generation. academy of management learning and education, 6(1), 69-80. rajendran, d. and andrew, m. (2014). using film to elucidate leadership effectiveness models: reflection on authentic learning experiences. journal of university teaching and learning practice, 11(1), 8. szopinski, d. (2019). squaring the circle: business model teaching in large classroom settings. journal of https://www.emerald.com/insight/search?q=jason cope https://www.emerald.com/insight/search?q=gerald watts https://www.emerald.com/insight/publication/issn/1355-2554 https://web-b-ebscohost-com.docelec.u-bordeaux.fr/ehost/viewarticle/render?data=dgjymppp44rp2%2fdv0%2bnjisfk5ie46bbmskmxulgk63nn5kx95uxxjl6oruqvpbbiskaesripr1kvrj5zy5zyit%2fk8xnh6ueh7n%2fivauns0iurlniska2purx7h%2b73pa%2b4ti7evpepizf3btzzjzfhrunskiyqq5mrqakfu3o63nys%2bsn6ulyffbq&vid=1&sid=7c3dc4a1-53bc-4333-9716-71c4d06a4cb6@sessionmgr103 https://web-b-ebscohost-com.docelec.u-bordeaux.fr/ehost/viewarticle/render?data=dgjymppp44rp2%2fdv0%2bnjisfk5ie46bbmskmxulgk63nn5kx95uxxjl6oruqvpbbiskaesripr1kvrj5zy5zyit%2fk8xnh6ueh7n%2fivauns0iurlniska2purx7h%2b73pa%2b4ti7evpepizf3btzzjzfhrunskiyqq5mrqakfu3o63nys%2bsn6ulyffbq&vid=1&sid=7c3dc4a1-53bc-4333-9716-71c4d06a4cb6@sessionmgr103 https://babordplus.hosted.exlibrisgroup.com/primo-explore/fulldisplay?docid=33pudb_alma_marc7175583640004671&context=l&vid=33pudb_ub_vu1&lang=fr_fr&search_scope=catalog_pci&adaptor=local search engine&tab=default_tab&query=any,contains,learning-by-doing and entrepreneurship&offset=0 https://babordplus.hosted.exlibrisgroup.com/primo-explore/fulldisplay?docid=33pudb_alma_marc7175583640004671&context=l&vid=33pudb_ub_vu1&lang=fr_fr&search_scope=catalog_pci&adaptor=local search engine&tab=default_tab&query=any,contains,learning-by-doing and entrepreneurship&offset=0 journal of business models (2022), online first 138138 business models, 7(3), 89-99. stake, r.-e. (1994). case studies in k. denzin et s. lincoln, handbook of qualitative research (p. 435-454). thousand oaks, sage publications. van gelderen, m. and verduyn, k. (2003). entrepreneruship in the cinema: feature films as case material in entrepreneurship education. international journal of entrepreneurship education, 1(4), 539-566. verstraete, t., krémer, f. and néraudau, g. (2018). using cinema in a pedagogical context to understand the importance of conventions in designing a business model. revue de l’entrepreneuriat, 17 (2), 63-89. verstraete t., jouison-laffitte e. (2009), business model pour entreprendre – le modèle grp: théorie et pratique, de boeck université. https://grp-lab.com/wp-content/uploads/2020/11/business-model-pour-entreprendre-de-boeck-1.pdf verstraete, t. and jouison-laffitte, e. (2011a), business model for entrepreneurship. edward elgar publishing limited. verstraete,t. and jouison-laffitte, e. (2011b).a conventionalist theory of the business model in the context of business creation for understanding organizational impetus. management international, 15(2), 109-124. yrjölä, m. (2019), teaching value propositions as part of the business model. journal of business models, 7 (3), 111-118. https://grp-lab.com/wp-content/uploads/2020/11/business-model-pour-entreprendre-de-boeck-1.pdf https://grp-lab.com/wp-content/uploads/2020/11/business-model-pour-entreprendre-de-boeck-1.pdf 13 journal of business models (2020), vol. 9, no. 4, pp. 13-35 the interaction between business models and business reality peter kesting1 abstract purpose: the aim of this paper is to conceptualize the connection between business model and business reality. on this basis, the paper aims to put the business model on a solid conceptual basis and to build bridges to its neighbouring concepts. in this way, this paper should to contribute to more terminological and conceptual rigor of the business model construct. in addition, this paper aims to conceptualize the processes of constructing and using business models for decision-making. design/methodology/approach: this is a conceptual paper; it introduces and specifies a new construct, the status quo, as real-world counterpart to the business model. based on this, it develops a model of the interaction between business model and status quo. findings: the key finding of this paper is that business model and status quo are shaped (and need to be described) by different characteristics. the characteristics of the status quo result from repetition (stability) and routinization (efficiency, low resistance, etc.). the characteristics of the business model result from observation, abstraction and simplification (purpose, observer perspective, etc.). originality/value: this is the first paper to develop the status quo as an independent construct for management research. it also offers the first comprehensive model of the relation between business model and business reality. based on that, it allows establishing new connections between the business model concept and the theory of the firm, particularly with regard to innovation and routine. keywords: business model; status quo; inertia; innovation; routine; theory of the firm please cite this paper as: kesting, p. (2021), the interaction between business models and business reality, vol. 9, no. 4, pp. 13-35 1 aarhus university, bss doi: https://doi.org/10.5278/jbm.v9i4.6238 issn 2246-2465 https://doi.org/10.5278/jbm.v9i4.6238 journal of business models (2020), vol. 9, no. 4, pp. 13-35 1414 introduction in their seminal review, zott, amit and massa (2011) show that there is a rich body of research on the business model construct1, offering a variety of insights and demonstrating the explanatory power of the concept. however, in the same paper the authors conclude: ‘the business model remains a theoretically underdeveloped (and sometimes overloaded) concept, which may raise doubts concerning its usefulness for empirical research and theory building. future research on business models should seek to overcome these limitations.’ (ibid.: 1038). much has happened since; however, not all theoretical shortcomings could be overcome by research (jensen, 2013; fielt, 2013; dasilva and trkman, 2014; wirtz, pistoia, ullrich and göttel, 2016b; foss and saebi, 2018). one remaining theoretical problem is the relation between business model and business reality.2 let me illustrate this problem with the example of amazon. for quite some while, there has been an intense discussion in germany about whether the business model of amazon is that of a logistics company or that of a retailer (ver.di, 2019). this question was of particular interest for the involved participants, because if amazon is a retailer, it has to pay significantly higher wages due to different collective agreements. however, the theoretical key point behind this discussion is that both parties are right to a certain extent. there are good arguments for 1 the two terms, concept and construct, are closely related. both denote phenomena that are thought as a semantic unit, becoming part of a thought or a theory. concept, consisting of the latin prefix “con” and the verb “capere” (taking, grasping) is more focusing on its theoretical function, whereas construct, which is borrowed from the latin word “construere” (erect, build), is more focusing on its mental nature. in the text, i use both terms as characterizations, either pointing to the theoretical (concept) or the cognitive (construct) dimension of the respective term. 2 the notion of reality is strongly loaded in the philosophical discussion. one key challenge is that there is no valid inference, leading from subjective impressions to evident statements about the nature of matters (popper, 1959; caldwell, 1982). it is not even uncontroversial if there is one reality at all and inasmuch reality itself is (socially) constructed (lawson, 2016). however, the use of the term reality in this article is broad, pointing to the existence of firm activity as the subject of model construction. either position and no side could prevail so far. similar observations can be made in expert interviews or teaching exercises on business models: people have a different perspective on the business model of the same firm—most likely they have different information, but they also interpret their information in different ways. but what does this mean? what is the business model of the firm? is it the interpretations of individuals, so that, as a consequence, the same firm can have two or more mutually exclusive business models at the same time? or is the business model the reality behind the interpretation? but what is this reality? retailer or logistics company? how can we make assertions about this and what is the epistemological status of such assertions? this lack of clarity points to a more fundamental underlying conceptual problem: in fact, the business model does not denote one, but two different constructs at the same time. on the one hand (reality level), the business model denotes attributes of real firms, ‘how a company makes money ’ (birkinshaw and goddard, 2009: 81). chesbrough (2007: 12, emphasis added), for instance, states: ‘every company has a business model, whether they articulate it or not.’ on the other hand (abstraction level), the business model denotes the conceptual representation of the business reality (massa, tucci and afuah, 2017). osterwalder, pegnuer and tucci (2005: 3), for instance, specify the business model as ‘a conceptual tool containing a set of objects, concepts and their relationships’. this confusion has been recognized and discussed before (dasilva and trkman 2014; baden-fuller and morgan 2010), but it has never been cleared up. different levels of abstraction have been distinguished (osterwalder, 2004; massa et al. 2017; jensen, 2013; taran and broer, 2017). however, these different levels are hardly related to each other and mostly exist side by side. there is no holistic model that conceptualizes the interaction between business model and business reality. as a consequence, the use of the business model term is often erratic, oscillating somewhere between the different meanings; in the words of foss and saebi (2018: 9), ‘bm and bmi [business model innovation] constructs are used in multiple explanatory contexts.’ or as jensen (2013) has put it: ‘much of the discussion and confusion is journal of business models (2020), vol. 9, no. 4, pp. 13-35 1515 due to lack of clarity of more fundamental aspects in the different applications of the concept.’ what is the problem? wittgenstein (1921) already noted that many philosophical problems have their origin in an imprecise use of language. in this line of thought, terminological, conceptual and methodological rigor became key principles of research. assigning two or more substantially different meanings to one and the same term fundamentally violates these principles, leading to confusion and unproductive discussions. one example of this is the ongoing dispute about the relation between business models and strategy, with some researchers understanding business models as part of strategy itself and others as its consequence and manifestation (teece, 2010, 2018; massa et al., 2017; casadesus-masanell and ricart, 2010; zott and amit, 2008). both positions are contradictory and correct at the same time (depending on the grounding concept of business model). similar confusions can be diagnosed for other aspects of business models, including cognition, routine, innovation and many more. at all these points, the missing distinction between the abstraction and reality level is impeding the progress of business model research. this is very much in line with the critical conclusion by foss and saebi (2018: 9): ‘we argue that the lack of cumulativeness stems from lack of construct clarity (i.e., bm and bmi are seldom defined with much precision) and lack of agreement on definitions’. this conceptual confusion can only be cleared up by the conceptual distinction of two independent constructs, one denoting the reality level and the other one the abstraction level. moreover, without such a distinction it is impossible to conceptualize the complex interaction between abstraction and reality, how business models are constructed in order to capture firm reality, how this impacts strategy and how strategy again impacts firm reality. the main aim of this article is to introduce the concept of the status quo of the firm as real-world counterpart to the business model. the status quo of the firm specifies how a firm pursues its business at a certain point in time (without any substantial changes). the construct has a long history and an outstanding meaning for almost all dynamic theories, beginning with schumpeter’s theory of innovation, and leading to more recent research like the distinction of exploitation and exploration and the specification of dynamic capabilities. however, the status quo has barely been a subject of reflections itself and most researchers are not familiar with it. for this reason, the status quo concept is carefully presented in section 2. the emphasis here is on persistence as key characteristic of the status quo and its relevance for firm behaviour, particularly with regard to innovation. following, an overview of research insights in relation to that is given. in section 3, i will argue that the very conception of the bm stipulates that a business model is an abstract representation of a certain status quo of a firm. based on this conceptual positioning, i will then introduce a model of the interaction between business model and status quo. this interaction model provides a conceptual ground for the clarification of the attributes of its key constructs, business model and status quo. it will be outlined how the business model is shaped by the construction process and the status quo by repetition. interaction mechanisms will be identified and mapped. the discussion in section 4 then outlines the consequences of the interaction model and key contributions of this paper: a farreaching terminological and conceptual clarification; a new perspective on the interaction between business model and business reality; and the establishment of new bridges, linking business model research with the theory of the firm. the status quo of the firm—what and why as a starting point, and in order to get a deeper understanding of its structure, it needs to be pointed out that the concept of the status quo does not have any distinct meaning for the neoclassical theory of the firm. as is well known, the theory of the firm was originally an economic domain that has been shaped by the principles of neoclassical economics from the later 19th century onwards (blaug, 1992). in neoclassical economics, the key principle of the explanation of firm behavior is rational decision making (hausman, 1992; samuelson, 1983). because of this, firms have been journal of business models (2020), vol. 9, no. 4, pp. 13-35 1616 seen as perfectly flexible in that they always immediately react to context changes in an optimal way. in this sense, there is no distinction between continuation and change. continuation is just an identical outcome of repeated decisions happening incidentally. the status quo has therefore no distinct meaning for the neoclassical theory of the firm whatsoever. this changes latest in 1912 with the publication of the theory of economic development by schumpeter (1934). in this theory, the status quo is represented by the circular flow of the economy, as described as general economic equilibrium by walras (samuelson, 1951). schumpeter challenges walras by claiming that there is no tendency of the circular flow to change from the inside, i.e. for inherent economic reasons; it stays unchanged as long as it is not disturbed by external shocks. for the context of this study, it is particularly relevant for the status quo to not only remain unchanged, but to tend to persist so that it requires an extraordinary effort to change it. this is in sharp contrast to neoclassic economics, challenging their concept of flexibility. in this sense, schumpeter (1934) conceptualizes innovation not as a simple change, but a break with the existing status quo. he puts forward three reasons why such a break is particularly challenging: first uncertainty, not only with regard to the outcome, but also to the process, the right way to carry out the innovation. secondly resistance, introduced by schumpeter already as a mixture of rational reason and psychological aversion against change. later (schumpeter, 1942), he even describes resistance as a broader, societal phenomenon. thirdly capital needs; schumpeter already describes the challenges of new venture financing. he argues that innovation raises the only systematic need for capital that is inherent to economic activity. these challenges all lead to the persistence of the status quo. this persistence of the status quo makes it difficult to carry out innovations successfully; it therefore requires a distinct personality to do so – the entrepreneur. schumpeter expends a lot of effort to specify the entrepreneurial personality, grounding it in contemporary elite theories. later, he focuses on the entrepreneurial function (schumpeter, 1939). yet the focus has always been on the specific challenges that entrepreneurs have to overcome in order to change the status quo. on the level of national economies, seminal changes of the status quo cause turbulence, business cycles, and lead to creative destruction (schumpeter, 1942). the key in schumpeter is that change is not just the choice of a different solution like in neoclassical theory, but a phenomenon on its own, following a different logic and requiring different theoretical explanations than the continuation of a given status quo. the status quo becomes a reference point for innovation; innovation is determined by the persistence and the specific characteristics of the status quo. this understanding is essential to the schumpeterian theory of innovation. this paradigmatic incommensurability is the key difficulty for neoclassical economists to integrate schumpeter in their theoretical understanding. after schumpeter, this perspective has been supported and further developed by a number of different research streams. these research streams have substantially advanced the theoretical understanding of the status quo. however, they also build on the distinct characteristics of the status quo and much of this research would be pointless without this. to give one example: research on dynamic capabilities offers an investigation of the firm’s ability to adapt to context changes. “dynamic capabilities thus reflect an organization’s ability to achieve new and innovative forms of competitive advantage given path dependencies and market positions.” (teece, pisano and shuen, 1997: 516). this research challenges the schumpeterian dictum of the entrepreneurial personality as key driver of innovations and poses that resources can change conditions significantly. however, the focus here is again on the specific challenges to overcome the status quo and how to address them; if these challenges did not exist, firms would need no specific dynamic capabilities (like they do not need dynamic capabilities when they continue their business unchanged) and the entire research would be pointless. table 1 gives an overview of the most important theories and research streams and their relation to the status quo in different ways. this relation is specified and key insights with regard to the status quo are listed. table 1: this is a table showing something that is really awesome and interesting. journal of business models (2020), vol. 9, no. 4, pp. 13-35 1717 table 1. research stream relation to status quo key insights on the status quo organizational inertia (henderson & clarke, 1990; rumelt, 1995; christensen, 1997) tendency of the status quo to persist offering rich empirical support for persistence offering specifications and theoretical explanations of persistence, including: • age dependency • status quo biases; decision avoidance • individual motives • political deadlocks • dependency and focus on key customers organizational ambidex-terity (duncan, 1976; raisch & birkinshaw, 2008); exploitation-exploration (march, 1991); punctuated equilibrium (romanelli & tushman, 1994) specification of the difference between continuing the status quo and breaking with it implications of continuation and change for organizational learning investigation of the ability/challenges to pursue incremental and radical innovations at the same time antecedents of organizational ambidexterity momentum (miller & fiesen, 1980) resistance towards reversals in the direction of change in strategy and structure offering empirical support for persistence offering specifications and theoretical explanations of persistence offering specifications and theoretical explanations for reorientations entrepreneurship and innovation management (schumpeter, 1934; 1939; 1943; kirzner, 1997; tidd, 2001) approaches to overcome the status quo development of various aspects of innovation, including: • entrepreneurial personality and motives; entrepreneurial function • specification of the opportunity concept • creativity and ideation • resistance, leadership, organizational culture • employee participation; team organization • first mover advantage, innovation strategy; competitive advantage dynamic capabilities theory (teece, pisano & shuen, 1997; eisenhardt & martin, 2000; arndt, & pierce, 2017). approaches to overcome the status quo investigating the meaning of capabilities (as subject of organizational decision-making) for change specification and discussion of a number of different capabilities, including: • the ability to learn • the integration of new strategic assets • the transformation of existing assets table 1: specification of the relation between research streams and the status quo journal of business models (2020), vol. 9, no. 4, pp. 13-35 1818 table 1. (continued) research stream relation to status quo key insights on the status quo turnaround management (lewin, 1951; kotter, 1995) approaches to overcome the status quo introducing the stage concept of unfreezing—change—refreezing approaches to create an urgency to change advantages of the status quo path dependency (nelson 1993; sydow et al., 2009) longer-term development of the status quo (meso level) investigation of how a given status quo determines possibilities for future development national innovation systems evolutionary economics (nelson & winter, 1982) longer-term development of the status quo (macro level) insights on economic developments that are caused by an innovation of the status quo the meaning of routines for business organizations routine research (simon, 1947; betsch et al., 1999; feldman &pentland, 2003) micro-foundation of the status quo explanation of the characteristics of the status quo insights on antecedents and drivers specification of the advantages of the status quo investigation into the challenges of operating outside the status quo dual process theory (hodgkinson & healey, 2008; kahnemann 2003) micro-foundation of the status quo like routine research investigation of the interplay between continuation and change table 1: specification of the relation between research streams and the status quo all the research streams in table 1 build on a concept of the status quo with its distinct properties; in a neoclassical world of total flexibility, most of this research would be pointless. from all this follows that it makes a difference if something is already realized or not. the status quo therefore becomes a theoretical category as reference point for change. the substance of change is not just finding another solution as in the neoclassical theory of the firm, but overcoming an existing status quo. perhaps the most significant insight on the status quo after schumpeter is its micro-foundation by routine research and the dual process theory, showing that the distinct characteristics of the status quo are grounded in the human bounds of rationality. this research allows an understanding of the antecedents of the status quo and the causes for its distinct characteristics. it allows an understanding of why the status quo is as it is. this research also allows us to position the status quo in a relation with neoclassical economics. it should be noted that there is not only the current status quo but that status quo can also relate to the past and the future (in the same sense as journal of business models (2020), vol. 9, no. 4, pp. 13-35 1919 the business models can). a future status quo is hypothetical and only gets its properties after its establishment. it is also important that the status quo of the firm is not completely stable, but allows for changes to the day-to-day business within the limits of given structures. schumpeter has defined these structures by the production function; nowadays, the structure of firm activity is described by its strategy, its value chain – or its business model. the business model as an abstract representation of the status quo as with many other complex constructs there are also various definitions of the business model term. a few of these are collected in table 1 (a broader overview can be found in massa et al., 2017). the table exposes how substantially different the definitions for the same construct are. even though all definitions include value, they address different elements of it from different perspectives. one puts the focus on governance, another on competitive advantage, a third on customer needs, which all relate to completely different fields associated with different research streams. however, these definitions (and all other definitions that i know of) have one thing in common: they specify the business model as one distinct way to run the business. let us elaborate this using the example of the definition by osterwalder and pigneur (2010: 14): ‘a business model describes the rationale of how an organization creates, delivers, and captures value.’ in this definition, the specification of a business model is connected with one certain rationale. this rationale is constitutive in the sense that it distinguishes the business model – a different rationale leads to a different business model. in this sense, every different business model canvas also represents a different business table 2. amit & zott, 2001: 511 the business model depicts ‘the content, structure and governance of transactions designed so as to create value through the exploitation of business opportunities.’ osterwalder & pigneur, 2010: 14 a business model describes the rationale of how an organization creates, delivers, and captures value. morris et al., 2005: 727 a business model is a ‘concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in competitive markets.’ chesbrough & rosenbloom, 2002: 529 the business model is ‘the heuristic logic that connects technical potential with the realization of economic value.’ baden-fuller & haefliger, 2013: 1 a business model is ‘a system that solves the problem of sensing customer needs, engaging with those needs, delivering satisfaction and monetizing the value.’ table 2: definitions of the business model term in highly quoted papers journal of business models (2020), vol. 9, no. 4, pp. 13-35 2020 model. the same applies to the other definitions: it is one certain ‘system’, one certain ‘concise representation’, etc. that specifies a business model. in all these definitions, a business model relates to a certain business reality, or in other words, to a certain status quo. given this, one can conclude the following conceptual relation between bm and status quo. a business model is an abstract representation of a distinct status quo of a firm. in other words, every business model (specific business model, like a filled business model canvas) is constructed in order to represent one certain status quo. the conceptual relationship between these two constructs is therefore very close. this theoretical foundation of the business model leads to a first fundamental insight: like the status quo, the business model is inherently static. this statement is a little difficult to understand and might irritate some readers, so it requires more detailed elaboration. static means that one business model always relates to one specific structure of the business reality. this follows from all the definitions above, specifying the term business model as one certain ‘content, structure and governance’, one specific ‘heuristic logic’, one specific business model canvas – in other words as one certain way to run the business. to stick with a given business model means to stick with the given status quo; conceptually every structural change of the status quo leads to a new business model. this insight is not new, but has been recognized before, e.g. by doz and kosonen (2010). however, static does not mean that it is not possible to change business models. to the contrary, that business models can be changed and are in fact changed on a frequent base is one of their key characteristics. there is a broad range of literature on business model innovation (wirtz, göttl and daiser, 2016a), specifying management approaches (teece, 2010; chesbrough, 2010; amit and zott, 2012; baden-fuller and haeflinger, 2013) and key elements and dimensions of business model innovation (wirtz and daiser, 2017). research shows that it can be vital for firms to change their business model (holm, günzel-jensen and ulhøi, 2013). however, research also shows that it is often challenging to change an existing (and often previously successful) business model and that firms miss necessary changes (christensen, 1997). moreover, in the same way as with the status quo, business models allow for incremental day-to-day changes as long as these do not affect the structure of the business. however, this static character should not be understood as a deficit or shortcoming, but as a positioning of the business model construct. indeed, with its current definition, the business model takes a very important conceptual position for theoretical reasoning – as a reference point for change. in this way, the business model becomes the conceptual counterpart of the factual level of the status quo, which takes a central position in many theories. the business model specifies the structure of the status quo of the firm that is subject to be overcome by an innovation (leading to a new status quo in the moment where the innovation is implemented). in other words, it conceptualizes what to innovate. in this way, it also helps to understand the challenges that need to be addressed in the innovation process (cavalcante, kesting and ulhøi, 2011). the entire reasoning about innovation becomes much clearer when based on a business model concept. for that reason, the business model is more than a mere research fashion. due to their close relation, status quo and business model interact with each other: on one hand, every business model is constructed with the aim of representing a certain status quo. the status quo is therefore the subject of the business model construction. on the other hand, the business model guides the perception of the status quo and with it decisions about continuation and change. people construct business models in order to create a basis for decision making. in this way, the status quo becomes the object of the business model. this interaction can be represented by the model in figure 1: the ground structure of the model in figure 1 resembles a feedback model with an ostensive and performative aspect interacting with one another, not unlike e.g. that of feldman and pentland (2003). this is very much the case if the business model is developed as a planning tool and systematically used to monitor and control the business reality. however, journal of business models (2020), vol. 9, no. 4, pp. 13-35 2121 business models are often also used in more informal and descriptive ways (massa et al., 2017). in these cases, there is no strict feedback structure and the relationship becomes more interactive. in its simplest form as represented in figure 1, the model has four elements, two positions, the status quo and the business model (the two boxes in figure 1), and two processes, business model construction and managerial influence (the two arrows, linking the boxes in figure 1). these model elements will now be specified in more detail. let us first have a look at the distinctive characteristics of the status quo on one hand and the business model on the other. these characteristics help understand the differences between the two and why it is so important to distinguish between them. the status quo as outlined above, research offers comprehensive insights into the status quo, its attributes and its meaning for a firm’s activity and change. some insights which are particularly relevant to understanding the characteristics of the status quo come from its micro-foundation. these insights give a deeper understanding of underlying mechanisms that drive the status quo. the basis for the micro-foundation is the stability; firm activity in the status quo broadly consists of repetition – of production and sales processes, promotion activities etc. this repetition is the basis for the development of routine; standard solutions are developed for standard problems (betsch, fiedler and brinkmann, 1998, betsch, haberstroh, glöckner, haar and fiedler, 2001). the longer it lasts – and the more stable it is – the more activity tends to be routinized in the status quo. this process of routinization shapes the characteristics of the status quo. specifically, increasing routinization of the status quo leads to the following characteristics: • first, planning needs tend to decrease because the use of standard solutions only requires some planning of application and adaptation, but not of the solutions as such (simon, 1947; 1977; betsch, brinkmann, fiedler and breining 1999). this decrease in the need for planning is particularly relevant with regard to the strategic level of management capacities (kesting and ulhøi, 2010). • second, processes tend to become more efficient as with increasing repetition the firm goes through the learning curve (arrow, 1962; argote, 1999). solutions are developed and refined as a result of planning, trial and error and feedback in the course of repetition (nelson and winter, 1982). • third, uncertainty tends to decrease and to be transformed into controlled risk (simon, 1955; north, 1990). the use of standard solutions and their outcome have been observed repeatedly by members of the firm. processes are refined and better understood and possible scenarios are identified and evaluated. • fourth, resistance tends to decrease after decisions are made and routines are established (waddell and sohal, 1998; rumelt, 1995). in line with this, nelson and winter (1982) have characterized routine as a ‘truce.’ a successful status quo (i.e. an absence of change) can therefore be associated with a relatively low level of conflict. • routine driven • low planning effort • high efficiency • low uncertainty • low resistance • increasingly inert over time • low effectiveness • purpose of planning • conceptual perspective • observer perspective • accuracy construction of reality, modelling, critical discourse managerial influence shaped by a certain interpretation status quo business model figure 1: model of the interaction between status quo and business model journal of business models (2020), vol. 9, no. 4, pp. 13-35 2222 these are significant advantages stemming from the continuation of a status quo. the persistence of the status quo therefore broadly results from its success; a change of the status quo is associated with high planning effort, leading to a structurally uncertain outcome. decisions for change lead to disagreement and conflict. wrong decisions and missing practice are seen as leading to inefficient results. this is why people say, ‘never change a running system’. other reasons for persistence have been identified, for instance political deadlocks and the focus on existing markets and customers (hendersen and clarke, 1990; rumelt, 1995; christensen, 1997), as well as irrational status quo biases in decision making (samuelson and zeckhauser, 1988). persistence is therefore multi-causal and not all reasons for it are grounded in the success of routine. however, the inherent persistence means that the status quo is not fully flexible and adapted to context changes. as a consequence, the status quo tends to become ineffective over time (betsch et al. 1999; simon, 1947). standard solutions are not adequate for changed problems or unchanged problems in a changed context anymore. as a result, a tension between the benefits of the status quo and the need for change arises. this tension becomes particularly challenging because it involves a comparison between the familiar (status quo) and the uncertain (outcome of a change). these are some characteristics of the business reality, given that the status quo is continued over a longer period of time. however, these are not the characteristics of the business model, i.e. the simplified abstraction of the business reality. the confusion of these different levels of analysis is the cause of many misunderstandings and ambiguities. the business model in itself is a result of an intellectual construction; its characteristics depend on this process. the specification of the business model is that of an analytical procedure. the business model some research is addressing the model-characteristics of business models already explicitly (massa et al., 2017; baden-fuller and morgan, 2010), however, there is a fully developed research body on abstraction and model construction in the theory of science. this should be the basis for the reflections about the characteristics of the business model as a construction in this section. understood as a model, a business model is a conceptual construction, based on an envisioning of the business reality. like all other models, construction means that the business model is an outcome of a creative process. already in 1908, schumpeter points to the constructive nature of models, but he also notices that models are constructed in hindsight to capture real phenomena (kesting, 2008). in connection with this, weber (1978) introduces the notion of the ideal type, emphasizing the essential and abstracting from the unimportant. the concepts of both of them already imply that there is not one model, but rather that a variety of models can represent the same reality. and in fact, in conclusion of his review of 20th century philosophy, caldwell (1982: 51) points out ‘that for any set of data, an infinite number of theories can be developed to explain them.’ models are not right or wrong, but only more or less accurate and purposeful. caldwell (1982: 47) further concludes: ‘any observation requires both selection and interpretation by the observer, and such activities will be colored by the observer’s prior theoretical framework, which incorporates such intangible qualities as interests, perspectives, past experiences, and anticipations regarding results.’ this does not only apply to the observation, but also to the model construction. based on this insight, four characteristics can be assigned to business models: purpose—there are many and various purposes to construct a business model (massa et al., 2017). business models are constructed in order to identify managerial opportunities (nenonen and storbacka, 2010); to reduce market risks of innovations (euchner and ganguli, 2014); to describe how strategy is put into practice (rauter, jonker and baumgartner, 2017); but also due to academic interests, driven by a variety of research questions. this specifies the business model as a tool, helping to structure a journal of business models (2020), vol. 9, no. 4, pp. 13-35 2323 complex business reality (teece, 2018). the purpose defines the requirements for the tool. information is prioritized according to its relevance, and relevance is determined by purpose (weber, 1978). in this way, purpose becomes one important characteristic of the business model. conceptual perspective—business models are typically constructed based on a given framework. this framework shapes the construction, its structuring, its content, and its focus. currently, research and practice are dominated by the structure of the business model canvas (osterwalder and pigneur, 2010), but various other concepts have also been developed such as i.e. the business model framework by hamel (2000) or the business model components by morris, schindehutte and allen (2005) or the new business model canvas for platform businesses in two-sided markets (taipale-erävala, salmela and lampela, 2021). the conceptual perspective is a choice (since there are different perspectives) that closely relates to purpose. observer perspective—as emphasized by hanson (1958) in particular and later supported by popper (1965), every observer has an individual perspective on the outside world. this perspective is shaped by experiences and convictions, but also by values. in this context, kuhn (1970) has pointed to the incommensurability of perspectives. a marketing executive typically has a different perspective on the same business reality than an engineer or financial advisor etc. bini, guinta, nielsen, schaper and simoni (2021) have just brought up this point with regards to the understanding of the business model concept by users and preparers of financial statements, one out of many different target groups of business models. accuracy generally speaking, accuracy denotes the correspondence of the business model with the business reality. accuracy is a key for the usefulness of the business model as a decision-making tool. this is not a question of perspective or purpose, but of constructing. however, as caldwell (1982) shows, because an infinite number of business models can be constructed to describe the same business reality, there are no objective standards to judge accuracy; or as harré (1985) has put it, ‘there are no brute facts.’ as a consequence, there is no objective procedure to judge accuracy, but accuracy needs to be assessed in a critical discourse in which arguments are presented and evaluated. these characteristics specify the outcome of the modelling process, the construction of the business model. they describe the way in which the business model represents the business reality. this knowledge is important to understand the influence of business models on perception and decision-making. these characteristics are fundamentally different from that of the business reality that is described by the business model, so there are two different layers of observation. at this point, it is important to distinguish very carefully. these are characteristics of the positions in the interaction model (figure 1). let us next have a closer look to the processes, driving the interaction between status quo and business model. on the one hand, the status quo of a company shapes the business model as the one is constructed with the purpose to represent the other. on the other hand, also the business model can shape the status quo when management decisions are based on it. the following sections present an overview of insights research offers on these processes and of open research questions. business model construction the status quo and the business model are positions, describing a state at a certain point in time. in contrast, business model construction describes a process, capturing a status quo in abstract terms and leading to the business model. it consists of the observation of a practice that is driven by certain interests and which leads to an abstract representation. this process is contingent on determining how a business model looks for a given business reality. literature on business model construction is dominated by handbooks, guides and instructions (osterwalder and pigneur, 2010; bocken, short, rana and evans 2013; joyce and paquin, 2016, and many more). some insights on the construction process come from the literature on cognitive schemas (massa et al., 2017). clues can also be taken from journal of business models (2020), vol. 9, no. 4, pp. 13-35 2424 the discussions about business model components (wirtz et al., 2016b), business model representations (zott et al., 2011), business model ontology (osterwalder, 2004), and business model archetypes (badenfuller and morgan, 2010). however, more research, less normative and more positive, is needed to gain a systematic understanding of the process of business model construction, particularly: a systematic identification of the drivers of business model construction; frameworks and criteria to discuss the accuracy of business models; frameworks and criteria to discuss the fit between purpose and approach. the result would be a conceptual foundation for business model construction and the discussion about accuracy and purposefulness. managerial influence business model construction is describing processes leading from business reality to abstract representation. in contrast, managerial influence describes processes leading from abstraction to reality, i.e. how the use of business models is shaping the business reality via management decisions. massa et al. (2017: 79) specify that ‘the business model can be considered a dominant logic – a current thinking pattern or established belief or cognitive schema held by managers in organizations’. this quote is related to the understanding of business models as cognitive/linguistic schemas, but it can be understood more generally. this way, business models are shaping the managerial perception of the business reality (bettis and prahalad, 1995) and in particular also the process of opportunity recognition (teece, 2007). they can be a key element of organization-level sense making or even used more strategically for sense giving (gioia and chittipaddi, 1991). usually they are a result of, and their role is manifested in, social interaction (massa et al., 2017). by shaping managerial perception, business models become an antecedent of managerial decisions (massa et al., 2017), having an impact on the status quo and leading to an interaction of both. this is particularly the case when business models shape innovation processes, leading to a change of the status quo (massa et al., 2017; teece, 2010; afuah, 2014). the concept of business model innovation links innovation directly to the business model construct (chesbrough, 2010; amit and zott, 2012; foss and seabi, 2017). there is a large number of research contributions throwing a light on the general link between managerial perception and decision-making. for instance, research offers some evidence that the interpretation of strategic issues as an opportunity or threat has a critical impact on strategic decisionmaking (jackson and dutton, 1988; thomas, clark and gioia, 1993). chesbrough and rosenbloom (2002) outline how the bias for an outdated business model blinded the management of xerox for attractive opportunities. this case is interesting as it shows how the agreement on a business model – a certain interpretation of the business reality – influences action and becomes a source of inertia itself. this finding appears to go along with research on entrepreneurship where business plans are identified as a source of inflexibility (sarasvathi, 2001). hambreck and mason (1984) throw a light on the meaning of subjective perceptions of top managers for management decisions. research addresses sensing, social construction and envisioning (teece, 2010, teece 2018). a very comprehensive and systematic study of the role that business models play in managerial cognition, particularly with regard to innovation, was recently been published by sund, galavan and bogers (2021), concluding that there are still “numerous gaps in our knowledge” (p. 7). discussion the conceptualization of the interaction between business model and business reality allows for conceptual clarification and a deeper understanding of underlying processes. based on this, the key contributions of this paper are: a terminological and conceptual clarification; a conceptual foundation to investigate the interaction between business model and business reality; and building a bridge to neighbouring concepts. journal of business models (2020), vol. 9, no. 4, pp. 13-35 2525 terminological and conceptual clarification first, the conceptual grounding in this paper allows for a clarification of the relation between different business model definitions. several researchers have already pointed to a mutual core of business model definitions. dasilva and trkman, for instance, (2014: 282), have specified the unifying ground structure of the business model construct as: ‘understanding how business works and how value is created for different stakeholders.’ with the introduction of the status quo, the analysis of this paper offers a conceptual foundation for a closer specification of this unifying ground structure. the mutual core of the business model construct is the aim to specify (capture and structure) one certain (current, past, projected) status quo of a firm. this specification might not be so very different from that of dasilva and trkman, but it embeds the business model in a theoretical foundation – the status quo and the rich theory behind it. other characteristics of the business model construct can be derived from this: the business model is (i) a unit of analysis (morris et al., 2005; zott et al., 2011) because of its association to a firm (as a unit). it is (ii) holistic (zott and amit, 2010; joyce and paquin, 2016) as it aims to provide a big picture of firm activity in the status quo. it (iii) focuses on value (creation, capture, osterwalder and pigneur, 2010; chesbrough and rosenbloom, 2002) because firm activity focuses on that. it (iv) is static because it describes one and only one status quo. differences in the business model concept result from different purposes as well as different conceptual backgrounds. the business model canvas by osterwalder and pigneur, 2010 is currently dominant, but there are other ways to represent the status quo of the firm. hamel (2000), for instance, puts a stronger focus on strategy; morris et al. (2005) have a stronger focus on the competitive advantage. this is a valid and immediate consequence of the construction and simplification procedure that leads to the business model. people from different functions typically see different things and have different interests. some variety is therefore even supportive. secondly, the analysis of this paper offers a conceptual structure to clarify the semantic of statements about business models. specifically, the analysis of this paper shows that the formulation ‘a firm has a business model’—used as an attribute of a real firm (massa et al., 2017)—also necessarily needs to build on a construction. this formulation expresses an observer’s conviction that the business practice of the status quo of a firm is structured in a certain way. it is a statement about the factual level of business practice, ‘the way firms do business’ (shafer, smith and linder, 2005: 126), or ‘how a company makes money ’ (birkinshaw and goddard, 2009: 81). however, as outlined above, every conviction necessarily results from a construction by an observer – based on observation, interpretation, and simplification. therefore, even statements about ‘the way firms do business’ are based on models – often informal models, less articulated and reflected, but still constructed. as a consequence, there is no substantial difference between business model conceptions at this point. all verbally or graphically expressed business models, and even unarticulated convictions, are abstract representations of the business reality – there is no way around. this perspective places a question mark on the distinction between business models as ‘attributes of real firms’ and ‘formal conceptual representations/descriptions’ by massa et al. (2017). given this, business models can have different degrees of formalization. they can consist of an informal image of individual managers, giving a structured account of their perception of the business practice (chesbrough and rosenbloom, 2002). on the other side of the spectrum, business models can be fully elaborated and tested formal artefacts, representing the business practice of a firm, like a fully developed business model canvas (osterwalder and pigneur, 2010). but irrespective of the degree of formalization, business models are always constructed – in order to capture the business practice of a firm, but still constructed. as a consequence, it is still valid to use a formulation such as ‘the firm has a business model’ as a statement about the business practice of a firm. however, the research should point to the informal character of such formulations and also to the complex relation between business model and business reality. journal of business models (2020), vol. 9, no. 4, pp. 13-35 2626 investigation of the interaction between business model and business reality another contribution of this paper is the introduction of the interaction model itself, structuring and conceptualizing the processes that drive the interplay between business model and business practice. to date there are only general feedback models (like that of feldman and pentland, 2003), but there is no feedback model specifically related to business models. the function of the interaction model in figure 1 is to identify and distinguish elements, and position and relate them conceptually. one important element of the interaction model is the identification and distinction of different characteristics of the status quo on the one hand and the business model on the other. these characteristics result from substantially different processes and have substantially different effects. the characteristics of the status quo result from repetition (stability) and routinization (efficiency, low resistance, etc.). the characteristics of the business model result from observation, abstraction and simplification (purpose, observer perspective, etc.). both are related to cognition, but in very different ways. these characteristics are relevant drivers of processes, important for understanding, but often ignored. some of these characteristics were described previously (for example: cavalcante et al, 2011; doz and kozonen, 2010; andries and debackere, 2013), but only unsystematically; there was no concept for their theoretical positioning. the interaction model allows for a more differentiated understanding of the function and use of the business model construct, more specifically because: first, it allows for a more structured analysis of how people construct and use business models. the basis for this is again the status quo as subject and reference point of the business model construction. the interaction model provides a frame for the what and how, namely the abstract representation of a (current, past, projected) status quo. the model also outlines the feedback and the influence of business models on decision making. business models shape the perception of decision makers by providing an interpretation of the business practice, focusing of some aspects and abstracting from others. this is what business models are there for and why people spend time and effort on constructing them – to provide a better understanding of the business reality. more research is needed into this interaction process in order to get a better understanding of the influence of business models on managerial decision-making. this research might be able to support managers in their use of business models in order to improve managerial decision-making. secondly, the interaction model of this paper can contribute to the evaluation of the accuracy of business models. accuracy means that business models are correct and exact. this becomes particularly relevant when business models are used as a basis for decision-making. using inaccurate business models means that decisions are based on wrong assumptions. but what does accuracy mean in this context? how to assess accuracy? when business models describe company attributes on the reality level (like in birkinshaw and goddard, 2009 or chesbrough, 2007), this question is meaningless because in this case business models are immediate. on the other hand, when business models are conceptual representations of the business reality (massa et al., 2017; osterwalder et al., 2005), accuracy requires a clear specification of the business reality to be represented. in this case, the status quo (with all its inherent characteristics) provides a reference point for the analysis and the interaction model helps to specify the meaning of accuracy with regard to business models. the core point is that without a clear concept of business reality (be it the status quo or any other concept) there is no assessment of the accuracy of a business model. building bridges to neighbouring concepts finally, the interaction model contributes to research by identifying and developing the status quo as a conceptual link between the business model and its neighbouring concepts (see also colquitt and zapata-phelan, 2007). as outlined in table 1, the status quo is not only specified by research, but also an essential element of it. against this background, the status quo can also serve as a theoretical foundation of the business model. based on this foundation, it is possible to position the business model conceptually in the research journal of business models (2020), vol. 9, no. 4, pp. 13-35 2727 environment. at first glance, its static character seems to lessen the explanatory power of the business model construct. however, the opposite is the case: by representing the status quo of the firm, the business model can take over an important conceptual function for various research streams. business models can give firms a face by conceptualizing what they presently (i.e. in the status quo) are and what they are doing. this is how siemens, or ibm, or google currently look. the business model offers a frame to capture the functions and processes within these firms. in this way, the business model fills the black box of ‘the firm’ with life. this perspective emphasizes the characteristic of business model as a holistic unit of analysis. previously in neoclassical economics, the firm was represented by the production function (walras, 1874; debreu, 1959). one might recall that based on this understanding, schumpeter (1934) defines an innovation as a change of the production function. like the business model, the production function is also a holistic unit of analysis, describing what a firm does. this conceptualization has dominated economic thinking from the 1870s onwards (hausman, 1982). however, for business research, the abstraction of the production function was too strong and too focused on production. an increasing number of researchers were trying to capture the firm beyond that (including simon, 1947; march and simon, 1958; cyert and march, 1963). there were some concepts which took the position of the production function (such as porter’s (1985) value chain), but none of these could prevail and none of these is as powerful as the business model. the ‘black box’ was often filled with a diffuse concept of ‘the firm’. as a representation of the status quo of a firm, the business model is now filling this position in a very structured way. taking this position, the business model construct can make a considerable contribution to its neighbouring concepts. one example is the analysis of innovation, which can now be specified as a change of the business model in that the business model takes the position of a reference point of change, representing the static and inert status quo of the firm. this provides the management with a much more detailed picture of what it is facing. not all building blocks are affected by change, and building blocks are affected in very different ways (cavalcante et al., 2011). so in this way, the business model provides a new, far more differentiated conceptual foundation for a structural analysis of innovation. similarly, the business model creates a new conceptual foundation for other research streams like inertia, dynamic capabilities, ambidexterity, turn-around management and others. the business model provides an instrument to locate inertia and relate it to specific processes and building blocks (and not only to a global ‘firm’); it provides an instrument to investigate the effect of dynamic capabilities on different processes and building blocks etc. it can contribute everywhere where a holistic conceptualization of the firm is needed. this way, the status quo suits to build a conceptual bridge between business model research and the theory of the firm. conclusion the theorizing of this paper takes some positions, particularly the strict understanding of the business model as a construct and its static character. however, its static character does not weaken the business model concept; on the contrary, it strengthens it, as it enables it to be positioned in a place where a strong concept was lacking so far, a holistic specification what a firm is and what it does in the status quo. in this way, the business model can take the position as a reference point for innovations. the status quo and the interaction model then offer a comprehensive grounding which is suitable for overcoming most of the theoretical deficits of the business model construct. it offers a clear theoretical grounding of the construction of the business model and also of its characteristics. furthermore, it builds a conceptual bridge to the business reality; this way it establishes a link to well-developed theories of the firm. as a result, it provides a clear perspective of what a business model is and where it is positioned in the research context. the most important practical implication is the establishment of clarity. this paper urges practitioners to carefully distinguish between business model and business reality. in this way, not only can a lot of journal of business models (2020), vol. 9, no. 4, pp. 13-35 2828 misunderstandings be avoided. practitioners also get a better understanding of the construction and use of business models. it is useful to be aware that construction serves a purpose and that it is shaped by the conceptual and observer perspective. this insight might facilitate the development of a variety of applied business model canvases like the one just proposed by taipale-erävala et al., (2021). the reference to the status quo provides an anchor for the variety: all canvas variations describe the same status quo, but from different perspectives. carefully differentiating between business model and business practice can also help practitioners incorporate the business model concept into their understanding of the company, particularly with regard to innovation and routine. journal of business models (2020), vol. 9, no. 4, pp. 13-35 2929 references afuah, a. (2014). business model innovation: concepts, analysis and cases. routledge, new york. amit, r. and zott, c. (2001). value creation in e-business. strategic management journal 22(6/7), 493-520. andries, p. and debackere, k., (2013). simultaneous experimentation as a learning strategy: business model development under uncertainty. strategic entrepreneurship journal 7(4), 288-310. arndt, f. and pierce, l. (2017). the behavioral and evolutionary roots of dynamic capabilities. industrial and corporate change 27(2), 413-424. argote, l. (1999). organizational learning: creating, retaining, and transferring knowledge. kluwer academic, boston. arrow, j. k. (1962). the economic implications of learning by doing. review of economic studies 29(3), 155-173. baden-fuller, c. and haeflinger, s. (2013). business models and technological innovation. long range planning 46(6), 419-426. baden-fuller, c. and morgan, m. s. (2010). business models as models. long range planning 3(2/3), 156-171. betsch, t., fiedler, k. and brinkmann, j. (1998). behavioral routines in decision making: the effects of novelty in task presentation and time pressure on routine maintenance and deviation. european journal of psychology 28(6), 861–878. betsch, t., brinkmann, j., fiedler, k. and breining, k. (1999). when prior knowledge overrules new evidence: adaptive use of decision strategies and role behavioral routines. swiss journal of psychology 58(3), 151–160. betsch, t., haberstroh, s., glöckner, a., haar, t. and fiedler, k. (2001). the effects of routine strength on adaptation and information search in recurrent decision making. organisational behaviour and human decision processes 84(1), 23–53. bettis, r. a. and prahalad, c. k. (1995). the dominant logic: retrospective and extension. strategic management journal 16(1), 5–14. bini, l., guinta, f., nielsen, c., schaper, s. and simoni, l. (2021). business model reporting: why the perception of preparers and users matters. journal of business models, 9(1), 1-7. birkinshaw, j. and goddard, j. (2009). what is your management model? mit sloan management review 50(2), 81–90. blaug, m. (1980). the methodology of economics. or how economists explain. cambridge university press, cambridge. bocken, n.m.p., short, s., rana, p. and evans, s. (2013). a value mapping tool for sustainable business modelling. corporate governance 13(5), 482–497. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3030 caldwell, b. (1984). beyond positivism: economic methodology in the 20th century. allen and unwin, london. r casadesus-masanell, r. and ricart, j. p. (2010). from strategy to business models and onto tactics. long range planning 43(2-3), 195-215. cavalcante, s., kesting, p. and ulhøi, j. p. (2011). business model dynamics and innovation: (re)establishing the missing linkages. management decision 49(8), 1327-1342 chesbrough, h. w. and rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change 11(3), 529–555. christensen, c. (1997). the innovator’s dilemma. harvard business school press, boston. cyert, r. and march, j. (1963). a behavioral theory of the firm. prentice hall, englewood cliffs. dasilva, c. m. and trkman, p. (2014). business model: what it is and what it is not. long range planning 47(6), 379-389. debreu, g. (1959). theory of value: an axiomatic analysis of economic equilibrium. yale university press, new haven and london. doz, y. l. and kosonen, m. (2010). embedding strategic agility: a leadership agenda for accelerating business model renewal. long range planning 43(1/2), 370-382. duncan, r. (1976). the ambidextrous organization: designing dual structures for innovation. in: killman, r. h., l. r. pondy, and d. sleven (eds.) the management of organization, pp. 167-188. north holland, new york. eisenhardt, k.m. and martin, j.a. (2000). dynamic capabilities: what are they? strategic management journal 21(21), 1105–1122. euchner, j. and ganguli, a. (2014). business model innovation in practice. research technology management 57(6), 33-39. feldman, m. and pentland, b. (2003). reconceptualizing organizational routines as a source of flexibility and change. administrative science quarterly 48(1), 94-118. fielt, e. (2014). conceptualising business models: definitions, frameworks and classifications. journal of business models 1(1), 85-105. foss, n.j. and saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management 43(1), 200-227. foss, n.j. and saebi, t. (2018). business models and business model innovation: between wicked and paradigmatic problems. long range planning 51(1), 9-21. gioia, d.a. and chittipaddi, k. (1991). sensemaking and sensegiving in strategic change initiation. strategic management journal 12(6), 433-448. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3131 hambrick, d. c. and mason, p. a. (1984). upper echelons: the organization as a reflection of its top managers. academy of management review 9(2), 193-206. hamel, g. (2000). leading the revolution. harvard business school press, boston. hanson, n. r. (1958). patterns of discovery. cambridge university press, cambridge. harré, r. (1985). the philosophies of science. oxford university press, oxford. hausman, d. (1992). the inexact and separate science of economicsi cambridge university press, cambridge. henderson, r. and clark, k. b. (1990). architectural innovation: the reconfiguration of existing product technologies and the failure of established firms. administrative science quarterly 35(1), 9-30. hodgkinson, g.p. and healey, m.p. (2008). cognition in organizations. annual review of psychology 59(1), 387– 417. holm, a. b., günzel-jensen, f. and ulhøi, j. p. (2013). openness in innovation and business models: lessons from the newspaper industry. international journal of technology management 61(3/4), 324-348. jackson, s. e. and dutton, j. e. (1988). discerning threats and opportunities. administrative science quarterly 33(3), 370-387. jensen, a.b. (2014). do we need one business model definition? journal of business models 1(1), 61-84. joyce, a. and paqui, r. p. (2016). the triple layered business model canvas: a tool to design more sustainable business models. journal of cleaner production 135, 1474-1486. kahneman, d. (2003). maps of bounded rationality: psychology for behavioural economics. american economic review 93(5) 1449–1475. kesting, p. (2008). one hundred years from today: joseph a. schumpeter. das wesen und der hauptinhalt der theoretischen nationalökonomie berlin: dunckerandhumblodt 1908, history of economics review 48(1), 78-91. kesting, p. and ulhøi, j. (2010). employee-driven innovation: extending the license to foster innovation. management decision 48(1), 65-84. kirzner, i.m. (1997). entrepreneurial discovery and the competitive market process: an austrian approach. journal of economic literature 35(1), 60-85. kotter, j. p. (1995). leading change: why transformation efforts fail. harvard business review 73(2), 60-67. kuhn, t.s. (1970). the structure of scientific revolutions. the university of chicago press, chicago. lawson, t. (2016). comparing conceptions of social ontology: emergent social entities and/or institutional facts? journal for the theory of social behaviour 46(4), 359–399. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3232 lewin, k. (1951). field theory in social science. kurt lewin: selected theoretical papers. the university of chicago press, chicago. march, j.g. (1991). exploration and exploitation in organizational learning. organization science 2(1), 71-87. march, j. g. and simon, h. a. (1958). organizations. wiley, new york. massa, l., tucci, c. l. and afuah, a. (2017), a critical assessment of business model research, academy of management annals 11(1), 73-104. miller, d. and friesen, p. h. (1980). momentum and revolution in organizational adaptation, academy of management journal 23(4), 591-614. morris, m., schinderhutte, m. and allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research 58(6), 726-735. nelson, r. r. (ed) (1993). national systems of innovation: a comparative study. oxford university press, oxford. nelson, r. r. and winter, s. g. (1982). an evolutionary theory of economic change. the belknap press of harvard university press, cambridge (ma) und london. nenonen, s. and storbacka, k. (2010). business model design: conceptualizing networked value co-creation strategic positioning. international journal of quality and service sciences 2(1), 43-59. north, d. c. (1990). institutions, institutional change and economic performance. cambridge university press, cambridge. osterwalder, a. (2004). the business model ontology—a proposition in a design science approach. dissertation 173, university of lausanne, switzerland. osterwalder, a., pigneur, y. and tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of the association for information systems: vol. 16 , article 1. osterwalder, a.and pigneur, y. (2010). business model generation: a handbook for visionaries, game changers, and challengers. wiley, hoboken. popper, k. r., (1959). the logic of scientific discovery. hutchinson, london. popper, k. r., (1965). conjectures and refutations: the growth of scientific knowledge, 2nd ed. basic books, new york. porter, m. (1985). competitive advantage: creating and sustaining superior performance, simon and schuster, new york (ny). raisch, s. and birkinshaw, j. (2008). organizational ambidexterity: antecedents, outcomes, and moderators. journal of management 34(3), 375-409. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3333 rauter r., jonker, j. and baumgartner, r. j. (2017). going one’s own way: drivers in developing business models for sustainability. journal of cleaner production 140(1), 144-154. romanelli, e. and tushman, m. l. (1994). organizational transformation as punctuated equilibrium: an empirical test. academy of management journal 37(5), 1141-1666. rumelt, r.p. (1995). inertia and transformation. in montgomery, c.a. (ed.), resource-based and evolutionary theories of the firm. kluwer, norwell, pp. 101-132. samuelson, p. a. (1947). foundations of economic analysis, enlarged edition. harvard university press, cambridge ma. samuelson, p. a. (1951). schumpeter as teacher and economic theorist. review of economics and statistics 33(2), 98-103. samuelson, w., and zeckhauser, r. (1988). status quo bias in decision making. journal of risk and uncertainty 1(1), 7-59. sarasvathy, s. d. (2001). causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency. academy of management review 26(2) 243-263. schumpeter, j. a. (1934). the theory of economic development: an inquiry into profits, capital, credit, interest and the business cycle. harvard university press, cambridge, ma. schumpeter, j.a. (1939). business cycles: a theoretical, historical, and statistical analysis of the capitalist process. 2 vols, mcgraw-hill, new york and london. schumpeter, j.a. (1942). capitalism, socialism and democracy. harper, new york. shafer, s. m., smith, h. j. and linder, j. c. (2005). the power of business models. business horizons 48(3) 199–207. simon, h. a. 1947 [reprint 1997]. administrative behaviour. the free press, new york. simon, h. a. (1955). a behavioral model of rational choice. quarterly journal of economics 69(1), 99-118. simon, h. a. (1977). the new science of management decision. prentice-hall, englewood cliffs. sund, k. j., galavan, r. j. and bogers, m. (2021.) exploring the connections between business models and cognition: a commentary. in sund, k.j., galavan, r.j. and bogers, m. (eds.) business models and innovation (new horizons in managerial and organizational cognition, vol. 4): 1-13. emerald, bingley, pp. 1-13. sydow, j., schreyögg, g. and koch, j. (2009). organizational path dependence: opening the black box. academy of management review 34(4), 689-709. taipale-erävala, k., salmela, e. and lampela, h. (2020). towards a new business model canvas for platform businesses in two-sided markets. journal of business models 8(3), 107-125. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3434 taran, y and broer, h. (2015). a business model innovation typology. decision sciences 46(2), 301-331. teece, d. j. (2007). explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. strategic management journal 28(13), 1319–1350. teece, d. j. (2010). business models, business strategy and innovation. long range planning 43(2/3), 172–194. teece, d.j. (2018). business models and dynamic capabilities. long range planning 51(1), 40-49. teece, d.j., pisano, g. and shuen, a. (1997). dynamic capabilities and strategic management, strategic management journal 18(7), 509-533. tidd, j. (2001). innovation management in context: environment, organization and performance. international journal of management reviews 3(3), 169 – 183. thomas, j. b., clark, s. m. and gioia, d. a. (1993). strategic sensemaking and organizational performance: linkages among scanning, interpretation, action and outcomes. academy of management journal 36(2) 239– 270. ver.di (2019), logistik oder handel. in welcher branche ist amazon einzuordnen? (in german), https://www.amazon-verdi.de/5147 (retreived at april 30, 2020). waddell, d. and sohal, a.s. (1998). resistance: a constructive tool for change management. management decision 36(6) 543-548. walras, l. (1874). éléments d’économie politique pure, ou théorie de la richesse social, lausanne, paris and bâle [english transl. by w. jaffé. allen and unwin, london 1954]. weber, m. (1978). economics and society. university of california press, berkley and los angeles. wirtz, b. w. and daiser, p. (2017). business model innovation: an integrative conceptual framework. journal of business models 5(1), 14-34. wirtz, b. w., göttel, v and daiser, p. (2016a). business model innovation: development, concept and future research directions. journal of business models 4(2), 1-28. wirtz, b. w., pistoia, a., ullrich, s. and göttel, v. (2016b), business models: origin, development and future research perspectives, long range planning 49(1), 36-54. zott, c. and amit, r. (2010). business model design: an activity system perspective. long range planning 43(2-3), 216-226. zott, c., amit, r. and massa, l. (2011). the business model: recent developments and future research. journal of management 37(4), 1019-1042. journal of business models (2020), vol. 9, no. 4, pp. 13-35 3535 about the authors peter kesting is currently associate professor of strategy and organizational behavior at the aarhus university, bss. peter kesting holds a dr. rer. pol. from the university of hamburg and a habilitation from the leipzig graduate school of management and is life member of the clare hall college in cambridge (uk). he is co-founder and scientific advisor of the negotiation challenge (tnc) and co-founder of the international negotiation research and teaching association (intra). in his research, peter kesting focuses on different aspects of innovation and business model change and the cognitive foundations of action taking. additionally, he is also interested in the meaning of cooperation for value creation, intuition and routine in negotiation and the meaning of procedural justice for peace negotiations. 4 journal of business models (2023), vol. 11, no. 1, pp. 4-12 business model imitation: definition and typology bilal bourkha1 abstract the concept of business model imitation (bmim) has not been developed adequately in the strategic management field, even though it has been recently used extensively by researchers. this gives us impetus to propose a definition of bmim highlighting the distinction between several types of bmim. on the basis of such an outlook, we will clarify the ambiguities in the literature related to this concept showing that imitating a competitor’s business model (bm) does not necessarily mean imitating all the components of a bm. key words: imitation, business model, business model imitation please cite this paper as: bourkha, b. (2023), business model imitation: definition and typology, journal of business models, vol. 11, no. 1, pp. 4-12 1 mohammed first university – encg business school, eresca research teem, b.bourkha@ump.ac.ma issn 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7144 introduction the business model (bm) literature agrees on the importance of bm innovation (bmi) for value-creating companies (wirtz et al., 2016). the bmi allows to create new markets (kim and mauborgne, 1999), competitive advantages (johansen and abrahamsson, 2014), and construct a new product or concept (johnson, 2010). however, recent conducted research has demonstrated that bmi is not the only path to success in an industry. for example, enkel and mezger (2013) pointed out in their study that 60% of young german entrepreneurs use business model imitation (bmim) by imitating successful existing bms in other industries. another recent contribution showed that firms operating in the same organizational field apply relatively similar bm configurations (montemari et al., 2022). in recent years, the bm literature has begun to give special attention to the issue of bmim. it therefore focuses on two forms of bmim, the first of which is to imitate the successful bm of an organization in a different industry (enkel and mezger, 2013; frankenberger and stam, 2020), and the second is to imitate a bm of an organization present in the same industry (frankenberger and stam, 2020; montemari et al., 2022). our research is part of mailto:b.bourkha@ump.ac.ma https://doi.org/10.54337/jbm.v11i1.7144 journal of business models (2023), vol. 11, no. 1, pp. 4-12 55 this intra-industry form, but with a particular focus placed upon competing firms, as the industry can include suppliers and customers in the case of business-to-business markets, which we call “competitive intra-industry imitation”. montemari et al. (2022) proved that firms mainly imitate the bms of their main competitors in the global industry and in their specific sub-groups. bourkha et al. (2015) proposed the different forms of bmim reaction after a new bm in a competitive market. this pioneering research in this intra-industry imitation bm does not distinguish between the different types of bmim and generally focuses on the imitation of the value component of a bm while imitation can affect other components such as resources and organization. given these theoretical gaps, this study aims to improve the theoretical understanding of bmim through the proposal of a definition and the different types of “intra-industry competitive imitation”. in this article, we assume that imitation does not always consist of copying competitors’ practices, but can rather take a more or less creative form which is difficult to distinguish from incremental type innovation (dosi, 1988). this qualification is very close to what bourkha (2019) has called “imovation”, an english concept introduced by shenker in 2010 that put much emphasis on a particular type of companies in a competitive market. these are firms that cannot innovate for a number of reasons and do not wish to be perceived as imitator organizations. according to this logic the imitator adopts the idea but with a different result and allows to respond to a different segment or even create new segments (bourkha and demil, 2016).  to theoretically answer our research question, we began by identifying the studies that have dealt with competitive imitation. then, we classified them by the object imitated in order to identify whether it is an imitation of value, of resources or of organization. for this reason, we used the rcov model of lecocq et al. (2006), which is an analysis grid that allows us to delimit the contours of the bm. each company is thus defined according to the three main components resources and competences (rc), organization (o) and value propositions (v). this analytical framework helps to circumscribe our object of study in a rigorous and systematic way. using the rcov model as a framing device for business model imitation the bm is a fuzzy concept (porter, 2001). this famous criticism has urged the defenders of the bm to prove its pertinence in creating, delivering and capturing value (amit and zott, 2001; lecocq et al., 2006). our objective is not to defend or criticize the concept of the bm but to study it from an imitative perspective through the mobilization of the “rcov” model (lecocq et al., 2006). the famous bm “rcov” is composed of three elements: (1) resources and competencies, (2) organization and (3) value propositions. the basic hypothesis of the rcov model is that a company builds its bm by clarifying how a company organizes itself to exploit resources and competencies to provide products and services to the market (value proposition). organization refers to the organizational choices which a company makes in its value chain and the relationships with its suppliers, competitors and the state (external stakeholders) to exploit its resources and competencies which are the assets of a company. resources can be developed internally or acquired externally, while competencies refer to the capabilities and knowledge developed to drive the services that resources can offer. finally, value propositions are delivered to customers in the form of products and services.  we have chosen to use this model because it appears appropriate in several respects. first, this model offers a satisfactory compromise between the level of detail and simplification, allowing thus to highlight the essential and simple characteristics of the value creation logic of a company (moyon and lecocq, 2014). this is an advantage which assists in identifying the similarity between bmi and bmim, and delineating which bm elements are imitated. second, the pertinence of the rcov model resides in its ability to be flexible, in that it can be applied to a variety of firms from both traditional and e-business sectors (bourkha et al., 2015), an attribution allowing us journal of business models (2023), vol. 11, no. 1, pp. 4-12 66 to analyzie the bimm typologies that we will subsequently propose. third, the rcov model is a dynamic analysis tool in opposition to the linear representations proposed in the literature (demil and lecocq, 2010), which enables us to assume that the imitation of a bm may involve only one or two elements and not necessarily all of the elements.  typologies of “intra-industry competitive” bm imitation wanasika and conner (2011) summarized the different forms of imitation which we noticed in the literature. the authors distinguish between two types of imitation, strategic imitation and tactical imitation. strategic imitation involves the commitment of substantial resources and long-term strategies to match the strategic actions of the innovator, while tactical imitation is often short term and consists of copying actions that do not involve a substantial commitment. this contribution opens up the debate on what a company can imitate in a market. recently, the imitation of a bm has been extensively debated by authors like otuya (2018) who qualifies imitation as the willingness of a company to replicate the successful bm of a competitor. he holds the idea that the imitator is not whatsoever limited to imitating the value (product), but also the process of creating this value as well, a view which is similarly corroborated by montemari et al. (2022). finally, like products and processes, new bms are difficult to protect from imitation as casadesusmasanell and zhu (2013) maintain, justifying their view with the case of british airways, which launched “go”, a bm similar to that of ryanair. the latter is also imitated by several high-end companies such as air france, which launched its low-cost subsidiary transavia. this same line of argument is espoused by bourkha et al. (2015) who highlighted the imitative reactions of french telecom operators after the launch of free mobile. the absence of strong legal barriers to protect a bm presents a source of motivation for imitators in competitive markets. . the researchers called the imitation of a bm the “business model copycats”, expounding that entrepreneurs prefer to imitate existing bms when they do not want to innovate (fu and tietz, 2019). consequently, using the line of argument of haunschild (1993), we define inter-organizational figure 1: bm elements representation (lecocq et al., 2006, p. 234) journal of business models (2023), vol. 11, no. 1, pp. 4-12 77 imitation of a bm by the following sequence: at time (t), a first organization adopts a new bm, after x time (t+x), a second organization adopts a bm composed of at least one same component (r&c, and/ or o and/or v) of the first bm. when both organizations operate in the same competitive market, we call it “competitive imitation of a bm”. based on our definition put forward above and the mobilization of the rcov model (lecocq et al., 2006), we propose four types of bmim: (1) the perfect bmim where all the components of a competitor’s bm are imitated; (2) the “value proposition-focused bm imitation” which implies an imitation at the level of the “value proposition” component of a competitor’s bm; (3) the “organizational-focused bm imitation” when a firm organizes its internal and extreme activities in the same way as a competitor; and (4) the “resources-focused bm imitation” when it is an imitation at the level of the bm’s rcs. we develop below the last 3 types and we consider the first one as the sum of the last 3. value proposition-focused bm imitation the “v” component of a bm is often debated based on its definition (johnson et al., 2008). researchers tend to associate value only with the supply side (hedman and kalling, 2001). this limited view of the value proposition in a bm makes it clear that firms can easily control the value of their competitors. the offerings are present in the market and competitors can collect information about the products easily; they can even procure a copy. therefore, in this case we move from the imitation of a bm to the imitation of a product. nevertheless, we consider that in this form of bmim, the companies can deliver on a market the same offer as the competitors with the optimization of its own resources and competences which we suppose different from the innovative company. the organization of resources/competences of the imitator is also different from the organization of resources/competences of the innovator. in another completely different view, some researchers prefer a general view (warnier et al., figure 2: bm imitation typology journal of business models (2023), vol. 11, no. 1, pp. 4-12 88 2016) that encompasses several axes such as customer benefits (hamel, 2000), customer segment (osterwalder, 2004), revenue model and margin model (johnson et al., 2008b), and price (afuah and tucci, 2001). this, in turn, expands the object to be imitated in a competitor ’s value proposition. in other words, in this case, the imitator must answer the question, “what value to imitate?”. imitation of a “value” is the most noted type in the imitation literature. srinivasan et al. (2007) showed that the launch of camcorders in the united states can be explained by the existence of imitative behavior. bourkha and demil (2016) have also observed this behavior in moroccan bank card market. they suggested that banks may imitate the product or even attack a new segment. compared to competitors, imitator firms with their different resources and skills and a different way of organizing themselves seek to create the same value as competitors. this value can be enhanced in some cases by the imitator by further creating certain value attributes. for example, lee and zhou (2012) noted that creative imitation of a competitors’ product contributes significantly to the imitator’s financial performance. similarly, posen et al. (2013) found that imperfect imitation can generate surprisingly good results for follower firms, even better than the results they may get if they were perfect imitators. organizational-focused bm imitation the organizational dimension of the bm is associated with several elements such as the internal configuration (hamel, 2000; chesbrough and rosenbloom, 2002; osterwalder, 2004), building partnerships (osterwalder, 2004; johnson et al., 2008), a value-creating organizational structure (alt and zimmermann, 2001), the relationship developed with customers (hamel, 2000; osterwalder, 2004), and the set of organizational processes for making decisions concerning a specific activity (alt and zimmermann, 2001; johnson et al., 2008). we have identified in the literature on imitation objects such as those associated with this organizational dimension that we develop below. beyond product imitation, henisz and delios (2001) were the first to associate imitation with an organizational level. the authors noted that less experienced japanese multinationals in the same industry imitate the internationalization strategies of their competitors. this contribution is also suggested by sirmon et al. (2008) who found that imitation also explains the decision to invest in r&d to innovate. resources-focused bm imitation resources and competencies are considered essential components of the bm (seelos and mair, 2007). resources are assets available to a firm and can take several forms: property rights (chesbrough and rosenbloom, 2002), brand image (dahan et al., 2010), personnel (johnson et al., 2008). moreover, competences are the result of the integration of these resources in addition to individual and collective know-how (warnier et al., 2016). much has been written about the importance of resources and competencies in a bm. the literature, using the work of barney (1991), agrees that strategic resources are difficult to imitate, while ordinary resources (weppe et al., 2013) are valuable but not scarce, imitable, and substitutable in the sense of barney (1991). we refer to this bmim as a strategic type that can take several forms depending on similarity between the innovator’s resources and the imitator’s resources. conclusion this present study introduces important contributions to the research concerned with bmim and competitive imitation. first, it is the first to propose the different types of intra-industry bm imitation. previous research in this area has emphasized the importance of imitation in developing a bm (fu and tietz, 2019; montemari et al., 2022). others researchers have also illustrated the importance of imitation like a competitive reaction to a bmi in a competitive market (bourkha et al., 2015). however, previous research has not clarified the concept of bm imitation and its typologies. this paper addresses this theorical gap in both the bm literature and imitation literature. in doing so, we hope to pave the way for more systematic research on the role of imitation in bm conception and on the journal of business models (2023), vol. 11, no. 1, pp. 4-12 99 success of the different types of bmim proposed in the paper. the second contribution regards the research on competitive imitation, although there are undeniably different works examining several imitated objects like product (srinivasan et al., 2007), internationalization decision (henisz and elios, 2001), alliances (garcia-pont and nohria, 2002), diversification (vermeulen and wang, 2005) and organizational innovation (anderson and semadeni, 2010). we see that our study contributes to this stream of literature by clarifying when the bm becomes an object of imitation in a competitive industry. additionally, our research is in congruence with recent work held on imitation assuming that the latter can be a source of differentiation (posen et al., 2013; bourkha and demil, 2016; bourkha, 2019). still, our present contribution is not immune to some shortcomings opening up new horizons for further research. first, our views are purely theoretical which enables us to develop sound thinking about bmim, but empirical research remains a necessity to confirm the typology proposed in this paper. moreover, further research could explore the advantages and disadvantages of each form of bmim proposed in the paper as well as the challenges related to the implementation of each form. following along these lines, future studies could examine the type of bmim that performs best in a competitive industry. second, this paper proposes a typology based on a contentbased approach, although mobilizing the process approach to explore the question of how to imitate a bmi is an interesting research area. third, this study suffers from a defect relative to its ability to classify imitation though we have made it clear from the outset that we are not only dealing with perfect imitation but also imperfect imitation. further research is needed to broaden the typology proposed in this paper or to develop finer types of bmim. journal of business models (2023), vol. 11, no. 1, pp. 4-12 1010 references afuah, a., & tucci, c. l. (2001). internet business models: a strategic management approach. irwin/mcgraw. alt, r., & zimmermann, h. d. (2001). preface: introduction to special section–business models. electronic markets, 11(1), 3-9. barney, j. (1991). firm resources and sustained competitive advantage. journal of management, 17(1), 99-120. bourkha, b. (2019).  l’imovation, vers un nouvel objet de recherche en management stratégique. in xxviiième conférence de l’association internationale de management stratégique (aims). bourkha, b., & demil, b. (2016). la capacité d’absorption, un processus d’imitation de produits.  revue française de gestion, (2), 155-168. bourkha, b., dewitte, a., & ranjatoelina, j. t. (2015). organiser l’imitation d’un business model innovant: quatre propositions pour les entreprises. in  xxvème conférence annuelle de l’association internationale de management stratégique (aims). brandes, p., hadani, m., & goranova, m. (2006). stock options expensing: an examination of agency and institutional theory explanations. journal of business research, 59(5), 595-603. casadesus‐masanell, r., & zhu, f. (2013). business model innovation and competitive imitation: the case of sponsor‐based business models. strategic management journal, 34(4), 464-482. chesbrough, h., & rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin‐off companies. industrial and corporate change, 11(3), 529-555. dahan, n. m., doh, j. p., oetzel, j., & yaziji, m. (2010). corporate-ngo collaboration: co-creating new business models for developing markets. long range planning, 43(2-3), 326-342. demil, b., & lecocq, x. (2010). business model evolution: in search of dynamic consistency. long range planning, 43(2-3), 227-246. dosi, g. (1988). sources, procedures, and microeconomic effects of innovation.  journal of economic literature, 1120-1171. enkel, e., & mezger, f. (2013). imitation processes and their application for business model innovation: an explorative study. international journal of innovation management, 17(01), 1340005. frankenberger, k., & stam, w. (2020). entrepreneurial copycats: a resource orchestration perspective on the link between extra-industry business model imitation and new venture growth.  long range planning,  53(4), 101872. fu, y., & tietz, m. a. (2019). when do investors prefer copycats? conditions influencing the evaluation of innovative and imitative ventures. strategic entrepreneurship journal, 13(4), 529-551. journal of business models (2023), vol. 11, no. 1, pp. 4-12 1111 garcia‐pont, c., & nohria, n. (2002). local versus global mimetism: the dynamics of alliance formation in the automobile industry. strategic management journal, 23(4), 307-321. ghani, r. (2012). contribution à la compréhension de l’adoption des erp dans les pme marocaines : une approche structurationniste et culturelle. phd thesis, montpellier 1 university. hamel, g. (2000). leading the revolution (cambridge, ma: harvard business school press). haunschild, p. r. (1993). interorganizational imitation: the impact of interlocks on corporate acquisition activity. administrative science quarterly, 564-592. hedman, j., & kalling, t. (2001). the business model: a means to understand the business context of information and communication technology. school of economics and management, lund university. henisz, w. j., & delios, a. (2001). uncertainty, imitation, and plant location: japanese multinational corporations, 1990‐1996. administrative science quarterly, 46(3), 443-475. johnson, m. w. (2010). the time has come for business model innovation. leader to leader, 2010(57), 6-10. johnson, m. w., christensen, c. m., & kagermann, h. (2008). reinventing your business model. harvard business review, 86(12), 57-68. johansen, m. w. & abrahamsson j. t. (2014). competing with the use of business model innovation an exploratory case study of the journey of born global firms. journal of business models, 2(1), p. 33-55. kim, w. c., & mauborgne, r. (1999). creating new market space. harvard business review, 77(1), 83-93. lecocq, x., demil, b., & warnier, v. (2006). le business model, un outil d’analyse stratégique. l’expansion management review, (4), 96-109. lee, r. p., & zhou, k. z. (2012). is product imitation good for firm performance? an examination of product imitation types and contingency factors. journal of international marketing, 20(3), 1-16. montemari, m., taran, y., schaper, s., nielsen, c., thomsen, p., & sort, j. (2022). business model innovation or business model imitation–that is the question. technology analysis & strategic management, 1-15. moyon, e., & lecocq, x. (2014). rethinking business models in creative industries: the case of the french record industry. international studies of management & organization, 44(4), 83-101. osterwalder, a. (2004). the business model ontology a proposition in a design science approach (doctoral dissertation, université de lausanne, faculté des hautes études commerciales). otuya, r. (2018). imitation as an organizational competitive strategy for growth and sustainability. africa journal of technical and vocational education and training, 3(1), 173-184. porter, m. e. (2001). strategy and the internet. harvard business review, 79(3), 62-78. journal of business models (2023), vol. 11, no. 1, pp. 4-12 1212 posen, h. e., lee, j., & yi, s. (2013). the power of imperfect imitation.  strategic management journal,  34(2), 149-164. seelos, c., & mair, j. (2007). profitable business models and market creation in the context of deep poverty: a strategic view. academy of management perspectives, 21(4), 49-63. semadeni, m., & anderson, b. s. (2010). the follower’s dilemma: innovation and imitation in the professional services industry. academy of management journal, 53(5), 1175-1193. shenker, o. (2010). imitation is more valuable than innovation. harvard business review, 28-30. sirmon, d. g., arregle, j. l., hitt, m. a., & webb, j. w. (2008). the role of family influence in firms’ strategic responses to threat of imitation. entrepreneurship theory and practice, 32(6), 979-998. srinivasan, r., haunschild, p., & grewal, r. (2007). vicarious learning in new product introductions in the early years of a converging market. management science, 53(1), 16-28. vermeulen, f. & wang, t. (2005). imitation or distinction: strategic responses to social reference groups, mai, euram, munich. wanasika, i., & conner, s. l. (2011). when is imitation the best strategy?.  journal of strategic innovation and sustainability, 7(2), 79-93. warnier, v., lecocq, x., & demil, b. (2016). le business model, un support à la créativité de l’entrepreneur. entreprendre innover, (1), 65-75. weppe, x., warnier, v., & lecocq, x. (2013). ressources stratégiques, ressources ordinaires et ressources négatives. revue française de gestion, (5), 43-63. williamson, i. o., & cable, d. m. (2003). organizational hiring patterns, interfirm network ties, and interorganizational imitation. academy of management journal, 46(3), 349-358. wirtz, b. w., göttel, v. & daiser, p. (2016). business model innovation: development, concept and future research directions. journal of business models, 4(2), 1-28. journal of business models (2021), vol. 9, no. 2, pp. 72-86 72 we need transdisciplinary research on sustainable business models claudia alba1 and nikolay a. dentchev2 abstract purpose: this paper explores the challenges sustainable business model (sbm) studies may face related to the information gathered during the data collection process, and elaborates on how transdisciplinary research can help to overcome these challenges. our contribution is based on the theoretical lens of information asymmetry. design/methodology/approach: this paper uses a qualitative methodology based on a transdisciplinary program that aims to support disadvantaged communities in bolivia. the program started 3 years ago, with as objective to help vulnerable communities through transdisciplinary intervention in 6 projects, viz. 1. social vulnerability, 2. integrated water management, 3. food security, 4. indigenous rights, 5. productive development and 6. transversal. in addition to our experience in the program, we have conducted 57 interviews and 10 focus group discussions with vulnerable entrepreneurs and relevant stakeholders, alongside numerous on-site observations. findings: the findings of our study illustrate that sbm research can face information asymmetry issues such as lack of access to, lack of understanding of and lack of trust in the information provided. we also show how transdisciplinary research helps to bridge such issues of trust, understanding and information availability. based on our research, we propose 5 suggestions to scholars who wish to adopt transdisciplinary research in their study of sbms: (i) understand the context, (ii) adapt to the context, (iii) develop relationships of trust, (iv) be flexible with your research focus and (v) systematically present to other disciplines and non-academic actors. originality/value: our contribution is based on the theoretical lens of information asymmetry and argues that a transdisciplinary approach is necessary to accumulate fundamental knowledge on sbms. such an approach constitutes a rather sophisticated research methodology that can help us embrace the complexity of sustainable business models and find practical solutions for their scalability. please cite this paper as: alba, c. and dentchev, n. a. (2021), we need transdisciplinary research on sustainable business models, journal of business models, vol. 9, no. 2, pp. 72-86 keywords: transdisciplinary research, vulnerable entrepreneurs, sustainable business models, methodology 1-2 vrije universiteit brussel doi: https://doi.org/10.5278/jbm.v9i2.3573 https://doi.org/10.5278/jbm.v9i2.3573 journal of business models (2021), vol. 9, no. 2, pp. 72-86 73 introduction scholars in the field of sustainable business models (sbms) have generated a solid body of knowledge during the past years, as demonstrated by numerous special issues, academic conferences as well as the vast interest shown by business and policymakers (lüdekefreund and dembek, 2017). such a broad interest in sbm scholarship is a logical consequence of the serious social and environmental challenges that our planet faces (brundtland et al., 1987), and of the expectation that managers can find solutions to them (bansal, 2003). lüdeke-freund (2010) argues that sbms create competitive advantage while contributing to the sustainable development of our planet. in fact, sbm scholars are often preoccupied with the practical side of sustainable business models, studying how organizations can improve their positive impact. the attention to practical relevance in this field is indicated by the various sbm ontologies (breuer, 2013; joyce and paquin, 2016; upward and jones, 2016) and archetypes developed (stubbs and cocklin, 2008; bocken et al., 2014; yip and bocken, 2018). despite the growing body of research with a practical orientation in sbms, much work still needs to be done to develop stronger and cumulative theoretical knowledge in this scholarly field (dentchev et al., 2018). this need for cumulative development of theoretical knowledge is a result of the complexity of sbms (høgevold et al., 2014), which is associated with the overall activity and strategic management of organizations (kolk and mauser, 2002). integrating sustainability in the business models arguably requires specific knowledge of social and environmental issues, additional processes and procedures, and an ambition to realize continuous improvement. the complexity of sbms themselves is based on their triple bottom line approach, embracing economic, environmental and social dimensions (bocken et al., 2014). the economic dimension refers to value generation from a profit perspective (osterwalder and pigneur, 2011), the environmental one to the preservation of environmental resources, while the social dimension appertains to the consideration of various stakeholders in business activities (joyce and paquin, 2016). these three dimensions need alignment (bocken et al., 2014) and should result in tangible outcomes of sustainable development (stubbs and cocklin, 2008). to understand this complexity of sbms, scholars need to be familiar with the practice of sbms, studying their slightest details and their context. in this line of reasoning, we follow the assertion of lüdeke-freund & dembek (2017, p. 1677) that our field “requires multi-, interand transdisciplinary efforts [… with the] importance to establish and maintain a strong link and communication not only within but also between academia, industry, and government.” transdisciplinary research involves academics from different disciplines studying a specific phenomenon in collaboration with non-academic participants (stock and burton, 2011). non-academic participation provides information about the real-world dynamics that complement academic knowledge and improves the understanding of a specific phenomenon (horlick-jones and sime, 2004). such transdisciplinary research is adequate to study complex phenomena (wickson, carew and russell, 2006; pohl and hadorn, 2008; stock and burton, 2011), such as sbms and is considered a valuable research strategy to increase academic rigor in the sbm field (lang et al., 2012). hence, our paper will elaborate on transdisciplinary research as a means to resolve challenges related to data collection and interpretation in sbm studies, our paper’s purpose. we use information asymmetry as a theoretical lens to focus on the challenges of data collection and interpretation (akerlof, 1970; malkiel and fama, 1970; stiglitz, 2000). this theoretical viewpoint is useful to help us understand the challenges of studying complex phenomena, such as sbms since it points out issues such as information availability, understanding and trust (cf. infra) that appear in the process of studying complex phenomena. this paper offers insights gathered in a transdisciplinary research program in support of disadvantaged communities from the universidad catolica boliviana (ucb) in bolivia. this program is funded by vlir, the flemish interuniversity council in belgium. drawing on the author’s experience in the program, we have further developed our methodological recommendations based on 57 interviews and 10 focus group discussions with vulnerable entrepreneurs and relevant stakeholders. here vulnerability refers to an inability to earn sufficient income to live a decent life, with exposure to a variety journal of business models (2021), vol. 9, no. 2, pp. 72-86 74 of social and environmental disadvantages such as malnutrition, insufficient health-care, lack of education, pollution and violence (pearlman, 2012). the business models of vulnerable entrepreneurs can resolve a variety of social issues, and in this sense, they can be seen as a subtype of sbms (dembek, york, & singh, 2018). the remainder of the paper is organized in five sections. first, we explain the importance of transdisciplinary research for the field of sustainable business models. secondly, we propose the use of the theoretical lens of information asymmetry in transdisciplinary research. thirdly, we clarify the methodological considerations used in this paper. fourthly, we present the findings of this paper. the fifth and final section summarizes our concluding remarks and recommendations. transdisciplinarity in sbms transdisciplinary research is recommended for the study of life-world problems (pohl & hadorn, 2008) with a complex nature (stock & burton, 2011). transdisciplinary research approaches complex problems (e.g. poverty) through the insights of various scientific disciplines and through the involvement of any relevant group of actors in a study (bracken, bulkeley and whitman, 2015). sustainability problems are not limited to the boundaries of a single discipline, therefore it is useful to approach them from multiple scientific angles, as transdisciplinary research prescribes (wickson, carew and russell, 2006). such an approach is also effective in creating linkages between theory and practice, yet above all it is a very useful tool in solving societal problems (horlick-jones and sime, 2004). the strength of transdisciplinary research is related to its ability to understand (1) the complexity of the phenomena studied, (2) the possible logical explanations and predictions, and (3) the different interpretations of reality (max-neef, 2005). this is achieved in the first place by the interactions of disparate disciplines, which provide distinct lenses through which to study complex problems. moreover, the involvement of stakeholders affected by the problem (e.g. poverty) provides an additional perspective on the phenomenon. poor people, for example, are then no longer the object of study, but have become part of the transdisciplinary research team. these nonacademic participants are useful for researchers to make sense of the complex phenomena (horlick-jones and sime, 2004). as such, the research team receives a more solid understanding about the context of the phenomenon studied, based on knowledge exchange with non-academic participants. as a result, the theoretical knowledge is more accurate, and its implications are more useful for the solution of complex societal problems. additionally, the mix of scientific and non-scientific perceptions of problems offers opportunities for practical solutions (wickson, carew and russell, 2006; pohl and hadorn, 2008; stock and burton, 2011). transdisciplinary research emphasizes three interrelated components, i.e. the context of the problem, the knowledge necessary for its solution and the learning about possible solutions (mitchell, cordell and fam, 2015). it thus provides a comprehensive approach to complex problems and enables the co-creation of solutions by the various members of the transdisciplinary team (polk, 2015). it therefore should not come as a surprise that transdisciplinary research is recommended for studying sustainability (cf. brandt et al., 2013). resolving the sustainability challenges of our planet requires coordinated research across multiple disciplines, and input by practitioners, policy makers, and civic organizations involved in a specific challenge needs to be taken into account (hadorn et al., 2006). actors outside academia provide knowledge and expertise that are indispensable to solving sustainability problems (polk, 2015). such a transdisciplinary research team is expected to result in collaborative problem solving of sustainability challenges (gibbons and nowotny, 2001; cundill, roux and parker, 2015; mitchell, cordell and fam, 2015) . in this context, sbms being rather complex and involving a wide range of stakeholders (bocken et al., 2014; schaltegger, hansen and lüdeke-freund, 2016) seem prime candidates for such collaborative problem solving, i.e. the reduction of harm to society and the natural environment, and the increase of social and environmental benefits (dembek, york and singh, 2018). in other words, the engagement of actors with various backgrounds is deemed necessary to develop successful sbms. we follow the assertion of max-neef (2005, p. 15) that “the epistemology of transdisciplinarity may be relatively clear, its applicability as a methodology in the social sciences still suffers from deficiencies” yet, we will argue that transdisciplinary research journal of business models (2021), vol. 9, no. 2, pp. 72-86 75 is essential to bridge the various information problems related to sbms, and we base our arguments on the theory of information asymmetry. information asymmetry the theory of information refers to the various problems related to information imperfections (schwartz and wilde, 1978). stiglitz (2000) identifies three major problems of information, i.e. incentives, scarcity, and selection. the problem of incentives is better known in literature as a moral hazard (holmstrom, 1979). mirrlees (1997) draws our attention to the problem of trust as a consequence of moral hazard, i.e. the question whether the information collected in sbm studies is always trustworthy. scarcity of information is related to its availability: do we have sufficient information? fama (1970) argues that markets work more efficiently when more information is available. he points at various types of information that could be available, such as secondary information, publicly available and insider information. the availability of information (sandmo, 1999) refers to our access to information in the data collection process of sustainable business models studies. the problem of information selection is related to the complexity of information (akerlof, 1970), which goes beyond the access to information and focuses on its being understood and interpreted. based on our background knowledge and interests, as simon (1991) would argue, scholars select and interpret information differently. without prior knowledge of relevant aspects of sustainable business models, it would be difficult to find a meaningful solution for improving their efficiency and effectiveness in doing this. successful sbm solutions can be developed with access to information, the comprehension of it, and the trust in the honest motives of all actors involved. information problems generate market imperfections (schwartz and wilde, 1978), and thus suboptimal solutions to the sustainability challenges of our planet, as it reduces the ability of practitioners and academics to develop new knowledge (bergh, ketchen, orlandi, & heugens, boyd, 2019). we will use the three dimensions of information asymmetry – incentives, scarcity, and selection – to discuss the challenges and potential solutions in adopting transdisciplinary research methods on sbms, based on the insights from a transdisciplinary research program in bolivia. research context and methods the goal of this paper is to argue why and how transdisciplinary research should be adopted in sbm scholarship. the insights presented in this paper are based on a transdisciplinary research program with ucb bolivia, aimed at “contribut[ing] to the development of the bolivian society by enhancing institutional capacity building” (vliruos, 2019). bolivia is one of the poorest countries in south america (world bank group, 2019b), which is among the least industrialized regions (nyssens, wanderley and gaiger, 2019). according to the inter-american development bank, 41% of the total bolivian population can be considered vulnerable, with a low level of education, limited access to healthcare, minimal social protection and inferior quality of jobs (beverinotti, 2018; castellani & zenteno, 2015). the transdisciplinary research program with ucb started in january 2017, with the objective to help disadvantaged communities in a transdisciplinary intervention in 6 projects: 1. social vulnerability, 2. integrated water management, 3. food security, 4. indigenous rights, 5. productive development and 6. transversal. each of these projects contributes to the program from a specific scientific discipline, viz. psychology, water engineering, agriculture, law, entrepreneurship, and research methods respectively. the involvement of four different vulnerable communities in bolivia is deemed crucial. the focal points of this program are the so-called transdisciplinary learning communities (tlcs), composed of team members of each of the 6 projects mentioned above and stakeholders from the selected communities (such as local ngos, political organizations, and the local population) as well as the involvement of scholars from different disciplines. as a team of authors, we are involved in project 5, productive development, with as main objective to build supportive ecosystems that can help vulnerable entrepreneurs to improve their business models. vulnerable journal of business models (2021), vol. 9, no. 2, pp. 72-86 76 entrepreneurs are defined as poor individuals who are self-employed by necessity and unable to earn sufficient income to ensure minimal life standards (yurdakul, arik, & dholakia, 2017). disadvantaged communities suffer typically from extreme poverty, and as a consequence are exposed to a variety of social and environmental problems. according to dembek, york, & singh (2018), the business models of vulnerable entrepreneurs can be seen as a subtype of sbms. casado-caneque & hart (2015) further explain that vulnerable entrepreneurs develop activities that are in harmony with the social community and the natural environment, while generating sufficient income to survive. therefore, we recognize the business models of vulnerable entrepreneurs in bolivia as a good proxy of sbms. despite the high percentage of self-employed, many entrepreneurs operate in informality (beverinotti, 2018). although bolivia has the seventh-highest rating of “total entrepreneurial activity” (querejazu, zavaleta and mendizabal, 2014), more than 60% of the enterprises in this country are motivated by pure necessity and not because they have identified a business opportunity (fernandez et al., 2010). the legal process to start a company in bolivia is quite demanding (pardo rada, 2019), ranking the country at one of the bottom places (175 out of 190) in the world (world bank group, 2019a). regarding the financial system, access to loans is limited and expensive, since business angel investors and venture capitalists are not legally approved (pardo rada, 2019). the transdisciplinary research program has been developed across the four campuses of ucb, viz. in cochabamba, la paz, santa cruz, and tarija. data collection for this study is based on the triangulation of (i) participatory techniques and observations, (ii) secondary information, and (iii) primary information based on interviews and focus group discussions in the period between december 2017 and april 2019. triangulation comes naturally in transdisciplinary research as it contributes to the internal validity by providing stronger justifications of constructs (eisenhardt, 1989). as to the external validity, it is typically considered rather limited in qualitative research (sharir and lerner, 2006), as generalization would only be relevant in contexts with similar characteristics (creswell, 2014). it is important to mention, however, that the overall research process – study design, data collection, data analysis, and research conclusions – has coincided with continuous discussions with actors from the vulnerable communities and with researchers from other disciplines. in this sense we can speak of a co-creation of research. as members of the transdisciplinary program, we have participated in 3 steering committees per year. each ucb campus has selected a specific disadvantaged community, viz. ucb la paz chose batallas, ucb cochabamba picked tiraque, ucb santa cruz preferred san jose de chiquitos, and ucb tarija selected subcentral de cirminuelas. in each of these communities, there is constant interaction between the different scientific disciplines and the different stakeholders from the local population in order to guarantee mutual learning, which is essential for the transdisciplinarity of the program (lang et al., 2012). we have received minutes and briefings of the tlc discussions (659 pages). we have personally visited each community at least twice and have organized events in three communities to observe the needs related to the business models of vulnerable entrepreneurs. in addition, we have studied secondary data from governmental plans, the publicly available data of the national institute of statistics of bolivia, publicity material by the different supporting organizations, marketing material of the ventures including their webpages and social media communications, newspaper articles, and books regarding the researched communities. our primary data collection is based on 57 interviews and 10 focus group discussions. interviewees were chosen following discussions with local researchers and community members, and we followed a combination of purposeful and snow-ball sampling. the interview protocols guided a discussion with the participants towards the challenges and opportunities related to the business models of vulnerable entrepreneurs and to the exploration of their supportive ecosystems. two interview protocols were used (cf. appendix 1), one for entrepreneurs and one for supportive organizations such as ngos, financial institutions, government or others (e.g. church institutions that support entrepreneurship). interviews lasted on average of 51 minutes, ranging between 19 and 156 minutes. the 10 focus group discussions included between 4 and 18 participants and took on average of 106 minutes, with a range between 60 and 240 minutes. interviews and focus group discussions were recorded and transcribed journal of business models (2021), vol. 9, no. 2, pp. 72-86 77 to heighten reliability. please note that one interviewee refused to be recorded and during one focus group we had technical problems with the recording. on these two occasions, only notes were taken. the interviews were conducted in spanish, which is the mother tongue of the first author and the language of preference of the interviewees. all quotes from respondents are a translation into english. we have adopted a thematic analysis (clarke, braun and hayfield, 2015) using the three problems of information asymmetry, i.e. incentives, scarcity and selection, while the analysis was conducted in nvivo 12. after interviews and focus groups, there have been follow-up discussions with the communities and also with colleagues from other disciplines. for an overview of the participants in the interviews and focus group discussions, cf. table 1. sector no. of interviews no. of focus groups total entrepreneurs 36 4 40 ngo 7 2 9 financial institution 4 0 4 government 6 2 8 other 4 2 6 total 57 10 67 table 1: interviews and focus groups out of 36 interviews with entrepreneurs, 14 involved vulnerable ones, while they made up all of the 4 focus group discussions. we have deliberately approached both vulnerable and conventional entrepreneurs to be able to determine what are the general and what are the specific challenges of their business models. the data provided by conventional entrepreneurs allowed us to better understand the distinctive challenges related to the business models of vulnerable entrepreneurs. results based on this research in bolivia, we will now present the results predicated on the three dimensions identified in information asymmetry. we discuss first how the transdisciplinary research method can help to resolve the information problem of incentives. only then do we examine the information problems of scarcity and selection. this order in our discussion is guided by the insights gained from our study. the information problem of incentives the problem of incentives refers to the trustworthiness of information. in this context, one needs to build a solid relationship with the respondents, which is a basic principle in transdisciplinary research (polk, 2015). this is expressed clearly by one of the researchers who is part of the vlir project in cochabamba. he visited tiraque at least two times per week in the last year. i55: “we need to build good relationships, which basically means that we come here to become friends of the people. you do not come to interview, because you are going to hear what you want to hear or because they will not tell you anything. (…) entrepreneurs think that we are coming to get information and return nothing. not even the results of the research. we are trying to change things by also giving back something valuable for them. hence, we do workshops on topics that they are interested in.” this quote indicates that one needs to create a dynamic around the research that peaks the interest of people in the communities and stimulates them to join based on the added value to themselves. it is not about going and getting the information that the researcher needs, but about creating value for all the participants. this is essential to generate trust, which is the most important element to avoid problems related to information asymmetry. as mitchell, cordell and fam (2015) explain, all the aspects of the research need to be shared with the participants and be as transparent as possible to maintain trust. however, respondents will question the researchers’ motives, as they occasionally suspect opportunistic behavior. this was mentioned by a vulnerable entrepreneur who is producing leggings: i41: “researchers come regularly to us, but we do not think they are here to really help us. we attend their theoretical courses, but when we ask their support in practice, their support remains absent. their behavior is selfish. if we have taken their training, why can they not support us?” journal of business models (2021), vol. 9, no. 2, pp. 72-86 78 in transdisciplinary research, engaging with respondents is specifically helpful to overcome selfish and short-sighted research behavior. a good tactic to overcome the perception of opportunism is to work through intermediaries that are closer to the entrepreneurs and already have their trust. nevertheless, and even with the intermediaries helping in the process, researchers doing transdisciplinary research need to be ready to devote substantial amounts of time to overcome this suspicion of self-centered intentions (stokols, 2006). this method allowed the vlir researcher i54 to approach the people in tiraque faster. i54: “there is a lot of mistrust (in the entrepreneurs). also, they are very reluctant to receive and even more, to give information. that is why i go often with the ngo, so they can start trusting me (…) but takes time.” it is therefore important to select carefully the intermediaries through whom a researcher can approach vulnerable entrepreneurs, keeping in mind the goal of the transdisciplinary research and the profile of the entrepreneurs. with or without intermediaries, good transdisciplinary practice presupposes that the collaboration between researcher and entrepreneurs becomes obvious (wickson, carew and russell, 2006) due to mutual trust. the scarcity of information once entrepreneurs and researchers trust each other, access to information becomes fairly easy. throughout the activities of the project, we have noted that vulnerable entrepreneurs are then eager to share information about their business models. this mainly entailed a detailed explanation of the business, an invitation to visit their premises and homes, and in only a few cases a business plan (prepared thanks to supportive organizations). it is essential to have access to this detailed information about the business models and the context in which vulnerable entrepreneurs are working. without it is impossible to understand their business ideas, opportunities, and challenges, nor their needs and requirements. in other words, detailed information is a precondition to help vulnerable entrepreneurs improve their business model. moreover, a transdisciplinary approach improves not only access to information for the researcher but also for the vulnerable entrepreneurs (bracken, bulkeley and whitman, 2015). it is important to realize that a transdisciplinary intervention involves various stakeholders with different backgrounds and potentially useful networks to help vulnerable entrepreneurs to improve their business models. these stakeholders can thus provide access to valuable information for the entrepreneurs. this point is well illustrated by interviewee 39 from tarija, a vulnerable entrepreneur producing llama sausages: i39: “this business plan was developed by me, but it was impossible to have all the details and ideas without the information and feedback provided by the people of the municipality, the business incubator, and the university.” in addition, transdisciplinary interventions can provide access to more specific and technical information for vulnerable entrepreneurs. in the words of interviewee 4, a member of a handcraft association from san jose de chiquitos: i4: “recently we had a training by ucb regarding the development of a strong brand. one week before we had a training by an ngo about clothing and traditional painting. until now we have received a lot of trainings that are useful to further develop and improve our business.” there is no doubt that the business models of vulnerable entrepreneurs are strengthened by additional information, training, and feedback. nevertheless, transdisciplinary interventions should keep flexibility in their priorities and timing (lang et al., 2012). without such flexibility, the value of the intervention risks becoming suboptimal. this argument is made clear by an ngo member that works with the vlir project in tiraque (i56) and a researcher of the vlir project (i54): i56: “even if they are interested in the training that you are offering to them, be careful with the timing. if you plan activities in the period of planting or harvesting, they will not participate.” i54: “there was a meeting during which the entrepreneurs were talking about politics. at that meeting, the researcher was giving a training on marketing strategies, willing to help them to improve their sales. the entrepreneurs did not say anything to the researcher, but just wanted the journal of business models (2021), vol. 9, no. 2, pp. 72-86 79 researcher to be out of the room, so they could continue with their discussion about politics.” referring to this last quote, making time to discuss overarching issues contributes to further the dynamic of the transdisciplinary research. it might feel like time wasted for the researcher, but in fact, such a discussion could be helpful to better understand the context, the needs, and the thinking of the vulnerable entrepreneurs. after all, transdisciplinary research is meant to help vulnerable entrepreneurs, and the flexibility of the researcher can contribute to realize this objective. the problem of information selection the problem of information selection is related to our understanding of the information available. at the beginning of project 5, we were thinking that our intervention is simply related to scaling up the business models of vulnerable entrepreneurs. however, the transdisciplinary methodology proved in various ways beneficial to understanding the context and the needs of vulnerable entrepreneurs. during one project meeting, for example, we were talking about the scaling of business models with the project leader of p1 (social vulnerability). on that occasion, our colleague explained that growing the business might increase domestic violence, especially in cases of female entrepreneurship. in paternalist communities, she explained, the husband feels humiliated when his wife earns more money and this carries the risk of an increase of violence as well as the husband wasting the financial resources of the enterprise. after this discussion, we understood that our task is not only simply focusing on the business model, but we should take into account the overall social context of the entrepreneur. understanding the context of vulnerable entrepreneurs constitutes a long process of constant interaction, in which the researcher needs to understand the available information, and interpret it correctly (hadorn et al., 2006). jumping quickly to conclusions based on early-stage preconceptions should therefore be avoided. in this sense, according to vlir researcher in tiraque, a transdisciplinary approach needs to adopt a careful and open attitude: i55: “the context of vulnerable communities contains a completely different life philosophy and different logic regarding the role of woman and man in the family. it is not a good idea to go in those communities only with your own perspective, without a willingness to understand their reality.” the above quote was confirmed in a discussion with a vulnerable entrepreneur. during our visit to his textile production activity, we asked what he would wish for in case his business became successful. the answer “i just wish to have a peaceful life” was rather surprising to us. no reference to an ambition of owning a business empire, becoming rich, living in a better house or having a new car. for vulnerable entrepreneurs, wealth is apparently not about having money but about satisfying their daily needs while acting responsibly toward nature (casado-caneque & hart, 2015). our western view on life and business might hence diverge from the philosophy of vulnerable communities (chmielewski, dembek and beckett, 2020). therefore, an open mindset is required, in which it is important to reflect on the views of the vulnerable entrepreneurs and of all other stakeholders and scientists from various disciplines (wickson, carew and russell, 2006). the case of an entrepreneur from tarija who makes leggings makes it very clear how contextual factors may impact the business model of precarious ventures. i41: “i am a single mother and i reached a point in which i wanted to quit my venture. but due to the support of my daughter and my desire to help other women in need through employment made me continue with the business. (…) why did i want to quit? at a certain moment, i needed a credit to finance the growth of my business. but i am separated from my husband without a divorce. since my ex has a credit, and we are not separated, i have no access to funding.” the above quote illustrates the differences in the financial and legal system of a country, and hence the importance to keep an open mind and understand the local context. the necessity for such an open attitude is further asserted in the 2017 annual report of the project: to integrate the different researchers and work together, for example by jointly designing surveys. this is in line with conventional views on transdisciplinary research, stressing the importance of dissolving disciplinary boundaries (wickson, carew and russell, 2006; bracken, bulkeley and whitman, journal of business models (2021), vol. 9, no. 2, pp. 72-86 80 2015). however, such discipline transgressing is easier said than done, even in a program with transdisciplinarity at its core. three years into the program, engaging colleagues from other projects and disciplines remains a continuous concern and needs constant attention, due to the differences in their research routines and the divergence in their respective theoretical approaches. therefore, we have decided at program level to organize regular presentations between projects. this methodological tactic ensures the possibility of feedback from different disciplines. moreover, through this dynamic, colleagues find opportunities for joint research initiatives. it is important to stress that transdisciplinary research is a learning process that requires regular adaptation (lang et al., 2012; mitchell, cordell and fam, 2015). the problem of understanding the information available is also relevant to vulnerable entrepreneurs. please note that those vulnerable entrepreneurs are not educated, let alone familiar with theories on entrepreneurship, marketing, management, accounting, or finance, to mention only a few of the most relevant disciplines to develop a solid business. when supporting entrepreneurs, therefore, some colleagues adopted game-based methodologies, where the learning experience takes place during the play of the game. on other occasions, we organized fairs, where vulnerable entrepreneurs had the opportunity to sell their products, and the coaching took place in a reallife environment. moreover, an ngo which had been working with vulnerable communities for 34 years explains the need to use examples from the entrepreneur’s reality, to improve their understanding of the information provided: i56: “simply explaining a certain topic is not sufficient. with the years, i start explaining by using the examples of a community, where to context is very close to theirs (…) in this way, vulnerable entrepreneurs see themselves in similar situations and understand our advice.” the overall goal of our research is to improve the business models of vulnerable entrepreneurs, which requires a thorough understanding of their context and background, and a transdisciplinary intervention is thereby an indispensable approach. discussion and concluding remarks in this paper, we explain that sbm studies face challenges related to the information gathered during the data collection process and argue that transdisciplinary research can help us overcome these challenges. we view our arguments through the theoretical lens of information asymmetry. such a lens helps us to see the contribution of transdisciplinary research to the trustworthiness of information, the availability of information, and the access to information. based on our research and on insights from various disciplines (international management, bop, and transdisciplinary research methods), we would like to advance 5 suggestions for adopting transdisciplinary research methods in sbm studies: 1. understand the context. this is in line with insights from international business research (verbeke, 2013) warning that copypasting strategies from other contexts may prove futile. 2. adapt to the context. the timing and content of transdisciplinary research should be adapted towards the needs of the relevant actors (casado-caneque & hart, 2015). understanding their living conditions, their background, and their time availability will help you make more accurate suggestions on to how to improve sbms. 3. develop relationships of trust. improving trust (rivera-santos and rufín, 2010) can be done by: (a) creating trustful relationships, (b) working together with all kind of intermediaries, – or by (c) simply being transparent about what your needs are and what you can contribute to the community. 4. be flexible. researchers may want to be flexible in adapting their research focus to what the field finds relevant. sbm quarrels may change substantially over time (chmielewski, dembek and beckett, 2020), so relevant transdisciplinary research should take such changes into account. journal of business models (2021), vol. 9, no. 2, pp. 72-86 81 5. present your ideas to stakeholders. researchers typically work in a monodisciplinary fashion. however, they should adopt an open attitude towards other disciplines (bracken et al., 2015). we simply recommend systematically presenting individual research ideas at different stages of the process to scholars from other disciplines and to non-academic actors. this methodological tactic not only provides continuous feedback but also gives researchers from various disciplines the opportunity to throw light from different angles on your ideas and ensures that the solutions become co-created by all stakeholders. while the 5 above-mentioned suggestions of transdisciplinary research in sbms are advocated, it is important to note the limitations of our study. in the first place, our study is restricted by the exclusive focus on vulnerable entrepreneurs. although we openly admit that vulnerable entrepreneurs are a very specific context of sbms, we are convinced that the challenges of information asymmetry apply to a broad variety of sustainable business models. therefore, a future avenue for transdisciplinary research could be to extend it to a variety of sbm contexts, apart from the context of vulnerable entrepreneurs. secondly, our study is constrained by its geographical context, i.e. 4 cities in bolivia. future transdisciplinary research should take place in other geographical contexts as well (lang et al., 2012). a third limitation of our study is our use of qualitative research. please note that transdisciplinary research may be perfectly well conducted in the form of surveys, experiments and any other forms of quantitative research. a fourth and a final limitation of our study is the focus only on the theoretical lens of information asymmetry, whereas a variety of theoretical lenses may further enhance the argumentation for transdisciplinary research of sbms. the creation of cumulative knowledge in sbms based on transdisciplinary research implies a serious reflection on the above-mentioned limitations and opportunities for future research. in addition, we note that it is not self-evident to conduct transdisciplinary research as it presumes intense contact within academic and nonacademic fields. yet, the development of tools and the gathering of resources that can help social entrepreneurs constitute powerful avenues for future research. despite all challenges of information asymmetry in sbm research, this field of research remains an important contributor to sustainable development. overall, we may conclude that transdisciplinary research can help us embrace the complexity of sustainable business models, find practical solutions for their scalability and as such is a much-needed additional methodological tool in the field. acknowledgements we would like to thank  the responsible guest editor  romana rauter and  the two  anonymous reviewers  for the valuable comments that have considerably strengthened the ideas present in this paper. our gratitude goes to all colleagues of  the  vlir  ucb program and  especially  to all project  5 members, since this paper is based on our participation in that program. we acknowledge the support of the vub chair of social entrepreneurship  founding partners (euroclear, close the gap and bnp paribas fortis) to strengthen our research and practical relevance in the field. our special thanks go to our colleagues philippe eiselein, abel diaz  gonzalez, gover barja daza, alain verbeke and elvira haezendonck, who have provided comments during various stages of this paper.   journal of business models (2021), vol. 9, no. 2, pp. 72-86 82 references akerlof, g. (1970) ‘the market for “lemons”: quality uncertainty and the market mechanism’, quarterly journal of economics, 84(3), pp. 488–500. bansal, p. (2003) ‘from issues to actions: the importance of individual concerns and organizational values in responding to natural environmental issues’, organization science, 14(5), pp. 510–527. bergh, d. d. et al. (2019) ‘information asymmetry in management research: past accomplishments and future opportunities’, journal of management, 45(1), pp. 122–158. beverinotti, j. (2018) development challenges in bolivia, inter-american development bank. available at: https://publications.iadb.org/en/publication/ development-challenges-brazil. bocken, n. m. et al. (2014) ‘a literature and practice review to develop sustainable business model archetypes’, journal of cleaner production. elsevier ltd, 65, pp. 42–56. bracken, l., bulkeley, h. and whitman, g. (2015) ‘transdisciplinary research: understanding the stakeholder perspective’, journal of environmental planning and management, 58(7), pp. 1291–1308. brandt, p. et al. (2013) ‘a review of transdisciplinary research in sustainability science’, ecological economics, 92, pp. 1–15. breuer, h. (2013) ‘lean venturing: learning to create new business through exploration, elaboration, evaluation, experimentation, and evolution’, international journal of innovation management, 17(3), p. 1340013. brundtland, g. et al. (1987) ‘our common future’. new york, 8. casado-caneque, f. and hart, s. (2015) base of the pyramid 3.0: sustainable development through innovation and entrepreneurship. sheffield: greenleaf. castellani, f. and zenteno, j. (2015) ‘pobreza y movilidad social en bolivia en la última década’, inter-american development bank. chmielewski, d. a., dembek, k. and beckett, j. r. (2020) ‘business unusual: building bop 3.0’, journal of business ethics, 161(1), pp. 211–229. available at: http:// dx.doi.org/10.1007/s10551-018-3938-7. clarke, v., braun, v. and hayfield, n. (2015) ‘thematic analysis’, in qualitative psychology: a practical guide to research methods, pp. 222–248. creswell, j. w. (2014) research design: qualitative, quantitative, and mixed methods approaches. sage publications. cundill, g., roux, d. j. and parker, j. n. (2015) ‘nurturing communities of practice for transdisciplinary research’, ecology and society, 20(2). dembek, k., york, j. and singh, p. j. (2018) ‘creating value for multiple stakeholders: sustainable business models at the base of the pyramid’, journal of cleaner production. elsevier ltd, 196, pp. 1600–1612. doi: 10.1016/j. jclepro.2018.06.046. dentchev, n. et al. (2018) ‘embracing the variety of sustainable business models: a prolific field of research and a future research agenda’, journal of cleaner production, 194, pp. 695–703. eisenhardt, k. m. (1989) ‘building theories from case study research’, academy of management review, 14(4), pp. 532–550. fernandez, m. a. et al. (2010) global entrepreneurship monitor reporte nacional de bolivia 2010. birkhäuser, basel: global entrepreneurship monitor. gibbons, m. and nowotny, h. (2001) ‘the potential of transdisciplinarity’, in in transdisciplinarity: joint problem solving among science, technology, and society, pp. 67–68. hadorn, g. h. et al. (2006) ‘implications of transdisciplinarity for sustainability research’, ecological economics, 60(1), pp. 119–128. høgevold, n. m. et al. (2014) ‘sustainable business models’, baltic journal of management, 9(3), pp. 357–380. journal of business models (2021), vol. 9, no. 2, pp. 72-86 83 holmstrom, b. (1979) ‘moral hazard and observability’, the bell journal of economics, 10(1), pp. 74–91. available at: https://www.jstor.org/ stable/3003320?origin=crossref. horlick-jones, t. and sime, j. (2004) ‘living on the border: knowledge, risk and transdisciplinarity’, futures, 36(4), pp. 441–456. joyce, a. and paquin, r. l. (2016) ‘the triple layered business model canvas: a tool to design more sustainable business models’, journal of cleaner production. elsevier ltd, 135, pp. 1474–1486. available at: http:// dx.doi.org/10.1016/j.jclepro.2016.06.067. kolk, a. and mauser, a. (2002) ‘the evolution of environmental management: from stage models to performance evaluation’, business strategy and the environment, 11(1), pp. 14–31. lang, d. j. et al. (2012) ‘transdisciplinary research in sustainability science: practice, principles, and challenges’, sustainability science, 7(1), pp. 25–43. lüdeke-freund, f. (2010) ‘towards a conceptual framework of business models for sustainability’, in knowledge collaboration & learning for sustainable innovation. delft. lüdeke-freund, f. and dembek, k. (2017) ‘sustainable business model research and practice: emerging field or passing fancy?’, journal of cleaner production. elsevier ltd, 168, pp. 1668–1678. available at: https://doi. org/10.1016/j.jclepro.2017.08.093. malkiel, b. and fama, e. (1970) ‘efficient capital markets: a review of the theory’, the journal of finance, 25(2), pp. 383–417. max-neef, m. a. (2005) ‘foundations of transdisciplinarity’, 53, pp. 5–16. mirrlees, j. (1997) ‘information and incentives: the economics of carrots and sticks’, the economic journal, 107, pp. 1311–1329. mitchell, c., cordell, d. and fam, d. (2015) ‘beginning at the end: the outcome spaces framework to guide purposive transdisciplinary research’, futures. elsevier ltd, 65, pp. 86–96. available at: http://dx.doi.org/10.1016/j. futures.2014.10.007. nyssens, m., wanderley, f. and gaiger, l. (2019) ‘social enterprise in latin america: context and concepts’, in social enterprise in latin america: theory, models and practice. routledge, pp. 1–26. osterwalder, a. and pigneur, y. (2011) business model generation: a handbook for visionaries, game changers and challengers. deusto. pardo rada, c. a. (2019) startups en bolivia. available at: https://www.rigobertoparedes.com/es/abogadosexpertos-bolivia/ (accessed: 20 january 2021). pearlman, s. (2012) ‘too vulnerable for microfinance? risk and vulnerability as determinants of microfinance selection in lima’, journal of development studies, 48(9), pp. 1342–1359. pohl, c. and hadorn, g. h. (2008) ‘methodological challenges of trans-disciplinary research’, natures sciences societes, 16, pp. 111–121. polk, m. (2015) ‘transdisciplinary co-production: designing and testing a transdisciplinary research framework for societal problem solving’, futures. elsevier ltd, 65, pp. 110–122. available at: http://dx.doi.org/10.1016/j. futures.2014.11.001. querejazu, v., zavaleta, d. and mendizabal, j. (2014) reporte nacional bolivia 2014, global entrepreneurship monitor. rivera-santos, m. and rufín, c. (2010) ‘global village vs. small town: understanding networks at the base of the pyramid’, international business review, 19(2), pp. 126–139. sandmo, a. (1999) ‘asymmetric information and public economics: the mirrlees-vickrey nobel prize’, journal of economic perspectives, 13(1), pp. 165–180. schaltegger, s., hansen, e. g. and lüdeke-freund, f. (2016) ‘business models for sustainability : origins , present research , and future avenues’. journal of business models (2021), vol. 9, no. 2, pp. 72-86 84 schwartz, a. and wilde, l. l. (1978) ‘intervening in markets on the basis of imperfect information: a legal and economic analysis’, university of pennsylvania law review, 127, p. 630. sharir, m. and lerner, m. (2006) ‘gauging the success of social ventures initiated by individual social entrepreneurs’, journal of world business, 41(1), pp. 6–20. simon, h. a. (1991) ‘bounded rationality and organizational learning’, organization science, 2(1), pp. 125–134. available at: https://apps.dtic.mil/dtic/tr/fulltext/u2/ a225615.pdf. stiglitz, j. e. (2000) ‘the contributions of the economics of information to twentieth century economics’, quarterly journal of economics, 115(4), pp. 1441–1478. stock, p. and burton, r. j. f. (2011) ‘defining terms for integrated (multi-inter-trans-disciplinary) sustainability research’, sustainability, 3(8), pp. 1090–1113. stokols, d. (2006) ‘toward a science of transdisciplinary action research’, american journal of community psychology, 38(1–2), pp. 63–77. stubbs, w. and cocklin, c. (2008) ‘conceptualizing a “sustainability business model”’, organization and environment, 21(2), pp. 103–127. upward, a. and jones, p. (2016) ‘an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science’, organization and environment, 29(1), pp. 97–123. verbeke, a. (2013) international business strategy. cambridge university press. vliruos (2019) iuc 2017 phase 1 ucb-b. available at: https://www.vliruos.be/en/projects/ project/22?pid=3607 (accessed: 20 january 2021). wickson, f., carew, a. l. and russell, a. w. (2006) ‘transdisciplinary research: characteristics, quandaries and quality’, futures, 38(9), pp. 1046–1059. world bank group (2019a) economy profile of bolivia. doing business 2020. world bank, washington dc. available at: https://openknowledge.worldbank.org/ handle/10986/32998. world bank group (2019b) gdp per capita (current us$) latin america & caribbean. available at: https://data.worldbank.org/indicator/ny.gdp.pcap. cd?end=2019&locations=zj&most_recent_value_ desc=false&start=2019&view=map (accessed: 20 january 2021). yip, a. w. and bocken, n. m. (2018) ‘sustainable business model archetypes for the banking industry’, journal of cleaner production, 174, pp. 150–169. yurdakul, d., atik, d. and dholakia, n. (2017) ‘redefining the bottom of the pyramid from a marketing perspective’, marketing theory, 17(3), pp. 289–303. journal of business models (2021), vol. 9, no. 2, pp. 72-86 85 appendix 1: interview protocols questionnaire for entrepreneurs 1. tell me about yourself (studies, family situation (kids, married, brothers, profession…) 2. can you describe your day-to-day routine? 3. what product/service is being provided? 4. to whom? 5. how many customers have been served? 6. where are you providing your products/services? 7. what are the major costs of your activity (materials, labor,…)? 8. how is your activity funded? 9. do you consider yourself as an entrepreneur? 10. is there an entrepreneurial culture in san jose? 11. what are the main problems of your business activity? 12. what type of support do you need as an entrepreneur (financials, networking, legal, coaching,…)? 13. what are the organizations or people in bolivia (san jose, santa cruz, etc.) who can support of entrepreneurs like yourself? 14. are you part of a network or a group? can you describe how’s that working? questionnaire for organizations 1. can you describe the mission of your organization? (association, ngo, government, training, financing, education, other)? 2. describe your organization: legal status, years of operation, founders, capital, top management, board of directors (if applicable) and other relevant information about the management of the organization. 3. is there a culture for entrepreneurship in san jose de chiquitos? what is the most relevant activity for entrepreneurs in san jose de chiquitos? 4. what is your relationship with entrepreneurship/ entrepreneurs in the city of san jose de chiquitos? 5. policy environment for social (vulnerable) entrepreneurs: a. what is the role of the government in supporting entrepreneurship: programs, needs or constraints? b. what is your perception of the policy environment: ease to create new businesses, taxes, incentives, regulations, grants, other programs) c. are there any other institutions or organizations having an influence in the organization’s environment? 6. what are the principal obstacles in the local market for your organization? 7. do you consider there is sufficient and qualified human capital to stimulate entrepreneurship/support entrepreneurs? if not, what types of profiles are missing. 8. infrastructure: what is your perception (electricity, telecommunications – internet, water, gas and transport) 9. can you please describe the business environment for your organization? competitors, supply chain, informal competition, and other relevant aspects.) 10. support: a. what type of support is available to entrepreneurs in the city: (networking, training, mentorship, coaching, legal, funding) b. who provides this support? 11. what do you consider is further needed to stimulate entrepreneurship in the city of san jose de chiquitos? 12. what are the relevant entrepreneurs/entrepreneurial organisations in san jose de chiquitos? journal of business models (2021), vol. 9, no. 2, pp. 72-86 86 claudia alba ortuño is phd student at the department of business at the vrije universiteit brussels, belgium. after obtaining her master on international business, she is preparing her doctoral dissertation on international support for enterprises at the bottom of the pyramid. her research is on vulnerable entrepreneurs from an ecosystem point of view. she is part of the vub chair of social entrepreneurship that focus on encouraging social and student entrepreneurship. she has participated in international conferences as iabs, nbm and the social entrepreneurship summit. claudia has been mentor of tu beca bolivia since 2019, a social enterprise that supports bolivians to access international scholarships. nikolay a. dentchev is associate professor of entrepreneurship and corporate social responsibility at vrije universiteit brussel, belgium. he holds the solvay business school chair of social entrepreneurship at vub, with founding partners close the gap and euroclear. nikolay is an executive board member of the international association for business and society and the international new business model conference series, and co-organizer of the social entrepreneurship summit. he serves as a member of the investment committee of trividend, member of the ethical committee of solifin, and board of directors member at vub related incubator icab nv. nikolay has (co-)authored more than 45 scientific publications, realized in various indexed journals such as business & society, journal of business ethics and business ethics: a european review. he serves as associate editor of business and society review, and occasionally leads special issues in journals such as business & society and journal of cleaner production. about the authors journal of business models (2020), vol. 8, no. 1, pp. 7-25 7 supporting data-driven business model innovations a structured literature review on tools and methods michael fruhwirth1, christiana ropposch2, and viktoria pammer-schindler3 abstract purpose: this paper synthesizes existing research on tools and methods that support data-driven business model innovation, and maps out relevant directions for future research. design/methodology/approach: we have carried out a structured literature review and collected and analysed a respectable but not excessively large number of 33 publications, due to the comparatively emergent nature of the field. findings: current literature on supporting data-driven business model innovation differs in the types of contribution (taxonomies, patterns, visual tools, methods, it tool and processes), the types of thinking supported (divergent and convergent) and the elements of the business models that are addressed by the research (value creation, value capturing and value proposition). research limitations/implications: our review highlights the following as relevant directions for future research. firstly, most research focusses on supporting divergent thinking, i.e. ideation. however, convergent thinking, i.e. evaluating, prioritizing, and deciding, is also necessary. secondly, the complete procedure of developing data-driven business models and also the development on chains of tools related to this have been under-investigated. thirdly, scarcely any it tools specifically support the development of data-driven business models. these avenues also highlight the necessity to integrate between research on specifics of data in business model innovation, on innovation management, information systems and business analytics. originality/value: this paper is the first to synthesize the literature on how to identify and develop data-driven business models, and to map out (interdisciplinary) research directions for the community. please cite this paper as: fruhwirth, m., ropposch, c., and pammer-schindler, v. (2020), supporting data-driven business model innovations a structured literature review on tools and methods, vol. 8, no. 1, pp. 7-25 keywords: business model innovation, data-driven business models, research agenda. acknowledgement: the research based on this paper has received funding from the austrian comet program competence centers for excellent technologies under the auspices of the austrian federal ministry of transport, innovation and technology, the austrian federal ministry for digital and economic affairs and by the state of styria. comet is managed by the austrian research promotion agency (ffg).. 1–3 graz university of technology 3 know-center gmbh journal of business models (2020), vol. 8, no. 1, pp. 7-25 8 introduction1 big data and analytics have a transformative aspect in many of today’s business models (bms) (loebbecke and picot 2015; woerner and wixom 2015) and facilitate the potential for further business growth (seiberth and gründinger 2018). a significant portion of companies report to have started investing in innovations based on data and analytics (gottlieb and rifai 2017). empirical research, however, shows that companies mostly utilize big data and analytics for internal optimization (schüritz and satzger 2016; zolnowski et al. 2016). simultaneously this field is a very challenging one for traditionally offline established organizations to realize value for their customers and innovate their bm through the use of data and analytics (schüritz et al. 2017c). organizations and managers find it difficult to systematically identify relevant opportunities for data as core elements of their business, as well as how to systematically proceed with evaluation, decision-making, and ultimately implementation of the new bm. nevertheless, there is consensus on the potential of data analytics for new business opportunities. further, publicly known examples for successful data-driven business models (ddbms) that could serve as inspiration or blueprint are centred to a great extent on global giants such as google, facebook, or uber. as traditionally offline established organizations differ from these companies, such that inspiration one may gain from those global giants needs significant re-thinking before it can be usefully applied. the literature recognises and researches tools and methods as support for business model innovation (bmi) processes (schneider and spieth 2013). several established tools and methods already exist, i.e. for designing and evaluating business models (osterwalder et al. 2014; osterwalder and pigneur 2010; täuscher and abdelkafi 2017; tesch and brillinger 2017). however, the development of ddbms requires attention to data 1 abbreviations: bm business model bmi business model innovation ddbm data-driven business model ddbmi data-driven business model innovation as key resource and data analytics as key activities. thus, in addition to such established generic tools and methods, supporting innovation tools and methods that incorporate the perspectives of data and analytics are required to support traditional offline established organizations. consequently, in the present paper we ask what prior knowledge is available about tools and methods that incorporate data as a lens of analysis for business model innovation? we answer this research question with a structured literature review. in this paper we structure existing knowledge from previous research on data-centric tools and methods, identify under-researched fields and provide directions for further research. with respect to literature reviews on tools and methods in bmi in general (for example visual languages for bms (john et al. 2017), visual tools (täuscher and abdelkafi 2017) or evaluation aspects in business model innovation (tesch and brillinger 2017)), the present literature review takes the complementary perspective of focusing on data as a lens of analysis in business model innovation. with respect to research on data-driven business models, this review complements existing reviews such as how to realize value with big data (günther et al. 2017), digital service innovation enabled by big data analytics (rizk et al. 2017) or data-driven service innovation (engel and ebel 2019) by focussing on the aspect of the process of innovation. the remainder of this paper is structured as follows: section two provides the conceptual background on tools and methods for business model innovation as well as existing literature on data and analytics enabled business model innovation. section three follows with a description of the process for the structured literature review. the findings of the review are structured in section four by the concepts type of contribution, type of thinking supported and the business model elements studied in each paper. subsequently, section five discusses the review and gives an outline for further research. section six points out the limitations of this research. the paper closes with a conclusion and a statement on the implications of this research in section seven. journal of business models (2020), vol. 8, no. 1, pp. 7-25 9 background and related work tools and methods in business model innovation the concept of business models has gained significance in recent years in several disciplines, as information systems (al-debei and avison 2010; veit et al. 2014), technology and innovation management (björkdahl 2009; chesbrough and rosenbloom 2002; wirtz et al. 2016) as well as strategic management (magretta 2002; wirtz et al. 2016; zott and amit 2008). from a widespread highlevel view, business models describe how organizations create and capture value (osterwalder and pigneur 2010) and explain “how the pieces of a business fit together” (magretta 2002). with the boom of the internet, an increasing number of companies have thought about innovating their business model in order to keep up with trends such as e-commerce. the business model emerged from a vehicle for innovation in order to commercialize new technologies towards a source of innovation, emerging as a source of competitive advantage (massa and tucci, 2013). skarzynski and gibson (2008, p. 111) define bmi as ”creating fundamentally new kinds of businesses, or about bringing more strategic variety into the business you are already in” (skarzynski and gibson 2008, p. 111). thereby, bmi can be seen as a process “the activity of designing that is, creating, implementing and validating a new bm” (massa and tucci 2013, p. 420). thus, bmi can be perceived as a creative and collaborative task (ebel et al. 2016; eppler et al. 2011). bmi processes can serve as a procedural framework or guidance to structure bmi initiatives (wirtz and daiser 2018). besides the process-oriented view, bmi is also treated as a result, the replacement of the existing bm of the company (mitchell and coles 2003). in this research paper, we consider bmi from the process perspective, i.e. the activity of designing bms, as we aim to analyse tools and methods that aim to support that process. within the bmi process, individuals and organizations can be supported by different tools and methods (schneider and spieth 2013). a method is a systematic development approach that follows specific rules, whereas a tool supports a part of a development process (brinkkemper 1996). tools and methods are used in bmi for idea generation (eppler et al. 2011) as well as evaluation and decision making (tesch and brillinger 2017). these two opposed activities in bmi relate to the concepts of divergent and convergent thinking (kim and pierce 2013) on the one hand seeking for alternatives and multiple solutions and on the other hand deciding on the best possible solution. tools and methods address specific business model elements or support the bmi process in general. a broad range of tools and methods incorporate all elements of an underlying business model ontology, such as the business model canvas (osterwalder and pigneur 2010). besides, other tools and methods may also incorporate a view on a specific element of the business model, like the value proposition (osterwalder et al. 2014) or revenue models (envision 2016). several different types of tools and methods are available that support bmi in general: visual representations are one key approach in designing and analysing business models (täuscher and abdelkafi 2017). visual representations support understanding and communicating a firm’s business model (eppler et al. 2011; osterwalder 2004), support generating and developing new business model ideas (gassmann et al. 2014; osterwalder and pigneur 2010), overcoming organizational innovation barriers (eppler et al. 2011) or stimulate collaborative innovations (täuscher and abdelkafi 2017). visual representations can incorporate a transactional, a causal and/or a component-based view (täuscher and abdelkafi 2017). furthermore, component-based views are based on ontologies or frameworks (osterwalder 2004; osterwalder and pigneur 2010). taxonomies and morphological boxes of business models from a certain domain list the most relevant dimensions and characteristics of business models and enable the classification of existing business models (remane et al. 2016). business model patterns describe recurring configurations of certain business model elements (gassmann et al. 2014) and support idea generation and evaluation via learning from analogies (gassmann et al. 2014). bmi can also be supported by software tools for developing and managing business models (veit et al. 2014). these tools enable users to digitally represent and change business models and make the process more efficient (szopinski et al. 2019). likewise, software tools allow additional actions like collaborative business model development in distributed teams (ebel et al. 2016). journal of business models (2020), vol. 8, no. 1, pp. 7-25 10 in summary, tools and methods are relevant and are needed to support bmis; but specific tools and methods for data-driven business model innovation (ddbmi) exist. a systematic synthesis and discussion of such specifics, and gaps in knowledge regarding specific tools and methods for ddbmi is missing to date, and provided in this paper. the existing literature on tools and methods for bmi provides an analysis framework and different viewpoints for identifying and analysing data-related innovation tools and methods for ddbmi in this literature review. business model innovation enabled by data and analytics one important driver for bmi is the increasing amount of data and the advances in analytics. the literature reveals two opposed courses for data-driven business model innovation: refining and improving existing business models with data, and designing totally new business models (günther et al. 2017; woerner and wixom 2015). besides that, the impact of big data and analytics on business models is highlighted by scholars from different perspectives: data and analytics is used to enhance decision-making and to improve internal processes (wixom and ross 2017); data-as-a-service and analytics-as-a-service as two service-oriented paradigms (chen et al. 2011); the enrichment of existing core offerings with analytics (davenport 2013); selling data and information (wixom 2014; wixom and ross 2017); the development of analytics-based products (davenport and kudyba 2016); data-driven service innovation (engel and ebel 2019); and data-driven business models (hartmann et al. 2016). likewise, empirical research shows that data and analytics enable continuous options for organizations in bmi (schüritz and satzger 2016). in line with recent publications, a data-driven business model encompasses the following main characteristics: data is used as a key resource (engelbrecht et al. 2016; hartmann et al. 2016), data analytics key activities generate customer value from data (hartmann et al. 2016; wixom and schüritz 2017), data or information is part of the value proposition (hartmann et al. 2016; kühne and böhmann 2018) and can be monetized (seiberth and gründinger 2018; wixom and ross 2017). in this paper, we understand ddbmi as the process when an organization adopts a novel approach to commercialize data as its new underlying asset to deliver value to existing or new customers (gambardella and mcgahan 2010; hartmann et al. 2016; seiberth and gründinger 2018). in other words, we understand ddbmi as the change of the value proposition due to the effect of data and analytics (schüritz et al. 2017c). this process is different in offline established organizations, than it is for start-ups, or genuinely online organisations such as the well-known global disruptors google, amazon or uber. following existing literature on general bmi, tools and methods can support the innovation process. however, beside generally applicable tools and methods for bmi (as shown in section 2.1), organizations require specialized or adopted tools and methods that incorporate the specific characteristics of ddbms, like data as key resource or data analytics as a key activity. knowledge on such specific tools and methods has to date not been systematically synthesised and discussed; doing so is the overall contribution of this paper. methodology in order to identify existing research on tools and methods that incorporate data as a lens of analysis and innovation for business models, we conducted a structured literature review adopting the general methodology of webster and watson (2002) and the rigorous procedure that vom brocke et al. (2009) propose for identifying relevant articles. the following subsections describe the search and selection as well as the analysis and synthesis of relevant literature in detail. search and selection process in order to ensure reproducibility and transparency of the process of searching and selecting relevant literature, we describe the five sequential steps in this subsection. step 1 initial search: we started the initial search within the ais electronic library using the keywords “business model” and (“big data” or “data-driven” or “data analytics”) to gain an overview of the research journal of business models (2020), vol. 8, no. 1, pp. 7-25 11 field of from an information system perspective, which is described in the background section. step 2 definition of databases: to identify relevant publications, we conducted a keyword search in the following databases: ais electronic library, google scholar, ieee xplore, science direct, scopus and web of science to cover research from the field of information systems, computer science and innovation and technology management. we did not set a filter by published year due to the infancy of the topic. publications issued by may 2019 were considered. step 3 key word search: the selection of the search strings was initially based on first insights on the topic as shown in step 1. as the topic of ddbmi is still in its infancy, we extended the search focus to additional keywords to obtain more results, as publications may incorporate data as a central element, without directly mentioning the phrase “data-driven business model”. as we are interested in identifying publications that provide knowledge about tools and methods with data as a central element to support ddbmi in organizations, we used a broad range of keywords to identify innovation tools and methods. we defined the first set of search strings as “tool” or “method*” or “canvas” or “map” or “process” or “framework” or “visualization” based on the conceptual background on tools and methods for business model innovation. in addition, to find tools and methods with a business model and data aspect focus, we defined (“business model” and (“data analytics” or “data-driven” or “data-based”)) or “data-driven service” as the second set of search strings based on the conceptual background on business model innovation enabled by data and analytics; both combined with the logical operator and. for the search base google scholar we used the search string “data-driven business model”. step 4 literature evaluation: the keyword search resulted in a total set of 11443 articles from five databases. to limit the papers to be considered within a manageable size, the first 200 results were examined for each database, through sorting the results by number of citations (or by relevance, if sorting by citations was not offered by the individual search database) to capture the most relevant papers. our selection process involved two stages. in the first stage, papers were judged based on their title, abstracts and keywords. the remaining papers were judged by reading the full text, resulting in 37 articles. we included publications that comply with the following criteria: publication that have business model focus or at least one aspect of the business model, like value creation or value proposition; and that have at least a partial focus on data or analytics; and that describe tools and methods with data as a significant focus supporting the innovation processes; and that are available either in english or german. we restricted the keyword search to peer-reviewed publications. in the forward and backward search as well as the list of promising authors we also included nonpeer-reviewed publications, such as working papers. in the next stage, numerous duplicates were identified and deleted, leading to 24 relevant articles. step 5 forward and backward search and reviewing authors publication lists: a subsequent forward and backward search (webster and watson 2002) performed through google scholar and web of science provided an additional set of 5 articles using the same evaluation criteria as stated above. moreover, we looked up publication lists of the authors identified in the previous steps (schryen 2015), leading to an additional set of 4 publications. finally, the search and selection process resulted in a total number of 33 articles. as shown in figure 1, the final set of papers to review was found to be published between 2015 and 2019. we observed an increasing publication frequency over the years, except for the year 2019, where we covered publications only for the first 5 months. figure 2 shows 2015 2016 2017 2018 2019 year of publication n u m b er o f p u b lic at io n s 10 8 6 4 2 0 figure 1: descriptive analysis of selected literature due to publication year. journal of business models (2020), vol. 8, no. 1, pp. 7-25 12 the rating of the selected publications according to vhb-jourqual32. analysis and synthesis process the aim of the analysis and synthesis step is to summarize and analyse existing research on tools and methods supporting the process of ddbmis and to identify gaps in the literature. in this regard, the 33 relevant papers are analysed from a concept-centric perspective, as recommended by webster and watson (2002). concepts serve as the organizing framework of the review to synthesize and discuss the literature in the context of each concept as well as for identifying patterns and gaps (vom brocke et al. 2009; webster and watson 2002). thus, a concept matrix is created from the literature search results. the concept matrix contains the identified papers in one dimension and the concepts and their characteristics in the other. the concepts we used are the main research question or research goal; the research method of the article; the type of contribution; the type of thinking supported by each tool or method; and the core business model element(s) the article is focusing on. the type of contribution describes the type of tool or method presented in the research. categories of this concept were developed by an inductive approach 2 vhb-jourqual3 is a ranking of journals relevant to business research based on evaluations by the members of the german academic association for business research. for further information see: https://vhbonline.org/vhb4you/jourqual/vhb-jourqual-3/. informed by the literature on tools and methods for bmi (see background section). the type of thinking says what type of cognitive approach in the sense of convergent vs. divergent thinking (kim and pierce 2013) the artefact supports, which relates to the activities of ideation and evaluation in bmi. element of the business model says on what core elements of a business model the article is focusing on. the corresponding categories are value creation, value proposition and value capturing, derived by a deductive approach from existing business model research (gassmann et al. 2014; johnson et al. 2008; osterwalder and pigneur 2010). the goal of the concept matrix is on the one hand to derive the distinct perspectives on tools and methods for ddbmi. on the other hand, sparse parts of the concept matrix demonstrate under-researched fields, thus providing avenues for further research (vom brocke et al. 2009). in order to show directions for future research, we identify missing or neglected themes in what has been researched, what alvesson and sandberg (2011) call gap-spotting. results and findings table 1 gives an overview over all 33 publications that are included in this literature review and shows how existing work differs significantly across the three concepts ‘type of contribution’, ‘type of thinking supported’ and ‘element of business model’. the following subsections below synthesize research with respect to the core elements of this concept matrix. types of contributions six types different types of contribution were revealed in the 33 papers that were reviewed: ‘taxonomies and frameworks’, ‘patterns and types’, ‘visual tools’, ‘methods’, ‘it tools’ and ‘processes’. taxonomies and frameworks (bock and wiener 2017; engelbrecht et al. 2016; hartmann et al. 2016; schmidt et al. 2018) represent a “basis for the analysis and clustering of big data-related business models” (hartmann et al. 2016, p. 1400) and list the main elements and characteristics of ddbms. business model patterns and types (förster et al. 2019; hartmann et al. 2016; schmidt et al. 2018; sprenger and mettler 2016) “can serve as an inspiration and a b c d n/a vhb-jourqual3 ranking n u m b er o f p u b lic at io n s 12 10 8 6 4 2 0 figure 2: rating of selected publications according to vhb-jourqual3 ranking. journal of business models (2020), vol. 8, no. 1, pp. 7-25 13 publication type of contribution type of thinking bm element v h b -j o u r q u a l3 ta xo n o m y / fr am ew o rk p at te rn / t yp e v is u al t o o l m et h o d it -t o o l p ro ce ss d iv er ge n t (i d ea ti o n ) c o n ve rg en t (e va lu at io n ) v al u e cr ea ti o n v al u e p ro p o si ti o n v al u e ca p tu ri n g agrawal et al. (2018) c ● ● ● ○ benta et al. (2017) n/a ● ○ ● ○ ○ ○ bock and wiener (2017) a ● ● ● ● ● brillinger (2018) b ○ ● ● ○ ● ● brownlow et al. (2015) n/a ○ ● ● ● ● ● enders et al. (2019) c ● ● ● engelbrecht et al. (2016) b ● ● ○ ○ exner et al. (2017) n/a ● ● ○ ● ● ● ● förster et al. (2019) c ● ○ ● ● hartmann et al. (2016) c ● ● ● ● ○ ● hunke et al. (2017) n/a ● hunke and wambsganß (2017) n/a ● ● ● hunke et al. (2019) b ● ● ● ○ hunke and schüritz (2019) d ● ● ● ○ kammler et al. (2019) b ○ ● ● ● kayser et al. (2018) n/a ○ ○ kronsbein and mueller (2019) c ● ○ ● ● ○ kühne and böhmann (2018) d ○ ● ● ● kühne and böhmann (2019) b ● ● ○ ● ● mathis and köbler (2016) n/a ● ○ ● ● nagle and sammon (2017) b ● ● ● ● rizk et al. (2018) c ● ● ● ● schmidt et al. (2018) c ● ● ● ○ ● schüritz and satzger (2016) n/a ● ● ● ● schüritz et al. (2017a) b ○ ● ● schüritz et al. (2017b) c ● ● ● spiekermann et al. (2018) d ● ● sprenger and mettler (2016) b ● ● ● ● ● terrenghi et al. (2018) b ● ○ ● ● ● ● wixom and markus (2015) n/a ○ ● ● wixom and schüritz (2018) n/a ○ ● ● zolnowski et al. (2016) b ● ● ● ● ● zolnowski et al. (2017) d ● ● ● table 1: overview of analysed publications along the concepts of three concepts ‘type of contribution’, ‘type of thinking supported’ and ‘element of business model’. key: n/a (not available), ● (characteristic fully covered), ○ (characteristic partially covered) journal of business models (2020), vol. 8, no. 1, pp. 7-25 14 blueprint” (hartmann et al. 2016, p. 1400) for organizations. in the context of established organizations, data-enabled business model transformation patterns (schüritz and satzger 2016; zolnowski et al. 2016) illustrate what elements of a business model can be affected by data and analytics. visual tools mediate collaboration and support ideation for data-driven innovations. such visual tools can be divided into a component view (e.g., (exner et al. 2017; hunke and schüritz 2019; kühne and böhmann 2018, 2019; nagle and sammon 2017)), a transaction view (brillinger 2018; terrenghi et al. 2018) or a causal view (förster et al. 2019). beside such holistic representations of bm, specialized tools emerge (agrawal et al. 2018; hunke and schüritz 2019; hunke and wambsganß 2017; kronsbein and mueller 2019; kühne and böhmann 2019; mathis and köbler 2016; nagle and sammon 2017) that support the generalized representation of a business model (kühne and böhmann 2019) by focusing on central elements of it, such as key resources, key activities or the value proposition. transactionor graph-based representations visualize value networks (brillinger 2018; terrenghi et al. 2018) or data-driven service systems (kammler et al. 2019). causal views visualize the cause and effect relations of data in business models (förster et al. 2019). we also revealed the methods of use for visual tools (brillinger 2018; nagle and sammon 2017) or certain types of workshops, like “data discovery sessions” (schüritz et al. 2017a). furthermore, we identified the description of how “data thinking workshops” are supported by visual tools (kronsbein and mueller 2019) to generate ideas. apart from ideation, the methods also support the evaluation of a business model in terms of a “data value assessment” (wixom and markus 2015), a “cost benefit analysis” (zolnowski et al. 2017) or the measurement of customer benefit and financial success (wixom and schüritz 2018). two publications comprise an it-tool related contribution. spiekermann et al. (2018) propose a metadata model for data goods, as the key resource of ddbms and terrenghi et al. (2018) states to implement the design elements via a software-reference model. process models in ddbmis shape the last type of contribution. such processes describe distinct steps or phases of a ddbmi, starting with an “understand” (benta et al. 2017) or “initiation” (hunke et al. 2017) phase, where the current situation of the organization is analysed and potential data sources are identified. this is followed by an “ideation” (hunke et al. 2017), “idea generation” (kayser et al. 2018), “design” (benta et al. 2017) or “use case generation” (schüritz et al. 2017a) phase, to generate different concepts of bms. subsequently, a phase of “proof of concept and evaluation” (kayser et al. 2018; schüritz et al. 2017a) or “prototyping and testing” (hunke et al. 2017) takes place, to test the bm prototype and to evaluate risks. finally, an “implementation” (benta et al. 2017; schüritz et al. 2017a), “realization” (hunke and wambsganß 2017) or “professionalization” (kayser et al. 2018) phase takes place that aims to operationalize the business model. types of thinking existing research can also be classified by the type of thinking supported by the artefact for the bmi activity of ideating and evaluating. idea generation for ddbmi can be supported by frameworks and patterns (bock and wiener 2017; engelbrecht et al. 2016; förster et al. 2019; hartmann et al. 2016; schmidt et al. 2018; sprenger and mettler 2016), visual tools (agrawal et al. 2018; hunke and schüritz 2019; hunke and wambsganß 2017; kronsbein and mueller 2019; kühne and böhmann 2019; mathis and köbler 2016; nagle and sammon 2017) as well as open questions (brownlow et al. 2015; exner et al. 2017) facilitating divergent thinking. fewer publications focus on evaluation and decision making in ddbmi, corresponding to convergent thinking. such activities encompass the analysis of costs and benefits of data and ddbmi ideas (wixom and markus 2015; zolnowski et al. 2017); the measurement of created customer value and financial success of a ddbmi (wixom and schüritz 2018); the reflection on risks (brillinger 2018; wixom and markus 2015); influencing factors for decisions on revenue models (enders et al. 2019) or decision points in the innovation process (schüritz et al. 2017a). elements of the business model tools and methods incorporate either a holistic view or focus on specific elements of the business model. from the perspective of value creation, existing research focuses on elements such as data as the key resource (mathis and köbler 2016; spiekermann et al. 2018) or data analytics as key activities (hunke and wambsganß 2017). in the value proposition dimension, journal of business models (2020), vol. 8, no. 1, pp. 7-25 15 research investigates data-driven services (hunke et al. 2019; hunke and schüritz 2019; kammler et al. 2019; rizk et al. 2018). from the value capturing dimension, research incorporates revenue models and financial evaluation (enders et al. 2019; schüritz et al. 2017b; wixom and schüritz 2018; zolnowski et al. 2017). other tools and methods combine two aspects of the business model, such as data and value proposition (kühne and böhmann 2019) or data as the key resource and analytics as key activities (nagle and sammon 2017). synthesis of tools and methods towards a toolbox as tools and methods should support organizations in their activities in business model innovation, we aligned, as shown in table 2, all identified tools and methods to the corresponding phases and activities of business model management, serving as a toolbox (in contrary, table 1 above structured the identified papers). we have chosen the business model management process in offline established organizations based on the empirical work of terrenghi (2019). as highlighted in table 2, most research is available for the design phase of ddbmi. thus, tools and methods are also predominantly available in the design phase. this implies the current focus of research and the specific need for supporting organizations and individuals in the activities of design and idea generation in ddbmi. further, tools and methods are clustered based on their origin from different research perspectives. as shown in table 2, tools and methods emerged from different conceptual backgrounds with diverging focus on the resource data and the business model concept: ddbms (i.e., full data and business model focus), digital business models (i.e., partial data and full business model focus) or data-driven innovation (i.e., partial business model and full data focus). this implies that no common wording has been established around data-driven business model innovation and that tools and methods are researched from different perspectives (e.g., business model innovation or service innovation), serving the same purpose for practice. analysis design evaluation implementation controlling data-driven innovations (partial business model focus) data value assessment1 data innovation board2 data value map3 data discovery sessions4 data innovation board2 ai canvas6 canvas with key factors for analytics-based services7 data value map3 taxonomy of data-driven / analytics-based services8 graph-based modelling of data-driven service systems21 meta data model of data goods22 metrics to reflect data wrapping returns23 data-driven business models (data and business model focus) data map5 taxonomy/framework9 patterns/types10 adopted business model canvas11 data insight generator12 ideation tool for key activities13 criteria for selecting revenue models14 causal loop-diagrams18 cost-benefit analysis 19 digital business models (partial data focus) taxonomy/framework15 patterns/types 16 design elements for transactionbased representation of cyberphysical systems business models17 mapping business model risk factors20 1 wixom and markus (2015) 2 kronsbein and mueller (2019) 3 nagle and sammon (2017) 4 schüritz et al. (2017a) 5 mathis and köbler (2016) 6 agrawal et al. (2018) 7 hunke and schüritz (2019) 8 rizk et al. (2018), hunke et al. (2019) 9 brownlow et al. (2015), engelbrecht et al. (2016), hartmann et al. (2016), exner et al. (2017) 10 hartmann et al. (2016), schüritz and satzger (2016), zolnowski et al. (2016), schmidt et al. (2018), förster et al. (2019) 11 benta et al. (2017), kühne and böhmann (2018) 12 kühne and böhmann (2019) 13 hunke and wambsganß (2017) 14 enders et al. (2019) 15 bock and wiener (2017) 16 sprenger and mettler (2016) 17 terrenghi et al. (2018) 18 förster et al. (2019) 19 zolnowski et al. (2017) 20 brillinger (2018) 21 kammler et al. (2019) 22 spiekermann et al. (2018) 23 wixom and schüritz (2018) table 2: synthesis of tools and methods for ddbmi across the phases of a bmi process. journal of business models (2020), vol. 8, no. 1, pp. 7-25 16 discussion and avenues for further research the results show that specific tools and methods are available to innovate a ddbm. we have also demonstrated that many tools are available especially in the design phase of the business model. those tools that are generally used when innovating the business model, like the business model canvas or the business model patterns, are transferred to ddbms. based on the above results summary, below we discuss gaps and underrepresented facets in existing research fields that highlight avenues for further research in how to support the process of ddbmi. table 3 summarises the three research streams identified and provides corresponding avenues and recommendations. evaluation and decision-making in data-driven business model innovation only a few papers (6 out of 33) investigate in convergent thinking (as table 1 shows) compared to divergent thinking, i.e. ideation (20 out of 33). existing research tends to focus on the ideation through taxonomies, patterns or visual tools, thus supporting divergent thinking. besides divergent thinking, bmi also requires evaluation and decision making (casadesus-masanell and ricart 2010; tesch and brillinger 2017), for instance to evaluate and select ideas for further elaboration, or to decide between options, and on further procedure. existing research on that direction is focusing on financial evaluation (wixom and schüritz 2018; zolnowski et al. 2017). evaluation of bms also involves identifying and managing risks (brillinger 2018; tesch and brillinger 2017). wixom and markus (2015) suggest bringing in not only costs and benefits, but also risks in data monetization. brillinger (2018) identified data as critical value streams and risk factors in value networks of business models. as often pointed out, data ownership, data security, privacy and data protection law are challenging factors in ddbmi (brownlow et al. 2015; dremel et al. 2017). few evaluation methods incorporate such aspects. in that sense we frame our first avenue for further research as designing tools and methods for evaluation, decision support and risk management in datadriven business model innovation. further research could identify data and analytic specific decision and evaluation criteria and success factors and critical elements of ddbm through in-depth literature review and expert interviews or surveys. based on that, further research field research direction recommendations tools and methods that supports convergent thinking (i.e. evaluation and decision making) designing tools and methods for evaluation, decision support and risk management in ddbmi. identifying data and analytics specific evaluation criteria and success factors through in-depth literature review and expert interviews or surveys developing decision support tools for ddbmi through design-oriented research in combination with design-oriented research developing data-specific risk assessment methods for business models overarching perspective on how single tools and methods link together designing a toolbox and a repeatable procedure for the combination of specialized tools and methods towards the development of a data-driven business model. study interrelation of tools and creation of a toolbox and assignment to bmi phases through in-depth case studies develop a repeatable process design for ddbmi through design-oriented research software tools to support the ddbm innovation process designing software tools as an it support for developing, evaluating and managing ddbmis based on information systems design methods. software implementation of ddbm representations combination and integration of tools in software tools to enable data consistency across representations implementation of data-driven methods table 3: research fields, research directions and recommendations for further research. journal of business models (2020), vol. 8, no. 1, pp. 7-25 17 research could develop decision support and evaluation tools to support and inform the decision-making process. further research could also develop decision support tools for specific business model elements, e.g. for the choice of appropriate revenue model or pricing mechanism, both through design-oriented research in combination with in-depth case studies. furthermore, as decision-makers have to find a balance between acceptable risk and estimated return (tesch and brillinger 2017), further research could investigate in methods for identifying and managing novel risk factors in ddbmis through case studies, expert surveys and design-oriented research. such evaluation and decision support tools can inform and help managers in their decisions for a certain business model design and balance risks and benefits to ensure the profitability and sustainability of the business model. this line of future research necessitates the integration of research on ddbmi, decision-making and risk analysis in bmi, and technology-oriented research as e.g., business analytics to consider knowledge on characteristics specific to data and data analytics. tool-chain and overarching methodology for innovating data-driven business models in the reviewed literature we see a range of tools and methods for special purposes that are still not related to each other which is the second research field we identified. tools and methods either incorporate all elements (e.g., (exner et al. 2017; hartmann et al. 2016)), or focus on a distinct element of the business model (e.g., (mathis and köbler 2016; schüritz et al. 2017b). thus, several tools and methods proposed are specialized for supporting the innovation process for a certain task, like identifying data sources (mathis and köbler 2016), connecting data with the value proposition (kühne and böhmann 2019) or ideating on analytics key activities (hunke and wambsganß 2017). specialized tools support the generalized representations of a business model (kühne and böhmann 2019; mathis and köbler 2016; osterwalder et al. 2014). likewise, existing research on processes (e.g., (benta et al. 2017; hunke et al. 2017)) does not provide information on detailed activities as well as tools in each process phase and lacks of empirical evaluation. to these terms we frame our second avenue for further research as designing a toolbox and procedure for the combination of specialized tools and methods towards the design and evaluation of a data-driven business model. further research could thus study such interrelations between specialized tools to develop a toolbox and tool chain for ddbmi and assign tools and methods to distinct phases of the innovation process as suggested by hunke et al. (2017) with the aid of (indepth) case studies. a first endeavour was made in the synthesis of this literature review, as shown in table 2. second, further research could develop a repeatable process design for developing data-driven business models, e.g. as suggested by simmert et al. (2019) for continuous business model improvements through design-oriented research. such a clearly defined process with a toolbox assigned to each phase of the process can help managers to overcome hurdles when it comes to designing and evaluating a data-driven business model due to a lack of structured procedure. this line of future research necessitates the integration between research on ddbmi and innovation management. it-support for data-driven business model innovation the third research field identified is the lack of software tools to support the ddbmi process. only two out of 33 reviewed research papers involve it to support ddbmi. in complete contrast to the digital nature of ddbmis, the underlying innovation process still appears to be fragmented and paper-based with very little it support. only terrenghi et al. (2018) indicate a softwarebased reference model of their tool and the research endeavour of spiekermann et al. (2018) points to an itrelated tool. on the other hand, there exist numerous software tools implementing generic bmi representations, such as the business model canvas (szopinski et al. 2019). much research effort is also going on in the information systems discipline to develop it tools for other types of business models, like the internet of things (athanasopoulu et al. 2018) or sustainable business models (schoormann et al. 2018). in that sense we frame our third research avenue as designing software tools as an it support for developing, evaluating and managing data-driven business model innovations in line with the call for research for it support for developing and managing bms (veit et al. 2014) using methods for information systems design. first, ddbm representations can be implemented in journal of business models (2020), vol. 8, no. 1, pp. 7-25 18 software tools to digitally track results and changes. likewise, combining specialized and generic bm tools within an it system to enable consistency and transfer of information across tools seems another fruitful path for further research. in addition, data-related software tools could also be developed, like a meta-database of available data sources within an organization. to further advance the field, not only the business model, but also the corresponding innovation process could be data-driven. augenstein and fleig (2017) suggest the use of data from organizational information systems to enable bottom-up creation of a business model, as the underlying process of business model creation is manual and prone to error, time-consuming and subjective. further research could develop data-driven methods to support ddbmi (szopinski et al. 2019). for managers, it-tools can support the results of the innovation process in such a way that they are visualized for presentation and communication. furthermore, it-tools can support the business model design process by delivering important data that is needed. this line of research necessitates further integration between research on ddbmi, design-oriented research in information systems, and research in business analytics related to the specific characteristics of data and data analytics in business models. limitations the search and selection for relevant literature as well as the analysis and synthesis process expose the research contribution to certain limitations. firstly, the focus of the literature search and selection was on tools and methods that specifically incorporate data as a central element. generic bmi tools and methods were not included in this research, even though these are also helpful for supporting the innovation process. furthermore, organizational measures, such as a data strategy, data-driven culture, or analytics competence centre in the organizational structure endorse the ddbmi process but are excluded in that research. secondly, due to the novelty of ddbmi research, the database search sometimes resulted in comparatively few results, and some of these were not rated b or above according to the vhb jourqual3. this highlights the emergent character of research on supporting the process of ddbmi, and the timeliness of providing a structured overview and synthesis into relevant future research directions. thirdly, although we have documented the research procedure as accurately as possible and discussed uncertainties within the team of researchers, the selection and analysis still remain subjective as this is the case with all structured literature reviews. conclusion in this paper we have argued that the development of tools that support decision-making in the process of ddbmi, the development of a complete procedure including tool chains, and the development of it tools that can support the process are promising avenues for research, and of practical relevance. for researchers, these three avenues also correspond to opportunities and necessities to integrate knowledge across slightly different research fields, such as research in business models, innovation management, information systems, and business analytics. for practitioners who are in charge of developing a data-driven business model, the challenge is therefore to still use generic overarching bmi processes, but to specify and concretise these by focussing on data as a key resource and data analytics as a key activity within this process. the present paper can support this approach by providing a structure to the available knowledge in terms of available concepts and tools as useful elements in the overall innovation process. journal of business models (2020), vol. 8, no. 1, pp. 7-25 19 references agrawal, a., gans, j., and goldfarb, a. 2018. “a simple tool to start making decisions with the help of ai,” harvard business review online. al-debei, m. m., and avison, d. 2010. “developing a unified framework of the business model concept,” european journal of information systems (19:3), pp. 359-376 (doi: 10.1057/ejis.2010.21). alvesson, m., and sandberg, j. 2011. “generating research questions through problemization,” academy of management review (36:2), pp. 247-271. athanasopoulu, a., haaker, t., and reuver, m. de 2018. “tooling for internet-of-things business model exploration: a design science research approach,” in proceedings of the 26th european conference on information systems: beyond digitization facets of socio-technical change, p. m. bednar, u. frank and k. kautz (eds.), portsmouth, uk. augenstein, d., and fleig, c. 2017. “exploring design principles for a business model mining tool,” proceedings of the thirty-eighth international conference on information systems (icis), seoul. benta, c., wilberg, j., hollauer, c., and omer, m. 2017. “process model for data-driven business model generation,” in proceedings of the 21st international conference on engineering design: volume 2: design processes, design organisation and management, a. maier, s. škec, kim, harrison: kokkolaras, michael, j. oehmen, g. fadel, f. salustri and m. van der loos (eds.), vancouver, canada. 21.-25.08.2017, glasgow: the design society, pp. 347-356. björkdahl, j. 2009. “technology cross-fertilization and the business model: the case of integrating icts in mechanical engineering products,” research policy (38:9), pp. 1468-1477 (doi: 10.1016/j.respol.2009.07.006). bock, m., and wiener, m. 2017. “towards a taxonomy of digital business models: conceptual dimensions and empirical illustrations,” proceedings of the thirty-eighth international conference on information systems (icis), seoul. brillinger, a.-s. 2018. “mapping business model risk factors,” international journal of innovation management (22:05), 1840005 (doi: 10.1142/s1363919618400054). brinkkemper, s. 1996. “method engineering: engineering of information systems development methods and tools,” information and software technology (38:4), pp. 275-280 (doi: 10.1016/0950-5849(95)01059-9). brownlow, j., zaki, m., neely, a., and urmetzer, f. 2015. data and analytics data-driven business models: a blueprint for innovation. http://cambridgeservicealliance.eng.cam.ac.uk/resources/downloads/monthly%20papers/20 15februarypapertheddbminnovationblueprint.pdf. accessed 19 july 2017. casadesus-masanell, r., and ricart, j. e. 2010. “from strategy to business models and onto tactics,” long range planning (43:2-3), pp. 195-215 (doi: 10.1016/j.lrp.2010.01.004). chen, y., kreulen, j., campbell, m., and abrams, c. 2011. “analytics ecosystem transformation: a force for business model innovation,” 2011 annual srii global conference, pp. 11-20 (doi: 10.1109/srii.2011.12). chesbrough, h., and rosenbloom, r. s. 2002. “the role of the business model in capturing value from innovation: evidence from xerox corporation‘s technology spin-off companies,” industrial and corporate change (11:3), pp. 529555 (doi: 10.1093/icc/11.3.529). davenport, t. h. 2013. “analytics 3.0,” harvard business review (91:12), pp. 64-72. journal of business models (2020), vol. 8, no. 1, pp. 7-25 20 davenport, t. h., and kudyba, s. 2016. “designing and developing analytics-based data products,” mit sloan management review (58:1), pp. 83-89. dremel, c., overhage, s., schlauderer, s., and wulf, j. 2017. “towards a capability model for big data analytics,” in proceedings der 13. internationalen tagung wirtschafstinformatik (wi 2017), j. m. leimeister and w. brenner (eds.), 1141-1155. ebel, p., bretschneider, u., and leimeister, j. m. 2016. “leveraging virtual business model innovation: a framework for designing business model development tools,” information systems journal (26:5), pp. 519-550 (doi: 10.1111/ isj.12103). enders, t., schüritz, r., and frey, w. 2019. “capturing value from data: exploring factors influencing revenue model design for data-driven services,” in human practice. digital ecologies. our future, t. ludwig and v. pipek (eds.), pp. 1738-1752. engel, c., and ebel, p. 2019. “data-driven service innovation: a systematic literature review and development of a research agenda,” in proceedings of the 27th european conference on information systems information systems for a sharing society, j. vom brocke, s. gregor and o. müller (eds.), stockholm and uppsala, sweden. engelbrecht, a., gerlach, j., and widjaja, t. 2016. “understanding the anatomy of data driven business models towards an empirical taxonomy,” proceedings of the twenty-fourth european conference on information systems (ecis), istanbul 2016. envision 2016. pricing strategy cards. https://www.businessmakeover.eu/platform/envision/download-file?id=9t 2nu7ivkuxi9py2xrgdgsy9. eppler, m. j., hoffmann, f., and bresciani, s. 2011. “new business models through collaborative idea generation,” international journal of innovation management (15:06), pp. 1323-1341 (doi: 10.1142/s1363919611003751). exner, k., stark, r., and kim, j. y. 2017. “data-driven business model: a methodology to develop smart services,” 2017 international conference on engineering, technology and innovation (ice/itmc), pp. 146-154 (doi: 10.1109/ ice.2017.8279882). förster, m., bansemir, b., and roth angela 2019. “understanding the role of data for innovating business models: a system dynamics perspective,” in human practice. digital ecologies. our future, t. ludwig and v. pipek (eds.), pp. 1753-1767. gambardella, a., and mcgahan, a. m. 2010. “business-model innovation: general purpose technologies and their implications for industry structure,” long range planning (43:2-3), pp. 262-271 (doi: 10.1016/j.lrp.2009.07.009). gassmann, o., frankenberger, k., and csik, m. 2014. the business model navigator: 55 models that will revolutionise your business, harlow: pearson. gottlieb, j., and rifai, k. 2017. fueling growth through data monetization. https://www.mckinsey.com/businessfunctions/mckinsey-analytics/our-insights/fueling-growth-through-data-monetization?cid=othereml-alt-mipmck-oth-1712. accessed 16 october 2018. journal of business models (2020), vol. 8, no. 1, pp. 7-25 21 günther, w. a., rezazade mehrizi, m. h., huysman, m., and feldberg, f. 2017. “debating big data: a literature review on realizing value from big data,” the journal of strategic information systems (26:3), pp. 191-209 (doi: 10.1016/j. jsis.2017.07.003). hartmann, p. m., zaki, m., feldmann, n., and neely, a. 2016. “capturing value from big data – a taxonomy of datadriven business models used by start-up firms,” international journal of operations & production management (36:10), pp. 1382-1406 (doi: 10.1108/ijopm-02-2014-0098). hunke, f., engel, c., schüritz, r., and ebel, p. 2019. “understanding the anatomy of analytics-based services: a taxonomy to conceptualize the use of data and analytics in service,” in proceedings of the 27th european conference on information systems information systems for a sharing society, j. vom brocke, s. gregor and o. müller (eds.), stockholm and uppsala, sweden. hunke, f., and schüritz, r. 2019. “smartere produkte durch analysebasierte dienstleistungen – ein methodisches werkzeug zur strukturierten entwicklung,” hmd praxis der wirtschaftsinformatik (56:3), pp. 514-529 (doi: 10.1365/ s40702-019-00531-8). hunke, f., seebacher, s., schüritz, r., and illi, a. 2017. “towards a process model for data-driven business model innovation,” 19th ieee conference on business informatics, pp. 150-157. hunke, f., and wambsganß, t. 2017. “turning data into value: towards an ideation tool for key activities of datadriven business models,” 3rd karlsruhe service summit research workshop. john, t., kundisch, d., and szopinski, d. 2017. “visual languages for modeling business models: a critical review and future research directions,” proceedings of the thirty-eighth international conference on information systems (icis), seoul. johnson, m. w., christensen, c. m., and kagermann, h. 2008. “reinventing your business model,” harvard business review (86:12), pp. 57-68. kammler, f., hagen, s., brinker, j., and thomas, o. 2019. “leveraging the value of data-driven services systems in manufacturing: a graph-based approach,” proceedings of the twenty-seventh european conference on information systems (ecis), stockholm 2019. kayser, v., nehrke, b., and zubovic, d. 2018. “data science as an innovation challenge: from big data to value proposition,” technology innovation management review (8:3), pp. 16-25. kim, k. h., and pierce, r. a. 2013. “convergent versus divergent thinking,” in encyclopedia of creativity, invention, innovation and entrepreneurship, e. g. carayannis (ed.), new york, ny: springer reference, pp. 245-250. kronsbein, t., and mueller, r. m. 2019. “data thinking: a canvas for data-driven ideation workshops,” in proceedings of the 52nd hawaii international conference on system sciences, t. bui (ed.), grand wailea, maui, hawaii, usa, pp. 561-570. kühne, b., and böhmann, t. 2018. “requirements for representing data-driven business models: towards extending the business model canvas,” proceedings of the twenty-fourth americas conference on information systems (amcis). journal of business models (2020), vol. 8, no. 1, pp. 7-25 22 kühne, b., and böhmann, t. 2019. “data-driven business models: building the bridge between data and value,” in proceedings of the 27th european conference on information systems information systems for a sharing society, j. vom brocke, s. gregor and o. müller (eds.), stockholm and uppsala, sweden. loebbecke, c., and picot, a. 2015. “reflections on societal and business model transformation arising from digitization and big data analytics: a research agenda,” journal of strategic information systems (24), pp. 149-157 (doi: 10.1016/j.jsis.2015.08.002). magretta, j. 2002. “why business models matter,” harvard business review (80:5), pp. 86-92. massa, l., and tucci, c. l. 2013. “business model innovation,” in the oxford handbook of innovation management, m. dodgson, d. m. gann and n. phillips (eds.), oxford: oxford univ. press, pp. 420-441. mathis, k., and köbler, f. 2016. “data-need fit towards data-driven business model innovation,” servdes. 2016 fifth service design and innovation conference, pp. 458-467. mitchell, d., and coles, c. 2003. “the ultimate competitive advantage of continuing business model innovation,” journal of business strategy (24:5), pp. 15-21 (doi: 10.1108/02756660310504924). nagle, t., and sammon, d. 2017. “the data value map: a framework for developing shared understanding on data initiatives,” in proceedings of the 25th european conference on information systems, i. ramos, v. tuunainen and h. krcmar (eds.), guimarães, portugal, pp. 1439-1452. osterwalder, a. 2004. the business model ontology: a proposition in a design science approach. phd thesis. osterwalder, a., and pigneur, y. 2010. business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons. osterwalder, a., pigneur, y., bernarda, g., smith, a., and papadakos, p. 2014. value proposition design: how to create products and services customers want. get started with, hoboken, nj: wiley. remane, g., nickerson, r. c., hanelt, a., tesch, j., and kolbe, l. m. 2016. “a-taxonomy-of-carsharing-businessmodels,” proceedings of the thirty-seventh international conference on information systems (icis), dublin. rizk, a., bergvall-kåreborn, b., and elragal, a. 2017. “digital service innovation enabled by big data analytics a review and the way forward,” proceedings of the 50th hawaii international conference on system sciences, pp. 1247-1256. rizk, a., bergvall-kåreborn, b., and elragal, a. 2018. “towards a taxonomy of data-driven digital services,” proceedings of the 51st hawaii international conference on system sciences, pp. 1076-1085. schmidt, j., drews, p., and schirmer, i. 2018. “charting the emerging financial services ecosystem of fintechs and banks: six types of data-driven business models in the fintech sector,” proceedings of the 51st hawaii international conference on system sciences, pp. 5004-5013. schneider, s., and spieth, p. 2013. “business model innovation: towards an integrated future research agenda,” international journal of innovation management (17:01), p. 1340001 (doi: 10.1142/s136391961340001x). journal of business models (2020), vol. 8, no. 1, pp. 7-25 23 schoormann, t., behrens, d., and knackstedt, r. 2018. “the noblest way to learn wisdom is by reflection: designing software tools for reflecting sustainability in business models,” proceedings of the thirty-ninth international conference on information systems (icis), san francisco. schryen, g. 2015. “writing qualitative is literature reviews: guidelines for synthesis, interpretation, and guidance of research,” communications of the association for information systems (37:12). schüritz, r., brand, e., satzger, g., and kunze von bischoffshausen, j. 2017a. “how to cultivate analytics capabilities within an organisation?: design and types of analytics competency centers,” proceedings of the twenty-fifth european conference on information systems (ecis), guimarães 2017, pp. 389-404. schüritz, r., and satzger, g. 2016. “patterns of data-infused business model innovation,” ieee 18th conference on business informatics, pp. 133-142 (doi: 10.1109/cbi.2016.23). schüritz, r., seebacher, s., and dorner, r. 2017b. “capturing value from data: revenue models for data-driven services,” in proceedings of the 50th hawaii international conference on system sciences, t. bui (ed.), waikoloa village, hawaii, usa, pp. 5348-5357. schüritz, r., seebacher, s., satzger, g., and schwarz, l. 2017c. “datatization as the next frontier of servitization: understanding the challenges for transforming organizations,” proceedings of the thirty-eighth international conference on information systems (icis), seoul. seiberth, g., and gründinger, w. 2018. data-driven business models in connected cars, mobility services and beyond. https://bvdw.org/datadrivenbusinessmodels/. simmert, b., ebel, p. a., peters, c., bittner, e. a. c., and leimeister, j. m. 2019. “conquering the challenge of continuous business model improvement,” business & information systems engineering (61:4), pp. 451-468 (doi: 10.1007/ s12599-018-0556-y). skarzynski, p., and gibson, r. 2008. innovation to the core: a blueprint for transforming the way your company innovates, boston mass.: harvard business school press. spiekermann, m., tebernum, d., wenzel, s., and otto, b. 2018. “a metadata model for data goods,” multikonferenz wirtschaftsinformatik 2018, pp. 326-337. sprenger, m., and mettler, t. 2016. “on the utility of e-health business model design patterns,” proceedings of the twenty-fourth european conference on information systems (ecis), istanbul 2016. szopinski, d., schoormann, t., john, t., knackstedt, r., and kundisch, d. 2019. “software tools for business model innovation: current state and future challenges,” electronic markets, p. 2794 (doi: 10.1007/s12525-018-0326-1). täuscher, k., and abdelkafi, n. 2017. “visual tools for business model innovation: recommendations from a cognitive perspective,” creativity and innovation management (26:2), pp. 160-174 (doi: 10.1111/caim.12208). terrenghi, n. 2019. design, implement, repeat: essays on business model management in offline-born organizations. phd thesis. terrenghi, n., schwarz, j., and legner, c. 2018. “towards design elements to represent business models for cyber physical systems,” in proceedings of the 26th european conference on information systems: beyond digitization facets of socio-technical change, p. m. bednar, u. frank and k. kautz (eds.), portsmouth, uk. journal of business models (2020), vol. 8, no. 1, pp. 7-25 24 tesch, j., and brillinger, a.-s. 2017. “the evaluation aspect of digital business model innovation: a literature review on tools and methodologies,” in proceedings of the 25th european conference on information systems, i. ramos, v. tuunainen and h. krcmar (eds.), guimarães, portugal, pp. 2250-2268. veit, d., clemons, e., benlian, a., buxmann, p., hess, t., kundisch, d., leimeister, j. m., and loos, p. 2014. “business models: an information systems research agenda,” business & information systems engineering (6:1), pp. 45-53 (doi: 10.1007/s12599-013-0308-y). vom brocke, j., simons, a., niehaves, b., niehaves, b., reimer, k., plattfaut, r., and cleven, a. 2009. “reconstructing the giant: on the importance of rigour in documenting the literature search process,” proceedings of the sixteenths european conference on information systems (ecis). webster, j., and watson, r. t. 2002. “analyzing the past to prepare for the future: writing a literature review,” mis quarterly (26:2), pp. 13-23. wirtz, b. w., and daiser, p. 2018. “business model innovation processes: a systematic literature review,” journal of business models (6:1), pp. 40-58. wirtz, b. w., göttel, v., and daiser, p. 2016. “business model innovation: development, concept and further research directions,” journal of business models (4:1), pp. 1-28. wixom, b. h. 2014. “cashing in on your data,” center for information systems research, sloan school of management, cambridge, ma: massachusetts institute of technology. research briefing (14:8). wixom, b. h., and markus, m. l. 2015. “data value assessment: recognizing data as an enterprise asset,” research briefing volume xv, number 3, center for information systems research. wixom, b. h., and ross, j. w. 2017. “how to monetize your data,” mit sloan management review (58:3), pp. 10-13. wixom, b. h., and schüritz, r. 2017. “creating customer value using analytics,” mit cisr research briefing volume xvii, number 11, november 2017. wixom, b. h., and schüritz, r. 2018. “making money from data wrapping: insights from product managers,” mit cisr research briefing volume xviii, number 12. woerner, s. l., and wixom, b. h. 2015. “big data: extending the business strategy toolbox,” journal of information technology (30:1), pp. 60-62 (doi: 10.1057/jit.2014.31). zolnowski, a., anke, j., and gudat, j. 2017. “towards a cost-benefit-analysis of data-driven business models,” in proceedings der 13. internationalen tagung wirtschafstinformatik (wi 2017), j. m. leimeister and w. brenner (eds.), pp. 181-195. zolnowski, a., towe, c., and gudat, j. 2016. “business model transformation patterns of data-driven innovations,” proceedings of the twenty-fourth european conference on information systems (ecis), istanbul 2016. zott, c., and amit, r. 2008. “the fit between product market strategy and business model: implications for firm performance,” strategic management journal (29:1), pp. 1-26 (doi: 10.1002/smj.642). journal of business models (2020), vol. 8, no. 1, pp. 7-25 25 michael fruhwirth is a researcher at the knowcenter and a doctoral candidate at graz university of technology with master’s degrees in information and computer engineering as well as business and law. his research interest is located at the intersection of data science and business management. in his ph.d. thesis, he is designing tools and methods to support established organisations in innovating datadriven business models. christiana ropposch is assistant professor and head of the business model management working group at the institute of general management and organisation at the graz university of technology. she is currently working on her habilitation with the topic of technology-oriented business model management. her focus is on business model development and business model innovation, mainly in the context of digitalization. christiana and her colleagues run a business model lab in which they advise and train companies on business model development and business model innovation. viktoria pammer-schindler is an associate professor at graz university of technology, and research area head at the know-center. her research is situated at the intersection of technology-enhanced learning, human-computer interaction, and information systems. viktoria studies and designs for learning, knowledge work, and computer technologies. in this, data-driven business model innovation is an example of a knowledge-intensive, collaborative, strategic knowledge construction activity, where knowledge is currently being constructed both at a global and local level. about the authors journal of business models (2021), vol. 9, no 2, pp. 22 43 22 exploring sustainability in business models of early-phase start-up projects: a multiple case study approach martin glinik1, michael rachinger2, christiana ropposch3, florian ratz4, and romana rauter5 abstract purpose: the purpose of this paper is two-fold: first, we provide an analysis of sustainability topics that occurred in business models deployed in early-phase start-up projects. second, we investigated potential drivers that led to the inclusion of sustainability aspects in different business model elements. design/methodology/approach: we investigated our sample of six early-phase start-up projects using a multiple case study approach, whereby the business model of each start-up project represents one case. the nascent entrepreneurs took part in a four-month academic start-up accelerator, called the gruendungsgarage, and we collected qualitative data at three sequential points in time. these data were then analysed using a qualitative content approach and interpreted from a business model and imprinting theory perspective. findings: the business models deployed in these six early-phase start-up projects are centred around sustainable value propositions. however, the type and degree of sustainability differs. in fact, an intention to comply with sustainability principles was initially expressed in only two of the six start-up projects. most of the investigated start-up projects did not holistically integrate sustainability-related values. instead, sustainability was considered as an ancillary benefit to providing products or services. practical and social implications: the findings offer practical knowledge that entrepreneurs can use to develop business models centred around a sustainable value proposition and benefit from the interactions among the three sustainability dimensions to address the unmet demand of a larger stakeholder group (i.e. solving social and ecological problems). originality/value: these study findings expand our knowledge about sustainable business model development in early-phase start-up projects. we use multiple data from six start-up projects to provide examples of different sustainability aspects that are being imprinted in business models. in addition, we provide empirical evidence of drivers that are considered to be supportive in the context of sustainable business model development, such as entrepreneurial motivation, careful resource use and waste reduction. viewed through an imprinting theory lens, several of the identified drivers can be associated with the individual entrepreneur (imprinter), highlighting the importance of the entrepreneurs’ characteristics for the further development of sustainable business models. in addition, just as many drivers could be assigned to strategic considerations (imprinting processes) to imprint sustainability in the business model. these considerations can be used to develop specific strategies to improve the competitive advantage of start-up projects that place a focus on sustainability. please cite this paper as: glinik et al. (2021), exploring sustainability in business models of early-phase start-up projects: a multiple case study approach, journal of business models, vol. 9, no. 2, pp. 22 43 keywords: sustainable business model development, entrepreneurial business models, start-up accelerator; sustainability 1-4 institute of general management and organisation, graz university of technology, martin.glinik@tugraz.at 5 institute of systems sciences, innovation & sustainability research, university of graz doi: https://doi.org/10.5278/jbm.v9i2.3557 https://doi.org/10.5278/jbm.v9i2.3557 journal of business models (2021), vol. 9, no 2, pp. 22 43 23 introduction for more than a decade, authors have explored the alternative orientations and motivations of entrepreneurs that go beyond mere profit maximisation, describing their findings in the literature on entrepreneurship (muñoz et al., 2018). although scholars have dealt extensively with the relevance of values and goals to founding new businesses (leung et al., 2013), they have paid relatively little attention to understanding how earlyphase start-up projects elaborate and imprint sustainability aspects in their business models (taeuscher and abdelkafi, 2018; voinea et al., 2019; fischer et al., 2020). so far, most scholars have treated the purpose of an organisation as a binary and static construct (estrin et al., 2016; stevens et al., 2015). this suggests that nascent entrepreneurs involved in early-phase startup projects are likely to choose either a commercial or a sustainable purpose when starting a business. this choice remains stable throughout the process of business development (dacin et al., 2011; mair and marti, 2006) and shapes important characteristics of the business model (bm) when a business is started (chesbrough and rosenbloom, 2002; siggelkow, 2002). once the bm has been introduced or founded, it is less likely to change due to path dependencies, dominant logics, the cognitive limitations of managers and a general aversion to change (gilbert, 2005; tripsas and gavetti, 2000). the initial characteristics of the bm may be retained over long periods of time, even if environmental impacts change at a later date (marquis and tilcsik, 2013). this phenomenon was first described by stinchcombe (1965) as imprinting. in this article, he argued that some characteristics of an organisation which are shaped during a sensitive period (i.e. founding or formation) may persist over a long period of time and can influence (or imprint) organisational design later on, even if subsequent environmental changes occur (stinchcombe, 1965; marquis, 2003; johnson, 2007). the imprinting theory implies that the decisions entrepreneurs made in the start-up phase shape the internal organisational design or its boundary-spanning design in the form of its bm (beckman and burton, 2008; snihur and zott, 2020). scholars agree that entrepreneurial decisions which influence the bm itself are crucial and of particular importance, since these bms are often preserved over a longer period of time (siggelkow, 2002; tripsas and gavetti, 2000). against this background, we argue that imprinting sustainability into the bm is a decision that also needs to be made early (enough) in the development phase to ensure that it remains a central cornerstone and becomes imprinted in strategies and structures as the organisation grows. however, little is known about these early development phases of the bm or the drivers (or reasons) that stimulate (or lead to) the imprinting of sustainability in bms used in early-phase start-up projects (stubbs and cocklin, 2008; rauter et al., 2017; davies and chambers, 2018; laasch, 2018; voinea et al., 2019). to the best of the authors’ knowledge, only one study has been carried out to investigate how start-ups integrate corporate social responsibility (csr) into their bms and identify what motivates them to engage in csr activities (voinea et al., 2019). in contrast to our study, their work builds on the stakeholder and social capital theory and does not examine the imprinting of sustainability in bm elements (remane et al., 2017) or the use of the business model canvas as a practical bm tool (osterwalder and pigneur, 2010; teece, 2010; remane et al., 2017; voinea et al., 2019). in addition, the five investigated start-ups in voinea et al.’s study (2019) were already established a couple of years ago, and interview data were only collected once 2019. their findings provide the first general insights regarding how start-ups strive to include sustainability in their bms and serve as a valuable basis for investigating the sustainability aspects of bms in start-up projects and, specifically, the inclusion of sustainability aspects within the bm elements. rauter et al. (2017) also investigated driving factors leading to the inclusion of sustainability in bms and came to the conclusion that these drivers included personal beliefs; their sample, however, was not limited to start-up companies. a more general study by sher et al. (2020) was carried out to investigate the drivers of start-up intentions for sustainable entrepreneurship, especially in the context of university students. overall, the lack of (empirical) evidence on early-phase start-up bms as well as the lack of information about which drivers cause certain start-up projects to develop bms that include sustainability aspects is obvious. to obtain a more thorough understanding of how earlyphase start-up projects imprint sustainability aspects in their early bms, we addressed this research gap by posing the following research questions: journal of business models (2021), vol. 9, no 2, pp. 22 43 24 (a) what elements of early-phase start-ups bms include aspects of sustainability? (b) what drives the inclusion of sustainability aspects in early-phase start-up bms? to answer these research questions, we investigated the bms deployed in six out of nineteen early-phase start-up projects and examined how they included sustainability aspects. we chose early-phase start-up projects that were not yet present on the market to study how they imprinted sustainability aspects in their bms in order to ‘arrive at a balanced sustainability system’ (divito and bohnsack, 2017; fischer et al., 2020, p. 88). all nineteen early-phase start-up projects were part of the start-up accelerator programme gruendungsgarage during our investigation (mueller et al., 2019). six out of the nineteen interdisciplinary early-phase start-up projects integrated sustainability aspects in their bms. we analysed the bms used in these six early-phase start-up projects in detail by applying multiple qualitative methods (glaeser and laudel, 2010; mayring, 2010) and by using the imprinting theory (simsek et al., 2015) as a theoretical basis. the findings of this qualitative empirical study allowed us to examine the drivers that led to the inclusion of sustainability aspects in these bms and improved our understanding of how and why early-phase start-up projects imprinted these sustainability aspects. theoretical background sustainable business model development in early-phase start-up projects the concept of the bm was originally developed for and used in purely profit-oriented organisations. for this reason, the focus of attention has typically rested on the commercial logic behind how an organisation creates, delivers and captures value (teece, 2010). the underlying conceptual structure of organisational values, however, also extends beyond the pure commercial market (laasch, 2018). the boundaries and limitations of purely profit-oriented bms have been identified recently (e.g., kiron et al., 2013; schaltegger et al., 2016; seelos, 2014), and scholars as well as practitioners have become increasingly interested in exploring the potential of ecofriendly and socially-oriented bms (luedeke-freund and dembek, 2017), the so-called sustainable bms. sustainable bms have been developed to achieve financial and sustainability objectives simultaneously (stubbs and cocklin, 2008; schaltegger et al., 2016) and, thus, create extended value for the individual, natural environment and society (govindaraj, 2003; boons et al., 2013; bocken et al., 2014; wells, 2016; taeuscher and abdelkafi, 2018). this extended value creation, however, is challenging and might require the use of new bm approaches (di domenico et al., 2010; kuckertz and wagner, 2010; wilson and post, 2013) that enable scholars and practitioners to achieve both non-financial and financial goals (murphy and coombes, 2009; hahn et al., 2010). so far, researchers have concentrated mainly on the bms of (established) sustainability-oriented organisations, providing a broad overview but failing to offer specific insights into entrepreneurial activities (e.g. schaltegger et al., 2012; boons and luedeke-freund, 2013; bocken et al., 2014). furthermore, the current methods used to imprint sustainability in bms have been designed for established organisations and smes. for this reason, they suffer from certain limitations when they are applied to start-ups due to the considerably different characteristics (retolaza et al., 2009). start-ups are characterised by their novelty and are supposed to mature and scale-up; therefore, it is of major importance to investigate how these organisations develop bms that go beyond the mere creation of economic value (boons et al., 2013) while facing high amounts of uncertainty regarding the market adoption of their products or the availability of critical resources (hall et al., 2010; bocken, 2015). however, little is known about how to develop appropriate bms to support early-phase start-up projects to imprint sustainability in their bms (stubbs and cocklin, 2008; rauter et al., 2017; davies and chambers, 2018; laasch, 2018; voinea et al., 2019). using the imprinting theory lens to examine sustainability aspects in bm elements of earlyphase start-up projects originally developed to study animal behaviour (stinchcombe, 1965), the imprinting theory has proven to be a valuable approach for the investigation of new ventures (simsek et al., 2015). like the development of imprints during the early life stage of an individual, the imprinting theory can also be applied to explore imprints in emerging start-up projects (marquis and tilcsik, 2013). journal of business models (2021), vol. 9, no 2, pp. 22 43 25 every organisation goes through various sensitive periods during its entrepreneurial journey (nelson, 2003; judge et al., 2015). thereby, the foundation period is certainly the most sensitive period in the life of an organisation, since it represents the transition from non-existence to existence (marquis and tilcsik, 2013; simsek et al., 2015). in this phase, the organisation takes shape. this shape lays the foundation for further orientation and business development. during this sensitive period, various sources of imprints may influence the organisational development and shape the key characteristics of the organisation (johnson, 2007; marquis and tilcsik, 2013). we based our work on the imprinting framework described by simsek et al. (2015) and focused on the genesis phase, in which an imprinting source becomes reflected in an imprinted entity. the framework suggests that the genesis of imprints can be organised around three core concepts: the imprinters (sources of imprinting), the imprinted (the focal entity that is subject to imprinting) and the imprinting processes (activities that refer to the occurrence of imprint formation during the founding period) (simsek et al., 2015). the initial work on imprinting focused on the environment as a crucial source of imprinting (stinchcombe, 1965). one of the early insights from this work was that the organisational structure reflects its founding environment. the initial focus on the environment as an influential source was subsequently extended to the personal level, explaining why founders were considered as an additional source of imprinting (van driel and dolfsma, 2009). it became evident that individual imprinters are often portrayed as founders or founding teams (beckman and burton, 2008; leung et al., 2013). especially in the (pre-) seed phase, the founders’ characteristics and motives represent particularly strong sources of imprinting (helfat and lieberman, 2002), as they have normally not yet been exposed to the imprinting effects of investors (alakent et al., 2020) and rarely have hired employees who participate in the imprinting process (snihur and zott, 2020). to date, the management scholars have primarily selected the organisation as the subject of imprinting (fauchart and gruber, 2011; leung et al., 2013; gioia et al., 2010; milanov and shepherd, 2013). in our study, we narrowed this perspective to focus on the bm and investigated early-phase start-up projects, the organisational structures of which had not yet been formalised. by referring to the imprinting framework of simsek et al. (2015), we address the bm as the imprinted (subject of imprinting) and the drivers that lead to the inclusion of sustainability aspects in the bms as imprinters (sources of imprinting) and forces that set in motion an imprinting process. methods data selection our analysis uses data on the bms of early-phase startup projects that were collected as part of the start-up accelerator programme gruendungsgarage hosted at the graz university of technology and university of graz (mueller et al., 2019). in our study, we investigated two cohorts of early-phase start-up projects; their founders participated in the accelerator from october 2018 to january 2019 and march 2019 to june 2019, respectively. in total, these two cohorts comprised nineteen earlyphase start-up projects with each start-up project consisting of up to four people. using a purposive sampling method (patton, 2002; denzin and lincoln, 2005), two of the authors independently screened the application documents (compare with figure 1) of the early-phase start-up projects for indications of sustainability. if the application documents contained aspects of either social or ecological sustainability in the bm elements of the early-phase start-up projects, they were included in the sample. in total, six of the nineteen early-phase startup projects included aspects of sustainability in their bm elements. these bms were subsequently investigated in detail to examine whether they included sustainability aspects and to identify the respective drivers for this inclusion during the start-up accelerator. data collection we investigated our sample of six early-phase start-up projects using a multiple case study approach, whereby the bm of each early-phase start-up project represents one case (eisenhardt, 1989; yin, 2009). qualitative data were collected from multiple sources at distinct time points during the accelerator programme to triangulate our data and add richness to our cases (compare with figure 1 and table 1 on next page). first, we collected documents required by the gruendungsgarage. these documents included written applications to take part in the accelerator programme, journal of business models (2021), vol. 9, no 2, pp. 22 43 26 which outlined the initial ideas about each start-up project’s bm. second, the bmc used by each early-phase start-up project was evaluated at discrete points in time during the four-month period of the investigation (osterwalder and pigneur, 2010). the bmc was used in this research as it is the ‘most widely used tool for developing and analysing business models’ (bertels et al., 2015, p. 21) as well as the ‘de facto reference standard [...] taught in management and entrepreneurship education worldwide’ (upward and jones, 2016, p. 100). specifically, we evaluated the bms of each early-phase start-up project after they had participated in a bm workshop (compare with figure 1). furthermore, the bmc was discussed in detail with each start-up project team at the end of the gruendungsgarage. third, over the four-month investigation period, we conducted two semi-structured interviews with each start-up project team. the interview included detailed questions call for app lica tion and sub mission evalua tion, hearing and sele ction decisio n follow-up activities, e.g. foundi ng a start-up, move to an incubator coaching phase workshop phaseinitiation phase 1 semester business model development before pr ogramme  screening of application document s  purposive sampling of bms for further investigation after bm workshop  interview 1  documentation of the bmc after compl etion of the programm e  interview 2  discussion of bmc  screening of secondary data figure 1: procedural overview of the start-up accelerator programme (based on mueller et al. (2019) and vorbach (2017)). data collection points are shown. start-up project time in accelerator programme gruendungsgarage datapoint 0 (application documents) datapoint 1 (after bm workshop) interview 1 bmc 1 datapoint 2 (after accelerator programme) interview 2 bmc 2 current status of start-up project a alphawood oct 2018 jan 2019 a0 a1 a2 founding in progress b dignisens oct 2018 jan 2019 b0 b1 b2 founded (website available) c mady pure oct 2018 jan 2019 c0 c1 c2 founding in progress d freyzein mar 2019 jun 2019 d0 d1 d2 founded (website available) e smarter studieren mar 2019 jun 2019 e0 e1 e2 founding in progress (website available) f whoopedu mar 2019 jun 2019 f0 f1 f2 founded (website available) table 1: overview of investigated cases and empirical data collected. journal of business models (2021), vol. 9, no 2, pp. 22 43 27 regarding the overall bm used in the start-up project, the inclusion of sustainability aspects in bm elements as well as drivers towards the inclusion of sustainability aspects. we transcribed all interviews in full. finally, secondary data, such as information extracted from the websites of the successfully founded start-ups, were gathered and compared with information from the documents and interviews. due to the early phases of investigated start-ups, the availability of secondary data was limited. the information about the earlyphase start-up projects’ bmcs, interview data as well as publicly available data extracted from websites were archived in a case study database for each start-up project. table 1 provides an overview of the investigated early-phase start-up projects and the collected data. data analysis all written material was coded and evaluated using the qualitative content analysis method described by glaeser and laudel (2010) and mayring (2010). the analysis was conducted using the web-based software qcamap. we applied inductive codes to paraphrased items. in addition, as proposed by mayring (2010), the ‘intra-coder reliability’ as well as ‘inter-coder reliability’ was ensured by meticulous coding of available material and discussing deviations in the interpretations among four individual researchers. the codes identified were subsequently assigned to main themes, applying the clustering logic proposed by gioia et al. (2013). furthermore, using the data gathered on the early-phase start-up project bmcs during the workshops as well as interview data, we analysed each start-up project’s bm to examine its inclusion of sustainability aspects on an element basis. again, differences in opinion were discussed among the authors until an agreement was reached. key examples shown in appendix 1 illustrate how the allocation of sustainability was applied to individual bm elements to ensure their intersubjective traceability. findings evidence for sustainability aspects in bm elements of early-phase start-up projects the analysis of sustainability aspects in bm elements was performed for the main bm dimensions of value proposition, value delivery, value creation and value capture (teece, 2010; remane et al., 2017). the results indicate that the value propositions included in five out of the six early-phase start-up projects show strong evidence of either ecological and/or social sustainability. for instance, freyzein formulated their intentions towards sustainability as follows: ‘one of our advantages is that starting now, we can ensure that every product we put on the market is fully integrated into this biological cycle.’ (freyzein, datapoint 1, translated) ‘our product for the customer should still offer him a good experience, that he can have fun outside and still act sustainably with it. and that was the plan all along.’ (freyzein, datapoint 2, translated) one interesting finding was that not all of the investigated early-phase start-up projects integrated sustainability aspects in their bms to address customers. the start-up projects alphawood, mady pure, freyzein and whoopedu predominantly showed strong indications that they used sustainability in the value-delivery dimension of their bms (compare with table 2, appendix 1). however, while alphawood, mady pure and freyzein displayed indicators of ecological sustainability, dignisens, smarterstudieren and whoopedu leaned more towards social sustainability. all start-up projects emphasised sustainability aspects in the value-creation dimension of their bms. because the start-up project teams had an interest in emphasising sustainability in value creation, they were driven to use local and/or sustainable resources, create local job opportunities and select partners that met sustainability standards. however, the exact focus of the sustainability in value creation in each start-up project varied. for instance, alphawood saw environmental sustainability as an ancillary benefit: ‘so it is a pleasant and very good environmental purpose. but it is not a main topic on which i want to focus.’ (alphawood, datapoint 1, translated) ‘i still have the same mindset, that my product embodies sustainability [...]’ (alphawood, datapoint 2, translated) while all start-up project teams mentioned aspects of sustainability regarding their resources, sustainability journal of business models (2021), vol. 9, no 2, pp. 22 43 28 aspects were not always emphasised in the value creation elements of each start-up project’s initial bm. for example, the start-up projects alphawood and mady pure did not include sustainability aspects in their activities, and smarterstudieren did not express any intentions regarding the selection of sustainable partners. while the start-up project teams predominantly reported that the inclusion of sustainability aspects in the bm led to higher overall costs, no evidence could be found that this had any significant impact on the principal cost structure of the investigated early-phase start-up projects. ‘it is designed to make a profit, quite clearly. otherwise we would probably not do it. it is also about making money with it, of course. secondly, sustainable in terms of ecological aspects or environmental protection etc. in any case.’ (mady pure, datapoint 2, translated) however, the early-phase start-up projects used sustainability aspects to increase revenue streams by justifying their higher sales prices. freyzein and whoopedu actively took advantage of their products’ sustainable properties to establish additional revenue streams, while alphawood acknowledged a reduction in revenues due to higher costs resulting from sustainable value creation processes, although they already used upcyclable materials (compare with appendix 2). furthermore, whoopedu was engaged in voluntary work while being committed to making donations; thus, they generated social value while increasing the start-up project’s overall costs. to summarize, table 2 provides an overview of the occurrence of sustainability issues in the bms of the investigated start-up projects. the allocation of sustainability aspects to bm elements only refers to aspects identified in the data. evidence for drivers leading to imprinting of sustainability aspects in bm elements of early-phase start-up projects based on the sustainability aspects observed in the bms of the investigated start-up projects, we identified specific drivers, determined whether they were internal or external and pinpointed the aspects of sustainability they addressed. furthermore, we assigned each driver an imprinting concept to identify which source (imprinter) or activity of imprinting (imprinting process) leads to a sustainability imprint in the investigated start-up project bms. the entrepreneur’s motivation to create social value (driver 1) was identified as a driver in all investigated start-up projects. moreover, the nascent entrepreneurs were motivated by different factors to contribute towards ecological sustainability, such as the desire to imprint ecological sustainability to increase revenues value proposition and value delivery value creation value capture vp cs ch cr kr ka kp c$ r$ alphawood ✔ ✔ ✔ ✘ ✔ ✘ ✔ ✘ ✘ dignisens ✔ ✘ ✘ ✘ ✔ ✔ ✔ ✘ ✔ mady pure ✔ ✔ ✔ ✘ ✔ ✘ ✔ ✘ ✘ freyzein ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ smarter studieren ✔ ✘ ✘ ✔ ✔ ✔ ✘ ✘ ✘ whoopedu ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✘ ✔ vp = value propositions; cs = customer segments; ch = channels; cr = customer relationships; kr = key resources; ka = key activities; kp = key partners; c$ = cost structure; r$ = revenue streams note: ✔ = aspect identified;✘ = no aspect identified; table 2: overview of sustainability aspects in bm elements of investigated early-phase start-up projects. journal of business models (2021), vol. 9, no 2, pp. 22 43 29 (driver 2) and reduce waste (driver 3), which were identified as common drivers that supported the imprinting of sustainability aspects in the bms of the start-up projects. table 3 lists all identified drivers that led to the imprinting of sustainability aspects in the bms of the start-up projects. furthermore, the drivers were sorted by the number of start-up projects in which they occurred and not on the basis of their absolute occurrence. this was done to avoid the influence of repeating answers of individual start-up projects on the obtained order (compare with table 4). driver no. identified driver main sustainability dimension in the bm (elkington, 1994) (imprinted entity) internal or external driver imprinting framework (simsek et al., 2015) level of analysis concept d1 entrepreneurial motivation to create social value social internal individual initial position holder and founder imprinter d2 ecological sustainability to increase revenues ecological/ economic internal adoption and structuring strategy selection imprinting process d3 entrepreneurial motivation to reduce waste for ecological sustainability ecological internal individual initial position holder and founder imprinter d4 entrepreneurial motivation towards ecological sustainability ecological internal individual initial position holder and founder imprinter d5 customers demand drives sustainability in bm ecological/social/ economic external environment economic and ecological conditions imprinter d6 demonstrating added value through sustainable partners ecological/social/ economic internal network alliance characteristics imprinter d7 inclusion of sustainability aspects to achieve differentiation from competitors ecological/social/ economic external adoption and structuring strategy selection imprinting process d8 ecological sustainability to differentiate from competitors ecological/ economic external adoption and structuring strategy selection imprinting process d9 enabling sustainable consumption through durable products ecological/ economic internal adoption and structuring strategy selection imprinting process d10 careful use of resources as entrepreneurial motivation ecological internal individual initial position holder and founder imprinter d11 local value creation activities to create ecological sustainability ecological internal individual initial position holder and founder imprinter d12 sustainability to communicate additional value ecological/social/ economic internal adoption and structuring strategy selection imprinting process d13 reputation drives ecological sustainability ecological internal selection and synthesis identity formation imprinting process table 3: identified drivers leading to imprinting of social, ecological or economic sustainability aspects in bms of investigated start-up projects. (continued) journal of business models (2021), vol. 9, no 2, pp. 22 43 30 in general, the identified drivers in table 3 illustrate that the personal beliefs of initial position holders form the main factor for imprinting ecological and social sustainability in the bms of investigated start-up projects. table 4 shows that particularly the entrepreneurial motivation to create social value was the most frequently mentioned driver for imprinting sustainability in the bms. this driver was predominantly present in the start-up projects created by dignisens and smarterstudieren, indicating that these start-up projects were strongly motivated to promote social sustainability. ‘the basic idea was to be sustainable. so the first idea was to help immigrants in a certain way. then we sort of switched to a not-so-sustainable bm, where we said: “hey let’s start with all kids and try to make as much profit as we can. and then later on we switched back to sustainability, where we said: “let’s target both: mainstream kids and let’s target refugee kids as well and put this fund that we are generating with this not so sustainable bm to this sustainable bm.”’ (whoopedu, datapoint 1, adjusted for readability) our findings also reveal that several respondents noted that environmental sustainability aspects were not included in the bm out of altruism but for strategic reasons, such as to generate additional revenues or to differentiate themselves from competitors. ‘so if i have two products and they are actually quite identical, meet the same needs and one of them is sustainable and costs a similar amount, then that is always a selling point.’ (mady pure, datapoint 2, translated) the development of durable products was also introduced by dignisens for strategic reasons because they changed their revenue mechanics from a one-time-sale to a leasing model, because it was more profitable for them to provide durable products. this is an example of an imprinting process in which the inclusion of sustainability was seen as a strategy selection. table 4 shows how often the identified drivers occurred in the respective start-up projects, sorted according to their frequency. discussion this research was conducted to explore the inclusion of sustainability aspects in the different bm elements of early-phase start-up projects (stubbs and cocklin, 2008; rauter et al., 2017; davies and chambers, 2018; laasch, 2018; voinea et al., 2019). we applied the imprinting theory (simsek et al., 2015) as well as the bm concept (teece, 2010) to identify internal and external drivers that led to the inclusion of sustainability aspects in the bms of the investigated start-up projects. driver d1 d2 d3 d4 d5 d6 d7 d8 d9 d10 d11 d12 d13 alphawood 1 2 2 1 x 1 1 1 2 3 2 1 1 dignisens 10 1 3 2 x x x x 2 x x x x mady pure 1 3 x x 3 x x x x x x x 1 freyzein 1 2 6 2 1 1 4 3 x 1 1 x x smarter studieren 5 x x x x x x x x x x x x whoopedu 1 x x x 1 1 x x x x x 2 x occurrence in start-up projects 6 4 3 3 3 3 2 2 2 2 2 2 2 absolute occurrence 19 8 11 5 5 3 5 4 4 4 3 3 2 note: identified drivers are sorted by the number of start-up projects in which they occurred. table 4: distribution of identified drivers for imprinting sustainability aspects in the bms of the start-up projects. journal of business models (2021), vol. 9, no 2, pp. 22 43 31 sustainability aspects in bm elements of start-up projects first, the bms of the investigated start-up projects were clearly centred around sustainable value propositions, as illustrated in table 2. while alphawood, mady pure and freyzein pursued more ecologically sustainable value propositions, dignisens, smarterstudieren and whoopedu placed a focus on creating social sustainability. the start-up projects alphawood, dignisens and mady pure viewed aspects of sustainability in their bms more as ancillary benefits than as main objectives. this is underlined by mady pure’s initial intention to address customers who were aware of sustainability; this idea was dropped later on without changing the remaining elements in the bm (compare with appendix 2). alphawood, mady pure and dignisens prioritised the economic dimension as higher than the social and ecological dimensions, which is consistent with the results of the empirical study by divito and bohnsack (2017), who uncovered prioritisation logics with regard to the entrepreneurial and sustainability orientation. the prioritisation regarding the economic dimension also corresponds to the results of voinea et al. (2019) who argued that short-term economic survival is more urgent for start-ups than for established organisations, indicating why the direct economic benefit is crucial for their organisational survival. second, in terms of sustainability in value creation, aspects of social sustainability appeared in the activities of all start-up projects (e.g. through the deliberate creation of local jobs, as in the cases of alphawood and dignisens). in addition to the creation of local jobs, the start-up projects also indicated their intentions to keep employee fluctuation rates low (voinea et al., 2019). the ways in which the start-up projects selected partners provided evidence for ecological sustainability in value creation (as in the cases of dignisens, mady pure and freyzein), as did their use of more sustainable resources (e.g. alphawood, mady pure). third, aspects of sustainability in capturing value were least pronounced in the investigated start-up projects (compare with table 2). however, aspects of sustainability were used to justify the higher sales prices established by whoopedu and freyzein, while reduced revenues as a trade-off for a more sustainable value proposition were acknowledged by alphawood. furthermore, whoopedu contributed towards social sustainability by donating a share of their revenues. fourth, like the results presented by govindaraj (2003), our results show that several bm elements were interlinked and oriented towards delivering value to customers in the investigated start-up projects. nevertheless, the type and degree of sustainability differed in each project; this meant that not every bm managed to present a balance of all three values (economic, environmental and social) (stubbs and cocklin, 2008; divito and bohnsack, 2017; fischer et al., 2020). fragmented aspects of sustainability in the bms were observed, especially regarding the dimensions of value delivery as well as the activities and partners for value creation (compare with table 2, appendix 1 and appendix 2). however, aspects of ecological sustainability seemed more pronounced in the start-up projects that offered physical products, while social sustainability seemed more pronounced in start-up projects that offered nonphysical products. drivers for imprinting sustainability-aspects in bms of early-phase start-up projects our findings reveal that the drivers for imprinting of sustainability aspects in the bms are heterogeneous, even in our limited sample of six start-up projects. based on our data, we matched the drivers according to identified aspects of sustainability as well as respective concepts of imprinting (imprinter or imprinting process – compare with simsek et al. (2015)). as indicated in table 3 and 4, entrepreneurial motivation, which corresponds to the imprinting process, was identified as the most prominent driver for imprinting aspects of sustainability and, in particular, social sustainability. this finding supports the insights provided by rauter et al. (2017) and voinea et al. (2019), who also noted that the personal beliefs and factors motivating entrepreneurs drove them to include sustainability aspects in their bms (rauter et al., 2017; voinea et al., 2019). interestingly, while entrepreneurial motivation as a driver was mentioned by every one of the six start-up project teams, the specific form of imprinted social value largely differed. while some start-up projects like whoopedu took a multi-faceted approach to generate journal of business models (2021), vol. 9, no 2, pp. 22 43 32 social value, alphawood or dignisens contributed to social value more as an ancillary benefit. we identified various forms of drivers in our data that resulted in ecological sustainability being imprinted in the investigated bms. again, entrepreneurial motivation was identified as the main respective driver. it was interesting to note that, in addition to purely altruistic drivers, rather strategic drivers were also identified. this refers to the imprinting process, in which the inclusion of sustainability is seen as a strategy selection. the entrepreneurs’ specific reasons ranged from an interest in increasing revenues to distinguishing themselves from competitors. thereby, sustainability value was used as an add-on to the general product features and sometimes even as a unique selling proposition for a specific customer segment. thus, sustainability value was directly connected to the commercial orientation in the bms of the respective start-up projects in our study; this finding is also reflected in the findings of hahn et al. (2019). financial advantages serve as continuously motivating factors for imprinting sustainability in the bms from the earliest stage in the bm development, as a need exists to achieve competitive strength and reputation. this result is similar to one presented by voinea et al. (2019). furthermore, the data revealed that most of the nascent entrepreneurs favoured imprinting of ecological sustainability aspects, although the literature to date has placed a strong emphasis on balancing all three dimensions of sustainability (economic, environmental and social) rather than treating them as self-contained components (divito and bohnsack, 2017; fischer et al., 2020). one reason for these findings could be that sustainability-oriented start-up projects can only carry out a finite number of activities due to their distinct scarcity of resources and available capabilities (austin et al., 2006; moizer and tracey, 2010). the nascent entrepreneurs of the investigated start-up projects strove to imprint sustainability and consequentially accepted the lower profits and growth that resulted in greater sustainability (hahn et al., 2010) or reduced their support of sustainability as they acquired more business knowledge (kuckertz and wagner, 2010). surprisingly, the nascent entrepreneurs of the investigated startup projects did not consider the start-up accelerator programme gruendungsgarage as an environmental imprinting-source that influenced the inclusion of sustainability in their bms. by highlighting the connections between drivers and specific aspects of sustainability in the bms of these start-up projects, we were able to add to the existing literature on entrepreneurial motivation towards sustainability (rauter et al., 2017; voinea et al., 2019). the focus on the early phase of sustainable bm development in start-up projects is of substantial importance, since the imprinters’ characteristics as well as the imprinting process potentially highly influence the bm elements (simsek et al., 2015). once imprinted, the characteristics of bms might become resistant to change (gilbert, 2005; tripsas and gavetti, 2000). consequently, it is of particular interest to acquire in-depth knowledge regarding sustainability aspects imprinted in bms. using the data from an academic start-up accelerator programme, we were able to add to the knowledge collected by voinea et al. (2019) about how entrepreneurs in early-phase startup projects imprint aspects of sustainability into their bms. conclusions our exploratory study provided valuable insights into the bms of early-phase start-up projects that took part in the accelerator programme gruendungsgarage. in this context, we shed light on early development phases of bms by illustrating (1) how sustainability was allocated to individual bm elements and (2) what drives the inclusion of sustainability in the bm. although all cases of our sample exhibit a sustainable value proposition, the types and degrees of sustainability in their bms differed, explaining why most of the start-up projects did not holistically integrate the sustainability-related values. this study, moreover, reveals the drivers that encouraged nascent entrepreneurs within early-phase startup projects to include sustainability aspects in their bms from an imprinting theory perspective. the characteristics of initial position holders within the investigated start-up projects strongly affected the inclusion of ecological and social sustainability in their bms during the imprint genesis. it was interesting to note that, in addition to purely altruistic drivers, rather strategic drivers could also be identified that led to the inclusion journal of business models (2021), vol. 9, no 2, pp. 22 43 33 of sustainability aspects in the start-up projects bms. this suggests that the inclusion of sustainability aspects in the bms of the investigated start-up projects was influenced by a combination of personal and financial intentions. naturally, our study has several limitations which, in turn, offers opportunities for future research: first, data were included from six cases of start-up projects that were involved in an academic start-up accelerator programme for a limited period of time. researchers could address these limitations by (1) performing similar research in other academic start-up accelerator programmes as well as (2) conducting a long-term, longitudinal study of sustainable start-ups. second, this study did not take into consideration contextualised data that refer to future industries, target markets, regulations, or potential investors, all of which can influence the imprinting of sustainability aspects in the start-ups’ longer-term bms. another recommendation for further research is to extend the scope of the study by analyzing key stakeholders and customers and to collect secondary data about the market in which the respective start-ups are represented. third, the qualitative nature of our research and the limited sample size do not allow us to generalize the results. in subsequent studies, this issue could be addressed by triangulating the qualitative data using questionnaires or secondary company data, if already available. fourth, the initial position holder and founder was predominantly identified as a source of imprinting, whereas other imprinters were clearly underrepresented. further research could address this phenomenon and investigate whether this is a finding that can be confirmed in other studies as well. in this way, our understanding of the development of sustainable start-ups and the subsequent inclusion of sustainability aspects in their bms could be improved. journal of business models (2021), vol. 9, no 2, pp. 22 43 34 references alakent, e., goktan, m.s. and khoury, t.a. (2020), “is venture capital socially responsible? exploring the imprinting effect of vc funding on csr practices”, journal of business venturing, vol. 35 no. 3, 106005. austin, j., stevenson, h. and wei-skillern, j. (2006), “social and commercial entrepreneurship: same, different, or both?”, entrepreneurship theory and practice, vol. 30 no. 1, pp. 1–22. beckman, c.m. and burton, m.d. (2008), “founding the future: path dependence in the evolution of top management teams from founding to ipo”, organization science, vol. 19 no. 1, pp. 3–24. bertels, h.m., koen, p.a. and elsum, i. (2015), “business models outside the core: lessons learned from success and failure”, research-technology management, vol. 58 no. 2, pp. 20–29. bocken, n. (2015), “sustainable venture capital – catalyst for sustainable start-up success?”, journal of cleaner production, vol. 108, pp. 647–658. bocken, n., short, s.w., rana, p. and evans, s. (2014), “a literature and practice review to develop sustainable business model archetypes”, journal of cleaner production, vol. 65, pp. 42–56. boons, f. and luedeke-freund, f. (2013), “business models for sustainable innovation: state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. boons, f., montalvo, c., quist, j. and wagner, m. (2013), “sustainable innovation, business models and economic performance: an overview”, journal of cleaner production, vol. 45, pp. 1–8. chesbrough, h. and rosenbloom, r.s. (2002), “the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies”, industrial and corporate change, vol. 11 no. 3, pp. 529–555. dacin, m.t., dacin, p.a. and tracey, p. (2011), “social entrepreneurship: a critique and future directions”, organization science, vol. 22 no. 5, pp. 1203–1213. davies, i.a. and chambers, l. (2018), “integrating hybridity and business model theory in sustainable entrepreneurship”, journal of cleaner production, vol. 177, pp. 378–386. denzin, n.k. and lincoln, y.s. (2005), “paradigms and perspectives in contention”, in denzin, n.k. and lincoln, y.s. (eds.), the sage handbook of qualitative research, 3. ed., sage publications, thousand oaks, ca, usa. di domenico, m.l., haugh, h. and tracey, p. (2010), “social bricolage: theorizing social value creation in social enterprises”, entrepreneurship theory and practice, vol. 34 no. 4, pp. 681–703. divito, l. and bohnsack, r. (2017), “entrepreneurial orientation and its effect on sustainability decision tradeoffs: the case of sustainable fashion firms”, journal of business venturing, vol. 32 no. 5, pp. 569–587. eisenhardt, k.m. (1989), “building theories from case study research”, academy of management review, vol. 14 no. 4, pp. 532–550. elkington, j. (1994), “towards the sustainable corporation: win-win-win business strategies for sustainable development”, california management review, vol. 36 no. 2, pp. 90–100. journal of business models (2021), vol. 9, no 2, pp. 22 43 35 estrin, s., mickiewicz, t. and stephan, u. (2016), “human capital in social and commercial entrepreneurship”, journal of business venturing, vol. 31 no. 4, pp. 449–467. fauchart, e. and gruber, m. (2011), “darwinians, communitarians, and missionaries: the role of founder identity in entrepreneurship”, academy of management journal, vol. 54 no. 5, pp. 935–957. fischer, d., brettel, m. and mauer, r. (2020), “the three dimensions of sustainability: a delicate balancing act for entrepreneurs made more complex by stakeholder expectations”, journal of business ethics, vol. 163, pp. 87–106. gilbert, c.g. (2005), “unbundling the structure of inertia: resource versus routine rigidity”, academy of management journal, vol. 48 no. 5, pp. 741–763. gioia, d.a., corley, k.g. and hamilton, a.l. (2013), “seeking qualitative rigor in inductive research”, organizational research methods, vol. 16 no. 1, pp. 15–31. gioia, d.a., price, k.n., hamilton, a.l. and thomas, j.b. (2010), “forging an identity: an insider-outsider study of processes involved in the formation of organizational identity”, administrative science quarterly, vol. 55 no. 1, pp. 1–46. glaeser, j. and laudel, g. (2010), experteninterviews und qualitative inhaltsanalyse als instrumente rekonstruierender untersuchungen, lehrbuch, 4. auflage, vs verlag, wiesbaden. govindaraj, t. (2003), “social and environmental perspectives in the design of engineering and service systems”, international journal of engineering education, vol. 19 no. 1, pp. 16–24. hahn, d., minola, t. and eddleston, k.a. (2019), “how do scientists contribute to the performance of innovative startups? an imprinting perspective on open innovation”, journal of management studies, vol. 56 no. 5, pp. 895–928. hahn, t., figge, f., pinkse, j. and preuss, l. (2010), “trade-offs in corporate sustainability: you can’t have your cake and eat it”, business strategy and the environment, vol. 19 no. 4, pp. 217–229. hall, j.k., daneke, g.a. and lenox, m.j. (2010), “sustainable development and entrepreneurship: past contributions and future directions”, journal of business venturing, vol. 25 no. 5, pp. 439–448. helfat, c.e. and lieberman, m.b. (2002), “the birth of capabilities: market entry and the importance of pre-history”, industrial and corporate change, vol. 11 no. 4, pp. 725–760. johnson, v. (2007), “what is organizational imprinting? cultural entrepreneurship in the founding of the paris opera”, american journal of sociology, vol. 113 no. 1, pp. 97–127. judge, w.q., hu, h.w., gabrielsson, j., talaulicar, t., witt, m.a., zattoni, a., lópez-iturriaga, f., chen, j.j., shukla, d., quttainah, m., adegbite, e., luis rivas, j. and kibler, b. (2015), “configurations of capacity for change in entrepreneurial threshold firms: imprinting and strategic choice perspectives”, journal of management studies, vol. 52 no. 4, pp. 506–530. kiron, d., kruschwitz, n., haanæs, k., reeves, m. and goh, e. (2013), “the innovation bottom line”, mit sloan management review, research report winter 2013. journal of business models (2021), vol. 9, no 2, pp. 22 43 36 kuckertz, a. and wagner, m. (2010), “the influence of sustainability orientation on entrepreneurial intentions investigating the role of business experience”, journal of business venturing, vol. 25 no. 5, pp. 524–539. laasch, o. (2018), “beyond the purely commercial business model: organizational value logics and the heterogeneity of sustainability business models”, long range planning, vol. 51 no. 1, pp. 158–183. leung, a., foo, m.d. and chaturvedi, s. (2013), “imprinting effects of founding core teams on hr values in new ventures”, entrepreneurship theory and practice, vol. 37 no. 1, pp. 87–106. luedeke-freund, f. and dembek, k. (2017), “sustainable business model research and practice: emerging field or passing fancy?”, journal of cleaner production, vol. 168, pp. 1668–1678. mair, j. and martí, i. (2006), “social entrepreneurship research: a source of explanation, prediction, and delight”, journal of world business, vol. 41 no. 1, pp. 36–44. marquis, c. (2003), “the pressure of the past: network imprinting in intercorporate communities”, administrative science quarterly, vol. 48 no. 4, pp. 655–689. marquis, c. and tilcsik, a. (2013), “imprinting: toward a multilevel theory”, academy of management annals, vol. 7 no. 1, pp. 195–245. mayring, p. (2010), “qualitative inhaltsanalyse”, in mey, g. and mruck, k. (eds.), handbuch qualitative forschung in der psychologie, 1. auflage, vs verlag für sozialwissenschaften, wiesbaden, pp. 601–613. milanov, h. and shepherd, d.a. (2013), “the importance of the first relationship: the ongoing influence of initial network on future status”, strategic management journal, vol. 34 no. 6, pp. 727–750. moizer, j. and tracey, p. (2010), “strategy making in social enterprise: the role of resource allocation and its effects on organizational sustainability”, systems research and behavioral science, vol. 27 no. 3, pp. 252–266. mueller, c., poandl, e. and glinik, m. (2019), “developing a viable business model for start-ups at the gruendungsgarage”, journal of business models, vol. 7 no. 3, pp. 80–89. muñoz, p., cacciotti, g. and cohen, b. (2018), “the double-edged sword of purpose-driven behavior in sustainable venturing”, journal of business venturing, vol. 33 no. 2, pp. 149–178. murphy, p.j. and coombes, s.m. (2009), “a model of social entrepreneurial discovery”, journal of business ethics, vol. 87 no. 3, pp. 325–336. nelson, t. (2003), “the persistence of founder influence: management, ownership, and performance effects at initial public offering”, strategic management journal, vol. 24 no. 8, pp. 707–724. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, john wiley & sons, hoboken, nj, usa. patton, m.q. (2002), qualitative research & evaluation methods, 3. ed., sage publications, thousand oaks, ca, usa. journal of business models (2021), vol. 9, no 2, pp. 22 43 37 rauter, r., jonker, j. and baumgartner, r.j. (2017), “going one’s own way: drivers in developing business models for sustainability”, journal of cleaner production, vol. 140, pp. 144–154. remane, g., hanelt, a., tesch, j.f. and kolbe, l.m. (2017), “the business model pattern database a tool for systematic business model innovation”, international journal of innovation management, vol. 21 no. 01, 1750004. retolaza, j.l., ruiz, m. and san-jose, l. (2009), “csr in business start-ups: an application method for stakeholder engagement”, corporate social responsibility and environmental management, vol. 16 no. 6, pp. 324–336. schaltegger, s., freund, f.l. and hansen, e.g. (2012), “business cases for sustainability: the role of business model innovation for corporate sustainability”, international journal of innovation and sustainable development, vol. 6 no. 2, p. 95. schaltegger, s., hansen, e.g. and luedeke-freund, f. (2016), “business models for sustainability”, organization & environment, vol. 29 no. 1, pp. 3–10. seelos, c. (2014), “theorising and strategising with models: generative models of social enterprises”, international journal of entrepreneurial venturing, vol. 6 no. 1, pp. 6–21. sher, a., abbas, a., mazhar, s., azadi, h. and lin, g. (2020), “fostering sustainable ventures: drivers of sustainable start-up intentions among aspiring entrepreneurs in pakistan”, journal of cleaner production, vol. 262, p. 121269. siggelkow, n. (2002), “evolution toward fit”, administrative science quarterly, vol. 47 no. 1, pp. 125–159. simsek, z., fox, b.c. and heavey, c. (2015), ““what’s past is prologue”: a framework, review, and future directions for organizational research on imprinting”, journal of management, vol. 41 no. 1, pp. 288–317. snihur, y. and zott, c. (2020), “the genesis and metamorphosis of novelty imprints: how business model innovation emerges in young ventures”, academy of management journal, vol. 63 no. 2, pp. 554–583. stevens, r., moray, n. and bruneel, j. (2015), “the social and economic mission of social enterprises: dimensions, measurement, validation, and relation”, entrepreneurship theory and practice, vol. 39 no. 5, pp. 1051–1082. stinchcombe, a.l. (1965), “social structure and organizations”, in march, j.g. (ed.), handbook of organizations, randmcnally, chicago, pp. 142–193. stubbs, w. and cocklin, c. (2008), “conceptualizing a “sustainability business model””, organization & environment, vol. 21 no. 2, pp. 103–127. taeuscher, k. and abdelkafi, n. (2018), “scalability and robustness of business models for sustainability: a simulation experiment”, journal of cleaner production, vol. 170, pp. 654–664. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43 no. 2-3, pp. 172–194. tripsas, m. and gavetti, g. (2000), “capabilities, cognition, and inertia: evidence from digital imaging”, strategic management journal, vol. 21 no. 10-11, pp. 1147–1161. journal of business models (2021), vol. 9, no 2, pp. 22 43 38 upward, a. and jones, p. (2016), “an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science”, organization & environment, vol. 29 no. 1, pp. 97–123. van driel, h. and dolfsma, w. (2009), “path dependence, initial conditions, and routines in organizations: the toyota production system re-examined”, journal of organizational change management, vol. 22 no. 1, pp. 49–72. voinea, c.l., logger, m., rauf, f. and roijakkers, n. (2019), “drivers for sustainable business models in start-ups: multiple case studies”, sustainability, vol. 11 no. 24, 6884. vorbach, s. (2017), “lecturing entrepreneurship at graz university of technology. the case of gruendungsgarage”, paper presented at the 20th international conference on interactive collaborative learning (icl), 27-29 september 2017, budapest, hungary. wells, p. (2016), “economies of scale versus small is beautiful”, organization & environment, vol. 29 no. 1, pp. 36–52. wilson, f. and post, j.e. (2013), “business models for people, planet (& profits): exploring the phenomena of social business, a market-based approach to social value creation”, small business economics, vol. 40 no. 3, pp. 715–737. yin, r.k. (2009), case study research: design and methods, applied social research methods series, vol. 5, sage publications, thousand oaks, ca, usa. journal of business models (2021), vol. 9, no 2, pp. 22 43 39 appendix criteria key examples for the allocation of sustainability aspects in bm elements of investigated start-up projects vp + value delivery vp freyzein: ‘we want to make outdoor sportswear, but also want our clothing to be sustainable. our jacket can be reintegrated into the biological cycle, i.e. if you lose a piece of our jacket in nature during a tour, it will rot at some point of time. that is what differentiates our product from all others.’ cs mady pure: ‘our target customers are interested in sustainability and consist of vegans, vegetarians, environmentally conscious people and owners of dogs with allergies who are looking for alternatives on the market.’ cr smarterstudieren: ‘we want to build a long-term community of smart students who help each other. students who learn and implement our methods should support classmates who do not have the financial resources to buy our products. it is important to us that students motivate and support each other so they can succeed together. in the end, everyone should benefit from it.’ ch alphawood: ‘we don’t use print media and don’t make personal customer visits, where we have to travel across the whole country, because we also want to conserve resources. i use existing sales channels to attract b2b customers.’ vcr kr dignisens: ‘sustainability means that a product is manufactured in a resource-saving manner.’ ka freyzein: ‘we decided to do research on the material to stand out from the competitors. the special thing about it is the cradle-to-cradle approach and the biodegradability of the product. at freyzein, we try to add functionality but still preserve the naturalness of the product.’ kp whoopedu: ‘we started our application because of social sustainability and in the end the whole start-up has a social impact. basically, our whole bm is around partners because without our partners we cannot do anything. partners are a pillar or the centre of our entire bm.’ vca c$ no sustainability aspects identified in this bm element of the investigated start-up projects. r$ freyzein: ‘a jacket is a durable product, which i do not want to send back after one year and get a new one. in the circular economy, we talk about leasing, second-hand market, etc. here, the business approach and the revenue mechanism are different.’ appendix 1: key examples for the allocation of sustainability aspects in bm elements of investigated start-up projects. journal of business models (2021), vol. 9, no 2, pp. 22 43 40 value proposition and value delivery value creation value capture alphawood alphawood uses ‘waste materials’ as a basic resource but does not explicitly emphasise sustainability aspects in its entire bm (a0). alphawood includes ecological sustainability in its value proposition by communicating an added value through the use of waste materials (a1). alphawood has a strong commitment towards local value creation and local sourcing (a1, a2). in addition, alphawood contributes to social responsibility by placing a focus on local production to create and secure local jobs (a1). further, procuring local resources was also identified as an influence on sustainability in the bm. a precondition for all initiatives towards sustainability is the economic sustainability of the venture (a1, a2). respondents mentioned the effects of sustainability on alphawood’s pricing (a1, a2). sustainability led to higher costs for resources and, subsequently, to lower profit margins when initially launching the product on the market (a1, a2). dignisens by using a clothing sensor, the number of nightly routine checks by nursing staff who care for bedridden people can be reduced. this potentially leads to an increase in the labour productivity of the nursing staff, as well as an improvement in life quality of the affected person (b1). dignisens offers a sustainable product but sees sustainability more as an add-on to its (main) value proposition (b2). dignisens refers to social responsibility in terms of human resources in order to offer secure jobs (b1, b2). dignisens emphasises local production and local sourcing. in that regard, the reasons are the availability of local supply chain partners and the perceived threat of patent theft when outsourcing to manufacturers abroad (b1, b2). dignisens expects that their customers (hospitals and nursing homes) will not necessarily pay extra for a sustainable product. therefore, sustainability is more of an ancillary benefit of the (main) value proposition (b1, b2). dignisens follows a durable product design using recyclable materials. this decision provides benefits in conjunction with the introduction of a leasing model (b0, b1, b2). mady pure mady pure initially addressed ecologically aware dog owners who were looking for a long-term dietary solution for dogs with allergies (c0). when mady pure entered the start-up accelerator programme, they considered the ecological sustainability of the developed product to be an additional value that could be offered to ecologically aware customers (c1). mady pure strived for transparency to communicate sustainability as added value to customers. (c1). at a later stage of bm development, the focus on targeting owners of dogs with allergies was emphasised while the main focus on ecologically aware customers was dropped (c2). by the end of the start-up accelerator programme, sustainability aspects were seen as an ancillary benefit of providing dog food for dogs with allergies (c2). manufacturing partners enable the creation of a sustainable value proposition mainly by supplying insect protein (c1). the production of insect-protein is generally more efficient than animal-protein and allows for upcycling of organic waste (c1, c2). although attempts are made to use local suppliers, the main criterion for supplier-selection is economic sustainability. mady pure highlighted the need to increase the transparency of the operations along the start-up’s supply chain (c1) as well as lean operating principles (c2). the decision to add sustainability aspects, such as sustainable packaging, is heavily influenced by the respective economic feasibility (c2). mady pure mentioned that the communication of sustainability is to justify the higher sale prices of their products (c1, c2). mady pure emphasises that its bm needs to be economically sustainable above all (c2). appendix 2: sustainability aspects in bm elements in the investigated start-up projects. journal of business models (2021), vol. 9, no 2, pp. 22 43 41 value proposition and value delivery value creation value capture freyzein freyzein produces textile products for the outdoor and sports sector (d0, d1), targeting sustainability aware customers. according to the cradle-to-cradle principle, their textiles can be repeatedly processed into new products and are biodegradable (d0). furthermore, the textiles produced can be mended using a proprietary repair-concept that increases longevity, addresses individual customer wishes and increases overall customer value (d1). sustainable product properties are actively communicated to customers (d2). r&d, contract manufacturing and branding are major parts of freyzein’s value creation (d1). freyzein emphasises control and transparency (d1) of partners. they seek to work with partners with similar mindsets regarding ecological issues, such as waste water management and the use of renewable energy (d2). freyzein relies on renewable resources and waste products for their products. in addition, freyzein works on the development of a biodegradable proprietary material (d2). in addition to research grants and conventional product sales, freyzein generates continuous revenue by offering leasing and subscription models. furthermore, freyzein offers a repair model and re-sells refurbished products (d1, d2). freyzein identifies r&d, prototyping and design as the most important cost drivers (d1, d2). smarter studieren smarterstudieren aims to help as many students as possible to achieve the best results in their studies. their approach does not involve expensive tutoring, but instead mediation of the correct mindset and the improvement of the emotional intelligence, time management and approved learning methods (e0, e1). for this purpose, smarterstudieren offers digital information products as well as personal coaching (e0-e2) to provide students with tools and methods that enable them to ‘study smarter instead harder’. due to their pedagogic concept, the level of frustration of students drops and the graduation rate increases (e0-e2). the development of pedagogic concepts for personality development (e0, e1) and the establishment of a community (e1, e2) are the main activities regarding the value creation. the community contributes to increase the social added value of the coaching and, thus, enables a large number of students to study more successfully (e2). smarterstudieren generates revenues by selling e-books, video lessons and podcasts via their online platform. their digital information products are usable for every german-speaking student (e0, e1), which enables the scalability of their product at a reasonable price. furthermore, they offer paid individual and group coaching, whereby smarterstudieren specifically addresses problems expressed by the respective participants (e1, e2). whoopedu whoopedu offers a mobile one-stop shop application for gamified education, providing value for children as well as parents. whoopedu improves its educational value through analytics (f1). customer groups are people from the balkan as well as refugees in transit who are not able to access conventional education (f0, f1). the international market is addressed using a premium-version of the application (f0, f1). customers are reached over whoopedu’s marketing channels (e.g. social media) as well as their sales channels (f1, f2). whoopedu emphasises partnerships in value creation to keep costs for creating value at a minimum (f1). the key partners are willing to invest in a company with a social impact and need to be sustainable themselves or at least promote sustainability (f1, f2). whoopedu’s resources are mainly invested in personnel, such as developers, designers, animators and marketers (f1). whoopedu uses a freemium subscription model (f0). in addition, revenue streams are generated through advertisements, product placements, merchandise as well as funding from ngos or companies with a csr focus. however, premium subscribers account for the main part of their revenues (f1). whoopedu redirects a percentage of all sales made on the international market into financial aid for education in underdeveloped countries and refugees (f1). whoopedu’s cost structure includes costs for legalisation of business, marketing, app store fees, merchandise, content translation as well as donations (f1). appendix 2: sustainability aspects in bm elements of investigated start-up projects. (continued) journal of business models (2021), vol. 9, no 2, pp. 22 43 42 martin glinik is a research assistant at the institute of general management and organisation at the graz university of technology. he is a ph.d. candidate with a master’s degree in business administration. his research interests focus on the fields of entrepreneurship, business models and sustainability. in his dissertation, he investigates sustainabilityoriented business models of start-ups. martin glinik works in the entrepreneurial university project, with the aim of inspiring and embedding the entrepreneurial spirit in the minds and hearts of students and scientific employees of graz university of technology. in addition, he is part of the gruendungsgarage, the academic start-up accelerator in styria, austria and has been able to support more than 50 start-ups in the (pre-) seed phase in the course of his consulting activities. michael rachinger is a ph.d. candidate in industrial management. his research interests are business models, business ecosystems, and innovation. currently, he is a research and teaching assistant at the institute of general management and organization at the university of technology in graz. also, he teaches management classes at the university of applied sciences campus02 in graz and is a trainer for innovation. before, he worked in the automotive industry and completed two master’s degrees in engineering. about the authors journal of business models (2021), vol. 9, no 2, pp. 22 43 43 christiana ropposch is assistant professor and head of the business model management working group at the institute of general management and organisation at the graz university of technology. she is currently working on her habitation with the topic of technology-oriented business model management. her focus is on business model development and business model innovation, mainly in the context of digitalization. christiana and her colleagues run a business model lab in which they advise and train companies on business model development and business model innovation. florian ratz is a research and teaching assistant at the institute of general management and organisation at the graz university of technology. he graduated from the master’s degree programme mechanical engineering and business economics at the graz university of technology and is currently attending the doctoral school techno-economics. in his dissertation, he investigates technology-based business models in the strongly evolving topic of sustainable mobility of persons and goods. romana rauter is assistant professor at university of graz, austria. her research and teaching interests include sustainability innovation, new and sustainable business models as well as strategic sustainability management. romana has (co)-authored numerous scientific publications in these fields, and recently became co-chair of the new business models conferences board. about the authors 1 journal of business models (2022), vol. 10, no. 1, pp. 1-10 intra-organizational business model implications of inter-organizational collaboration casper g. holm1, louise b. kringelum2 abstract this short paper explores the intra-organizational business model implications of organizations as they enter different inter-organizational collaborations, as exemplified by clusters, networks, and ecosystems. the aim is to show, conceptually, how organizations must consider the degree of interconnection and the value co-created with other actors through inter-organizational collaboration, as these affect the value creation, value configuration and value capture of their existing business model(s). keywords: business models; inter-organizational collaboration; ecosystem; network; cluster please cite this paper as: holm, c. g. and kringelum, l. b. (2022), intra-organizational business model implications of interorganizational collaboration, vol. 10, no. 1, pp. 1-10 1 research assistant, caspergh@business.aau.dk, aalborg university business school – strategic management lab 2 associate professor, kringelum@business.aau.dk aalborg university business school – strategic management lab issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6827 https://doi.org/10.54337/jbm.v10i1.6827 journal of business models (2022), vol. 10, no. 1, pp. 1-10 22 introduction taking part in an inter-organizational collaboration— such as a cluster, network or ecosystem—can create a competitive advantage for the involved actors (håkansson and ford, 2002; adner, 2017). however, the process of changing relationships within and across the business context is unpredictable, and requires organizational openness to increase the degree of relational dependency. the lack of control and limited possibility of predicting outcomes of collaboration is a managerial challenge (wilkinson and young, 2002), as strategic decisions must be made regarding an unchartered potential while sustaining and contemplating potential changes to the existing business model; this poses a challenge resembling the management of ambidexterity. thus, inter-organizational collaboration can be challenging, and can require changes to both business practices and different parts of the existing business model(s). the aim of this paper is to illustrate aspects of interorganizational collaboration that affect the decisionmaking process of practitioners who are engaging in or orchestrating different types of collaboration. in addition, an initial theoretical conceptualization is introduced to bridge the fields of business models and organizational collaboration. based on a conceptual discussion, this is explored by illustrating the business model implications that might occur when organizations further their development from being a part of a cluster, to becoming part of a network or an ecosystem. in doing so, we explore both potential considerations for decision-making practitioners and the theoretical development and implications of collaborative business models. the study of changing relationships among organizations is longstanding and founded in (amongst others) the discussion of networks and strong and weak ties which granovetter (1973) set forward. as digital technologies in both production and communication continue to create new possibilities for (inter)organizational interaction, the possibilities for creating strong ties have never been greater. ties come in many forms, from bilateral strategic alliances, to clusters, networks, and ecosystems that all represent ways of creating value via ties to other organizations. in recent years, the concept of ecosystems has gained especial prominence in business research (jacobides et al., 2018). ecosystems are centered on a joint value proposition created throughout a structure of interdependent activities (ritala et al., 2013). however, developing a new ecosystem is not easy and therefore not for all—especially because the creation of a new value proposition potentially challenges organizations’ existing trajectories (ritala et al., 2017). while existing research has focused on defining what business ecosystems are, when and why they emerge, and how they operate (jacobides et al., 2018), little attention has been paid to the organizational and business model implications of entering into a network or ecosystem constellation in which new collaborative business models are established (kringelum, 2017). the following review introduces existing literature on clusters, networks, and ecosystems, to conceptually identify the business model implications of entering into these constellations. based on the review, the co-existence of inter-organizational relationships is discussed from the perspectives of value creation, value capture, and value configuration, to cover the broad perspectives regarding business model implications. based on the definition of lepak et al. (2007, p. 183), we define value creation as being dependent on the subjective realization of value by the customer in question, which reflects a willingness to engage in transactions with the organization. value capture concerns the appropriation of value, which, when dealing with inter-organizational relationships, also addresses the division of value appropriation among organizations (dyer et al. 2018). value configuration encompasses the efficient mix of resources, activities, and channels designed to create and capture value (taran et al. 2016). business model implications of entering into clusters, networks and ecosystems although much business model research takes the focal firm as the central level of analysis, value creation does not occur in isolation within organizational boundaries. when value creation transcends the journal of business models (2022), vol. 10, no. 1, pp. 1-10 33 focal organization, new types of collaboration and cooperation become of relevance (zott et al., 2011). it is increasingly recognized that business model innovation should be based on stakeholder inclusion, open business models, or collaboration within networks (storbacka et al., 2012). as emphasized by kringelum and gjerding (2018), the processes of business model innovation are often affected by the relational links of the value network that surrounds the focal organization. however, this creates new challenges, as it requires alignment among business models via both intraand inter-organizational configurational fit (nenonen and storbacka, 2010). taking the intra-organizational point of view, entering into new forms of collaboration has an effect on both the existing business models and those that might be in development. the effects depend on the degree of coupling among organizations, and on the degree of co-created value, which may differ depending on the extent of inter-organizational collaboration in clusters, networks, and ecosystems. this has implications for organizations’ value creation, value capture, and value configuration, and for the calculated degree of value slippage (lepak et al., 2007) which organizations might have to accept based on the interdependency of their interorganizational relationships. clusters the business model implications of entering into a cluster are elaborated based on the cluster definition set forward by porter, who defines clusters as: … geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (e.g. universities, standards agencies, trade associations) in a particular field that compete but also cooperate. (porter, 2000) geographic concentration is an important aspect of the definition; it is also emphasized in extant cluster literature, in which there is consensus regarding the geographic concentration of companies in the definitions of clusters (porter, 2000; maskell, 2001; carayannis and campbell, 2009). geographic concentration does not represent a clearly defined area, but rather depends on the scope, meaning that a cluster can vary in geographic size from 10 companies in a municipal area to, for some industries, certain countries as a cluster. carayannis and campbell (2009) expand the understanding of clusters by dividing them into two dimensions: geographical clusters and sectoral clusters. a geographical cluster is defined by companies’ specific location, and without any focus on certain industry-specific characteristics. meanwhile, sectoral clusters are defined based on specific sectors or industries, thus creating a more specific cluster profile compared to geographical clusters (carayannis and campbell, 2009). we define geographic clusters based on carayannis and campbell (2009), as consisting of organizations that operate in the same geographic location. these organizations may be either private companies or public organizations that are loosely connected units within a geographic area, but are not defined by the industry in which the organizations are operating. in contrast, sectoral clusters are defined by the specific industry in which the organizations are operating, but otherwise have the same characteristics as the geographical clusters. business model implications of clusters taking the definition of clusters as a point of departure, there is not necessarily a direct transactional link between companies in a given cluster. they might compete, they might cooperate, and they might be parts of the same value network (allee, 2008) without any direct interconnection. while the cluster provides potential for establishing relationships (porter, 2000), it is not inherent in the structure, so organizations must proactively seek stronger ties if they are to obtain full potential. the value created from being part of a cluster is thus indirect, and will not necessarily affect a company ’s perceived use value (lepak et al., 2007); belonging to a cluster thereby may not significantly change the existing business model of the focal organization. changes to value configuration are limited due to the primarily indirect nature of advantages related to clusters, as these advantages are often driven by external economies or spillovers from the business environment. nevertheless, a cluster provides the potential for value configuration through strengthening ties. journal of business models (2022), vol. 10, no. 1, pp. 1-10 44 networks håkansson and ford (2002) define networks as “a structure where a number of nodes are related to each other by specific threads.” the connections between the actors in a network comprise an important characteristic in the network literature (mcevily and zaheer, 1999; carayannis and campbell, 2009; barile et al., 2016). a network is a constellation in which organizations can be connected through interaction and complementarity. being part of a network can create certain advantages for the actors, including: the exchange of information among actors, which may not have been obtained otherwise; the outsourcing of functions to other members of the network; and the creation of a base from which organizations can further develop (håkansson and ford, 2002; carayannis and campbell, 2009). barile et al. (2016) distinguish between networks and ecosystems based on the value created among the actors in the two instances. networks, in contrast to ecosystems, focus more on the connection among actors rather than on the cocreation of value. based on this conceptualization, we regard the value interaction of networks as a connection among organizations that are based on relationships and interactions among the actors within the network. in a network, there is focus on information and knowledge sharing. the degree of interconnection among the actors is greater than that in clusters, but less than that in ecosystems. business model implications of networks the network represents a higher degree of connection among actors, which includes knowledge sharing and potential new value configuration through the creation of tighter links. building and maintaining the network becomes a central activity, and often requires a network broker (facilitator), who can maintain structure and neutrally facilitate interactions (huggins, 2000). often, as a network becomes more formalized, its potential for value creation and capture increases. the focal organization must therefore take into account how openly to approach the network structure: which role do they aim to sustain, and what are the potential effects of the existing business model? because a given network might be based on the value network of the existing business model, tighter links within the network can ensure both explorative and exploitative processes (möller and halinen, 2017) that create potential for both value creation and value capture. ecosystems one of the biggest differences among clusters, networks, and ecosystems is the degree of connections among the actors involved. ecosystems are characterized by a continuous flow of either knowledge, communication, or materials among the organizations, which creates closer connections among the actors (adner, 2017; moore, 1993). furthermore, adner (2017) characterizes ecosystems as a structure in which organizations interact to materialize a value proposition. thus, ecosystems have a greater focus on the co-creation of value among actors, in comparison to clusters and networks. the co-creation of a value proposition contributes solutions to mutual issues by combining resources from the actors in the ecosystem (adner, 2017; barile et al., 2016). according to spigel (2017), ecosystems consist of attributes—material, social, and cultural—all of which must continuously be balanced. therefore, it is not possible to develop ecosystems by merely focusing on one of the attributes; development requires a more holistic view of ecosystems. ecosystems are defined as a closer connection among the actors, in which the focus is not only on information and knowledge sharing, but also on the co-creation of a mutual value proposition (adner, 2017). furthermore, there is continuous flow of either communication, knowledge, or materials within the ecosystem. business model implications of ecosystems when regarding ecosystems as structures to create joint value propositions, the business model implications for the focal firm can be extensive. as lingens et al. (2021) demonstrate, entrepreneurs can structure their entire business model on their interactions with other organizations in an ecosystem. thus, ecosystem interaction will affect the focal organization, which might find itself in a situation of managing multiple business models (markides and charitou, 2004) both within and outside the ecosystem structure. this creates implications for value configuration, value creation, and value capture, when it affects the resource distribution across multiple business models. thus, an ecosystem requires both alignment structures, journal of business models (2022), vol. 10, no. 1, pp. 1-10 55 and an untangling of the multilateral relations among actors  (adner, 2017). while each organization  within an ecosystem has its own business model, all of the participating organizations  can  be  interconnected in producing a joint value proposition.  all firms have their own approaches to and intentions regarding the ecosystem, and thus all have their own ecosystem strategies  (adner, 2017). this naturally entails that some might also have ecosystem strategies that do not converge with the  ecosystem as a whole. thus, organizations in an ecosystem naturally take on various roles during ecosystem establishment. building on a system of alignment, ecosystem management mechanisms  must be implemented to maintain,  realize,  and deploy potential value creation and value capture (ritala et al., 2013). thus, the needed threshold level of coordination for creating and capturing value in a specific ecosystem must be determined (adner, 2017). co-existence of the concepts figure 1 illustrates, as elaborated above, that entering into a cluster, network, or ecosystem will have different implications for the business model of the focal firm. the concepts covering various degrees of inter-organizational collaboration exist simultaneously; they are complementary constellations that depend on the degree of interaction reflected in the connection and co-creation of value among the participating organizations. thus, a network can be a subsystem in a geographic cluster, and furthermore, a geographic cluster can feature different sectoral clusters. the degree of interconnection and co-creation of value are the driving forces when examining the differences among different constellations. based on the above, figure 1 visualizes the transition from clusters and networks to ecosystems based on the degree of connection and co-creation of value. figure 1: degree of connection and co-creation in inter-organizational collaboration journal of business models (2022), vol. 10, no. 1, pp. 1-10 66 discussion the conceptual exploration above illustrates why it is of great importance that organizations possess the necessary knowledge regarding how to work with their business model(s) when entering clusters, networks, or ecosystems, based on the potential implications. having this knowledge increases the chances of obtaining improved results when entering different types of business constellations. the following section discusses how organizations and leaders can work with their business models to create the appropriate conditions based on their specific contexts. value creation value creation reflects the use value for customers, and the price they are willing to pay for value creation (lepak et al., 2007). inter-organizational relations can change the threshold of value creation within and among organizations. as storbacka et al. (2012) argue, meso-level types of organization are developed through rule structures that create new market practices. thus, when an organization enters into an inter-organizational setup—either tightly or loosely coupled—as a cluster, network, or ecosystem, new market practices are created that can also create ripple effects for the business model of the focal firm. closer coordination and value cocreation make firms dependent on both individual and joint value creation objectives (storbacka et al., 2012). depending on the degree of autonomy and coupling, the focal firm might find itself in a position in which its existing business model becomes superfluous or needs radical adjustment. as le pennec and raufflet (2018) argue, the ultimate motivation for engaging in collaboration is value creation. however, the competitive advantage gained through collaboration, based on the appropriable quasi-rents, remains firm-specific, and will often overlook the resources embedded in the interfirm relationships (duschek, 2004; dyer and singh, 1998). the value creation of the different collaboration types varies greatly. while clusters and networks create potential for value creation through closer coupling among organizations, the interdependence of value creation grows significantly within ecosystems. when an organization enters a cluster, the value creation is primarily indirect, because the participants’ value creation arising from the cluster comes in the form of the increased pool of knowledge and workforce that firms contribute. examining the value creation implications of networks reveals that a central shift occurs, from internal value creation towards potential co-creation of value through tighter linkages among actors within those networks. the shift toward co-creation of value is significantly increased when organizations enter ecosystems, because of the necessary focus on shared value propositions. this shift, from value being created within firm boundaries toward being created among actors of networks and ecosystems, involves challenges regarding how organizations manage this value co-creation (nenonen and storbacka, 2010). value capture value capture also differs greatly among the different constellations. clusters contribute a different value compared to that of networks or ecosystems (porter, 2000; adner, 2017). the complementarities of a cluster are relatively easy to obtain, because complementarity in a cluster is a passive value that is based on each organization’s location. in contrast, the value capture in a network is more active than that of a cluster because of the broader mutual sharing of knowledge and information. organizations might obtain unique knowledge about competition, customers, and other important matters, which might prove useful to each company (mcevily and zaheer, 1999). by entering an ecosystem, organizations create value in ways that enable other participating actors to receive value from one another. the organizations in an ecosystem expose parts of their business model to other actors; therefore, to compensate for the increased risk, the potential value capture must be greater in ecosystems than in other setups. in such meta-organizational setups, value creation and value capture are both reliant upon intricate links of dependence across the value network. moving upward in the value network can contribute to increasing value capture, but leaders need to be aware that the increased value comes with the price of relational journal of business models (2022), vol. 10, no. 1, pp. 1-10 77 dependency and the demand to create value for other actors (barile et al., 2016). value configuration taking an inter-organizational perspective on the construct of new relations in clusters, networks, or ecosystems, the degree of collaboration among organizations depends on the temporal expectations, the purpose of the collaborative efforts, and the degree of organizing among participants (kringelum, 2020). as organizations move from clusters to networks and ecosystems, the key partners of the business model become more important because of the interconnections among the actors. therefore, networking and stakeholder-related activities become increasingly important focal areas for leaders when their organizations enter networks or ecosystems. as kretschmer and schilling (2020) argue: “the success of platforms hinges on cooperation, coordination, and integration across a diverse and often very large array of organizational units and agents, some of whom face conflicting incentives or are direct rivals.” these success factors are thus ingrained in the existing business model of the organizations that collaborate within an ecosystem. the cooperation among organizations in platforms can be inspired by spigel (2017), and by the attributes—material, social and cultural—of which ecosystems consist. it is insufficient for leaders to merely focus on, for example, the material aspects of cooperation with other organizations; leaders need to incorporate a holistic view that focuses on social and cultural attributes as well to create the best conditions (spigel, 2017). as discussed above, the coordination aspect is of great importance to the succes of the platform because multiple actors are working on the shared value proposition (kretschmer and schilling, 2020). based on this, organizations need to be able to coordinate effectively with the different actors in their specific constellation. this coordination is especially important when working in ecosystems, because of the co-creation of value and the degree of interconnection. exploring the value potential in the interdependencies created among actors requires acknowledging the interplay among existing structures and the agency of organizational actors within each inter-organizational form. the interconnection of organizations is the fundamental idea underlying the classical value chains perspective which porter (1985) advanced. however, as inter-organizational relationships become less materially oriented and less transactional, knowledge and immaterial value flows increase in importance. to support the sharing of knowledge and immaterial value, leaders need to create trusting relationships with the other actors operating in the value network (hakanen et al., 2016). when moving toward a higher degree of value cocreation, the focal firm becomes dependent on the responsiveness of the external relationships (kringelum and gjerding, 2018). as the need for closer connections among actors increases, the need for relational capital grows. however, creating relational capital among organizations can require changes in the key activities of the focal organization, which can further imply that organizations need an orchestrator to facilitate the ecosystem. in the light of this, leaders need to be prepared to outsource responsibility to other organizations in order to focus on joint value propositions (lingens et al., 2021). implications and future research this short paper explores how the business model of a focal firm can be affected and experience related implications in the value creation, value capture, and value configuration when a firm enters a business cluster, network, or ecosystem. for practitioners working with inter-organizational collaboration, awareness of both the possible advantages and risks when entering these types of collaborative models is important. clusters provide potential for knowledge sharing and interaction, without significant effects on the business model of the focal firm. while geographical co-location of sectorial clusters can create a competitive advantage via both access to a specialized workforce and co-branding efforts (maskell, 2001), the effects on value creation will be low, and therefore, value capture is also minor. networks create potential for closer connections among their actors, but managers should be aware of the time spent on the network compared to the value creation provided through the network. journal of business models (2022), vol. 10, no. 1, pp. 1-10 88 furthermore, there is a risk of creating structures, which might lead to inertia (håkansson and ford, 2002). collaborating in an ecosystem provides potential value creation through joint value propositions, beyond what is possible for the individual organizations on their own, via tight coupling and sharing of knowledge and resources (jacobides et al., 2018). the increased potential in ecosystems comes with a higher degree of risk based on the interdependencies created, which presuppose that the ecosystem is prioritized by all partners operating within it (adner, 2017). alignment of expectations is essential, as misalignment might lead to ecosystems failing or radically changing, because of the multiple different interests or expectations among the participants (lund and nielsen, 2014). as conceptualizations of value creation, value capture, and value configuration among organizations are rare, this paper provides a starting point and an initial conceptual framework for empirical exploration of the topic. future research, based on empirical exploration of the different contexts, can help to increase knowledge regarding how different organizations’ business models change based on how they approach and engage with inter-organizational relationships. furthermore, the notion of inter-organizational collaboration in various forms is dependent on the establishment of an inter-actor configurational fit among the participants’ business models. as storbacka et al. (2012) argue, this can occur at a business model meso-level through rule structures inherent to the market practices. thus, the particular distinction of the micro and meso-level structures influencing the processes of value creation, value capture, and value configuration, as well as the distinction between intraand inter-organizational business model innovation, are key areas for future research. journal of business models (2022), vol. 10, no. 1, pp. 1-10 99 references adner, r. (2017). ‘ecosystem as structure: an actionable construct for strategy ’, journal of management, january, pp. 37–58. allee, v. (2008). ‘value network analysis and value conversion of tangible and intangible assets’, journal of intellectual capital, 9(1), pp. 5–24. doi: https://doi.org/10.1108/14691930810845777 barile, s., lusch, r., reynoso, j., saviano, m. and spohrer, j. (2016). ‘systems, networks and ecosystems in service research’, journal of service management, pp. 652–674. carayannis, e. g. and campbell, d. f. (2009). ‘“mode 3” and “quadruple helix”: toward a 21st century fractal innovation ecosystem’, international journal of technology management, pp. 201–234. duschek, s. (2004). ‘inter-firm resources and sustained competitive advantage’. management revue, 15(1), pp. 53-73. dyer, j. h., and singh, h. (1998). ‘the relational view: cooperative strategy and sources of interorganizational competitive advantage’, academy of management review, 23(4), pp. 660-679. dyer, j. h., singh, h., and hesterly, w. s. (2018). ‘the relational view revisited: a dynamic perspective on value creation and value capture’, strategic management journal, 39(12), pp. 3140-3162. granovetter, m. s. (1973). ‘the strength of weak ties’, american journal of sociology, 78(6), pp. 1360–1380. hakanen, m., kossou, l., and takala, t. (2016). ‘building interpersonal trust in business networks: enablers and roadblocks’. journal of business models, 4(1), pp. 45-62. huggins, r. (2000). ‘the success and failure of policy-implanted inter-firm network initiatives: motivations, processes and structure’, entrepreneurship & regional development, 12(2), pp. 111-135. håkansson, h. and ford, d. (2002). ‘how should companies interact in business networks’, journal of business research, pp. 133–139. jacobides, m. g., cennamo, c. and gawer, a. (2018). ‘towards a theory of ecosystems’, strategic management journal, 39(8), pp. 2255–2276. https://doi.org/10.1002/smj.2904 kretschmer, t. and schilling, m. (2020). ‘platform ecosystems as metaorganizations: implications for platform strategies’, strategic management journal, pp. 1-35. kringelum, l. (2017). transcending organizational boundaries: exploring intra-and inter-organizational processes of business model innovation in a port authority. ph.d. aalborg university. kringelum, l. and gjerding, a. n. (2018). ‘identifying contexts of business model innovation for exploration and exploitation across value networks’, journal of business models, 6(3). kringelum, l. (2020). ‘organisering på tværs af organisatoriske grænser’, samfundslederskab i skandinavien, 35(3), pp. 147-163. https://doi.org/10.1108/14691930810845777 https://doi.org/10.1002/smj.2904 journal of business models (2022), vol. 10, no. 1, pp. 1-10 1010 lepak, d. p., smith, k. g., and taylor, m. s. (2007). ‘value creation and value capture: a multilevel perspective’, academy of management review, 32(1), pp. 180-194. le pennec, m., and raufflet, e. (2018). ‘value creation in inter-organizational collaboration: an empirical study ’, journal of business ethics, 148(4), pp. 817-834. lingens, b., miehé, l. and gassmann, o. (2021). ‘the ecosystem blueprint: how firms shape the design of an ecosystem according to the surrounding conditions’, long range planning, 54(2). doi: https://doi.org/10.1016/j. lrp.2020.102043 lund, m., and nielsen, c. (2014). ‘the evolution of network-based business models illustrated through the case study of an entrepreneurship project’. journal of business models, 2(1), pp. 105-121. markides, c. and charitou, c. d. (2004). ‘competing with dual business models: a contingency approach’, academy of management executive, 18(3), pp. 22–36. maskell, p. (2001). ‘towards a knowledge-based theory of the geographical cluster’, industrial and corporate change, pp. 921–943. mcevily, b. and zaheer, a. (1999). ‘bridging ties: a source of firm heterogeneity in competitive capabilities’, strategic management journal, pp. 1133–1156. moore, j. f. (1993). ‘predators and prey: a new ecology of competition’, harvard business review. möller, k. and halinen, a. (2017). ‘managing business and innovation networks—from strategic nets to business fields and ecosystems’, industrial marketing management, 67, pp. 5–22. nenonen, s., and storbacka, k. (2010). ‘business model design: conceptualizing networked value co‐creation’, international journal of quality and service sciences, 2(1), pp. 43-59. porter, m.e. (1985). ‘competitive advantage: creating and sustaining superior performance’, new york: free press. porter, m. e. (2000). ‘location, competition, and economic development: local clusters in a global economy ’, economic development quarterly, february, pp. 15–34. ritala, p., agouridas, v., assimakopoulos, d. and gies, o. (2013). ‘value creation and capture mechanisms in innovation ecosystems: a comparative case study ’, international journal of technology management, 63(3/4), 244–267. doi: https://doi.org/10.1504/ijtm.2013.056900 ritala, p., almpanopoulou, a. and blomqvist, k. (2017). innovation ecosystem emergence barriers : institutional perspective. march. spigel, b. (2017). ‘the relational organization of entrepreneurial ecosystems’, entrepreneurship theory and practice, january, pp. 49–72. storbacka, k., frow, p., nenonen, s. and payne, a. (2012). ‘designing business models for value co-creation’, review of marketing research, 9(june), pp. 51–78. https://doi.org/10.1016/j.lrp.2020.102043 https://doi.org/10.1016/j.lrp.2020.102043 https://doi.org/10.1504/ijtm.2013.056900 journal of business models (2022), vol. 10, no. 1, pp. 1-10 1111 taran, y., nielsen, c., montemari, m., thomsen, p., and paolone, f. (2016). ‘business model configurations: a five-v framework to map out potential innovation routes’, european journal of innovation management, 19(4), pp. 492-527. wilkinson, i. and young, l. (2002). ‘on cooperating: firms, relations and networks’, journal of business research, 55(2), pp. 123–132. doi: https://doi.org/10.1016/s0148-2963(00)00147-8 zott, c., amit, r. and massa, l. (2011). ‘the business model: recent developments and future research’, journal of management, 37(4), pp. 1019–1042. doi: https://doi.org/10.1177/0149206311406265 https://doi.org/10.1016/s0148-2963(00)00147-8 https://doi.org/10.1177/0149206311406265 83 journal of business models (2022), vol. 10, no. 2, pp. 83-94 emerging market firms and dual business models: an indian perspective swarup kumar dutta1 abstract managers in organizations face severe challenges and conflicts that arise from pursuing dual business models. documented studies are available on how western multinationals operate in emerging markets, however, little evidence is available about how home-grown emerging market firms pursue this challenge in their home markets. with an ambidexterity perspective and activity systems approach, this study aims to offer novel insights into how indian firms carry out organizational integration and separation—they focus on domains of expertise in organizational activities such as sales and marketing rather than on business units—as they pursue the challenges of dual business models, in contrast to the multinational corporation (mnc) approach. keywords: dual business models; ambidexterity; domain separation; emerging markets; activity systems. please cite this paper as: dutta, s. d. (2022), emerging market firms and dual business models: an indian perspective, journal of business models, vol. 10, no. 2, pp. 83-94 1 indian institute of management, ranchi issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i2.6966 introduction because of the institutional, infrastructure, and resource constraints in many emerging markets, firms must create uniqueness for example through newer business models to meet the price-performance requirements of customers at the lower end of the pyramid (luo and child, 2015). thus, launching products and services targeted at the broad middle to the lower end of the market is often the prerogative of firms if they have to successfully cater to emerging markets (luo, 2016). as a large part of the customers in many emerging markets are quite sensitive to price-performance requirements across product categories, it is observed that a 50% solution at a 30–40% price of the high-end offering is often a preferred option (immelt, et al., 2009). existing business models in emerging markets often attempt to address the needs of the top of the pyramid but fail to satisfy the needs of low-end customers (seelos and mair, 2007; george et al., 2012). many multinational corporations (mncs) have addressed this challenge https://doi.org/10.54337/jbm.v10i2.6966 journal of business models (2022), vol. 10, no. 2, pp. 83-94 8484 by implementing business models catering to customers at the lower end alongside the existing business model of serving premium customers. the aspect of catering to customers on a differentiation plank in one business model (high-end customers) and another business model on a low-cost proposition (low-end customers) raise conflicts in many organizations regarding what they stand for or signal to customers (markides and charitou, 2004). thus, the challenge of operating two different business models within a common product category raises conflicts in terms of how to handle the tensions of exploiting the current business model and attempting to explore the new business model. the tensions and conflicts can arise because (markides and charitou,2004) (a) the two business models and their underlying value chains can conflict with one another, thereby alienating distributors, customers, and other stakeholders; (b) companies that have often positioned themselves on the differentiation plank through a culture of innovation and differentiation and thereafter make a foray into lower category products can damage their existing brands and find themselves diluting their culture for innovation, and (c) companies can face the risk of signaling to the market what they stand for, that is signaling that accrues to their reputation. documented studies suggest that firms attempting new business models need to deploy them in separate organizational units (markides and charitou, 2004). the current study attempts to find how firms from emerging markets manage aspects of integrating or separating new business models from the existing business model (such as high-end versus low-cost) by following an ambidexterity activity systems perspective, which requires different sets of capabilities to compete in each market (kachaner et al., 2011; markides, 2013). unlike typical studies that focus on mncs operating in emerging markets, the current study looks at how home-grown players manage dual business models in their home markets in india. conceptual anchor a set of business model innovation studies have focused on the phenomenon of working around with dualities of business models (markides and charitou, 2004; markides, 2013; winterhalter et al., 2015), value creation (amit and zott, 2012) as well as sustainable value creation (lüdeke-freund, et al., 2020). although researchers have studied dual business models in terms of technological innovations like ecommerce and bricks-and-mortar models (amit and zott, 2001), here dual business models refer to newer low-cost business models that accompany existing high-end business models or vice versa (winterhalter et al., 2015). as new markets present different sets of key success factors, they require different combinations of value chain activities, internal processes, structures, and cultures fine-tuned and tailored to the respective unit or division of the firm. thus many organizations can assume a hybrid form of organizing activities, structures, processes, and meanings by which it can make sense of and combine aspects of multiple organizational forms (earle et al., 2019). thus, if the goal is to manage the conflicts, then key questions facing firms in adopting dual business models are, “can we manage conflicts and how?” and “which activities should we separate and when?” (markides and charitou, 2004.) with the above perspective, markides (2013) called for adopting the ambidexterity lens that could provide explanations of how dual business models can be visualized and implemented. thus firms can frame the challenge of managing two different and conflicting business models simultaneously as an ambidexterity challenge. organizational ambidexterity is a well-researched stream in the field of strategic management; less researched is how firms manage the dualities of exploitation and exploration from an ambidexterity perspective. broadly, developments in the field of ambidexterity have identified at least three primary ways by which firms attempt to balance exploration and exploitation: • structural mechanisms (tushman and o’reilly, 1996); • temporal (nickerson and zenger, 2002); • contextual arrangements (gibson and birkinshaw, 2004). more recent research uncovered other solutions that could promote ambidexterity. extant work also suggests that ambidexterity is the capability of a firm to journal of business models (2022), vol. 10, no. 2, pp. 83-94 8585 operate both in mature and emerging markets, where experimentation, speed, and flexibility are critical for success (he and wong, 2004). recently, academic literature on ambidexterity has started to focus on the dynamics of ambidexterity that managers can exercise in discrete fields of organizational activity called domains such as production and sourcing, research and development (r&d), marketing, sales, and branding (lavie et.al., 2011). accordingly, through domain separation, firms attempt to separate exploration and exploitation along the value chain—by exploring in one domain (e.g., in production and sourcing) while exploiting in another domain (e.g., r&d) (winterhalter et al., 2015). we can visualize our notion of organizational ambidexterity as a tension between differing and conflicting business models. ambidexterity literature on domain function separation offers an appropriate lens to bridge this gap (lavie et al., 2011; winterhalter et al., 2015). thus, with a value chain ambidexterity perspective, the current study aims to understand how firms attempt to address the dualities in business models through the following research questions: 1. how do emerging market players handle conflicts that arise by pursuing dual business models? 2. how do the firms in question manage to separate the two business models? 3. what is the sequence firms use to separate or integrate value chain functions? 4. how do firms reconcile to strategic similarities in the markets catered to as well as the conflicts of pursuing dual business models? methodology the study focuses on 12 manufacturing firms representing different product categories. we sought to understand the complete value chain activities of these manufacturing firms. we selected our 12 firms based on their recent launch of distinct low-cost versions of their mid-to-high-end offerings in the indian market in similar product categories. we used a qualitative methodology (eisenhardt, 1989), specifically a multiple case study approach with a crosscase comparison to understand the similarities and differences among firms in terms of markets and the degree of conflict between the two business models. we adopted an activity system perspective of business models to demarcate the findings on how the firms integrated or separated their new low-cost business model from their premium business model in terms of value chain activities (zott et al., 2011). refer to table 1 for brief details of the twelve product industries. all the different product industries were studied concerning the differences or similarities of the value chain for both the business models. data was collected from a combination of various sources (case studies, media reports, websites of companies, product details, etc., to understand the granular aspects of the value chain, and a cross-case comparison was used. the available data were analyzed to understand how the activity systems approach for the dual business models catered to were different. the dimensions used for the studies were the degree of conflicts between the business models and the strategic similarities of the markets catered to. for conflicts between the business models, typical conflicts (nine dimensions mentioned in markides and charitou (2004)) were used to demarcate between the activity systems. if more than five dimensions were reported, then the degree of conflict was reported to be high otherwise low. for strategic relatedness between the markets catered to, three dimensions broadly grouped under customer assets, channel assets, and process assets were measured through five questions. responses that showed positivity in more than three questions were considered high for strategic relatedness between markets, otherwise low. thereafter plotting of the two dimensions was made (refer to table iii), and generalizations based on the insights provided were made. journal of business models (2022), vol. 10, no. 2, pp. 83-94 8686 table 1. manufacturing firm industry products mf-1 farm equipment tractors for small farmers mf-2 watches low-end watches mf-3 consumer electronics low-end television sets mf-4 water purification systems low-end water purification systems mf-5 cement low-end wall putty mf-6 branded luggage travel bags mf-7 optical storage devices low-end floppy discs mf-8 health diagnostic equipment cheaper pulse oximeters mf-9 furniture midhigh-end furniture mf-10 hydrocarbons low-end polymer mf-11 cosmetics cheaper deodorants mf-12 branded footwear cheaper sport shoes table 1: brief details of the 12 product industries journal of business models (2022), vol. 10, no. 2, pp. 83-94 8787 key insights tensions and conflicts can arise in firms because of the simultaneous pursuit of two different business models. it was observed from the study samples (mf4 and mf-12) that the underlying value chains conflicted with one another and had the potential to alienate distributors, customers, and other interested parties, as the similarities between the targeted markets were very low. so, the firms (mf-4 and mf-12) chose to separate the sourcing and production in both models to address the conflicts between the two models. the firms under study resorted to managing the conflicts by demarcating aspects of the value chain that were similar and dissimilar. also, conflicts arose in companies that had started on the differentiation plank through a culture of innovation and differentiation and then made a foray into lower category products. the positioning of the two different business models had the potential to damage and dilute its existing brands. as an example, the firms (mf-2 and mf-6) resorted to separate branding and marketing & sales from the value chains of the two business models and both the firms did not use their umbrella brand while promoting their low-cost brand. however, as the markets were quite different, mf-2 separated the sourcing and production activity (dissimilar markets), while mf-6 integrated the production of both the business models (similar markets). this aspect enabled both firms to exercise their choices in managing the conflicts. firms largely resorted to implementing dual business models by domain separation across value chain activities to handle tensions between exploitation and exploration. through domain separation along the value chain, the firms under study helped them get into new customer segments while leveraging existing knowledge and know-how. firms separated individual value chain activities to explore a new business model (e.g., a new low-cost business model) but kept other activities in the value chain integrated with the high-end business model to exploit synergies. findings suggest that the firms decided what to separate or integrate based on (a) strategic similarities of the two markets served and (b) degree of organizational conflict between the two business models in terms of differences or similarities along the value chain while straddling two different value propositions like differentiation and low cost. all the firms in the current study chose to separate the branding of their low-cost business model from that of the high-end business model. at the same time, all firms integrated their r&d at the domain level. none of the 12 firms fully integrated its premium business model with its low-cost model across all domains of the value chain. please, see table 2 for details. similarly, none of the firms fully separated their dual models across the value chain, unlike many multinationals operating in emerging markets (winterhalter et al., 2015). major findings of the study reveal the following: 1. all the emerging market firms under study were found to have an integrated r&d for both their premium and low-cost models which is in contrast to multinational firms operating in emerging environments, where r&d is separated ; 2. the branding activity of the low-cost models is separated from the premium models in all the organizations under study; 3. only in the sourcing and production and the sales and marketing domains did all the firms separate exploration and exploitation activities to differentiate between their business models; 4. irrespective of conflicts in the business models, if the strategic relatedness(fulfilling different needs, differences in per capita consumption, etc.) in terms of similarities in the two markets catered to was low, then firms tended to keep sourcing and production separate; 5. irrespective of conflicts in the business models, if the strategic relatedness of the markets between both the models was high, firms tended to integrate sourcing and production; 6. in terms of the differences between the firms studied, all firms either separated the sourcing and production or the sales and marketing domains; journal of business models (2022), vol. 10, no. 2, pp. 83-94 8888 table 2. firm research and development efforts sourcing and production approach sales and marketing approach branding degree of conflict between business models similarities between the two target markets mf-1 integrated integrated separated separated high conflicts in the business model as a low-cost offering of smaller capacity posed challenges of cannibalization of the mid to high-end offerings. the trade-off was achieved through smaller size for the low-end with basic features only. high similarities between the markets catered to as in both the models the targeted, the customer was the farmer. mf-2 integrated separated separated separated high conflicts in pursuing a differentiated brand and making a foray into a low-cost brand. the low-cost brand was branded without the umbrella brand lower levels of similarities between customers of the differentiated brand and the value for money brand. mf-3 integrated integrated integrated separated lower levels of conflict as the low-end version was a strippeddown version of a high-end model with a separate brand the similarities of the customers seeking entertainment were broadly the same. mf-4 integrated separated integrated separated very low degree of conflict between the business models, the trade-off was achieved by separating production and sourcing-, and branding. targeted customers were different in different segment mf-5 integrated integrated integrated separated the lower level of conflict between the business models as products were dissimilar and substitutable, yet catered to similar needs of the customers high level of overlaps between targeted customers table 2: integration and separation approaches of low cost and premium business models journal of business models (2022), vol. 10, no. 2, pp. 83-94 8989 table 2. firm research and development efforts sourcing and production approach sales and marketing approach branding degree of conflict between business models similarities between the two target markets mf-6 integrated integrated separated separated as the products were differentiated with features only, a high degree of conflict was common. the umbrella brand was not put in the low-cost brand the requirements of both the markets were relatively similar mf-7 integrated integrated separated separated as requirements in both the markets catered to were the same, high degree of conflict separating the two models. arose. the trade-off was achieved through differentiated features and the quality of components. the requirements of both the markets were similar mf-8 integrated integrated integrated separated the degree of conflict was low as differentiation between the business models was ensured by stripping down additional features in the low-cost segment very high similarities in both the segments in terms of the need to be fulfilled mf-9 integrated integrated integrated separated low conflicts were ensured through price point differentiation high similarity with both markets mf-10 integrated integrated integrated separated a very low level of conflict between the business models was ensured through different levels of quality of polymers high familiarity with both the markets in terms of the need to be catered to. mf-11 integrated integrated separated separated high conflicts resulted because of catering to differences between high-end and low-end customers. high familiarity in terms of the markets catering to mf-12 integrated separated separated separated high conflict because the company after making a mark through differentiation forayed into cheaper sports shoes lower levels of similarity between the markets catered to table 2: integration and separation approaches of low cost and premium business models (cont.) journal of business models (2022), vol. 10, no. 2, pp. 83-94 9090 discussion and conclusions successful emerging market firms follow a path different from that of mncs in pursuing dual business models in their home markets. thus, traversing the path of mncs in emerging markets may not be a preferable solution nor a guarantee for success. conflicts are inevitable in pursuing dual business models. conflicts arise at every level of the hierarchy, from cannibalizing existing offerings at the business level to alienating existing customers at functional levels. examples of conflicts could be that the two dual business models stand for different value propositions, giving confusing signals to customers or the new business model offer a better price-performance ratio with improved utility functions which can alienate another set of customers catering to the earlier business model. all of these pose some form of risk to the management of companies and often lead to tensions about the company ’s way forward. however, domain separation of the value chain offers a novel way of either integrating or separating these functions to align with the functioning of the dual business models. thus, firms in emerging markets decide whether to integrate or separate a function based on the strategic similarities of the markets served by both models and on the degree of conflict between the two business models (for a detailed understanding of conflicts that typically arises in business models, markides and charitou (2004) offer a good perspective). however, what distinguishes successful home-grown players is their decision-making and action-taking around what to separate and when pursuing newer business models. s tr at eg ic re la te dn es s of m ar ke ts s er ve d h ig h separate branding separate sales & marketing branding integrate r&d sourcing & production sales & marketing integrate r&d sourcing & production lo w separate sourcing &production branding separate sourcing & production, sales & marketing branding integrate r&d sales & marketing integrate r&d low high degree of conflicts between business models table 3: strategic similarities between markets vs. conflicts in business models journal of business models (2022), vol. 10, no. 2, pp. 83-94 9191 if the strategic similarities of both the markets are greater, irrespective of the degree of conflicts in the business models, then firms integrate sourcing and production in the value chain. the observed pattern suggested that the degree of similarities in the different targeted markets was the deciding factor in separating or integrating value chain activities of production and sourcing. higher market homogeneity in the sample aligned a firm to have integrated sourcing and production and vice versa. if the degree of conflict between the business models was higher, firms tended to separate sales and marketing and vice versa. thus, this observation suggests higher conflicts in business models are handled by separating the sales and marketing domains of the value chain. the probable reason for integrating r&d in all the sample firms under study was to share and spread the development costs across variants offered at different price points. it was also observed that the majority of the firms in the sample were in the developmental stage of coming up with new variants of offerings targeted at the lower end at incremental price increases to offer better features or performance of products. this ploy could further skim the market on one hand and further narrow the perceived differences between the variants on the other. though there are risks of cannibalization of the existing product offerings, attempts to manage the dualities better and reduce market heterogeneity over the foreseeable future are likely. however, in emerging markets, the issue of catering to customers at the low end of the pyramid is going to be a sustainable issue in the foreseeable future. thus the processes followed in managing business models in firms need to be highly resilient and adaptable to suit the changing dynamic contexts (montemari and gatti, 2022). future research projects may test whether these tendencies apply outside manufacturing, in service firms, and other contexts. through the path of domain separation, many firms help themselves address new customers while leveraging existing knowledge. but does domain separation differ between emerging market firms and mncs operating in emerging markets? yes, in terms of the sequence. mncs operating in emerging markets tend to start by separating sourcing and production from their premium business model by transferring this domain into low-cost environments. this separation potentially allows mncs to tap customers with products of lower cost than the ones produced in relatively costlier manufacturing sites in developed markets (winterhalter et al., 2015). next, mncs tend to separate r&d, and then sales and marketing. in contrast, emerging market firms separate domains in no particular sequence. a nice parallel can be drawn from the example of ge healthcare’s foray into the medical diagnostic space in india with the introduction of low-end electrocardiogram (ecg) machines. ge healthcare operates in india through a joint venture with a leading industrial house, wipro. the bottom of the pyramid (bop) offering of wipro ge healthcare is not about developing high-end technological products, but about making the technology affordable and accessible to more people (dutta & snehvrat, 2019). ge recognized that its bulky and expensive ecg devices were unaffordable for physicians in emerging markets like india, china, and africa. the company also realized that these devices were impractical in these markets, as doctors could not carry them on their motorbikes or bicycles when visiting patients in far-flung villages. also, villages often did not have electricity to power these ecg devices. recognizing the problem and aware of the need for this device in rural areas, ge’s researchers in india invented in 2008 the mac-400, a portable ecg device that cost one-tenth and weighed one-fifth of its current equivalent in western markets (dutta & snehvrat, 2019). the compact mac-400 priced at $1000 boasted of super-long battery life and used several off-the-shelf components. as a result, mac400 was easy to use and maintain in dusty rural environments and delivered more value at a lower cost. the entire value chain of this low-end offering developed in india was separate from the value chain of the high-end model. ge india attempted to develop products and services with a frugal mindset in an emerging market to focus on products that were affordable and accessible. in terms of the ownership pattern of mncs vis-à-vis the domestic players operating in emerging markets, the mncs tend to have a separate unit journal of business models (2022), vol. 10, no. 2, pp. 83-94 9292 built from scratch for addressing bop markets to separate the midhigh-end models. as the market stabilizes in terms of the adoption of both models, firms look at ways of integrating some aspects of both models. a contrasting viewpoint is provided by many of the emerging market players which tend to operate both models in parallel with some aspects only of the value chain either separated or integrated. the multinationals tend to go for jvs typically in emerging markets while for domestic players, it is largely wholly owned subsidiaries. as a broad way to understand the different patterns followed in developed markets and emerging markets, refer to table 4 for details. future studies can look to reaffirm or contradict these findings from studies in different emerging markets. accordingly, we can state the proposition as: the higher the strategic similarities between the premium and low costs markets served by the business models, the lesser the amount of domain separation that emerging market firms seek to reach out to low-cost customers. thus, in response to the oft-repeated question, “should we integrate or separate our business models?” companies have the option of separating domains rather than establishing separate business units. the current study provides evidence that the business model can serve as a valuable construct for firms to overcome the tensions of dualities if pursued through the ambidexterity lens by separating domains in the value chain. table 4. type of players developed markets emerging markets mnes create a separate division for catering to bop products and resort to importing from low-cost countries. separate division/hiving off strategy create different value chains through collaborations that bear no similarity with each other. joint venture strategy domestic players built the bop product with added features to suit the advanced requirements of developed markets but at a lower price import from low-cost countries strategy separating and integrating some aspects of the value chain wholly owned subsidiary strategy bop = bottom of the pyramid table 4: ownership patterns and modes of operation journal of business models (2022), vol. 10, no. 2, pp. 83-94 9393 references amit, r., & zott, c. (2001), value creation in e-business. strategic management journal, vol. 22, no 6-/7, pp. 493–520. amit, r., & zott, c. (2012), creating value through business model innovation. mit sloan management review, vol. 53, no 3, pp. 41–49. dutta, s. k., & snehvrat, s. (2019), a componovation perspective of innovation in emerging markets: evidence from indian organizations. thunderbird international business review, vol. 62, no 1, pp. 65–75 earle, a., hiz, d., & turell, y. (2019), hybrid business models and the public science-private industry interface. journal of business models, vol. 7, no. 4, pp. 20-26 eisenhardt, k.m. (1989), building theories from case study research. the academy of management review, vol. 14, no 4, pp. 532–550. george, g., mcgahan, a.m. & prabhu, j. (2012), innovation for inclusive growth: towards a theoretical framework and a research agenda, journal of management studies, vol. 49, no 4, p p . 661–683. gibson, c. b., & birkinshaw, j. (2004), the antecedents, consequences, and mediating role of organizational ambidexterity, academy of management journal, vol. 47, no 2, pp. 209–226. he, z. & wong, p. (2004), exploration vs. exploitation: an empirical test of the ambidexterity hypothesis, organization science, vol.15, pp. 481–494. immelt, j.r., govindarajan, v. & trimble, c. (2009), how ge is disrupting itself, harvard business review, septoct kachaner, n., lindgardt, z. & michael, d. (2011), innovating low-cost business models, strategy & leadership, vol. 39, no.2, pp. 43–48. lavie, d., kang, j. & rosenkopf, l. (2011), balance within and across domains: the performance implications of exploration and exploitation in alliances, organization science, vol. 22, no 6, pp. 517–1538. luo, y. (2016), “innovation in emerging asia: a componovation approach”, in sms special conference, contextualizing strategic management in asia: institutions, innovation, and internationalization, hong kong: strategic management society. lüdeke-freund, f., rauter, r., pedersen, e., & nielsen. (2020), sustainable value creation through business models: the what, the who and the how, journal of business models, vol. 8, no. 3, pp. 62-90 luo, y., & child, j. (2015), a composition-based view of firm growth, management and organization review, vol.11, no 3, pp. 379–411. markides, c. (2013), business model innovation: what can the ambidexterity literature teach us, the academy of management perspectives, vol. 27, no 4, pp. 313–323. journal of business models (2022), vol. 10, no. 2, pp. 83-94 9494 markides, c., & charitou, c. (2004), competing with dual business models: a contingency approach, academy of management executive, vol.18, no 3, pp. 22–36. montemari, m. & gatti, m. (2022), building resilient and innovative business models in the era of covid-19: a process approach, journal of business models, vol. 10, no. 1, pp. 67-77 nickerson, j. a., & zenger, t. r. (2002), being efficiently fickle: a dynamic theory of organizational choice, organization science, vol. 13, no 5, pp. 547–566. seelos, c.c. & mair, j. (2007), profitable business models and market creation in the context of deep poverty: a strategic view, the academy of management perspectives, vol. 21, no 4, pp. 49–63. tushman, m. l., & o’reilly, c. a. (1996), ambidextrous organizations: managing evolutionary and revolutionary change, california management review, vol. 38, no 4, pp. 8–30. winterhalter, s., zeschky, m. b. & gassmann, o. (2015), managing dual business models in emerging markets: an ambidexterity perspective, r&d management, vol. 46, no 3, pp. 464–480 zott, c., amit, r. & massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no 4, pp. 1019–104 19 journal of business models (2022), vol. 10, no. 1, pp. 19-29 the creation of ecosystems as a mean for business model adaptation : how banks chose to respond to the rise of fintech startups olfa chelbi1, thierry rayna2, antoine souchaud 3 abstract the business model concept and the concept of coopetition have been the focus of substantial attention for the past twenty years. however, current research is still short on explaining how both concepts relate to each other. this paper provides a first integration of the two concepts by trying to operationalize the process of business model adaptation in the context of coopetitive settings involving small and young firms. the paper uncovers four roles played by fintech startups in the ecosystem created by the incumbent bank: the role of a supplier, client, complementor, and coopetitor. in the case of fintech startups positioned as suppliers, clients and complementors we show an impact on the two dimensions of value creation and value captures. with respect to fintech companies positioned as coopetitors, early findings show the impact of such settings on the value delivery dimension. key words: business model, adaptation, ecosystem, collaboration, coopetition, bank, fintech please cite this paper as: olfa chelbi, o., rayna, t. and souchaud, a. (2022), the creation of ecosystems as a mean for business model adaptation : how banks chose to respond to the rise of fintech startups, vol. 10, no. 1, pp. 19-29 1 phd candidate, i3-crg, cnrs, école polytechnique, institut polytechnique de paris, talan labs, talan group, france, olfa.chelbi@ polytechnique.edu 2 professor of innovation management, i3-crg, cnrs, école polytechnique, institut polytechnique de paris, france 3 associate professor, neoma business school, i3-crg, cnrs, école polytechnique, institut polytechnique de paris, france issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6804 mailto:olfa.chelbi@polytechnique.edu mailto:olfa.chelbi@polytechnique.edu https://doi.org/10.54337/jbm.v10i1.6804 journal of business models (2022), vol. 10, no. 1, pp. 19-29 2020 introduction the concept of the business model and the concept of coopetition have been the focus of substantial attention from academics and practitioners for the past twenty years (devece et al., 2019; wirtz et al., 2016). nevertheless, it seems that there has been very little work that has addressed both concepts at the same time (ritala et al., 2014; spieth et al., 2020; velu, 2016). looking at the literature on business models, scholars (klang et al., 2014; mason & spring, 2011; zott & amit, 2010) have raised attention to the necessity of taking a perspective that transcends firms’ boundaries when analyzing the business model to integrate resources and activities that can be controlled or are provided by other stakeholders of the focal firm (andreini & bettinelli, 2017; berglund & sandström, 2013; spieth & schuchert, 2017) as this is becoming a relatively widespread practice among firms (hamani & simon, 2020). many scholars have talked in this case about openness in the business model, a significant phenomenon presenting salient features that are not sufficiently understood (iivari, 2015). yet, few references are made as to whether the list of stakeholders includes competitors (ritala & sainio, 2014) and in particular competitors with whom the firm transacts, also described as coopetitors (bengtsson & raza-ullah, 2016), and the impact that these types of actors have on the business model of the firm and its evolution (saebi et al., 2016). understanding the link between business models and coopetition, how they can be integrated, and assessing the relevance of analyzing one concept using the lens of the other remains an aspect that hasn’t been covered much in the literature (bengtsson & kock, 2014). a first element of response was given by ritala et al. (2014) who suggest that coopetition and business models are linked because they both integrate the mechanisms of value creation, value capture and potentially value delivery as central elements even though this last dimension of the business model is not yet assessed. the authors then introduce the concept of coopetitive business models thus suggesting that business models could be planned from a coopetitive perspective to serve a specific purpose (velu, 2018). similar links were noted between the concept of coopetition and business model innovation. some scholars have investigated whether firms chose to engage in coopetition in order to innovate their business models (velu, 2016) or adapt them in times of crisis (crick & crick, 2020). in this case, business model innovation or adaptation is the primary objective for companies and engaging in coopetition is the mean to achieve this goal. other scholars have considered that business model innovation could be one of the many outcomes for firms that choose to engage in coopetition (kraus et al., 2018). therefore, it is consequent to engaging in a coopetitive setting but not the primary motivation. this paper seeks to further explicit the link between business models and coopetition, a research area that was highlighted in the literature (bengtsson & kock, 2014). in particular, it takes the specific case of coopetitive settings involving asymmetric coopetitors (hogenhuis et al., 2016), large firms and small and young firms, settings that were highlighted by scholars in the field of coopetition as lacking in terms of contribution (devece et al., 2019; hora et al., 2018) since coopetition was mainly studied in the context of large companies (chiambaretto et al., 2020). it also investigates the influence of these settings on the business model of the incumbent actor and its adaptation (saebi et al., 2016). hence, this paper follows the perspective of foss and saebi (2016), who operate a distinction between business model adaptation, where firms undergo a process of transformation of their business models to adapt to changes stemming from their environment and business model innovation, where firms engage in a voluntary process of transformation of their business models. this study thus aims at answering the following research question: how does the development of coopetitive settings involving small and young firms influence the process of business model adaptation within large firms? the banking industry provides an empirical context for investigating how to integrate coopetition and business models. in the past ten years, the banking industry has gone through several changes: regulatory changes on the national, european and global level. in france for instance, the creation of a breach in the monopoly of banks in the lending segment facilitated the emergence of crowdlending platforms (souchaud, 2017). on the european level, journal of business models (2022), vol. 10, no. 1, pp. 19-29 2121 the adoption of a new european directive (psd2) that ended the monopoly of banks in the payment segment facilitated the entry in the market of new actors, which are today referred to under the umbrella term of fintech (gomber et al., 2017). while different usages of the term could be noted in the literature, to refer to a technology (chen et al., 2019) or to refer to new markets (schmidt et al., 2018), this paper uses the term fintech to refer to rising companies that deliver financial services through innovative solutions (gimpel et al., 2018). these rising companies seemingly challenge established banks and their business models since they impose new delivery standards (seran & bez, 2020). they also have a more customer-centric approach than established players who long adopted product-centric approaches (bourjij, 2016). in some cases, they offer banking services and products that are more accessible and more affordable (rochet & verdier, 2021). these regulatory changes associated with a change in the competitive landscape have created among banks a need for innovation and constant development (sund et al., 2021). yet, what scholars have observed is that banks, instead of engaging in a frontal battle with the newcomers, have shifted from a competitive logic to a logic of collaboration (hornuf et al., 2020; schmidt et al., 2018) or acquisition of fintech companies (pietronudo et al., 2021). this paper will focus on the case of an incumbent corporate bank which has been actively involved with fintech companies (acquisition, partnerships, internal creation). the analysis of the different means of engagement with fintech companies will allow a better understanding of the nature of the relationship between fintech companies and the incumbent bank. it will also allow the analysis of the impact on the business model of the incumbent corporate bank and its evolution. through our research, we aim to contribute to the already rich literature addressing business models and business model innovation and adaptation (foss & saebi, 2016; xavier et al., 2010), especially business model innovation within large companies facing the rise of competitors adopting new and disruptive bms (lüttgens & montemari, 2016). we also aim at contributing to research on coopetition and coopetitive ecosystems (adner, 2017) and respond to the specific call for research on coopetition between corporates and startups and smes (bouncken et al., 2015; hora et al., 2018). the paper is structured as follows: section two presents the methodological approach of the research, whereas section three presents the key insights. these sections are followed by a discussion of the results in light of the existing literature and the conclusion. study design in this paper, a qualitative single-case study was conducted, taking the case of an incumbent corporate bank which has been actively involved with startups. the choice of single-case studies allow researchers to gain an in-depth understanding of organizational phenomena and how such phenomena unfold over time (ozcan et al., 2017). in particular, single case studies have been recommended for the exploration of new phenomena, here, the relationship between coopetition and business models (ritala et al., 2014) and has been described as an appropriate approach for studying the way business models evolve (hamani & simon, 2020). researchers also opted for a longitudinal case study, that allows the observation of the process of business model innovation and, on the other, shows how coopetitive settings evolve over time. the choice of the case company was carried out following a first period of observation and listing of all the m&a deals and alliances that took place between fintech companies and incumbent banks in france. this led to the identification of some key players in the industry including the commercial bank that was selected for the investigation of the research question and because of facilitated field access for data collection. the 360° business model framework the literature (osterwalder & pigneur, 2010; warnier et al., 2016) proposes various frameworks for journal of business models (2022), vol. 10, no. 1, pp. 19-29 2222 analyzing the business models. this paper focuses on the 360° model framework as described by rayna & striukova (2016), as it allows scholars to have a dynamic and integrated view of the process of business model innovation. the framework is also suitable for the analysis of business models on an ecosystem level. as shown in figure 1, the model is characterized by five components: value creation, value proposition, value delivery, and value capture, which are often found in other frameworks to which researchers have added another component, value communication. according to the authors, firms create value by combining core competencies, key resources, governance, complementary assets, and value networks. � figure 1: the 360° business model framework the value captured by the firm, also referred to by some scholars as the profit formula (johnson et al., 2008), can be assessed according to three indicators the revenue model, the cost structure, and the profit allocation across the value chain. the greater the total value created, the more a company reinforces its bargaining power and the greater the amount of value that can be appropriated or captured (zott et al. 2010). the value proposition represents the benefits delivered to stakeholders for which payment or another value exchange occurs (bocken et al., 2013). it defines the type of services or products offered by firms and the price of these offerings. on the other hand, value delivery looks at the distribution channels through which these products and services are provided and the targeted customer segments. lastly, value communication defines the way companies communicate with stakeholders in their environment about the value they create. as argued by the authors, it includes “the story the firm tells and the ethos it communicates which allows the firm to set itself apart from the competition and encourage customers to build an emotional identification with the company” (rayna et striukova, 2016, p23). analysis of coopetitive settings different definitions of the concept of coopetition have been suggested in the literature (bengtsson & kock, 2014). yet, most of them agree that coopetition is characterized by the simultaneous presence of two contradicting logics, cooperation and competition (gnyawali & ryan charleton, 2018), which make these settings particularly complex (lado et al., 1997). we retain the following definition suggested by bouncken et al. (2015, p. 591):“ coopetition is a strategic and dynamic process in which economic actors jointly create value through cooperative interaction, while they simultaneously compete to capture part of that value”. coopetitive settings have been observed and studied at multiple levels: at the inter-organizational level (bengtsson & kock, 2000), within different units of the same firm (tsai, 2002), and even at the individual level (chiambaretto et al., 2019). similarly, coopetition has been analyzed on the horizontal and also on the vertical level (lechner et al., 2016) for instance between suppliers and their customers. case company the corporate bank was set up in the late 1800. it totalizes about 30  million clients, employs over 120  000 people, and is present internationally (in over 50 countries). starting from 2015, the corporate bank has been an active player in terms of investment, acquisition, and journal of business models (2022), vol. 10, no. 1, pp. 19-29 2323 collaboration with fintech companies. researchers identified: • three acquisitions of fintech companies: a crowdlending platform (cl), a startup providing banking services to small businesses (s1), and a startup providing one-stop shop banking services to rising fintech startups (s2), • one fintech created internally providing banking services to small and medium enterprises (smes), • several partnerships with fintech companies data collection researchers relied on primary and secondary data representing a six-year period (from 2015 to 2021). primary data were gathered through semi-structured interviews and are still being collected. the interview questions varied according to the profile of interviewees: either presenting the perspective of the case bank or presenting the perspective of fintech startups. in the first case, the questions aimed at understanding the approach of the case bank in terms of innovation and in relation with fintech startups. researchers also asked interviewees to reflect on the case of the fintech companies which were acquired by the case bank. in the second case, the interview questions covered aspects that allowed researchers to understand the specificities of the business model of the considered fintech startups and asked interviewees to reflect on the nature of their relationships with the corporate bank. the interviews allowed researchers to hear from: • representatives from the case bank (four interviews) • representatives of fintech startup acquired by the bank (three interviews) • interviews with fintech startups created internally (one interview) • interviews with fintech companies which are indirect customers of the bank (four interviews) the interviews lasted between 33 min and 53  min. they were recorded and then transcribed as soon as possible in order to preserve the quality of the data (dumez, 2016). they were then transcribed in english since the original data set was in french. secondary data was collected through press reviews, the screening of different conferences and podcasts that specifically addressed the nature of the relationship between the corporate bank and the fintech companies it is associated with. key insights the first findings concern the qualification of the nature of the relationship between banks and fintech companies. a first positioning was identified where fintech companies position themselves as suppliers of technological solutions for banks. this first positioning was confirmed by certain scholars (hornuf et al., 2020; schmidt et al., 2018) which show that banks rely on the services and solutions provided by fintech companies to accelerate their digital transformation processes . this is also observed in the context of the case bank with a number of partnerships serving operational needs (solutions to track fraud, cash collection solutions) and allowing the bank to swiftly adapt to the needs and challenges brought by the digital age (klus et al., 2019). as argued by one of the bank’s representatives: “these are back-office partnerships”. we observed a number of partnerships with fintech startups that allowed the bank to offer extra-financial services to its customers, such as accounting services, website development services or e-commerce platforms development . as argued by one of the interviewees: “these collaborations allow us to integrate products that are not ours into our channels [..] it is in fact the opportunity for us to better serve our customers’’. these products or services, offered through partnerships with fintech companies, constitute complementary assets for the bank and are a vector for retaining old customers. for the time being, the bank is remunerating itself on the basis of a business service provider model and enables its customers to benefit from certain advantages (discounts, free services, etc.) if they make use of their partners’ journal of business models (2022), vol. 10, no. 1, pp. 19-29 2424 services. therefore, we uncover another positioning of fintech companies, as complementors of the bank. building on the 360° framework (rayna & striukova, 2016), we see that these fintech companies exert an impact on the value creation component, precisely on the two sub-dimensions of value networks and complementary assets. with respect to the impact on the value capture dimension, we assume that such partnerships could provide the bank with new revenue models. however, uncertainties remain concerning the bank’s ability to accentuate the relevance of such partnerships to its existing customers or whether these partnerships could be a driving force to attract new clients. this aspect is currently being investigated. this aspect needs to be investigated (or deepens) in future studies. our results also uncover a third positioning of fintech companies as clients of banks. this aspect is salient to the banking industry, which is a highly regulated industry, and requires companies evolving in this industry to operate as regulated actors and therefore obtain a license. a second alternative consists in leaning against a regulated actor, a bank, or another regulated company, in order to be able to operate. thus, the acquisition of s2, an example of such regulated actors that is the driving force behind many other fintech companies presenting an overlap in certain market segments covered by the bank (segment of young adults, segment of small businesses..) was a strategic move for the case bank. indeed, by allowing the bank to have access to the ecosystem of s2, it also allows it to operate as an active contributor to this ecosystem. as argued by a representative from the bank: “the way we see it is that a customer comes to s2, they will grow. they will go into the whole ecosystem of services that we offer”. thus, building on the 360° framework (rayna & striukova, 2016), we see that the corporate bank is able to boost its value delivery through s2, which serves as a vehicle for distributing its products and also have access to other market segments. it is also a way for the corporate bank to generate new revenue streams that ultimately impact the way it captures value. moreover, we see that the bank positions itself through s2 in a vertical coopetitive setting as a supplier of technological facilities while remaining in competition on certain market segments with clients of s2. lastly, the analysis of fintech companies as coopetitors is still ongoing. the first assumption is that such actors will certainly impact the value delivery dimension on the two levels of target market segment since coopetition often involves competition on markets or clients and potentially distribution channels. in the context of this study, this aspect is salient when we look at the case of s1 which provides banking services to small businesses, a market segment that the corporate bank already addressed through its traditional branches. as argued by one of the bank’s representatives: “we bought a vehicle that we thought would meet the expectations of a segment we wanted to enter”. thus, we suggest the following building on the 360° framework (rayna & striukova, 2016): fintech companies positioned as coopetitors in the ecosystem of the corporate bank exert an impact on the value delivery dimension of the business model. discussions and conclusions this paper tried to look at the process of business model adaptation within an incumbent player following the rise of entrants in the market. as highlighted by scholars, the description of the business model adaptation process is an area that remains to be further investigated and clarified (foss & saebi, 2016; schneider & spieth, 2013; wirtz & daiser, 2017) and we aimed, through our study, to contribute to improving the understanding of this process in two ways. first, we showed how the incumbent bank was able to construct an ecosystem by engaging with fintech companies that play different roles: suppliers complementors clients and to some extent coopetitors. in the two cases of complementors and clients, we saw how the bank’s business model evolves with regard to the way it creates and captures value and to a lesser extent to the way it delivers value. journal of business models (2022), vol. 10, no. 1, pp. 19-29 2525 with respect to the positioning of fintech companies as coopetitors, we tried to shed light on how engaging in coopetition contributes to the evolution of the business model of the incumbent bank. our preliminary results indicate the existence of a link between the two concepts with respect to the value delivery dimension, which was already suggested by some scholars but hasn’t been presented in previous studies, at least to our best knowledge (ritala et al., 2014). as these are preliminary results, we also expect to have additional findings concerning the impact of coopetition on the two dimensions of value creation and value capture. we have primarily taken the perspective of the large firm in this study. yet, we believe taking the perspective of young entities and seeing how such coopetitive settings affect the design of their business models (massa & tucci, 2014) deserves further consideration. concerning, the link between coopetition and business models, we present a first level of analysis on how both concepts could be analyzed simultaneously. future studies could try to look at other levels of analysis such as the risk management processes implemented by firms which chose to engage in the two processes/settings of business model innovation and coopetition, often described as risky and presenting a high level of failure (velu, 2018). journal of business models (2022), vol. 10, no. 1, pp. 19-29 2626 references adner, r. (2017). ecosystem as structure : an actionable construct for strategy. journal of management, 43(1), 39-58. https://doi.org/10.1177/0149206316678451 andreini, d., & bettinelli, c. (2017). business model innovation : from systematic literature review to future research directions. springer international publishing. https://doi.org/10.1007/978-3-319-53351-3 bengtsson, m., & kock, s. (2000).”coopetition” in business networks—to cooperate and compete simultaneously. industrial marketing management, 29(5), 411-426. https://doi.org/10.1016/s0019-8501(99)00067-x bengtsson, m., & kock, s. (2014). coopetition—quo vadis? past accomplishments and future challenges. industrial marketing management, 43(2), 180-188. https://doi.org/10.1016/j.indmarman.2014.02.015 bengtsson, m., & raza-ullah, t. (2016). a systematic review of research on coopetition : toward a multilevel understanding. industrial marketing management, 57, 23-39. https://doi.org/10.1016/j.indmarman.2016.05.003 berglund, h., & sandström, c. (2013). business model innovation from an open systems perspective : structural challenges and managerial solutions. international journal of product development, 18(3/4), 274. https:// doi.org/10.1504/ijpd.2013.055011 bocken, n., short, s., rana, p., & evans, s. (2013). a value mapping tool for sustainable business modelling. corporate governance: the international journal of business in society, 13(5), 482-497. https://doi.org/10.1108/ cg-06-2013-0078 bouncken, r. b., gast, j., kraus, s., & bogers, m. (2015). coopetition : a systematic review, synthesis, and future research directions. review of managerial science, 9(3), 577-601. https://doi.org/10.1007/s11846-015-0168-6 bourjij, s. (2016). innovations technologiques et offre de services financiers en appui au développement : note de conjoncture et de problématique. techniques financières et développement, 124(3), 7. https://doi. org/10.3917/tfd.124.0007 chen, m. a., wu, q., & yang, b. (2019). how valuable is fintech innovation? the review of financial studies, 32(5), 2062-2106. https://doi.org/10.1093/rfs/hhy130 chesbrough, h. (2010). business model innovation : opportunities and barriers. long range planning, 43(2-3), 354-363. https://doi.org/10.1016/j.lrp.2009.07.010 chiambaretto, p., bengtsson, m., fernandez, a.-s., & näsholm, m. h. (2020). small and large firms’ trade-off between benefits and risks when choosing a coopetitor for innovation. long range planning, 53(1), 101876. https://doi.org/10.1016/j.lrp.2019.03.002 chiambaretto, p., fernandez, a.-s., & roy, f. l. (2019). 10. la coopétition ou l’art de coopérer avec ses concurrents. in les grands courants en management stratégique (p. 281-312). ems editions. https://www.cairn.info/ les-grands-courants-en-management-strategique--9782376873174-page-281.htm crick, j. m., & crick, d. (2020). coopetition and covid-19 : collaborative business-to-business marketing strategies in a pandemic crisis. industrial marketing management. scopus. https://www.scopus.com/inward/ record.uri?eid=2-s2.0-85085321642&doi=10.1016%2fj.indmarman.2020.05.016&partnerid=40&md5=8627760 3fcd93dc6933a025e5ff424b0 journal of business models (2022), vol. 10, no. 1, pp. 19-29 2727 devece, c., ribeiro-soriano, d. e., & palacios-marqués, d. (2019). coopetition as the new trend in inter-firm alliances : literature review and research patterns. review of managerial science, 13(2), 207-226. https://doi. org/10.1007/s11846-017-0245-0 dumez, h (2016) méthodologie de la recherche qualitative. vuibert, paris. gimpel, h., rau, d., & röglinger, m. (2018). understanding fintech start-ups—a taxonomy of consumer-oriented service offerings. electronic markets, 28(3), 245-264. scopus. gnyawali, d. r., & ryan charleton, t. (2018). nuances in the interplay of competition and cooperation : towards a theory of coopetition. journal of management, 44(7), 2511-2534. https://doi.org/10.1177/0149206318788945 gomber, p., koch, j.-a., & siering, m. (2017). digital finance and fintech : current research and future research directions. journal of business economics, 87(5), 537-580. https://doi.org/10.1007/s11573-017-0852-x hamani, a., & simon, f. (2020). business model innovation in a network company. journal of innovation economics & management, n°33(3), 105. https://doi.org/10.3917/jie.033.0105 hogenhuis, b. n., van den hende, e. a., & hultink, e. j. (2016). when should large firms collaborate with young ventures? : understanding young firms’ strengths can help firms make the right decisions around asymmetric collaborations. research-technology management, 59(1), 39-47. https://doi.org/10.1080/08956308.2016.111732 9 hora, w., gast, j., kailer, n., rey-marti, a., & mas-tur, a. (2018). david and goliath : causes and effects of coopetition between start-ups and corporates. review of managerial science, 12(2), 411-439. https://doi.org/10.1007/ s11846-017-0273-9 hornuf, l., klus, m. f., lohwasser, t. s., & schwienbacher, a. (2020). how do banks interact with fintech startups? small business economics. scopus. https://www.scopus.com/inward/record.uri?eid=2-s2.085085013087&doi=10.1007%2fs11187-020-00359-3&partnerid=40&md5=071673eaf6f3b22174f8f9860fda5238 johnson, m. w., christensen, c. m., & kagermann, h. (2008). reinventing your business model. harvard business review, 86, 50-59. klang, d., wallnöfer, m., & hacklin, f. (2014). the business model paradox : a systematic review and exploration of antecedents: the business model paradox. international journal of management reviews, 16(4), 454-478. https://doi.org/10.1111/ijmr.12030 kraus, s., schmid, j., & gast, j. (2018). innovation through coopetition : an analysis of smalland medium sized trust companies operating in the liechtenstein financial centre. international journal of business science and applied management, 17. lado, a., boyd, n., & hanlon, s. (1997). competition, cooperation and the search for economic rents : a syncretic model. academy of management review, 22(1), 110-141. lecocq x., demil b. (2010), business models as a research program in strategic management: an appraisal based on lakatos, m@n@gement, 13, 4, p.214-225. www.management-aims.com/papersmgmt/134lecocq.pdf https://doi.org/10.1007/s11846-017-0245-0 https://doi.org/10.1007/s11846-017-0245-0 http://www.management-aims.com/papersmgmt/134lecocq.pdf journal of business models (2022), vol. 10, no. 1, pp. 19-29 2828 iivari, m. 2015, “dynamics of openness in smes: a business model and innovation strategy perspective”, journal of business models, vol. 3, no. 2, pp. 30-50. lüttgens & montemari (2016), editorial: new ways of developing and analyzing business model innovation, journal of business models, vol. 4, no. 3, pp. 1-4 mason, k., & spring, m. (2011). the sites and practices of business models. industrial marketing management, 40(6), 1032-1041. https://doi.org/10.1016/j.indmarman.2011.06.032 massa, lorenzo & tucci, christopher. (2013). business model innovation. the oxford handbook of innovation management. 420-441. osterwalder, a., & pigneur, y. (2010). business model generation—a handbook for visionaries, game changers and challengers”. ozcan, pinar, han, s. and graebner, m. e. (2017) single cases: the what, why, and how. in: mir, raza a. and jain, sanjay, (eds.) the routledge companion to qualitative research in organization studies. new york: routledge, pp. 92-112. isbn 9781138921948 pietronudo, m. c., del gaudio, b. l., & leone, d. (2021). coopetition strategy and industry convergence. evidence in the chinese banking market. technology analysis & strategic management, 1-14. https://doi.org/10.1 080/09537325.2021.2003323 rayna, t., & striukova, l. (2016). 360° business model innovation : toward an integrated view of business model innovation: an integrated, value-based view of a business model can provide insight into potential areas for business model innovation. research-technology management, 59(3), 21-28. https://doi.org/10.1080/0895630 8.2016.1161401 ritala, p., golnam, a., & wegmann, a. (2014). coopetition-based business models : the case of amazon.com. industrial marketing management. scopus. https://www.scopus.com/inward/record.uri?eid=2-s2.0-84897663281&doi=10.1016%2fj.indmarman.2013.11.005&partnerid=40&md5=305d5d4e3f804d2ec1a0fd542466e992 ritala, p., & sainio, l.-m. (2014). coopetition for radical innovation : technology, market and business-model perspectives. technology analysis and strategic management. scopus. https://www.scopus.com/inward/record.uri?eid=2-s2.0-84893022912&doi=10.1080%2f09537325.2013.850476&partnerid=40&md5=8c36c23cb0 8ab371eff6b173fe60a0ae rochet, j.-c., & verdier, m. (2021). banques, monnaie et paiements: revue d’économie financière, n° 142(2), 135-155. https://doi.org/10.3917/ecofi.142.0135 saebi, t., lien, l., & foss, n. (2016). what drives business model adaptation ? the impact of opportunities, threats and strategic orientation. long range planning, 50. https://doi.org/10.1016/j.lrp.2016.06.006. schmidt, j., drews, p., & schirmer, i. (2018). charting the emerging business ecosystem of fintechs and banks: seven types of collaborative business models. 16. https://doi.org/10.1016/j.indmarman.2011.06.032 journal of business models (2022), vol. 10, no. 1, pp. 19-29 2929 seran, t., & bez, s. m. (2020). open innovation’s “multiunit back-end problem” : h ow c orporations c an o vercome b usiness u nit r ivalry. california management review, 000812562096860. https://doi. org/10.1177/0008125620968609 souchaud, a. (2017). deus ex machina dans l’« espace régulatoire » du crédit en france, la reconnaissance du crowdlending face au monopole bancaire. annales des mines gérer et comprendre, n° 128(2), 3. https://doi. org/10.3917/geco1.128.0003 spieth, p., laudien, s. m., & meissner, s. (2020). business model innovation in strategic alliances : a multi‐layer perspective. r&d management, radm.12410. https://doi.org/10.1111/radm.12410 spieth, p., & schuchert, s. (2017). business model innovation alliances: how to open business models for cooperation. international journal of innovation management, 22, 1850042. https://doi.org/10.1142/ s1363919618500421. sund, k. j., bogers, m. l. a. m., & sahramaa, m. (2021). managing business model exploration in incumbent firms : a case study of innovation labs in european banks. journal of business research, 128, 11-19. https://doi. org/10.1016/j.jbusres.2021.01.059 tsai, w. (2002). social structure of “coopetition” within a multiunit organization : coordination, competition, and intraorganizational knowledge sharing. organization science, 13(2), 179-190. https://doi.org/10.1287/ orsc.13.2.179.536 velu, c. (2016). evolutionary or revolutionary business model innovation through coopetition ? the role of dominance in network markets. industrial marketing management. scopus. https://www.scopus.com/inward/ record.uri?eid=2-s2.0-84951961333&doi=10.1016%2fj.indmarman.2015.11.007&partnerid=40&md5=592aaf623c662000818370098536e89e velu, c. (2018). coopetition and business models. in a.-s. fernandez, p. chiambaretto, f. le roy, & w. czakon (éds.), the routledge companion to coopetition strategies (p. 10 4324 9781315185644-32). warnier, v., lecocq, x., & demil, b. (2016). le business model, un support à la créativité de l’entrepreneur. entreprendre & innover, 28(1), 65. https://doi.org/10.3917/entin.028.0065 wirtz et al. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1-28 wirtz, b.w. and p. daiser (2017), business model innovation: an integrative conceptual framework, journal of business models, vol. 5, no. 1, pp. 14-34 zott, c., & amit, r. (2010). business model design : an activity system perspective. long range planning, 43(2-3), 216-226. https://doi.org/10.1016/j.lrp.2009.07.004 https://doi.org/10.3917/entin.028.0065 journal of business models (2021), vol. 9, no. 2, pp. 1 21 1 exploring the coevolution of traditional and sustainable business models: a paradox perspective niklas endregat, msc1*, dr. bartjan pennink2 abstract purpose: this paper rectifies a dearth in current research and investigates the coevolution of traditional and sustainable business models under one corporate roof. by taking on a paradox perspective, firms’ solutions, and mechanisms to cope with the paradoxical tensions that arise throughout the coevolution are determined and analyzed. design/methodology/implications: this is executed by conducting seven case studies of western-european firms, consulting firms, and governmentally-owned consulting institutions. findings: findings display the array of responses firms deploy to address paradoxical areas of competing demands of economic, social, and environmental foci, organizational culture and mindset, training and staffing, resource allocation, and the stakeholder environment during the coevolution of traditional and sustainable business models. furthermore, four coping strategies firms utilize are derived from the data, namely splitters, operational perfectionists, strategic mandators, and transformers. research limitations: all cases under investigation resemble western-european firms, which limits the generalizability of the findings at hand. furthermore, the sample size and the mixed industries cases have been selected from stipulate a limitation. practical implications: this paper outlines four pathways firms deploy to address paradoxical tensions arising during the coevolution of traditional and sustainable business models under one corporate roof. originality/value: this study contributes to the discussion related to the integration of traditional and sustainable business model research, as it sheds light onto a previously largely unresearched phenomenon: a situation where both business models coevolve under one corporate roof. utilizing the paradox view as a theoretical lens, underlying dynamics and arrays of solutions are uncovered. please cite this paper as: endregat, n. and dr. pennink, b. (2021), exploring the coevolution of traditional and sustainable business models: a paradox perspective, journal of business models, vol. 9, no. 2, pp. 1-21 keywords: traditional business models, sustainable business models, coevolution, paradox lens, sustainability 1-2 university of groningen, the netherlands *corresponding author, email: nik.endregat@gmail.com doi: https://doi.org/10.5278/jbm.v9i2.6088 mailto:nik.endregat@gmail.com https://doi.org/10.5278/jbm.v9i2.6088 journal of business models (2021), vol. 9, no. 2, pp. 1 21 2 introduction in light of a rapidly and radically changing planet, which has exposed long-term challenges such as climate change and pollution (montalvo et al., 2006), the development of new logics regarding the conduct of social and environmental affairs in the field of business models is more crucial than ever before. whilst the predominant logic of a firm rests upon neo-classical theory (stormer, 2003), current developments have raised awareness that firms indeed may have an obligation to move beyond mere economic value creation, and the literature on sustainable business models (sbms) has experienced a surge of interest (dentchev et al., 2018). sbms assimilate three pillars, namely (i) a sustainable value proposition not only to a firm’s customers, but spanning all stakeholders, (ii) value creation that includes all stakeholders, and distributes benefits accordingly, and (iii) an economic value capture that, at the least, maintains social, environmental, and economic value throughout the spheres of organizations’ operations (lüdeke-freund & dembek, 2017; schaltegger et al., 2016). sbms, hence, inherit the potential to facilitate the development of solutions to face the long-term challenges identified by our society. nonetheless, dentchev et al. (2018) outline a dearth of literature concerning the coevolution of traditional business models (tbms) and sbms. ergo, the coevolutionary process and interrelations between tbms and sbms remain unexplored (dentchev et al., 2018). in order to bridge this gap, this paper investigates the following research question: how do traditional and sustainable business models coevolve within firms? in order to answer this research question, a paradox lens is adopted. the paradox view stipulates that organizations must, throughout the course of their existence, overcome situations where apparently opposing goals and demands seem to be incongruent. representing “persistent contradiction[s] between interdependent elements” (schad, 2016: 6), and therefore the definition of a paradox, tbms and sbms, stemming from their opposing foci, resemble opposing poles on a continuum (biloslavo et al., 2018). throughout the coevolution of tbms and sbms, the interrelated nature gives rise to several paradoxical tensions (vladimirova et al., 2017). these paradoxical tensions need to be bridged with coping strategies that firms develop to navigate their way around paradoxical waters. by addressing the dearth in the literature and using case studies, the contribution of this paper is threefold. firstly, insights into the coevolution of tbms and sbms within a firm are generated. we hope these aid further developments in the integration of the fragmented research fields on tbms and sbms by analyzing the coevolution through a fresh perspective: a paradox lens (biloslavo et al., 2018; dentchev et al., 2018). secondly, this paper uncovers four coping strategies to overcome paradoxes during the coevolution. and lastly, it informs practitioners of best practices on the management of both tbms and sbms under one corporate roof. theoretical background the concept of a traditional business model the concept of the traditional business model started to emerge in the late 1990s (alt & zimmerman, 2014), with a logic of the firm resting upon neoclassical theory (stormer, 2003). neoclassical theory mandates the firm to maximize economic profits, and hence, success is defined by profit maximization only. reforms would only be engaged in if it serves the organization’s own agenda (purser, park, & montouri, 1995). consequently, this dictates that externalities like waste or pollution are disregarded, encouraging firms to engage in make-tothrow-away approaches instead of sustainable resource utilization (shrivastava, 1995). indeed, in the neoclassical view, corporate ambitions to pursue sustainable goals are seen to be inferior to the principal aim of economic profit maximization (freeman & gilbert jr., 1992). due to the different usage of the concept of a tbm, and hence the different contexts it has been applied to, three major stances have been identified by wirtz (2011, wirtz et al., 2016). these are the technology driven approach (e.g. gambardella & mcgahan, 2010; ghaziani & ventresca, 2005), organizational theory (e.g. tikkanen et al., 2005), and the strategy-oriented approach (e.g. chesbrough, 2010; mitchell & coles, 2003). overarching of these streams, boons et al. (2013) have identified three distinct elements a tbm encompasses. firstly, a value proposition, referring to the interconnection of exchange between an organization and its customers. secondly, it must clarify the process of value creation, spanning the organization’s spheres of operations. lastly, a business model identifies the value capture component. in a journal of business models (2021), vol. 9, no. 2, pp. 1 21 3 similar fashion, boons and lüdeke-freund (2013) identify four areas a business model portrays. by extending the work of osterwalder (2004) and doganova & eyquemrenault (2009), they have identified (i) a value proposition, (ii) a specification on the arrangement of the supply chain, (iii) a clarification on customer relationships, and (iv) a financial model stipulating the distribution of costs and revenues. more recently, wirtz et al. (2016) highlighted a convergence of all three major stances regarding the business model concept. they identified a more homogenous comprehension of the business model concept materializing with contemporary authors increasingly defining it as an abstraction of the organization in its entirety. thus, after a revaluation of the dominant literature concerning the business model, wirtz et al. (2016) defined a business model as follows, and this definition shall serve as a conceptualization for this paper: “a business model is a simplified and aggregated representation of the relevant activities of a company. it describes how marketable information, products, and/or services are generated by means of a company’s valueadded component. in addition to the architecture of value creation, strategic as well as customer and market components are taken into consideration, in order to achieve the superordinate goal of generating, or rather, securing the competitive advantage (wirtz et al., 2016: 41).” the concept of a sustainable business model the shift away from economic-focused business models by including social and environmental values has paved the way for sustainable business models (schaltegger et al., 2012). lit by elkington’s (1997) early approach of a triple bottom line entailing people, planet and profit combined, and lovins’ et al. (1999) fourfold set of actions incorporating environmental needs in firms’ operations, the spark of sustainable infusion of tbms started to glow. elkington’s (1997) triple bottom line has earned its places in the majority of corporate csr reports, and is commonly acknowledged as a guiding principle in sbms (cf. breuer et al., 2018). the concept of an sbm has begun to emerge (schaltegger et al., 2012). similarly to tbms, sbms display a fragmented nature and the literature has progressed in several ways. lüdeke-freund & dembek (2017: 1674) present evidence that “sbm research and practice show blankial traits of an emerging field, or at least sufficient momentum to become a field in the very near future.” following their findings of a review on the contemporary state of the field, five core beliefs and concepts have been presented to hold true among all streams of literature, based on ehrenfeld’s (2004) criteria on the evaluation of a research field. they identified (i) an explicit orientation towards sustainability, comprising ecological, social, and economic elements, (ii) a redefinition of the traditional notion of value creation, (iii) an extended comprehension of value capture in terms of actors considered, (iv) a replacement of customer focus with stakeholder focus, and (v) an embeddedness of the organization’s surrounding within its sustainable business and beyond. in light of these five core principles, the definition of schaltegger et al. (2016) embodies the best reflection of these constituents, and shall thus serve as this paper’s definition: “a business model for sustainability helps describing, analyzing, managing, and communicating (i) a company’s sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries (schaltegger et al., 2016: 6).” the co-evolution of traditional and sustainable business models the evolution from tbms to sbms, hence, involves a threefold set of economic, social, and environmental components, leading to multi-value creation and multiple actors across the firm’s operational chain (pennink, 2014). when introducing a new sbm, it will co-exist and co-evolve with the firm’s incumbent tbm (graf, 2005; moingeon & lehmann-ortega, 2010). similarly, sabatier, mangematin, & rousselle (2010) find that new firms may entertain a bm portfolio, defined as “a portfolio of business models as the range of different ways a firm delivers value to its customers” (sabatier, mangematin, & rouselle, 2010: 432). the relationship between tbms and sbms, thus, ought to be seen as two opposing yet mutually influencing poles along a continuum rather than a linear relationship (boons & lüdeke-freund, 2013; moingeon & lehmann-ortega, 2010). hence, the situation considering the bms in this paper is the following. the cases investigated for this paper have had tbms established first, and (co-established) their sbms journal of business models (2021), vol. 9, no. 2, pp. 1 21 4 afterwards. the moment of investigation is from that time onwards, so after both have been established and are operating alongside one another. figure 1: tbms and sbms. combining opposites: a paradox perspective following the paradox view, corporations have to face and resolve apparently opposing goals and demands along the course of their existence (smith & lewis, 2011). tbms and sbms are to be seen as opposing poles on a continuum, thereby reflecting the definition of a paradox, or a “persistent contradiction between interdependent elements” (schad, 2016: 6). paradoxes originate in the unique history of organizations, cultural context, and the strategic settings utilized along their existence. paradoxes may be occurring across several time and space levels (biloslavo et al., 2018). paradoxes, such as the coevolution of tbms and sbms, inherit paradoxical tensions. tensions are defined as “elements that seem logical individually but inconsistent and even absurd when juxtaposed” (smith & lewis, 2011: 382). paradoxical tensions that occur during the co-evolution of tbms and sbms will be discussed below. paradoxical tensions and coping-strategies in the co-evolution of traditional and sustainable business models paradoxical tensions arise throughout the process of organizing, when two opposing poles manifest within a given context (smith & lewis, 2011). an orientation in the direction of sustainability implies constant friction and challenges that materializes between internal and external stakeholders and their respective set of interests (biloslavo et al., 2018). indeed, the co-evolution of tbms and sbms sets free potential for paradoxical tensions (vladimirova et al., 2017), which we have summarized below after consulting relevant literature. concerning a first area of paradoxical tension, namely the competing demands of tbms and sbms, hart & millstein (2003) corroborate how sustainability, although often described as being incompatible with economic value creation, may be integrated and balanced. similarly, stubbs & cocklin (2008) pinpoint the challenges of balancing the neoclassical and the ecological modernization perspective within organizations, whilst schaltegger et al. (2012) underscore the battle to balance economic fitness and social and environmental sustainability. to remedy this, rangan, karim, and chase (2015) present three theaters that embellish our understanding of the degree sustainability is embedded in companies’ bms and how reporting is undertaken. the first theater takes a philanthropic approach, the second theater opts for operational improvements to enhance sustainability, and the third theater is concerned with a complete business model transformation. regarding a possible cannibalization of profit margins between tbms and sbms, schaltegger et al. (2012) highlight three possible reaction-types to address this. firstly, the defensive type, involving adaption of products and product communication to reduce risks of profit margin loss. second, the accommodative type, recognizing customer segments targeted at sustainability, and serving them with specific products, next to pre-existing tbms. and thirdly, the proactive type, strategically establishing a competitive advantage with an sbm becoming the dominant element in the business portfolio. the second area of paradoxical tension concerns the organizational culture and mindset of an organization. barquet et al. (2013) illustrate the timeand resource intensity required to (re-)craft and harmonize culture and mindset during bm innovation. similarly, the tension between incumbent and sustainable mindsets is highlighted by schaltegger et al. (2012). as avenues for harmonization, the following paths to rectify these paradoxical tensions are found in the literature. barquet et al. (2013) and stubbs & cocklin (2008) journal of business models (2021), vol. 9, no. 2, pp. 1 21 5 identify strong (top-)leadership as a key factor, while value-aligned and inclusive corporate strategies are also highlighted by stubbs & cocklin (2008). regarding training and staffing, barquet et al. (2013) pinpoint the necessity to maintain capabilities at the highest standards through adequate training, and the possible urgency to recruit new talent in the event of change. in a similar fashion, kianto, sáenz, & aramburu (2017) corroborate the concepts of knowledge-based training and knowledge-based recruitment, to ease the achievement of an adequate human resource stock necessary to sail through the waters of co-evolution. thus, knowledge-based training and hiring display two alternatives to rectify the paradox concerning staffing and training. resource allocation, the fourth area of paradoxical tension, requires a critical consideration of a firm’s resource allocation among its bms (barquet et al., 2013). björkdahl & holmén (2013) further accentuate this circumstance, stressing the frictions regarding resource allocation between new and old bms, as the incumbent bm is generating the majority of the firm’s profits. more extremely, chesbrough (2010) pinpoints the hazard of starvation of new bms for that reason. avenues for rectification are (i) an allocation of resources that enables both bms to run independently and self-sufficient, and (ii) a gradual shift in resources from tbms to sbms to boost growth (björkdahl & holmén, 2013). the stakeholder environment stipulates a fifth area of paradoxical tension. boons & lüdeke-freund (2013) pinpoint the increased involvement of stakeholders and communities in organizations’ socioeconomic environment when sbms have advanced. schaltegger, lüdeke-freund, & hansen (2016) corroborate the different roles that stakeholders inherit within tbm and sbm settings, where the stakeholders are more involved and rewards are more equally distributed than in tbms, where economic value maximization for the focal firm is the main goal. this notion is underscored by stubbs & cocklin (2008), who found the same challenging role differences of stakeholders between the two models. thus, an increase in collaboration and involvement with stakeholders, and a balance of perks are avenues to rectify the paradox in the stakeholder environment (schaltegger, lüdeke-freund, & hansen, 2012; stubbs & cocklin, 2008). we have summarized the areas of paradoxical tensions found in the literature in table 1. no. of paradox paradox name short explanation authors 1 competing demands competing demands of economic, social, and ecological foci within one organization hart & milstein (2003) rangan, chase, & karim (2015) stubbs & cocklin (2008) schaltegger et al. (2012) 2 organizational culture and mindset competing organizational mindsets per business model and tensions for organizational culture barquet et al. (2013) boons & lüdeke-freund (2013) yu & hang (2010) 3 training and staffing different requirements related to the workforce engaged with the different business models barquet et al. (2013) kianto, sáenz, & aramburu (2017) 4 resource allocation the allocation of different resources between traditional and sustainable business models barquet et al. (2013) björkdahl & holmén (2013) chesbrough (2010) 5 stakeholder environment the impact of the coevolution on and of both the internal and external stakeholder environment surrounding the corporation boons & lüdeke-freund (2013) schaltegger, lüdeke-freud, & hansen (2016) stubbs & cocklin (2008) table 1: different paradoxes occurring during coevolution. journal of business models (2021), vol. 9, no. 2, pp. 1 21 6 the conceptual model the above-discussed areas of paradoxical tension may occur in different moments in time and reappear throughout the process of coevolution. figure 2 visualizes the five areas of paradoxical tension along with the solutions identified above. the process here refers to the time passing whilst the tbm and sbm are simultaneously managed under a single corporate roof. methodology given the aim of this research, namely, to provide coping strategies associated with the paradoxes unearthed by the coevolution of tbms and sbms, an inductive, qualitative design is chosen. derived from the interest of this research and given the fact that the research question resembles a ‘how’ or ‘why’ question, a multiple case study design is chosen (yin, 2003). moreover, this paper investigates a contemporary event, which resembles another criterion in favor of a case study design (yin, 2014: 9). case selection case selection was undertaken based on theoretical sampling (eisenhardt, 1989). the purpose of this study is the extension of an emerging field. thus, cases have been selected based on the notion that organizations are undertaking a coevolution of tbms and sbms. hence, potential cases had been approached via linkedin or email, and been asked whether a coevolution of tbms and sbms was currently taking place under their roof. if this condition was met, or if they were directly involved in advising a firm undertaking such a coevolution, they were considered feasible for the analysis. the selection resembles a literal replication aimed at gaining and validating crucial insights that can answer the research question (yin, 2014). to determine the optimal number of cases, saturation is chosen as a cut-off criterion (jonker & pennink, 2010). a list of the seven selected cases can be found in appendix 1. moreover, cases have been chosen from the following three groups of companies. the differences in groups are related to the theoretical sampling: in the three groups we expect to find differences in the process of coevolution of tbms and sbms. 1. businesses directly experiencing a coevolution of traditional and sustainable business models under their corporate roof. this group provides us with direct in-house experience, thereby validating our answers to refine our conceptual model. figure 2: the five paradoxical tensions and coping pathways. journal of business models (2021), vol. 9, no. 2, pp. 1 21 7 2. private consulting firms, which are involved in advising firms who are experiencing a coevolution of traditional and sustainable business models. this group will infuse a birds-eye perspective, thereby enhancing reliability of our answers. 3. public research and innovation entities, who are involved in advising firms, but may not be as concerned with economic viability of their consulting style as group 2. the third group is chosen to check whether the answers will differ due to economic success pressures. this has resulted in a sample of seven cases. two cases are from the netherlands, the five others from countries in europe (uk, france, belgium, norway and sweden). two cases were energy producers, one case a consumer good producer and four consulting firms. data collection phone interviews serve as a data collection method to obtain information from participants of the cases selected. to extract the full potential of information from participants, interviews have been conducted in a rather closed fashion in conjunction with a semistructured interview approach with the utilization of probing to clarify ambiguous answers. the interview guide can be found in appendix 2. all interviews were conducted by the same researcher, which may limit the search for answers on our research question. data analysis this research is guided by dey’s (1993) analytical spiral. in accordance with this spiral, textual analysis is utilized to gain information from gathered data, also referred to as coding (strauss & corbin, 1990). data is organized into codes, which are explained and defined in their initial context, and then compared and categorized to develop theory (hennink, hutter, & bailey, 2011). this process is also referred to as open, axial, and selective coding. open coding encompasses the initial organization into chunks of data and being labeled with codes. these codes are then grouped into overarching categories, which is called axial coding. selective coding, then, involves the organization of axial codes into core variables. selective coding is provided in appendix 3, whilst open and axial coding as well as the thick description of codes are available upon request. the coding procedure was done by the same researcher to ensure consistency, which was the same researcher conducting the interviews. an overview of the analyzed transcripts is found in table 2 below. research criteria data triangulation, ergo the utilization of a multitude of data sources in order to ensure a strong weight of evidence, has been chosen to strengthen this paper, combined with a closed chain of evidence (guion, 2002; jonker & pennink, 2010; yin, 2014). these are resembled by the three distinct groups outlined earlier. moreover, the selection of different european cases improves the external validity, as findings stem from an inter-european level. additionally, a case study data base was established, comprising transcripts, recordings, and other related documents, which improves reliability (yin, 2014). to account for controllability and transparency, transcripts, interview guide, and coding procedure are available upon request for the assessing entities (jonker & pennink, 2010). in this article we case label time interviewed pages of interview transcript analyzed month interview conducted case 1 business 1 (b1) 35:33 20 november 2019 case 2 business 2 (b2) 43:25 19 november 2019 case 3 business 3 (b3) 32:21 12 november 2019 case 4 consulting firm 1 (cf1) 38:01 19 november 2019 case 5 consulting firm 2 (cf2) 40:01 15 november 2019 case 6 consulting firm 3 (cf3) 32:24 12 november 2019 case 7 government consulting firm 1 (gcf1) 39:38 16 november 2019 table 2: overview of interview and transcript length. journal of business models (2021), vol. 9, no. 2, pp. 1 21 8 have used the cases in an illustrative way to build up our arguments for the answer. whilst this may evoke the feeling we are testing this is not the case. results & discussion how do firms address the paradoxical tensions of competing demands? competing demands of economic, social, and economic foci the tension of the competing demands of economic, social, and environmental foci between tbms and sbms have been addressed in several ways. b1, b2 and b3 have balanced these foci through integration of sustainability into their overall strategy. both tbms and sbms have to fulfill sustainability standards, with b2 even making sustainability a mandatory part of doing business. cf1 similarly aligns these foci through the added value that sustainability is offering, such as cost reduction and satisfaction of customer demands for more sustainability. cf2, on the contrary, reported a distinct separation of the foci per bm, where the tbm funds sustainable operations through donation of its earnings. cf3 and gcf1 both acknowledge the competitive treatment of sustainability, and the integration via a long-term strategic perspective. hence, results show that firms rectify this paradoxical tension through integration. rangan, chase, and karim’s (2015) three “theaters” are found in solving these foci. consulting firm 2 embodies theater 1, where tbm’s profits are being used to fund the sbm. theater 2 manifests in operational improvements to integrate social and environmental issues, and is embodied in b1 and b3, cf1, cf3, and gcf1, who also report business cases for sustainability introduced by schaltegger et al. (2012) and hart & milstein (2003) identified to align the competing foci during the co-evolution. theater 3, hence, a transformation of bms through engraining sustainability as a mandatory aspect of every bm, manifests in b2. comparability of performance metrics to establish comparability of endeavors throughout the corporation, the following possibilities have been reported. b2, cf1, cf2, cf3, and gcf1 have integrated sustainable and traditional reporting structures into all operations. gcf1 further adopted a triple bottom line canvas to ensure comparability of operations. b3 implemented a strategic mandate to manage future expectations for the sbm, and to prevent a bias for decisions based on return on investment only. b1 and cf1, however, adopted a translation approach to metrics, where all metrics are being translated into a higher-order performance indicator, such as translating emissions into euro, or other objective key results. cf2 indicated a clear separation of metrics per business model, meaning that the tbm is measured against traditional performance metrics, whilst the sbm utilizes indicators that are in congruence with its purpose. therefore, a comparison between the two is willingly not made. stubbs & cocklin (2008) underscored the necessity of having a reporting structure that meaningfully reflects economic, social, and ecological impacts a firm has. as gcf1 exemplifies, elkington’s (1999) triple-bottom-line approach is mirrored in a triple-bottom-line-canvas (tblc), which maps out economic, social, and environmental aspects of an organization’s operations (joyce & paquin, 2016). most cases opted for a combined reporting structure of traditional and sustainable metrics, although different options than the tblc were chosen. b3 opted for a strategic mandate to counterbalance a bias towards economic metrics (stubbs & cocklin, 2008). cf2, on the contrary, highlighted a clear separation of metrics per bm, which reflects rangan, chase, and karim’s (2015) reporting structures in theater 1. cannibalization of profit margins with respect to addressing profit margin cannibalization, two different options have been reported. cannibalization of profit margins of the tbm by the sbm has been reported to be accepted in the long-term if not strategically mandated by most cases. b2, however as a second option, handles the cannibalization issue based on a global-local strategic consideration. whilst sustainability is a mandatory pillar in these decisions, profit cannibalization dilemmas are dependent on economic and strategic factors only. schaltegger et al. (2012) highlighted three different types, of which two types have been found in the data analyzed. the accommodative type, where customer segments concerned with sustainability are recognized and served with specific products, besides existing journal of business models (2021), vol. 9, no. 2, pp. 1 21 9 tbms, is embodied by most cases, who have been entertaining an sbm next to a tbm. b2, as the second recognized type, mirrors the proactive type, as bms have been transformed to accommodate sustainable components as a mandatory part across the corporation. noteworthy is the acceptance of profit margin cannibalization by all interviewed cases. how do firms address the paradoxical tensions of organizational culture and mindset? organizational culture and mindset to address the tension of cultural and mindset difficulties between tbms and sbms, b2, b3, cf1, cf2, cf3, and gcf1 have outlined strong leadership as a key component to harmonize culture and mindset. b1 deploys a participation-based corporate strategy coupled within an inclusive corporate purpose, which is continuously communicated internally. b2, cf1, and cf2 established a strong and values-based corporate vision and philosophy which resonates with the staff’s own value set. b2 further deploys champions for sustainability that are constantly advocating for sustainable change within the organization, a practice that is also acknowledged by cf1 and cf2. b3, however, highlights the cruciality of external market developments confirming a necessary switch onto sbms alongside the tbm to aid cultural harmonization. yu & hang (2010) and boons & lüdeke-freund (2013) highlight the pivotal role culture and mindset play during the co-evolution of bms. successful adaptation of culture requires leadership (barquet et al., 2013; stubbs & cocklin, 2008). moreover, b2, cf1, and cf2, advocate for strong, values-based corporate visions and philosophies that resonate with staff’s own values, and b1 reports a participative, inclusive strategy to motivate cultural harmonization. these values-related and inclusive corporate vision and strategy is also highlighted by stubbs & cocklin (2008) and lleo, viles, jurburg, & lomas (2017). b3, instead, underscored the notion of hockerts & wüstenhagen’s (2010) market development fostering adjustment of corporate mindset. b3, thus, opted for an organic approach to cultural adjustment and harmonization. moreover, increased communication of values and purpose has been introduced, as well as different programs to standardize processes and boost growth based on common value sets. zerfass & viertmann (2016) describe a similar approach in their values-based communication paradigm, where corporate value communication to internal stakeholders is key. behavioral rules, norms, and regulations b1 established a stage-gate model that ensures the involvement of all relevant stakeholders at each step of the design process of a product or service, which enables joint agreement and inhibits cultural conflicts internally. moreover, an in-house program is in place, establishing a common mindset for the workforce by stressing the importance of operational optimization. the organization set two different strategic objectives per bm, which aids expectation management of relevant stakeholders. b2 reported a code of principles that has to be signed by every employee semi-annually, clearly underscoring the importance of values such as sustainability, respect, authenticity. a further powerful mechanism is the firm’s innovation and corporate development process, giving each brand its own purpose and commitment to shape strategy in accordance. cf1, similarly, highlights the importance of continuous communication of values and purpose. cf3 and gcf1 reported hr involvement and leadership as crucial mechanisms, whilst b3 opted for organic cultural growth instead. how do firms address the paradoxical tensions of training and staffing? regarding the training of staff, b1, b2, cf2, and gcf1 established training centers and programs to enable continuous learning. employees receive training on different matters reaching from basic skill development onto more complex, sustainability-related topics. b2 additionally introduced a purpose-led self-development program. b1 has introduced training programs for everyday improvements and understanding the weighted impact of it development per business model, which enhances transparency on how it resources are being devoted. cf2 deploys training courses to improve collaborative management. gcf1 reported the utilization of an in-house academy to facilitate skill development. in addition to these physical training opportunities, b2, b3, and gcf1 also utilized online training facilities and platforms to train employees, and other relevant stakeholders. in terms of accommodating the workforce into the process of the coevolution, values-based hiring has been introduced by business 2, business 3, consulting firm 1, consulting firm 2, and government consulting journal of business models (2021), vol. 9, no. 2, pp. 1 21 10 firm 1. this matches with the slightly confusing term in this context, ‘knowledge-based recruiting’, which “involves a strong and explicit focus on choosing candidates with relevant knowledge, learning and networking capabilities” (kianto et al., 2017: 12). in the context of the coevolution of business models, the ability to properly learn and network hinges on the understanding of the common corporate values. furthermore, kianto et al. (2017: 13) highlight the necessity to “regularly developing the depth and breadth of employees’ knowledge and expertise, personalizing training to fit particular needs and, finally, ensuring continuous employee development”. virtually all cases entertain either physical or online training facilities, or both. concerning staffing, most cases reported a valuesbased hiring process to find the best match. b2 and b3 state that recruitment efforts move toward specialized talent to satisfy the needs for the sustainable business model. similarly, cf1, cf2, and gcf1 report this development. how do firms address the paradoxical tensions of resource allocation? b1, b3, cf1, cf2, cf3, and gcf1 confirmed that resources are increasingly reallocated towards the sbm. cf2, on the other hand, reported that there are dedicated resources for each bm, and no resources flow from one to another. b2 highlighted that resources are allocated based on strategic growth decisions and performance, based on quarterly agile-performance-reviews, so that resources may flow quickly to where they are needed the most. in line with björkdahl & holmén (2013) and chesbrough (2010), almost all cases indicated a gradual shift of resources from the tbm to the sbm. b2 highlighted that the allocation of resources was dependent on an agile-performance-review in order to allocate resource most efficiently, a trend gauged by cappelli & travis (2016). lastly, cf2 reported no resource shift between tbm and sbm, but a fixed allocation of resources per model, a notion indicated by björkdahl & holmén (2013). how do firms address the paradoxical tensions arising in the stakeholder environment? external stakeholders all cases have reported an increase in collaboration, communication, and interaction with stakeholders. cf1 highlights stakeholders’ increased emphasis on transparency and involvement, whilst gcf1 underscores the cruciality in increased communication to maintain close ties and credible relationships with stakeholders. b3, cf2 and cf3 report an increase in interaction, but also in the number of stakeholders involved. b1 highlights further the increase in collaboration with local governments and other industries, whilst b2 highlights more inter-industry partnerships and collaborations, as well as partnerships with ngos and governments. in line with schaltegger, lüdeke-freund, & hansen (2016) and stubbs & cocklin (2008), all cases reported an increase in collaboration, communication, and interaction with stakeholders. cf1 and cf3 further note an increase in the number of stakeholders involved, a notion indicated by pennink (2014). furthermore, b1 and b2 highlight an increase in interand intra-industry collaborations, as well as partnerships with governments and ngos. schaltegger, lüdeke-freund, & hansen (2016) highlight similarly an increased collaboration with ngos, retailers, and other relevant stakeholder groups, whilst boons and lüdeke-freund (2013) stress the need for inter-organizational clusters even beyond firm actors and an embracement of stakeholder’s expectations. resistance throughout the value chain whilst b1 outlined no frictions during the coevolution, most cases highlighted issues along their value chains. b2 reported cynics and critics along the value chain but overcame the resistance by demonstrating the potential of sustainable business conduct and strong leadership. by now, supplier who wish to work with b2 must sign a code of principles, subscribing to the adherence to sustainable practices. b3 also reported frictions in the value chain, especially with the financial industry, which were tackled via collaboration with partners that were willing to change. cf1 and cf2 concur this notion, and advocate for supplier screening and co-creation of value with suitable partners. cf3 and gcf1 highlight the necessity for strong leadership and effective change management to combat resistance, as well as advocating for risk reduction through more sustainable business conduct. regarding possible difficulties throughout the value chain, b1 did not encounter any frictions. the remainder of cases have addressed supplier reluctance through journal of business models (2021), vol. 9, no. 2, pp. 1 21 11 supplier screening and alignment of interests via demonstration, which according to stubbs & cocklin (2008) is crucial to overcoming these difficulties. cf1 further outlines the co-creation of value with suppliers as a crucial mechanism to manage supplier friction, which is in line with sheth (2019). internal stakeholders to overcome issues in the internal stakeholder environment, cf1, cf2, and cf3, and gcf1 address this with strong leadership and increased collaboration and communication. this is achieved by establishing a clear corporate vision and strategy. b1 and b2 confirm this notion, and also highlight the need for a unified processes and transparency. b3 overcame competing interests of internal stakeholders with patience and strategic consequence. while exercising the coevolution continuously, stakeholders that resisted gradually diminished by natural turnover, and opted for an organic approach. with respect to the internal stakeholder environment, competing interests have been addressed in several ways. strong leadership and collaboration have been reported as a key strategy to remedy competing interests (boons & lüdeke-freund, 2013; stubbs & cocklin, 2008). along the argumentation of lleo, viles, jurburg, & lomas (2017) and stubbs & cocklin (2008), b1, b2, cf2, cf3, and gcf1 report the cruciality of a strong corporate vision and strategy in conjunction with internal stakeholder involvement. b3, on the contrary, has opted for an organic approach to rectify competing interests, whereby organic turnover diminished incompatible stakeholders, an approach enabled through strong leadership and strategy (stubbs & cocklin, 2008). conclusive findings: four coping strategies this paper’s objective is to explore and identify the coping pathways and mechanisms of businesses that encounter paradoxical tensions during the coevolution of traditional and sustainable business models. therefore, the following research question has been formulated based on literature and current developments: how do traditional and sustainable business models coevolve within firms? through the adoption of a paradox lens, we have been able to view tbms and sbms as opposing poles, that are yet interrelated and interdependent (smith & lewis, 2011). thus, we could identify several areas of paradoxical tensions that must be addressed as they occur during the coevolution. after reviewing a map of uncovered responses, the empirical data revealed four fruitful coping strategies to address the five areas of paradoxical tension during the coevolution, which are presented below. coping strategies, in the spirit of lazarus and folkman (1984), refer to the behavior and endeavors undertaken to address different internal and external demands, in this research context, the five areas of paradoxical tension occurring during the coevolution of tbms and sbms. the four coping strategies range from separation of tbms and sbms, to narrowing of tbms and sbms via operational improvements or strategic mandates, to a complete transformation from tbms to sbms. the results suggest, however, a predominant shift from tbms onto sbms in the long run. 1. type 1 “splitter”, splits tbms and sbms, and displays a philanthropic approach, where reporting structures remain separate per business model, profit margin cannibalization is accommodated in the operations with respect to competing demands. strong leadership and an inclusive, participatory strategy are chosen to harmonize organizational mindset and culture. values-based hiring and the utilization of training facilities are used to address the paradox in staffing and training. regarding resource allocation, a self-sufficiency of business models is opted for, with no gradual shift in resource allocation over time. the external stakeholder environment is included through increased stakeholder involvement, whilst competing interests in the internal stakeholder environment were addressed with strong leadership, and a participatory internal management approach. 2. type 2 “operational perfectionist”, focuses on operational excellence, ergo exhibits operational improvements in the traditional business model, while entertaining an sbm to combine competing demands. traditional and sustainable metrics are jointly reported throughout the corporation, and profit margin cannibalization is accommodated. for organizational mindsets and cultures, strong journal of business models (2021), vol. 9, no. 2, pp. 1 21 12 leadership and an inclusive strategy are used. regarding staffing and training, values-based recruitment as well as physical training facilities and online platforms are established. resources shift gradually from the tbm to the sbm. furthermore, more interaction in the external stakeholder environment and partnerships with other industries and governmental actors is observed. along the value chain, suppliers are screened for fit, closer collaboration initiated, and value jointly created. competing interests in the stakeholder environment are addressed through strong leadership, increased collaboration, and involvement of all relevant internal actors. 3. type 3 “strategic mandator”, strategically mandates the sbm’s development. a strategic mandator undertakes operational improvements in the tbm whilst entertaining an sbm to combine competing demands. tbms and sbms are jointly reported, although a strategic mandate has been established to counterbalance a bias towards traditional metrics. profit margin cannibalization has been accommodated. regarding organizational mindset and culture, strong leadership paired with an organic approach was chosen, with market trends providing the stimulus for harmonization. training and staffing have been approached via values-based recruitment, and the utilization of training facilities and online platforms. resources are gradually shifted from the tbm toward the sbm. furthermore, increased involvement of external stakeholders as well as supplier screening and collaboration is observed. competing interests in the internal stakeholder environment are addressed through strong leadership, and an organic approach where the number of incompatible internal stakeholders diminishes over time. 4. type 4: “transformer” resembles a transformation of bms to satisfy competing demands of economic, social, and environmental foci. sustainable and traditional metrics are jointly reported, although the focus on traditional metrics such as return on investment remains the crucial set of metrics. profit margin cannibalization was addressed in a proactive manner, as bms were transformed to be sustainable and become one of the main drivers of the organization. for organizational mindset and culture, strong leadership paired with an inclusive, values-based strategy were deployed. as for training and staffing, values-based recruitment, as well as physical training centers and online platforms are utilized. resource allocation is based on an agile, figure 3: four coping strategies: from splitters to transformers. journal of business models (2021), vol. 9, no. 2, pp. 1 21 13 performance-based allocation mechanism to channel resources fast and efficiently. the external stakeholder environment is addressed through increased involvement and external partnerships with actors from different industries and governmental entities. suppliers are screened for fit based on capabilities and values. competing interests in the internal stakeholder environment are approached through strong leadership paired with involvement and collaborative value-alignment programs. the coevolution of tbms and sbms creates paradoxical tensions. these five areas of paradoxical tension, specifically competing demands, organizational culture and mindset, training and staffing, resource allocation, and the stakeholder environment, necessitated firms to develop strategies. by identifying an array of firms’ responses and four coping strategies, this research contributes to existing literature in the following ways. firstly, it infuses the field of tbm and sbm research with a paradox lens and highlights four coping reactions firms have developed that might help them to address the paradoxical tensions. secondly, it points out current best practices on the synchronistic management of tbms and sbms under one roof. limitations nevertheless, this research has inherent limitations. as is clearly indicated this is an inductive oriented case illustration with the main purpose to develop new theoretical insights. our four coping strategies and the five areas of paradox are as we hope new theoretical insights. furthermore, our case selection was based on theoretical sampling, ergo the selection hinged on relevant criteria to the issue under investigation, which might have limited our inductive search process as also our choice of only western european cases could have done that. additionally, the relatively small number of cases and their mixed industries may contribute accordingly. lastly, the scope of this paper limits the detail of the outcome. this research concentrates on five areas of paradoxical tension, however, there may be smaller, nonetheless still significant, paradoxical areas that may remain unaccounted for. avenues for future research future research may explore the phenomenon of the coevolution of tbm and sbm in a context beyond west-europe. secondly, as sub-groups of cases do not exhibit equal numbers, this offers the opportunity to investigate whether findings would diverge in case of equal distribution of sub-groups. lastly, due to the limited scope of this paper, a rather complex phenomenon was explored with a single interview per case. a longitudinal case study with multiple interviews over time would may enable a more nuanced capture of the coevolution, with more data points over time (yin, 2014). journal of business models (2021), vol. 9, no. 2, pp. 1 21 14 references alt, r. & zimmermann, h.-d. (2014), status of business model and electronic market research: an interview with alexander osterwalder, electronic markets, vol. 24, no. 4, pp. 243-249. barquet, a.b.p., de oliviera, m. g., amigo, c. r., cunha, v. p., & rozenfeld, h. (2013), employing the business model concept to support the adoption of product-service systems (pss), industrial marketing management, vol. 42, pp. 693 704. biloslavo, r., edgar, d., & bagnoli, c. (2019), organizational identity and value triangle: management of jungian paradoxes to enable sustainable business model innovation, in a. aagaard (ed.), sustainable business models: innovation, implementation, and success, palgrave macmillan, cham, switzerland. björkdahl, j., & holmén, m. (2013), business model innovation – the challenges ahead, international journal of product development, vol. 18, no. 3, pp. 213-225. boons, f. & lüdeke-freund, f. (2013), business models for sustainable innovation: state-of-the-art and steps towards a research agenda, journal of cleaner production, vol. 45, pp. 9-19. boons, f., montalvo, c., quist, j., wagner, m. (2013), sustainable innovation, business models, and economic performance: an overview, journal of cleaner production, vol. 45, pp. 1-8. breuer, h., fichter, k., lüdeke-freund, f. and tiemann, i. (2018), sustainability-oriented business model development: principles, criteria and tools, int. j. entrepreneurial venturing, vol. 10, no. 2, pp. 256–286. cappelli, p., & tavis, a. (2016), the performance management revolution, harvard business review, 10. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, pp. 354-363. corbin, j. m., & strauss, a. (1990), grounded theory research: procedures, canons, and evaluative criteria, qualitative sociology, vol. 13, pp. 3-21. dentchev, n., rauter, r., jóhannsdóttir, l., snihur, y., rosano, m., baumgartner, r., nyberg, t., tang, x., van hoof, b., & jonker, j. (2018), embracing the variety of sustainable business models: a prolific field of research and a future research agenda, journal of cleaner production, vol. 194, pp. 695-703. dey, i. (1993), qualitative data analysis: a user-friendly guide for social scientists, routledge: london. doganova, l. & eyquem-renault, m. (2009), what do business models do? innovation devices in technology entrepreneurship, research policy, vol. 38, pp. 1559-1570. eisenhardt, k. m. (1989), building theories from case study research, the academy of management review, vol. 14, no. 4, pp. 532-550. elkington, j. (1997), partnerships from cannibals with forks. the triple bottom line of 21st century business, environmental quality management, vol. 8, no. 1, pp. 37-51. freeman, r. e. & gilbert, d. r. jr. (1992), business, ethics, and society: a critical agenda, business & society, vol. 31, p. 9. journal of business models (2021), vol. 9, no. 2, pp. 1 21 15 gambardella, a., & mcgahan, a. m. (2010), business-model innovation: general purpose technologies and their implications for industry structure, long range planning, vol. 43, pp. 262-271. ghaziani, a., & ventresca, m., (2005), keywords and cultural change: frame analysis of business model public talk, 1975-2000, sociological forum, vol. 20, pp. 523-559. graf, l. (2005), incompatibilities of the low-cost and network carrier business models within the same airline grouping, journal of air transport management, vol. 11, pp. 313-327. guion, l. a. (2002), triangulation: establishing the validity of qualitative studies, institute of food and agricultural sciences. hart, s. l., & milstein, m. (2003), creating sustainable value, academy of management executive, vol. 17, no. 2, pp. 56-69. hennink, m, hutter, a., & bailey, a. (2011), qualitative research methods. london: sage publications. hockerts, k., & wüstenhagen, r. (2010), greening goliaths versus emerging davids – theorizing about the role of incumbents and new entrants in sustainable entrepreneurship, journal of business venturing, vol. 25, no. 5, pp. 481-492. jonker, j., & pennink, b. (2010), the essence of research methodology: a concise guide for master and phd students in management science, berlin: springer. joyce, a., & paquin, r. l. (2016), the triple layered business model canvas: a tool to design more sustainable business models, journal of cleaner production, vol. 135, pp. 1474-1486. kianto, a., sáenz, j., & aramburu, n. (2017), knowledge-based human resource management practices, intellectual capital, and innovation, journal of business research, vol. 81, no. 3, pp. 11-20. lazarus, r., & folkman, s. (1984), stress, anxiety, and coping, new york: springer. lleo, a., viles, e., jurburg, d., & lomas, l. (2017), strengthening employee participation and commitment to continuous improvements through middle manager trustworthy behaviours, total quality management and business excellence, vol. 28, no. 9/10, pp. 974-988. lovins, a., lovins, h., & hauwken, p. (1999), natural capitalism: creating the next industrial revolution, boston: little, brown and co. lüdeke-freund, f. & dembek, k. (2017), sustainable business model research and practice: emerging field or passing fancy?, journal of cleaner production, vol. 168, pp. 1668-1678. mitchell, d. & coles, c. (2003), the ultimate competitive advantage of continuing business model innovation, journal of business strategy, vol. 24, no. 5, pp. 15-21. moingeon, b., & lehmann-ortega, l. (2010), creation and implementation of a new business model: a disarming case study, management, vol. 13, no. 4, pp. 266-297. journal of business models (2021), vol. 9, no. 2, pp. 1 21 16 montalvo, c., tang, p., mollas-gallart, j., vivarelli, m., marsilli, o., hoogendorn, j., butter, m., jansen, g., braun, a. (eds.). (2006), driving factors and challenges for eu industry and the role of r&d and innovation, european policy support network, brussels. osterwalder, a. (2004), “the business model ontology: a proposition in a design science approach”, doctoral thesis, university of lausanne, available at https://serval.unil.ch/resource/serval:bib_r_4210.p001/ref.pdf, accessed 17.02.2020. pennink, b. j. w. (2014), dimensions of local economic development: towards a multi-level, multi actor model, journal of business and economics, vol. 5, no. 1, pp. 249-256. porter, m. e., & kramer, m. r. (2011), creating shared value: how to reinvent capitalism and unleash a wave of innovation and growth, harvard business review, jan-feb issue, pp. 66-77. purser, r. e., park, c., & montuori, a. (1995), limits to anthropocentrism: toward an ecocentric organization paradigm?, academy of management review, vol. 20, pp. 1053-1089. rangan, k., chase, l., & karim, s. (2015), the truth about csr, harvard business review, vol. 93, no. 1-2, pp. 41-49. sabatier, v., mangematin, v., & rousselle, t. (2010), from recipe to dinner: business model portfolios in the european biopharmaceutical industry, long range planning, vol. 43, pp. 431-447. schad, j., lewis, m. w., raisch, s., & smith, w. k. (2016), paradox research in management science: looking back to move forward, the academy of management annals, vol. 10. no. 1, pp. 5–64. schaltegger, s., hansen, e.g., & lüdeke-freund, f. (2016), business models for sustainability: origins, present research, and future avenues, organization & environment, vol. 29, no. 1, pp. 3-10. schaltegger, s., lüdeke-freund, f., & hansen, e. g. (2012), business cases for sustainability: the role of business model innovation for corporate sustainability, international journal for innovation and sustainable development, vol. 6, no. 2, pp. 95-119. schaltegger, s., lüdeke-freund, f., & hansen, e. g. (2016), business models for sustainability: a co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation, organization & environment, vol. 29, no. 3, pp. 264-289. sheth, j. (2019), customer value propositions: value co-creation, industrial marketing management, available at https://dio.org/10.1016/j.indmarman.2019.10.012, accessed 19.12.2019. shrivastava, p. (1995), ecocentric management for a risk society, academy of management review, vol. 20, no. 1, pp. 118-137. smith, w.k., and lewis, m.w. (2011), toward a theory of paradox: a dynamic equilibrium model of organizing, academy of management review, vol. 36, no. 2, pp. 381–403. stormer, f. (2003), making the shift: moving from “ethics play” to an inter-systems model of business, journal of business ethics, vol. 44, pp. 279-289. https://serval.unil.ch/resource/serval:bib_r_4210.p001/ref.pdf https://dio.org/10.1016/j.indmarman.2019.10.012 journal of business models (2021), vol. 9, no. 2, pp. 1 21 17 stubbs, w. & cocklin, c. (2008), conceptualizing a sustainability business model, organization & environment, vol. 21, pp. 103 127. tikkanen, h., lamberg, j. a., parvinen, p., kallunki, j. p. (2005), managerial cognition, action and the business model of the firm, management decision, vol. 43, pp. 789-809. vladimirova, d., holgado, m., van fossen, k., yang, m., silva, e. a., & barlow, c. y. (2017), business model innovation for sustainability: towards a unified perspective for creation of sustainable business models, business strategy and the environment, vol. 26, pp. 597-608. wirtz, b. w. (2011), business model management, in: design instruments success factors, gabler: wiesbaden. wirtz, b. w., pistoia, a., ullrich, s., & göttel, v. (2016), business models: origin, development and future research perspective, long range planning, vol. 49, pp. 36-54. yin, r. k.-z. (2014), case study research: design and methods, fifth edition, second printing, thousand oaks, ca: sage publications. yin, r.k. (2003), case study research, beverly hills: sage. yu, d., & hang, c. c. (2010), a reflective review of disruptive innovation theory, international journal of management reviews, vol. 12, pp. 435-452. zerfass, a., & viertmann, c. (2017), creating business value through corporate communication: a theory-based framework and its practical application, journal of communication management, vol. 21, no. 1, pp. 68-81. journal of business models (2021), vol. 9, no. 2, pp. 1 21 18 appendix appendix 1: list of interviewed cases case industry location label firm size (no. employees) case 1 energy/power producer netherlands business 1 (b1) > 40,000 case 2 consumer goods united kingdom business 2 (b2) > 150,000 case 3 energy/power producer france business 3 (b3) > 150,000 case 4 consulting netherlands consulting firm 1 (cf1) > 150,000 case 5 consulting belgium consulting firm 2 (cf2) < 100 case 6 consulting sweden consulting firm 3 (cf3) < 100 case 7 governmentally-owned consulting norway government consulting firm 1 (gcf1) > 500 appendix 2: interview guide section question literature expectation introduction (…) n.a. n.a. general information what is your current position and how does your experience with both traditional and sustainable business models look like? n.a. n.a. competing demands 1. how do you deal with competing demands of economic, social, and environmental foci? hart & milstein (2003) stubbs & cocklin (2008) rangan, chase, & karim (2015) to explore pathways for rectifying competing foci. 2. how do you ensure comparability of projects with respect to performance metrics? schaltegger et al. (2012) stubbs & cocklin (2008) rangan, chase, & karim (2015) to explore pathways for rectifying comparability of endeavors. 3. how do you address the potential issue of cannibalization of profit margins between the two models? hart & milstein (2003) schaltegger et al. (2012) to explore pathways for rectifying cannibalization of profit margins. organizational mindset and culture 4. have you experienced any difficulties with respect to organizational culture? how did you overcome this? barquet et al. (2013) stubbs & cocklin (2008) to explore pathways for rectifying competing mindsets/ cultures. 5. have you introduced new internal behavioral norms or rules to harmonize the co-evolution within the firm? barquet et al. (2013) stubbs & cocklin (2008) to explore pathways for rectifying competing mindsets/ cultures. journal of business models (2021), vol. 9, no. 2, pp. 1 21 19 section question literature expectation training and staffing 6. how is staffing and the workforce affected by the coevolution? barquet et al. (2013) kianto, sáenz, & & aramburu (2017) to explore pathways for rectifying competing interests in and demands from the workforce. 7. have you introduced a learning platform, such as a training center? barquet et al. (2013) kianto, sáenz, & & aramburu (2017) to explore pathways for rectifying competing skill requirements. resource allocation 8. in terms of resource allocation, how is this managed between the two models? barquet et al. (2013) björkdahl & holmén (2013) chesbrough (2010) to explore pathways for rectifying competing resource demands. stakeholder environment 9. how has the co-evolution affected the external stakeholder environment? boons & lüdeke-freund (2013) schaltegger, lüdeke-freund, & hansen (2013) stubbs & cocklin (2008) to explore pathways for addressing competing interests in the external stakeholder environment. 10. have you faced any resistance throughout your value chain throughout the process? how have you addressed potentially competing interests? boons & lüdeke-freund (2013) schaltegger, lüdeke-freund, & hansen (2013) stubbs & cocklin (2008) to explore pathways for addressing competing interests in the external stakeholder environment, specifically along the value chain. 11. how has the coevolution affected the internal stakeholder environment? how have you addressed potentially competing interests? boons & lüdeke-freund (2013) schaltegger, lüdeke-freund, & hansen (2013) stubbs & cocklin (2008) to explore pathways for addressing competing interests in the internal stakeholder environment. appendix 2: interview guide (continued) journal of business models (2021), vol. 9, no. 2, pp. 1 21 20 appendix 3: selective coding paradox codes competing demands all businesses integrate economic, social and environmental foci (b1, b2, b3) as well as most consulting firms (cf1, cf2, cf3, gc1) by engraining sustainable and economic requirements in both traditional and sustainable business models (b1, b2, b3, cf1, cf3, gc1), through cost reduction (cf1) another option to balance the competing demands is by generating profits with the traditional business model and donate them to a social business model (cf2) translation of different kpis onto a common level (b1, cf1) integration of both sustainable and traditional metrics across all operations (b2, cf1, cf2, cf3, gc1) and expectation management for lower returns of sustainable business models (b3) separate set of metrics per business model’s emphasis (cf2) acceptance of cannibalization of profit margins from traditional model by sustainable model (b1, b3, cf1, cf2, cf3, gc1) direction of strategic narrative guides cannibalization acceptance, unrelated to sustainability (b2) future legislation favors focus on sustainability (cf1, gc1) organizational mindset and culture participation-based corporate strategy (b1) with inclusive organizational purpose that is continuously communicated to overcome cultural difficulties top leadership (b2, b3, cf1, cf2, cf3, gc1) strong, values-based corporate vision and philosophy (b2, cf2, cf3) with champions for sustainability in the ranks (b2, cf1, cf2) market development proving the right direction (b3) mechanisms used are hr involvement and leadership (b1, gc1, cf3), increased communication of values (cf1, b2), and organic cultural growth (b3) training and staffing values-based hiring to find the best match (b2, b3, cf1, cf2, gc1) online platforms to enable continuous learning (b2, b3, gc1) training centers and programs to facilitate learning (b1, b2, cf2, gc1) collaborative management, communication, and leadership (b2, cf1, cf2, cf3, gc1) resource allocation resources are increasingly being re-allocated from traditional to sustainable business models (b1, b3, cf1, cf2, cf3, gc1) resources are being allocated based on strategy and performance, without taking sustainability into consideration (b2) resources are distinctly allocated per business model, and all business models are functioning self-sufficiently (cf2) stakeholder environment increased collaboration, communication, and interaction with stakeholders (b1, b2, b3, cf1, cf2, cf3, gc1) increased partnerships with governmental entities (b1, b2) increased interand intra-industry partnerships (b1, b2) to address and overcome resistance from the value chain, suppliers are being screened and engaged if they share the same values (b2, b3, cf1, cf2, cf3) to address and overcome resistance from the value chain, effective risk management is being advocated (gc1) to overcome internal stakeholder issues, leadership (cf1, cf3, gc1), as well as collaboration and participation of these internal stakeholders in the process is key (b2, cf1, cf2, cf3) to overcome competing interests of internal stakeholders, unified processes and transparency are vital (b1, b2) organic outgrowing of incumbent resistance (b3) journal of business models (2021), vol. 9, no. 2, pp. 1 21 21 niklas endregat is a master graduate from the university of groningen, the netherlands. after his bachelor’s in international business, he obtained his master’s degree in international business and management in 2020. he was runner-up for the cloverleaf award at the 5th international conference on new business models 2020. his research interests lie in sustainability topics within the realm of international business and management. dr bartjan w. pennink is assistant professor at the department of global economics and management. after his study of sociology at the same university he started there to work at 1984 at the university of groningen. in 2004 he finished his phd. the last ten years the focus in his research is on modeling the process of local economic development and for his research he travels to indonesia and tanzania in order to collect data in regional remote areas. from this focus the connection with sustainable business models has been made: which factors do support the cooperation of involved actors and on sharing which values to stimulate local economic and social development. for much more details see: https://www.sustainable-local-economicdevelopment.nl/ in his teaching he is involved in courses on corporate social responsibility (msc) on organizational theory (bsc) and on project management for humanitarian actions (msc). from 2015 on he is also visiting lecturer in the field of research methodology at the institute of finance management in tanzania (dar es salaam). besides the regular programs he also participates in the honours master programs of the rug by a masterclass on ubuntu and a masterclass on new (sustainable) business models. about the authors 11 journal of business models (2022), vol. 10, no. 1, pp. 11-18 incumbent business model innovation under misperceived hypercompetition kristian j. sund1 and annesofie lindskov2 abstract hypercompetition theory states that incumbent firms must restructure their organizations, resources, and product portfolios, as competitive advantages cannot be sustained over time. yet, hypercompetition is rarer than many scholars and practitioners suggest. in this paper, we suggest that if managers misperceive the true state of competition in their industry, they run two potential risks. the first is to underestimate the competitive dynamics and to therefore focus too much on incremental changes to their existing business model. the second is to overestimate the dynamics and to waste resources on unnecessary radical business model innovation. in this chapter we discuss these risks in light of recent research on both hypercompetition and on incumbent business model innovation. acknowledgements: we thank journal reviewers for their useful comments. an earlier version was presented at the 2021 business model conference. keywords: hypercompetition, sustainable competitive advantage, dynamic competition, technology-intensive sectors, performance please cite this paper as: sund, k. j. and lindskov, a. (2022), incumbent business model innovation under misperceived hypercompetition, vol. 10, no. 1, pp. 11-18 1 professor of strategic management at roskilde university, sund@ruc.dk 2 roskilde university & sino-danish college, the university of chinese academy of sciences, annesli@ruc.dk issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.6825 https://doi.org/10.54337/jbm.v10i1.6825 journal of business models (2022), vol. 10, no. 1, pp. 11-18 1212 introduction the balancing of incremental and radical business model innovation (bmi) is a critical activity for incumbent firms facing changing environments (amit & zott, 2012; egfjord & sund, 2020; khanagha, volberda, and oshri, 2014; sund, bogers, & sahramaa, 2021). radical innovations lead to a discontinuity, while incremental innovations build on the existing (bucherer, eisert, & gassmann, 2012). in stable and less competitive environments, incumbent firms can build sustainable competitive advantages by making incremental improvements around existing capabilities (jensen & sund, 2017), or to the orchestration of existing resources (sund, barnes, & mattsson, 2018). in environments characterized by intense competition, this becomes more difficult, and managers may seek to explore more radical forms of bmi in order to escape this competition. one type of environment that makes it difficult to build sustainable advantages is that characterized by hypercompetition. this is an environment that d’aveni (1994) defines as “an environment of  intense change, in which flexible, aggressive, innovative competitors move into  markets easily and rapidly, eroding the advantages of the large and established  players” (d’aveni, 1994: 6). in hypercompetitive markets, such established players (incumbent firms), can gain only a temporary competitive advantage through incremental changes to their business model. a more radical change made to the business model may instead differentiate the firm from its competitors and create a more sustained competitive advantage. but what if managers misperceive the true nature of the environment? under intense competitive conditions, firms succeed or fail based on their ability to reinvent themselves, develop new advantages, undermine the advantages of their competitors, and increase their competitive intensity (i.e. the frequency of competitive actions). yet managers may misjudge their competitive environment. managers make decisions on behalf of their organization based on their subjective perceptions of the competitive reality, not on the reality itself. how managers perceive the environment thus guides their business modelling activities, something which has been pointed out in recent literature examining the cognitive aspects of bmi (sund, galavan, & bogers, 2020). what are the implications of misjudging hypercompetition? in this short paper we explore this question. hypercompetition and business model innovation the resource-based view of the firm suggests that the primary goal for managers is to create sustainable competitive advantages that can lead to abovenormal returns (hall, 1993; oliver, 1997). this can be achieved through barriers to imitation and substitution (reed & defillippi, 1990), by accumulating rare and valuable resources (barney 1991; kraaijenbrink, spender, & groen, 2010), by building and defending core competences (prahalad, 1993), or through superior resource orchestration (sund, barnes, & mattsson, 2018). it has long been recognized that the ability to achieve advantage is intimately linked to the state of the competitive environment. sustainable competitive advantage requires conditions of environmental heterogeneity that are durable, and as peteraf (1993: 182) writes: “this will be the case only if there are in place ex post limits to competition as well. by this i mean that subsequent to a firm’s gaining a superior position and earning rents, there must be forces which limit competition for those rents.” not surprisingly, more recently scholars have pointed out that when competition becomes very intensive, competitive advantages become temporary in nature (see e.g. dagnino, picone, & ferrigno, 2021; sirmon, hitt, arregle, & campbell, 2010). the concept of hypercompetition emerged in the 1990s to account for the empirical observation that competition actually appeared to have intensified over time, at least in certain industries in the united states (d’aveni, 1995). some scholars argue that as the competitive intensity escalates, the competitive environment becomes characterized by disruptions, only rarely punctuated by stable periods (d’aveni, 1999, 1994; d’aveni & dagnino, 2010). since then, there have been a handful of large-scale empirical studies trying to ascertain whether other industries, including in other parts of the world, are becoming hypercompetitive, as some have suggested (see e.g. lindskov, 2021; mcnamara, vaaler, & devers, 2003; vaaler & mcnamara, 2010). the evidence is mixed, journal of business models (2022), vol. 10, no. 1, pp. 11-18 1313 suggesting that hypercompetition is not a universal phenomenon, but one that is limited in industry, geographical space, and time (lindskov, sund, & dreyer, 2021). scholars argue that when markets become hypercompetitive, the competitive intensity increases and competitive advantages disappear quickly, forcing firms to more rapidly shift resources and product portfolios (see e.g., andrevski & ferrier, 2019; d’aveni, 1994). the dilemma managers face becomes whether to focus on the gradual and incremental refinement of current advantages, or, at the right time, try to more radically change the business model, or even seek a new business model altogether. essentially the dilemma is of business model exploitation versus business model exploration (foss & saebi, 2016; giesen, riddleberger, christner, & bell, 2010; jensen & sund, 2017). in this context, we define the degree of radicality as the extent to which a bmi departs from the existing model (taran, boer, & lindgren, 2015). while the radical bmi has the potential to move the incumbent firm into new markets, thereby escaping the hypercompetition of the existing market, the incremental bmi involves minor extensions or improvements (bucherer, eisert, & gassmann, 2012). thus, managers need to understand the competitive dynamics within their industry, to be able to understand when and by how much to innovate the business model. if managers misperceive the true state of competition in their industry, they might end up focusing too much on incremental changes, or alternatively waste resources on what may be unnecessary radical changes. the risks of misperception managers have been called information workers, who capture information about the environment, interpret this information, and act on it on behalf of their organization, in what is essentially an ongoing organizational sensemaking process (daft & weick, 1984; sund, 2013). managers within the same organization may capture different information about the environment, which can affect how different departments prioritize innovation (egfjord & sund, 2020; sund, bogers, & sahramaa, 2021). there is also plentiful evidence to suggest that humans fall victim to the general problem of knowledge overconfidence (kahneman, 2011). this problem affects managers in their decision-making (mezias & starbuck, 2003; sund, 2016). managers are thus known to misperceive the competitive environment and have too much confidence in their own interpretations of that environment. one explanation for this bias has to do with the way we search for information in memory. when faced with a question or problem, managers will tend first to conduct a rapid memory search for a possible solution. once this has been found, they will seek to confirm their initial judgment, filtering out information that does not fit (kahneman, 2011). in the context of a collective management team decision, pressures to socially conform may amplify this tendency (mcgill, johnson, & bantel, 1994). the implication is that managers tend to underestimate the degree of uncertainty surrounding their own perceptions and decisions (sund, 2016). in figure 1, we propose a simple matrix with four scenarios of how managers’ perceptions of the competitive environment, related to hypercompetition, may affect the balancing of incremental and radical business model innovation (bmi). as a reminder, and for the sake of simplicity, we here define incremental bmi as a change to the business model involving minor extensions or improvements (bucherer, eisert, & gassmann, 2012). we define radical bmi as a change of many components of the business model, or the adoption of an entirely new one, allowing the incumbent to escape the condition of hypercompetition. this is consistent with the approach of numerous scholars, although we recognize that there are many other conceptualizations in literature (for a discussion see e.g., foss and saebi, 2016; taran, boer, & lindgren, 2015)). in the absence of hypercompetition, managers may correctly identify that their market is normally competitive. this is illustrated in quadrant a in figure 1. in this circumstance, their knowledge of the environment can be considered correctly calibrated (mezias & starbuck, 2003), and managers should be in a position to correctly balance incremental and radical forms of bmi. it may in this context be possible to build sustainable competitive advantages, and to engage in incremental exploitative bmi around these journal of business models (2022), vol. 10, no. 1, pp. 11-18 1414 to adapt to a slowly evolving market, thereby keeping up advantage. it should be noted that management may still have a desire to diversify their company through radical bmi, but the decision is not predicated on the intensity of competition in the current market environment. in the situation illustrated in quadrant b in figure 1, managers (mis)perceive their market environment to be more dynamic than it is. managers believe the environment to be hypercompetitive, which may lead them furthermore to assume that it would be impossible to maintain a sustainable competitive advantage. the perceived solution could investments in radical bmi, aimed less at the further exploitation of existing advantages, but more at seeking new advantages, through excessive product or market development, or even unrelated diversification. as the market is in fact not hypercompetitive, environmental munificence and company resource slack may enable such exploration. this could include making strategic unrelated acquisitions. the problem of unprofitable diversification is described in literature (see e.g. markides, 1995), and we thus propose that one explanation for such investments could be misperceptions of hypercompetition. in the situation illustrated in quadrant c in figure 1, managers again misperceive their market environment, but this time underestimating the true nature of competitive dynamics. this situation is evidenced in the numerous empirical studies uncovering problems of myopia (levinthal & march, 1993), core rigidities (hacklin, inganas, marxt, & pluss, 2009; leonardbarton, 1992), and managing strategic change (johnson, 1992). managers believe the environment to be relatively stable, leading them to keep focussing on incremental business model adaptation around what they perceive to be strong unique resources and core competences. meanwhile, the environment is changing rapidly, performance suffers, and by the time management recognizes that their competitive advantages are eroded, it may even be too late to successfully shift the focus towards more radical bmi. in particular, diminishing environmental munificence and a lack of slack resources may limit the options for investments if these are postponed for too long. finally, in the situation illustrated in quadrant d in figure 1, managers correctly perceive their market to be hypercompetitive. bogner and barr (2000) argue that in hypercompetitive environments, characterised by extreme uncertainty, conventional market perceived to be normally competitive market perceived to be hypercompetitive normally competitive market a: managers correctly balance the need for exploitation and exploration, and may seek advantages through incremental bmi b: managers may waste resources looking for a new basis for competition through radical bmi, when they could exploit more their existing advantages with incremental bmi hypercompetitive market c: managers underestimate the competitive dynamics and focus too much on incremental bmi at the expense of radical bmi d: managers correctly identify and act on the need to invest in radical bmi in addition to incremental bmi figure 1: perceptions of hypercompetition and business model innovation journal of business models (2022), vol. 10, no. 1, pp. 11-18 1515 sensemaking frameworks do not work. instead, managers in such environments must rely on a higher diversity of information and access to real-time information. managers also need a faster decisionmaking process, and have to focus on business model experimentation as part of their sensemaking (egfjord & sund, 2020; sund, bogers, & sahramaa, 2021). there is mounting evidence that for incumbent firms, radical bmi is challenging, as is managing multiple business models under one organization (snihur and tarzijan, 2018; sund, bogers, villarroel, and foss, 2016). correctly identifying the true nature of competition in the environment may provide the firm with a better chance of correctly balancing incremental and radical bmi. concluding remarks in hypercompetitive environments, firms do not necessarily need to have a revolutionary product or service to gain a competitive advantage, but a unique business model can shield the firm from competition. while firms can gain and sustain competitive advantages through bmi, the balance of incremental and radical bmi depends on correctly perceiving the competitive conditions. if managers misperceive the intensity of the competitive environment, they may waste resources on exploring new opportunities, fail to conduct such exploration, or fail to exploit existing advantages. this insight, coupled with evidence that hypercompetition may not be common (lindskov, sund, & dreyer, 2021), has important implications. firstly, it serves as a warning to scholars against using managers as informants on the true state of the industry environment. this warning has been discussed numerous times in literature in general (kumar, stern, & anderson, 1993; mezias, & starbuck, 2003; sund, 2016; sutcliffe, 1994), but we extend this warning to perceptions of hypercompetition. the fact that a manager believes the industry environment to be hypercompetitive, or that a firm appears to invest heavily in incremental or radical bmi, is not an indication of hypercompetition in itself. secondly, empirically documented issues of organizational myopia (levinthal & march, 1993), core rigidities (hacklin, inganas, marxt, & pluss, 2009; leonard-barton, 1992), and strategic drift (johnson, 1992), could at least in part be explained by misperceptions of the degree of competition in the environment, and a subsequent mis-balancing of business model exploration and exploitation. the implication of misperception is that managers may be overor underestimating the industry conditions in which they compete, affecting their investments. the issue of knowledge overconfidence thus serves as a warning to analyze carefully the true state of the environment before making investments (markides, 1995). verifying our four proposed scenarios empirically could be done in a number of ways. qualitative case study work could seek to verify the existence of misperceptions and associated misbalancing of bmi. quantitative work could seek to verify the extent to which such misperceptions actually take place, and perhaps quantify the implications in terms of firm performance and returns to investors, an area that does not appear to have received much attention in the business model literature so far (cuc, 2019; wirtz, göttel, & daiser, 2016). journal of business models (2022), vol. 10, no. 1, pp. 11-18 1616 references amit, r., & zott, c. (2012). creating value through business model innovation. mit sloan management review, 53(3): 41-49. andrevski, g., and w. j. ferrier. 2019. does it pay to compete aggressively? contingent roles of internal and external resources. journal of management 45(2): 620–644. barney, j. b. (1991). firm resources and sustained competitive advantage. journal of management, 17: 99-120. bogner, w. c., & barr, p. s. (2000). making sense in hypercompetitive environments: a cognitive explanation for the persistence of high velocity competition. organization science, 11(2): 212–226. bucherer, e., eisert, u., & gassmann, o. (2012). towards systematic business model innovation: lessons from product innovation management. creativity and innovation management, 21(2): 183-198. cuc, j. e. (2019). trends of business model research: a bibliometric analysis. journal of business models, 7(5): 1-24. daft, r. l., & weick, k. e. (1984). toward a model of organizations as interpretation systems. academy of management review, 9(2): 284–295. dagnino, g. b., picone, p. m., & ferrigno, g. (2021). temporary competitive advantage: a state‐of‐the‐art literature review and research directions. international journal of management reviews, 23(1): 85-115. d’aveni, r. a. (1994). hypercompetition. managing the dynamics of stratgic maneuvering (1st ed.). free press. d’aveni, r. a. (1995). coping with hypercompetition: utilizing the new 7s’s framework. academy of management perspectives, 9(3): 45-57. d’aveni, r. (1999). strategic supremacy through disruption and dominance. mit sloan management review, 40(3): 127–135. d’aveni, r. a., & dagnino, g. b. (2010). the age of temporary advantage. strategic management journal, 31(13): 1371–1385. egfjord, k. f. h., & sund, k. j. (2020). do you see what i see? how differing perceptions of the environment can hinder radical business model innovation. technological forecasting and social change, 150, 119787. foss, n. j., & saebi, t. (2016). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43(1): 200–227. giesen, e., riddleberger, e., christner, r., & bell, r. (2010). when and how to innovate your business model. strategy and leadership, 38(4): 17–26 hacklin, f., inganas, m., marxt, c., & pluss, a. (2009). core rigidities in the innovation process: a structured benchmark on knowledge management challenges. international journal of technology management, 45(3-4): journal of business models (2022), vol. 10, no. 1, pp. 11-18 1717 244-266. hall, r. (1993). a framework linking intangible resources and capabiliites to sustainable competitive advantage. strategic management journal, 14(8): 607-618. jensen, h., & sund, k. j. (2017). the journey of business model innovation in media agencies: towards a threestage process model. journal of media business studies, 14(4): 282-298. johnson, g. (1992). managing strategic change – strategy, culture and action. longe range planning, 25(1): 2836. kahneman, d. (2011). thinking, fast and slow. macmillan. khanagha, s., volberda, h., & oshri, i. (2014). business model renewal and ambidexterity: structural alteration and strategy formation process during transition to a c loud business model. r&d management, 44(3): 322-340. kraaijenbrink, j., spender, j. c., & groen, a. j. (2010). the resource-based view: a review and assessment of its critiques. journal of management, 36(1): 349-372. kumar, n., stern, l. w., & anderson, j. c. (1993). conducting interorganizational research using key informants. academy of management journal, 36(6): 1633-1651. levinthal, d. a., & march, j. g. (1993). the myopia of learning. strategic management journal, 14(s2): 95-112. leonard‐barton, d. (1992). core capabilities and core rigidities: a paradox in managing new product development. strategic management journal, 13(s1): 111-125. lindskov, a. (2021), “hypercompetition: a review and agenda for future research”, competitiveness review, online first. https://doi.org/10.1108/cr-06-2021-0097 lindskov, a., sund, k. j., & dreyer, j. k. (2021). the search for hypercompetition: evidence from a nordic market study. industry and innovation, 28(9): 1099-1128. markides, c. c. (1995). diversification, restructuring and economic performance. strategic management journal, 16(2): 101-118. mcgill, a. r., johnson, m. d., & bantel, k. a. (1994). cognitive complexity and conformity: effects on performance in a turbulent environment. psychological reports, 75(3): 1451-1472. mcnamara, g., vaaler, p. m., & devers, c. (2003). same as it ever was: the search for evidence of increasing hypercompetition. strategic management journal, 24(3): 261–278. mezias, j. m., & starbuck, w. h. (2003). studying the accuracy of managers’ perceptions: a research odyssey. british journal of management, 14(1): 3–17. oliver, c. (1997). sustainable competitive advantage: combining institutional and resource-based views. strategic management journal, 18(9): 697–713. journal of business models (2022), vol. 10, no. 1, pp. 11-18 1818 peteraf, m. (1993). the cornerstones of competitive advantage: a resource-based view. strategic management journal 14(3): 179–191. prahalad, c. k. (1993). the role of core competencies in the corporation. research-technology management, 36(6): 40-47. reed, r., & defillippi, r. j. (1990). causal ambiguity, barriers to imitation, and sustainable competitive advantage. academy of management review, 15(1): 88-102. sirmon, d. g., hitt, m. a., arregle, j. l., & campbell, j. t. (2010). the dynamic interplay of capability strengths and weaknesses: investigating the bases of temporary competitive advantage. strategic management journal, 31(13): 1386-1409. snihur, y., & tarzijan, j. (2018). managing complexity in a multi-business-model organization. long range planning, 51(1): 50-63. sund, k. j. (2016). a test of perceptual accuracy and overconfidence in a strategic issue context. in k. j. sund, r. j. galavan, & a. s. huff (eds.), uncertainty and strategic decision making (pp. 101–126). emerald. sund, k. j. (2013). scanning, perceived uncertainty, and the interpretation of trends: a study of hotel directors’ interpretation of demographic change. international journal of hospitality management, 33: 294–303. sund, k.j., galavan, r.j. and bogers, m. (2020). exploring the connections between business models and cognition: a commentary. in sund, k.j., galavan, r.j. and bogers, m. (eds.) business models and innovation. bingley: emerald publishing limited, pp. 1-13. sund, k. j., m. bogers, j. a. villarroel, & n. j. foss. (2016). managing tensions between new and existing business models. mit sloan management review, 57(4): 8-10. sund, k. j., bogers, m. l., & sahramaa, m. (2021). managing business model exploration in incumbent firms: a case study of innovation labs in european banks. journal of business research, 128: 11-19. sund, k. j., barnes, s., & mattsson, j. (2018). the ipoet matrix: measuring resource integration. international journal of organizational analysis, 26(5): 953-971. sutcliffe km. (1994). what executives notice: accurate perceptions in top management teams. academy of management journal, 37(5): 1360-1378 taran, y., boer, h., & lindgren, p. (2015). a business model innovation typology. decision sciences, 46(2): 301331. vaaler, p. m., & mcnamara, g. (2010). are technology-intensive industries more dynamically competitive? no and yes. organization science, 21(1): 271–289. wirtz, b., göttel, v., & daiser, p. (2016). business model innovation: development, concept and future research directions. journal of business models, 4(1), 1-28. 94 journal of business models (2021), vol. 9, no. 4, pp. 94-111 gaining trust advantage for the vaccination certificate platform liina joller1 abstract purpose: in the conventional international health and safety policy design, the decision makers rarely think in terms of business models. as an example, the yellow paper-based vaccination certificates, initiated and implemented by the who in 1969, have not changed very much since then. in 2020, the covid-19 crisis accelerated innovation, particularly digitalisation, in many sectors, and the sense of urgency to have a digital immunisation certificate was voiced by many governments, as well as corporations. the new solution must enable international interoperability, but it is a challenging task because the setup of health registries varies across countries and because the common actions have been hindered due to the lack of trust – the trust deficit. approach: in this article, the case is discussed in the platform business model framework, and the role of trust in gaining competitive advantage – the trust advantage – in its fast and widespread adoption is particularly exemplified. the case was analysed in parallel with the discussions and actual development, not ex post, as common in business model literature. findings: the solution that could be capable of overcoming the privacy and security concerns that have been brought up in the international discourse can be described as a decentralised multisided platform, which has a distributed management system. the platform’s standardisation would ease its global uptake, and the strategic partnerships with countries, organisations, and firms that are already considered trustworthy (possess trust credit) will have the opportunity to gain trust advantage. limitations: this paper was written having the managerial perspective in mind, hence, it does not go deeply into all technical and legal aspects affecting the implementation of the digital vaccination certificate platform. it was written in parallel with the vivid disputes in the international arena. by the time this article was finished, the first pilots had just taken off and it was not clear yet which of the technical solutions and business models will eventually become dominant. keywords: business model innovation, platform business model, trust advantage, distributed trust, interoperability, innovation policy acknowledgements: the author wishes to thank mr marten kaevats from the estonian government office, who is also a member of the who digital health technical advisory group, for sharing insights about the development of one of the potential solutions for digitising the vaccination certification data. the author acknowledges financial support from the estonian research council’s research project prg791 “innovation complementarities and productivity growth” please cite this paper as: joller, l. (2021) gaining trust advantage for the vaccination certificate platform, vol. 9, no. 4, pp. 94-111 1 university of tartu, liina.joller@ut.ee doi: https://doi.org/10.5278/jbm.v9i4.6580 issn: 2246-2465 https://doi.org/10.5278/jbm.v9i4.6580 journal of business models (2021), vol. 9, no. 4, pp. 94-111 9595 introduction platform-based business models are emerging at a fast pace. so far, they have been successfully established in many sectors in order to communicate, co-innovate, exchange data, goods and services. however, in health-related sectors their diffusion has been lagging behind, and one of the main reasons for this could be the trust-intensive nature of health data. the overall increase of trust deficit in society has hindered it even further. it should be emphasised in the beginning that this article does not address the trust towards a vaccine per se, but towards a platform-based ecosystem that is handling health data – the individual’s vaccination records. the setup and operation of this ecosystem are addressed from the platform-based business model perspective. this case study focuses on the development of a multisided platform that enables sharing information about the individual’s vaccination status1. in this article, the ‘platform’ is defined as a nexus of rules and infrastructure that facilitate interactions among network users (eisenmann, parker, and van alstyne, 2011), and in this case offering value as a central interoperability service. in the public discourse the vaccination certificate has synonyms, e.g. green certificate2, immunity passport, etc., but as it is not an official travel document, the word ‘passport’ is misleading. for the new platform to be able to replace the yellow paper-based vaccination certificates3, initiated by the who and implemented by individual countries in 1969, a commonly accepted global digital approach is needed. as times of uncertainty may provide new opportunities for business model innovation (aagaard and nielsen, 2021), the covid-19 pandemic could be a much-needed trigger here. 1 although traditionally the immunity certificates have been used for verification that the individual has received a vaccine, the same data exchange platform can also be used for verification of the existence of antibodies, or that the person has tested negative a few days before the travel. 2 eu green certificate [https://ec.europa.eu/info/live-worktravel-eu/coronavirus-response/safe-covid-19-vaccines-europeans/covid-19-digital-green-certificates_en], and several similar regional and national initiatives. 3 international certificate of vaccination or prophylaxis [https:// www.who.int/ihr/ports_airports/icvp/en/] in order to gain ground, the management (orchestration) of the platform is crucial, as its successful implementation will require a critical mass of users. the tactical steps should therefore consider the platform development phase and respective critical success factors (trischler, meier, and trabucchi, 2021). to take off, the users and all other stakeholders need to have trust towards the platform leader, each other, and the technology. the trust in the whole platform may still be vulnerable to psychological manipulations, even if the technology behind it is proven to be secure. this has given a reason to say that a new form of trust is needed (werbach, 2018), and this article aims to contribute to building this knowledge stream. the extant literature predominantly addresses the trust between individuals or the trust between firms (see also the review by fulmer and gelfand, 2012), but these streams have not been well interlinked. there are fewer studies about how individuals trust companies, or more specifically, discussing trust towards different types of business models. as the trust has been used to explain human choice (miller, 1992), it could be claimed, of course, that partly it is covered in marketing studies. however, there it is also usually addressed indirectly. from the literature, it can be summarised that the precondition for trust to be meaningful rises from risk, which further comes from interdependence (rousseau, sitkin, burt, and camerer, 1998). the actual or cognitive risks can be associated with change, the deviation from the status quo, which in the case of the digital vaccination certificate are exemplified in table 1. the perceived interdependence-related risks come from digitalisation, data storage and transfer, particularly from sharing the responsibility of ensuring security and transparency in this process. however, objectively the distributed ledger technology (dlt) and decentralised management can actually reduce risks. in the platform business model, interdependence is unavoidable, moreover, it is actually an enabler of the main source of its competitive advantage over traditional two-sided business models – the network effects. however, it is a business model design and journal of business models (2021), vol. 9, no. 4, pp. 94-111 9696 implementation challenge where the relationships between stakeholders are quite complex, and motivations often intertwined. so far, the literature (parker and van alstyne, 2018; mcintyre and srinivasan, 2017; de reuver, sørensen, and bahole, 2018) addresses mainly platform-based interactions where the platform sides are either firms or individuals, leaving the role of governments and intergovernmental organisations aside. although the individuals, ict companies, vaccination clinics and large pharma companies are all part of this extended ecosystem, the market uptake and diffusion of the interoperable digital vaccine certification platform depends first on governments and intergovernmental agreements (including global intergovernmental organisations). of particular importance is their ability to reduce perceived risks, and enable trust to be built and sustained, which is crucial for the emergence of network effects. if implemented, the digital platform can replace the current yellow printed vaccination booklets on borders, as well as ease domestic travel, access to campuses, large events and corporate buildings. in the long term, the underlying dlt and its multisided platform business model creates even more e-governance opportunities. in this article, the case was addressed at the metamodel level (massa, tucci, and afuah, 2017), and is based on interviews with the visionary and technical people behind it. the data collection as well as the theory building followed the principles of grounded theory (strauss and corbin, 1994), and the researcher was interacting with the platform’s team during its development. the article is set up so that the description of the development of a case is intertwined with relevant theoretical standpoints, especially from the rich literature on the phenomenon of trust, and lessons from commercial platform business models. it starts with explaining the essence of a multisided platform business model and continues by discussing the different facets of trust. thereafter, these streams merge to bring out the importance of trust – the trust advantage – for the success of a platform. background of the digital vaccination certificate platform the writing up of this case study occurred in parallel with its implementation endeavours, not ex post, as is common in business model literature. the development of the digital vaccination certificate platform started in 2019 (i.e. pre-covid-19) as one of the sub-projects of the estonian x-road platform4. the idea came from the nordic institute of interoperability solutions and was promptly picked up by the estonian government strategy office. the who5 also acknowledged the need, which gave a boost to the it developers in estonia and finland who initially took up the challenge as a non-for-profit side-task. however, the most critical aspect, the approach for bringing it to actual use (gawer and cusumano, 2008) with all of its possibilities, was not so clear at the beginning. the term ‘approach’ is used consciously because people making international health policy agreements usually do not use business model terminology or think in the platform business model framework. as the first contributors were predominantly ict firms, many with extensive experience, then technically there was probably quite a good understanding of what the critical features of the solution could be – interoperability, personal data protection, time stamping, etc. however, it is known that inferior technical properties can be overplayed by a superior business model (amit and zott, 2015), so the latter required thorough attention as well. the aim was no less than to create a global standard for exchanging data about an individual’s vaccination status, where the international interoperability is based on a distributed data governance model and decentralised management. the key principle and guidance for developers was “the simpler, the better”. the envisioned approach would fall under a platform architecture logic, although so far the platforms have been used, as well as addressed in the literature, primarily in the business context. 4 nordic institute for interoperability solutions [https://x-road. global/] 5 world health organization [https://www.who.int] journal of business models (2021), vol. 9, no. 4, pp. 94-111 9797 table 1. paper-based yellow vaccination certificate digital vaccination certificate platform with decentralised management and based on distributed ledger technology both contain entries about every vaccination event (injection made by whom, where and when, often accompanied with vaccine name and batch number). entries (and vaccine injections) are made by qualified personnel in accredited clinics. requires presenting an official travel id (passport) to match the person with the vaccination records. the border officer can browse the whole paperbased vaccination certificate. only the necessary data can be made visible, i.e. if a border officer should check for covid-19, then only relevant data can be made visible. an individual covers the costs of issuing the blank paper-based vaccination certificate. an individual may cover the costs of keeping the digital ledger, but it may be also covered in full by the government. the financial model still needs to be agreed upon and can differ across countries. can get lost. cannot get lost. not tamper-proof. signature, stamp, batch sticker rather easy to replicate. tamper-proof. timestamped, irreversible, and encrypted data entry and transmission. paper-based records can be duplicated in the national electronic health registry and then they are also remotely accessible to doctors in the same country. enables international interoperability and communication between national it systems, accessible abroad and valid in all participating countries around the world. needed for travelling to a limited number of countries, mainly in africa and asia. since 2020 covid-19 pandemic affects all travellers around the world. table 1: similarities and differences between the digital vaccination certificate platform and the established paper-based yellow vaccination certificate journal of business models (2021), vol. 9, no. 4, pp. 94-111 9898 the platform setup the setup took advantage of the participating ict companies’ existing competences in blockchain and similar dlts, which enable features that would not have been possible even a decade ago. there is no need for a central global database that could be a target for a cyber-attack. instead, during the check for vaccination status the inspector makes inquiries to the platform, which further communicates with the national databases that keep the records made by the nationally certified vaccination clinics (figure 1). hence, the primary role of the digital vaccination certificate platform is to be a transaction platform, where data is the transaction object. for quick and wide diffusion it is important that no specific hardware or software should be needed to check the vaccination status. therefore, the identifier, a qr or barcode, which is unique for each injection or vaccine dose, should be readable even with a mobile phone scanner. the setup is based on the open technological standard and standardised, default contracts, which have been considered as essential elements of the platform business model (parker and van alstyne, 2018; eisenmann, parker, and van alstyne, 2009) and a cornerstone of its competitive advantage. the paradox of openness (schmeiss, hoelzle, and tech, 2019) has been considered as one of the main challenges in setting up the platform ecosystem – finding the right balance between openness and control for maximising value to all members. in the case of the digital vaccination certificate, the platform would be eventually open to all countries. however, a smaller group would be used for the first piloting round. similarly, it would be usable to all individuals residing in, or travelling to and from, these countries. similarly, the platform should be open to all vaccination clinics that are certified and as of today working with paper-based certificates. the openness does not reduce the value here in any way, in fact, it increases it. the 2nd level complementors, e.g. other ict firms that wish to build their applications on the same platform later on, should be required to fulfil some credibility criteria, in order not to compromise the trust towards the whole ecosystem. therefore, it could be said that the digital vaccination certificate is a semi-open platform, i.e. the platform leader retains control over who can become a complementor. in the business context, the platform technology and created data are usually proprietary (teece, 2017), and the platform leader prefers to keep control over it, to be able to ensure that the trust towards the platform is not abused. in the case of the digital vaccination certificate platform, there is no creation of proprietary data that could cause ownership disputes between the platform ecosystem participants or be an obstacle for any country joining the system. in legal terms, the individual remains the owner of the data, and the national regulations of its use will prevail. forming the ecosystem following the nested hierarchies of systems, as suggested by massa, viscusi, and tucci (2018), compared to the business model of a single firm, the platforms are systems with a higher level of complexity. the borderguard national digital health system inquiry response vaccination transcript of a travelling individual certified vaccination clinic figure 1. inquiries and data flows on the digital vaccination certificate platform journal of business models (2021), vol. 9, no. 4, pp. 94-111 9999 stakeholders of a platform altogether form an ecosystem, in which they ideally would be complementors – covering all the crucial competences and resources. the platform typically has a single leader (sometimes referred to as an orchestrator), who is responsible for the governance of the platform ecosystem (wareham, fox, and giner, 2014). the governance comprises mainly execution and secure record-keeping of the transactions, and their validation. it encompasses setting rules, the control mechanisms that would act as a deterrent from opportunism (rousseau et al., 1998), and creating the incentives that would keep all parties motivated. the appropriateness of the incentives is crucial for the fast emergence of network effects (casadesus-masanell and zhu, 2013). in the case of the digital vaccination certificate platform, during the launch the leader’s role was distributed among the participating organisations, mainly visionary incumbent ict firms, and untypically, an important role was played by the estonian government (figure 2). in this platform, two groups of end-users interact with each other – the national border-crossing unit officials and the individuals who need to travel abroad. the complementors, who build their products and services to be offered via this platform, are no less important. some of the complementors can be essential for the platform to exist, and some more ‘complementary ’, providing convenience features. in this case, the essential complementors would be the vaccination clinics. in business model terms, this leads to a service-service bundle value proposition, as giving the vaccine is the first service, and keeping a verifiable record of the vaccination data is the accompanying service. the second wave of complementors could include ict firms with various foci – in principle the open standard would allow building any kind of new e-governance solutions on it. for the platform to exist and run smoothly, system integrators (external service providers) might also be necessary. these are the ict support companies that help to install (if necessary) and provide training for the platform users or complementors, e.g. border guards or vaccination doctors. even when the core ecosystem members are in place, the selection of additional external partners can be critical as well. they can be particularly valuable in creating trust towards the platform, as we will explain in the next sections with an example of the role of the who in launching the certification systems. creating trust towards the platform trust is a phenomenon that has been described as an antecedent, outcome or moderator (mcevily, perrone, and zaheer, 2003). among the many conceptualisations of trust that can be found across government of the country that the individual enters platform leader shared role between the government of estonia and incumbent ict companies in estonia and finland government of the country that the individual leaves homeland security of the country that the individual enters public health authority of the country that the individual leaves 2nd level user: the guard on the border 1st level user: the travelling individual complementor an accredited vaccination clinic entry to the database/ platform partner world health organization (who) inquiry on the platform/ validation figure 2: the ecosystem of the digital vaccination certificate platform journal of business models (2021), vol. 9, no. 4, pp. 94-111 100100 disciplines, it has been attributed to the trustor’s belief in the trustee’s ‘ability ’ (mayer, davis, and schoorman, 1995; sitkin and roth, 1993), ‘capability ’ (jaatun, pearson, gittler, leenes, and niezen, 2020), ‘expertise’ (parmigiani and mitchell, 2005), or ‘competence’ (david and mcdaniel, 2004) on the one hand, and ‘willingness’ (jaatun et al., 2020) on the other. although with slight differences to the original works, in this study the first four of the above terms can be considered as synonyms, and from here on in the term ‘ability ’ will be used. furthermore, if we consider the ability to be domain-specific (sitkin and roth, 1993), we could reason that so is the trust (zand, 1972). the willingness has also been related to (avoiding) opportunistic behaviour (rousseau et al., 1998), which is likely a more general personality trait (not as much domain-specific as the ability). although the digital vaccination certificate platform falls into the broader health sector, which per se encompasses high requirements for trust, here it is discussed mainly from the perspective of managing personal data. as the impeachment of trust in the case of this platform is not as fatal as could potentially be in the case of some other health-related technologies, the concern about trust is perhaps more related to personal data protection in general. in the increasingly digitalised world, where the concern over privacy can be felt with every new ict application, the concern related to the processing of personal data is a serious trust barrier in the diffusion of innovations. this is exactly where the value of the technical architecture of the dlts comes to the picture – providing transparent, irreversible and encrypted data transmission technology and standardised contracts, which are not dependant on cultural context. the ability to provide this universal value constitutes the technical part of its trust advantage (competitive advantage resulting from being trustworthy). already today the vaccination clinics that fill in the yellow paper-based certificates need to be accredited, and often this information is also stored digitally in a national health system. hence, it could be said that the individuals who are using it have at least some trust towards their own government’s ability to handle this. in the case of the digital vaccination certificate platform, it will be leveraged with the need to trust personal data processing, storage and transfer across borders and cultures. we need to be aware that the technological awareness and acceptance of digitalisation is not equally high everywhere, and it differs also between cohorts in a country. yet, for maximising the value this innovation can create, it is crucial to get the majority of the countries and their accredited clinics aboard. as emphasised earlier, the success of a platform business model depends on its ability to create network effects. this ability, as argued below, further depends on the ability of the platform and its leader to create trust. the experience from commercial platform business models suggests that incumbents can leverage their existing reputation to jump-start their platform (fuentelsaz, garrido, and maicas, 2015; eisenmann et al., 2011). similarly, estonia’s reputation as a small agile country with a pro-innovation mindset was a good starting point for initiating this project. this kind of ‘trustworthiness’ advantage can hardly be copied by a single firm, especially a newcomer. in many sectors, the requirement for trustworthiness is much lower for complementors, when compared to the platform leader. however, in this case it is not, as everyone wants to be sure that they get the right vaccine, in the right dosage, that it has been kept in proper conditions prior to the injection, etc. this can be achieved by accrediting the clinics and their doctors (the complementors), and it is done by a government authority. the trust towards a nascent platform can also be increased by the careful inclusion of external partners and strategic allies. the selection of partners is an important strategic decision (zott, amit, and massa, 2011), and their role is usually connected to scaling the platform for faster emergence of network effects. this role can be dedicated to them due to the possession of some specific technical capabilities, infrastructure, etc., or also coming from intangible assets, e.g. previous experience, reputation, including earned trust. in the case of the digital vaccination certificate platform, the impact of the who as journal of business models (2021), vol. 9, no. 4, pp. 94-111 101101 a strategic partner6 cannot be overemphasised. the value certainly comes from the who’s international network, its information dissemination channels, etc., but likely most importantly from having the global and cross-cultural reputation of being trustworthy. formation of trust in the case of the digital vaccination certificate platform a path for forming trust might not be straightforward for a nascent platform. in this particular case, the opportunity-risk ratio is first evaluated by the governments (arrow 1 in figure 3), and if a government has decided to join the platform, only thereafter can it be used by individuals (arrow 2). as a feedback loop, the governments usually consider public opinion in making their decisions (arrow 4), and the public opinion about the new solution includes the perceived risk. this perceived risk in the public opinion depends also on whether the individuals trust the platform leader (arrow 3), first that their data will always be available when needed, and second, that it will not be misused. the latter is likely the biggest hurdle for large technology companies to become leaders of such platforms, as the cases of personal data misuse are vividly in people’s memory. 6 on october 5th, 2020, the estonian government signed a memorandum of understanding (mou) with the who [https:// news.err.ee/1143517/estonia-and-world-health-organizationdigitally-sign-cooperation-agreement] in some cultural contexts, the individual’s trust can also form through government in that if people have high trust in their own government, then they believe that the government makes good choices on their behalf. they do not feel the need to dive into technical details by themselves, and in a way this discharges individuals from direct liability in the case any of the risks are realised. one way or another, once the triangulation for this decision has reached a positive conclusion, it will be quite hard to turn it back, i.e. in a way they become dependent on it. in parallel, the platform leader needs to trust the governments, who need to trust the vaccination clinics and personnel in their country. for the latter, the governments have set up registries, standards, and accreditation systems that are effective also today with the paper-based system. as also today, the governments need to trust that all other governments have done the same (i.e. intergovernmental trust). in this case, the trust is connected to validation of the actual vaccination procedure and its matching entry in the national database. if this is in place in all participating countries, and the other governments trust the platform leader and technology developer, then they can trust the whole platform as well. the case of the digital vaccination certificate platform is distinctive, in that the platform leader ’s role has been shared among the technology developers and the government of the developing and piloting country, i.e. this government has a dual role in the ecosystem. individuals, public opinion governments platform leader 1 2 4 3 figure 3: the path for forming trust towards a nascent vaccination certificate platform journal of business models (2021), vol. 9, no. 4, pp. 94-111 102102 the nexus of risk and trust in a platform business model, and its effect on the emergence of network effects in explaining the nexus of risk and trust, scholars have used various terms, which allow us to also explain the risk in the context of a platform business model. these include, for example, the “perceived probabilities” (bhattacharya, devinney, and pillutla, 1998) about failing or succeeding, or lack of “confidence” (das and teng, 1998) that the platform can deliver what it promises. higher trust means that the perceived likelihood of positive outcomes is higher than of the negative outcomes (figure 4), or that the potential benefits outweigh the risks. in the case of the digital vaccination certificate platform, the perceived probability of succeeding to provide expected value to all ecosystem members is directly related to the perceived ability to create network effects (mcintyre and srinivasan, 2017). however, as discussed before, the ability to create network effects depends on the platform leader’s ability to form a strong platform ecosystem (including complementors and external partners) and manage (orchestrate) its operations. the economics behind the platform’s value creation is grounded in marginal utility theory, known from the neoclassical roots of microeconomics (see the works of jevons, menger, and walras in the 19th century). for the platform to take off, the direct network effect coming from maximising the participating countries is most important. this would further result in maximising complying border-crossing points and accredited vaccination clinics. at the same time, the number of individual travellers using digital vaccination certificates would be maximised. however, for the platform to become sustainable and competitive in the long term, the indirect network effect that should come from a variety of complements and complementors is equally important (mcintyre and srinivasan, 2017). if we assume that the first core service would be based on the covid-19 vaccination, then access to certain public places (i.e. beyond border crossing) could be considered the first complement, as would be the vaccinations for other diseases. furthermore, the ict firms providing other e-governance solutions based on the same platform, using the same standard for interoperability, could become complementors as well. hence, the indirect effect resonates with the possibility to extend the platform, to use it for many more healthrelated data and functions, and possibly beyond the negative outcomes positive outcomes opportunism data privacy and security issues strong network effects increased convenience and transparency lock-ins and possible switching costs in the future perceived risk related to the truste’s is ability and willingness to: • prevent (mitigate risk), • detect (monitor and identify risk and policy violation), and • correct (manage incidents and provide redress) lack of trust (low trust) reduced transaction costs trust (high trust) figure 4: the nexus of risk and trust journal of business models (2021), vol. 9, no. 4, pp. 94-111 103103 health sector as a global e-governance standard. ideally, both the direct and indirect network effects would emerge quickly and be strong in nature. an increasingly important source of indirect network effect is also the data itself that accumulates during the platform operations and can provide valuable learning opportunities over time. the gathered data can be used to further improve the platform technology and offered service, and access to the data can be alluring to even more complementors, further strengthening the network effects. however, if this value creation mechanism that is very common in commercial platforms starts to threaten the formation of trust, then in this particular case this optional functionality should be dismissed. these network effects do not emerge just by themselves. as usual with the platform business models, the initiator and platform leader need to solve the common ‘chicken and egg’ problem. therefore, at the launch of a platform, the incentives are set to speed up the process, which is often achieved by subsidising (at least) one of the platform ecosystem members (rochet and tirole, 2006; parker and van alstyne, 2005). this is needed until the platform reaches a critical mass of users, and the network effects become self-enforcing. thereafter, when strong network effects have emerged, the platform can be quickly scaled up, and a sustainable incentives system is established. in the case of the digital vaccination certificate platform, similar effects can be achieved when countries with a common interest collaborate (e.g. the decision of the european commission on 17.03.20217). the lack of trust (or low trust) may mean, in the worst case, that no agreement on collaboration will be achieved. but it may also be that because of urgent and severe needs the platform ecosystem will be formed, but the constantly emerging privacy and security issues do not allow it to achieve its full potential. among the outcomes of joining a platform 7 european commission, covid-19: digital green certificates. [https://ec.europa.eu/info/live-work-travel-eu/coronavirusresponse/safe-covid-19-vaccines-europeans/covid-19-digitalgreen-certificates_en] are also lock-in situations, which at first sight are positive from the platform orchestrator’s view, but seem negative from a country ’s perspective. these may include, for example, technical lock-in, nontechnical lock-in (e.g. habits), and possible switching costs. however, when looking deeper into the multisided platform business model value creation logic, it becomes apparent that all platform participants together benefit when everybody is locked in – the network effects are sustained. the different facets of trust, and their dynamics across the disciplines, it can be observed that the (transaction cost) economists view trust as a cause of reduced opportunism among transacting parties, which results in lower transaction costs (williamson, 1975), whereas organisational science suggests that the trust enables cooperative behaviour (gambetta, 1988) and promotes adaptive organisational forms, such as network relations (miles and snow, 1992). game theorists suggest that over time cooperative behaviour develops trust (axelrod, 1984), i.e. emphasising its relative and dynamic nature, and bringing in the importance of the context when investigating the true functioning of trust (rousseau et al., 1998). indeed, trust can be viewed in several contextual boundaries – economic, technological, cultural, etc. moreover, the trust depends on the stakes involved, the balance of power in the relationship, and the alternatives available to the trustor (mayer et al., 1995). the interorganisational and interpersonal trust are different (zaheer et al., 1998; fulmer and gelfand, 2012), and this raises many challenges for building trust around a digital service like the platform-based certification of vaccinations. from the rich extant literature stream, it is known that the phenomenon of trust can have many facets and levels (fulmer and gelfand, 2012). the trust can differ in the bandwidth (sitkin and roth, 1993; rousseau et al., 1998), where a narrow bandwidth refers to a specific trustee’s ability, while a broad bandwidth may cover trust towards the trustee’s general execution ability across disciplines or functions. it is possible (and likely) that across disciplines the trust is journal of business models (2021), vol. 9, no. 4, pp. 94-111 104104 not consistent (lewicki, mcallister, and bies, 1998). rousseau et al. (1998) highlight the three basic forms of trust – calculus-based or calculative, relational, and institutional trust. these forms are present in all relationships, but their importance and role change over time. deterrence is not usually considered as a form of trust, however, it certainly affects diffusion processes, and is sometimes mixed up with the utilitarian considerations of calculative trust. in the case of the digital vaccination certificate platform, the deterrence is backed by the underlying dlt. the main forms of trust and the sources of their formulation in the case of the digital vaccination certificate platform are shown in figure 5. the case where the trustor and the trustee are both individuals was evolutionally likely the first one. in this case, interpersonal trust matters first-hand through its institutionalising effects on interorganisational trust (zaheer et al., 1998), as individuals are viewed as representatives of their organisations or nations. once the interpersonal trust has been achieved and well maintained, the start of any new collaborative project between these individuals (but also their organisations) can benefit from trust credit. the relational trust emerges from previous experiences of cooperation. as this form of trust also depends on the cultural context, it has varying importance across the world (dyer and chu, 2003). it requires time and consistency, and therefore it is difficult to imitate and substitute (barney, 1991) by competitors, and provides a potential source of sustained competitive advantage (porter and siggelkow, 2008). in the case of the vaccination certificate, the relational trust can build on the leading firms’ and countries’ previous track record in developing and managing reliable e-governance solutions, which by now have also been adopted by several other countries. calculative trust is based on rational choice. the quality of the choice further depends on the availability of comprehensive and truthful information, ex te n d ed v ie w o n t ru st f o rm s o f tr u st calculative trust ‒ sense of urgency ‒ system of yellow paper-based booklets in place since 1969 relational trust ‒ track record of developing, managing, and exporting e-governance solutions ‒ trust credit institutional trust ‒ backed and piloted by the estonian government, not just a few it firms ‒ who as a partner deterrence-based trust distributed ledger technology (dlt) interpersonal trust ‒ participation in the who digital health technical advisory group ‒ trust credit positive decision action figure 5: the forms and sources of formulation of trust journal of business models (2021), vol. 9, no. 4, pp. 94-111 105105 which is rarely the case in practice. even if it were, it has been shown in behavioural economics (e.g. ariely, 2008) that it would not necessarily be sufficient to predict the decisions and actions. it could be assumed that in the increasingly digitalised world one day the yellow paper booklets would have been replaced anyway because of their inherent inefficiency. but in the case of the vaccination certificate, one of the accelerators is clearly the sense of urgency created by the covid-19 pandemic, and this feeds directly to the context where the rational choice is made. although difficult to quantify precisely, it is clear that every day of delay with the decision and action will have a cost on the economy and society at large. the decision needs to be made promptly, and the partners who have a track record proving their ability to execute urgently will have an advantage. in economic transactions, the choice comes down to costs and benefits, and those who can provide a successful pilot or at least a working prototype pro bono could get an initial advantage. if wisely managed, this initial advantage can be developed into a sustainable competitive advantage. the institutional trust can be built on the trust credit of the countries participating in the pilot project if these countries have experience in launching nationwide digital solutions. despite the actual developers being ict firms, the governments’ role in promoting and sponsoring the initiative during the platform birth phase is crucial. similarly, the role of the who as a strategic partner should not be undervalued, not only because it is a global non-governmental organisation, and therefore reduces the risk of opportunistic behaviour, but primarily because the who itself would be directly affected by ‘cannibalism’. the who can affect the speed of change from both sides – how quickly the digital vaccination certificate platform is adopted, as well as how quickly the old paper-based yellow booklet phases out (is cannibalised). it has been suggested that during the trust formulation process the share of calculative trust decreases and the share of relational trust increases, and that the role of institutional trust changes little throughout the trust development (rousseau et al., 1998). this change comes over time from accumulating collaboration experience. in their reasoning, building the trust starts from a blank page, i.e. they do not take into account the possibility to use trust credit. in the case of the vaccination certificate, during the platform birth phase, trust credit can be a valuable resource for having a head start over the competition. the involvement of governments and ict firms, which have a track record in e-governance solutions, confirms the domain-specific capabilities and expertise. these domain-specific capabilities do not cover only the technology, but also capabilities of orchestrating the whole ecosystem, including effectively managing any incurring challenges, and designing a business model that is financially sustainable, providing value to all platform sides. the strategic partnerships (e.g. the who) provide further trust credit about the achievability of global diffusion. it is reasonable to assume that as long the platform management (orchestration) structure remains stable, the institutional trust does not change much as well. in the later phases, the initial trust credit needs to be justified. it will be gradually replaced by a rational calculative analysis of competing value propositions (including the switching costs, envisioned reduction of future transaction costs, etc.). the yellow paper booklets will be the first-hand reference for this analysis, but there will also be competition between the many digital newcomers around the world. the relational trust changes throughout the platform development as well. at the birth, it is based on the ecosystem members’ previous experiences with each other, or at least with the platform leader. when new experiences accumulate, e.g. during the piloting phase, the basis for trust becomes even more domain-specific, i.e. specific to this particular platform. the increase of the relational trust over time enables the platform to enter the self-renewal stage. if a vaccination certificate platform succeeds in achieving leadership, then new questions related to the platform openness, possible new complements, and new areas of application will rise. the openness, which in the platform economy is predominantly seen as a positive feature, should not compromise journal of business models (2021), vol. 9, no. 4, pp. 94-111 106106 the existing platform members’ trust towards the leader and the whole ecosystem. as for the majority in the society, building trust takes time, while the social influence from the pioneer users is also an important part of the trust emergence (rogers, 2003). the pioneers in this case are the first countries joining the pilot project, but at the same time also the first organisations or individuals (opinion leaders creating interpersonal trust). these pioneer countries are more likely the ones who recognise the existence of this kind of trust credit, or the ones who feel the most severe sense of urgency to have this kind of interoperable data platform in place. conclusions: the role of trust and trust advantage in gaining sustained competitive advantage the rise of the platform economy has brought to the spotlight competition between digital platforms, more recently also in the health sector. the trustintensive nature of health data is likely the reason why the multisided platforms have not been diffusing in the healthcare systems as quickly as in other sectors, but it is about to change. as an antecedent of long-term cooperation (mcevily et al., 2003), competitive advantage resulting from being trustworthy – the trust advantage – deserves further attention in analysing its potential diffusion paths. the logic behind the platform business models challenges our understanding of the competitioncooperation nexus, prioritising between quality and quantity, as well as achieving and sustaining competitive advantage. in the platform economy, in the case of the first entrants to a market, a superior platform quality might be a way to outweigh a smaller ecosystem and weaker network effects (mcintyre and srinivasan, 2017), as a high-quality platform can later be scaled up, not vice versa. the “quality” here is a combination of the platform leader’s ability and willingness to orchestrate the platform setup and operations so that it would maximise mutually created value, and trust can also be considered a reflection of the abovementioned platform quality. trust is an intangible asset that has been often neglected or included in the broader term of a firm’s reputation. trust is likely one of the imperfectly imitable (lippman and rumelt, 1982) resources, in that a firm that does not possess it cannot obtain it (easily and quickly). the trust advantage is a socially complex (wilkins, 1989) firm resource, which is extremely hard to copy, i.e. if the platform leader itself does not slip, then it can be a cornerstone of the sustained competitive advantage. taken together, trust as a resource and the capability to gain and sustain trust, form the core of the competitive advantage for the platforms. this article used the digital vaccination certificate platform as an example of a nascent platform, while announcements of several similar initiatives have been made around the world. based on the rationale of a free market economy, the best price/value ratio from the end user’s perspective emerges in a competitive market situation, while for the society as a whole the competition is perceived as a positive force. however, for simplifying global travel it would be logical that eventually one dominant standard would emerge. so, does this digital vaccination certificate platform offer a service where we can see (or would like to see) ongoing competition in the future, or is its perfect implementation possible only when there is one common global standard? could the monopolistic status be a threat or would it be beneficial to the society as a whole? first, it depends on how much, if any, power it has over the ecosystem members’ national vaccination registries, or whether it is just an intergovernmental data communication platform. the yellow cardboard vaccination certificates have a common standard also today, but it is hard to see a business opportunity in it, rather they are a public good. however, if we look at the digital vaccination platform as a new data governance standard for e-health, or e-governance more broadly – as an attractive marketplace for providers of complementary goods and services, or as a hybrid platform encompassing also co-creation (cusumano, gawer, and yoffie, 2019), the competition question becomes more relevant. if a group of motivated participants in a business sector, covering the main ecosystem functions, already journal of business models (2021), vol. 9, no. 4, pp. 94-111 107107 successfully launches a dlt-based multisided platform that is able to provide increasing marginal utility through network effects, it will be very difficult to beat it with a traditional business model. the nature of network effects, which were discussed before, allows only a few dominant marketplaces (gassmann, schmück, and gilgen, 2019), and the initial competitive advantage in this case could come from a first-mover advantage (liebermann and montgomery, 1988), assuming that the first-mover could get a lead with creating the network effects. the more countries that join the first platform, the higher the entry barriers (bain, 1956) to followers will be, as it becomes harder to provide equal value compared to the first-comer, and hence harder also to attract a critical mass of users. the trust develops over time, and its nature and influence mechanisms change. at the launch, the trust towards the digital vaccination certificate platform depends on the visionary countries, ict firms and the individuals representing them. the objects of trust are the previous domain-specific experiences and references, which enable the trust credit. another potential source of trust credit is the carefully chosen strategic partnerships, the who in this particular case. successful piloting further strengthens the trust, and it is crucial for creating stronger network effects and scaling up. thereon, in the stabilisation stage, established trust motivates the countries and individuals to remain using the platform, and even apply it beyond international travel. the process is also well aligned with the ecosystem development model phases (birth, expansion, leadership, self-renewal) of moore (1993), and it is useful in explaining how the trust evolves, and over time changes in its scope and degree. in the course of the scaling up of the platform, the bottom line of the potential gains and losses becomes the focal point, i.e. the calculative trust in the platform’s viability becomes central. in the stabilisation stage, the trust becomes dependent on the experiences in participating in the platform operations (e.g. success of the piloting period), and the platform leader’s capability to orchestrate it – preventing, detecting and correcting faults, if necessary. the global spread of covid-19 has given the opportunity to harness the momentum of setting up a digital vaccination certificate platform, but it remains relevant far beyond covid-19 – for travelling to countries where diseases like hepatitis, yellow fever, tuberculosis, rabies, etc. can still be found. journal of business models (2021), vol. 9, no. 4, pp. 94-111 108108 references aagaard, a. & nielsen, c. (2021), the fifth stage of business model research: the role of business models in times of uncertainty, journal of business models, vol. 9, no. 1, pp. 77–90. amit, r. & zott, c. (2015), crafting business architecture: the antecedents of business model design, strategic entrepreneurship journal, vol. 9, no. 4, pp. 331–350. ariely, d. (2008), predictably irrational: the hidden forces that shape our decisions, harper collins, canada, 304 pp. axelrod, r. (1984), the evolution of cooperation, new york: basic books, 241 pp. bain, j. (1956), barriers to new competition. cambridge: harvard university press. barney, j. (1991), firm resources and sustained competitive advantage, journal of management, vol. 17, no. 1, pp. 99–120. bhattacharya, r., devinney, t. m. & pillutla, m. m. (1998), a formal model of trust based on outcomes, the academy of management review, vol. 23, no. 3, pp. 459–472. casadesus-masanell, r. & zhu, f. (2013), business model innovation and competitive imitation: the case of sponsor-based business models, strategic management journal, vol. 34, no. 4, pp. 464–482. cusumano, m. a., gawer, a. & yoffie, d. b. (2019), the business of platforms: strategy in the age of digital competition, innovation, and power. harper business. das, t. k. & teng, b-s. (1998), between trust and control: developing confidence in partner cooperation in alliances, the academy of management review, vol. 23, no. 3, pp. 491–512. david, l. p. & mcdaniel, r. r. jr. (2004), a field study of the effect of interpersonal trust on virtual collaborative relationship performance, mis quarterly, vol. 28, no. 2, pp. 183–227. de reuver, m., sørensen, c. & basole, r. c. (2018), the digital platform: a research agenda. journal of information technology, vol. 33, pp. 124-135. dyer, j. h. & chu, w. (2003), the role of trustworthiness in reducing transaction costs and improving performance: empirical evidence from the united states, japan, and korea, organization science, vol. 14, no. 1, pp. 57–68. eisenmann, t., parker, g. & van alstyne, m. (2009), opening platforms: how, when and why? in platforms, markets and innovation. gawer a (ed). edward elgar: cheltenham, uk. eisenmann, t., parker, g. & van alstyne, m. (2011), platform envelopment, strategic management journal, vol. 32, pp. 1270–1285. fuentelsaz, l., garrido, e. & maicas, j. p. (2015), a strategic approach to network value in network industries, journal of management, vol. 41, no. 3, pp. 864–892. journal of business models (2021), vol. 9, no. 4, pp. 94-111 109109 fulmer, c. a. & gelfand, m. j. (2012), at what level (and in whom) we trust: trust across multiple organizational levels, journal of management, vol. 38, no. 4, pp. 1167–1230. gambetta, d. (1988), trust: making and breaking cooperative relations. new york: basil blackwell. gassmann, o., schmück, k. & gilgen, n. (2019), democratizing the platform economy: the quiet revolution through blockchain. [https://coinjournal.net/news/democratizing-the-platform-economy-the-quiet-revolution-through-blockchain/] gawer, a. & cusumano, m. a. (2008), how companies become platform leaders, mit sloan management review, vol. 49, no. 2, pp. 28–35. jaatun, m. g., pearson, s., gittler., f., leenes, r. & niezen, m. (2020), enhancing accountability in the cloud, international journal of information management, vol. 53, 101498. lewicki, r. j., mcallister, d. j. & bies, r. j. (1998), trust and distrust: new relationships and realities, academy of management review, vol. 23, no. 3, pp. 438–458. lieberman, m. b. & montgomery, d. b. (1988), first-mover advantages, strategic management journal, vol. 9, no. s1, pp. 41–58. lippman, s. a. & rumelt, r. p. (1982), uncertain imitability: an analysis of interfirm differences in efficiency under competition, bell journal of economics, vol. 13, pp. 418–438. massa, l., tucci, c. l. & afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73–104. massa, l., viscusi, g., & tucci, c. (2018), business models and complexity, journal of business models, vol. 6, no. 1, pp. 70–82. mayer, r. c., davis, j. h. & schoorman, d. (1995), an integrative model of organizational trust, academy of management review, vol. 20, no. 3, pp. 709–734. mcevily, b., perrone, v. & zaheer, a. (2003). introduction to the special issue on trust in an organizational context, organization science, vol. 14, no. 1, pp. 1–4. mcintyre, d. p. & srinivasan, a. (2017), networks, platforms, and strategy: emerging views and next steps, strategic management journal, vol. 38, no. 1, pp. 141–160. miles, r. e. & snow, c.c. (1992), causes of failure in network organizations, california management review, vol. 34, no. 4, pp. 93–72. miller, g. j. (1992), managerial dilemmas: the political economy of hierarchy. new york: cambridge university press. moore, j. f. (1993), predators and prey: a new ecology of competition, harvard business review, vol. 71, no. 3, pp. 75–83. parker, g. g. & van alstyne, m. (2005), two-sided network effects: a theory of information product design, management science, vol. 51, no. 10, pp. 1494–1504. journal of business models (2021), vol. 9, no. 4, pp. 94-111 110110 parker, g. g. & van alstyne, m. w. (2018), innovation, openness, and platform control, management science, vol. 64, no. 7, pp. 3015–3032. parmigiani, a. & mitchell, w. (2005), how buyers shape supplier performance: can governance skills substitute for technical expertise in managing out-sourcing relationships?, academy of management proceedings, c1–c6. porter, m. e. & siggelkow, n. (2008), contextuality within activity systems and sustainability of competitive advantage, academy of management perspectives, vol. 22, no. 2, pp. 34–56. rochet, j-c. & tirole, j. (2006), two sided markets: a progress report, the rand journal of economics, vol. 37, no. 3, pp. 645–667. rogers, e. m. (2003), diffusion of innovations. fifth ed., new york: free press. 576 p. rousseau, d. m., sitkin, s. b., burt, r. s. & camerer, c. (1998), not so different at all: a cross-discipline view of trust, academy of management review, vol. 23, no. 3, pp. 393–404. schmeiss, j., hoelzle, k. & tech, r. p. g. (2019), designing governance mechanisms in platform ecosystems: addressing the paradox of openness through blockchain technology, california management review, vol. 62, no. 1, pp. 121–142. sitkin, s. b. & roth, n. l. (1993), explaining the limited effectiveness of legalistic “remedies” for trust/distrust, organization science, vol. 4, pp. 367–392. strauss, a. & corbin, j. (1994), grounded theory methodology: an overview. in denzin, n., lincoln, y. handbook of qualitative research. 1st ed., pp. 273–284. teece, d. (2017), dynamic capabilities and (digital) platform lifecycles, advances in strategic management, vol. 37, pp. 211–225. trischler, m., meier, p., & trabucchi, d. (2021), digital platform tactics: how to implement platform strategy over time, journal of business models, vol. 9, no. 1, pp. 67–76. wareham, j., fox, p. & giner, j. c. (2014), technology ecosystem governance, organization science, vol. 25, no. 4, pp. 1195–1215. werbach, k. (2018), the blockchain and the new architecture of trust. cambridge, ma: mit press. wilkins, a. (1989), developing corporate character. san francisco: jossey-bass. williamson, o. e. (1975), markets and hierarchies. new york: free press. zaheer, a., mcevily, b. & perrone, v. (1998), does trust matter? exploring the effects of interorganizational and interpersonal trust on performance, organization science, vol. 9, no. 2, pp. 141–159. zand, d. e. (1972), trust and managerial problem solving, administrative science quarterly, vol. 17, pp. 229–239. zott, c., amit, r. & massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2021), vol. 9, no. 4, pp. 94-111 111111 liina joller is a lecturer on innovation management at her alma mater, the university of tartu, estonia. during her graduate studies she has spent a semester as a guest researcher at the aalto university in finland as well as the university of st. gallen in switzerland. besides her work in academia, she is a strategy coach for several start-up companies, and is contributing in an advisory role to innovation policy development, mainly in the areas of electromobility, carbon capture & utilization, renewable energy, and biotechnology. about the authors journal of business models (2021), vol. 9, no. 2, pp. i xiv i fostering cross-disciplinarity in business model research florian lüdeke-freund1, romana rauter 2, christian nielsen3, marco montemari4, nikolay dentchev5, niels faber6 abstract purpose: we illustrate how cross-disciplinarity in business model research (multi-, interand transdisciplinarity) can help scholars overcome silo-building and span disciplinary boundaries. the seven articles contained in the special issue ‘fostering cross-disciplinarity in business model research’ are summarised, and the authors’ perspectives on the phenomena studied as well as the theories and methods adopted are portrayed. methodology: we provide literature-based definitions of cross-disciplinary research modes and discuss their potential for business model research informed by insights from the seven special issue articles. findings: there is much variety regarding the theories applied in business model research. these include design, imprinting, information asymmetry, paradox theories and many more. this variety illustrates that traditional domains, such as organisation, management and entrepreneurship studies, can be extended in creative ways, and hence can be equipped to deal with emerging and complex issues such as sustainability, circular economy, data management and base-of-thepyramid entrepreneurship. interdisciplinarity seems to be well developed regarding the use of theories, but more must follow in terms of research methods and collaboration formats. research implications and limitations: the common understanding of the potential and importance of cross-disciplinarity can be considered the major implication of this special issue. beyond this, further critical reflection is required. important questions remain open, primarily regarding research methods and collaboration formats. this editorial article reflects the perspectives of both the guest editors and the authors in this special issue. the presented understandings of cross-disciplinary business model research and implications for its future are of a preliminary nature. originality and value: business model research is growing rapidly and scholars from various fields contribute to expanding our knowledge. an explicit focus on the potential of multi-, interand transdisciplinary research approaches is missing so far. please cite this paper as: lüdeke-freund, f., rauter, r., nielsen, c., montemari, m., denchev, n. and faber, n., (2021) fostering cross-disciplinarity in business model research, journal of business models vol. 9, no. 2, pp. i-xiv keywords: cross-disciplinarity, multidisciplinarity, interdisciplinarity, transdisciplinarity, business model research acknowledgment : we would like to thank all authors for their contributions and the reviewers for their time and efforts in reviewing the manuscripts. our special thanks go to the editor-in-chief, professor robin roslender, for his support during the production of this special issue, and to mette hjorth rasmussen, for her excellent, conscientious editorial assistance. earlier versions of some papers included in this special issue were presented at the new business models conference 2019 (https://www.newbusinessmodels.org/) and at the business model conference 2019 (http://businessmodelconference.com/). hence, our gratitude also goes to all conference participants who contributed to the various discussions on fostering cross-disciplinarity in business model research. list of reviewers: petri ahokangas, andres alcayaga, christina bidmon, krzysztof dembek, andrew earle, timber haaker, anna holm, maya hoveskog, gjalt de jong, moniek kamm, susan lambert, dirk lüttgens, laura michelini, allan næs gjerding, samuli patala, arijit paul, jonatan pinkse, birthe soppe, yariv taran and sjors witjes 1 escp business school berlin, fluedeke-freund@escp.eu, 2 university of graz, romana.rauter@uni-graz.at 3 aalborg university business school, chn@business.aau.dk, 4 università politecnica delle marche, m.montemari@univpm.it 5 vrije universiteit brussel, nikolay.dentchev@vub.be, 6 university of groningen / hanze uas, n.r.faber@rug.nl doi: https://doi.org/10.5278/jbm.v9i2.6739 issn 2246-2465 https://www.newbusinessmodels.org/ http://businessmodelconference.com/ mailto:fluedeke-freund@escp.eu mailto:romana.rauter@uni-graz.at mailto:chn@business.aau.dk mailto:m.montemari@univpm.it mailto:nikolay.dentchev@vub.be mailto:n.faber@fm.ru.nl https://doi.org/10.5278/jbm.v9i2.6739 journal of business models (2021), vol. 9, no. 2, pp. i xiv ii introduction the field of business model research is garnering more diverse attention, and publication activity is growing rapidly (nielsen et al., 2018). it is remarkable that this research field attracts researchers from many diverse disciplines, including management and organisation studies, entrepreneurship and innovation, industrial design, information technologies, engineering, sociology, sustainability studies and many more (e.g. dentchev et al., 2018; foss and saebi, 2017; massa et al., 2017; maucuer and renaud, 2019; wirtz and daiser, 2018). this involvement of multiple disciplines speaks not only to the inherent complexities of business models (cf. massa et al., 2018) but also to the richness and potential of this research field. referring to the latter, we can state that business model research holds potential for cross-disciplinary modes of knowledge generation, bringing together researchers from more than one discipline to investigate a specific phenomenon (mennes, 2020). for example, several disciplines deal with shared or recurring business model phenomena from their individual perspectives, which allows juxtaposing their specific insights (e.g. what management scholars discover about business model innovation compared to what designers can tell us). however, despite, or maybe because of, this situation there seems to be a tendency towards ‘silo-building’ in business model research, hampering progress towards other, more integrative, cross-disciplinary modes, including multi-, interand transdisciplinary research. let us look at two recent developments. first, silobuilding takes place between different business model (sub-)communities. we see at least one community dealing with ‘traditional’ or ‘mainstream’ business models, and another one interested in ‘new’ or ‘sustainable’ business models. the existence of two conference series—international conference on new business models and business model conference—is an indication of these different communities.1 similar patterns can be found in the topics typically discussed in leading journals such as long range planning and journal of management on the one hand and organization & 1 see http://businessmodelconference.com/ and https://www. newbusinessmodels.org/ environment and journal of cleaner production on the other hand. second, silo-building takes place within these communities as well, as researchers tend to limit themselves to discipline-specific phenomena, theories and methods and fall back to their camps in the multidisciplinary spectrum. such a tendency is natural since specialisation in once-acquired knowledge and skills together with subordination to given cultures of research, hierarchies and knowledge structures are key features of disciplines (cf. turner, 2017) and serve the very pursuit of an academic career (aagaard-hansen, 2007). as a consequence, we observe some hesitation with regard to the development and application of more diverse cross-disciplinary research modes (cf. mennes, 2020). as guest editors of this special issue, we wondered: what if we could make use of the richness and potential of various streams of business model research early on, before specialisation turns into unsurmountable barriers, and help researchers from different disciplines to connect and learn from each other? this may have been a naïve stance, but we insisted on giving it a chance and hence called for contributions showcasing crossdisciplinary research in business models applied to diverse topics and phenomena (e.g. paradoxes of business model development and performance, disruptive business models and industry dynamics, ecological and social entrepreneurship, business models for sustainability transitions and so on)—referred to as ‘multiand interdisciplinary’ in the original call for papers.2 our aim was to explore the variety of current business model research and to motivate cross-disciplinary exchange to make sure that progress in specialised streams of business model research translates into progress of the field as a whole. we deliberately invited participants from both 2019 business model conferences to submit their papers to this special issue. let us take stock of what we did and did not find. but before, we briefly explain our understanding of crossdisciplinarity in business model research and why striving to overcome silos and disciplinary boundaries is a worthwhile endeavour. 2 see http://www.journalofbusinessmodels.com/media/1253/cfpfostering-multi-and-interdisciplinary-business-model-research. pdf http://businessmodelconference.com/ https://www.newbusinessmodels.org/ https://www.newbusinessmodels.org/ journal of business models (2021), vol. 9, no. 2, pp. i xiv iii why strive to overcome silos and disciplinary boundaries? in 2011, zott, amit and massa found that the business model literature was ‘developing largely in silos, according to the phenomena of interest to the respective researchers. the main interest areas identified were (1) e-business and the use of information technology in organizations, (2) strategic issues, such as value creation, competitive advantage, and firm performance and (3) innovation and technology management’ (zott et al., 2011, p. 1019). from more recent reviews we can conclude that this tendency is becoming more pronounced and that other special interest groups, such as entrepreneurship and sustainability researchers, are adding new camps to the business model research landscape (e.g. dentchev et al., 2018; foss and saebi, 2017; lüdeke-freund and dembek, 2017; massa et al., 2017; maucuer and renaud, 2019). increasing specialisation within a maturing research field is undoubtedly necessary to gain more detailed insights into its phenomena, improve its research methods and theories, discover new ones, and, in general, make use of efficient division of labour and variety in perspectives. in a similar vein, lecocq et al. (2010) argued for the advantages of developing a ‘research programme’ for business models, which was followed by nielsen et al.’s (2018) four distinct phases of business model research. in particular, the first phase focuses on definitions and conceptualisations of business models as well as the links between business models and strategies. the second phase is dominated by the research stream of business model innovation. the design of frameworks and the foundations for theory-building are at the core of the third phase. the fourth phase is centred on the performative approach. studies in this phase explore what actually happens in companies when business model tools are designed, implemented and used (e.g. what works and what does not work, levers and barriers of designing, implementing and using business model tools; see montemari, 2018). research adopting a performative approach builds on the assumption that business models are context-dependent and are given meaning by subjects in the specific situations in which they are developed and applied (roslender and nielsen, 2019). taking these developments in business model research into consideration, this special issue builds on the conviction that the increasing specialisation and search for a research programme should be complemented by a search for cross-disciplinary approaches (cf. mennes, 2020) or, at least, the openness to look beyond disciplinary boundaries. our assumption is that cross-disciplinarity improves our understanding of phenomena, methods and theories, particularly regarding complex questions that scholars aim to address, for example, how entrepreneurial values motivate the shape and performance of ecologically and socially beneficial business models. finding answers to questions such as this one requires expertise from diverse fields (e.g. entrepreneurship, psychology and sustainability). cross-disciplinary approaches (in contrast to mono-disciplinary approaches) should be better suited to grasp these issues and to study business models as they actually are: complex and multi-dimensional systems (massa et al., 2018). as such, business models integrate human interactions, organisational structures, markets and diverse stakeholders, and thus, they typically cross the boundaries of various social, economic and technological systems, for example, by connecting supply and demand, technologies and markets, stakeholders and value creation and so on (for exemplary overviews of the variety in business model research see lüdeke-freund and dembek, 2017; dentchev et al., 2018; maucuer and renaud, 2019). accordingly, maucuer and renaud suggest that ‘disciplines should cross-fertilize in order to enrich their own conceptualization [of business models] and reinforce the co-development of their respective fields … [and to] combine their efforts in developing transversal issues …’ (maucuer and renaud, 2019, p. 38). the benefits of such an approach can be illustrated with another example: some researchers work on the cognitive micro-foundations of business model development and propose that these involve configurations of simple design and decision-making rules, so-called heuristics (loock and hacklin, 2015), or schemas representing firms’ value-creating activities (martins et al., 2015; massa et al., 2017). such cognitive perspectives are also important to understand how actors deal with ambiguous and even paradoxical issues, such as integrating sustainability considerations into business activities (hahn et al., 2014). in turn, how such challenges can be journal of business models (2021), vol. 9, no. 2, pp. i xiv iv addressed effectively by developing new business models is a question that may be answered by building on two decades of research on business model innovation (foss and saebi, 2017; wirtz, göttel et al., 2016, wirtz, pistoia et al., 2016). business model researchers have a natural tendency to deal with complex and multidimensional issues (cf. massa et al., 2018) involving multiple stakeholders’ needs and interests (lüdekefreund et al., 2020) and hence require correspondingly integrative and diverse research modes. what is cross-disciplinarity? we follow mennes (2020) and use the term cross-disciplinarity ‘to refer to the general category of research that involves more than one discipline’ (p. 3). dominating taxonomies of cross-disciplinarity typically distinguish three modes. the following definitions proposed by mennes particularly highlight the role of collaboration: • ‘‘multidisciplinarity’ refers to the collaboration of researchers with different backgrounds where their respective disciplines are juxtaposed instead of integrated …; • ‘interdisciplinarity’ stands for the collaboration of researchers with different disciplinary backgrounds where (elements of) the respective disciplines are integrated …; and • ‘transdisciplinarity’ either refers to a collaboration where the integration of (elements from) different disciplines is so extensive that the origin of the elements gets lost, or refers to a collaboration of researchers and non-academics such as stakeholders and/or practitioners who integrate their knowledge and know-how.’ (p. 4–5) multidisciplinarity is typically described as juxtaposing different disciplines (klein, 2017; vermeulen and witjes, 2021). the involved disciplines, for example, innovation management and psychology, remain separate and their characteristics, such as theories and methods, retain their original identity. this research mode involves different approaches to studying shared phenomena, for example, how entrepreneurs come up with new business models. while innovation management scholars and psychologists may both study this phenomenon, the theories and methods they use and the knowledge they generate remain within their respective disciplinary boundaries. the obtained results will be complementary and may even be combined in a joint framework, but they will only be loosely related and presented in a sequential or encyclopaedic manner. the multidisciplinary research mode leads to multiple perspectives on jointly studied business model phenomena, but it does not foster theoretical or methodical integration. by contrast, interdisciplinarity is characterised by proactive integration and interaction between disciplines (klein, 2017; vermeulen and witjes, 2021). methods and concepts are borrowed from other disciplines to test hypotheses, develop new theories and find answers to research questions that require the knowledge and skills from more than one discipline. such approaches are driven by, for example, the complexities of natural and social phenomena, the search for solutions to societal problems and technological change. for example, innovation management scholars can borrow psychological concepts, such as values and motivation, to study the antecedents and moderators of entrepreneurs’ sustainability-oriented business model innovation processes. beyond ‘borrowing’, researchers may cross disciplinary boundaries—in fact, create new disciplines—by proactively integrating their approaches and developing new theoretical constructs and empirical methods. psychologically enhanced innovation theories and empirical investigations of ‘values-based business model innovation’ (e.g. breuer and lüdekefreund, 2017) or the development of new reference frames for ‘sustainability-oriented business models’ (e.g. dentchev et al., 2018) serve as examples. attributes associated to transdisciplinarity include ‘hyper-integrative’ (mennes, 2020), ‘transcending’ and even ‘transgressive’ (klein, 2017). while interdisciplinarity crosses boundaries by being integrative and interactive, transdisciplinarity goes further in that the original characteristics of involved disciplines may even disappear. the use of transdisciplinary inquiry aims to reach such integration at multiple levels of abstraction (max-neef, 2005). such overarching synthesis can lead to new sciences, such as anthropology as the science of humans, universal ‘interlanguages’ that transcend not only disciplines but also science, education and practical application (e.g. mathematics or system theory), and the redefinition of hierarchies, structures and actor roles in journal of business models (2021), vol. 9, no. 2, pp. i xiv v the creation and application of knowledge. transdisciplinarity is driven by the quest for systematically integrated and universal knowledge, critical evaluation of theories, concepts and methods as well as the underlying sociopolitical antecedents. transdisciplinary research driven by environmental and sustainability issues (schaltegger et al., 2013; vermeulen and witjes, 2021), for example, acknowledges the ‘life-worlds’ of humans, and not disciplinary interests, as frames for the definition of research problems and knowledge production. new forms of collaboration between academics, business and other social actors, in which scientifically reliable knowledge is merged with socially robust problem definitions and knowledge, are another result of the search for more integrative and universal modes of research. mono-disciplinarity represents an ‘opposite’ research mode in which scholars apply a rather limited or focused perspective to investigate a phenomenon. however, one must bear in mind that a clear differentiation between these different research modes is difficult to achieve and is context dependent. it is not difficult to see that cross-disciplinary research holds some potential for contemporary business model studies as these often require, at least theoretically, cross-disciplinary collaboration, diverse theories and methods and new ways of dealing with complex phenomena such as innovation, entrepreneurship and sustainability. in the following, we briefly summarise the articles and key findings of the special issue articles and how researchers deal with various phenomena and use diverse theories and methods. these articles’ contributions to, and implications for, cross-disciplinarity in business model research are discussed in the final section. articles in the special issue this special issue contains seven articles, all of which provide inspiration for, and contribution to, future crossdisciplinary conversations and projects in the field of business model research. table 1 provides an overview of these articles, the diversity of phenomena studied and the variety of applied theories and methods. the short paper by dror etzion (2020), ‘radical resource productivity as an inspiration for business model innovation: the case of foodchain’, addresses business model innovations in the service sector. foodchain is a fastcasual restaurant recently founded in montreal, canada, with the primary aim of serving uncooked, vegetablebased meals. the research objective is to understand the effects of waste-minimisation efforts, following a radical resource productivity (rrp) approach on business model design. a major rrp design choice was to use so-called robot-coupes for food production, which increases efficiency gains in earlier manufacturing-like stages of the value chain. furthermore, an activity map was found to be a useful tool to visualise essential business model design choices and consequences. the article by michael fruhwirth, christiana ropposch, and viktoria pammer-schindler (2020), ‘supporting data-driven business model innovations: a structured literature review on tools and methods’, reviews research on tools and methods for data-driven business model innovation. the analysed literature is structured according to the types of contribution (taxonomies, patterns, visual tools, methods, it tools and processes), types of thinking supported (divergent and convergent) and the business model elements that are addressed (value creation, value capturing and value proposition). by drawing on these findings, the authors identify three avenues for future research: first, tools and methods that enable convergent thinking require additional studies; second, more research is needed to provide a holistic view that integrates single tools and methods; and third, designing software tools to support data-driven business model innovation is an area that should be further investigated. the article by martin glinik, michael rachinger, christiana ropposch, florian ratz, and romana rauter (2021), ‘exploring sustainability in business models of early-phase start-up projects: a multiple case study approach’, explores the drivers for integrating sustainability aspects in the business models of early-stage start-ups. the authors studied the sustainability in the business models of six early-stage entrepreneurial projects. they found that most cases indicate that early-stage start-ups do not holistically integrate sustainability, but rather consider it as an additional benefit to their products and services. the authors assert that the main drivers of sustainable business models in early-stage ventures are entrepreneurial motivation, careful resource use and waste reduction. both journal of business models (2021), vol. 9, no. 2, pp. i xiv vi altruistic and strategic, respectively financial motivations were found to be important for the inclusion of sustainability considerations. the article by päivi luoma, anne toppinen, and esko penttinen (2021), ‘the role and value of data in realising circular business models: a systematic literature review’, is positioned at the crossroads between circular business models and data. it studies the role that data, such as supply-chain and life-cycle data, plays in circular business models. the review shows that this role is still poorly understood. the recognition of data as both driver and enabler for circular economic activities is common. additionally, two approaches author(s) and title phenomena studied theories and methods used etizon, d. (2020), radical resource productivity as an inspiration for business model innovation: the case of foodchain, journal of business models, vol. 8, no. 1, pp. 1–6. foodchain’s business model business model design driven by radical resource productivity and efficiency radical resource productivity; business model innovation teaching case data; activity mapping fruhwirth, m., ropposch, c. and pammer-schindler, v. (2020), supporting data-driven business model innovations: a structured literature review on tools and methods, journal of business models, vol. 8, no. 1, pp. 7–25. data-driven business model innovation types of thinking related to business model innovation tools and methods for business model innovation dataand analytics-enabled business model development structured literature review; conceptual framework development glinik, m., rachinger, m., ropposch, c., ratz, f. and rauter, r. (2021), exploring sustainability in business models of early-phase start-up projects: a multiple case study approach, journal of business models, vol. 9, no. 2, pp. 22-43. sustainability in business models of earlyphase start-ups imprinting processes giving shape to new business models imprinting theory; sustainable business model development multiple case study approach; qualitative content analysis luoma, p., toppinen, a. and penttinen, e. (2021), the role and value of data in realising circular business models: a systematic literature review, journal of business models, vol. 9, no. 2, pp. 44-71. role of data in circular business models data as a source of value in data-driven business models dataand analytics-enabled business model development; circular business models systematic literature review; conceptual framework development endregat, n. and pennink, b. (2021), exploring the coevolution of traditional and sustainable business models: a paradox perspective, journal of business models, vol. 9, no. 2, pp. 44-71. tensions and paradoxes of sustainabilitydriven business model development strategies to deal with co-evolutionary tensions and paradoxes business model co-evolution; paradox perspective multiple case study approach; conceptual framework development alba ortuño, c. and dentchev, n. (2021), we need transdisciplinary research on sustainable business models, journal of business models, vol. 9, no. 2, pp. 72-86. transdisciplinary research in vulnerable entrepreneurship data-related challenges in sustainable business model research information asymmetry; sustainable business models; international management; base-of-the-pyramid case study; interviews and focus groups; data triangulation urmetzer, s. (2021), dedicated business models – connecting firms’ values with the systemic requirements of sustainability, journal of business models, vol. 9, no. 2, pp. 87-108. role of business models in changing innovation systems integration and diffusion of sustainability values dedicated innovation systems; sustainability transitions systematic literature review; conceptual framework development table 1: articles contained in the special issue journal of business models (2021), vol. 9, no. 2, pp. i xiv vii regarding the value of data are distinguished: the outward-oriented approach emphasises the value of data to shape the user experience relating to the design of circular products and services, and the inward-focused approach focuses on the way in which data operationally contributes to improving economic and environmental performance. the article by niklas endregat and bartjan pennink (2021), ‘exploring the coevolution of traditional and sustainable business models: a paradox perspective’, uses seven case studies to investigate the tensions and paradoxes that occur when traditional and sustainability-oriented business models co-evolve under one corporate roof. the identified tensions and paradoxes include competing demands in terms of performance and value creation, fit with organisational culture and mindset, challenges in training and staffing, the allocation of resources between traditional and sustainable business models and balancing the roles and expectations of multiple stakeholders. the authors present a framework to structure these challenges and to analyse their sample of cases. four coping strategies are identified: ‘splitter’, ‘operational perfectionist’, ‘strategic mandator’ and ‘transformer’. the article by claudia alba ortuño and nikolay dentchev (2021), ‘we need transdisciplinary research on sustainable business models’, argues in favour of transdisciplinarity in sustainable business model research. the authors developed their arguments based on a transdisciplinary programme in bolivia and 57 interviews and 10 focus group discussions with vulnerable entrepreneurs and relevant stakeholders, alongside numerous on-site observations. the authors used the theoretical lens of information asymmetry and argue that transdisciplinary research can resolve the problems of moral hazard, information analysis and information access, which occur while investigating complex phenomena, such as sustainable business models. based on the findings of this study, the authors make five suggestions for how scholars can adopt transdisciplinarity in their sustainable business model studies: (i) understand the context, (ii) adapt to the context, (iii) develop relationships of trust, (iv) be flexible with the research focus and (v) systematically present to other disciplines and non-academic actors. the article by sophie urmetzer (2021), ‘dedicated business models – connecting firms’ values with the systemic requirements of sustainability’, brings together insights from innovation system theory, sustainability transitions and innovation trajectories. the main finding is that dedicated business models affect an innovation system at the level of its leading paradigms. these business models commit to sustainability values, increase their influence through expansion of their networks and actively impose these sustainability values on consumers and suppliers. the theorical link this paper explores between innovation system and transition theories culminates in the role business models play as a linking pin to shape and instigate change at a fundamental level. more in-depth insights into diffusion mechanisms and patterns of values, and how these reconfigure leading paradigms at regime and systems levels, call for the inclusion of additional disciplines (e.g. social psychology, innovation management). implications and potential for cross-disciplinarity in business model research the goal of this special issue is to illustrate the variety of phenomena studied by business model scholars and to shed light on the diversity of theories and methods they apply. while this special issue can of course only offer a very limited snapshot, it covers diverse topics including business model design, entrepreneurship, sustainability and data and analytics, in addition to diverse combinations of these topics. several indications of cross-disciplinarity in studying these topics can be found in the articles, mostly in terms of interdisciplinary approaches to defining phenomena under investigation and to using theory. we discuss the implications of these observations in more detail below. in addition to our reading of the articles, we asked the authors to appraise their research modes, using a simple continuum ranging from monoto multi-, inter and transdisciplinarity. the authors were provided with the definitions of research modes proposed by mennes (2020) (see the ‘what is cross-disciplinarity?’ section). figure 1 demonstrates how the authors appraised their own work by responding to the following question: journal of business models (2021), vol. 9, no. 2, pp. i xiv viii ‘please position your paper along the continuum from monoto transdisciplinary. the cross-disciplinary aspects of your research approach adopted could refer to, for example, theories, methods, collaboration processes, or disciplinary backgrounds of the authors.’ according to the authors, most of the studies presented in the special issue involve interdisciplinary research modes. acknowledging that interdisciplinarity seems to be a common research mode applied by the special issue authors and that future research should be more transdisciplinary, we reflect on some implications for cross-disciplinarity in business model research. we focus on the four most prominent topics covered in our special issue, namely business model design, entrepreneurship, sustainability and data and analytics. in doing so, we also present the authors’ points of view. asked for their key learnings, they offered some interesting insights and explanations for why crossdisciplinarity makes sense in the context of business model research. business model design many special issue articles deal with topics related to business model design, including business model innovation, design principles and methods and tools for business model development. business model design is a ‘hot topic’ in business model research, exemplified by a constantly growing number of journal articles focusing on it (e.g. wirtz and daiser, 2018). in this special issue, it is addressed from various theoretical perspectives, including engineeringand sustainability-inspired approaches to resource use (etzion, 2020), imprinting theory to explain organisational behaviour (glinik et al., 2021), dataand analytics-enabled figure 1: research modes adopted and thematic areas covered in the special issue articles (according to the authors) note: (1) etzion; (2) fruhwirth, ropposch and pammer-schindler; (3) luoma, toppinen and penttinen; (4) glinik, rachinger, ropposch, ratz and rauter; (5) endregat and pennink; (6) alba ortuño and dentchev; (7) urmetzer journal of business models (2021), vol. 9, no. 2, pp. i xiv ix business model development (fruhwirth et al., 2020; luoma et al., 2021) and tensions and paradoxes occurring in the co-evolution of different types of business model (endregat and pennink, 2021). this variety shows that, regarding theories, interdisciplinary approaches are common and maybe even the norm, given the many various issues studied in relation to business model design. this is an interesting, but perhaps not surprising, observation, given that business models and related phenomena are, per se, complex and related to a huge variety of systemic and multi-level issues (cf. dentchev et al., 2018; massa et al., 2018). entrepreneurship, management and business scholars seem to be accustomed to applying theoretical perspectives coming from ‘alien’ domains such as design, engineering and information technology, as well as domains such as psychology and biology. this openness to interdisciplinary approaches in the form of using theory seems to be a useful research strategy— first, to deal with new and complex socio-technical and socio-economic phenomena, and second, for crossfertilisation (see ‘why strive to overcome silos and disciplinary boundaries?’ section). novel and promising perspectives can be expected the more business model scholars delve into other domains’ theories, for example, those derived from psychology (e.g. microfoundations of business model development), biology (e.g. business model evolution and ecosystems) and data sciences (e.g. new business models driven by, and driving, big data). this expectation seems to be shared by the special issue authors: ‘not only in academia, but also in business and policy, there is a significant need for more people that have insight on the interfaces of different disciplines, opportunities and challenges etc. multiand interdisciplinary business model research can make a great contribution to this. frameworks used in some disciplines could add great value when used in others.’ (luoma, toppinen and penttinen; personal statement) ‘most of the investigated start-up projects did not holistically integrate sustainability-related values. instead, sustainability was considered as an ancillary benefit to providing products or services. besides intrinsic motivation, there are also strategic reasons …’ (glinik, rachinger, ropposch, ratz and rauter; personal statement) the value of interdisciplinary approaches to using theory is obviously appreciated. the glinik et al. (2021) paper, as an example, shows that better understanding of how sustainability is integrated into new business models requires both strategic management and psychological, respectively ethnographical perspectives that can be embedded in an imprinting theory framework borrowed from animal studies. although the potential for interdisciplinarity is obvious, questions and challenges remain beyond the special issue articles, such as whether appropriate empirical methods are available and how collaborative research settings can be instituted in a fruitful manner. entrepreneurship continuing with the glinik et al. (2021) paper, we see how a focus on various interrelated aspects of a phenomenon, such as sustainability-oriented business model design, can give shape to interesting, yet hardly understood, research topics in the realm of entrepreneurship. these topics include the development and acceleration of new ventures with a sustainability orientation; the characteristics, motivations and intentions of entrepreneurs driving these ventures; their values and normative orientations; how they arrange value creation for multiple stakeholders; or their ventures’ strategic positioning. going deeper into any of these facets of entrepreneurial behaviour and its outcomes not only requires cross-disciplinary collaboration, theories and methods, but can also serve as a steppingstone to transdisciplinarity. an example of moving towards a transdisciplinary research mode is presented by alba ortuño and dentchev (2021). regarding theory, they build on information asymmetry, international management and base-of-the-pyramid approaches to study the business models of vulnerable entrepreneurs in bolivia. the authors actively participated in a programme aiming ‘to contribute to the development of the bolivian society by enhancing institutional capacity building’ for local communities and entrepreneurs (alba ortuño and dentchev, 2021, p. 75). creating meaningful insights and new knowledge required intense collaboration with various stakeholders, including continuous formal and informal discussions with local communities, different participatory methods, primary data collection through interviews and focus groups and analyses of secondary data. journal of business models (2021), vol. 9, no. 2, pp. i xiv x the authors summarise their experience as follows: ‘transdisciplinary research allows to understand the opportunities and challenges of sustainable business models (sbm) more precisely due the interaction of all involved actors. transdisciplinary research is highly beneficial to overcome problems in information asymmetry when researching sbm.’ (alba ortuño and dentchev; personal statement) this example tells us that complex entrepreneurship topics, such as vulnerable entrepreneurship and its potential for social value creation, can be addressed by combining different theoretical lenses, which are not limited to ‘pure’ entrepreneurship theories. furthermore, the immersion of researchers into a local context and object of study is not only promising but maybe even required. in support of this, longitudinal research designs, action research and data triangulation are useful elements in a transdisciplinary toolbox for the study of entrepreneurship business models. sustainability sustainability, for example, in terms of integrating principles of ecological or social value creation into business model design or seeing it as an entrepreneurial motivation, has already been mentioned (alba ortuño and dentchev, 2021; etzion, 2020; glinik et al., 2021). this shows that sustainability topics seem to be likely and promising subjects for cross-disciplinary business model research. an interesting and innovative interdisciplinary perspective is offered by urmetzer (2021). her conceptual work deals with how values of sustainability (e.g. customer expectations for better ecological performance) can become part of a business model and diffuse in innovation systems. her theory is that the design of value proposition, delivery and capture is an important mechanism to diffuse certain values and hence to link business model and system-level sustainability. values of sustainability are touched on by glinik et al. (2021) as well, as the motivation of entrepreneurs to give their business models a certain direction, and etzion (2020) makes a very explicit link between ecological design principles and business model design. while etzion (2020) and glinik et al. (2021), in simple terms, study how sustainability becomes a part of business models, urmetzer (2021) attempts to understand how business models can help diffuse sustainability values throughout the wider innovation systems in which business models are embedded. both perspectives are highly complementary and indicate a new field of study, namely values-based business models (breuer and lüdeke-freund, 2017). with a view to the future, urmetzer (2021) concludes that more in-depth insights about diffusion mechanisms and patterns of values are needed, and how these reconfigure leading paradigms at the regime and systems levels. this is a much needed, but no less ambitious call for cross-disciplinary business model research and a call for various micro-, mesoand macro-level disciplines to join in (e.g. social psychology, culture studies, policy research, innovation and sustainability transition studies). a novel firm-level perspective is offered by endregat and pennink (2021). they identify tensions and paradoxes that occur when companies operate traditional business models and aim to add sustainability-oriented business models to their portfolios. competing demands regarding performance and value creation, lack of fit with the dominant organisational culture and mindset, as well as challenges related to training, staffing and resource allocation are observed. while these challenges and the theoretical lens through which they are studied remain largely in the field of organisation and management studies, deeper analysis of the origins of the corresponding tensions and paradox will require a broad multior interdisciplinary approach. as with the examples above, various disciplines are required to understand how business performance is impacted (e.g. accounting), how organisational and business cultures are formed and (de-)stabilised (e.g. cultural studies, institutional theory), how human resources can be managed with regard to sustainability demands (e.g. psychology, human resource research and how decision-makers find solutions to paradoxical decisions about resources (e.g. paradox theory, psychology, leadership studies). the authors’ statements below show that such issues offer promising contexts for cross-disciplinary business model research: ‘integrating theories from different disciplines is a challenge but worth doing: it results in interesting new questions and ‘black-boxes’ to discuss from multiple journal of business models (2021), vol. 9, no. 2, pp. i xiv xi angles. introducing more philosophical arguments in your research broadens the theoretical perspective, for example it can overcome previously established divides (as in the concepts of tbm [traditional business model] and sbm [sustainable business model]).’ (endregat and pennink; personal statement) ‘i learned that business models tell us so much more about the true values and objectives of a firm than mission statements, sustainability reports, or interviews with ceos.’ (urmetzer; personal statement) again, the availability of corresponding research methods and collaboration formats is crucial. given the attention that universities and funding bodies are currently paying to issues of sustainability and circular economy, the future looks quite promising for business model research in these fields. data and analytics an interesting direction at the junction of sustainability and data sciences has been taken by luoma et al. (2021). they studied the role and value of data for the development of circular economy business models and found an outward-oriented and inward-focused approach to business model development, the former emphasising how data (such as product life cycle data) can be used to shape the user experience with circular products and services, and the latter focusing on how using data can improve the economic and environmental performance of circular economy business models. for the outward approach, further studies may encourage behavioural sciences to obtain more insights into consumer behaviour and the data requirements this creates. in addition to data on products and services, this approach calls for the inclusion of data on user behaviours and attitudes. the inward approach calls for a more intimate relation with the discipline of information management, obtaining a clearer picture of the requirements for data process optimisation, information systems, storing and search, or artificial intelligence for the optimisation of circular economy business models. while it seems reasonable to continue with a multi-disciplinary approach in which, for example, data sciences and psychology prepare the ground, later stages will most likely require interand transdisciplinary approaches in which theories and methods from these fields are merged. in a similar vein, fruhwirth et al. (2020) call for a more intense integration of different disciplines for future studies on data-driven business model design. these include, for example, innovation management, information systems and data sciences. further integration issues, such as the need to better understand the role of collaboration and to integrate insights from dataspecialists, are mentioned by luoma et al. (2021), all pointing to the need for further theoretical and methodical advances. in addition, fruhwirth and colleagues emphasise in their statement that more knowledge at cross-disciplinary intersections is needed, particularly when there is the need to combine different business model conceptualisations and tools: ‘tool support for (data-driven) business model innovation needs more conceptualisation and integration in the scientific community. tools typically are very specific to a single element of a business model or phase of business model innovation – and very little knowledge has been created about how these different conceptualisations map to each other, and how tools can be used in combination, and in a coherent process.’ (fruhwirth, ropposch, and pammer-schindler; personal statement) researchers, managers and entrepreneurs obviously have different understandings of business models. the same holds true for engineering, organisation theory, circular economy and data experts. this is a challenge and an opportunity, as for example, alba ortuño and dentchev (2021) tell us very explicitly. in short, we have just begun exploring the business model concept, but we can see that cross-disciplinary business model research can deliberately create situations in which theoretical and methodical diversity, fruitful deviance and sometimes tensions and conflicts are created to make the most of the otherwise unconnected expert perspectives. for the moment, this is maybe our conclusion, we are moving rapidly towards interdisciplinary applications of theory, but in terms of research methods, more must come. this might result also in different perceptions of (empirical) findings, or different findings, per se, and allow for diverse implications. this relates to the overall idea of interdisciplinarity that describes a collaboration journal of business models (2021), vol. 9, no. 2, pp. i xiv xii of researchers leading to an integration of elements of the disciplines involved (mennes, 2020), but it does not need to happen all at once. the same for the ‘ultimate’ move towards transdisciplinarity, of course, without falling into the fallacy that more cross-disciplinarity is always the best solution. as with many things in life, it depends. our colleague dror etzion nicely reminded us of that: ‘my paper suggests avenues for future research that remain mono-disciplinary, within the management discipline, but i do not want to suggest that cross-disciplinary business model research is a bad idea. quite the opposite.’ (etzion; personal statement) journal of business models (2021), vol. 9, no. 2, pp. i xiv xiii references aagard-hansen, j. (2007), the challenges of cross-disciplinary research, social epistemology. a journal of knowledge, culture and policy, vol. 21, no. 4, pp. 425–438. breuer, h. and lüdeke-freund, f. (2017), values-based network and business model innovation, international journal of innovation management, vol. 21, no. 3, pp. 1–35. dentchev, n., rauter, r., jóhannsdóttir, l., snihur, y., rosano, m., baumgartner, r., nyberg, t., tangh, x., van hoof, b. and jonker, j. (2018), embracing the variety of sustainable business models: a prolific field of research and a future research agenda, journal of cleaner production, vol. 194, no. 1, pp. 695–703. foss, n. and saebi, t. (2017), fifteen years of research on business model innovation, journal of management, vol. 43, no. 1, pp. 200–227. hahn, t., preuss, l., pinkse, j. and figge, f. (2014), cognitive frames in corporate sustainability: managerial sensemaking with paradoxical and business case frames, academy of management review, vol. 39, no. 4, pp. 463–487. klang, d., wallnöfer, m. and hacklin, f. (2014), the business model paradox: a systematic review and exploration of antecedents, international journal of management reviews, vol. 16, no. 4, pp. 454–478. klein, j. (2017), typologies of interdisciplinarity: the boundary work of definition, in frodeman, r., klein, j. and pacheco, r. (eds.), the oxford handbook of interdisciplinarity. 2nd ed. oxford, uk, oxford university press, pp. 21–34. lecocq, x., demil, b. and ventura, j. (2010), business models as a research program in strategic management: an appraisal based on lakatos, m@n@gement, vol. 13, no. 4, pp. 214–225. loock, m. and hacklin, f. (2015), business modelling as configuring heuristics, in baden-fuller, c. and mangematin, v. (eds.), advances in strategic management. business models and modelling. emerald, bingley, uk, pp. 187–205. lüdeke-freund, f. and dembek, k. (2017), sustainable business model research and practice: emerging field or passing fancy?, journal of cleaner production, vol. 168, pp. 1668–1678. lüdeke-freund, f., rauter, r., pedersen, e. and nielsen, c. (2020), sustainable value creation through business models: the what, the who and the how, journal of business models, vol. 8, no. 3, pp. 32–60. martins, l, rindova, v. and greenbaum, b. (2015), unlocking the hidden value of concepts: a cognitive approach to business model innovation, strategic entrepreneurship journal, vol. 9, no. 1, pp. 99–117. massa, l., tucci, c. and afuah, a. (2017), a critical assessment of business model research, academy of management annals, vol. 11, no. 1, pp. 73–104. massa, l., viscusi, g. and tucci, c. (2018), business models and complexity, journal of business models, vol. 6, no. 1, pp. 70–82. maucuer, r. and renaud, a. (2019), business model research: a bibliometric analysis of origins & trends, m@n@ gement, vol. 22, no. 2, pp. 176–215. max-neef, m. (2005), foundations of transdisciplinarity, ecological economics, vol. 53, no. 1, pp. 5–16. journal of business models (2021), vol. 9, no. 2, pp. i xiv xiv mennes, j. (2020), putting multidisciplinarity (back) on the map, european journal for philosophy of science, vol. 10, article 18, https://doi.org/10.1007/s13194-020-00283-z montemari, m. (2018), editorial: introduction to the special issue based on papers presented at the business model conference 2018, journal of business models, vol. 6, no. 2, pp. 1–4. nielsen, c., montemari, m., paolone, f., massaro m., dumay j. and lund, m. (2018), business models: a research overview. routledge, london. roslender, r. and nielsen, c. (2019), performative research in the business model field: exploring the underpinnings of studying business models in action, journal of business models, vol. 7, no. 2, pp. 31–34. schaltegger, s., beckmann, m. and hansen, e.g. (2013). transdisciplinarity in corporate sustainability: mapping the field. business strategy and the environment, vol. 22, pp. 219–229. schneider, s. and spieth, p. (2013), business model innovation: towards an integrated future research agenda, international journal of innovation management, vol. 17, no. 1, article 1340001. turner, s. (2017), knowledge formations: an analytic framework, in frodeman, r., klein, j. and pacheco, r. (eds.), the oxford handbook of interdisciplinarity, 2nd ed., oxford university press, oxford, uk, pp. 9–20. vermeulen, w. j. v. and witjes, s. (2021). history and mapping of transdisciplinary research on sustainable development issues. dealing with complex problems in times of urgency, in m. m. keitsch and w. j. v. vermeulen (eds.), transdisciplinarity for sustainability. aligning diverse practices, routledge, london and new york, pp. 6–26. wirtz, b. and daiser, p. (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, pp. 40–58. wirtz, b., göttel, v. and daiser, p. (2016), business model innovation: development, concept and future research directions, journal of business models, vol. 4, no. 2, pp. 1–28. wirtz, b., pistoia, a., ullrich, s. and göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, vol. 49, no. 1, pp. 36–54. zott, c., amit, r. and massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2014), vol. 2, no. 1 pp. 1-5 1 in justifying the track, the notion that the field of business models had received a vast amount of interest from business, political, technical and academic perspectives in the past decade was highlighted. despite this rising focus, much progress seems to have been consultingdriven, and research in the field is if not lacking then at least behind schedule. as track leaders, we noted that new models of doing business were presenting themselves continuously, but that the academic community was not addressing them accordingly. new modes of business e.g. based on loosely coupled networks and multisided platforms of value creation and businesses utilizing co-creation and co-opetition oriented structures, potentially pose as threats to the traditional professions as the very structure of organizing and value-realization is altered. perhaps it can even be argued that management as we know it, will become obsolete in a world of network organizations and socialcommunity based business models, thus posing new conceptions of accountability, control and leadership and ultimately creating new sets of stakeholder tensions. hence, traditional disciplines such as organization, management, accounting and finance, as we know them, may be in dire straits. thus from perspective of managing companies we may need to ask: “how do we produce decision-relevant information, create management structures, ensure leadership, alignment of the organization, and implementation of strategic intent?” and from a value determination perspective we may need to ask: “how do we capture value creation and value realizing transactions of network-based enterprises?” furthermore, from an auditing and law perspective we may need to ask: “how do we validate information across structures that do not exist per se”? finally, implications for policy-making bodies need to be evaluated. although there may be obvious problems as described above, some reflection on whether this tension between business and academia merely can continue on an “as is-basis” will also become of notable importance. this track welcomed a broad spectrum of contributions, including conceptual, theoretical, empirical and interdisciplinary contributions anchored in the business model keywords: 1: aalborg university 2: university of oulu 3: uppsala university 4: linköping university please cite this paper as: nielsen, c., ahokangas, p., cöster, m., westelius, a., iveroth, e., petri, c. 2014. ‘editorial: the business model eruption and how game changing mind sets challenge existing nodes of business’, journal of business models, vol. 2, no. 1, pp. 1-5. editorial: the business model eruption and how game changing mind sets challenge existing nodes of business christian nielsen1, petri ahokangas2, mathias cöster3, alf westelius4, einar iveroth3 & carl-johan petri4 journal of business models (2014), vol. 2, no. 1 pp. 1-5 2 literature as well as other fields of contemporary research. the paper by ahokangas and myllykoski explores a new perspective on business models by looking at them specifically from action research and action learning perspectives. much of the extant business model literature being conceptualization focused, the paper focuses on business model creation and transformation as practices. the action perspective helps to overcome two major problems the authors want to highlight, namely that of agency, i.e., the role and experience of the individuals dealing with business models, and that of context, i.e., how contextual factors influence business model creation and transformation. the contribution of the paper is in that it roots the action perspective to opportunity and advantage related discussion on business models, and builds a coherent approach or framework to research not only the content but also the process dimension of business models. ahokangas and myllykoski want to take a step further from mere business model innovation to seeing business model creation and transformation as exploration and exploitation of opportunities and advantages. peyton, lueg, khusainova, iversen and panti present a case study on business model change in the software industry. the purpose of the paper is to identify elements of a business model in the software industry. furthermore the purpose was to identify the antecedents that lead to business model change and assess the consequences of this change. as a foundation for analysis they use rajala et al.’s, (2003) concept of the elements of a business model. they also highlight that customers’ willingness to pay for advancements in technology is crucial for software business models. in their findings they state that the framework for business models in the software industry that they use reasonably well describes the specific conditions of the industry. they suggest though that this framework should be extended by the element of innovation. they conclude that it is necessary in order to capture and include the influence from emergent strategies and technologies in software companies. johansson and abrahamsson study how business models are used by born global firms when acting upon new business opportunities and how the companies manage their business model innovation over time in order to prosper and grow. they define born global firms as young firms characterized by a rapid international growth and innovativeness from their inception. these kinds of firms have the capacity to identify and act upon novel opportunities due to fast access to international networks, international customers, and international financing. the study is based on three exploratory case studies of born global firms in mobile communication, financial services and digital music distribution. findings from the case studies are that business model innovations are used as a tool by maturing born global firms to navigate the value chains and achieve international growth. furthermore, they find that these kinds of firms need the capabilities to balance different business model designs simultaneously and to manage its business model innovation in a timely manner. in his paper on pricing re business models, petri combines research on price models with osterwalder and pigneur’s business model canvas. he argues that many business model frameworks lack a detailed description of their embedded priceor revenue models. he proposes the concept of a “price model equalizer”, that is a concrete model that can be used to describe and analyze the specifics of a price model. it can be used to make sure that the price model is aligned with – and leverages – the business model. the empirical case in the article describes the biggest swedish taxi company, taxi kurir. taxi kurir decided to introduce a new price model, which was in line with the customers’ preferences. the new price model changed the value proposition, by offering a “fixed fee”-price model. this new price model was only possible to deliver given taxi kurir’s existing key resources. the new value proposition (and price model) also required the company to introduce new management processes to assure that the key partners (taxi owners and taxi drivers) delivered according to the new value proposition. hence, the price model, and processes associated with it, was an essential component in leveraging the company’s business model. heikkilä addresses the area of networked business models, studying a case of a novel ehealth service. in order for the service to work, doctors, pharmacies, health-concerned individuals, among others, need to find sustainable ways of collaborating. there is thus a journal of business models (2014), vol. 2, no. 1 pp. 1-5 3 need for a business model for the network, rather than just for a focal firm. to aid in the assessment of the viability of the ehealth services, heikkilä proposes a networked-business-model-based set of performance indicators. the case serves as an illustration of a generally applicable performance estimation process in multi-party settings, and thus contributes to both the performance measurement and the business model literatures. yrjölä sets out to explore how retailers adopt multichannel business models and the challenges they face when they do so. more specifically the paper increase our understanding of how retailer creates customer and firm value by the utilizations of multiple channels―such as a combination of brick-and-mortar stores, vending machines, kiosks, mobile devices, online storefronts―in their business model. yrjölä has commendably collected rich empirical material from the field. this consist of semi-structured interviews with top executives from different retailing environments that together provides a clear and in-depth picture of the different challenges that they face when they use multiple channels. yrjölä essentially argues that using a multichannel retail business model requires a critical re-assessment of the cornerstones of an organizations value creation. he also elaborates on the challenges and sums them up into a triad:  multichan nel formats can lead to a mismatch between customer and firm value, retailers face pressures to use their activities to form integrated total offerings to customers, and finally multiple channels might lead to organizational silos with conflicting goals. overall, yrjölä’s paper provides a more complete and richer understanding of how different channels can co-exist in the same business model than earlier research has offered us. lund and nielsen argue that existing frameworks for understanding and analyzing the value propositions and value configuration do not work in the case of network-based business models, i.e. organizations where several companies combine resources and activities in order to lift a certain value proposition to a customer segment. furthermore, especially in relation to the understanding and configuring of strategic partnerships in relation such network based business models, lund and nielsen see abrupt weaknesses in existing methodologies. trough a longitudinal case study spanning three years the authors illustrate how a network-based business model arises and evolves and how the forces of a network structure impact the development of its partner relationships. the contribution of this study is to understanding how partners positioned around a business model can be organized into a network-based business model that generates additional value for the core business model and for both the partners and the customers and while existing studies of business model evolution are concerned with the dynamics created by interactions between a business model’s components, this study adds value by reflecting the dynamics created in the interactions between a business model’s strategic partners. the papers chosen from the 2013 nff track on business models for this special issue of the journal of business models are currently paving way to new frontiers in business model research. the forthcoming nff conference in 2015 at copenhagen business school, denmark, will hopefully provide a platform for continuing down this road by focusing both on the emerging topical themes, such as sustainability and scalability of business models, as well as on relevant approaches to doing future research on business models in the first place. journal of business models (2014), vol. 2, no. 1 pp. 1-5 4 about the authors christian nielsen, phd, is professor at aalborg university in denmark. he is director of crebs (center for research excellence in business models, www.crebs.aau.dk), the world’s first interdisciplinary research centre focusing on business models. christian has previously worked as an equity strategist and macro economist focusing specifically on integrating intellectual capital and esg factors into business model valuations. his phd dissertation from 2005 won the emerald/efmd annual outstanding doctoral research award, and in 2011 he received the emerald literati network outstanding reviewer award. christian nielsen has a substantial number of international publications to his record and his research interests concern analysing, evaluating and measuring the performance of business models. public profile available on http://www.linkedin.com/in/christianhnielsen and http://personprofil.aau.dk/profil/115869#/minside petri ahokangas, d.sc., is senior research fellow and adjunctprofessor at the university of oulu business school, finland. prior to his present position he has worked in the telecoms/software industry and as the professor of international business. he is an entrepreneur, active consultant, and serves in the board of directors in several ict companies. his research interests are in how innovation and technological change affect international business, entrepreneurship, business models, and strategies in highly technology-intensive and software-intensive business domains. he has about 50+ publications in scientific journals, books, conference proceedings, and other reports. he is actively working in several ict-focused research consortia leading business-related research streams. mathias cöster, phd, is engaged as assistant professor at uppsala university campus gotland where he teaches informatics and accounting. cöster’s research comprises studies of it influence on industries and business strategies and his previous work have been carried out on the swedish graphic industry. currently, he is also engaged in research on the relationship between business models and pricing and price models. journal of business models (2014), vol. 2, no. 1 pp. 1-5 5 alf westelius is professor of economic information systems at linköping university. his research centres on change processes (often, but not exclusively connected with it) and conditions for attaining sustainable change. related areas include strategic applications of it, learning, knowledge management, management of change and project management. the concept perspectives management identifying and paying heed to perspective differences among people regarding the phenomenon of interest is central in his research. as consultant, he works with organisations from the public, private and non-profit sectors. one current research interest is the connection between business ecologies, business models and pricing models. einar iveroth, dr., is assistant professor at uppsala university. he is an expert on strategic pricing, price models and it-enabled change. his most recent work includes the co-authored book “pricing: business ecologies, business models, pricing models” (studentlitteratur, in swedish). he has also published extensively in a wide variety of internationally scholarly journals including e.g. journal of environment management, european management journal, california management review, health care management review, journal of accounting & organizational change, and journal of change management. additional research interests include strategy, management control, innovation and creativity. prior to academia he worked with organizational change issues within the private and public sector. carl-johan petri, phd, holds a ph.d. from linköping university. his main research interests are within the fields of strategy, management control and pricing. he has written several books about balanced scorecard (for example making scorecards actionable, wiley 2003, that has been translated into eight languages). during the last years he and his colleagues at the centre for advanced studies of innovative price models have published several articles and a book about how to design innovative price models. 95 journal of business models (2022), vol. 10, no. 2, pp. 95-109 using business models in hindsight helen kavvadia1 abstract purpose: develop a method for an extended “fore-and-aft” use of business models. the method will turn them also into potent business history tools, in addition to being valuable forward planning instruments. approach: business models can be used to understand organizations by studying them as “snapshots” at any given time or accounting for their evolution by comparing their past successive forms on a temporal axis. the paper proposes a method of evolutionary analysis, which, by following a historical institutionalism approach, identifies “critical junctures”, organizational change and business model revisions. the evolution of organisations can be deciphered by comparing the business models at these “critical junctures”. findings: the method has been tested in two international financial institutions. value: there is no similar approach and use of business models. the method can serve scholarly purposes and business applications. keywords: business model, business history, multilateral banks, non-profit-making organizations, organizational studies, historical institutionalism. acknowledgement: earlier versions of the paper have been presented at the 46th economic and business history society conference, at porto on may 18th-21st, 2021 and the 2nd world congress of business history “business history in a changing world” at nagoya on 9-11 september 2021, both held remotely. the author would like to thank the discussants at the two conferences chris corker, university of york and mads mordhorst, copenhagen business school, respectively, as well as the participants for their useful comments. disclosure and conflict of interest: the author declares that there is no financial or other substantive conflict of interest that might be construed to influence the results or interpretation of this research. please cite this paper as: kavvadia h. (2022), using business models in hindsight, journal of business models, vol. 10, no. 2, pp. 95-109 1 researcher in residence, institute of political science, university of luxembourg. issn: 2466doi: https://doi.org/10.54337/jbm.v10i2.6882 https://doi.org/10.54337/jbm.v10i2.6882 journal of business models (2022), vol. 10, no. 2, pp. 95-109 9696 introduction business models describe the way organizations create and deliver value necessary for their existence and development. stemming from organizational theory, they have been increasingly deployed for the reification or re-orientation of a wide variety of companies. a number of archetypes have been proposed by scholars and practitioners alike, predominantly in the “dot.com” era (foss & saebi, 2017), for aligning shareholders and financiers in new entrepreneurial concepts. their popularity trivialized them to a certain extent and turned them into a sort of topical “buzzword” used by some “professionals,” mainly in the consultancy field, adroitly filling-up archetypes for establishing new business ventures. arguably, their potency lies in their potential to depict complex organizational systems concisely and comprehensively in simple diagrams. this is the role of any model. nonetheless, conceptually, business models are more than mere background canvases to be filled with business details. as blueprints do for engineers, business models enable, through their visual representational simplicity, understanding and clarity for consensus-building on the nature, identity, structure, and operation of new or existing organizations within a certain contextual setting. by describing how action occurs or should occur within organized systems, business models can also guide the “engineering” of new or revised realities, reflecting or even being constitutive parts of change. focusing on the present, they have therefore been equally well applied as effectual tools for analyzing or evaluating organizations, in light of eventual changes, in a sense mapping the actual and, subsequently, the desired situation. as organizational changes are transcribed onto business models, the models show a co-evolutionary path (cantwell, dunning and lundan, , 2010). reflecting organizational evolution, business models also follow a complete life-cycle, from creation to extension or revision to complete termination (morris, schindehutte and allen, 2005; calvante, kesting and ulhoi., 2011). hence, by assessing business models at different points in time one can understand the organizational changes they represent. why, however, should such tools be exclusively forwardlooking, as applied to date? this paper claims that, by altering the direction of their perspective, business models can go beyond their presumed use as a means of planning and serve as equally potent organizational history tools. by studying these organizational “snapshots” in hindsight, one can follow and understand the business history and evolution, similar to the way in which people become more aware of changes by going through old photo albums. by comparing snapshots over time, business models turn from static to dynamic revelations, illuminating trends. in an equivalent fashion, previous balance sheets are used in financial analysis, whereby datespecific financial “pictures” are compared over a period of time to identify tendencies. the difference is that, unlike balance sheets, business models are not readily available, first because their deployment started in the mid-1990s, and second, even if they do exist, they cannot usually be found in the public domain for confidentiality reasons. accordingly, this paper proposes a method for using business models in hindsight, starting with a technique for crafting past business models externally based on publicly available organizational information, including statutes, annual reports, and policy papers. the technique consists of first extracting and subsequently analyzing, categorizing, and transcribing information into a business model archetype. the archetype used here is a “hybrid” model developed based on existing proposals (shafer, smith and linder, 2005; wirtz, pistoia, ullrich and göttel, 2016), allowing for generalized applicability to all types of organizations, including for-profit as well as not-for-profit organizations (kavvadia, 2021a). it frames organizational reality within four basic elements, which, through their interrelationship, create and deliver value: strategic choices, value capture, value creation, and value network. as business models remain unchanged for long periods before a minor or major change occurs, the method proposes to retrospectively craft only business models corresponding to “critical juncture” points, where organizational change also triggers a change in the business model. these points are identified by studying the organization’s past evolution from a historical institutionalism perspective. journal of business models (2022), vol. 10, no. 2, pp. 95-109 9797 the suggested method is developed in the form of analytic eclecticism, drawing from business and organizational studies as well as political science. it adds to existing scholarly work by demonstrating empirically that business models have multiple functions. first, they can be used as lynchpins to understand organizations in depth, recounting the organizational structure and activity, accounting for their evolution analytically and, by corollary, going beyond simply chronicling a sequence of events. second, they constitute an outstanding vanguard point for viewing organizations holistically and avoiding a pars pro toto restricted understanding. third, they can be tested and verified through triangulation with business metrics and other data. fourth, when performed on peer organizations they enable easier comparisons. finally, they allow hermeneutics from different perspectives, possibly in combination with a wide range of political science theoretical approaches, depending on the focal point of the research. grounded on existing scholarly sources, the method has been instantiated through its application to two international not-for-profit organizations, the european investment bank (eib) and the asian infrastructure investment bank (aiib) (kavvadia, 2021b). the eib is one of the oldest multilateral banks, commencing operations in 1958, and thus provides considerable historic depth for performing a historical analysis of its business model. the aiib, however, is one of the newest of its type, established in 2015. hence, its business model has been used in a comparative analysis with the eib to test the comparative use of the method as well. for its empirical part, the paper used both primary and secondary sources in the form of organizational documentation and scholarly literature, respectively. the dual contribution of this research article to existing literature is the development of a new approach to business history, synthesizing elements of business and historical traditions and the use of business models in retrospect for studying, instead of planning organizations. the remainder of the paper is structured as follows: section 2 reflects on the theoretical background of the method, while section 3 describes the method in a procedural manner. section 4 presents some aspects of the empirical testing. finally, major takeaways are summarized in section 5, which concludes the paper. theoretical underpinnings along with the increasingly prominent role of economic entities in the contemporary world, academic disciplines arose focused on them. business history is a case in point (friedenson, 2007). although human economic activity has been examined since its early days in ancient civilizations (moore & reid, 2011), business history emerged with n. s. b. gras at harvard business school in 1927. following the prevailing harvard tradition of using case studies as an investigation method, business history evolved quickly, mainly as company historiography, driven by generous private sector sponsorship, until alfred chandler jr. pioneered theorization on the discipline in the early 1960s (chandler, 1962). endeavoring to connect the past with the present, chandler gained renown by developing frameworks relevant to the (at the time) thriving corporate economy, linking history with business, organizational, and economic studies. chandler discovered tangencies and overlaps in these fields, opening the way for a multidisciplinary approach to business history, and historians followed by increasingly focusing on epistemological and ontological questions (appleby, appleby, covington, hoyt, latham and sneider, , 1996; rowlinson, 2001; amatori & jones, 2003; zeitlin, 2007; anteby & molnár, 2012). organizational specialists followed the “use of the past approach,” a term coined by clark and rowlinson (2004), seeking to use the past as a resource to improve organizational understanding and development in areas such as strategy, identity, and culture (zald, 1990; kieser, 1994; gioia, schultz and corley, 2000; booth & rowlinson, 2006; brunninge, 2009; coraiola, foster and suddaby, 2015). the “rapprochement” of the two disciplines had been sought by both historians and organizational specialists, resulting in a converging approach and a search for empirical evidence to ground their results in the corporate reality, often by exploiting the past to serve the present and future needs of business as an academic field and real economy alike (üsdiken & journal of business models (2022), vol. 10, no. 2, pp. 95-109 9898 kieser, 2004; kobrak & schneider, 2011; durepos & mills, 2012). following this “integrationist” position as labelled by üsdiken and kieser (2004), business historians aim to separate their discipline from ossification and scholasticism by deploying new theories and methodologies to answer questions regarding where history and organizational studies intersect and interact (leblebici & shah, 2004). this is consistent with the widely accepted view that history concerns “knowledge that is collected and meaningfully interpreted about what happened in the past” (foster, coraiola, suddaby, kroezen and chandler, 2017, p. 3). tellingly, this disciplinary confluence engendered heterogeneity in the business history field (bucheli & wadhwani, 2014) as well as an increasing tendency to eschew chronicling and focus instead on the analysis and interpretation of historical elements, acknowledging that they “continue to shape [our] experiences in the present and [our] expectations for the future” (mordhorst & schwarzkopf, 2017, p. 1165). this led to the emergence of “historical cognizance” (kipping & üsdiken, 2014, p. 562), referring to a theorized understanding of history from a contextual perspective. yet, despite stressing the importance of a holistic approach, analysis often remained fragmented, focusing “on one element of the corporation not on an institution as an integrated whole. […] business institutions remain largely ‘black boxes’ […]. few studies can or want to delve into how and why corporate decisions are made and implemented. […] how the institution works and interacts with its environment […]. how a company integrates inputs and disposes of outputs is not independent of its environment” (kobrak & schneider, 2011, p. 409). nonetheless, this approach was exemplified by chandler, who is widely recognized as the most influential business historian of the twentieth century, in his seminal work on strategy and structure (chandler, 1962) as well as his work on scale and scope (chandler, 1990). in an antipodal manner, organizational scholars have indulged in the holistic study of organizations, both at theoretical and practical levels, particularly those with an interest in strategy. theorizing on strategy and related issues, such as change (leavitt, 1965) and future development (porter, 1985), has also led to their operationalization through corollary application tools, mainly in the form of models of reality, which, through simplification, facilitate the understanding about organizations and consensus building among stakeholders, especially in view of future changes. prime examples of such endeavors are business models, which came to center stage in the mid-1990s in the run-up to the “dot-com” era (foss & saebi, 2017), when large numbers of new ventures were seeking to engage stakeholders. as abstractions describing organizations at a conceptual level (osterwalder, pigneur and tucci, 2005), business models allow the articulation and instantiation of the interdependent activities that enable organizations to create value and also to appropriate a share of that value, transcending their boundaries. viewing organizations as open entities in interaction with their stakeholders, business models reflect the ways organizations interlock with their contextual environment. as business models are relatively new as a concept, there is little consensus as to their definition, constituents, trajectory, and use, as evidenced by a content analysis of keywords in thirty definitions (morris et al., 2005). morris et al. (2005) classified divergent definitions into three categories: economic, operational, and strategic, depending on the unique set of decision variables used by each business model definition. this highlights the wide cross-theoretical differences in the value creation perspectives guiding the futures of organizations. the reason for these differences is that the business model concept has been developed from different starting points by management scientists (amit & zott, 2012; cavalcante et al., 2011; johnson, christensen and kagermann, 2008; mäkinen & seppänen, 2007; mcgrath, 2010; moingeon & lehmann-ortega, 2010; osterwalder, 2004) and organizational sociologists (perkmann & spicer, 2010). nevertheless, having been accepted as holding “promise as a unifying unit of analysis that can facilitate theory development in entrepreneurship” (morris et al., 2005, p. 726), business models have been widely used as planning tools for the reification or re-orientation of organizations considering change. consequently, well integrated in the corporate reality, business models, as defined in the extant literature, are aimed at profit-making organizations. journal of business models (2022), vol. 10, no. 2, pp. 95-109 9999 as they are equally useful for the establishment, evolution, and analysis of non-profit organizations, this paper uses a definition and archetype that allows more generalized use (kavvadia, 2021a), which has been developed as a “hybrid” from existing proposals (shafer et al., 2005; wirtz et al., 2016). it consists of four primary interlocking elements, which together create and deliver value: strategic choices, value capture, value creation, and value network. as they are reflective and simultaneously constitutive of these organizational fundamentals, recounting structure, and processes, business models can be deployed beyond their currently limited forward planning remit to better understand organizations. in other words, their use as analysis tools can serve both the present and future as well as the past. this extended “fore-and-aft” perspective turns them into potent business history and evolutionary organizational analysis tools. building on the views of shafer et al. (2005) concerning the utilization of business models in a backward-looking context for reviewing strategic choices made over time, this paper proffers a method for their application in organizational history. their added value lies in their ability to go beyond narratives due to their graphic representational description of organizational fundamentals, which provides an easy overview of organizations— a snapshot—at any given point in time. seen in isolation, business models allow topical analysis, whereas, when compared with previous or subsequent snapshots, they enable the temporal analysis of organizations; if contrasted with the models of similar organizations, they even support comparative peer analyses. this is the basis of the argument of this paper, which has been elaborated in a procedural stepwise fashion. the method to achieve the epistemic goal of this paper, and following the chandlerian paradigm, the paper operationalizes its main argument by developing a method for using business models in hindsight. arguably, business models, as multi-tier conceptual maps of actors, actions, interactions, and outcomes, are a powerful tool for studying organizations, even though they have not been used in this way previously. considering this novelty, their incorporation in a method for historical analysis had to overcome a number of challenges. first, business models are mainly used internally by organizations, either for their establishment or for guiding them through their evolution, providing “a powerful way for executives to analyze and communicate their strategic choices” (shafer et al., 2005, p. 207). thus, in most cases business models are not publicly disclosed, either because they do not even exist—given that they are a fairly new instrument developed after the mid-1990s—or, when they do exist, they are usually not publicized for reasons of confidentiality. to overcome this hurdle, a technique has been devised whereby organizational information is extracted from official organizational primary sources, including statutes, annual reports, and policy papers. such documents are mostly available for private and public organizations alike, predominantly as part of applicable institutional dispositions, such as company registration, credit rating requirements, stock exchange listing, or parliamentary oversight. the information extracted is then analyzed and, depending on its relevance, categorized into the four elements of the business model archetype suggested above. the level of detail of the organizational information extracted has to be matched consistently with the chosen level of detail of the business model and the research purposes. business models can articulate organizational features at different levels of detail following a “loop” approach, from the abstract strategic to a more detailed operational level and on to a tactical level (morris et al., 2005). although the level of detail can be chosen to match the research needs, for most business history questions, which tend to focus on strategy issues, the general strategic level can be deemed appropriate. yet, the recourse to publicly available information, albeit helpful, cannot provide sensitive internal organizational information. business models developed externally are conspicuously limited in their inability to include some important but sensitive organizational operational aspects, such as pricing, staffing, and other areas bound to strict confidentiality. however, this limitation has not proven to be prohibitive for studying organizations at a strategic level, especially non-profit entities, such as those empirically analyzed using this method. journal of business models (2022), vol. 10, no. 2, pp. 95-109 100100 second, the crafting of business models often faces flawed assumptions and misunderstandings concerning organizational fundamentals (shafer et al., 2005). these difficulties are mostly linked to the prospective use of business models, the role of cognition, and the interpretation of events (cavalcante et al., 2011). the same challenge can affect the retrospective use of business models for historical analysis purposes, through cognitive interpretational filtering. however, as the suggested method is based primarily on primary official and publicly available documentation rather than personal narratives, this issue is minimized. naturally, if needed or desired—and if possible—archival information can be supplemented with such additional insights through interviews, which, used as control elements of the documentation-based results, can verify the understandings or correct misconceptions, reducing the potential for bias. third, the method is based on the comparison of business models at different points in time. to improve the efficiency of the analysis, as business models are mostly unavailable in the public domain, the method proposes to retrospectively craft only those that correspond to inflection points of historic organizational change. change, seen as a resource-allocative process (cantwell et. al., 2010) for an isomorphic adjustment to the environment and driven by factors that are exogenous or endogenous to the organization (or even a combination of the two), can be detected through the combined historic study of the organization and its environment. yet, this is not sufficient. certainly, the thesis of some co-evolutionary organizational theorists that organizational and contextual changes occur quasi simultaneously and influence one another in a retrofit process (lewin & volberda, 1999) reflects some cases of business model change. nonetheless, it is not always synchronized with organizational change. every organizational change is not immediately translated into a business model change because business models tend to change less frequently than organizations. when they do change, business models move along a life cycle, from specification to refinement and adaptation and ultimately to revision and reformulation (morris et al., 2005). nonetheless, the change process does not necessarily follows this order, however, because the models are “never complete as the process of making strategic choices and testing business models should be ongoing and iterative” (shafer et al., 2005, p. 207). despite the lack of consensus among scholars concerning the business model life cycle, their disagreement is a matter of form—numbers and names of phases—rather than substance. while labels of life cycle phases differ, there is agreement that all business models go through creation, extension, revision, and even termination (calvacante et al., 2011). given that change in organizations is quasi-ubiquitous, while business models only pick up and reflect important organizational changes, particularly when organizations alter their core components (calvacante et al., 2011), the phase in the life cycle to which the changed models correspond, is determined by criteria concerning the extent of change in content, structure, and governance (amit & zott, 2012). to identify the “strategic inflection historic points” for which business models must be retroactively fashioned, the present method suggests a combined historical analysis of both the organization and the environment in which it is embedded. the points of interest are those where important changes co-occur. fourth, once the organizational changes of interest are identified, they must be analyzed to provide meaningful insights regarding not only what happened and when but also why it happened and who initiated the change. for this purpose, one has to go beyond the principal reasons for business model reshaping provided in the business model literature, which are mainly related to purely business-related issues, such as new market creation or the exploitation of new opportunities in existing markets (amit & zott, 2012). to understand organizations, the analysis of change has to integrate a wide variety of explanatory factors, of which the social ones are of particular interest. they include exogenous as well as endogenous reasons for both micro-and macro-level choices for coping with the uncertainties of a dynamic physical, technological, and human environment, thus leading to change, underpinned by culture, norms, beliefs, and mores. this relates to the ways in which history relates to the social scientific slant, which has come to characterize organizational analysis. this slant was pioneered by hidy (1970) and is exemplified by increasingly voiced journal of business models (2022), vol. 10, no. 2, pp. 95-109 101101 calls to enrich historical analysis through the use of multivariant social sciences parameters (teichova, 1986; scott, 2001; wilson & toms, 2011). due to similar concerns from the organizational side from scholars eager to add a historical perspective (zald, 1990; leblebici & shah, 2004; lippmann & aldrich howard, 2014; rowlinson & hassard, 2014; de jong, higgins and van driel, 2015), a fused approach has been shaped. originating from neo-institutionalism and evolutionary attitudes on organizational analysis as well as political science, this approach has been labelled integrationism by üsdiken and kieser (2004). focusing on the cumulative process by which organizations function within their boundaries in interaction with their larger social, political, and economic contexts, the integrationist approach fits into historical institutionalism. as a conceptual framework, historical institutionalism studies the historical evolution of organizations to understand their actions and actors, based on multiple perspectives, such as realist and constructivist perspectives (nichols, 1998; munslow, 2006). in the context of the proposed method, historical institutionalism serves the epistemic goal of the paper, supporting the understanding of organizational evolution by acknowledging the interactive nature of organizations with their internal and external environments. moreover, acknowledging the multiplicity of actors and actions, historical institutionalism accommodates a number of explicative perspectives. addressing these issues fundamentally involves “recognising that more recent organisational forms and arrangements have been shaped by past events and that their course of development has been influenced by the broader context. in terms of more specific concerns, it implies turning to processes of organisational change, development of organisational forms and variations across societal settings, path dependencies and continuities in organisational ideas and practices” (üsdiken & kieser, 2004, p. 323). path dependency, which is one of the central concepts of historical institutionalism, holds that past decisions define the path ahead, constraining the possible objectives of or tools available to an institution (hall & taylor, 1996). in other words, organizations are established to serve a specific purpose, and their very creation coupled with their functioning push history along a determined path (pierson, 1996). despite the ubiquitous change within the organizational context, the path tends to remain unchanged. organizations are rather stable actors, and the reshaping of preferences, interests, structures, or frameworks happen as “paradigm shifts” at specific “critical junctures,” characterizing the distinct points in time of significant change or “cleavages which present new paths or opportunities for change” (hall & taylor, 1996, p. 18) and new legacies. hence, the new legacy becomes the new antecedent condition, which determines future changes at subsequent critical junctures, while, in the meantime, organizations remain path dependent and constrained by their previous changes. this stepwise historical evolution, centered at given points in time when major organizational changes happen, fits with the pattern of business model evolution. through their successive “snapshot” alterations, in connection with significant organizational changes, the evolution of business models trace the trajectory of an organization in a clearly and illustratively marked path-dependent way. this notion is at the heart of the proposed method. conflating historical institutionalism with business models as analytical frameworks, the paper presents a novel method for understanding the evolution of organizations. understanding a method as a particular procedure for accomplishing or approaching something in a systematic manner, this paper proposes an analytic method consisting of eight steps, some of which can be performed reiteratively in loops: i) preliminary study of the organization to understand its nature; ii) selection of an appropriate business model archetype suitable for the specific organization. the present method suggests the use of the archetype developed for generalized use by both for-profit and not-for-profit organizations mentioned earlier, which has four interrelated basic elements modeling the way organizations create and deliver value: strategic choices, value capture, value creation, and value network; iii) archival research to locate primary organizational sources matching the point in time or the time period of research interest; iv) retrospectively crafting the business model at the moment of interest or at the starting or end point of the research period, by analyzing and categorizing the relevant information under the constituent journal of business models (2022), vol. 10, no. 2, pp. 95-109 102102 elements of the business model archetype and “flicking the canvas.” the canvas has a level of detail, which can be refined quasi at infimum, but for a general historical analysis the most abstract level is appropriate because it provides a strategic overview. this step can be repeated as often as necessary to frame the period under investigation in an iterative feedback loop including also the next two steps; v) historical analysis of the organization and its environment throughout the time span of research interest to identify critical junctures, eventually implying a business model transformation. this is followed by a validity check of the crafted business model at each of these critical juncture points, benchmarking it against the relevant organizational information regarding governance and operations. subsequently, a new business model is recrafted (in case of invalidity, proceeding as for step iv); vi) evaluation of the degree of the business model change based on the business model life cycle; in other words, classifying the change as one of the life-cycle categories: creation, extension, revision, or termination. by juxtaposing the newest one on the previous one, changes can be clearly and illustratively marked as additions, omissions, or alternations; vii) analysis of the business model (shaped under step iv) to understand the organization as a functioning whole, in interaction with its context, at the specific points in time corresponding to the crafted business models. in other words, what were the primary objectives and resources, and how have they been used to achieve the organizational objectives and assess the degree to and ways in which the objectives have been achieved? further, who were the primary actors and stakeholders, and what was their role? what was the interaction with the organization with its context, and how did the context shape organizational agency? in the event that the research question concerns a specific organizational activity, the business model can alternatively allow the focus to be on the relevant aspects of the particular organizational activity through refinement to increase the level of detail to the desired level, matching the research needs. the level of detail remains, nonetheless, constrained by limited access or a complete dearth of information on several issues, which are not in the public domain; viii) comparison of the molded business models corresponding to all points at the time of interest. in this way, business models reveal organizational “footprints,” which when studied can demonstrate evolutionary paths and explain tendencies that shape the trajectory of organizations in the period under investigation (kantrow, 1986). empirical illustrations calls for multidisciplinary research have often been coupled with calls for intensified empirical research to test hypotheses and construct broad generalizations (friedman & jones, 2011; de jong & van driel, 2015). however, this paper has empirically applied the propounded method simply to test its validity in the first place. the method was used with two international not-for-profit organizations, which served as case studies: the eib, the primary financial arm of the european union (eu), and the aiib, the newest china-promoted multilateral bank, which aims to become asia’s largest infrastructure financier. the two organizations have been selected based on well-established criteria for case studies, particularly general validity and replicability. both organizations satisfy the criteria, as they constitute valid examples of not-for-profit organizations, and as such, are good precedents for the replication of the method to peers and other similar organizations once the applicability of the method is demonstrated. additionally and importantly, they both fulfill a principal prerequisite for the application of the method. that is, notwithstanding the unavailability of their business models in the public sphere, both organizations disclose their basic documents and main activity and financial reports for reasons of accountability and transparency. founded in 1958, the eib has noticeable historical depth and adequate research material to investigate. consequently, the proposed method has been applied to study the bank’s evolution in the sixty-year period 1958–2018. in this period, the eib has grown to become one of the world’s largest multilateral banks, with its activity stretching progressively across the world, against a background of changing circumstances. albeit still scant, academic interest in the eib has been growing, with researchers predominantly looking at the bank’s activity from political science, economic, legal, technical, and historical perspectives. however, journal of business models (2022), vol. 10, no. 2, pp. 95-109 103103 works on the history of the eib have reviewed and analyzed its evolution (bussière et al., 2008, coppolaro, 2010), without considering its organizational functioning. applying the proposed method could thus contribute to existing academic work by identifying the “critical junctures” in eib’s business model development, analyzing the reasons for change, and elucidating the inferred modifications in its modus operandi (kavvadia, 2022). the method was successfully and seamlessly applied through all seven steps of its procedural approach. it revealed that eib’s incipient business model, due to its inherent flexibility, allowed the bank to traverse critical contextual periods, such as the collapse of the bretton woods system, the oil crises, and multiple extensions of activity, even beyond the eu borders, without a major revision of the bank’s business fundamentals. despite business cycle variations, the eib kept enjoying steady organic and inorganic growth. the forty years of business model fixity have been interrupted twice, with a ten-year interval, at two “critical junctures” in 1999 and 2010, in response to the watershed challenges of the run-up to the euro epoch and the global financial crisis. in both business model revisions, the eib opted for increased risk-taking and entrance into new financial market segments, such as risk-sharing and advisory operations built with careful and stepwise incremental changes. conversely, for the aiib, a new organization established in 2015, the method could not be used to pursue a historical scope. instead, it was used in a comparative approach. for this purpose, only the first four steps, corresponding to the back-casting of its business model, were applied. yet, the method was able to build further on available scholarly research, as it examined the aiib as a functioning organizational entity, unlike existing works, which have mainly concentrated on international relations, governance, and legal perspectives, with historical studies being obviously absent, given the bank’s recent establishment. by contrasting the aiib, a new institution, with the eib, one of the first multilateral banks, the method allowed assessing whether the aiib shows path dependency from bretton woods traditions (as all multilateral banks do) or whether it constitutes a paradigm shift, as claimed by several scholars and the aiib itself (kavvadia, 2021b). in this comparative analysis, the method was applied within an economic sociology framework, in particular the theory of fields (fligstein & mcadam, 2012), in order to analyze the role of the two banks and their interrelationship within the sector. the application of the present method on the aiib demonstrates not only the validity of the method as such but also its usefulness when combined and supplemented with other analytical frameworks and techniques in a synthetic approach. the method provided insights into aiib’s structure and activity setup, which proved that the bank does not represent a paradigm shift compared to its peers, as claimed. its business model, while broader than those of a number of its peers, emanates from the world bank “mold,” adjusted to mirror current contextual and organizational developments, thus emulating the eib’s 2010 business model. in both cases, the answers to the research questions received from the application of the method were triangulated with a business metrics analysis from primary sources (regarding the activity of the organizations) as well as existing scholarly work on the two organizations. all were concurring. in this sense, the method grounded on the use of business models for historical studies not only provided cogent explanations to the research questions but also uncovered additional operational aspects that were ostensibly hidden behind the usual “black-box” approach to organizations. whether applied autonomously or together with other analytical means, the method proved effective in bringing juncture points, weightier reasons, and the results of major organizational changes to the fore. by considering the business models of the two organizations as concise and illustrative descriptions of their business fundamentals, the study gained insights into their intricate nature and development through successive phases of fixity and change. conclusions responding to the calls of multidisciplinarity-oriented scholars, the paper proposed a method at the nexus of business history and organizational studies for propping the understanding of past institutional evolution by combining business models and journal of business models (2022), vol. 10, no. 2, pp. 95-109 104104 historical institutionalism. this synthetic method is based on the acknowledgment that business models constitute concise illustrative abstractions of organizational fundamentals, including actors, actions, interactions, and outcomes. reflecting an analytical eclecticism orientation, the method is novel in both academic disciplines, as it utilizes business models in hindsight for historical analysis going, hence, against the grain of business models’ forward-looking and business-oriented traditions. without being ergodic, the method follows an eightstep procedural track. whether segueing from the starting step into the last step, or using only part of it in a stepwise manner, the method construes organizational reality in a holistic way and in interaction with its contextual setting at any given point in time. it allows gauging issues of change at important points and unveils the organizational “black box” to understand the modus operandi encapsulated in the business model. the empirical test of two international organizations provided substantial evidence indicating that the method can be used successfully autonomously or together with other conceptual frameworks, as exemplified by its ability to incorporate the theory of fields to probe deeper into the positioning of organizations and their interactions within the field of their activity. while its soundness has been demonstrated, the method needs to be tested widely in different types of organizations and time frames to discover challenges and issues, which could lead to fine-tuning and ultimately establishing its broader generalizability. providing an outstanding vanguard point and allowing hermeneutics as well as triangulation, the suggested method facilitates a deeper and holistic historical reading of organizations over time, by bridging the way historians and organizational researches understand historical reality, and enabling a way for a reflective and informed account of the history of organizations. journal of business models (2022), vol. 10, no. 2, pp. 95-109 105105 bibliography amatori, f., & jones, g. (2003). introduction. in amatori, f., & jones,g. (eds.), business history around the world, cambridge: cambridge university press, 1–7. amit, r. & zott, c. (2012). creating value through business model innovation, the mit sloan management review, 53(3), 41–49. anteby, m. & molnár, v. (2012). collective memory meets organizational identity: remembering to forget in a firm’s rhetorical history, academy of management journal, 55(3), 515–540. appleby, j., covington, e., hoyt, d., latham, m., & sneider, a. (1996). knowledge and postmodernism in historical perspective. in appleby, j., covington, e., hoyt, d., latham, m. and sneider, a. (eds.). knowledge and postmodernism in historical perspective, new york: routledge, 1–20. booth, c. & rowlinson, m. (2006). management and organizational history: prospects, management & organizational history, 1(1), 5–30. brunninge, o. (2009). using history in organizations: how managers make purposeful reference to history in strategy processes, journal of organizational change management, 22(1), 8–26. bucheli, m. & wadhwani, r.d. (2014). organizations in time: history, theory, methods, oxford: oxford university press. bussière, é., dumoulin, m. & willaert, é. (eds.) 2008. the bank of the european union: the eib, 1958–2008, luxembourg: european investment bank. cantwell, j., dunning, j. h. & lundan, s. m. (2010). an evolutionary approach to understanding international business activity: the co-evolution of mnes and the institutional environment, journal of international business studies, 41(1), 567–586. cavalcante, s., kesting, p. & ulhoi, j. (2011). business model dynamics and innovation: (re)establishing the missing linkages, management decision, 49(8), 1327–1342. chandler, a. d. jr. (1962). strategy and structure. chapters in the history of the industrial enterprise, cambridge, ma: mit. chandler, a. d. jr. (1990). scale and scope: the dynamics of industrial capitalism, cambridge, ma: harvard university press. clark, p. & rowlinson, m. (2004) the treatment of history in organisation studies: towards an ‘historic turn’? business history, 46(3), 331–352. coppolaro, l. (2010). setting up the financing institution of the european economic community: the creation of the european investment bank (1955-1957), journal of european integration history, 15(2), 87–104. coraiola, d. m., foster, w. m. & suddaby, r. (2015). varieties of history in organizational studies. in mclaren, p., g., mills, a., j. & weatherbee, t., g. (eds). the routledge companion to management & organizational history,new york, ny: routledge, 206-221. journal of business models (2022), vol. 10, no. 2, pp. 95-109 106106 de jong, a., higgins, d. m. & van driel, h. (2015). towards a new business history? business history, 57(1), 5–29. decker, s., kipping, m. & wadhwani, r. d. (2015). new business histories! plurality in business history research methods. business history, 1-11. doi:10.1080/00076791.2014.977870. durepos, g. & mills, a. j. (2012). actor-network theory, anti-history and critical organizational historiography, organization, 19(6), 703–721. fligstein, n.,& mcadam, d. (2012). a theory of fields. new york: oxford university press. foss, n. j. & saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43(1), 200–227. foster, w. m., coraiola, d. m., suddaby, r., kroezen, j., & chandler, d. (2017). the strategic use of historical narratives: a theoretical framework. business history, 59(8), 1176-1200. foss, n. j. & saebi, t. (2017). fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43(1), 200–227. fridenson, p. (2007). business history and history. in g. jones & j. zeitlin (eds.), the oxford handbook of business history, oxford: oxford university press, 9–36. friedman, w. e. & jones, g. (2011). business history: time for debate, business history review, 85(1), 1–8. gioia, d. a., schultz, m. & corley, k. g. (2000). organizational identity, image, and adaptive instability, academy of management review, 15(1), 63–81. hall, p. a. & taylor, r. c. r. (1996). political science and the three new institutionalisms, köln: max-planck-institut für gesellschaftsforschung,. discussion paper 96/6, available at: https://eclass.uoa.gr/modules/document/file.php/pspa113/hall%20and%20taylor.pdf (accessed 14 december 2020) hidy, r. w. (1970). business history: present status and future needs, business history review, 44(4), 483–497. johnson, m. w., christensen, c. m., & kagermann, h. (2008). reinventing your business model, harvard business review, 86(12), 1–10. kantrow, a., m. (1986). why history matters to managers, discussion with chandler, a. d. jr., mccraw, t. k., mcdonald, a. l., tedlow, r. s. & vietor, r. h. k., harvard business review (jan.–feb), 81–88, available at: https:// hbr.org/1986/01/why-history-matters-to-managers (accessed 4 december 2020). kavvadia, h. (2021a). using business models beyond business, world journal of business and management, 7(1). doi: https://doi.org/10.5296/wjbm.v7i1.18163. kavvadia, h. (2021b). the european investment bank and the asian infrastructure investment bank: incumbents and challengers in the field of regional development banking. in j. clifton, d. díaz fuentes & d. howarth (eds.), regional development banks in the world economy, oxford: oxford university press, 256-282. https://doi.org/10.5296/wjbm.v7i1.18163 journal of business models (2022), vol. 10, no. 2, pp. 95-109 107107 kavvadia, h. (2022). small words, big changes: understanding the european investment bank through its business model. in coppolaro, l. & kavvadia, h. (eds), deciphering the european investment bank: history, politics, and economics, london: routledge, 116-139. kieser, a. (1994). why organization theory needs historical analyses – and how this should be performed, organization science, 5(1), 608–620. kipping, m. & üsdiken, b. (2014). history in organization and management theory: more than meets the eye, the academy of management annals, 8(1), 535–588. kobrak, c. & schneider, a. (2011). varieties of business history: subject and methods for the twenty-first century, business history, 53(3), 401–424. leblebici, h. & shah, n. (2004). the birth, transformation and regeneration of business incubators as new organisational forms: understanding the interplay between organisational history and organisational theory, business history, 46(3), 353–380. leavitt, h. (1965). applied organisational change in industry. chicago: rand mcnally. lewin, a. y. & volberda, h. w. (1999). prolegomena on coevolution: a framework for research on strategy and new organizational forms, organization science, 10(5), 519–534. lippmann, s. & aldrich howard, e. (2014). history and evolutionary theory. in bucheli, m. & wadhwani, r. d. (eds), organizations in time: history, theory, and methods, oxford: oxford university press, 124–146. mäkinen, s. & seppänen, m. (2007). assessing business model concepts with taxonomical research criteria. a preliminary study, management research news, 30(10), 735–748. mcgrath, r. g. (2010). business models: a discovery driven approach,. long range planning, 43(1), 247–261. moingeon, b. & lehmann-ortega, l. (2010). creation and implementation of a new business model: a disarming case study, management, 13(4), 266–297. moore, k. & reid, s. ( 2008). the birth of brand: 4000 years of branding history, business history, 4(4), 1–40. mordhorst, m. & schwarzkopf, s. (2017). theorising narrative in business history, business history, 59(8), 1155– 1175. morris, m., schindehutte, m. & allen, j. (2005). the entrepreneur’s business model: toward a unified perspective, journal of business research, 58(1), 726–735. munslow, a. (2006). deconstructing history (2nd ed.). new york ny: routledge. nichols, p. m. (1998). historical institutionalism and sociological institutionalism and analysis of the world trade organization. university of pennsylvania journal of international economic law, 461–511, available at: http://repository.upenn.edu/lgst_papers/11 (accessed 21 may 2017). http://repository.upenn.edu/lgst_papers/11 journal of business models (2022), vol. 10, no. 2, pp. 95-109 108108 osterwalder, a. (2004). the business model ontology. a proposition in a design science approach,phd thesis, ecole des hautes etudes commerciales de l’ université de lausanne. available at : https://www.semanticscholar.org/ paper/the business model ontology a proposition in a osterwalder/87bbedf0efbf010515ed54086bdf31c7cb33e 4a3 (accessed 21 may 2017). osterwalder, a., pigneur, y. & tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept, communications of the association of information systems, 16(1), 1–25. perkmann, m. & spicer, a. (2010). what are business models? developing a theory of performative representations,. sociology of organizations, 29(1), 269–279. pierson, p. (1994). dismantling the welfare state? cambridge: cambridge university press. porter, m. e. (1985). competitive advantage: creating and sustaining superior performance. new york: the free press. powell, w. w., koput, k. w. & smith-doerr, l. (1996). interorganisational collaboration and the locus of innovation: networks of learning in biotechnology, administrative science quarterly, 41(1), 116-145. rowlinson, m. (2001). business history and organization theory, journal of industrial history, 4(1), 1–23. rowlinson, m., & hassard, j. (2014). history and the cultural turn in organization studies. in bucheli, m. & wadhwani, r. d. (eds), organizations in time: history, theory, and methods, oxford: oxford university press, 147–168. scott, w. r. (2001). institutions and organizations. thousand oaks, ca: sage publications. shafer, s. m., smith, h., j. & linder, j. c. (2005). the power of business models, business horizons 48(1), 199– 207. teichova, a. (1986). multinationals in perspective. in teichova, a., levy-leboyer, m. & nussbaum, h. (eds.), multinational enterprises in historical perspective, cambridge: cambridge university press, 262–271. üsdiken, b. & kieser, a. (2004). introduction: history in organisation studies, business history, 46(3), 321–330. westney, d. e. (2009). the multinational firm as an evolutionary system. in collinson, s. & morgan, d. (eds), images of the multinational firm, chichester: john wiley, 117–144. wilson, j. & toms, s. (2011). business history: sustaining excellence, business history, 54(1), 1–5. wirtz, b. w., pistoia, a., ullrich, s. & göttel, v. (2016). business models: origin, development and future research perspectives, long range planning, 49(1), 36–54. zald, m. n. (1990). history, sociology, and theories of organization. in jackson, j. e. (ed.), institutions in american society, ann arbor, mi: university of michigan press, 81–108. zeitlin, j. (2007). the historical alternatives approach. in jones, g. & zeitlin, j. (eds.), the oxford handbook of business history, oxford: oxford university press, 120–140. journal of business models (2022), vol. 10, no. 2, pp. 95-109 109109 about the authors dr helen kavvadia is researcher in residence at the university of luxembourg. prior to this, she was a senior adviser at the european investment bank (eib). she holds a phd in economics and political science from the panteion university in athens, an msc from the london school of economics (lse) and a diploma in diplomatic and strategic studies from the centre des études diplomatiques et stratégiques (ceds) in paris. she holds undergraduate degrees in economics and business administration. her research and publications focus on political economy, with special interest in the regional development banks and economic diplomacy. i journal of business models (2022), vol.10, no. 1, editorial the business model conference 2021, held at aalborg university ’s copenhagen campus in early october, provided the members of the academic community with a great opportunity to discuss the latest research, innovative teaching methods, and best practices in business models research. following the cancellation of the business model conference 2020 due to the covid-19 crisis, the 2021 edition represented a new beginning and restored the familiar sense of community feeling experienced before the pandemic. around 110 academics and practitioners from a multitude of disciplines attended the conference, where 42 papers were presented. five influential keynote speakers inspired and challenged the participants —professor oliver gassmann (university of st. gallen, switzerland), professor christopher tucci (imperial college business school, uk), professor benoit demil (lille university, france), professor xavier lecocq (lille university, france), and professor marcel bogers (eindhoven university of technology, the netherlands). the conference was further enriched by a phd colloquium, a phd workshop, a book panel debate on business models and firm internationalization, and a panel debate on legitimacy and legitimation of business models. the phd colloquium was organized by professor xavier lecocq and professor benoit demil, while the phd workshop was conducted by assistant professor kristina madsen, professor morten lund, dr gert spender, and professor jes broeng. both the colloquium and the workshop provided doctoral students with an overview of the challenges of conducting research on business models. it was also a great opportunity for doctoral students to present and discuss their research with distinguished international faculty. editorial: introduction to the special issue based on papers presented at the business model conference 2021 marco montemari1 please cite this paper as: montemari, m. (2022), editorial: introduction to the special issue based on papers presented at the business model conference 2021, journal of business models, vol. 10, no. 1, pp. i-iv keywords: business models, business model conference, editorial 1 department of management, università politecnica delle marche, ancona, italy issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.7338 https://doi.org/10.54337/jbm.v10i1.7338 journal of business models (2022), vol.10, no. 1, editorial iiii the book panel debate revolved around presentation of the book “business models and firm internationalisation”, published by routledge and edited by professor christian nielsen, professor svetla t. marinova and professor marin a. marinov. moreover, the panel consisted of five contributors — professor svetla t. marinova, dr mika yrjola, professor tamara galkina, professor petri ahokangas, and professor jean-francois hennart — who explored the connections between business models and firm internationalization from different perspectives, such as the effects of platform business models on the outcome and speed of internationalization or the features of the business models of new international ventures. the panel debate, focusing on the theme “legitimacy and legitimation of business models,” was chaired by professor petri ahokangas, professor romeo turcan, and dr marika iivari. the panel consisted of early-stage researchers (esrs) from the marie skłodowska-curie project lnetn (legitimation of newness and its impact on eu agenda for change). innovations, such as novel business models, might suffer from low legitimacy and, thus, innovators need to plan strategies for improving the legitimacy of their business models. in view of such a challenge, the contributors provided novel insights into the antecedents and outcomes of legitimacy and the legitimation of business models in different contexts. the activities of the scientific committee, both before and after the conference, were again very intense. in the months preceding the conference, it reviewed all the papers submitted for possible presentation in order to ensure high standards. consequently, the selected papers were organized into 12 streams — circularity; fifth stage of bm research; innovation 1; innovation 2; ecosystems; digitalization 1; digitalization 2; society and sustainability; challenges and decision-making; value; theories, frameworks, and tools; disclosure and reporting. after the conference, the scientific committee selected the eight papers that are included in this special issue of the journal of business models. originality, significance, and rigor were the three criteria that guided the selection process, leading to a “compilation” of papers that tackle business model issues from different perspectives and through different research methods. let me briefly introduce these papers by focusing mainly on their respective objectives and contributions. holm and kringelum conceptually address the business model implications of entering into clusters, networks, and ecosystems, i.e., different inter-organizational collaborations, from an intra-organizational perspective. the paper underscores that companies must consider the degree of interconnection arising from interorganizational collaboration, as this affects the value creation, value configuration, and value capture of their existing business model. while clusters have no significant effect on the business model of the focal firm, networks involve information and knowledge sharing as well as potential new value configuration through the creation of tighter links. finally, ecosystems entail the opportunity to create joint value propositions, resulting in the extension of business model implications for the focal firm. sund and lindskov underscore the two potential risks that might arise if managers misperceive the true state of competition in their industry. the first risk is connected to underestimating the competitive dynamics in the industry and, therefore, excessively focusing on incremental changes to the existing business model. the second risk is related to overestimating the dynamics in the industry, thus wasting resources on unnecessary radical business model innovations. in their paper, the authors discuss these risks in light of recent research on hypercompetition and incumbent business model innovation. journal of business models (2022), vol.10, no. 1, editorial iiiiii chelbi, rayna, and souchaud investigate the link between business models and coopetition — a stream of research that requires, and deserves, additional attention. in particular, the authors provide an integration of the two concepts by operationalizing the business model adaptation process of an incumbent company in the context of coopetitive settings involving small and young firms. through a longitudinal, in-depth case study of an established bank that has built an ecosystem of financial technology startups, the authors show the impact of coopetitors on the value delivery dimension of the incumbent company ’s business model. uski, kukkamalla, kärkkäinen, and menon aim to expand the understanding of the capabilities needed for implementing a pay-per-outcome business model and the ways in which equipment manufacturing companies can successfully implement such a model. based on a systematic literature approach, the authors detected 36 capabilities along seven different dimensions: customer relationship, value network, digitalization, organization and governance, contracting, service development, and financing. along these lines, the authors show that pay-per-outcome business models, compared to other service-based ones such as the pay-per-use business model, require specific capabilities related to customer relationship and contracting. finally, the authors formulate a capability framework for pay-per-outcome business models in the equipment manufacturing industry. zhang, gisca, dehkordi, and ahokangas highlight that digitalization lays the groundwork for the emergence of novel business models that, however, face an array of legitimacy challenges. thus, the authors propose an integrated framework for studying these legitimacy challenges by combining three different conceptual constructs — the lens of managerial choices and consequences of the business model, the legitimacy aspects reflecting on the stakeholders at different (individual, business, and ecosystemic) levels, and the layers of digitalization, i.e., artificial intelligence, data, and platforms. the paper highlights the need to consider the ecosystemic perspective in discussions on the legitimacy of digitalization-driven business models. perätalo, mohamed, and iivari begin with the consideration that the transition from hierarchal corporate governance to platform governance mechanisms entails the need for smart cities to develop new models for managing the dynamics between city divisions. by conceptualizing smart cities as a platform of platforms, the authors use the business model approach to develop a platform governance framework to illustrate how this approach can lead to better communication between the different layers of smart cities as well as better planning and decision-making, thus improving smart city development. roslender and nielsen underscore that the absence of employees in business model literature is at odds with their pivotal contribution to the value creation, value delivery, and value capture processes. as a resource that is continually challenged by the management to grow, their success has been identified as an outcome that falls within the scope of integrated reporting. the authors suggest several categories of people information that might be documented in reports, such as the employee value proposition that aims at reporting the specific package of conditions and benefits that an organization makes available to its employees. montemari and gatti present a structured process aimed at combining different bm tools to support companies in building resilient and original bms in the face of instability and uncertainty. in particular, the paper highlights that bm tools, when combined together, may play multiple roles during crisis situations— first, bm measurements provide managers and entrepreneurs with an alert system to signal when and in which areas the bm should be changed. second, bm pivots offer a “library” of potential changes that can be generated in the bm. third, bm configurations provide a portfolio of potentially available options when considering how the bm should be changed. journal of business models (2022), vol.10, no. 1, editorial iviv this special issue is composed of short papers, an innovative publication format adopted by the editors of the journal of business models, designed to fast-track the publishing process and, thereby, speed up the development of business model research. this objective is achieved thanks to a very lean template and standard content that ensure the authors to focus on a single clear message. contributors are reminded that they are strongly encouraged to develop their submissions into full-length papers, which may be submitted to the journal of business models or suitable alternative outlets. in conclusion, i hope the reader finds the short papers included here to be of value. i have been a member of the scientific committee of the business model conference since its launch, and it has provided me with the ongoing opportunity to remain abreast of the various directions in which business model researchers are concentrating their efforts. i must admit that this is, indeed, a privilege. i would like to thank all the members of the scientific committee, who have contributed their time and effort to the review process of the papers submitted for presentation at the conference as well as the selection process of the papers included in this special issue. my heartfelt gratitude goes out to professor robin roslender and professor christian nielsen for their support during the production of this special issue and to mette hjorth rasmussen for her excellent, conscientious editorial assistance. marco montemari department of management università politecnica delle marche, ancona, italy journal of business models (2013), vol. 1, no. 1 pp. 38-60 incorporating enterprise risk management in the business model innovation process yariv taran 1, harry boer2 & peter lindgren3 abstract purpose: relative to other types of innovations, little is known about business model innovation, let alone the process of managing the risks involved in that process. using the emerging (enterprise) risk management literature, an approach is proposed through which risk management can be embedded in the business model innovation process. design: the integrated business model innovation risk management model developed in this paper has been tested through an action research study in a danish company. findings: the study supports our proposition that the implementation of risk management throughout the innovation process reduces the risks related to the uncertainty and complexity of developing and implementing a new business model. originality: the study supports the proposition that the implementation of risk management throughout the innovation process reduces the risks related to the uncertainty and complexity of developing and implementing a new business model. the business model risk management model makes managers much more focused on identifying problematic issues and putting explicit plans and timetables into place for resolving/reducing risks, and assists companies in aligning the risk treatment choices made during the innovation process with the company’s corporate strategy and risk appetite. keywords: business model innovation, risk management, action research 1: aalborg university, center for industrial production, fibigerstræde 10, 9220 aalborg, denmark, e-mail: yariv@business.aau.dk 2: aalborg university, center for industrial production, fibigerstræde 10, 9220 aalborg, denmark 3: aarhus university, business and social sciences, birk centerpark 15, 7400 herning, denmark please cite this paper as: taran, y., boer, h., lindberg, p. 2014. “incorporating enterprise risk management in the business model innovation process”, journal of business models, vol. 1, no. 1, pp. 38-60. 38 journal of business models (2013), vol. 1, no. 1 pp. 38-60 introduction the demise of lehman brothers triggered a global chain reaction, the financial crisis of 2008 to 2011 – world stock markets collapsed, large financial institutions and industrial companies went bankrupt, were bought out, or are still (at the time of writing this paper) struggling to recover (e.g. gm, chrysler, aig). worldwide, millions of employees lost their jobs, and governments have had to come up with rescue packages to save their own financial systems. as if it was not hard enough to adapt to the effects of hypercompetition (e.g. d’aveni, 1994), many companies experienced the financial crisis as “the final straw that broke the camel’s back”. in a business summit that took place at harvard university in the early phases of the financial crisis (october 14, 2008), professor robert s. kaplan linked the financial crisis with firms’ behavior, and argued that “apart from the macro issues [such as] interest rates and regulatory problems, virtually all the failures at those firms were because of the failure of their risk management function”. that is, ceos were fired and companies collapsed because they took higher risks than they could afford, and were not prepared for, or failed to identify and respond adequately to, the magnitude of the crisis. business today is more difficult to manage than ever – economic trends and market changes are hardly predictable, and globalization has created ever more complex business environments. innovation is a key ingredient in the way companies (have to) react to external changes. while most innovation efforts have traditionally been focused on developing new products and, albeit to a lesser extent, process technologies, companies are increasingly considering their entire business model as an object for innovation. the ibm global ceo study 2006 held among 765 top ceos indicated that competitive pressures had pushed business model innovation much higher than expected on industrial priority lists. according to that study, approx. 30 percent of ceos were pursuing business model innovation initiatives and quite rightly so. there is little theoretical understanding of how to manage that process adequately. the aim of this paper is to contribute to developing that understanding, with a specific focus on the role of risk and risk management. while product and process innovations are not without risk (e.g. keizer and halman, 2007), business model innovation is potentially much riskier. accordingly, our research question is: to what extent and, especially, how can risk management help a company handling various risks effectively throughout its business model innovation process? risk and risk management in simple terms, the term risk refers to “uncertainty of outcome” (chapman and ward, 2004). risk management has been defined as “the systematic application of management policies, procedures and practices to the tasks of communicating, consulting, establishing the context, identifying, analyzing, evaluating, treating, monitoring and reviewing risk” (iso/iec guide 73, 2002). the evolution of risk management has come a long way in the past two decades. however, although companies have successfully adopted risk management in their internal audit, treasury, insurance, environmental health and safety, and legal functions, it has not yet been fully incorporated into core business processes related to future growth, such as strategic planning, capital allocation, and performance management (deloitte & touche, 2008). this seems to imply that unrewarded risks, in the sense that no premium is obtained from managing them – only the potential for loss is reduced, are the main driver in today’s risk management practices, while managing rewarded risks, which are part and parcel of decision-making processes associated with future growth, is not yet fully embedded in organizational change and innovation processes. furthermore, even if companies attempt to manage rewarded risks systematically, for example in project management (e.g. kendrick, 2003; chapman and ward, 2004) or product innovation management (e.g. keizer et al., 2002; keizer and halman, 2007), they essentially assume that those risks can be managed in isolation from the entire system. recent surveys and studies (e.g. taplin, 2005; deloitte & touche, 2008; o’connor et al. 2008; kalvet and lember, 2010; guo, 2012, 2013), however, have shown that a growing percentage of 39 journal of business models (2013), vol. 1, no. 1 pp. 38-60 managers worldwide are interested in applying risk management in a much more comprehensive (i.e. proactive and holistic) manner. a study by accenture (2009) suggests that there are, roughly speaking, three risk management models that a company can adopt, namely: 1. risk management for compliance, which involves a regulatory set of requirements focused on keeping the company complying with regulations. 2. risk management for value protection, which is aimed at managing expected risks as well as reducing the degree of unforeseen risks.. 3. risk management for value enhancement, which is aimed at covering all dimensions of the business as well as increasing the protection against unforeseen risks according to accenture (2009), “in choosing where to stand on the risk management spectrum, a company is deciding what kind of risk management culture it wants to embrace. does it want to simply comply with regulations? or does it want to be visionary and adjust risk management for the evolved company it will become as the business grows?”. this suggests that dynamic, i.e. innovative, companies will, or perhaps even should, adopt a risk management model that is more focused on value enhancement and helps them proactively to manage risks, pitfalls and surprises along the way (e.g. coso, 2004). enterprise risk management enterprise risk management (erm) attempts to capture and reduce the effects of today’s business complexity and uncertainty by providing a broad framework for managing risks (e.g. moeller, 2007; monahan, 2008; olson and wu, 2010; wu and olsen, 2010; hoyt and liebenberg, 2011; kraus and lehner, 2012). according to the committee of sponsoring organizations (coso), erm deals with risks and opportunities affecting value creation, and helps an entity to get where it wants to go and avoid pitfalls and surprises along the way. thus, they define erm as “a process, effected by an entity’s board of directors, management and other personnel … designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives” (coso, 2004). table 1 gives an example of an erm framework (cas, 2003). table 1: enterprise risk management framework (adapted from cas, 2003) process step types of risks strategic operational & cultural financial hazard establish context identify risks analyze / quantify integrate risks assess / prioritize risks treat / exploit risks monitor and review 40 journal of business models (2013), vol. 1, no. 1 pp. 38-60 erm benefits – applying erm helps companies (e.g. coso, 2004; graham, 2004; ernst & young, 2006; the national affordable homes agency, 2008, deloitte & touche, 2008; olson and wu, 2010; wu and olsen, 2010; hoyt and liebenberg, 2011; kraus and lehner, 2012): • improve their contingency planning by taking a proactive approach, so that managers can avoid surprises, and anticipate and influence events before they are happening. • make better decisions by aligning a company’s risk appetite with its strategy. • enhance risk response decisions through risk avoidance, reduction, sharing, and acceptance. • identify and manage multiple cross-enterprise risks, segmented mostly to four core risk groups: strategic, operational & cultural, financial and hazard risks (cas, 2003). • seize new opportunities based on identified risks. • achieve efficiencies – a structured and comprehensive risk management process built into existing activities generates better managerial processes; e.g. facilitating resource allocation, improving deployment of capital, avoiding unnecessary problems, or setting demanding performance targets. • improve their corporate governance – an efficient erm process can assist with defining reporting and communication protocols, setting appropriate corporate ethics as well as securing compliance with regulatory requirements. • strengthen accountability by demonstrating that levels of risk associated with policies, plans, programs and operations are explicitly understood, and that stakeholder interests are optimally balanced. erm challenges – despite the potential benefits suggested above, it has also been implicitly argued (e.g. ernst & young, 2006; deloitte & touche, 2008; kraus and lehner, 2012) that the understanding of how to incorporate erm into future-oriented business processes is currently lacking. companies that do apply erm embed it within their system, but tend to focus on risks related to existing assets. in so doing, they miss the connection to business processes aimed at future growth (e.g. deloitte & touche, 2008), including business model innovation processes. demonstrating the benefits of the value of taking risk (and preventing their consequences) is one of the great challenges related to the adoption of erm and using it in future-oriented activities. according to the deloitte & touche erm survey (2008, p. 2), “management is demanding proof of the value proposition of erm, just as they did when quality initiatives were first being introduced. unfortunately, such proof is usually most evident after a catastrophe”. the aim of the study presented here is to demonstrate the usability and usefulness of risk management in one such future-oriented and, as the next subsection will show, potentially quite risky activity, namely business model innovation. uncertainty and complexity management risk is a function of the uncertainty and complexity related to innovation. boer (1991) addressed uncertainty and complexity as follows. uncertainty – several terms have been used to refer to this aspect of organizational reality. some authors use the term predictability (e.g. mintzberg, 1979); others prefer to call it uncertainty (e.g. thompson, 1967; galbraith, 1973; mowery and rosenberg, 1979). inevitably connected with innovation, uncertainty refers to the extent to which individuals, groups or organizations are informed about the future (galbraith, 1973). the level of uncertainty may vary along a continuum of certainty, risk, uncertainty and unstructured uncertainty (de leeuw, 1982), is generally assumed to be highest at the initial stages of the innovation process, but should tend to decrease in the course of time. it may concern the objectives to be pursued, the activities to be performed in order to achieve desirable results, the people to perform the activities, the arrangements regulating their cooperation, and the influence of the organization’s context (simon, 1964; galbraith, 1973; mintzberg, 1979; kickert, 1979; de leeuw, 1982). typical symptoms of uncertainty are failures being made, setbacks and surprises occurring, unforeseen barriers needing to be leveled, goals and objectives requiring re41 journal of business models (2013), vol. 1, no. 1 pp. 38-60 definition during the process, formerly elaborated ideas and accepted solutions being rejected and exchanged for new ideas leading to alternative solutions, implemented solutions appearing to be less effective than anticipated, and/or schedule and budget overruns (galbraith, 1973; sayles, 1974; during, 1984; schroeder et al., 1986). complexity – this factor has been referred to using different terms, such as comprehensibility (mintzberg, 1979) and analyzability (perrow, 1967). still following boer (1991), we use the term complexity to refer to the difficulty with which a process can be understood (cf. mintzberg, 1979). the extent to which an innovation process is complex or, contrarily, easy to understand, depends on features such as the newness and radicality of the innovation. furthermore, not all activities in an innovation process are complex. the greater the gap between the knowledge and skills required from the people involved, and the competences these people actually have, the more the organization has to rely on unanalyzed experience, intuition, chance and guesswork, rather than wellknown, standard methods of designing, developing and implementing solutions to the innovation problem (cf. e.g. perrow, 1967). in other words, competence gaps increase uncertainty. uncertainty, complexity and risk – it is important to note that the success of a business model innovation depends on the company’s ability to recognize that it is about to perform activities that are more uncertain, complex and therefore also riskier than anything it has experienced in the past, and the ability to cope with these process characteristics. figure 1 illustrates the relationships between uncertainty, complexity and risk and, implicitly, suggests that the higher the level of innovation uncertainty and complexity, the greater the need for risk management. the question is: how? the next section will investigate that. figure 1: complexity-uncertainty based risk scale high risk uncertain medium-high risk simple low risk certain low-medium risk complex b c da 42 journal of business models (2013), vol. 1, no. 1 pp. 38-60 managing risk in business model innovation business model innovation many authors have attempted to define the business model concept. some authors took a narrow, more technological or financial focus (e.g. stewart and zhao, 2000; chesbrough, 2007), others adopted a more general perspective (e.g. amit and zott, 2001; osterwalder et al., 2004). some have incorporated corporate strategy in their business model definition (e.g. timmers, 1998; hamel, 2000), others have left it out (e.g. selz, 1999; weill and vitale, 2001). however, put simply, most (if not all) authors agree that a business model is a model that explains how a company does business. the number of building blocks of business model canvasses presented in the literature ranges from three to nine (osterwalder et al., 2004; morris et al., 2005). there has been quite a debate in the literature on the question when a change can rightfully be called a business model innovation. two approaches seem to prevail. the first approach defines business model innovation as a radical change in the way a company does business (chesbrough 2007; linder and cantrell 2000). the second approach regards any change in any of the building blocks of a business model, or the relationships between them, as a form of business model innovation (amit and zott 2001, osterwalder et al. 2004, magretta 2002; taran et al., 2014). we adopt the second approach. risk management in business model innovation risk management in the context of business model innovation is “terra incognita” – unexplored territory (taran, 2011). we will therefore rely on the (limited) research available on risk management in adjacent areas, namely project and product innovation management (e.g. taplin, 2005; o’connor et al. 2008; kalvet and lember, 2010; guo, 2012, 2013), in particular the work of keizer et al. (2002) and chapman and ward (2002), to develop a deeper understanding on how and when risk management could be incorporated into a company’s business model innovation process. keizer et al. (2002) clarified how unilever, a worldleading company in fast-moving consumer goods, adopted the risk diagnosing methodology (rdm) in its product innovation management. rdm was initiated, developed and successfully tested first in a division of philips electronics company. its aims were to identify and evaluate technological, organizational and business risks in product innovation. similar to the philips results, rdm proved to be a very useful method for unilever for diagnosing product innovation project risks, promoting creative solutions, strengthening team ownership and building a knowledge base of potential risks in product innovation projects. keizer et al. (2002) argued that, in relation to unilever’s innovation funnel (figure 2), the rdm process should be applied at the end of the “feasibility” phase, i.e. at the “contract” gate. since rdm was focused particularly on one of the gates of the company’s innovation funnel, the main issues addressed at that stage were consumer and trade acceptance, commercial viability, competitive reactions, external influential responses, human resource implications, and manufacturability. chapman and ward (2004) proposed a framework for incorporating risk management in project management processes, called shampu (share, harness, and manage project uncertainty). in contrast to keizer et al.’s (2002) study, which argues for applying the risk management process only once, at the end of the feasibility phase, chapman and ward maintain that the nine phases of the shampu risk management process (define, focus, identify, structure, ownership, estimate, evaluate, harness, manage), should be presented as an ongoing process activity, followed by an iterative loop back to the “estimate” phase or even to the (first) “define” phase, to refine or redefine the basis of analysis of sources of uncertainty revealed to be important. however, similar to keizer et al. (2002), chapman and ward (2004) also argued that the risk management process should start at the early phases of the project and end at the planning phase, before allocating and executing the project. this “planning” phase in the chapman and ward model can, to a great extent, be compared to the “feasibility” phase in the unilever innovation funnel (figure 2). in translating the suggestions put forward by keizer et 43 journal of business models (2013), vol. 1, no. 1 pp. 38-60 al. (2002) and chapman and ward (2004) to business model innovation, we make one important amendment, which follows from the question why risk management should only be applied early on in the innovation process. why is it that other gates can be left out and, more fundamentally, how can risks be managed adequately at other (more progressed) gates, if risk management is not applied there? we believe that risk management should play a role throughout the entire innovation process and therefore propose: the implementation of risk management throughout the innovation process reduces the risks related to the uncertainty and complexity of developing and implementing a new business model. in order to be able to research this proposition, we put forward a generic process that illustrates the possible integration of risk management within the overall business model innovation process (figure 3). the model adopts the widely used stage-gate model proposed by cooper (1993). the rationale for adopting a stage-gate process is twofold. first, previous research (e.g. taran, 2011) indicated that many companies have adopted this model and incorporated it, in one way or another, in their innovation processes. this makes logical sense: the stage-gate model is essentially a project management tool, which is meant to increase the manageability of an innovation process by organizing it as a sequence of stages and gates. second, adopting the stage-gate model allows us and, for that matter, companies using the model, to allocate risk management activities where they belong, namely at the gates, as also suggested by both keizer et al. (2002) and chapman and ward (2004). a business model innovation risk management model we propose the model in depicted in figure 3 to describe a practical, i.e. linear and systematic, implementation of risk management in the business model innovation process. stage one focuses on visualizing the “as-is” business model of the company. then, the process will continue by following a stage-gate procedure ending with the implementation of the new business model. each stage and gate provides an opportunity for a complete risk management process. based on an extensive literature review (e.g. coso, 2004; graham, 2004; ernst & young, 2006; the national affordable homes agency, 2008, deloitte & touche, 2008; olson and wu, 2010; wu and olsen, 2010; hoyt and liebenberg, 2011; kraus and lehner, 2012), we narrowed that process down to four core activities, namely: figure 2: the unilever innovation funnel (keizer et al., 2002) phase 1 ideas phase 2 feasibility phase 3 capability phase 4 launch preparation phase 5 post launch evaluation phase 6 rollout contender candidate project a candidate project b project c project d project e project f project g project h on shelf in first market/s charter gate contract gate launch gate rollout gate 44 journal of business models (2013), vol. 1, no. 1 pp. 38-60 1. identify various risks – strategic, operational & cultural, financial and hazard risks. 2. analyze each of the risks identified. 3. evaluate those risks – determine the level of risk that a company is willing to accept. 4. treat the risks – the four possibilities are: avoiding, reducing, accepting and transferring/sharing the risks (e.g. de loach, 2003). the purpose of the gates is to relax constraints, uncertainties and complexities throughout the business model innovation process, as well as to provide more certainty for managers regarding the path chosen. the first risk management phase is focused on the assessment of the current (“as-is”) business model. identifying the risks at that stage can, for example, follow from a swot analysis, where the company is considering how to take advantage of opportunities and strengths and deal with weaknesses and threats. then, through careful analysis and evaluation of each identified (strategic, operational & cultural, financial, hazard) risk, managers search for possibilities to treat those risks, which eventually results in three possibilities, namely: retrenchment (cost cutting), compliance with regulations, or search for innovation solutions (e.g. a new product/service, process and/or market position). the second risk management phase begins by identifying the risks of each business model innovation possibility that was proposed in the design phase. here, too, users follow a systematic process of analyzing, evaluating and then treating those risks, which results, during the prioritization phase, in rejecting some business model innovation ideas, and selecting others for further processing. finally, the third risk management phase facilitates the identification, analysis, evaluation and treatment of risks related to each downstream milestone. the purpose of this gate is to systematically organize the anticipation and sense of urgency needed to prevent sloppy implementation processes by dealing with a large variety of strategic, operational & cultural, financial and hazard risks. thus, unlike keizer et al. (2002) and chapman and ward (2004), who suggested that the risk analysis should take place (only) at the gates of the innovation process, in our model we propose that the risk management process should be applied through the entire business model innovation process i.e. during all stages and at all gates. figure 3: risk management integrated in the business model innovation process stage 1 gate 1 stage 2 gate 2 stage 3 gate 3 stage 4 innovation risk management as-is business model new business model design prioritizing and milestones implementation identify risks i i i analyze risks a a a evaluate-prioritize e e e treat risks t t t 45 journal of business models (2013), vol. 1, no. 1 pp. 38-60 it should also be noted that unlike cooper’s (1993) stage-gate model, we chose not to include a testing and validation phase. due to the nature of business model innovations, it would be quite impossible to test and validate a new business model prior to its implementation, as suggested for product innovations. research design in the previous section we presented a business model innovation risk management model, which is based on the proposition that risk management should be implemented throughout the innovation process. this section describes the design of the pilot study we conducted to shed more light on the practical usability and usefulness of the model. according to christensen (2006), theory is built in two major stages: 1. a descriptive stage, which aims to inductively observe, classify and define various relationships to a specific phenomenon. 2. a normative stage, in which the researcher moves beyond statements of correlation to define what causes the outcome of interest. given the “state-of-the-theory” of business model innovation, it would be too early to pursue normative theory. for that reason, this paper focuses on the first phase, i.e. the descriptive ‘pyramid’. while the wide majority of business model innovation research has focused on the base (observe, describe, measure) of the pyramid, and some work has been conducted at the second level (categorization) (e.g. koen et al., 2011; taran et al., 2014), this paper moves business model innovation theory development to the third level (models) (figure 4). a business model innovation process conducted by a danish company, provital, provides the empirical basis for this paper. we decided to perform action research in order to: figure 4: the process of building a (descriptive) theory (christensen, 2006) statements of association (models) categorization based upon attributes of phenomena (frameworks & typologies) observe, describe, and measure the phenomena (constructs) co n fir m pr ed ic t anomaly 46 journal of business models (2013), vol. 1, no. 1 pp. 38-60 • put the model developed (figure 3) into a field test aimed at analyzing its usability and usefulness and, through that, • explore the extent to which and, especially, how risk management can help a company handling various risks throughout its business model innovation process (cf. our research question formulated in the introduction section). the study began in early 2008 and ended in 2011. we were involved in the company’s attempt to develop an innovative business model from its inception, and participated actively in the development and screening of new business model ideas, as well as in the strategic decision making and change processes implemented later on. short case description provital was established in 2008 as a joint venture between two medium-sized danish companies. provital’s value proposition involved a new and revolutionary filtration system, which can be assembled in various ways and applied in multiple industries (e.g. pools, car wash, marine boats, drinking water). one of the strengths of the products resided in the fact that they offered higher quality for a lower price and lower life-cycle cost to target customers, regardless of their industry. taking the changing focus of customers and countries towards environmentally friendlier products, and given the fact that there were few competitors to their offering in the global market, provital expected that its cleansing system had the potential to revolutionize the market for water purification and would help the company become a large and global player in a relatively short period of time. however, due to the potentially wide array of applications of, and target markets for, their products, provital had difficulties in understanding how to manage the development of a business model supporting the company’s ambitions and, particularly, how to mitigate the risks involved in that process. each industrial focus required its own manufacturing methods and technologies, ways to organize the company’s core activities, and selection of key suppliers as well as target markets, including choices such as customer types (e.g. b2b versus b2c) and geographical areas. data collection and data analysis the company gave us a lot of freedom in experimenting with the business model innovation risk management model. in order to keep track of our interventions, we developed a project definition report that systematically described each phase we went through. after we completed that report, the r&d manager was interviewed in order to assess the risk management process in light of the criteria benefits, timing and functionality (see below). data collection – in order to develop that report we used participant observation and, in addition, conducted ten semi-structured in-process interviews, an ex-post interview with the r&d manager, and seven meetings with the company managers. we designed the meetings as workshops, which systematically followed the business model innovation process depicted in figure 3. this helped us to test the risk management process while it was implemented, and explore its effects on the innovation process. all notes taken at the meetings and workshops were uploaded to the project extranet. the managers had free access to those files and were encouraged to comment, correct and/or simply accept our interpretations of these events. data analysis – similar to the procedure reported by keizer and halman (2007), the data was analyzed in three successive steps: 1. risk management literature review – to develop a list of key risk factors. 2. analysis of the interviews – to develop a better understanding of disparities between the expected and the actual contribution of applying risk management, and of the importance of applying risk management in the business model innovation process. 3. content analysis – to draw valid case conclusions and check the risks identified by provital’s managers during the workshops against the potential risks outlined on the basis of our previous literature review. 47 journal of business models (2013), vol. 1, no. 1 pp. 38-60 through that process we developed a list of risks, separated into four categories (strategic, operational & cultural, financial and hazard) with 22 critical risk issues. additionally, given that our intention with the action research was to put the model developed (figure 3) into a field test to analyze its application and effects, we decided to select the following criteria for assessing whether the application of the model should be considered as successful, partly successful or a failure: • benefits – so that we could learn whether the application of risk management throughout the business model innovation process was, indeed, beneficial for the company, not only in terms of the “success” or “failure” of the innovation, but also as regards the extent to which uncertainties, complexities and consequent risks were reduced throughout the business model innovation process. • timing – so that we could learn whether risk management activities should be applied only once (e.g. keizer et al. 2002), several times, but still only at the early phases of an innovation process (e.g. chapman and ward, 2004) or, as our model suggests, ongoing, throughout the entire process. • functionality – akin to the clinical test of a new medicine, we developed a new model (i.e. new medicine) but can only confirm whether the model actually functions as expected and if there are any “side-effects”, by trying it out in practice. the “benefits” criterion tests the usefulness of the model. the “timing” and “functionality” criteria test the model’s usefulness as well as its usability. according to popper (1963), every genuine test of a theory is an attempt to falsify or to refute it. testability, according to him, is falsifiability. accordingly, a successful case would only suggest that the model is not refuted – further research would be needed to develop arguments for its usefulness and usability in similar contexts and its transferability to different contexts. the second scenario (i.e. partly successful), would suggest that the model has been partly disproven. further investigation would be needed in order to learn what went wrong in which stage(s) and/or gate(s) of the model, and which aspects of the model need to be revised before testing it again. the third scenario (i.e. failure) would indicate that the model has to be rejected. validity and reliability – as recommended by fielding and fielding (1986), duffy (1987), dick (1993), lewis (1998), greenwood and levin (2000) and maxwell (2005), we used the following tactics: • data triangulation – multiple sources of evidence were used, namely primary and secondary data, face-to-face interviews, mediated interviews, and group and third party interviews. • two action research cycles were performed – this increased our understanding, and facilitated us in refining the initial conceptual framework (e.g. lewis, 1998). • data gathering process – as mentioned above, inprocess and ex-post interviews were conducted for understanding better the disparity between the expected and the actual contribution of applying risk management, as well as the importance and seriousness of applying risk management in the business model innovation process (e.g. keizer and halman, 2007). • iterative triangulation – is recommended in situations where the research topic is novel and underdeveloped, but at the same time a body of relevant literature exists (lewis, 1998). accordingly, the business model innovation risk management model, was developed based on existing studies, rather than on data collected directly from the company. analysis and discussion the aim of this section is to analyze the results in view of the research question, give more concrete details on the process applied to identify, evaluate, analyze and 48 journal of business models (2013), vol. 1, no. 1 pp. 38-60 treat various risks, and present initial findings regarding “how” and the “extent” to which risk management can help a company in the complex and uncertain process of business model innovation. process description as shown in table 2, the risk management process involved four phases. first, for each risk criterion (strategic, operational & cultural, financial and hazard), potential risks were identified. then, each risk was analyzed qualitatively by assessing both the probability of the risk to occur and the relative impact that risk would have. for those risks that were rated as “medium” or “high”, i.e. misfit to the corporate risk appetite level of the firm, an “action needed to be taken” description was made, focused on a possible solution, i.e. avoiding, reducing, accepting, transferring or sharing the risk (e.g. de loach, 2003), along with appointing a person in charge and determining the expected target date of completion. finally, residual risks were assessed against the risk appetite level of the firm. benefits our observations and experiences from the workshops and interviews suggest that provital has gained valuable benefits from experimenting with risk management. the company’s managers report that risk management assisted them in managing various risks across the enterprise efficiently and effectively, as well as in prioritizing their strategic, operational and financial choices throughout the business model innovation process. according to provital’s r&d manager, many of the risks identified were not new to them, but through the process of analyzing these risks they realized that they had not really known how to manage them effectively but learned to do so. furthermore, rating risks as low, medium or high helped them to better understand, systematically prioritize and organize what needed to be done in order to deal with the risks identified. by explicitly describing how to treat each risk expected in the course of the process, they were better prepared for and more aware of the risks they were willing to accept, which reduced the risk level (inherent versus residual risks) and, with that, also the overall uncertainty and complexity associated with the business model innovation process. furthermore, according to provital’s r&d manager, risk management also served as a compass that kept the company on track with its strategic goals and, for himself, to prioritize his work tasks. running daily operations is hard enough, and focusing on small issues can distract attention from the bigger and more urgent ones. keeping an “action needed to be taken” table for the risks that were rated as “medium” or “high” kept him focused and certain that he would find the time to address them. additionally, he also found risk management to be a very efficient tool. dividing the larger problem into different criteria and steps that are relatively easy to understand guided him through the business model innovation process. all in all, provital’s managers were very satisfied with experimenting with the risk management process, and the r&d manager in particular stated that he intended to continue working with risk management in future innovation processes, as well as with prioritizing his daily, weekly and monthly activities. these findings confirm previous publications (e.g. coso, 2004; graham, 2004; ernst & young, 2006; the national affordable homes agency, 2008; deloitte & touche, 2008), which propose many benefits that company may gain from applying risk management in their innovation processes. timing when the r&d manager was asked whether risk management should be applied once or, rather, as an ongoing part of the innovation process, he argued for the latter. he felt it is particularly important to apply risk management at the early phases of the innovation process, but since competition today is so dynamic, today’s certainties can very easily become tomorrow’s new challenges – e.g. their bank crashed during the global financial crisis. thus, as strategies and innovation plans may need to be changed frequently and occasionally perhaps even radically, new risks may emerge, which need to be analyzed all the time, both with respect to new innovations and also in different phases of a single innovation process. according to the r&d manager, provital will be 49 journal of business models (2013), vol. 1, no. 1 pp. 38-60 table 2: example of evaluation and treatment of risks at provital qualitative risk analysis action plan post-hoc evaluation medium and high risks identified likelihood (1-5) impact (1-5) inherent risk risk treatment person in charge, and milestones residual risk fit to the company’s risk appetite further action planned strategic risks s1 – provital’s lack of sales, leads to a shutdown of the joint venture. 5 5 high primary focus is on insuring the company owners’ satisfaction through improving web visualization, aggressive marketing, achieving immediate sales and revenues, and securing ipr on the system. top manager and r&d manager are responsible, already working on solving the problem. they continue more rigorously after receiving funding. low fit no further action needed. but keep m o n i t o r i n g closely the owners’ expectations. s2 new competitor enters the industry with a competitive solution. 4 3 medium monitoring the industry for potential competitors. r&d manager medium no fit keep monitoring the industry for p o t e n t i a l competitors on a monthly basis. operational & cultural risks o1 no professional sales people. low marketing skills and practice. 1 5 medium need to get funding for employing high quality sales and marketing people. also, considering outsourcing the marketing function and selling to a third (expert) company. all company managers. partly already in progress, and to be applied more rigorously after receiving funding. low fit no further action is needed. 50 journal of business models (2013), vol. 1, no. 1 pp. 38-60 table 2: example of evaluation and treatment of risks at provital qualitative risk analysis action plan post-hoc evaluation medium and high risks identified likelihood (1-5) impact (1-5) inherent risk risk treatment person in charge, and milestones residual risk fit to the company’s risk appetite further action planned o2 tests fail to show that the system is successful also in other industrial settings. 2 3 medium insure that the system operates successfully before sales. the system will not sell if the prestress tests show that the system fails to operate successfully. r&d manager. already working on the problem. low to medium poor fit no further action needed. o3 one of provital’s suppliers choose to stop working with the company. 1 1 low (many suppliers available) no further action needed financial risks f1 lack of investment money. 3 4 medium looking for potential investor. all managers (and owners). already working it. low to medium poor fit no further action needed. f2 one of the mother companies goes bankrupt. 1 5 medium cannot be controlled by the company. medium no fit tolerate. 51 journal of business models (2013), vol. 1, no. 1 pp. 38-60 table 2: example of evaluation and treatment of risks at provital qualitative risk analysis action plan post-hoc evaluation medium and high risks identified likelihood (1-5) impact (1-5) inherent risk risk treatment person in charge, and milestones residual risk fit to the company’s risk appetite further action planned hazard risks h2 global financial crisis affects the company’s performance and sales. 5 3 high each financial investment will be carefully analyzed and decided on jointly with financial experts. top manager and r&d manager are responsible. already in progress. low to medium poor fit no further action needed. able to stay ahead of its competitors, be more flexible and cope better with changing conditions that are both internal and external to the organization, by continually analyzing various risks systematically. thus, contrary to keizer et al. (2002), but partly in line with chapman and ward (2004), the provital case suggests that risk management cannot only be beneficially applied in the early stages but actually during all stages and at all gates of an innovation process. functionality the study shows that risk treatment choices need to be considered in a comprehensive manner when looking for appropriate and holistic solutions. every change may create new problems, challenges and risks. if each risk is handled individually, treating one strategic risk may very well result in a new operational challenge. for example, sales volumes in the local markets provital served so far were low and in order to grow the company was eager to enter the us market. however, the entire supply chain was comprised of local players only. the high operational and (particularly) logistical costs involved in setting up a global supply system forced the company to consider alternative, more cost effective, operational solutions such as licensing and a joint venture. thus, in addition to managing strategic, operational & cultural, financial and hazard risks individually, keeping a bird’s eye (i.e. systemic) view on the entire business model innovation process is also recommendable. however, provital’s r&d manager also observed that an over-abundance of risk management can be problematic, too, as this overloads the organization with too many activities, which are not only time consuming but can also be confusing for staff members to cope with. for example, when provital’s managers were asked to list what they thought would be significant risk factors (table 2), they realized that their list was getting longer and longer, to a point that it simply became impossible to manage it effectively, and decided to reduce the list to the 22 most critical risk factors. this observation touches on previous research, which has reported the negative impact of bureaucracy on 52 journal of business models (2013), vol. 1, no. 1 pp. 38-60 innovation (e.g. burns and stalker 1961), especially during the early phases of an innovation process (e.g. zaltman et al., 1973; kelly and kranzberg, 1975; pierce and delbecq, 1977; boer and during, 2001). thus, although managing risks throughout the business model innovation process is important, finding the right balance so as not to suffocate the process is a serious challenge. additionally, we also identified that by incorporating risk management in business model innovation processes, starting at the stage prior to a gate, followed by risk analysis at the gate, and treatment choices that take place in the stage following that gate, provital could significantly reduce many of the uncertainties and complexities they were facing in the course of the business model innovation process. they were much more clear about the treatment initiatives in terms of “what to do”, “how to do it” and “when to do it”, and address the most urgent ones first with full commitment from the management team. these findings correspond with courtney et al. (1997), who argued that if a company underestimates or fails to manage uncertainties adequately, it will lead the company to develop strategies and operational processes that: • neither defend against threats nor take advantage of opportunities. • assume that the world is entirely unpredictable, which will then lead them to either abandon planning processes (i.e. too uncertain – too risky), or simply follow their gut instinct (i.e. “just do it”). in the latter case, the innovation process will be perceived as nothing less than a gamble.. finally, we observed that the company did not always implement initial treatment choices made at the gates in full. if new problems emerged (e.g. financial constraints), the ceo occasionally decided to re-prioritize. this raises the question whether risk treatment decisions made at the gates should always be carried out “as planned”, or, alternatively, that they should be regarded as suggestions for action during the next stage(s). evaluation and propositions the application of the model in the provital case should be considered a success: • benefits: provital gained multiple benefits from applying the model. it has reduced the risk level (inherent versus residual risks), and with that also the overall uncertainty and complexity of the entire business model innovation process. consequently, they could proceed with the innovation process with more certainty. additionally, by mitigating (mostly) known risks, they became more actively aware of their risk appetite and the volume and types of risks they were willing to accept. • timing: it appears to be important to apply risk management through the entire innovation process i.e. during all stages and at all gates. by continually analyzing potential risks, the company was able to act more flexibly and cope better with changing conditions both internal and external to the organization. • functionality: the approach proposed in figure 3 works (for provital). one issue remains: too little risk management creates unforeseen risks and effects; too much risk management creates bureaucracy and reduces flexibility and creativity. finding the right balance is crucial, but how to achieve that is an open question. thus, the business model innovation risk management model proposed in this paper was not rejected. however, it is too soon to conclude that the model is generally valid – more research in similar and different contexts is needed. table 3 translates the findings reported above into testable propositions. 53 journal of business models (2013), vol. 1, no. 1 pp. 38-60 table 3: generalization of action research findings into propositions category action research case analysis related text proposition benefits “by explicitly describing how to treat each risk expected in the course of the process, they were better prepared for and more aware of the risks they were willing to accept, which reduced the risk level (inherent versus residual risks) and, with that, also the overall uncertainty and complexity associated with the business model innovation process.”. proposition 1: the implementation of risk management into a business model innovation process reduces the level of risk related to the uncertainty and complexity of, or associated with, developing the new business model. proposition 2: managing risks throughout the entire business model innovation process will assist a company in aligning risk-treatment processes with the risk appetite level of the firm. timing “when the r&d manager was asked whether risk management should be applied once or, rather, as an ongoing part of the innovation process, he argued for the latter. he felt it is particularly important to apply risk management at the early phases of the innovation process, but since competition today is so dynamic, today’s certainties can very easily become tomorrow’s new challenges …”. proposition 3: the likelihood of launching a successful new business model is increased if risk management is applied throughout the entire business model innovation process, i.e. in all stages and at all gates. “provital will be able to stay ahead of its competitors, be more flexible and cope better with changing conditions that are both internal and external to the organization, by continually analyzing various risks systematically”. proposition 4: embedding risk management process in business model innovation process promotes organizational learning and flexibility, and creates more focus on strategic choices made at the gates. functionality “…in addition to managing strategic, operational & cultural, financial and hazard risks individually, keeping a bird’s eye (i.e. systemic) view on the entire business model innovation process”. “…an over-abundance of risk management can be problematic, too, as this overloads the organization with too many activities, which are not only time consuming but can also be confusing for staff members to cope with”. proposition 5: the likelihood of launching a successful new business model increases by securing: 1) an adequate alignment of various (strategic, operational & cultural, financial and hazard) risks treatments choices with one another. 2) a sufficient and effective volume of risk management activities overall. 54 journal of business models (2013), vol. 1, no. 1 pp. 38-60 conclusion contribution in this paper we investigated the application and success potential of risk management in business model innovation processes, and formulated the following research question: to what extent and, especially, how can risk management help a company handling various risks effectively throughout its business model innovation process? accordingly, we integrated findings reported in the risk management literature and cooper’s stage-gate process in the business model innovation risk management model depicted in figure 3, and tried that model in a business model innovation process undertaken by the danish company provital. given the limited research available on business models and risk management (associated with innovation processes), and the lack of research on understanding how to incorporate risk management within the overall business model innovation process, this research was largely explorative study – entering “terra incognita”. in addition, the research is based on the study of a single case. yet, some valuable lessons can be formulated. first, the study supports our proposition that the implementation of risk management throughout the innovation process reduces the risks related to the uncertainty and complexity of developing and implementing a new business model. the operational use of the business model risk management model suggests that it makes managers much more focused on identifying problematic issues (“know what to do”), and on putting explicit plans and timetables into place for resolving/reducing identified high and medium rated risks (“know how and when to do it”). furthermore, the study indicates that risk management assists a company in aligning the risk treatment choices made during the innovation process with the company’s corporate strategy and risk appetite. in effect, managers are more confident about the strategic choices made during the innovation process, and it is also relatively easier for them to share their vision and future plans with their staff members, and to prioritize their operational plans. so, risk management is “good”, but the case study also suggests that too much risk management is not. an overload of risk management leads to time-consuming bureaucracy and reduces flexibility and creativity. how to find the optimal “volume” of risk management in a business model innovation process remains a question for further research. further research carlile and christensen (2005) suggest that the descriptive part of theory building (figure 4) is a preliminary stage, which researchers generally must pass through in order to develop more advanced normative theory. according to them, “the ability to know what actions will lead to desired results for a specific company in a specific situation awaits the development of normative theory in this field” (carlile and christensen 2005, p. 4). the action research reported in this paper should be considered as a pilot study (e.g. lancaster et al., 2004; ruxton and colegrave, 2006), aimed at pre-testing or “trying out” (baker, 1994) the approach proposed in figure 3. thus, although the action research failed to falsify the proposed generic business model innovation process (figure 3), the results drawn from this research should be considered as tentative theory. consequently, further research is needed in order to validate and test the generalizability of the model. in order to eventually arrive at normative theory, further research will involve the following consecutive steps: • test the approach in different situations, through a multiple action research study aimed at testing the approach through business model innovation initiatives of various companies, preferably smes and larger firms, representing different industries. in that respect, it should also be recognized that practitioners should not only measure the operational use of the approach by the “success” or “failure” of a business model innovation, but also in terms of the extent to which uncertainties, complexities and consequent risks are reduced throughout the innovation process. the reason for doing so is the understanding that innovation is a “risky business” – risk will never be eliminated completely. the application of the model in various circumstances may also validate, or alternatively falsify, the suggested linear nature of the model and, particularly, the risk management activities applied throughout that process. 55 journal of business models (2013), vol. 1, no. 1 pp. 38-60 • measure long-term effects of applying the model – once the application of the model has been tested in various industrial settings, and still assuming that it has yet to be falsified, we propose to proceed with a questionnaire-based survey to analyze, retrospectively, not only the short term effects of applying the model, but also the long term effects of its application in terms of, for example, avoiding cannibalization and securing sustainable growth. references accenture (2009), managing risk in extraordinary times. http://www.anniesearle.com/web-services/documents/ articles/managing%20risk%20in%20extraordinary%20times.pdf. retrieved 29 january 2014. amit, r., and zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6-7, pp. 493520. baker, t.l. (1994), doing social research, new york: mcgraw-hill inc. boer, h. (1991), organising innovative manufacturing systems, aldershot: gower. boer, h. and during, w.e. (2001), innovation – what innovation? a comparison between product, process and organisational innovation, international journal of technology management, vol. 22, nos. 1-3, pp. 83-107. burns, t. and stalker, g.m. (1961), the management of innovation, london: tavistock publications. carlile, p.r. and christensen, c.m. (2005), the cycles of theory building in management research, working paper 05057, boston: harvard business school. http://www.hbs.edu/faculty/publication%20files/05-057.pdf. retrieved 30 november 2013. cas (casualty actuarial society) (2003), overview of enterprise risk management, arlington: erm community. chapman, c.b. and ward, s.c. (2004), project risk management: processes, techniques and insights, chichester: john wiley and sons. chesbrough, h. (2007), open business models. how to thrive in the new innovation landscape, boston: harvard business school. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, nos. 2-3, pp. 354-363. christensen, c.m. (2006), the ongoing process of building a theory of disruption, journal of product innovation management, vol. 23, no. 1, pp. 39-55. coso (2004), enterprise risk management – integrated framework executive summary, committee of sponsoring organizations of the treadway commission, usa. cooper, r.g. (1993), winning at new products: accelerating the process from idea to launch, boston: addison-wesley. 56 http://www.anniesearle.com/web-services/documents/articles/managing%20risk%20in%20extraordinary%20times.pdf http://www.anniesearle.com/web-services/documents/articles/managing%20risk%20in%20extraordinary%20times.pdf http://www.hbs.edu/faculty/publication%20files/05-057.pdf journal of business models (2013), vol. 1, no. 1 pp. 38-60 courtney, h., kirkland, j. and vigueria, p. (1997), strategy under uncertainty, harvard business review, vol. 75, no. 6, pp. 66–79. d’aveni, r.a. (1994), hypercompetition. new york: the free press. de leeuw, a.c.j. (1982), organisaties: management, analyse, ontwerp en verandering; een systeemvisie, assen: van gorcum. de loach, j.w. (2003), building enterprise risk management on the foundation laid by sarbanes-oxley, protiviti, inc. deloitte & touche (2008), perspectives on erm and the risk intelligent enterprise – enterprise risk management benchmark survey, deloitte development llc. http://www.deloitte.com/assets/dcom-unitedstates/local%20 assets/documents/us_risk%20consulting-ermbenchmarksurvey_110308.pdf. retrieved 27 november 2013. dick, b. (1993), you want to do an action research thesis? an interchange resource document no. v2.06:930507, brisbane: interchange. duffy, m.e. (1987), methodological triangulation a vehicle for merging quantitative and qualitative methods, image: the journal of nursing scholarship, vol. 19, no. 3, pp. 130-133. during, w.e. (1984), innovatieproblematiek in kleine industriële bedrijven, phd thesis, enschede: school of management studies, university of twente (also published as: during, w.e. (1986), innovatieproblematiek in kleine industriële bedrijven, assen: van gorcum). ernst & young (2006), managing risk across the enterprise: the value of enterprise risk management. http://www. wlu.ca/documents/35471/managing_risk_across_the_enterprise.pdf. retrieved 27 november 2013. fielding, n. and fielding, j. (1986), linking data: the articulation of qualitative and quantitative methods in social research. sage, london and beverly hills/london: sage. galbraith, j.r. (1973), designing complex organizations, reading, ma: addison-wesley. graham, a. (2004), integrated risk management: implementation guide, treasury board of canada secretariat. http://post.queensu.ca/~grahama/publications/textpdf.pdf. retrieved 27 november 2013. greenwood, d.j. and levin, m. (2000), reconstructing the relationship between universities and society through action research. in n.k. denzin and y.s. lincoln (eds.), handbook of qualitative research, thousand oaks: sage, pp. 85-106. guo, y. (2012), research on innovation risk management based on bayesian risk decision-making, international journal of business administration, vol. 3, no. 1, pp. 21-30. guo, y. (2013), research on framework of risk management of uncertain innovation, management, vol. 3, no. 7, pp. 402-407. hoyt, r.e. and liebenberg, a.p. (2011), the value of enterprise risk management, the journal of risk and insurance, vol. 78, no. 4, pp. 795-822. ibm (2006), expanding the innovation horizon, http://www-935.ibm.com/services/uk/bcs/html/t_ceo.html, retrieved on 22 november 2006. iso/iec guide 73 (2002), risk management: vocabulary, guidelines for use in standards. http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html. retrieved 27 november 2013. 57 http://www.deloitte.com/assets/dcom-unitedstates/local%20assets/documents/us_risk%20consulting-ermbenchmarksurvey_110308.pdf http://www.deloitte.com/assets/dcom-unitedstates/local%20assets/documents/us_risk%20consulting-ermbenchmarksurvey_110308.pdf http://www.wlu.ca/documents/35471/managing_risk_across_the_enterprise.pdf http://www.wlu.ca/documents/35471/managing_risk_across_the_enterprise.pdf http://post.queensu.ca/~grahama/publications/textpdf.pdf http://www-935.ibm.com/services/uk/bcs/html/t_ceo.html http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html http://www.standardsdirect.org/standards/standards4/standardscatalogue24_view_26100.html journal of business models (2013), vol. 1, no. 1 pp. 38-60 kalvet, t. and lember, v. (2010), risk management in public procurement for innovation: the case of nordic–baltic sea cities, innovation: the european journal of social sciences, vol. 23, no. 3, pp. 241-262. kraus, v. and lehner, o.m. (2012), the nexus of enterprise risk management and value creation: a systematic literature review, acrn journal of finance and risk perspectives; vol. 1, no. 1, pp. 91-163. keizer, j.a., halman, j.i.m. and song m. (2002), from experience: applying the risk diagnosing methodology, journal of product innovation management, vol. 19, no. 3, pp. 213-232. keizer, j.a. and halman, j.i.m. (2007), diagnosing risk in radical innovation projects, research technology management, vol. 50, no. 5, pp. 30-36. kelly, p. and kranzberg, m. (eds.), (1975), technical innovation: a critical review of current knowledge (volume 1: the ecology of innovation), advanced technology and science studies group, atlanta: georgia tech. kendrick, t. (2003), identifying and managing project risk: essential tools for failure-proofing your project, new york: amacom. kickert, w.j.m. (1979), organisation of decision-making. a systems-theoretical approach, amsterdam: north-holland publishing company. koen, p.a., bertels, h.m.j. and elsum, i.r. (2011), the three faces of business model innovation: challenges for established firms, research technology management, vol. 54, no. 3, pp. 52-59. lancaster, g.a., dodd, s. and williamson, p.r. (2004), design and analysis of pilot studies: recommendations for good practice. journal of evaluation in clinical practice, vol. 10, no. 2, pp. 307-12. lewis, m.w. (1998), iterative triangulation: a theory development process using existing case studies, journal of operations management, vol.16, no.4, pp. 455-469. magretta, j. (2002), why business models matter?, harvard business review, vol. 80, no. 5, pp. 86-92. maxwell, j.a. (2005), qualitative research design: an interactive approach, thousand oaks: sage. mintzberg, h. (1979), the structuring of organizations, englewood cliffs: prentice-hall. moeller, r. (2007), coso enterprise risk management: understanding the new integrated erm framework, hoboken: john wiley & sons. monahan, g. (2008), enterprise risk management: a methodology for achieving strategic objectives, hoboken: john wiley & sons. morris, m., schindehutte, m. and j. allen (2003), the entrepreneur’s business model: toward a unified perspective, journal of business research, vol. 58, no. 6, pp. 726-735. mowery, d. and rosenberg, n. (1979), the influence of market demand upon innovation: a critical review of some recent empirical studies, research policy, vol. 8, no. 2, pp. 102-153. o’connor, c.g., ravichandran, t. and robeson, d. (2008), risk management through learning: management practices for radical innovation success, journal of high technology management research, vol. 19, pp. 70-82. olson, d.l. and wu, d.d. (2010), a review of enterprise risk management in supply chain, kybernetes, vol. vol. 39, no. 5, pp. 694-706. 58 journal of business models (2013), vol. 1, no. 1 pp. 38-60 osterwalder, a., pigneur, y. and tucci, l.c. (2004), clarifying business models: origins, present, and future of the concept, communications of ais, vol. 16, pp. 1-25. osterwalder, a. and pigneur, y. (2010), business model generation. a handbook for visionaries, game changers and challengers, hoboken: john wiley and sons. perrow, c. (1967), a framework for the comparative analysis of organizations, american sociological review, vol. 32, no. 2, pp. 194-208. pierce, j.l. and delbecq, a.l. (1977), organization structure, individual attitudes and innovation, academy of management review, vol. 2, no. 1, pp. 27-37. popper, k. (1963), conjectures and refutations, london, uk, routledge and kegan paul, pp. 33–39. reprinted in theodore schick (ed.), (2000), readings in the philosophy of science, mountain view: mayfield publishing company, pp. 9-13. ruxton, g.d. and colegrave, n. (2006), experimental design for the life sciences, oxford: oxford university press. sayles, l.r. (1974), the innovation process: an organizational analysis, the journal of management studies, october, vol. 11, no. 3, pp. 190-204. schroeder, r., van de ven, a.h., scudder, g. and polley, d. (1986), managing innovation and change processes: findings from the minnesota innovation research program, agribusiness, vol. 2, no. 4, pp. 501-523. selz, d. (1999), value webs: emerging forms of fluid and flexible organizations, unpublished doctoral dissertation, st. gallen: university of st. gallen. simon, h.a. (1964), on the concept of organizational goal, administrative science quarterly, vol. 9, no. 1, pp. 1-22. stewart, d.w. and zhao, q. (2000), internet marketing, business models, and public policy, journal of public policy & marketing, vol. 19, no. 2, pp. 287-296. taplin, r. (2005), risk management and innovation in japan, britain and the united states, london: routledge. taran, y. (2011), rethinking it all: overcoming obstacles to business model innovation. phd thesis, aalborg: center for industrial production, aalborg university. taran, y., boer, h., and lindgren, p. (2014), a business model innovation typology, decision sciences journal (forthcoming) the national affordable homes agency (2008), risk management strategy, london: housing corporation. thompson, j.d. (1967), organizations in action, new york: mcgraw-hill. timmers, p. (1998), business models for electronic markets, journal on electronic markets, vol. 8, no. 2, pp. 3-8. weill, p. and vitale, m.r. (2001), place to space, boston: harvard business school press. wu, d. and olson, d.l. (2010), enterprise risk management: coping with model risk in a large bank, journal of the operational research society, vol. 61, no. 2, pp.179-190. zaltman, g., duncan, r. and holbek, j. (1973), innovations and organizations, new york: john wiley & sons. 59 journal of business models (2013), vol. 1, no. 1 pp. 38-60 about the authors dr. yariv taran is an assistant professor in innovation and organization at the center for industrial production at aalborg university. he received a bsc in management and sociology at the open university of israel, and an msc in economics and business administration at aalborg university, from where he also received his phd in business model innovation. his research focuses on business model innovation. other areas of research interests include intellectual capital management, knowledge management, entrepreneurship and regional systems of innovation. dr. harry boer is a professor of strategy and organization at the center for industrial production at aalborg university, denmark. he holds a bsc in applied mathematics and an msc and phd both in management engineering, all from twente university, the netherlands. he has published on subjects such as organization theory, flexible automation, manufacturing strategy, and continuous improvement/innovation in the international journal of operations & production management, the journal of production innovation management, decision sciences, the journal of manufacturing technology management, creativity and innovation management, production planning & control, and the international journal of technology management. his current research interest is in continuous innovation, the effective interaction between day-to-day operations, incremental change, and radical innovation. dr. peter lindgren is professor of multi business model innovation and technology at aarhus university. he holds a phd in network based high speed innovation from aalborg university. he has (co-)authored articles and books on business model innovaion and multi business model innovation and technology. he was a researcher at politechnico di milano, stanford university. he was founder and center manager of international center for innovation and research group multi business model innovation and technology (mbit). he is a thematic leader at the center for teleinfrastruktur (ctif) and is editor of the journal of multi business model innovation and technology. his research interest is multi business model innovation and technology. 60 _goback _goback _goback 1 journal of business models (2023), vol. 11, no. 1, pp. 1-3 editorial: introduction to the special issue based on papers presented at the business model conference 2022 please cite this paper as: montemari, m. 2023, editorial: introduction to the special issue based on papers presented at the business model conference 2022, journal of business models, vol. 11, no. 1, pp. 1-3 1 department of management, school of economics “g. fuà” università politecnica delle marche, m.montemari@staff.univpm.it issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7800 the business model conference 2022, held at the university of lille in early june, provided members of the academic community with an excellent opportunity to discuss the latest research, innovative teaching methods, and best practices in business model research. approximately 100 academics and practitioners from multiple disciplines attended the conference, at which 62 papers were presented. four influential keynote speakers inspired and challenged the participants—professor oliver gassmann (university of st. gallen), professor stefan haefliger (bayes business school), professor ivanka visnjic (esade business school), and professor wim vanhaverbeke (university of antwerp). the conference was further enriched by a phd colloquium and a teaching forum. the phd colloquium, organized by professor xavier lecocq and professor benoit demil, provided doctoral students with an overview of the challenges associated with business model research. the colloquium also offered the students a valuable opportunity to present and discuss their research with distinguished international academics. the teaching forum was organized by professor anna b. holm and professor christina bidmon with the aim of introducing participants to innovative teaching formats and best practices in business model teaching. the scientific committee engaged in intense activity both before and after the conference. in the months preceding the conference, it reviewed all the papers submitted for possible presentation to ensure a high standard. the selected papers were subsequently organized into 16 streams — challenges and decision making; creativity; data-driven dimension; digitalization 1; digitalization 2; ecosystems; entrepreneurship; hybrid business models; implementation and measurement; innovation 1; innovation 2; resilience and flexibility; sector-related challenges; social dimension; sustainability 1; and sustainability 2. after the conference, the scientific committee selected the seven papers that are included in this special issue of the journal of business models. the selection process was guided by the three criteria of originality, significance, and rigor, leading to an assemblage of papers that address business model issues from various perspectives and through the application of different research methods. here, i shall briefly introduce these papers, focusing primarily on their respective objectives and contributions. marco montemari1, associate editor https://doi.org/10.54337/jbm.v11i1.7800 journal of business models (2023), vol. 11, no. 1, pp. 1-3 22 bourkha addresses the concept of intra-industry business model imitation by clarifying its meaning and content and distinguishing different types of imitation of this nature. drawing on existing literature, the author identifies four business model imitation types: (1) the perfect imitation, where all the components of a competitor ’s business model are imitated; (2) the value proposition-focused imitation, which implies an imitation at the level of the value proposition component of a competitor ’s business model; (3) the organizational-focused imitation that occurs when a company organizes its activities in the same way as a competitor; and (4) the resources-focused imitation, which involves imitating the competitor ’s resources and competences. papanikolaou, angelis, and moustakis analyze the nature and characteristics of a business model that aligns with the attributes of distributed ledger technology (dlt). in particular, the authors demonstrate that existing business model configurations (network-based business models, digital business models, and information business models) partially fit the characteristics of dlt given that existing business model configurations do not consider certain critical dlt parameters. the authors thus highlight the conditions that should be addressed when designing a dlt business model, thus underscoring how the following aspects should be managed within this configuration of business model: the relationship between actors who co-exist within the dlt ecosystem; the dimension of trust; the power dynamics between actors; and the value of data ownership. montakhabi investigates the factors that render a business model (un)investable by exploring the reasons behind venture capitalists’ decisions to reject entrepreneurs’ proposals. taking cases that had been rejected from the american shark tank tv show as secondary data, the author identifies several motivations for rejection from the investors’ perspective. in particular, barriers to investment may be related to the business’ ownership structure, ownership profile, non-scalability, or replicability, among other factors. the study advances our understanding of how successful ideas might be better evaluated and generated and sheds light on the pitfalls that entrepreneurs should avoid when presenting business models to venture capitalists. van de ven, lara machado, athanasopoulou, aysolmaz, and türetken take as their starting point the consideration that the existing literature fails to offer a complete picture of the performance indicators that may be used to evaluate business models and monitor their performance. the authors conducted a semi-systematic literature review to determine which performance indicators the business model literature refers to. the catalogue compiled in the paper comprises 215 performance indicators categorized according to four pillars (frontstage, backstage, profit formula, and environment) and 12 dimensions (including channel performance, customer relationships performance, and value proposition performance, for example) relevant to business models. in addition to providing an overview of the current state of research on this topic, the authors also identify possible avenues for further research. havemo’s paper lies at the intersection of business model innovation, sustainability, and visual thinking. in particular, the author develops a framework of sustainable trajectories for business model innovation using visualization techniques. the author identifies four different logics pertaining to how value creation may be conceptualized within a business model (classification logic, transactive logic, circular logic, and process logic) and integrates sustainable trajectories in these different logics — that is, mechanisms that may support the business model in achieving a higher level of sustainability. in so doing, the paper offers a more nuanced and detailed view of sustainability by highlighting that this phenomenon might unfold differently and follow different trajectories depending on the model’s conceptualization and value creation adopted. mohamed, ahokangas, and pikkarainen explore the context of multi-platform ecosystems (mpes), which are multiple platforms integrated with the aim of creating and capturing value together through coopetition. while previous research has focused on incumbent platforms, the paper explores how entrant platforms configure their business models to endorse coopetition with incumbents in mpes. journal of business models (2023), vol. 11, no. 1, pp. 1-3 33 using a single in-depth case study of an mpe operating in the healthcare sector, the authors illustrate how entrant platforms adapt their business models to integrate into mpes by means of a series of actions: they flexibly align their business model with the complementarity requirements that the incumbents specify; they combine interand intra-platform collaborative dynamics in their business models; and they build on coopetition with incumbents. ghoreishi begins with the assumption that data is considered an essential enabler of the circular economy given its potential to support decisions on resource usage, product design, or recirculation of materials. despite this, only a limited number of studies have examined the role of digital technologies in circular business models. the author thus conducts a systematic literature review to identify the existing data-driven business models in the circular economy. the catalogue presented in the paper includes six different configurations of business models capable of leveraging data to enhance circularity (e.g., digital remanufacturing business model, digital recycling business model). the paper defines each configuration and clarifies the role that data play in the circular economy. in addition to providing an overview of the current state of research on this topic, the author also identifies potential avenues for further research. this special issue is composed of short papers, an innovative publication format designed to fast-track the publishing process and thereby accelerate the development of business model research. this objective has been achieved thanks to the lean template and standardized content that ensures that the authors focus on a single clear message. contributors are reminded that they are strongly encouraged to develop their submissions into full-length papers, which may be submitted to the journal of business models or suitable alternative outlets. in conclusion, i am confident that the reader will find the short papers included herein valuable. i have been a member of the scientific committee of the business model conference since its launch, and it has provided me with the ongoing opportunity to remain abreast of the various directions in which business model researchers have focused their efforts. this is indeed a privilege. i would like to thank all the members of the scientific committee, who have contributed time and effort to reviewing the papers submitted for presentation at the conference as well as the process of selecting the papers included in this special issue. my heartfelt gratitude goes to professor robin roslender and professor christian nielsen for their support during the production of this special issue and to mette hjorth rasmussen for her excellent, conscientious editorial assistance. marco montemari department of management università politecnica delle marche, ancona, italy 58 journal of business models (2023), vol. 11, no. 1, pp. 58-67 sustainable trajectories for business model innovation: insights from visual thinking emelie havemo1 abstract this paper introduces a visual approach to sustainable business model innovation that helps business model designers conceptualise how sustainability can be integrated in business models. drawings are used to illustrate four sustainable trajectories for business model innovation. the visualisation of trajectories helps to open the “black box” of sustainable value creation by enabling different understandings of value creation from a business model perspective. the paper also introduces and exemplifies the concept of “multi-lens” thinking for sustainable business model innovation, which entails combining insights from several perspectives. keywords: sustainability, business model innovation, design, visual thinking, trajectories, toolbox please cite this paper as: havemo, e. (2023), sustainable trajectories for business model innovation: insights from visual thinking, journal of business models, vol. 11, no. 1, pp. 58-67 1 cbmi centre for business model innovation, department of management and engineering, linköping university, sweden, emelie.havemo@liu.se issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7179 introduction business models describe how an organisation creates value. given the increasing focus on sustainability concerns, new approaches to doing business are necessary to ensure that business models support planetary and social value as well as financial value (bocken et al., 2014). business model innovation is thus a critical activity that supports sustainable development going forward. business model redesign is particularly important when it comes to making fundamental changes to business models to achieve sustainable outcomes (guldmann, bocken and brezet, 2019). visualisation can be used to systematise the design process by providing a shared picture for the designers to work on together (spence, 2014). in addition, visual thinking has the power to engage an audience through holistic and immediate impressions of key information (meyer et al., 2013). this makes visualisations particularly useful in collaborative settings where they illustrate and facilitate a shared mailto:emelie.havemo@liu.se https://doi.org/10.54337/jbm.v11i1.7179 journal of business models (2023), vol. 11, no. 1, pp. 58-67 5959 understanding among participants (sibbet, 2008). accordingly, prior studies have recognised the immense potential of visualisation for business model innovation activities (täuscher and abdelkafi, 2017; havemo, 2018; massa and hacklin, 2021). for example, visual tools can be used to clarify design goals and guide dialogues among key stakeholders in each stage of the business model innovation process (guldmann, bocken and brezet, 2019). incumbent firms in particular may benefit from visual enhancements as they face the cognitive challenge of overcoming current business model logics and reducing path dependency during the design phase of business model innovation (daood, calluso and giustiniano, 2021; massa and hacklin, 2021). to accomplish this, it is important to identify and question the current cognitive model and identify relevant alternatives. however, at present, the visual perspective on business models is fragmented, as evidenced by the wide range of different approaches to business model visualisation currently used (täuscher and abdelkafi, 2017; henike, kamprath and hölzle, 2020). there is thus an opportunity to contribute to the visualisation perspective on business models. another challenge associated with sustainable business model innovation is that many of the current design methodologies do not specifically include sustainability (evans et al., 2017). some recent studies do include tools and frameworks for sustainable design (e.g., guldmann, bocken and brezet, 2019; vladimirova, 2019), but given the scarcity of such models there is still a gap when it comes to harnessing the potential of visual principles to improve sustainable business model innovation. against this background, the aim of this paper is to draw on visual theory to develop tools to improve the sustainable business model innovation process. this is achieved through a framework of sustainable trajectories for business model innovation. a cognitive view on business models is adopted since this is often linked to the visual perspective (massa and hacklin, 2021). according to this view, business model innovation is the activity of (re)imagining the firm’s value creation logics by following visual design principles to update the cognitive map of the business model. the paper is organised as follows. first, the methodological approach is described, which involved using visual theory and linking it to the sustainable business model literature. next, the key insights are introduced, focusing on how to use visual thinking to support sustainable business model innovation. finally, the concluding section describes the theoretical contribution, namely the opening of the “black box” of sustainable value creation (lüdeke-freund et al., 2020) by visualising different business model value creation trajectories, and the practical contribution of guidelines for visual business model design and a multi-lens design approach to combine sustainable trajectories. methodological approach the paper adds to the typology of value creation logics in business model visualisations found in my previous article (havemo, 2018). in that paper, over 200 business model diagrams from firms’ annual reports and websites were analysed to identify patterns and styles of communication. i found that business model illustrations could be sorted into four basic value creation logics based on how they visually depicted value, where each logic presented a different cognitive lens describing the business model. as a result, a visualisation logic may guide interpretations and discussions of the business model according to the cognitive potentials and limitations of that particular visual illustration. for example, a visualisation showing activities and links (the transactive logic) will centre discussions around the network of exchanges and relationships between actors and activities, whereas a process illustration will emphasise the inputs and outputs of a value creation process. because mental and visual models guide how we think and interact with others (tversky, 1997; sibbet, 2008), they can be used to support the business model design process. the methodological approach in this paper was therefore to use the visual value creation logics described in havemo (2018) as journal of business models (2023), vol. 11, no. 1, pp. 58-67 6060 a starting point to develop four sustainable trajectories for business model innovation. the first step was to conduct a literature survey of sustainable business models to identify theoretical concepts and approaches linked to each visual logic. next, empirical examples (for example, h&m’s circular business strategy) were used together with visual theory to populate each trajectory with content. for example, the visual grammar described by kress and van leeuwen (2006) was used to determine the design affordances of different types of diagrams, such as classification and process diagrams. this grammar was combined with the work of barbara tversky (1997), which describes different visual modes such as “spatial metaphors” and the communicative role of shapes and lines in diagrams, to develop the illustrations of the trajectories according to visual design recommendations. finally, a second literature search was conducted to find case studies in the literature that illustrate the thinking within each trajectory. key insights: sustainable business model trajectories to imagine what it takes to be more sustainable, the concept of pathways has been used to identify steps that support increased business model sustainability in prior research. for instance, endregat and pennink (2021) describe pathways for managing business model complexity and bocken et al. (2014) outline eight archetypes of sustainable value creation and value capture (e.g., maximising resource efficiency and encourage sufficiency) that can lead to higher sustainability performance of the business model. drawing on concepts like pathways and archetypes, this paper develops four trajectories for sustainable business model innovation based on visual thinking. the four logics of value creation (from havemo, 2018) and the resulting sustainable trajectories are shown in figure 1 in the top and bottom row, respectively. the illustrations of business models are examples of types based on the findings by havemo (2018). the trajectories are also summarised in table 1, which names advantages and disadvantages of each logic and lists examples of related cases. classification trajectories classification diagrams conceive of the business model as a set of components that are crucial for value creation. this logic is common among practitioners’ business model diagrams (havemo, 2018) as it conveys key dimensions of value creation (for example, business units, products, or activities) in a clear manner. using the classification visualisation as the basis of sustainable innovation invites questions about the role of the existing components and whether any elements should be added or removed to increase sustainability. a theoretical proposition in line with this idea is the sustainable canvas adapted from the original business model canvas to include people and planet as part of the value proposition (bocken, schuit and kraaijenhagen, 2018). the classification design is, however, limited to the static nature of these diagrams (kress and van leeuwen, 2006), such that changes will focus mainly on the presence or absence of elements rather than the role of links, relationships, and transformations. an example of a classification-based approach is the business model innovation displayed by the owner of a sustainable pizzeria, as described by franceschelli et al. (2018). the business model of “pizza” was developed by changing the components of the “traditional” pizzeria business model by including, for example, bike or e-scooter delivery (instead of car), the use of electric ovens, biodegradable cutlery (instead of plastic), and locally sourced and “zero kilometre” ingredients to ensure a low environmental impact as well as high quality products (as opposed to a lowcost model). each change from the traditional restaurant model involved exchanging a component for a sustainable alternative. the innovation process thus included the activity of defining the characteristics of an original business model and making replacements in line with sustainable goals. transactive trajectories the transactive logic stipulates that value is created through interaction between, or within, firms (havemo, 2018). this corresponds to a network perspective on the business model, for example, the activity systems view that conceptualises the business model as the sum of activities carried out by the firm and its network (zott and amit, 2010; massa and journal of business models (2023), vol. 11, no. 1, pp. 58-67 6161 hacklin, 2021). from a visual perspective, changing a transactive logic involves adding new nodes (e.g., actors) to a network, changing links between nodes, or reorganising nodes as insiders or outsiders. relatedly, the sustainability literature emphasises that the boundary of control needs to be expanded to support strong sustainability where firms take more responsibility (antonini and larrinaga, 2017); this could be visually illustrated by the extending or shrinking of the line marking the boundary of the business model network. several studies stress the importance of collaboration for sustainability, which from the transactive figure 1: framework of sustainable business model trajectories journal of business models (2023), vol. 11, no. 1, pp. 58-67 6262 perspective can be supported by changing how actors are linked in the business model’s network. for example, brennan and tennant (2018) describe business model network innovation in a case study of a commodities supply chain in the uk. the initial configuration of the business model network was strictly market-based, where a brewery accessed their resources through a maltster and its supply chain, buying products through yearly spot contracts. the brewery then conducted a reconfiguration at the network level by changing the links between actors to include direct links with each tier of its supply chain, which influenced the actors’ sustainability responsibility through new pathways for learning and innovation. this illustrates the trajectory of changing links between existing actors to increase the influence regarding sustainability concerns in the firm’s business model, a change which can be illustrated visually by adding new lines that link actors in the network. circular trajectories the circular trajectory reflects the lifecycle thinking of circular business models, whereby value is created through a circular process with the aim of narrowing or closing resource loops (bocken, schuit and kraaijenhagen, 2018). for example, prior studies have used the cycle logic to illustrate causal loops between decisions and outcomes (casadesus-masanell and ricart, 2010). visually, changes can be illustrated based on the concept of directionality. according to tversky (1997), directionality is the sense of transformation or change conveyed through the order of elements (leftto-right) and the use of arrows to indicate a direction of change. thus, the circular diagram lends itself to visualising recycling or remanufacturing by adding new activities to the current loops or by adding new arrows to indicate the closing of loops. what this logic fails to illustrate clearly, however, is the role of specific actors and the inputs and outputs that are inevitably part of a resource loop. this could be addressed by adding inputs and outputs to each step of the loop, although this runs the risk of increasing the visual complexity to the point that it lowers the usefulness of the illustration. an example of business model redesign guided by life-cycle thinking is the case of norwegian office chair manufacturer håg (høgevold, 2011). håg’s sustainability journey began in the 1990s when they started to reframe the business model in terms of a lifecycle logic, which guided the firm’s design process. for instance, concepts like cradle-to-cradle were adopted when adding recycled materials to the production loop in order to reduce the product’s negative environmental impacts over its entire lifespan. process trajectories the process logic identifies the value chain as the focal point of value creation, which is tied to an understanding of the firm as a rationally organised and bureaucratic entity (as opposed to the nature-oriented view of the circular logic). treating the business model as a process visually emphasises the value proposition (input), value creation (process steps) and value delivery (output) as a set of sequentially organised elements. process visualisation therefore supports design discussions focusing on inputs and outputs, i.e., the key material flows and outcomes of the business model, which are crucial topics from a resource efficiency perspective. the office chair case (see above) contains several examples of a process-oriented redesign of a manufacturing business model. since life-cycle analyses showed that it was largely the supply chain that contributed to the firm’s product’s environmental impact, the conceptualisation of the process was expanded to include inputs from the supply chain in order to show the total impact of the firm’s business model. this illustrates how process-oriented thinking invites questions regarding the flows of the supply chain as well as the roles of suppliers and customers in the business model process. combining lenses most firms use only one business model visualisation logic at a time (havemo, 2018). however, it has been suggested that multiple design principles can be combined to achieve a fruitful design process (täuscher and abdelkafi, 2017), especially when it comes to sustainable business models (young and gerard, 2021). for example, the office chair case (håg) shows that business model innovation can be guided by both circular and process thinking, which suggests synergistic outcomes from using these perspectives together. accordingly, it would be possible to treat journal of business models (2023), vol. 11, no. 1, pp. 58-67 6363 the visual trajectories as complementary ‘design lenses’ in order to cast light on different aspects during the business model innovation process. such a multi-lens approach could cycle through each of the design lenses, either iteratively or sequentially. an example of a sequential design process is shown in figure 2. a first step is to use the process lens to describe the intended outputs of the value creation process. here, designers need to define the purpose of the business model that takes sustainable value into account, as discussed by, for example, bocken et al. (2014). second, the classification logic guides designers to think about which elements are needed to deliver more sustainable value. inspired by the pizzeria case, a favourable design outcome could involve identifying which existing practices to replace in order to enable more sustainable value creation across all the elements of the business model. third, the cycle perspective invites consideration of whether there are any loops to close to reduce waste, which in turn feeds into transactive-oriented considerations about the key business model table 1. classification transactive circular process focal point key value creation elements actors and exchanges sustainable loops materials and resource efficiency goal of the visual design process identify elements to change, add, or remove to create more sustainable value. consider key roles from a system perspective and redefine roles for value creation. identify circularity inside and outside the firm boundary to increase sustainable value. increase process efficiency and link process steps to a renewed notion of sustainable value. advantages simple to use when identifying key bm elements. highlights actors’ co-creation and collaboration. emphasises circular thinking and closing loops. shows material flows (inputs and outputs). disadvantages static; does not illustrate the process of value creation. hides the sustainability impact of each actor’s activities. ignores inputs and outputs. ignores the role of network actors and circular loops. illustrative case pizzeria case (franceschelli, santoro and candelo, 2018) brewery case (brennan and tennant, 2018) office chair case (håg) – lifecycle perspective (høgevold, 2011) office chair case (håg) – supply chain perspective (høgevold, 2011) table 1: design trajectories for sustainable business models journal of business models (2023), vol. 11, no. 1, pp. 58-67 6464 actors, what links between them are needed inside the activity system to enable the sustainable loops, and whether the firm boundary needs to shrink or expand to enable sustainable value creation. taken together, these questions support the combination of multiple perspectives in the business model innovation process. conclusions by conceptualising how sustainability can be integrated into the business model through four different sustainable trajectories that guide the innovation process, this paper contributes to the literature on sustainable business models and business model innovation. the paper also provides a novel visualisation to the growing list of sustainable business model visualisations, such as the circular business experiment cycle (bocken, schuit and kraaijenhagen, 2018) and the sustainable value proposition model (vladimirova, 2019). a further contribution is the multi-lens perspective, that is, the combined use of multiple business model logics to support sustainable business model innovation. since sustainability is a complex matter involving numerous business model changes, multi-lens methodologies are potentially important tools to manage complexities and consider multiple, sometimes conflicting, perspectives in the design process. moreover, the four trajectories illustrate that value creation can be understood in fundamentally different ways, as each logic frames value differently and emphasises different focal points, such as actors, loops, resources, and outputs. this in turn affords different interpretations of the key design goals in the sustainable business model innovation process. thus, the paper responds to the concern that sustainable value creation is often treated as a “black box” in the literature (lüdeke-freund et al., 2020) by extending and nuancing sustainable value creation through visual drawings that illustrate different interpretations of value creation. the practical contribution of the paper is the “toolbox” of visual business model trajectories. firms can use this toolbox to identify the current value creation logic of their business model and then use the sustainable trajectory of this logic as a design lens to discuss avenues for innovation. a second option is to employ all the business model lenses interactively figure 2: the sustainable trajectories used as business model (bm) design lenses journal of business models (2023), vol. 11, no. 1, pp. 58-67 6565 or sequentially during the innovation process to identify multiple opportunities for designing a sustainable business model. the practical toolbox can be used at any level of the organisation where the current and future state of the business model are discussed. for instance, doganova and eyquem-renault (2009) describe business modelling involving visualisations as a way to represent a new venture’s future value creation potential to key investors. although business model design is often linked to the domain of decision makers – indeed, it has been suggested that it can be useful to start with a small team of key roles in the early stages of business model innovation and to gradually engage more stakeholders (bocken, schuit and kraaijenhagen, 2018) – there is a potential to extend the scope of business model design by using visualisations to support dialogue with a range of internal and external stakeholders during the design process. in terms of limitations, the sustainable trajectories are theoretically derived based on visual theory and the sustainable business model literature but not yet empirically verified. although empirical examples were mapped according to the trajectories, it is conceivable that firms would not follow the trajectories as strictly as the current framework suggests. there is therefore an opportunity for future studies to use case-based approaches to dive deeper into each of the trajectories to identify critical success factors as well as find additional trajectories. finally, there is an opportunity to conduct action research to develop new visual business model innovation methodologies for sustainability based on these, and other, sustainable trajectories. journal of business models (2023), vol. 11, no. 1, pp. 58-67 6666 references antonini, c. and larrinaga, c. (2017) ‘planetary boundaries and sustainability indicators: survey of corporate reporting boundaries’, sustainable development, 25, pp. 123–137. bocken, n.m.p. et al. (2014) ‘a literature and practice review to develop sustainable business model archetypes’, journal of cleaner production, 65, pp. 42–56. bocken, n.m.p., schuit, c.s.c. and kraaijenhagen, c. (2018) ‘experimenting with a circular business model: lessons from eight cases’, environmental innovation and societal transitions, 28, pp. 79–95. brennan, g. and tennant, m. (2018) ‘sustainable value and trade-offs: exploring situational logics and power relations in a uk brewery ’s malt supply network business model’, business strategy and the environment, 27(5), pp. 621–630. casadesus-masanell, r. and ricart, j.e. (2010) ‘from strategy to business models and onto tactics’, long range planning, 43(2–3), pp. 195–215. daood, a., calluso, c. and giustiniano, l. (2021) ‘unveiling the dark side of business models: a novel framework for managerial cognition and decision-making’, business models and cognition: new horizons in managerial and organizational cognition, 4, pp. 39–56. doganova, l. and eyquem-renault, m. (2009) ‘what do business models do? innovation devices in technology entrepreneurship’, research policy, 38, pp. 1559–1570. endregat, n. and pennink, b. (2021) ‘exploring the coevolution of traditional and sustainable business models: a paradox perspective’, journal of business models, 9(2), pp. 1–21. evans, s. et al. (2017) ‘business model innovation for sustainability: towards a unified perspective for creation of sustainable business models’, business strategy and the environment, 608, pp. 597–608. franceschelli, m.v., santoro, g. and candelo, e. (2018) ‘business model innovation for sustainability: a food start-up case study ’, british food journal, 120(10), pp. 2483–2494. guldmann, e., bocken, n.m.p. and brezet, h. (2019) ‘a design thinking framework for circular business model innovation’, journal of business models, 7(1), pp. 39–70. havemo, e. (2018) ‘a visual perspective on value creation: exploring patterns in business model diagrams’, european management journal, 36(4), pp. 441–452. henike, t., kamprath, m. and hölzle, k. (2020) ‘effecting, but effective? how business model visualisations unfold cognitive impacts’, long range planning, 53, p. 101925. høgevold, n.m. (2011) ‘a corporate effort towards a sustainable business model: a case study from the norwegian furniture industry ’, european business review, 23(4), pp. 392–400. kress, g. and van leeuwen, t. (2006) reading images: the grammar of visual design [1996]. 2nd edn. london: routledge. journal of business models (2023), vol. 11, no. 1, pp. 58-67 6767 lüdeke-freund, f. et al. (2020) ‘sustainable value creation through business models: the what, the who and the how ’, journal of business models, 8(3), pp. 62–90. massa, l. and hacklin, f. (2021) ‘business model innovation in incumbent firms: cognition and visual representation’, business models and cognition: new horizons in managerial and organizational cognition, 4, pp. 203–232. meyer, r.e. et al. (2013) ‘the visual dimension in organizing, organization, and organization research: core ideas, current developments, and promising avenues’, the academy of management annals, 7(1), pp. 489–555. sibbet, d. (2008) ‘visual intelligence: using the deep patterns of visual language to build cognitive skills’, theory into practice, 47(2), pp. 118–127. spence, r. (2014) information visualization: an introduction. 3rd edn. cham: springer. täuscher, k. and abdelkafi, n. (2017) ‘visual tools for business model innovation: recommendations from a cognitive perspective’, creativity and innovation management, 26(2), pp. 160–174. tversky, b. (1997) ‘cognitive principles of graphic displays’, aaai technical report fs-97-03, pp. 116–124. vladimirova, d. (2019) ‘building sustainable value propositions for multiple stakeholders: a practical tool’, journal of business models, 7(1), pp. 1–8. young, d. and gerard, m. (2021) four steps to sustainable business model innovation. bcg henderson institute. available at: www.bcg.com/publications/2021/four-strategies-for-sustainable-business-model-innovation. zott, c. and amit, r. (2010) ‘business model design: an activity system perspective’, long range planning, 43(2–3), pp. 216–226. 67 journal of business models (2021), vol. 9, no. 4, pp. 67-93 platform-based business models in future mobile operator business seppo yrjölä, petri ahokangas, marja matinmikko-blue abstract purpose: as an emerging field, the fifth generation, 5g, mobile communications technologies related business models have only been discussed to a limited extent in the literature, and platform business models in general have seldom been examined. the purpose of this paper is to explore how to understand and capture the evolution of future mobile operators’ platform-based business models in the 5g/6g context? approach: building on economics and engineering traditions, this study utilizes the 4c (connectivity, content, context, commerce) and the as-a-service (aas) digital service business model typologies. this research follows a cyclical process of research-oriented action research, collecting data in two phases from the future-oriented world cafe workshops held at nokia radioactive! user group event in espoo in november 2017 and 6g wireless summit in levi in march 2019. findings: the paper uncovers the extended ecosystemic platform architecture for the business model and ecosystem research consisting of components, interfaces, data and algorithms. value: we are currently lacking a coherent approach for researching ecosystemic platform-based business models as the extant discussions tend to focus either on ecosystem(ic) features of business models or platform business models that, however, share common characteristics. the study adopts a value-based and service-dominant lens focused on business model research at the ecosystemic level. for the first time, the study introduces the extended ecosystemic platform architecture, investigating how this business framework can enable the transformation of the 5g. keywords: action research, business ecosystem, business model, platform, 5g, 6g acknowledgement: the research has been supported by the business finland 5g-viima program. in addition, the authors would like to acknowledge the support of the 6g flagship programme at the university of oulu. please cite this paper as: yrjölä, s., ahokangas, p., matinmikko-blue, m. (2021) platform-based business models in future mobile operator business, vol. 9, no. 4, pp. 67-93 1 professor of practice at the faculty of information technology and electrical engineering, university of oulu 2 professor of future digital business at martti ahtisaari institute, oulu business school, university of oulu 3 director of sustainability and regulation at 6g flagship program at university of oulu doi: https://doi.org/10.5278/jbm.v9i4.6222 issn: 2246-2465 https://doi.org/10.5278/jbm.v9i4.6222 journal of business models (2021), vol. 9, no. 4, pp. 67-93 6868 introduction recent discussions on platform-based business models have started to converge and build a basis for a more unified research agenda (gawer, 2014; de reuver, sørensen and basole, 2018; helfat and raubitschek, 2018) for understanding and capturing such business models. with roots in economics and engineering, platform research has an intrinsically dualistic perspective to business (gawer, 2014). in the economics tradition, platforms have been seen as twoor multisided markets connecting supply and demand, whereas, in the engineering tradition, they have been seen as modular technological designs for facilitating innovation. moreover, there is also a tendency in these works of literature to see platforms and ecosystems as intertwined (teece, 2018), as both traditions acknowledge platforms to be consisting of a complex networked/layered system of modular components and interfaces the scope and scale of which go beyond the immediate platform actors. the business model concept has emerged as a solution to deal with this duality of perspectives—the increased platformization of businesses is well exhibited in extant business model discussions. for example, the demand-side business models have come to complement supply-side business model discussions (priem, wenzel and koch, 2018), and open and mixed business models have come to challenge traditional closed business models (casadesus-masanel and llanes, 2011; langley, van doorn, ng, stieglitz, lazovik and boonstra, 2021). platform interactions and convergence have emerged as an increasingly important topic (zhao, von delft, morgan-thomas and buck, 2020), and the discussions on ecosystemic business models have fundamentally influenced how the environment of the organization is seen (demil, lecocq and warnier, 2018). however, we are currently lacking a coherent approach for researching ecosystemic, platformbased business models as the extant discussions tend to focus either on the ecosystem(ic) features of business models (iivari, ahokangas, komi, tihinen and valtanen, 2016; gomes, iivari, pikkarainen and ahokangas, 2018) or platform business models (e.g., fehrer, woratschek and brodie, 2018; täuscher and laudien, 2018). these two streams of literature, however, share common characteristics. researching platform-based business models call for a systemic approach that considers both platform and ecosystem viewpoints to business models and can delve into the phenomena discernible in this kind of research setting. in addition, an appropriate research context is needed. as the fifth generation, mobile communications technologies are expected to transform the future wireless communications services and networks businesses—including business models—it serves as a research context foundational to new theory development and deriving managerial implications. (yrjölä, ahokangas and matinmikko-blue, 2020a; ahokangas, yrjölä, matinmikko-blue and seppänen, 2020) mobile networks, such as 5g and 6g, can be regarded as connectivity-focused platforms (pujol, elayoubi, markendahl and salahaldin, 2016) or ecosystems (basole and karla, 2011; ahokangas et al., 2020) where the mobile operator has the focal role as the platform owner. beyond engineering, the 5gand 6g-related businesses and business models have been discussed only to a limited extent in the literature (ahokangas, matinmikko-blue, latva-aho, seppänen, arslan and koivumäki, 2021b) as multi-faceted, mobile platforms are difficult to categorize. gawer and cusumano (2014) identify company-internal platforms that serve firms’ internal purposes, supplier-network platforms that integrate firms and serve information flow purposes, and ecosystem platforms that serve various purposes of changing partners. later, gawer (2020) differentiated between innovation and transaction platforms. in turn, zhao et al. (2020) coin pipeline platforms that serve buyer-seller relationships, manufacturing platforms that operate within a network of suppliers, and multisided platforms that enable (as an intermediary) interaction between users. thus, considering platform categorizations, mobile platforms can be seen as hybrid platforms (c.f., ahokangas, matinmikko-blue, yrjölä and hämmäinen, 2021a), characterized by each of the types presented by gawer and cusumano (2014) or zhao et al. (2020). existing 5g/6g business model research in the engineering context highlights the research’s overly technical starting points, pointing out the importance of platforms (c.f., camps-aragó, delaere and ballon, 2019; hmoud, salim and yaakub, 2020). journal of business models (2021), vol. 9, no. 4, pp. 67-93 6969 recently, the evolution of future platform businesses and business models has raised various interests. for example, zhao et al. (2020) pay attention to competitive battles and jullien and sand-zantman (2021) to competition policy. wallbach, coleman, elbert and benlian (2019) examine multisided platform diffusion in a competitive business-to-business context. gawer (2020), in turn, pays attention to scope, sides, and interfaces when combining platforms. in close connection to platforms, langley et al. (2021) are interested in the role of smartness and connectedness on business modes, and climent and haftor (2021) examine industry evolution and business models. in the mobile communications context, ahokangas et al. (2021a) pay attention to platform convergence in a multi-platform context and yrjölä, ahokangas and matinmikko-blue (2020a, 2020b) in the 5g/6g transition context. however, scant research beyond engineering research considers mobile operators’ platform business models (ahokangas et al., 2021b). building on the above, a practical challenge that we identify is how future platform business models unfold, especially in the context of 5g/6g business transformation, giving rise to the research question addressed in this paper: how to understand and capture the evolution of future mobile operators’ platform-based business models in the 5g/6g context? qualitative and exploratory research methods are recommendable in occasions where the aim is to add theoretical knowledge on phenomena that deserve more detailed research (eisenhardt, 1989), which is the case in this research. to answer the research questions, we follow the cyclical process of research-oriented action research (eden and huxham, 2006). in action research aiming at theory development, the nature of the research problem guides the action research cycle, giving primacy to the flowing cycle: foreknowledge, emergent theory, action/data generation, reflection, theory exploration, and development (dickens and watkins, 1999). following the action research cycle, the data for the research was collected in two phases starting from future-oriented world cafe workshops held at nokia radioactive! -user group event in espoo in november 2017 and 6g wireless summit in levi in march 2019. our discussion is organized as follows. the following section presents the theory framework for the paper and next one provides a discussion on the 5g context and business models. these are followed by the research method section. the results of the two phases of data analysis are presented after the method section. finally, the empirical implications, theoretical contributions, limitations, and avenues for further research arising from the study are discussed in the concluding section. framing the discussion on platform-based business models ecosystemic platform business models the question is how the business model might be utilized as an approach to examining businesses. conceptually, one can distinguish between the design of the business transaction’s content, structure, and governance in the business model (zott and amit, 2010) or their focus, modus, or locus (onetti, zucchella, jones and mcdougall-covin, 2012). practically, the technology, offering, and network architecture can also be considered the major constituent parts of a business model (mason and spring, 2011). gatautis (2017) found that information and communication technologies (ict) based infrastructure platforms have become the basis for ecosystems to orchestrate and organize activities of many companies. weil and woerner (2015) proposed four types of business models for the digitalized context: the supplier model works in the value chain of another company; the multichannel model makes firms restructure across several digital and physical touchpoints to serve their customers; the modular model builds on plugand-play interfaces to complement firms’ offerings; and finally, the ecosystem model builds a customercentric platform to facilitate ecosystemic interaction among customers. in turn, gawer (2014) categorized platforms in three categories: as a company and its internal units, i.e., the internal platforms; a network of company and its suppliers, i.e., the supply chain platforms; and an ecosystem keystone actor and its supplement actors in a technology or business ecosystem, i.e., the ecosystem platform. journal of business models (2021), vol. 9, no. 4, pp. 67-93 7070 ecosystem platform architecture may be seen as a conceptual blueprint that describes how the ecosystem is partitioned into a relatively stable platform, a complementary set of varying modules, and the design rules binding on both (baldwin and woodard, 2009; cusumano and gawer, 2002; katz and shapiro, 1994; sanchez and mahoney, 1996; ulrich, 1995). decomposition of a platform ecosystem into constituent atomic subsystems minimizes interdependence among the evolution processes within components of the platform ecosystem, supports change and variation, and helps to cope with complexity (simon, 1962). schilling (2000) sees the platform ecosystem as a complex system composed of interacting subsystems that are always to some degree interdependent and interoperate exclusively using predefined, stable interfaces (eisenmann, parker and van alstyne, 2006). modules can be defined as an add-on software subsystem that connects to the platform to add functionality to the platform (baldwin and clark, 2000; sanchez and mahoney, 1996). katz and shapiro (1994) defined interfaces as specifications and design rules that describe how the platform and modules interact and exchange information using well-documented and predefined standards like application programming interfaces (apis). baldwin (2008) found that modularity decreases coordination costs and transaction costs across the module boundary while interface standardization decreases asset specificity of modules (schilling, 2000). attempts made to look at ecosystemic platform business models can be found in software, webscale, e-commerce business, cloud, internet-ofthings (iot), the platform business, and wireless communications contexts. for example, in the digital services domain, everything-as-a-service (xaas) (lenk, klems, nimis, tai, sandholm and alto, 2009) enables a large number of digital service providers to offer a variety of cloud-based services across the cloud stack layers. within xaas, the most widely deployed digital as-a-service business models are infrastructure-as-a-service (iaas), platform-as-aservice (paas), and software-as-a-service (saas) (mell and grance, 2011). wirtz, schilke and ullrich (2010) proposed a typological 4c business model framework for the internet age to make the business model analysis more straightforward and structured. each of the four types of business models has varying value propositions and revenue models: connection (e.g., wireless), content (e.g., data), context (e.g., search or location intelligence), and commerce (e.g., marketplace and platforms). thus, the typology can be interpreted as a set of nested layers from the platform ecosystem perspective, where lower layer business models are required as enablers and value levers for the higher layers (yrjölä, matinmikko, ahokangas and mustonen, 2016). a transformation of business models and entire industries from vertical or horizontal linear towards two-sided and networked has been found (van alstyne, parker and choudary, 2016). furthermore, with the emergence of platforms, iivari et al. (2016) defined an ”oblique” business model that has a focus on value sharing through value co-creation and co-capture, while the traditional vertical controloriented business models have aimed at controlling value creation and the horizontal business models controlling value capture. in these emerging valuesharing-oriented platform ecosystems focusing on the co-creation of complementary new services, the critical issue (casadesus-masanell and llanes, 2011) is the openness of the business model. notably, they see the openness of a business model starting from closed and extending toward the open edge, open core, and open source. themes relevant to examine ecosystemic platform business models the engineering approach to platforms highlights innovation as modularity makes managing innovation in complex technical systems more manageable and incremental (schilling, 2000). teece (2018) discusses profiting from innovation through enabling and general-purpose technologies in the wireless world, raising several concerns for value appropriation and positive spillover effects related to enabling and general-purpose technologies. casadesusmasanell and llanes (2011) discuss closed, open, and mixed business models. they see the openness of a business model starting from closed and extending toward the open edge, open core, and open source. the openness of business models boils down to discussions on open innovation (chesbrough, 2003; journal of business models (2021), vol. 9, no. 4, pp. 67-93 7171 2006), and in platform contexts, this brings the ecosystem and its stakeholders close. an equally important aspect to innovation and openness is complementarity, related to production, customers, asset prices, inputs, technologies, or innovation (teece, 2018). complementarity raises business model-related concerns. more importantly, it puts forth the question of the platform type–whether internal, supply-chain, or industry (gawer, 2014)—as different types of platforms may exhibit different configuration types and levels (lightly or loosely coupled) of complementarity. helfat and raubitscheck (2018) focus on dynamic and integrative capabilities in platforms and argue that when designing platform business models, on top of the usual business model elements, attention should be paid to the core product innovation, functionalities, and features, number of sides of the platform, degree of outsourcing as related to complementarity, and governance. the increasing volume of data has transformed today ’s business practices (mcafee, brynjolfsson, davenport, patil and barton, 2012; bharadwaj, el sawy, pavlou and venkatraman, 2013; jeble, kumari and patil, 2018). in terms of defining new business strategies to deal with digital technologies, expanding business networks and collaborating to build interconnected relationship business models, and then figuring out new insights for the value creation strategy have been found essential (bharadwaj et al., 2013). the algorithmic revolution and enabling cloud computing can be seen as the foundations of the platform economy. computing power is converted into economic tools using algorithms operating on the raw material of data. the software layer that stretches across and is interwoven with the economy is a fabric of algorithms. that software layer, that algorithmic fabric, is being extended to cover manufacturing, giving birth to the internet of things, the internet of everything, or the industrial internet, with its implied webs of sensor networks (kenney and zysman, 2016). however, the existing literature has not yet proved how different business models can align with data-oriented systems. also, to date, there is only limited research found on how to link the big data with the business model thinking, as the previous research efforts focused on the technical aspects of data related to data monetization, clustering, and data lifecycle, ignoring customers and business requirements (khaloufi, abouelmehdi, benihssane and saadi, 2018). competition in platforms may appear at three levels, between platforms, between the platform and its partners, and between complementors (teece, 2018). inter-platform competition has resulted in winner-takes it all outcomes in cases of great demand, supply-side economies, multi-homing costs, or no niche specialization. however, competition between platforms leads also to increased openness. however, all platform contexts require careful balancing of cooperation and competition at the three identified levels. casadesus-masanel and llanes (2011) found that open and mixed business models have come to challenge traditional closed business models. priem et al. (2018) complement supply-side business model discussions with the demand-side business models. furthermore, how an organization’s environment is seen has been fundamentally influenced by the discussions on ecosystemic business models (demil, lecocq and warnier, 2018). gawer (2014), de reuver et al. (2018), and teece (2018) all raise the question of how to organize and govern platforms, discussing what types of platforms exist, how to deal with the openness of interfaces in the platform, what capabilities (i.e., services) are accessible by or through the platform, and whether the governance of the platform is based on ownership (managerial authority), contractual relationships, or ecosystem governance. the traditional engineering discussion on platforms has been directed to economies of scale in service provisioning, i.e., on the supply-side (teece, 2018), while in business model discussions, attention has been paid to business model scalability (nielsen and lund, 2018). in addition, network effects of the platforms have been seen to increase the value of platforms, but gawer (2014) also relates economies of scope regarding service provisioning and innovation to platforms. 5g business models as the research context the application of big data, new algorithms, cloud computing, and 5th generation (5g) wireless connectivity will change the nature of work and the structure of the economy. as basic mobile broadband journal of business models (2021), vol. 9, no. 4, pp. 67-93 7272 connectivity service becomes increasingly commoditized and is under significant pricing pressure, mobile network operators (mnos) are exploring ways to diversify their businesses. these might involve bundling connectivity subscriptions with utility services, providing platforms for e-commerce, increasing focus on the business-to-business (b2b) market, or emphasizing new areas such as enterprise cloud and the internet of things (iot) verticals (yrjölä, ahokangas and matinmikko-blue, 2018). as a result, mnos worldwide are reinventing their businesses to better position against digital transformation and take them beyond the traditional communication service provider role. that shift requires more focus on innovation, disruption, and experimentation to build and execute platforms and ecosystems that drive new business and establish an agile corporate culture that embraces change (ahokangas et al. 2020). 5g architecture and key enabling technologies compared to today ’s 4g technology, initially designed for high-speed mobile broadband, 5g is a complete redesign of network architecture with the capabilities, flexibility, and agility to support an array of future service opportunities not available in previous generations of network technologies. 5g will enable networks to go beyond traditional human-to-human interaction, connect further billions of connected things and reliably control machines in real-time. consumer entertainment will be enhanced with super-fast download of high definition (hd) video in seconds and new virtual reality experiences. connectivity for billions of iot devices will enable smart factories, where robots, sensors, and remotely located human operators work synchronized. a critical aspect of the 5g network is creating customized network slices that enable services tailored to specific customer needs with service level agreed (sla) and performance on demand (ordonez-lucena, ameigeiras, lopez, ramos-munoz, lorca and folgueira, 2017). network slices enable mobile operators to generate new revenues through customized industrial automation and enterprise services while exploiting the benefits of a common network infrastructure. third-party application and service providers will use the sub-set of the network capabilities flexibly in a configurable and programmable manner and use network resources needed for their service offerings. moving from hierarchies to the marketplace for the connectivity and underlying network resources can more efficiently balance supply and demand, raise the utilization of infrastructure, and ultimately maximize economic value within the industry. increased network elasticity and scalability introduced with 5g and adaptation of resource usage to needed capacity and service level on demand will improve business agility and reduce capital and operational expenses. furthermore, software-based networks enable efficient infrastructure sharing by different network users, open the ecosystem to new players, and accelerate time to market by reducing service creation and activation times. the service orchestrator acts as the logical interface between network and business applications by providing an abstraction of the network towards applications and interfaces for easy service creation and optimization and exposes actionable network insights to application and content providers, enterprises, and industry verticals (ahokangas, matinmikko-blue, yrjölä, seppänen, hämmäinen, jurva, and latva-aho, 2019). 5g business models due to the transition from mobile voice services to mobile data services (kallio, tinnilä and tseng, 2006) and industry convergence and digital disruption in telecommunications industries (ghezzi, cortimiglia and frank, 2015), the value is rapidly migrating across industries and between firms (hacklin, björkdahl and wallin, 2018). however, the existing 5g studies focus on traditional mobile network operator business models and discuss 5g in rather technical and general terms, mainly at the industry level. from the technical perspective, the focus has been on analyzing the cost, coverage, and rollout implications of 5g networks, e.g., highlighting the impact of the spectrum and infrastructure deployment (oughton and frias, 2018), network densification to increase capacity (bouras, kollia and papazois, 2016), strategies for infrastructure sharing (meddour, rasheed and gourhant, 2011), fixedmobile substitution (briglauer, gugler and haxhimusa, 2016), neutral host deployments of small cells for local services (fund, shahsavari, panwar, erkip and rangan, 2017), and integration of utilized radio frequencies (nikolikj and janevski, 2015). table 1 presents the journal of business models (2021), vol. 9, no. 4, pp. 67-93 7373 table 1. • partnerships and collaboration (camponovo and pigneur, 2003). • context level mobile services' business model designs from service, technology, organizational, and financial domain perspectives (reuver and haaker, 2009). • characterization of various core components and roles in mobile communications includes platform types as enablers, system integrators, neutral, or brokers (ballon, 2009). • mnos' capabilities to adopt web-based software-as-a-service and platform-as-a-service models (gonçalves and ballon, 2011). • envisioning aggregatorand service-centric models in addition to telcoand device-centric models (kuoa and yub, 2006; ballon, 2009; zhang and liang, 2011). • the impact of the internet on the telecommunications industry, predicting integration between internet companies and the telecommunication networks, and the internet companies building networks themselves using unlicensed spectrum technologies or acquiring telecommunication companies (feasey, 2015). • recommendation for mnos to move from market protection to specify and manage the implementation of an innovative ecosystem (ghezzi et al., 2015; weber and scuka, 2016). • the nature of 5g services is local (ahokangas, moqaddamerad, matinmikko, abouzeid, atkova, gomes and iivari, 2016). • transformation is needed to utilize iot opportunities (palattella, dohler, grieco, rizzo, torsner, engel and ladid, 2016; sarfaraz and hämmäinen, 2017). • listing antecedents and perspectives that are needed to understanding business models and their success factors (neokosmidis, rokkas and xydias, 2017; chochliouros, kostopoulos, spiliopoulou, dardamanis, neokosmidis, rokkas and goratti, 2017). • introduction of the local 5g micro-operator concept, its related roles and stakeholders, and business models (matinmikko, latva-aho, ahokangas, yrjölä and koivumäki, 2017; matinmikko, latva-aho, ahokangas and seppänen, 2018). • presenting key business opportunities for local 5g micro operators: hosting local connectivity to mnos, offering secure local networks for verticals, providing differentiating local services, and acting as a data operator governing application and user data for various customers (matinmikko et al., 2017). • transformation of mnos towards value creation in content and applications and increasing competition with verticals in supplying these utilizing network sharing, multitenancy, and wholesale models (cave, 2018). • proposition of novel resource orchestration and configuration-based business models and decentralized marketplace concept for the supply chain of data and virtualized network resources utilizing distributed ledger (yrjölä, 2019). • vision papers on future communication needs, enabling technologies, the role of ai, and emerging use cases and applications (viswanathan and mogensen, 2020; latva-aho and leppänen, 2019; saad, bennis and chen, 2020; letaief, chen, shi, zhang and zhang, 2019). • presentation of 6g indicators of value and performance (ziegler and yrjölä, 2020), • the role of regulation and spectrum sharing in 5g (matinmikko-blue, yrjölä and ahokangas, 2020). • the antecedents of multisided transactional platforms (yrjölä, 2020) and 6g ecosystems (ahokangas et al., 2020). • presentation of exploratory scenarios of future 6g business (yrjölä et al., 2020). • analysis of the convergence of connectivity and data platform configurations (ahokangas et al., 2021a) table 1. discussions related to 5g business models. journal of business models (2021), vol. 9, no. 4, pp. 67-93 7474 key discussions related to 5g business models. the research method this research applies the anticipatory action learning (aal) approach that is a particular type of action research (ar) conducted in a future-oriented mode (inayatullah, 2006). ar is an iterative, participatory, and collaborative research method developed to address the management of change and develop foresight utilizing cross-disciplinary knowledge, involving practitioners and researchers, which impacts participants and organizations beyond the research project (coghlan and brannick, 2010). this research method was chosen to provide rich data to characterize a multi-stakeholder environment where different stakeholders can also have conflicting goals. in addition, action research provides contextual relevance in future-oriented situations. this research follows the cyclical process of research-oriented action research (eden and huxham, 2006). in action research aiming at theory development, the nature of the research problem guides the action research cycle, giving primacy to the flowing cycle: foreknowledge, emergent theory, action/ data generation, reflection, theory exploration, and development (dickens and watkins, 1999). following the cyclical process of research-oriented action research, the data collection comprised two phases. the results from phase one (radioactive! world café workshop, espoo in november 2017) were utilized as a foreknowledge for the second phase of data collection from the 6g wireless summit world café workshop at levi in march 2019. world café is a structured conversational aal process intended to facilitate open and intimate discussion and link ideas within a larger group to access the collective intelligence represented by the participants (carson, 2011). the participants in the 5g workshop in 2017, representing business and technology management of the 32 mnos worldwide, were divided into ten heterogeneous groups that moved between a series of roundtables where they continued discussion moderated by the organizers in response to a set of questions. the groups focused on 5g opportunities with a potentially significant techno-economic impact on the mobile industry: technology innovations on architecture, telco cloud, artificial intelligence, use cases, and business models. the moderated questions were: what include the major emerging architecture and technology triggers that can have a significant techno-economic impact on the 5g industry? what are the business drivers for telco cloud? what are the 5g business opportunities and use cases that will generate the most revenue? how to capture the value? how and why do business models change due to 5g? the 6g wireless summit (6gsummit, 2019) event was organized by the finnish 6g flagship programme (6g flagship, 2018) with 300 participants from 29 countries, including significant infrastructure manufacturers, operators, regulators, and academia. in conjunction with the summit, a 6g white paper workshop was organized with 60 participants to launch the process for drafting the first 6g white paper (latva-aho and leppänen, 2019). the workshop’s target was to identify the key drivers, research requirements, challenges, and critical research questions related to 5g evolution. the workshop was run in 6 groups: use cases, societal and business drivers, radio hardware progress and spectrum bands, new air-interface opportunities, new network technologies, and enablers for new services. at phase one, the first author facilitated the phase one radioactive! world café workshop, espoo in november 2017. in the second phase of data collection, the authors facilitated the societal and business drivers world café workshop as a part of the 6g wireless summit at levi in march 2019. the ideas presented by the participants were written down on post-it notes and placed on the whiteboards. also, numerous connections were drawn between the items written or drawn on the whiteboard. the objective was that each subsequent group would build on the results of the previous group and themes. the world café ended with a wrap-up summary where the participants also got an opportunity to assess and provide responses on their collective results. participants were encouraged to create new, shared knowledge through a set of questions with a specific focus on the next three to five years. in qualitative foresight-focused future research, external validity is challenging to control (yin, 2009). although particular attention was paid to arranging journal of business models (2021), vol. 9, no. 4, pp. 67-93 7575 workshops to engage practitioners from different parts of the ecosystem and researchers from different research disciplines, other researchers could have interpreted the data differently. furthermore, this research focused on studying business models, platforms, and ecosystems—business models should always be calibrated to context (teece, 2010). to increase construct and external validity of the research, after each workshop, all the systematically documented raw data, as well as outputs in forms of use cases and business opportunities, were analyzed, using the theoretical framework of the widely appreciated futures research methodology, the causal layered analysis (cla) (inayatullah, 1998). furthermore, the integral futures four-quadrant method within the business model framework was applied to deepen the foresight and ensure the quality of the research (inayatullah, 2006). in this method, the futures were backcasted against the past and present experience and knowledge of the participants by discussing alternatives and transforming the futures to identify technologies, use cases, and business models to connect the future to the present. the participants’ integral futures four-quadrant results were validated in the assessment phase of the workshops, in which key results such as business drivers and scenarios were summarized and documented. data analysis and results in the following, the results of the world café workshops will be presented as structured and summarized. in phase one, the results are presented in four scenarios; market penetration, market development, service development, and diversification scenario named based on ansoff (1957). in addition, this study applied the exploratory scenarios approach by schwartz (1991), and suchman (1995), representing a foresight method that provides a means to depict, make sense of, and assess alternative future events, trends, and choices holistically. in phase two, the discussion will build around platform thinking by looking at components, interfaces, data, and algorithms. results – phase one the participating mobile network operators (mnos) find it increasingly difficult to grow their revenues in a situation where the internet and mobile markets are nearly saturated. as subscriber growth slows down and price levels fall, many mnos are focusing on acquiring customers from competitors. in emerging markets with growth potential but lower average-revenue-per-user (arpu), most creative operators make headway by tapping into new revenue sources and engaging their customers in unique and non-traditional ways. new 5g technology enablers and business approaches allow mnos to fine-tune or change their traditional operations, making their existing systems more efficient and cost-effective. in the face of disruptive new competition, many operators are adopting disruptive strategies and are in the process of reinventing their business models. they start looking at their services and infrastructure in a new light, shifting away from core telco connectivity services to innovative new offerings made possible by emerging technologies and business models. as a result, mno’s top objectives comprise achieving a better experience for enhanced mobile broadband services, enabling digital transformation in different industries, and finding new revenues in enterprise and iot. these are followed by the clear expectation of lowering the total cost of ownership compared to current technologies. most operators are not looking to identify killer applications, but the flexibility to drive multiple services and support a wide variety of new revenue streams and user bases. four different business opportunity scenarios for operators were identified with a different set of success factors in each: making more out of existing markets (market penetration), expanding the business into new segments or offerings (market or service development), and doing both: entering new market segments with entirely new offers (diversification). an mno enhances the established mobile broadband connectivity service offering to current consumer and enterprise market segments to gain revenues at a lower total cost of ownership in the market penetration scenario. keys to a profitable business are spectral efficiency, lower site deployment costs, the network’s energy efficiency, and the fast timeto-market, which enable significant market share gain, although time-to-market may not be a prime strategic concern. this business opportunity is journal of business models (2021), vol. 9, no. 4, pp. 67-93 7676 considered mandatory for an established mno to grow and protect its core business. 5g is seen as a solution for three challenges: first, overcoming capacity constraints of the 4g. overall, it is expected that 4g networks will not be able to meet the demand for capacity by 2022, and in some markets and hotspots even faster. second, overcoming cost issues, depending on the used spectrum bands and the radio configuration, 5g provides the same capacity 2.5 to 7 times more cost-efficiently than 4g. third, dealing with energy costs, the inherent technological advantages of 5g are estimated to lead to 10% overall network operational expense savings. the business case for the opportunity largely depends on the timely availability and the cost of the spectrum. beyond the general investment and rollout approach, the viability of the 5g business case depends on the general readiness of the ecosystem (i.e., tested and 3gpp compliant network gear and a range of 5g devices), which will be a potential bottleneck for an early mover advantage. in addition, the business case is seen to depend on a set of vendor-specific technological capabilities like the implementation of novel antenna innovations, infrastructure site acquisition and solution deployment for the multi-spectrum band, multi-technology, and multi-capacity equipment, deployment costs of the network infrastructure, and efficiency of end-to-end network scalability. the market development scenario builds on mnos’ capabilities to serve new dedicated user groups or locations which form new target market segments in the content provisioning domain. differentiation will be based on unique services like smart stadiums, coverage of enterprise campuses, enhanced mobile broadband in vehicles within public transportation, and video surveillance for smart cities. success factors for the business opportunity are similar to the enhanced mobile broadband for consumers scenario. the mno could win revenue from high-value passengers and governments by supplying 5g bandwidth to public transport. however, many use cases such as smart stadiums will require localized edge cloud implementations. furthermore, 5g ultra-low latency performance will be needed to support virtual reality, gaming, and other delay-sensitive applications. an operator wanting to provide good video quality would not realistically use 4g as this would reach too few subscribers and incur too high a cost. in contrast, 5g can simultaneously deliver high-definition video to many subscribers, e.g., within the stadium as a free or almost-free service covered by the cost of the stadium entry ticket. moreover, many new target segments need ultra-high capacity in specific locations. diversification brings challenges to traditional telco business processes and platforms when adding new technologies. collaboration with third-party services and ecosystems such as cloud services, content distributors, and mobile payment/identification platforms is essential. that will require a unified front-end system for billing and other customerfacing processes that bring together all the underlying services, along with a single integrated product catalog and a streamlined approach to integrating new technology acquisitions. as an example, the emergence of over-the-top (ott) offerings has caused classical media distribution to plateau. with so much content running through mobile networks, many mnos see the aggregation, advertising, sellthrough, or even exclusive distribution rights for tv, movies, and sports, whether through partnerships or vertical integration, as a key potential area for growth and differentiation. to take on a more significant role in content and media, accessing and understanding a broad range of audiences will be critical to the success of any media venture emphasizing the need for enhanced user data management and analytics systems to gain insight into the behavior and allowing the network to evolve accordingly. the service development scenario stems from existing market segments with new context services leveraging 5g beyond enhanced mobile broadband, particularly the low latency capabilities providing intense consumer experience, e.g., for augmented, virtual and mixed reality, cloud gaming, and fixed-mobile services. such services require the proficient deployment of edge clouds distributing processing of the applications and technical openness to collaborate with the ecosystem. in this scenario, the business opportunity will not necessarily journal of business models (2021), vol. 9, no. 4, pp. 67-93 7777 rely on direct traditional average-revenue-per-user (arpu) increases but on collaboration with global web-scale companies and application developers to serve their local customers. these new services add low latency localization to the equation. these use cases rely on openness and massive deployment of edge clouds. in the diversification scenario, diversification leverages 5g slicing and service-oriented architecture (soa) capability for dedicated services and applications. the offering of new customized services to vertical enterprise markets requires an mno to transform its business model from connectivity centric comfort zone into a new digital service provider (dsp) role, utilizing platformization and commerce business models extensively. the critical success factors for this role are the close link between it and the network domain, adaptation to businessto-business customer’s processes and new partnerships, and radically improving go-to-market to enterprise verticals. compared to the other 5g business opportunities found and discussed above, the dsp deep-slicing business heavily relies on capabilities on top of the network, in particular, network management and orchestration and business support systems. therefore, it requires the capabilities of providing high availability and reliability needed for many operations from the network, also from a management and orchestration point of view. furthermore, endto-end security automation is needed to protect critical business processes, and openness is needed to include third-party components, bring close-tozero-touch automation, and integrate the network with business support systems. several mnos engage in various network sharing and virtual network operator agreements as a new source of revenue. these lower the traditionally high barriers to entry into the telecoms industry and open the door to out-of-industry players whose non-traditional thinking and aggressive pricing may have significant potential to disrupt the marketplace. as outside players disrupt and leapfrog established players, mnos are being forced to accelerate their digitalization efforts by creating new digital ecosystems for services and focusing on innovative customer-facing areas like sales and service. further, mnos should explore opportunities to deploy converged fixed-mobile infrastructure to enable new offers and service bundles to their customers. to summarize, four assets were seen as essential in capturing value to achieve mnos key objectives: a better experience for existing services in enhanced mobile broadband, enabling digital transformation in different industries, and finding new revenues in enterprise and iot: 1) the new differentiating performance level of 5g networks, 2) new control point at the edge cloud, 3) the billions of transactional and control data points produced by networks, and 4) dedicated virtual sub-networks and resources, which can be offered as-a-service that provide tailored capabilities required for different industries and their various use cases. results – phase two to ensure data richness, building on the foreknowledge of the first scenario phase data collection and analysis on mnos key objectives and assets essential in capturing value, we run the second phase workshop focusing on the 5g evolution towards 6g. the workshop was to identify the key drivers, challenges, and critical research questions related to the 5g evolution towards future wireless networks and services. the workshop was run in 6 groups: use cases, societal and business drivers, radio hardware progress and spectrum bands, new air-interface opportunities, new network technologies, and enablers for new services. the vision statement outcome of the summit was ubiquitous wireless intelligence. according to the vision, ubiquitous services follow users everywhere seamlessly; wireless connectivity is part of critical infrastructure; intelligent context-aware smart services and applications are also available for non-human communications. as discussed above, 5g was mainly targeted to address the traditional mnos’ productivity demand and, to some extent, utilize new technology opportunities driven by the verticals. with the 5g evolution, the need for a substantially more holistic approach was seen essential, including a larger community journal of business models (2021), vol. 9, no. 4, pp. 67-93 7878 into the definition of future wireless networks to address the goals, trends, and demands to avoid merely commercially driven system definition. the transition to ever higher frequencies with smaller radio ranges and the increasing role of indoor networks will boost network sharing in cities and indoors, drive integration of short-range connectivity solutions with large-coverage cellular systems and introduce a local operator paradigm in the market resulting in new ecosystems. one of the key business-related findings was the transformation from connectivity-driven networks towards more holistic and ecosystemic platforms. building on the key outcomes from the phase 1 scenario workshop, it was considered to extend the traditional engineering platform thinking from modules and interfaces (katz and shapiro, 1994) to look at the role of data and intelligence. furthermore, in the phase 2 workshop focusing on identifying the key drivers, challenges, and critical research questions related to 5g evolution towards future wireless networks and services, the role of data access, data ownership, and ai/ml in 5g/6g networks were evident in the workshop results. the workshop results provided a new view to platforms; in addition to components and interfaces, the roles of data and intelligence, especially ai/ml algorithms, were recognized. components future network targets at 10-100 times better performance in most technology domains at the connectivity layer. dependable use cases such as wireless factory automation will require ultra-high reliability, ultra-low latency, high-accuracy inter-device synchronicity, high-resolution localization, among others, corresponding to the current requirements for wired industrial control networks. the future wireless networks are expected to seamlessly interface terrestrial, satellite, and airborne networks to support the coverage and capacity requirements. short wavelength and wider available bandwidth above 100 ghz will enable increased data rates and angular and ranging precision not seen before for imaging and radar applications for localization, 3d imaging, and sensing. advances in virtualization, automation, and orchestration, combined with the new networking power, will also enable data, intelligence, and transactional decision-making to be distributed to the edge of the network. these advances in virtualization include the ability to tie mobility, edge cloud, public/private cloud, and traditional security solutions together into a single, seamless, and integrated system that can follow and protect workflows, applications, and services that need to span the network, from the mobile device to data center, regardless of where either is located. virtual (vr), augmented (ar), and mixed reality (mr) technologies are merging into extended reality (xr), which encompasses wearable displays and interaction mechanisms that create and maintain perceptual illusions. the users quickly accept an alternative version of reality that enhances their ability to consume media, search the internet, explore real and virtual worlds, collaborate on work projects, connect with family and friends, and engage in restorative activities. telepresence will be made possible by high-resolution imaging and sensing, wearable displays, mobile robots and drones, specialized processors, and next-generation wireless networks. autonomous vehicles for ecologically sustainable logistics of humans and shipments are made possible by advances in wireless networks and distributed ai and sensing. interfaces the need for an open architecture and open collaboration using open common interfaces and toolkits are seen as essential in every level of the network architecture, from hardware to services and applications. the complexity of radio frequency transceivers and digital signal processing will increase substantially at chip and system levels. dealing with this complexity calls for open-source platforms that enable low-level algorithmic development and possibly go much deeper into specific technologies than any open-source software or hardware has seen before. via softwarization and virtualization of networks and opening of interfaces, sharing economy concepts will be utilized not only at higher platform business layers but widely in network connectivity and data context layers. changes in the ownership of spectrum access rights, networks, network resources, facilities, and customers will result in different journal of business models (2021), vol. 9, no. 4, pp. 67-93 7979 combinations depending on the situation as different facilities have different requirements and infrastructures. new incentives will arise, including the functioning of society. the sharing economy will continue to expand, and even the nature of transactions will be further disrupted by digital currencies making trust and security essential. dynamic networks of everything will be built on the foundation of embedded trust and dynamic data security. data wireless networks will generate an unprecedented amount and types of information about people, things, and environments at large. private information collected from the physical world can be of sensitive nature and be used against people, companies, and societal interests in many ways. the protection of private and critical information was seen as a key enabler to realize the full potential of future networks and make them acceptable to society. the data generated by novel devices and elements in public and private networks have value for many societal functions and possibly to other private corporations than the one that collects the data. edge cloud computing elements and interfaces enable a local and instant information service, e.g., for fast discovery of people, services, devices, resources, and any local information near the user that centralized search engines cannot collect. such edge information service platform could be used, e.g., in the creation of a highly local and dynamic marketplace for services, things, and information. an extreme case for edge computation would be a thin user client, essentially a light, low-energy device capable of interacting with human senses or neural systems, with all user-specific computing occurring in the edge cloud. wireless network data markets offer a natural new business opportunity, where data ownership is a source of value creation and control. data ownership has evolved from specific context data towards big data with the large volume of detailed data, realtime velocity, and wide variety in types and sources. the pervasive influence of ai and digital twins will reflect what something looks like and what constitutes its context, meaning, and function. we will interact with this ”mirror world” (gelernter, 1993), manipulate it, and experience it as we do in the real world. for robots, this will be the way they see the world. creating a big data system that transforms how data are gathered, organized, prioritized, synthesized, and distributed can create strong initial controversy, e.g., by raising serious privacy concerns over location and data. furthermore, how to do business with data itself becomes a key question. the contractual policies between the actors will define the relative strengths of information and data ownership between parties, for example, how the trust and ownership of information and data will be established in the future’s autonomous smart device and service entities. algorithms artificial intelligence (ai) and machine learning (ml), relying on big data mined to gain information and knowledge, was seen to play a significant role from link to system and management and orchestration to business-level solutions of wireless networks to ”connect intelligence.” employment of machine learning algorithms was seen as essential in addressing the design complexity of radio frequency (rf) systems and improving rf characteristics such as channel bandwidth, antenna sensitivity, and spectrum monitoring. more importantly, deep learningbased training models facilitate a better awareness of the operational environment and promise end-toend learning to create an optimal radio system. new air interface enablers require extensive ml and ai algorithm usage to enhance the optimality of the air interface design. in the semantic communications scenario, the meaning of the messages is utilized in making connectivity and networking more efficient. in the hyper-flexible and configurable future network, ai and ml can be used in concert with radio for sensing and positioning. for management and orchestration of networks, intelligence needs in self-configuration, optimization, and orchestration of virtual resources meet the dynamic content, contextual, and event defined needs. the programmable network will utilize a digital twin as an exact digital replica of complex physical assets, processes, and systems, providing a detailed understanding of how the real system is behaving and predict what journal of business models (2021), vol. 9, no. 4, pp. 67-93 8080 it will do next. resources and assets needed to meet the versatile needs of the wireless network are then provided by different stakeholder roles providing physical infrastructure (facilities, sites), equipment (devices, networks), data (content, context), under the regulatory framework set by the policymakers. demands and resources are brought together by matching/sharing stakeholder roles, including operators (local or vertical-specific operators, fixed operators, mobile network operators, satellite operators), resource brokers, and various service/application providers such as trust/security providers. blockchain or distributed ledgers technology is attracting high hopes as ai/ml complementing technologies. without central authority in a distributed manner, this technology allows storing and sharing information that does not change too often such that the complete record of the changes is kept as well, giving rise to, e.g., new ways of organizing data markets or helping to maintain trust in an inter-operator setting. the matching and sharing of resources to meet the demands will occur through new activities that ensure inclusion, sustainability, and transparency. ultimately, the emergence and shape of the new ecosystem are dependent on regulations that promote or hinder the developments. discussion and conclusions this paper has explored the evolution of future ecosystemic platform-based business models in the context of 5g evolution, the 5th generation of mobile communications, applying a research-oriented action research approach in two phases. our analysis and discussion give rise to both managerial and theoretical contributions. as the 5g mobile communications technologies are expected to transform the future wireless communications services and networks businesses, including business models, it serves as a research context foundational to new theory development and managerial implications. this paper’s practical implications are related to the possibilities of analyzing 5g and future wireless mobile network business models with platform-oriented logic. the study presents the insight for traditional mobile network operators and the novel type of future digital service companies and practitioners to explore new opportunities of creating, capturing, and sharing value in 5g exploiting novel data and algorithm technologies in content, context, and commerce business model layers. the findings coincide with ahokangas, matinmikko, yrjölä, okkonen, and casey (2013) and ahokangas, matinmikko-blue, yrjölä, seppänen, hämmäinen, jurva and latva-aho (2018) that the 5g business opportunities can be seen to represent two basic mobile operator business models: connectivity service provider and its differentiation. moreover, the paper shows that collaborative business models introduced by noll and chowdhury (2011), brokerage business model by rasheed, radwan, rodriguez, kibilda, piesiewicz, verikoukis and moreira (2015), and the cloud-assisted business model by zhang, cheng, gamage, zhang, mark and shen (2015) can be applied through diversification that leverage 5g deep slicing and service-oriented architecture capability for dedicated services and applications. the offering of new customized services to vertical enterprise markets requires an mno to transform its business model from the connectivity-centric comfort zone into a new digital service provider role utilizing platformization and commerce business models extensively. the critical success factors for this role are the close link of the it and the network domain, adaptation to b2b customer’s processes and new partnerships, and radically improving go-to-market to enterprise verticals. more precisely, the findings illustrate the majority of emerging positions in a highly collaborative type of business around the contextand commerce-related requirements in the 5g context. theoretical contributions in the second phase of the study, business opportunity scenario work was expanded to 5g evolution towards future wireless networks. the novelty value of the research relates to the introduction of two new complementing elements into the platform architecture: data and algorithms. the findings agree with baldwin and clark (2000) and katz and shapiro (1994), demonstrating that in 5g, modules can be defined as an add-on software subsystem that connects to the platform to add functionality to the platform defined interfaces as specifications and design rules that describe how the platform’s components interact and exchange data and other information using well-documented, and predefined standards like application journal of business models (2021), vol. 9, no. 4, pp. 67-93 8181 programming interfaces. this finding is supported by lenk et al. (2009), who claim that everything-asa-service business models enable a large number of digital service providers to offer various cloud-based services across the network layers. also, the 4c-typology of business models (wirtz et al., 2010) can be seen as a set of nested layers (yrjölä et al., 2016), where the lower-layer business models are required as enablers and value levers for the higher layers to existing. connectivity (e.g., 5g) enables sending and receiving content (e.g., data, radar), context (e.g., search or location ai/ml algorithms) is needed for making sense of the content, and commerce (e.g., marketplace ai/ ml algorithms) are needed for doing seamless business. one of the key findings was the transformation from connectivity-driven 5g towards a more holistic and ecosystemic future network as a platform, seen as a continuation of the 5g diversification scenario discussed above. with roots in economics and engineering, the academic contribution of the study is the proposition of an ecosystemic platform architecture for the business model and ecosystem research to complement the existing modular perspective (schilling, 2000) and the 4c ecosystemic framework (wirtz et al., 2010) and the as-a-service (aas) digital service business model typologies (lenk et al., 2009). the framework integrates supplyand demand-side thinking and describes and explains the logic of how ecosystem platform architecture configurations enable complementarity and novel services as companies can choose to focus on any element or combination of elements to do business in an ecosystemic manner. the proposed novel architecture and framework consists of components, interfaces, data, and algorithms, as depicted in figure 1 below. we aimed at forming and utilizing a framework or approach for understanding platform business models. our attention paid to innovation, openness, complementarity, competition and cooperation, organization and governance, economies of scale and scope, and type of business models. our findings agree with ahokangas et al. (2019), who found three generic business models for future wireless networks: vertical, horizontal, and oblique, each of them having a different logic of innovation. the engineering approach to platforms highlight innovation as modularity makes managing innovation easier and incremental. the openness of business models boils down to discussions on open innovation, and in platform contexts, this brings the ecosystem and its stakeholders close. for example, a software-based, service-oriented cloud-native network enables efficient infrastructure and resource sharing by different tenants, can open the ecosystem to new players, and accelerate time to market by reducing service creation and activation times. our findings are supported by helfat and raubitscheck (2018), who claimed that when designing platform business models on top of the usual business model elements, attention should be paid to the core product innovation, functionalities, and features, the number of sides of the platform, degree of outsourcing as related to complementarity, and governance. the orchestration layer can incorporate an exposure function opening the assets of a network to other service providers like mobile virtual network operators, micro-operators, industry verticals, enterprises, and third-party applications. exposing valuable infrastructure and data assets to the developer community through a set of interfaces and setting up effective partnerships will allow service providers to grow their 1 algorithms algorithms algorithms algorithms algorithms components algorithms algorithms interfaces algorithms algorithms data platform modularity and architecture service & organizing modularity and architecture su p p ly / p r o v is io n in g d e m a n d / u t il iz a t io n figure 1: the elements of ecosystemic platform business model approach in future mobile operator business. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8282 businesses by sharing their services with these external partners. future wireless system architecture enables different levels of exposure to resources and network functions between business actors. depending on the relationships between business actors and customers, there are different transparency levels in network slice provisioning and other different forms of cooperation models. regarding organization and governance, our findings draw attention to discussing different types of platforms, the openness of platform interfaces, accessibility of capabilities (i.e., services) in the platform, and the basis of ownership of governance in the platform, whether managerial authority, contractual relationships, or ecosystem governance. the standardization of wireless technology has been essential for the global success of the wireless network and the related ecosystem. standardization ensures global (multi-vendor) interoperability between networks, devices, and operators and economies of scale. furthermore, it minimizes the complexity and thereby reduces the cost of interfaces. developing a new telecom standard within a standardization organization is based on a consensus of different parties across the ecosystem: vendors, operators, users, interest groups, academia, and governments. the key domains of the future wireless system are wider than previous generations, including support for virtualized network function, slicing, converged wireless and wired access, transport, cloud, applications, and orchestration. with the further diversity in use cases and standardization, open-source platforms are foreseen to become an essential new cross-domain collaboration and interoperability tool for the industry and business agility to provide tailored solutions. platformization works hand-in-hand with virtualization that will enable separation of the software from the hardware and offer the possibility to instantiate many functions on a common infrastructure leveraging commodity-of-the-shelf. introduced network elasticity and scalability enable network and resource usage adaptation to needed capacity and service levels on demand that, in turn, improves business agility while reducing both capital and operational expenses. the findings are in line with (teece, 2018) regarding platforms offering economies of scale in service provisioning and gawer (2014) regarding economies of scope related to service provisioning and innovation on platforms. finally, our study anticipates the increase in twoor multisided business models. traditionally, the context of wireless networks has been dominated by supply-side business models. in the future, different types of distinct demands will be placed on mobile networks. future consumers will demand contextualized video, smart home services, highly interactive gaming applications, and high-resolution immersive content, all delivered from the cloud. on the enterprise and industrial front, ”physical” industry sectors will be massively transformed by gaining the ability to become automated and to exist independent of physical space and infrastructure—essentially to become virtualized. the nature of applications will range from millions of simple low-power sensors to mission-critical operations technologies (ot), putting unprecedented demands on tailoring and scalability (yrjölä et al., 2018). likewise, different third-party services can seamlessly be integrated and provided to end-users. with respect to the limitations, the study limits its research context to the mobile telecommunication domain, focusing on business models. on the one hand, this approach offers the advantage of diving deep into a focused context, enabling the research outcomes to have vertical depth. on the other hand, the research has not investigated the applicability of the resulting framework in other contexts based on different industry verticals. although the study ’s approach is only tested in the mobile telecommunication domain, the research sees the potential for the insights to be applied in other industries, especially those that require or rely on ecosystemic platformbased business models. therefore, this study invites scholars to test further, experiment, and evaluate the ecosystemic platform architecture in a broader range of industry and business model contexts. to conclude, since the findings demonstrate that content, context, and commerce specific platformbased ecosystemic business (c.f., wirtz et al., 2010; yrjölä et al., 2016) that utilize data and algorithms is the most potential emerging business opportunity of journal of business models (2021), vol. 9, no. 4, pp. 67-93 8383 mnos in 5g evolution, deeper investigation in those scopes aiming at clarifying potential businesses opportunities in these specific areas is suggested. moreover, we recommend future research to study how the mnos’ hybrid business models will evolve towards product-service model building on higher 4c layers, context, and commerce. finally, we suggest extending the study from mobile network operators’ business models to other stakeholders in the business ecosystem, particularly, to actors having a role in resource aggregation and brokering. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8484 references ahokangas, p., matinmikko, m., yrjölä, s., okkonen, h., and casey, t. (2013),” simple rules” for mobile network operators’ strategic choices in future spectrum sharing networks, ieee wireless commun., vol. 20, no. 2, pp. 20-26. ahokangas, p., moqaddamerad, s., matinmikko, m., abouzeid, a., atkova, i., gomes, j., and iivari, m. (2016), future micro-operators business models in 5g, the business & management review, vol. 7, no. 5, pp. 143-149. ahokangas, p., matinmikko-blue, m., yrjölä, s., and hämmäinen, h. (2021a), platform configurations for local and private 5g networks in complex industrial multi-stakeholder ecosystems, telecommunications policy, 45(5), 102128. ahokangas, p., matinmikko-blue, m., latva-aho, m., seppänen, v. arslan, a., and koivumäki, t. (2021b), future mobile network operator business scenarios: sharing economy and 5g, in baikady, r, and baerwald, p. (eds): the palgrave handbook of global social change. palgrave macmillan. ahokangas, p., matinmikko-blue, m., yrjölä, s., seppänen, v., hämmäinen, h., jurva, r., and latva-aho, m. (2018), “business models for local 5g micro operators”, ieee international symposium on dynamic spectrum access networks (dyspan), seoul, south korea. ahokangas, p., matinmikko-blue, m., yrjölä, s., seppänen, v., hämmäinen, h., jurva, r., and latva-aho, m. (2019), business models for local 5g micro operators, ieee tccn, vol. 5, no. 3, pp. 730-740. ahokangas, p., yrjölä, s., matinmikko-blue, m., and seppänen, v. (2020), “transformation towards 6g ecosystem”, the 2nd 6g wireless summit, levi, finland, 2020. van alstyne, m. w., parker, g. g., and choudary, s. p. (2016), reasons platforms fail. harvard business review, 31(6), 2-6. ansoff, h.i (1957), strategies for diversification, harvard business review, september–october, p. 113-124. baldwin, c., and clark, k. (2000), design rules: the power of modularity, mit press, cambridge. baldwin, c. (2008), where do transactions come from? modularity, transactions, and the boundaries of firms, industrial and corporate change, vol. 17, no. 1, pp. 155-195. baldwin, c., and woodard, j. (2009), the architecture of platforms: a unified view. in platforms, riding in the open source development model? management science, vol. 52, no. 7, pp. 1116-1127. ballon, p. (2009), the platformisation of the european mobile industry, communications & strategies, no. 75, p. 15. basole, r. c., and karla, j. (2011), on the evolution of mobile platform ecosystem structure and strategy, business & information systems engineering, vol. 3, no. 5, pp. 313. bharadwaj, a., el sawy, o., pavlou, p., and venkatraman, n. (2013), digital business strategy: toward a next generation of insights, mis quarterly, vol. 37, no. 2, pp. 471-482. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8585 bouras, c., kollia, a., and papazois, a. (2016), dense deployments and das in 5g: a techno-economic comparison, wireless personal communications, vol. 94, pp. 1777–1797. briglauer, w., gugler, k., and haxhimusa, a. (2016), facilityand service-based competition and investment in fixed broadband networks: lessons from a decade of access regulations in the european union member states, telecommunications policy, vol. 40, no. 8, pp. 729-742. camponovo, g., and pigneur, y (2003), “business model analysis applied to mobile business”, proceedings of the 5th international conference on enterprise information systems, pp. 23-26. camps-aragó, p., delaere, s., and ballon, p. (2019), “5g business models: evolving mobile network operator roles in new ecosystems,” in 2019 ieee ctte-fitce: smart cities & information and communication technology (ctte-fitce), pp. 1-6). carson, l. (2011), designing a public conversation using the world café method, social alternatives, vol. 30, no. 1, pp. 10-14. casadesus-masanell, r., and llanes, g. (2011), mixed source, management science, vol. 57, no. 7, pp. 1212-1230. cave, m. (2018), how disruptive is 5g? telecommunications policy, vol. 42, no. 8, pp. 653-658. chesbrough, h. (2003), open innovation – the new imperative for creating and profiting technology, harvard business school press, brighton, ma. chesbrough, h. (2006), open business models: how to thrive in the new innovation landscape, harvard business school press, brighton, ma. chochliouros, i.p., kostopoulos, a., spiliopoulou, a.s., dardamanis, a., neokosmidis, i., rokkas, t., and goratti, l. (2017), business and market perspectives in 5g networks, in internet of things business models, users, and networks, pp. 1-6. climent, r. c., and haftor, d. m. (2021), value creation through the evolution of business model themes, journal of business research, vol. 122, pp. 353-361. coghlan, d., and brannick, t. (2010), doing action research in your own organization, 3rd edition. london, sage. cusumano, m., and gawer, a. (2002), the elements of platform leadership, mit sloan management review, vol. 43, no. 3, pp. 51-58. demil, b., lecocq, x., and warnier, v. (2018), ” business model thinking”, business ecosystems and platforms: the new perspective on the environment of the organization, m@ n@ gement, vol. 21, no. 4. de reuver, m., and haaker, t. (2009), designing viable business models for context-aware mobile services, telematics and informatics, vol. 26, pp. 240–248. de reuver, m., sørensen, c., and basole, r. c. (2018), the digital platform: a research agenda, journal of information technology, vol. 33, no. 2, pp. 124-135. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8686 dickens, l., and watkins, k. (1999), action research: rethinking lewin, journal of management learning, vol. 30, no. 2, pp. 127–140. eden, c., and huxham, c. (2006), researching organizations using action research, in: clegg, s.r., hardy, c., lawrence, t.b., and nord, w.r. (ed.) the sage handbook of organization studies, london, sage publications, pp. 389–408. eisenhardt, k. m. (1989), building theories from case study research, academy of management review, vol. 14, no. 4, pp. 532-550. eisenmann, t., parker, g., and van alstyne, m. (2006), strategies for two-sided markets, harvard, vol. 43, no. 3, pp. 51-58. feasey, r. (2015), confusion, denial and anger: the response of the telecommunications industry to the challenge of the internet, telecommunications policy, vol. 39, no. 6, pp. 444-449. fehrer, j. a., woratschek, h., and brodie, r. j. (2018), a systemic logic for platform business models. journal of service management, vol. 29, no. 4, pp. 546-568. fund, f., shahsavari, s., panwar, s.s, erkip, e., and rangan, s. (2017), “resource sharing among mmwave cellular service providers in a vertically differentiated duopoly”, 2017 ieee international conference on communications (icc), pp. 1-7. gatautis, r. (2017), the rise of platforms: business model innovation perspective, engineering economics, vol. 28, no. 5, pp. 585–591. gawer, a. (2014), bridging differing perspectives on technological platforms: toward an integrative framework, research policy, vol. 43, no. 7, pp. 1239-1249. gawer, a. (2020), digital platforms’ boundaries: the interplay of firm scope, platform sides, and digital interfaces, long range planning, pp. 102045. gawer, a., and cusumano, m. a. (2014), industry platforms and ecosystem innovation, journal of product innovation management, vol. 31, no. 3, pp. 417-433. gelernter, d. (1993), mirror worlds: or the day software puts the universe in a shoebox...how it will happen and what it will mean, oxford university press. ghezzi, a., cortimiglia, m.n., and frank, a.g. (2015), strategy and business model design in dynamic telecommunications industries: a study on italian mobile network operators, technological forecasting and social change, vol. 90, no. a, pp. 346-354. gomes, j.f., iivari, m., pikkarainen, m., and ahokangas, p. (2018), business models as enablers of ecosystemic interaction: a dynamic capability perspective, international journal of social ecology and sustainable development, vol. 9, no. 3. gonçalves, v., and ballon, p. (2011), adding value to the network: mobile operators’ experiments with softwareas-a-service and platform-as-a-service models, telematics and informatics, vol. 28, no. 1, pp. 12-21. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8787 hacklin, f., björkdahl, j., and wallin, m. (2018), strategies for business model innovation: how firms reel in migrating value, long range planning, vol. 51, no. 1, pp. 82-110. helfat, c. e., and raubitschek, r. s. (2018), dynamic and integrative capabilities for profiting from innovation in digital platform-based ecosystems, research policy, vol. 47, no. 8, pp. 1391-1399. hmoud, a. y., salim, j., and yaakub, m. r. (2020), platformisation of mobile operators business model: a proposition using design science approach and grounded theory principles, international journal on advanced science engineering information technology, vol. 10, no. 2, pp. 473-484. iivari, m., ahokangas, p., komi, m., tihinen, m., and valtanen, k. (2016), toward ecosystemic business models in the context of industrial internet, journal of business models, vol. 4, no. 2, pp. 42-59. inayatullah, s. (1998), causal layered analysis: poststructuralism as method, futures, vol. 30, no. 8, pp. 815-829. inayatullah, s. (2006), anticipatory action learning: theory and practice, futures, no. 38, pp. 656-666. jeble, s., kumari, s., and patil, y. (2018), role of big data in decision making, operations and supply chain managementand international journal, vol. 11, no. 1, pp. 36-44. jullien, b., and sand-zantman, w. (2021), the economics of platforms: a theory guide for competition policy, information economics and policy, no. 54, pp. 100880. kallio, j., tinnilä, m., and tseng, a. (2006), an international comparison of operator‐driven, business models. business process management journal, vol. 12, no. 3, pp. 281-298. katz, m., and shapiro, c. (1994), systems competition and network effects, journal of economic perspectives, vol. 8, no. 2, pp. 93-115. kenney, m., and zysman, j. (2016), the rise of the platform economy, issues in science and technology, vol. xxxii, no. 3. khaloufi, h., abouelmehdi, k., benihssane, a., and saadi, m. (2018), security model for big healthcare data lifecycle, procedia computer science, vol. 141, pp. 294-301. kuoa, y-f., and yub, c-w. (2006), 3g telecommunication operators’ challenges and roles: a perspective of mobile commerce value chain, technovation, vol. 26, pp. 1347–1356. langley, d. j., van doorn, j., ng, i. c., stieglitz, s., lazovik, a., and boonstra, a. (2021), the internet of everything: smart things and their impact on business models, journal of business research, no. 122, pp. 853-863. latva-aho, m., and leppänen, k. (ed.) (2019), key drivers and research challenges for 6g ubiquitous wireless intelligence, 6g flagship program, university of oulu. letaief, k.b., chen, w., shi, y., zhang, j., and zhang, y.a. (2019), the roadmap to 6g: ai empowered wireless networks, ieee communications magazine, vol. 57, no. 8, pp. 84-90. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8888 lenk, a., klems, m., nimis, j., tai, s., sandholm, t., and alto, p. (2009), “what’s inside the cloud? an architectural map of the cloud landscape”, proceedings of the 2009 icse workshop on software engineering challenges of cloud computing, cloud 2009, ieee computer society, washington dc, pp. 23–31. mason, k., and spring, m. (2011), the sites and practices of business models. industrial marketing management, 40(6), 1032-1041. matinmikko, m., latva-aho, m., ahokangas, p., yrjölä, s., and t. koivumäki, t. (2017), micro operators to boost local service delivery in 5g, wireless personal communications, vol. 95, pp. 69-82. matinmikko, m., latva-aho, m., ahokangas, p., and seppänen, v. (2018), on regulations for 5g: micro licensing for locally operated networks, telecommunications policy, vol. 42, no. 8, pp. 622-635. matinmikko-blue, m., yrjölä, s., and ahokangas, p. (2020), “spectrum management in the 6g era: role of regulations and spectrum sharing”, the 2nd 6g wireless summit, levi, finland, 2020. mcafee, a., brynjolfsson, e., davenport, t.h., patil, d.j., and barton, d. (2012), big data: the management revolution, harvard business review, vol. 90, no. 10, pp. 60-68. meddour, d-e., rasheed, t., and gourhant, y. (2011), on the role of infrastructure sharing for mobile network operators in emerging markets, computer networks, vol. 55, no. 7, pp. 1576-1591. mell, p.m., and grance, t. (2011), the nist definition of cloud computing, nist special publication, vol. 145, gaithersburg. neokosmidis, i., rokkas, t., and xydias, d. (2017), roadmap to 5g success: influencing factors and an innovative business model, internet of things business models, users, and networks, copenhagen, pp. 1-8. nielsen, c., and lund, m. (2018), building scalable business models, mit sloan management review, vol. 59, no. 2, pp. 65-69. nikolikj, v., and janevski, t. (2015), state-of-the-art business performance evaluation of the advanced wireless heterogeneous networks to be deployed for the ‘tera age’, wireless personal communications, vol. 84, no. 3, pp. 2241–2270. noll, j., and chowdhury, m.m. (2011), 5g: service continuity in heterogeneous environments. wireless personal communications, vol. 57, no. 3, pp. 413-429. onetti, a., zucchella, a., jones, m. v., and mcdougall-covin, p. p. (2012), internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management & governance, 16(3), 337-368. ordonez-lucena, j., ameigeiras, p., lopez, d., ramos-munoz, j., lorca, j., and folgueira, j. (2017), network slicing for 5g with sdn/nfv: concepts, architectures, and challenges, ieee communications magazine, vol. 55, no. 5, pp. 80-87. journal of business models (2021), vol. 9, no. 4, pp. 67-93 8989 oughton, e., and frias, j.z. (2018), the cost, coverage and rollout implications of 5g infrastructure in britain, telecommunications policy, vol. 42, no. 8, pp. 636-652. palattella, m. r., dohler, m., grieco, a., rizzo, g., torsner, j., engel, t., and ladid, l. (2016), internet of things in the 5g era: enablers, architecture, and business models, ieee journal on selected areas in communications, vol. 34, no. 3, pp. 510-527. priem, r. l., wenzel, m., and koch, j. (2018), demand-side strategy and business models: putting value creation for consumers center stage, long range planning, vol. 51, no. 1, pp. 22-31. pujol, f., elayoubi, s. e., markendahl, j., and salahaldin, l. (2016), mobile telecommunications ecosystem evolutions with 5g, communications & strategies, no. 102, pp. 109. rasheed, t., radwan, a., rodriguez, j., kibilda, j., piesiewicz, r., verikoukis, c., and moreira, t. (2015), business models for cooperation. in energy efficient smart phones for 5g networks (pp. 241-267). springer, cham. de reuver, m., and haaker, t. (2009), designing viable business models for context-aware mobile services. telematics and informatics, 26(3), 240-248. saad, w., bennis, m., and chen, m. (2020), a vision of 6g wireless systems: applications, trends, technologies, and open research problems, ieee network, vol. 43, no. 3, pp. 134 142 sanchez, r., and mahoney, j. (1996), modularity, flexibility, and knowledge management in product contingencies, mis quarterly, vol. 23, no. 2, pp. 261-290. sarfaraz, a., and hämmäinen, h. (2017), 5g transformation: how mobile network operators are preparing for transformation to 5g? internet of things business models, users, and networks, copenhagen, pp.1-9. schilling, m. (2000), toward a general modular systems theory and its application to interfirm product organization and design, strategic management journal, vol. 17, no. 1, pp. 63-76. schwartz, p. (1991), the art of the long view. simon, h. (1962), the architecture of complexity, proceedings of the american philosophical society, vol. 24 106, no. 6, pp. 467-482. suchman, m.c. (1995), managing legitimacy: strategic and institutional approaches, academy of management review, vol. 20, no. 3, pp. 571-610. teece, d. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2–3, pp. 172–194. teece, d. j. (2018), profiting from innovation in the digital economy: enabling technologies, standards, and licensing models in the wireless world, research policy, vol. 47, pp. 1367-1387. täuscher, k., and laudien, s. m. (2018), understanding platform business models: a mixed methods study of marketplaces, european management journal, vol. 36, no. 3, pp. 319-329. journal of business models (2021), vol. 9, no. 4, pp. 67-93 9090 ulrich, k. (1995), the role of product architecture in the manufacturing firm, research policy, vol. 20, no. 2, pp. 180-197. viswanathan, h., and mogensen, p.e. (2020), communications in the 6g era, ieee access, vol. 8, pp. 5706357074. wallbach, s., coleman, k., elbert, r., and benlian, a. (2019), multi-sided platform diffusion in competitive b2b networks: inhibiting factors and their impact on network effects, electronic markets, 29(4), 693-710. weber, a., and scuka, d. (2016), operators at crossroads: market protection or innovation? telecommunications policy, vol. 40, no. 4, pp. 368-377. wirtz, b.w., schilke, o., and ullrich, s. (2010), strategic development of business models: implications of the web 2.0 for creating value on the internet, long range planning, vol. 43, no. 2, pp. 272-290. weill, p., and woerner, s.l. (2015), thriving in an increasingly digital ecosystem. mit sloan management review, vol. 56, no. 4, p. 27. yin, r.k. (2009), case study research: design and methods (4th ed.), newbury park, ca: sage publications. yrjölä, s. (2019), “decentralized 6g business models”, 6g wireless summit, levi, finland, april 2019. yrjölä, s., matinmikko, m., ahokangas, p., and mustonen, m. (2016), “licensed shared access to spectrum”, spectrum sharing in wireless networks: fairness, efficiency and security, j.d. matyjas., s. kumar, and f. hu (ed.), crc press, pp. 139–164. yrjölä, s., ahokangas, p., and matinmikko-blue, m. (2018), “novel context and platform driven business models via 5g networks”, the 2018 ieee 29th annual international symposium on personal, indoor, and mobile radio communications (pimrc), genova, italy. yrjölä, s. (2020), “how could blockchain transform 6g towards open ecosystemic business models?”, the ieee icc 2020 workshop on blockchain for iot and cps, dublin, ireland. yrjölä, s., ahokangas, p., and matinmikko-blue, m. (2020a), sustainability as a challenge and driver for novel ecosystemic 6g business scenarios, sustainability, 12(21), 8951. yrjölä, s., ahokangas, p., and matinmikko-blue, m., (ed.) (2020b), white paper on business of 6g, 6g research visions, 3, university of oulu, finland. http://urn.fi/urn:isbn:9789526226767 zhang, j., and liang, x-j. (2011), business ecosystem strategies of mobile network operators in the 3g era: the case of china mobile, telecommunications policy, vol. 35, no. 2, pp. 156-171. zhang, n., cheng, n., gamage, a.t., zhang, k., mark, j.w., and shen, x. (2015), cloud assisted hetnets toward 5g wireless networks, ieee commun. mag., vol. 53, no. 6, pp. 59-65. zhao, y., von delft, s., morgan-thomas, a., and buck, t. (2020), the evolution of platform business models: exploring competitive battles in the world of platforms, long range planning, vol. 53, no. 4, pp. 10189. journal of business models (2021), vol. 9, no. 4, pp. 67-93 9191 ziegler, v., and yrjölä, s. (2020), “6g indicators of value and performance,” the 2nd 6g wireless summit, levi, finland, 2020. zott, c., and amit, r. (2010), business model design: an activity system perspective. long range planning, 43(2-3), 216-226. 6g flagship, retrieved from www.6gflagship.com 6g summit, retrieved from www.6gsummit.com http://www.6gflagship.com http://www.6gsummit.com journal of business models (2021), vol. 9, no. 4, pp. 67-93 9292 about the authors seppo yrjölä holds a dr. sc. degree in telecommunications engineering from the university of oulu and is an adjunct professor and professor of practice at the faculty of information technology and electrical engineering, university of oulu in the field of techno-economics. he is a principal engineer at nokia enterprise and has been building radios for 30 years in research, development, innovation, and business development. he incubates and steers opportunities externally with customers, partners, academia, and governments with the purpose of driving growth by innovating holistically from technology to business models. previously as head of wireless technology for the networks division at nokia, his role required to look beyond the product roadmap and identify what new trends, technologies and tools were on the horizon, and determine and validate how those future opportunities fit into the nokia pipeline. he has been awarded over €10 million in competitive research funding as the lead investigator, authored more than 100 peer-reviewed publications, and holds several patents in the radio domain. dr. yrjölä conducts multi-disciplinary research combining technology, business and regulatory aspects. his current mission is digitalizing the 70% of the gdp that has not yet been digitalized in order to drive massive productivity growth and new business. with roots in engineering and economics he explores how and why platform-based ecosystemic business models can emerge in the future wireless systems context. petri ahokangas received his d.sc. degree (1998) from university of vaasa, finland. currently he is the professor of future digital business at martti ahtisaari institute, oulu business school, university of oulu. prior to his academic career, he worked in the telecoms/ software industry. his research is in the intersection of entrepreneurship, strategic management, international business, futures research and action research, and various fields on technology. specifically, he is interested in business models, strategies, ecosystems, and internationalization within digital, wireless (5g/6g), smart energy, and smart city domains. journal of business models (2021), vol. 9, no. 4, pp. 67-93 9393 marja matinmikko-blue received her d.sc. degree (2012) in telecommunications engineering and ph.d. degree (2018) in management sciences from university of oulu, finland. currently, she is director of sustainability and regulation at 6g flagship program at university of oulu, where she also holds an adjunct professor position on spectrum management. she conducts multi-disciplinary research on technical, business and regulatory aspects of mobile communication systems in close collaboration between industry, academia and regulators. she has coordinated four national project consortia that have successfully demonstrated the world’s first licensed shared access spectrum sharing trials and introduced a new local 5g operator concept that has become a reality. she has published 170+ scientific publications and prepared 150+ contributions to regulatory bodies on spectrum management in national, european and international levels. about the authors 58 journal of business models (2022), vol. 10, no. 2, pp. 58-82 in-house coworking space as a new initiative towards businnes model innovation in incumbent firms – a case study on motivation, knowledge sharing and collaboration kathrine friis-holm egfjord1, abstract purpose: a new collaboration form between incumbent firms and startups has emerged, with incumbents hosting coworking spaces in-house to innovate their business models. this paper aims to investigate what motivates the startups to participate in the coworking space, how knowledge transfer and collaboration take place and how the role of the incumbent was perceived. design: a case study was performed in an in-house coworking space based on 17 semi-structured interviews with the startups. findings: findings uncovered that physical, social and professional conditions were important for the startups. generally, there was a good physical framework. being a part of a larger community with “colleagues” and the possibility of participating in professional activities were beneficial. this promoted knowledge sharing, sparring and collaboration between the startups. ongoing activities to support this were requested. the majority of the startups expressed interest in collaboration with the incumbent, but only few had currently established it. value: it was perceived, that both the startups and the incumbent possessed knowledge and resources which could be valuable for both parts. however, it was not experienced that the incumbent clarified how the startups could fit into their business. thus, an untapped potential for collaboration seemed to be present. ideally, the present constellation represents an engagement form with both economic, social, professional and cultural capitals. it could be a promising solution, if the incumbent is ready for radical business model innovation. keywords: open business model innovation, coworking spaces, incumbent and startup firms, motivation, knowledge sharing, collaboration acknowledgements: i would like to thank kristian j. sund and søren jagd (deceased in 2020) for comments and inputs to the research process, and colleagues for comments on the semi-structured interview guide. i am also very grateful to the many participants in the interviews. the research would not have been possible without the jointly support by roskilde university and tryg. finally, i appreciate the useful comments during the review process. please cite this paper as: egfjord, k. f. (2022), in-house coworking space as a new initiative towards businnes model innovation in incumbent firms – a case study on motivation, knowledge sharing and collaboration,journal of business models vol. 10, no. 2, pp. 58-82 1 roskilde university, universitetsvej 1, 4000 roskilde, denmark, e-mail: kathrine-dk@live.dk, kfhe@ruc.dk issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i2.6505 mailto:kathrine-dk@live.dk mailto:kfhe@ruc.dk https://doi.org/10.54337/jbm.v10i2.6505 journal of business models (2022), vol. 10, no. 2, pp. 58-82 5959 introduction while coworking spaces (cws), in the last decade, have become more widespread, a new constellation between incumbent firms and startups has emerged, where incumbent firms host startups within their own in-house cwss (orel, dvouletý and ratten, 2021; heinzel, georgiades and engstler, 2021). this new form of collaboration can help incumbent firms to get closer to the entrepreneurial environment and to get inspiration and knowledge from the startups who can help the them to innovate and maybe even reveal new business models (reuschl and bouncken, 2018). in this paper, incumbent firms are defined as mature firms that are already in a strong position in the market. they often face the unique situation of having to balance the exploration of new business models with the exploitation of existing ones (bogers, sund, and villarroel, 2015; egfjord and sund, 2020; frankenberger, weiblen, csik, and gassmann, 2013; jensen and sund, 2017; sosna, trevinyo-rodríguez and velamuri, 2010; teece, 2018). in a world characterized by rapid changes and complexity, many incumbent firms today face the challenge that more of their existing business models are being threatened and replaced by new technologies and new business models (sund, bogers and sahramaa, 2021; taran, boer and lindgren, 2015). in this context, capabilities of the incumbent firm to work with business model innovation (bmi) are seen as an effective way to achieve sustainable competitive advantage (mitchell and coles, 2003; wirtz, gottel and daiser, 2016). the ability of the firm to gain new knowledge plays a crucial role in succeeding with innovation and often it is necessary to seek knowledge and explore new ideas outside their own framework (chesbrough, 2003; von hippel, 2005; kohler, 2016: taran, boer and nielsen, 2022). adopting the basic principle of open innovation that firms should combine the use of external and internal ideas, incumbent firms are increasingly building programs to engage with startups (chesbrough, 2003; horn and keyzer, 2014, kohler, 2016; von hippel, 2005). through collaborations, incumbent firms and startups can bring each other several advantages, which can create unique opportunities for both parts (bagnoli, massaro, ruzza and toniolo, 2020). startups can be a valuable source of innovation and can bring entrepreneurial spirit, fresh talents and new ideas that can help to rejuvenate the corporate culture (heinzel et al., 2021). by working with startups, the incumbent firm can develop and test new technologies and service solutions with lower cost and less risk to their core business. conversely, incumbent firms have a large number of advantages for startups in terms of experience and knowledge about the market, economies of scale, well-established networks and brand power. thus, due to the complementary nature, both parts can benefit from collaboration (orel et al., 2021; weiblen and chesbrough, 2015). the phenomenon of coworking emerged shortly after the turn of the century and has been in explosive growth since its emergence. according to a forecast by small business labs, a us business portal, and the organization the global coworking unconference conference (gcuc), it is a growing trend. in their 2017 forecast (2018-2022), the number of cwss in the world (almost 15.000) was estimated to increase with an average annual growth rate of 16.1% and the number of users (1.74 million) even faster, with an average annual growth rate of 24.2%. within the past years, a tendency has also been observed towards the incumbent firms being interested in taking part of coworking environment, either by establishing their own cwss or by placing departments or groups of employees in the external cowork environments (smallbizlabs, 2017; gcuc, 2017). it is known that the various forms of collaboration between incumbent firms and startups can be fruitful for both parts (kohler, 2016). however, in many cases it is not successful and does not live up to expectations (weiblen and chesbrough, 2015). the emergence of the new engagement form of inhouse cwss illustrates a new and different way of working with bmi which is relatively new and has not yet been studied extensively. there is not yet much literature on this specific type of collaboration and neither on the preferences of cws users in general (heinzel et al., 2021; weijs-perrée, van de koevering and arentze, 2019). thus, the aim of this paper is to investigate an example of an in-house cws, at a leading corporate player, to study what motivates journal of business models (2022), vol. 10, no. 2, pp. 58-82 6060 the startups to participate in the cws, how knowledge transfer and collaboration take place and how the role of the incumbent firm is perceived by the startups. business model innovation in incumbent firms and coworking incumbent firms and bmi the notion of business models has existed for several decades but still the definition of the concept remains fuzzy and a variety of definitions are found in the academic literature (taran et al., 2022). in this paper, a business model is broadly defined as how value is created, captured and appropriated by the organization (amit and zott, 2001; egfjord and sund, 2020; foss and saebi, 2017; teece, 2010; zott, amit and massa, 2011). similar to the definition of a business model, many different views on bmi exists. however, they all overall point towards doing something new and regardless of the different opinions, there is an agreement on its importance (taran et al., 2022). therefore, in extension bmi can be described as doing things differently and as changing the game, slightly or radically, to take advantage of opportunities to better create or capture value. both the concept of business model and bmi have been growing topics for discussion and have gained an increasing amount of attention from both academics and practitioners over the last decades. however, while much of the existing research literature on business models focuses on startups and their creation of new business models, a much smaller part pays attention to incumbent firms and their decisions to add new business models that might be disruptive (bogers et al., 2015; egfjord and sund, 2020; kim and min, 2015; sosna et al., 2010). the context of bmi in incumbent firms is exceptional as they, opposite to startups, already has pre-established structures, resources, relationships and existing business models. incumbent firms must at the same time operate with routines for “doing what we do better” and routines for “doing differently” (boer and bessant, 2004; tushman and o’reilly, 1997; taran et al., 2022; wirtz, pistoia, ullrich and göttel, 2016). however, while experimentation and development related to bmi is wanted, it can meet several barriers, especially when it comes to more radical bmi (egfjord and sund, 2020; snihur and tarzijan, 2018; sund, bogers, villarroel and foss, 2016). in incumbent firms, managers and employees might feel sceptic to innovation activities and tend to resist new initiatives, if they believe that it threatens the existing business. if a new business model does not immediately fit the “dominant logic” of the core business, there is a risk that new ideas will be discarded (kim and min, 2015; snihur and tarzijan, 2018; sund et al., 2016) therefore, often incremental innovation tend to be preferred over more radical innovation, which may be perceived to be associated with greater risk and uncertainty (chesbrough, 2010). continuous innovation processes can be demanding for incumbent firms and challenging to manage (gryszkiewicz, lykourentzou and toivonen, 2016a). in attempts to break out of the stalled patterns of thinking and the dominant logic of the firm, many firms use new working methods and workspaces to achieve innovation, by combining multiple competences, ideas and talents in a collaborative working community, for example a cws (christensen and raynor 2003; gryszkiewicz, lykourentzou and toivonen, 2016b; orel and dvouletý 2020; viki 2017;). in recent decades, there has been a fundamental shift in the way firms develop and bring new ideas to market, from following the model of closed innovation to a new model of open innovation (chesbrough, 2003). today, many firms follow strategies of open innovation which embraces that valuable ideas could now come from inside as well as outside the firm. this implies considerations on how internal competencies can give rise to new businesses outside the organization and the exploration of new opportunities outside the organization that can contribute to the existing business in order to generate value for the organization (chesbrough, 2003). the incumbent firms are increasingly trying to engage in initiatives based on collaborations with startups to use them as a driving force for bmi, rather than solely seeing them as disruptive players in the market (orel et al., 2021; weiblen and chesbrough, 2015). across industries, more incumbent firms have begun to experiment with the possibilities of coworking. it journal of business models (2022), vol. 10, no. 2, pp. 58-82 6161 could be perceived that large firms want to be related to the trendiness that is associated with coworking. however, a study reveals that corporate employees seek similar benefits as startups and freelancers, in being part of a cws. this includes faster learning, networking and inspiration (nagy and lindsay, 2018). the incumbent firms can get involved in coworking in various ways (heinzel et al., 2021). for example, they can open their own cws. this can be an internal or external space, which can be open to everyone or to selected members (nagy and lindsay, 2018). despite that collaborations between incumbent firms and startups with its complimentary abilities may seem like the perfect match, it can be difficult to achieve and unfortunately it is not always easy to exploit to its full potential. several previous attempts to establish successful collaborations bear witness to disappointments and to having been abandoned (chesbrough and chen, 2013; weiblen and chesbrough, 2015). when the two worlds become united, it can create real challenges. startups may worry that their ideas can be stolen or that it could take forever to make critical decisions that are necessary for the startup to succeed. moreover, differences in the organizational clock speed and cultural differences can lead to misunderstandings. also, it can be difficult for the incumbent firm to measure the real effect or return on investment. corporate cwss require an investment and it is not always an easy job for the incumbent firm to decide whether it is worth it or not (nagy and lindsay, 2018; weiblen and chesbrough, 2015). the field of corporate cwss is fairly new within the coworking research literature and so far, only a few scientifical contributions exist (heinzel et al., 2021). the intention of the present study is thus to contribute to a better understanding of this emerging field. the coworking phenomenon through the ages, radical changes have taken place in the nature of the work that characterizes the corporation and its employees. the sale of knowhow and service has become more and more widespread. knowledge, service and administration have increasingly replaced the traditional company, where the machine was in centre. at the same time, the labour market has become more individualized and non-standardized forms of employment, such as freelancers or project based employment, have become more common. furthermore, the growth of internet communication technologies has made the workers more mobile and independent of geography. as a result, it is much easier for the knowledge workers to do their job from more or less everywhere. still, it can be a struggle for independent and remote workers to find the right working space. in this context, the use of cwss has boomed (gandini, 2015; spreitzer, garrett and bacevice, 2015). computer engineer brad neuberg has been credited to be the first one to use the concept of “coworking” (golonka, 2021). he was the founder of the cws “hat factory” which was established in san francisco in 2005. he used the term to describe a place and a way of working, a so called third way of working, when he tried to solve the dilemma of workers, who generally were forced either to work alone at home or in an office of a business. in the first case, they would attain autonomy and independency, but with the risk of isolation and loneliness. whereas in the second case, they could enjoy being a part of a community and organizational structure but suffer from the loss of flexibility and freedom. thus, the third way of working should offer a balance between autonomy and community and coworking could be an alternative work environment for the remote workers within the knowledge industry (fuzi, clifton and loudon, 2014; gandini, 2015; jones, sundsted and bacigalupo, 2009; parrino, 2013; reuschel and bouncken, 2018; spreitzer et al., 2015). coworking is a broad term that has been characterized in many different ways (gandini, 2015; parrino,  2013; spinuzzi, 2012). cwss roughly refer to shared, collaborative workspaces, where people gather to work individually. initially, users typically consisted of self-employed, freelancers, digital nomads, entrepreneurs, startups, and microbusiness, but today also larger firms choose to take advantage of the opportunities. the locations may vary a lot in size, equipment, services and other offerings but basically a cws offers an individual office space along with a number of common facilities such as shared reception area, wi-fi and office equipment, open workplace, lounge, conference rooms and shard kitchen facilities. other offers may include activities journal of business models (2022), vol. 10, no. 2, pp. 58-82 6262 that can promote idea development, knowledge sharing and collaboration. among essential reasons to become part of a cws, the desire to belong to a community and to interact with other people is described, along with the possibility to get feedback, as well as overcoming isolation and loneliness and get the experience work life. moreover, networking activities, knowledge sharing and the random opportunities and discoveries that may arise in that connection are mentioned along with the potential for new business partnerships (gandini, 2015; spinuzzi, 2012; spreitzer et al., 2015). ideally, the core values of coworking can be related to openness and the willingness to share, collaborate, support and help each other in a community where the environment is characterized by trust. it should be accessible in terms of being financial affordable and geographical well located and finally it should be sustainable (bednár, mariotti, rossi and danko, 2021; nagy and johnson, 2016; reed, 2007). since its origin, the idea of coworking has spread far and wide and has become a buzzword and a trendy concept that is associated with high expectations. cwss e.g. is described to represent “hubs of innovation” and linked to creativity and “coolness” (capdevila, 2013; gandini, 2015). despite an increasing amount of literature, from the perspectives of both academic and practitioners, most contributions in the literature assume that coworking represents an inevitably positive innovation. only few are based on empirical findings and rarely offering a critical understanding (gandini, 2015; heinzel et al., 2021). important factors of the motivation to become a part of a cws, and factors which enhance knowledge sharing in a such environment have been studied (weijs-perrée et al., 2019). however, knowledge is still missing about the value of the in-house cws constellation as a part of an incumbent firm, to innovate and explore new business models. this paper explores the motivations, the pros and cons, of startups operating from a corporate inhouse cws, in the following called the coworking space of the actual study (cwsa), as perceived by the startup companies. to gain a deeper understanding of the phenomenon and arrive at an answer to this research question the aim in this paper is to examine: (1) what motivates startup firms to be a part of a cws such as cwsa, (2) to what extent and how does knowledge transfer and collaboration take place between the actors in cwsa and (3) how is the role of the incumbent firm perceived in cwsa? case and method a case study setting was applied to investigate the in-house cws at the incumbent case firm (icf). the case study method is a useful approach to answer the research question as it allows researchers to focus on and observe a phenomenon in a specific context in depth. the method has an advantage in exploring and illuminating complexities which occur in the social world by producing rich accounts for explanations and for advancing theory (flyvbjerg, 2006; yin; 2018). “the advantage of the case study is that it can “close in” on real-life situations and test views directly in relation to phenomena as they unfold in practice.” (flyvbjerg, 2006: 235). moreover, a theoretical sample was used for this study, searching for an incumbent firm engaging in bmi and the emerging phenomenon of the in-house cws. case the selected case firm is an experienced corporate player in the nordic financial sector, which has around 4000 employees, and 4 million customers in scandinavia. in order to keep up with competitors and be a leading player within the industry the icf, like many other firms, started to pay increased attention to innovation. in recent years, they have changed their whole approach and created a new organization and strategy that aims to focus more on innovation. at the same time, they have launched a lot of different initiatives to innovation. to mention some, a new dedicated innovation team was established to focus on new business in the firm. their main purpose is to create innovative solutions for the icf and icfs customers. this includes the development of new business models and business cases for projects, incremental as well as radical. moreover, the icf have made investments to be a part of a european accelerator program, to get inspiration from across europe. in october 2016 the icf opened an in-house cws at their headquarters in collaboration with one journal of business models (2022), vol. 10, no. 2, pp. 58-82 6363 of europe´s leading facilitators of entrepreneurship, to support a more innovative culture. the cwsa has been assigned its own building of 4500 m2, with room for 300 entrepreneurs. in 2018 cwsa was moved to the ground floor of another building at the headquarters with an area of 8500 m2 with around 230 office spaces. at the time of the study, cwsa consisted of 33 companies beside the icf. the majority of these were “micro companies”, either entrepreneurial startups of one-man companies or companies with few employees (less than 10). moreover, there were few” small-sized” companies, with 10-50 employees, and one “medium-sized” company with around 70 employees. furthermore, not all desks where filled out. in the present study, the focus was on the micro companies, which were considered to constitute the actual startup entrepreneurs. cwsa provides workstations with own desk – either in shared space or in team rooms. also, basic needs such as meeting facilities, wi-fi, free printing, tea and coffee, diverse lunch options and free unlimited parking are offered. moreover, the members of cwsa can get access to fitness and sport facilities. furthermore, they get access to cwsas network and the opportunity to join its different events like workshops, visiting speakers and social events such as friday chill. the interior furnishing is kept in scandinavian bright design, and cwsa functions as an independent young and exciting department in the middle of the large icf. cwsa wants to attract entrepreneurs that on one hand are tech-driven and on the other hand develop products and services within areas and industries, which lies within the interest of the icf. as a part of the initiative, the icf seeks for entrepreneurs, that could contribute with new perspectives and extra creativity, which can help them to prepare for a future where new business models can challenge its core business. as a concept based on the idea that a collaboration must be built between the entrepreneurs and the icf, according to the facilitator, it is essential that the entrepreneurs who are taken in do not only create value for themselves but also have the potential to create value for icf. therefore, it is crucial for the success of cwsa that a bridge is being built between two worlds. to enhance the creation of new knowledge and growth for both parts, the entrepreneurs are placed among employees from the icf, as inspired by e.g. google. the icf therefore moved a group of employees engaged in innovation and business development into cwsa, where they have permanent office space to boost the synergy effects between the two worlds. the ambition for cwsa is to act as a link between the icf and the bubbling entrepreneurial scene. as icf stated in a press release, cwsa must be an attractive cws in itself. however, what they really are interested in is the dialogue and cooperation with the companies that move in. the icf has an ambition to do pilot projects and partner collaborations with the startups in cwsa. also, the perception of the aim with establishing cwsa has been confirmed during informal conversations with employees from icf. method a qualitative method with an inductive research strategy was used to gain in depth insights of cwsa and a deeper understanding of the mechanisms of this new type of business constellation. the empirical data for this study was collected in cwsa from may to june 2019. during the above-mentioned period, seventeen semi-structured interviews, representing the same number of startups, were conducted (see table 1). the interviews lasted about an hour per participant and resulted in more than seventeen hours of material, which was subsequently transcribed to approx. 200.000 words. for the interviews with the startups in cwsa, a semi-structured interview guide was prepared, which was formed to answer the above mentioned research questions. both thematic and dynamic questions were used for the interviews. the thematic questions were included in order to contribute to knowledge. the dynamic questions were included to promote a positive interaction, keep the conversation going and motivate the participants to talk about their experiences (kvale, 2003). initially, also, questions about the background of the participants where asked. prior to the interviews, pilot interviews were conducted with colleagues to test and discuss journal of business models (2022), vol. 10, no. 2, pp. 58-82 6464 table 1. respondent no. membership of cwsa (months of duration) awareness of cwsa through length of interview (minutes) word count 1 13-18 family/friends/network 53.24 9581 2 13-18 marketing / research 64.02 13516 3 13-18 marketing / research 61.32 14700 4 7-12 family/friends/network 62.03 9838 5 0-6 marketing / research 58.20 11880 6 7-12 incumbent 51.19 9365 7 7-12 family/friends/network 70.58 12535 8 13-18 marketing / research 62.08 10733 9 24 < incumbent 50.43 10886 10 13-18 marketing / research 53.53 12807 11 0-6 family/friends/network 58.57 12593 12 7-12 family/friends/network 65.41 13736 13 7-12 family/friends/network 48.43 7266 14 0-6 marketing / research 57.51 11458 15 24 < marketing / research 75.22 13352 16 24 < family/friends/network 67.07 9876 17 7-12 marketing / research 66.06 14498 table 1: list of respondents in the actual coworking space (cwsa) journal of business models (2022), vol. 10, no. 2, pp. 58-82 6565 the content. following feedback from the test persons, the design was re-evaluated, and some adjustments were made. the interviews took place in cwsa, based on the participants choices, either in private meeting rooms or in the office of the participant. interviews were recorded, anonymised and transcribed. after transcription, the interviews were analysed with the use of a thematic analytical approach. this method helped to provide a nuanced and more focused processing of the material and to form an overview of the content of the meaning. such a theme-centred coding approach makes it possible to focus on different themes in the data material and make comparison of information about the given themes from all the informants (thagaard, 2004). in the analysis, a semi-quantitative terminology has been used to describe and categorize the answers of the participants (see table 2). findings in this section, the results are presented according to the aim of the study. motivation to participate in coworking space in the interviews, the startups were asked questions on: why they had chosen to become part of a cws and what they wanted to achieve in this connection? what benefits they associated with being a part of a cws in general? and what they personally experienced as most motivating by being part of the cwsa? overall, the study showed a good agreement between the initial expectations of the startups to become part of a cws, their perceived general benefits of coworking and their experience of what motivated them most by being part of the cwsa. an overview of the motivation factors is shown in figure 1. the conditions described by the startups in relation to motivation, could be categorized into social, professional and physical factors. social benefits many of the respondents described that social conditions played a role in their choice of becoming a part of a cws. it was about being part of something bigger a community with “colleagues”. the social aspect of having people around and not sitting alone at home was important to the respondents. several added that it could be difficult to sit at home and work and that they need a routine and some dynamic. the respondents described advantages such as being able to talk to like-minded people and someone you were “in the same boat” with. in addition, several came up with examples of backing each other up mentally, both if you have a “down” day and when something is to be celebrated. the respondents also described many different social activities as benefits, e.g. getting to know each other, having breakfast or lunch together, having someone to run with and events like friday bar, as well as easter and christmas lunches. for example, respondent #7 described: “for me, in the beginning, it is very much the soft things. and that ... has something to do with becoming a small family. so, we hold easter lunch and have held christmas lunches ourselves, e.g. the small table 2. number of respondents terminology 1 one / a single 2-4 few 5-7 several 8-9 half 10-12 many 13-16 most 17 all table 2: semi-quantitative terminology used to describe and categorize the answers of the respondents journal of business models (2022), vol. 10, no. 2, pp. 58-82 6666 benefits disadvantages social • being part of a community with "colleagues" • having people around not sitting alone at home • need for routine and dynamic – creates professionalism, seriousness and commitment • good and inspiring atmosphere creates drive, efficiency and productivity • opportunity to talk to like-minded that are “in the same boat” • mental backup down days or celebration • social activities breakfast, lunch, friday bar, easter and christmas lunches • risk of mismatch between companies • risk of sitting alone in the office when many small or one-man businesses are sitting together – empty seats • risk of adapting to a limiting monoculture • risk of groupings or cliques slightly harsh tone or bullying • lack of participation in the community from other companies professional • possibility of sparring, feedback and knowledge sharing • opportunity for professional collaborations and the potential to do business with each other • the facilitator can act as a sparring partner and help to promote cross-disciplinary collaborations • networking and the professional events external speakers, joint meetings and morning meetings etc. • risk of lack of confidentiality no declaration of confidentiality • risk of competing companies in the cws • risk of “stealing” each other’s employees physical • easy concept to have a place to sit where you can get started quickly • rent at a fair price • necessary office furniture, internet and printer, security and alarm, reception, meeting rooms, canteen and catering with coffee machines, toilets, cleaning, service, maintenance, parking and goods such as fitness with changing facilities incl. bath • good physical environment green and bright and nice to be in • location that suits well good transport options • too long transport time to the cws • lack of opportunity to give own stamp and identity e.g. how to decorate the office • risk of being moved around • problems with finding vacant meeting rooms • risk of noise nuisance, disturbances and distracting activities figure 1: motivation factors of the startups to participate in coworking space journal of business models (2022), vol. 10, no. 2, pp. 58-82 6767 businesses ... you get some social work relationships, and you just should not underestimate that, because it means a lot.” (respondent #7) half of the respondents explained that the most motivating part of being a member of cwsa was the collegial and social community among the startups. it was described as “good chemistry”, unity and the feeling of being a part of a community, which created seriousness and commitment to feel like part of a family package. one also described that being part of cwsa created some kind of affiliation with a well-established firm (referred to icf). the mood in the environment was described by half of the respondents as a significant factor for motivation – an atmosphere that was inspiring. it provided a good dynamic and energy, which for several of the respondents created drive, efficiency and productivity. professional benefits many of the respondents found that a general advantage of cwss was the opportunity for professional collaborations and the potential to do business with each other. it was emphasized that it was an advantage to have someone to talk to when it came to knowledge sharing and sparring. in this connection respondent #2 described: “there are companies at different levels and their different life cycles also do that … well some of the challenges that we have, this (other) company maybe had 2 years ago. and those that have just started, the challenges that they have. well those are the ones that we had 2 years ago. so, if we can help each other, then i think it’s incredibly strong.” (respondent #2) several of the respondents pointed out that it was one of the most important factors of being a part of cwsa it was about sparring with “colleagues” with completely different areas of work, who could provide new input. for example, respondent #10 explained: “well we ... well yes, it can because we are so many different industries ... it’s a mashup and it makes it exciting. you will be allowed to hear about some worlds that you have not heard of before. my god, it was so interesting and such things, i think it might make it exciting that you get to expand your horizons, a bit old-fashioned meant, but you get some input that you would not be able to get from elsewhere.” (respondent #10) furthermore, several described that this played a role in the choice to become part of a cws an environment that can provide inspiration and dynamic. half of the respondents saw an advantage in the network and the professional events that may be associated with a cws. it could be in the form of events, external speakers, joint and morning meetings etc. this could contribute to inspiration and the opportunity to make contacts. few mentioned joint events as some of the most motivating part of being part of cwsa as it contributed to the opportunity to get closer to the entrepreneurial environment and allowed for networking. in addition, it was mentioned as an advantage that the facilitator could act as a sparring partner and also help to mediate and promote cross-disciplinary collaborations. physical benefits about half of the respondents reported that practical matters around the physical framework were important. these factors included the importance of the concept being easy and to have a place to sit where you can get started quickly. several expressed satisfactions with the offered office furniture, internet, wifi and printer, security and alarm, as well as facilities such as reception, meeting rooms, toilets, canteen, kiosk and catering with coffee machines. there were good opportunities to invite in customers and partners to visit and for meetings. in addition, there was cleaning, service and maintenance, which made it all easy. furthermore, parking and goods such as fitness with changing facilities and bath were mentioned. several said that the location suited them well and that it was easy for them according to transport options. several of the respondents believed that it was important for their motivation to have a good physical environment in cwsa, which was described as green and bright and nice to be in. finally, several described the physical setting as one of the factors, that they were most satisfied with. everything was included at a reasonable price, which provided a good basis for getting started. in the interviews, the startups were then asked questions on possible disadvantages associated with a cws in general, and if they experienced any journal of business models (2022), vol. 10, no. 2, pp. 58-82 6868 demotivating factors in relation to being part of cwsa, see figure 1. possible disadvantages in coworking space of general disadvantages, several of the respondents described the risk of noise nuisance, especially in the open office environments. here there was both a risk that you may be disturbed by noise from others, but conversely, you must also be careful not to disturb your “colleagues”. several respondents also mentioned that was is a risk of interruptions and that you may be disturbed in your work and lose concentration. it could e.g. be about distractions from “colleagues” or distracting activities in the community, such as table tennis and friday bar. furthermore, one of the respondents also mentioned that there could be a danger that you may become too involved in other activities so that you do not reach your main goals. several of the respondents also pointed to the disadvantage of risk of lack of confidentiality. this could be a problem in relation to confidential conversations about the company ’s business and trade secrets, but also internal matters in the company, which one does not necessarily want to deal with in an open forum. respondent #1 explained: “then there is one thing that may have surprised me a little. it is that there is no declaration of confidentiality in the lease. yes, because we sit and listen to what each other is talking about here and it is unrealistic, like imagining that every time you have to say something that must not come out, you have to run into another place. so, i had ... and i have often thought that in principle there should be, in the lease itself, a declaration of confidentiality that what you hear here, you must not pass on.” (respondent #1) few respondents pointed out that it could be a disadvantage that you cannot, to the same extent, give your own stamp and identity (e.g. how to decorate the office) when you are part of a community and that there is a risk that you adapt to a limiting monoculture. few others pointed to other possible disadvantages, such as the risk of sitting alone in the office when many small or one-man businesses are sitting together. few described that there could be a risk of ending up in a cws with competing companies but did not feel that this was a current problem in cwsa. furthermore, there might be a risk of “stealing” each other’s employees. few pointed out that it could be a disadvantage if the transport time to the cws was too long. it could also be a disadvantage if, in addition to office facilities, you need other facilities such as larger storage space. disadvantages and pitfalls in cwsa when the respondents were asked if they perceived anything as demotivating about being part of cwsa, most answered that they did not find anything directly demotivating. however, some respondents mentioned conditions that they experienced as negative. in this connection, conditions as being moved around and risk of sitting alone because there was no one in the office were described. in addition, it could be problematic if you were matched incorrectly with those you sit with, e.g. in connection with disturbances and noise levels. one respondent described that there was always a risk that there would be someone you were not tuned on the same wavelength with. another described the perception that there might be groupings or cliques. respondent #7 explained: “so, it’s still an adult workplace and unlike many other places there are a lot of independent people ... and that means that there are many opinions and i think that if you are a little younger, you could get in trouble on it. ... yes. so, i do not want to say adult bullying, but there may be a slightly harsh tone, and there are some who are out and some who are in. “ (respondent #7) a few others reported perceptions of negative conditions such as expensive canteen service and the experience that more people thought that the facilitator’s “tone of voice” could be a little too “popped”, and that the flexibility in the work space could previously be limited, as the furniture had to be in a certain way there was like a design police. when respondents were asked what they were generally least satisfied with, many reported that there was nothing major, which they were dissatisfied with. however, half of the respondents supplemented with diverse inputs. factors such as irritation about being journal of business models (2022), vol. 10, no. 2, pp. 58-82 6969 moved around, mess (moving clutter) that could take a long time to be cleaned up, problems with finding vacant meeting rooms, and financial conditions such as a slightly expensive canteen service and a slightly high rental price in relation to needs were mentioned here. one respondent mentioned that it could sometimes take a long time to fill the desks (empty seats). one described that there could be more participation in the community from other companies in cwsa, both in relation to general openness and participation in joint events. one respondent explained about the experience of an untapped potential in relation to possible collaboration with icf. suggestions for improvements in cwsa when the respondents were asked if they have suggestions for improvements, there was an immediate response from half. the proposals were partly about improving the physical practical framework. mention was made here of better administration of the meeting rooms in connection with the experience of meeting rooms which have been booked but were not used. in addition, suggestions were made for improving the design and atmosphere of the meeting rooms, which were perceived as sterile and boring. this could have an impact when customers are invited to cwsa. it was pointed out that the internal communication app was simple and boring and should be improved. in addition, there was a proposal to set up telephone boxes for use in private and confidential conversations. in addition, one respondent suggested an improved level of service regarding the handling of necessary practical matters. other proposals revolved around social and professional conditions. here a proposal was made for a common place where the companies in cwsa could have lunch together. also, a desire was expressed for activities that could link the companies in cwsa closer together, e.g. more frequent common breakfast. in addition, a suggestion was put out about a small team that could give advises on basic issues, e.g. legal assistance, as well as a desire for more internal network groups between the startups with e.g. same customer segment. few respondents pointed to suggestions for improvement that relate to the role of the facilitator. in this connection, it was suggested that the facilitator was properly familiar with all the startup companies in cwsa and their individual competencies, so that their know-how could be used and applied, e.g. in connection with various events. this respondent felt rejected by an offer of assistance and generally believed that the internal resources could be better utilized. another respondent found that the facilitators’ attitude, as well as dialogue and handling of human relationships, could be perceived as dismissive, which was unfortunate. the respondent believed that it might be due to stress or lack of experience. one respondent experienced that the facilitator’s behaviour might seem to be too “popped” (smart) and as being a little too much on “the big innovation trend”, which resulted in that the behaviour could be perceived as less credible or as acting. the respondent suggested that one focused more on getting the internal companies to tell more to each other, instead of it being constantly external speakers that were invited in. that would create a greater cohesion. knowledge sharing and innovation in cwsa in the interviews, questions were asked related to the respondents’ experience of knowledge sharing, sparring and collaboration in cwsa. several of the respondents told that they have established collaboration with other companies in cswa. business collaborations between groups of two to three startup companies were described. some collaborated on specific projects and others on sharing customer base. such collaborations must be presumed to involve knowledge sharing and sparring. few respondents have a direct collaboration with icf, which they have had already in connection with becoming part of cwsa. in addition, several respondents explained about sparring with the other members and facilitator about specific issues, and about the purchase and sale of products and services between the companies in cwsa. when it came to sparring, it was again assumed, as with collaboration, that it also includes knowledge sharing. several of the other respondents said that they shared knowledge with the other companies in cwsa. often it occurred randomly and was of an informal nature, e.g. at events and morning meetings. few respondents stated that they did not yet experienced so much but were journal of business models (2022), vol. 10, no. 2, pp. 58-82 7070 interested. in general, all respondents reported an experience that they share knowledge, or would be open to do it when an opportunity arise. activities on the question of whether there were specific initiatives and activities that could promote knowledge sharing and professional collaboration, many of the respondents mentioned events where external speakers came in. some used these events a lot and described them as inspiring and with a good opportunity to ask questions and network. others did not often participate in these activities and believed that it was not necessarily something you could actually use for anything. many of the respondents also reported about joint breakfast meetings and other weekly meetings. these activities were popular, with large attendance. these kinds of meetings had elements of a professional nature but also provided an opportunity for informal social dialogue, which many of the respondents were happy about. several respondents mentioned social activities such as summer party, christmas lunch, friday bar as well as yoga and meditation. and some of the respondents stressed that the social activities mattered the most. lunch meetings or business lunches where the startups could meet and explain to each other what they were doing and receive input from each other, were activities that few of the respondents explained has existed in the past. however, one of them told that it unfortunately died out, due to lack of support from the companies in cwsa, probably due to the meeting time. other respondents talked about similar networking activities that they had not used enough. few described an app used for internal communication as a way to get in touch. also, facilitator had arranged workshops on various processes around starting a business. furthermore, there had previously been an overview board with pictures of the members of cwsa and a note where you could write down “what i want to know and what i can share”. none of these had been maintained. however, one of the respondents described that it would be a good idea to resume and improve the initiative with the overview of members in order to create more contact. one respondent emphasized the importance of having ongoing activities to keep up the spirit. contact surfaces in cwsa all respondents described that they, to a greater or lesser degree, have contact of a professional and social nature with other companies in cwsa. most of the respondents had some contact with the facilitator as well. this usually took place in relation to practical matters or networking. networking at the request of the facilitator had in several cases resulted in contact with icfs innovation department, which as earlier mentioned is placed in cwsa. however, the respondents generally reported that this contact with the innovation department had so far not been followed up or did not have a major impact on their business. many reported no contact with icfs innovation department and some even had the impression that the innovation department was a closed department or was not interested in the rest of cwsa. few others described the contact as superficial, or that they had no knowledge of the department or even know where they were sitting. finally, few respondents reported that they had contacts with employees from other departments in icf. the contact was described by many as informal, which often took place randomly, sometimes through social activities. few of the respondents explained that it was a mixture between formal and informal contact. several of the respondents said that the facilitator has tried to establish contacts for the startups. few explained about contact that had been important to them while others mentioned that they did not had success with the experience, or that they had not achieved much with it. suggestions for how to promote knowledge sharing and cooperation in cwsa many respondents described proposals, which should increase awareness of the individual startup companies’ competencies and activities. some suggested activities that continuously support opportunities to tell each other about their company and projects. several believed that the breakfast meetings would suit well for that purpose, as many members of cwsa participated in this activity. among other things, it was proposed that e.g. 5 companies got “2 minutes of fame” at each meeting, and 5 minutes for pitch speeches by occasion. other respondents suggested activities with fewer participants at a time, e.g. workshops or network journal of business models (2022), vol. 10, no. 2, pp. 58-82 7171 meetings with up to 10 participants, where companies could present a topic, their project or about their company and subsequently spar and create dialogue with inputs and questions. in addition, there were suggestions to place an overview board in the entrance area or by the coffee machines with information, such as the logo of the companies and where in the building the companies were located. the respondent believed, that if you know what others are doing, then you are more likely to turn to them. thus, the opportunity for collaboration can grow. another respondent suggested similar overviews in the form of a catalogue. a further proposal mentioned that the tv screens in the common areas could be used to show short videos about the companies including information about their competencies and activities. this could possibly also be used to offer knowledge sharing, and the respondent would personally like to offer a seminar in the area of own competencies. few also pointed to the possibility of informing about themselves on the facilitator ’s official website. it was important to be able to share competencies in a large community. in connection with the mentioned proposals, some respondents expressed the desire to brand their company partly for knowledge sharing and collaborations, but also in order to do business as well internally in cwsa as externally. in addition to the proposals, a single respondent believed that one should be aware of the size of the companies sitting in cswa. the respondent experienced that while you feel the interdisciplinary knowledge and competencies among the smaller companies, the few large companies in the cwsa isolated themselves and run their own show. there was no interaction with them. according to another respondent, the same view applied in relation to icf. an overview of activities which can promote knowledge sharing, sparring and collaboration in coworking space is shown in figure 2. knowledge sharing sparring collaboration • internal communication app • overview board / catalogue of the companies with pictures • short information videos with presentations of the companies • awareness of the individual startup companies' competencies and activities e.g. 2 minutes of fame or 5 minutes pitch • events with external speakers • joint meetings and social activities to enhance professional end social informal dialogue • workshops on various processes around starting a business • business lunches and networking activities where companies meet and explain what they are currently doing and receive input from each other • workshops or network meetings with up to 10 participants, where companies present a topic, their project or information about their company to subsequently spar and create dialogue with inputs and questions • branding of the individual companies, for knowledge sharing and collaborations to do business internally and externally • sharing of customer base • collaboration on specific projects note: many of the activities can be promoted by the facilitator figure 2. activities which can promote knowledge sharing, sparring and collaboration in coworking space journal of business models (2022), vol. 10, no. 2, pp. 58-82 7272 the role of the icf in relation to cwsa when the respondents were questioned why the icf had chosen to invest in cwsa, most of them had a perception that on a broad scale matched icfs official stated intentions, as mentioned in the case description. at the same time, several of the respondents believed that the reason for the investment was to rent out vacant business premises. few described other reasons, such as that the establishment of cwsa contributed to the icfs prestige and brand value, in-house resources, as well as insight into the startup culture. in addition, one of the respondents believed that the main purpose was to support the startup environment. when asked whether icf had an impact on the decision to become a part of cwsa, many of the respondents explained, that the fact that cwsa was located at the head office of a well-established company provided a form of security and safety in their tenancies. in this connection, several of the respondents also pointed at the good physical environment, where some, in this connection, expressed their gratitude for icf having invested in and contributed to the financing of cwsa, which provided a reasonable rent for the startups. furthermore, one of the respondents pointed out that the ability to draw on the resources of the icf could play a role, and however stressed, that the interaction with the well-established firm, in order to be complete, requires planning and effort from both parts. few of the respondents explained that they had become part of cwsa due to an existing collaboration with icf. also, some of the respondents did not believe that icf had any influence on their choice to become part of cwsa. as earlier mentioned, three of the respondents reported about a specific collaboration with icf. in relation to which role icf played for the respondents individual startup, several of the respondents highlighted that they were a customer of icf. few underlined that the relationship was based on the fact that icf was their landlord, while others emphasized the benefits of the practical and physical conditions in cwsa. few of the respondents described that they felt as a part of something bigger and pointed to the possibility of potential collaboration with an experienced incumbent firm, with a large interface in the society. in general, most expressed that they could be interested in collaborating with icf. potential business model innovation beside the three respondents who already collaborated with icf, many respondents described that they, to some extent, have had icf in mind in relation to potential collaboration. however, it had not yet resulted in any actual collaborations. when the respondents were asked if icf had made it clear how they could fit into their business, most thought that this was not the case. they described that no inquiries were received and that nothing proactive had been done by icf. as described previously, several of the respondents reported about situations where the facilitator had mediated information to icf, which had resulted in meetings. here, the respondents did not experience any clear feedback. some considered whether it was because icf was not interested. only one reported about being outreaching with positive results. several of the respondents were convinced that icf possesses knowledge and resources that could fit into their business. one commented, that a large company could contribute with e.g. financial capital, staff and knowledge. half assumed that this was the case while few explained that they unfortunately did not know the icf so well. conversely, most of the respondents believed that they possessed knowledge and resources that could fit into icfs business. many stated this with a great conviction. three of them were already collaborating with icf, as previously mentioned. several of the respondents were of the opinion that their knowledge and resources constituted an unused potential for icf. respondent #3 underlined: “there is a gigantic potential and i simply don´t understand that you don´t make better use of that potential. i simply don´t get it.” (respondent #3) suggestions for the icf to improve knowledge sharing, learning and collaboration generally, the respondents described conditions regarding lack of visibility and contact from icfs side, which resulted in untapped potentials for collaborations. many respondents came up with journal of business models (2022), vol. 10, no. 2, pp. 58-82 7373 suggestions, which they believed could improve this relationship. some respondents pointed out that the contact and thus the strength lies in the random situations that arise from the constellation. in this connection, it was proposed that the monthly breakfast meetings should be held more frequently. to increase contact and the link to icf, an “icf hour” could be arranged, e.g. in continuation of the breakfast meetings. at a fixed place and time, an icf employee should be available to answer icf-related questions concerning e.g. practical matters, establishing contact in icf regarding ideas and products or possible job opportunities. another respondent explained about an earlier experience and appreciation of a visible contact person from icf and expressed that this was now a shortcoming. moreover, one respondent pointed out that the internal communication channel used in cwsa could be used to make icf more visible. one respondent explained that by offering job opportunities to the startups in cwsa, icf could show a helping, paternal role. another suggested that, as owner of an innovation environment like cwsa, it could be “a strong card in hand” to be able to say that you can help startups with funding. an “introductory package” with benefits, similar to those of the employees of icf, had also been proposed. this could contribute to the feeling of being like a “real icf employee” and to have sympathy for the firm. one respondent commented that there was a need for ongoing contact with some employees from icf. they should signal that they have the will to look for opportunities. in this connection, other respondents suggested that employees from icf could give presentations, e.g. about their products, solutions, projects or operational challenges and needs. this could give the startups in cwsa opportunities to react and contribute. other respondents came up with similar proposals that icf should more proactively open up for dialogue on collaborative development activities. it could e.g. be in form of weekly or monthly sessions or network meetings with specific themes, possibly related to development or optimization within icf, and with the possibility of knowledge sharing and sparring. one respondent added to have experience of such collaboration with icf and told that it had benefits for both parts. furthermore, one respondent suggested a more radical solution. instead of placing one group of employees from icf in cwsa, they could be divided into three or four groups. then establish rotation offices where the employees from icf were put together with startup companies in cwsa to make a kind of “forced rotation”, e.g. every third month. the respondent explained that just sitting together could bring value. the respondent had experienced something similar before where the employees were against it from the beginning but loved it afterwards. finally, one respondent was of the opinion that when it was decided to establish an in-house cws within an incumbent firm, action is needed for the investment to yield a return and it requires a change in culture you cannot just copy a product without knowing the function. it was pointed out, that apparently a link is missing between the management’s decision and the startups in cwsa. thus, the respondent proposed that a steering group should be established in icf, to manage and utilize the potentials and the gains, when an incumbent firm is part of a cws. the property and facilities itself are not the way to the goal. the incumbent firm is the strong part that can afford to facilitate and take profits home. based on the findings, strategies for an incumbent to promote collaboration and bmi in cws are suggested in figure 3. discussion the present case study approach makes it possible to recognize snapshots of an in-house cws as a new business constellation. while in general the case study does not bring generalizable facts, the results can be transferred as empirical insights contributing to an enhanced understanding of detailed aspects of the phenomenon of an in-house cws as a new initiative to bmi. the study contributes to a deeper understanding of how the startups perceive to be a part of this setup for potential collaboration with an incumbent host firm. in addition, the study can help to identify, benefits and barriers for the parts involved. journal of business models (2022), vol. 10, no. 2, pp. 58-82 7474 it is demonstrated that conditions which motivate the startups can be categorized in to social, professional and physical factors, as shown in figure 1. similar factors were previously shown to be important for the motivation of users of cwss in general (weijs-perrée et al., 2019). this implies that the motivation factors for the startups in the present case seem to be independent of the participation of an incumbent firm. overall there is good agreement between the startups initial expectations, the perceived general good framework • rent out vacant business premises at a reasonable rent • good physical office environment which offer security and safety in tenancies • benefits similar to the employees of the incumbent e.g. introductory package to feel like a part of incumbent • give feeling of being part of something bigger • incumbent can have a helping, paternal role e.g. by offering job opportunities and funding ongoing visibility and contact • contribute to brand value and prestige for all parts • visibility through internal communication channel • visible contact person from the incumbent on a fixed date and time to answer questions, increase contact and link • involvement in professional and social activities e.g. breakfast meetings. strength lie in the random situations that arise from the constellation • bring incumbent employees and startups closer together e.g. office space with forced rotation knowledge sharing • signal the will to look for opportunities – e.g. presentations on incumbent’s products, solutions, projects, challenges and needs to give opportunity to react an contribute • opportunities to learn from each other e.g. insight to startup culture, increased in-house resources, experience from incumbent with a large interface in society • proactively open up for dialogue and collaborative development activities e.g. sessions or network meetings with possibility for sparring and knowledge sharing explore and exploit potentials • opportunity of customer relationships • requires planning and effort from both parts • incumbent steering group to manage and utilize potentials and gains figure 3: strategies for an incumbent to promote collaboration and business model innovation in cws journal of business models (2022), vol. 10, no. 2, pp. 58-82 7575 benefits of a cws and their experience of what motivates them most by being part of cwsa. this indicates that icf, to a great extent, has created good framework and foundation for their in-house cws. the mentioned social and professional factors also function as a mechanism for knowledge sharing and sparring. as the companies in cwsa are at different stages in the life cycle of their business, there is a good breeding ground for the companies to share experiences and help each other (greiner, 1972). this is supported by the ongoing need for activities, which has been emphasized by the startups. the sense of community and the “collegial” cooperation is however not directly written down in any kind of contract, but rather a consequence of the culture and the constellation. despite the generally positive motivation to be a part of cwsa, possible disadvantages were pointed out, see figure 1. the presence of icf may imply a dominant corporate culture with the risk of affecting the environment. such strong corporate culture of an incumbent firm could tend to be perceived as bureaucratic and be inhibitory to the more agile culture of the startups. this can lead to an unwanted unification of the culture in the cws. in addition, one must also be aware of the individual needs for confidentiality and the risk of competitive disadvantages between the members of the cws. at the time of the study, the interviews indicate that most startups have competencies that could fit into the business of the icf. contrarily, most of the startups think that the icf possesses valuable knowledge and resources that can fit into their business. this results in the perception of an untapped potential for collaboration. in connection with the application process to become part of cwsa, some startups had the impression that the companies were screened to become members of cwsa. it may therefore be, that some of them feel, that they have been selected. thus, some may experience disappointment and lack of interest in their potential collaboration, and therefore feel, that the role of the icf seems to be superficial. it could indicate, that a passive behaviour from the incumbent firm can result in demotivation regarding the lack of collaboration. hence, communication and alignment of expectations between the companies in cwsa and icf should be improved. if missing communication is based on the risk and fear of loss of intellectual property rights, it should be considered how it could be handled. the current form of engagement represents a model of open innovation, as a part of the innovation strategy of an incumbent firm, which has both advantages and disadvantages. at the time of the investigation, the study demonstrates an established collaboration between few startups and the icf. such collaborations can be considered to be beneficial to the incumbent firm as it can be a quick and cost-effective way to solve problems. also, it is pointed out that renting out vacant business premises could be a contributing motive for the investment of the icf. working with startups can contribute to prestige and brand value of the incumbent firm. thus, it can have a positive effect on the perception of the corporate brand among the external customers, partners and future employees. furthermore, implementing an in-house cws can have a refreshing effect on the corporate culture. the incumbent firm can be inspired by the entrepreneurial mindset which can help to get awareness of future trends and the potential of new technologies. earlier studies had discussed different forms of engagements between startups and incumbent firms (weiblen and chesbrough, 2015). in the current constellation, unlike other engagement forms, there is not a direct commitment to a concrete business relationship. the collaboration is rather based on more or less random coincidences and therefore requires an ongoing effort to succeed. thus, there is not necessarily a direct return, in the same way as it is seen in other types of engagement. this is supported in the present study, as the contact in the cwsa often occurs randomly and is often of an informal nature. therefore, it is suggested, that in order to provide value for both parts, an ongoing effort and investment from the incumbent firm is required and should be a standing point on the agenda. if the goal is to create innovation and new business models to secure the future of the incumbent firm, it demands that the organization is open to exploring new opportunities – including radical innovations rather than incremental changes. journal of business models (2022), vol. 10, no. 2, pp. 58-82 7676 another challenge with the model is that it can be complex to operationalize, and it has to adapt to the specific requirements of the initiative (wirtz and daiser, 2018). on one hand, it requires many manhours, planning and possibly also a radical change in the mindset of the incumbent firm, which can be resisted. on the other hand, a strong corporate culture with certain resistance to external ideas that are different, can create tension and resistance. thus, there is a risk of a cultural clash between the startupand corporate culture. on the basis of the investigation, doubts may arise as to whether icf actually, at the present time, wishes to cooperate with the startups in cwsa, as there seem to appear a detachment between the startups and icf. it may be considered whether this could it be due to a bad match between the current companies in cwsa and icf. based on the interviews, it is indicated that several of the startups are of the opinion that icf is only interested in a collaboration if it is directly related to the core business of icf. the question is whether this is correct or whether the icf could in fact reap the benefits of various initiatives, that could contribute to their overall portfolio. if so, it is important that the icf signals and communicates it. if icf, to a greater extent, wishes to include cwsa in their business, they should reconsider the desired strategic return and make a clear placement of responsibility for the realization of the project. to avoid that it will not become a “castle in the air”, it requires both economic and mental resources which probably also require a cultural change. formation of a steering group, which can design specific initiatives, could be considered, including increased initiatives for icfs visibility and dialogue with the startups. furthermore, icf could continuously perform a systematic follow-up by adding cwsa as a fixed item on the agenda. overall, engaging with startups can have several benefits for incumbent firms. it can create the foundation to increase innovation in the organization and enable it to move faster, more flexibly and to promote radical innovation. different forms of engagement can support different key goals of the incumbent firm. thus, it is important that the incumbent firm is clear about the desired outcome and that the collaboration is linked to the strategic goals of the organization (weiblen and chesbrough, 2015). conclusion the present case study investigates the constellation of an in-house coworking space, a recently emerged engagement form between an incumbent firm and startups, which relies on the principles of open innovation. the study revealed physical, social and professional conditions as important motivation factors and general benefits for the startups to participate in the cwsa. furthermore, good agreement was found between their initial expectations and the reported experience. generally, there is a good physical framework, which contributes to a positive atmosphere. the feeling of being a part of a larger community with “colleagues” and the possibility of participating in professional activities seems to promote knowledge sharing, sparring and collaboration between the startups. the contact in cwsa often occur randomly, with an informal nature. the above mention conditions can however possess downsides and barriers. there are risks of distracting activities, unfortunate matches or groupings between the members and social and professional inactivity. nevertheless, the startups express wishes of more ongoing activities to elucidate increased knowledge of their individual competencies to better use their know-how. most of the startups were aware of the intention of icfs establishment of cwsa. at the same time, the rental of vacant premises, prestige and brand value for the icf were perceived as contributing factors for the investment. the presence of the incumbent firm provides a form of security and safety for the startups. most of the startups expressed, that they could be interested in collaborating with icf. at the time of the study, only few had an active collaboration with icf, while others primarily were customers or perceive themselves as tenants. several meant that the icf possesses knowledge and resources that could fit into their business, and many were convinced that the opposite is the case, as well. most of the startups, however, did not experience that icf clarify how they can fit into their business. thus, cwsa is perceived to constitute an untapped potential for icf. journal of business models (2022), vol. 10, no. 2, pp. 58-82 7777 the study indicates, that if icf wants a greater return of their investment, they should improve visibility and communication and to a greater extent signal the willingness to look for opportunities for collaborations. we do not know the exact reason for the perceived lack of activity. this could be due to several reasons, as for example a mismatch between the incumbent firm and the startups, concerns about intellectual property rights or cultural clashes and resistance to accepting external opinions and ideas. and essentially, the question could be asked if the incumbent firm is ready for radical business model innovation? in conclusion, the present constellation seems to represent an ideal investment with both economic, social, professional and cultural capitals – and, in the future, seems to be a promising contribution to innovation in incumbent firms with an open mind. limitations and future research the study was primely performed to investigate the motivation to be a part of a cws like cwsa, how knowledge transfer and collaboration between the actors take place and the role of the incumbent firm in this specific constellation, all perceived by the startup companies. based on official statements from the icf, we know their motivation to establish cwsa and the official goal with the project, as a part of their bmi. this was moreover supported by informal conversations with employees from the innovation department. however, formal interviews with employees from icf have not been conducted. this would have made it possible to find similarities, difference, and major gaps between the startups and the icf. despite that the single case study does not provide generalizable facts, it nevertheless has generated an in depth understanding of the complexities which occur in the social world in relation to the constellation of an in-house cws and have provided results that can inform the existing theory in the field. furthermore, the present case study illustrates a snap shot of the ongoing process and the current study does not deliver follow-up results, which possibly could be done in the future. in the future, more studies are needed to evaluate the value of in-house cwss for bmi in incumbent firms. especially, what is needed to optimize the model and the yield, for the incumbent firm as well as the startup companies? existing literature underlines that the question on how to achieve bmi has been largely neglected (taran et al., 2022). thus, future studies could be done to evaluate the proposed strategies for an incumbent to promote collaboration and bmi in cws, which were suggested based on the results of the study. journal of business models (2022), vol. 10, no. 2, pp. 58-82 7878 references amit, r. and zott, c. (2001), value creation in e-business. strategic management journal, 22 (6–7), 493–520. bagnoli, c., massaro, m., ruzza, d. and tonlolo, k. (2020), business models for accelerators: a structured literature review, journal of business models, vol.8, no. 2, pp. 1-21. bednář, p., mariotti, i., rossi, f. and danko, l. (2021), the evolution of coworking spaces in milan and prague: spatial patterns, diffusion, and urban change. in orel, m., dvouletý, o. and ratten v. (eds.), the flexible workplace: coworking and other modern workplace transformations (pp. 81-96). springer international publishing. https://doi.org/10.1007/978-3-030-62167-4_5 boer, h. and bessant, j. (2004), organising for continuous innovation. published as boer, h. and bessant, j. (2004), organisering af continuous innovation. in: johansen, j. and riis, j.o., fremtidens produktion i denmark, copenhagen: dansk industri, pp. 77-99. bogers, m., sund, k.j., villarroel, j.a. (2015), the organizational dimension of business model exploration: evidence from the european postal industry. in: foss, n.j., saebi, t. (eds.), business model innovation: the organizational dimension. oxford university press. capdevila, i., (2013), “knowledge dynamics in localized communities: coworking spaces as microclusters”, available at: ssrn electronic journal. 10.2139/ssrn.2414121. https://papers.ssrn.com/sol3/papers. cfm?abstract_id=2414121 (accessed 27 january 2020) chesbrough, h. (2003), “the era of open innovation” mit sloan management review, vol. 44, no. 3, pp. 35-41. chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning, 43: 354363.  chesbrough, h. and chen, e.l., (2013): recovering abandoned compounds through expanded external ip licensing. california management review, vol 55, no. 4, pp. 83-101. christensen, c. m. and raynor, m. e. (2003), the innovator’s solution: creating and sustaining successful growth. harvard business school press. egfjord, k. f-h., and sund, k. j. (2020). do you see what i see? how differing perceptions of the environment can hinder radical business model innovation. technological forecasting & social change, 150, 1-10. flyvbjerg, b. (2006), ‘five misunderstandings about case-study research’, qualitative inquiry, vol. 12, no. 2, pp.219–245. foss, n.j. and saebi, t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go? journal of management, 43 (1), 200–227. frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013). the 4i-framework of business model innovation: a structured view on process phases and challenges. int. j. prod. dev, 18 (3–4), 249–273. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414121 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414121 journal of business models (2022), vol. 10, no. 2, pp. 58-82 7979 fuzi, a., clifton, n., and loudon, g. (2014), ”new in-house organizational spaces that support creativity and innovation: the co-working space”, r & d management conference 2014, stuttgart, available at: https://www. researchgate.net/publication/263298239_new_in-house_organizational_spaces_that_support_creativity_ and_innovation_the_co-working_space (accessed 27 january 2020) gandini, a. (2015), “the rise of coworking spaces: a literature review”, ephemera, theory and politics in organization, vol.15, no. 1, pp. 193-205. golonka, m. (2021), coworking vs corpoworking: realistic perspective. in orel, m., dvouletý, o. and ratten v. (eds.), the flexible workplace: coworking and other modern workplace transformations (pp. 81-96). springer international publishing. https://doi.org/10.1007/978-3-030-62167-4_5 greiner l., (1972) evolution and revolution as organizations grow, harvard business review, vol. 50, no. 4, p. 37. gryszkiewicz, l., lykourentzou, i. and toivonen, t. (2016a). innovation labs: leveraging openness for radical innovation? international journal of innovation management, 4(4), 68–97. gryszkiewicz, l., lykourentzou, i. and toivonen, t. (2016b, november 3). innovation labs – 10 defining features. ssir. https://ssir.org/articles/entry/innovation_labs_10_defining_features heinzel, v., georgiades, s. and engstler, m. (2021). corporate coworking – a catalyst for collaboration, creativity, and innovation. in orel, m., dvouletý, o. and ratten v. (eds.), the flexible workplace: coworking and other modern workplace transformations (pp. 81-96). springer international publishing. https://doi.org/10.1007/9783-030-62167-4_5 horn, d. and keyzer, e. (2014), “corporates & startups: hip, but not happening”, kpmg, available at: https://assets.kpmg/content/dam/kpmg/pdf/2016/05/new-horizons-2014-1.pdf (accessed 27 january 2020) jensen, h. and sund, k.j. (2017), the journey of business model innovation in media agencies: towards a threestage process model. journal of media business studies, 14 (4), 282–298. jones, d., sundsted, t. and bacigalupo, t. (2009), i`m outta here – how coworking is making the office obsolete, not an mba press, brooklyn/austin. kim, s. k. and min, s. (2015), business model innovation performance: when does adding a new business model benefit an incumbent? strategic entrepreneurship, 9(1): 34-57. kohler, t. (2016), “corporate accelerators: building bridges between corporations and startups”, business horizons, vol. 59, no. 3, pp. 347–357. kvale, s. (2003), interview, en introdiktion til det kvalitative forskningsinterview, hans reitzels forlag, 1. udgave, 9. oplag, københavn. mitchell, d.  and  coles, c.  (2003), “the ultimate competitive advantage of continuing business model innovation”, journal of business strategy, vol. 24, no. 5, pp. 15-21. https://www.researchgate.net/publication/263298239_new_in-house_organizational_spaces_that_support_creativity_and_innovation_the_co-working_space https://www.researchgate.net/publication/263298239_new_in-house_organizational_spaces_that_support_creativity_and_innovation_the_co-working_space https://www.researchgate.net/publication/263298239_new_in-house_organizational_spaces_that_support_creativity_and_innovation_the_co-working_space https://assets.kpmg/content/dam/kpmg/pdf/2016/05/new-horizons-2014-1.pdf https://assets.kpmg/content/dam/kpmg/pdf/2016/05/new-horizons-2014-1.pdf https://www.emerald.com/insight/search?q=carol coles https://www.emerald.com/insight/publication/issn/0275-6668 https://www.emerald.com/insight/publication/issn/0275-6668 journal of business models (2022), vol. 10, no. 2, pp. 58-82 8080 nagy, g. and johnson, b. (2016), “harnessing the potential of co-working”, fraunhofer iao / haworth, available at: https://bellia.net/wp-content/uploads/2017/03/harnessing-the-potential-of-coworking-81444.pdf (accessed 27 january 2020) nagy, g. and lindsay, g. (2018), “why companies are creating their own coworking spaces”, harvard business review, september 24. 2018, available at: https://hbr.org/2018/09/why-companies-are-creating-their-owncoworking-spaces (accessed 27 january 2020) orel, m. and dvouletý, o. (2020). transformative changes and developments of the coworking model: a narrative review. in v. ratten (ed.), technological progress, inequality and entrepreneurship, (pp. 9–27). cham: springer. orel, m., dvoulety, o. and ratten, v. (2021), “the flexible workplace coworking and other modern workplace transformations”, springer international publishing. https://doi.org/10.1007/978-3-030-62167-4 parrino,  l.  (2013), ”coworking: assessing the role of proximity in knowledge exchange”,  knowledge management research & practice, vol. 13, no. 1, pp. 261–271.  reed, b. (2007), “co-working: the ultimate in teleworking flexibility”, network world, available at: https://www. networkworld.com/article/2287504/co-working--the-ultimate-in-teleworking-flexibility.html (accessed 27 january 2020) reuschl, a. j. and bouncken, r. b. (2018). coworking-spaces: how a phenomenon of the sharing economy builds a novel trend for the workplace and for entrepreneurship. review of managerial science, 12(1), 317–334. snihur, y. and tarzijan, j. (2018). managing complexity in a multi-business-model organization. long range planning, 51(1): 50-63. sosna, m., trevinyo-rodríguez, r.n. and velamuri, s.r. (2010), business model innovation through trial-and-error learning: the naturhouse case. long range planning, 43 (2), 383–407. spinuzzi, c. (2012), “working alone together coworking as emergent collaborative activity”, journal of business and technical communication, vol. 26, no. 4, pp. 399-441. spreitzer, g. m., garrett, l. e and bacevice, p. (2015), ”should your company embrace coworking?” mit sloan management review, vol. 57, no. 1, pp. 27-29. sund, k. j., bogers, m. and sahramaa, m. (2021), managing business model exploration in incumbent firms: a case study of innovation labs in european banks. journal of business research, 128, 11-19. sund, k. j., bogers, m., villarroel fernandez, j. a. and foss, n. j. (2016). managing tensions between new and existing business models. mit sloan management review, 57(4): 8-10. taran, y., boer, h. and lindgren, p. (2015), a business model innovation typology, decision sciences, 46(2), 301331. taran, y., boer, h. and nielsen, c. (2022), the business model innovation process: preparation, organization and management. (1 udg.) routledge. routledge studies in innovation, organizations and technology. https://bellia.net/wp-content/uploads/2017/03/harnessing-the-potential-of-coworking-81444.pdf https://hbr.org/2018/09/why-companies-are-creating-their-own-coworking-spaces https://hbr.org/2018/09/why-companies-are-creating-their-own-coworking-spaces https://doi.org/10.1007/978-3-030-62167-4 https://www.networkworld.com/article/2287504/co-working--the-ultimate-in-teleworking-flexibility.html https://www.networkworld.com/article/2287504/co-working--the-ultimate-in-teleworking-flexibility.html journal of business models (2022), vol. 10, no. 2, pp. 58-82 8181 teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2-3): 172-194. teece, d.j. (2018), business models and dynamic capabilities. long range planning. 51 (1), 40–49. thagaard, t. (2004), systematik og indlevelse. en indføring i kvalitativ metode, akademisk forlag, 1. udgave, københavn. tushman, m. l. and o’reilly, c. a. (1996). ambidextrous organizations: managing evolutionary and revolutionary change. california management review, 38: 8−30. yin, r. k. (2018), case study research and application design and methods (6. edition). london: sage applied social research methods series. viki, t. (2017), the corporate startup – how establishes companies can develop successful innovation ecosystems. devente. von hippel, e. (2005), democratizing innovation, mit press, cambridge, ma. weiblen, t. and chesbrough, h. w. (2015), “engaging with startups to enhance corporate innovation”, california management review, vol. 57, no. 2, pp. 66-90. weijs-perrée, m, van de koevering, j. and arentze, t. (2019), analysing user preferences for co-working space characteristics, building research & information, vol. 47, no. 5, pp. 534-548. wirtz, b.w. and p. daiser (2018), business model innovation processes: a systematic literature review, journal of business models, vol. 6, no. 1, pp. 40-58. wirtz, b. w., gottel, v., and daiser, p. (2016), business model innovation: development, concept and future research directions. journal of business models, vol. 4, no. 2, pp. 1–28. wirtz, w.b., pistoia, a., ullrich, s. and göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, 49(1): 36-54. zott, c., amit, r. and massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. smallbizlab, 2017, available at: https://www.smallbizlabs.com/2017/12/coworkingforecast.html (accessed 27 january 2020) gcuc, 2017, available at: https://gcuc.co/2018-global-coworking-forecast-30432-spaces-5-1-million-members-2022/ (accessed 27 january 2020) https://www.smallbizlabs.com/2017/12/coworkingforecast.html https://gcuc.co/2018-global-coworking-forecast-30432-spaces-5-1-million-members-2022/ https://gcuc.co/2018-global-coworking-forecast-30432-spaces-5-1-million-members-2022/ journal of business models (2022), vol. 10, no. 2, pp. 58-82 8282 about the authors kathrine friis-holm egfjord is a phd fellow at roskilde university, denmark. she holds a bsc in business administration and an msc in economics and business administration, both from roskilde university. her doctoral research focuses on incumbent organizations and processes of business model innovation. the project is partly industry-funded. she has private sector experience as a project manager and research consultant and has previously worked within the insurance and telecom industries. journal of business models (2014), vol. 2, no. 1 pp. 6-18 6 the practice of creating and transforming a business model petri ahokangas1 & jenni myllykoski2 abstract purpose: the paper explores the dynamics of business model creation and transformation as practices. design/methodology/approach: the paper is conceptual and exploratory in nature and builds on the practice / action learning approach. findings: the paper presents an action research based framework for approaching and understanding business model creation and transformation as practices. these practices are rooted in managerial and entrepreneurial experience through the exploration and exploitation of business opportunities and competitive advantages. practical implications: from a managerial and entrepreneurial perspective, the findings of the paper highlight the role and dynamism of the business context and of continuous assessment of the business model in business model creation and transformation. originality/value: the paper proposes a novel framework for business model creation and transformation and sees them as practices. it also connects business models to opportunity and advantage exploration and exploitation. keywords: business model creation, business model transformation, practices, business opportunities, competitive advantage. 1: oulu business school, department of management and international business, petri.ahokangas@oulu.fi 2: oulu business school, department of management and international business please cite this paper as: ahokangas, p. & myllykoski, j. 2014, ‘the practice of creating and transforming a business model’, journal of business models, vol. 2, no. 1, pp. 6-18. journal of business models (2014), vol. 2, no. 1 pp. 6-18 7 1. introduction the term business model has become one of the keywords of contemporary business (zott, amit, and massa, 2011; onetti et al., 2012). the term denotes not only a practical tool but also an object of analysis in research (zott et al., 2011). however, understanding the dynamic side of business models—especially how they are created or changed in practice—by referring solely to existing research, is problematic from two standpoints. first, while there have been many attempts to define the concept (see zott et al., 2011 and onetti et al., 2012) and as many to capture the essence of business models (see linder and cantrell 2000; chesbrough, 2010; mcgrath, 2010; sosna et al., 2010; osterwalder and pigneur, 2010), we find a research gap arising from the fact that scholars have paid surprisingly little attention to the processes of creating and transforming business models despite there being an implicit assumption of an underlying process dimension in the business model concept. second, the dynamics between the business model concept and the relevant business context— sometimes referred to as the business environment— where it is applied appears often rather obscure in the prior research. the business context has in most cases been reduced to customers, channels, partners, and suppliers, focusing on value creation and capture (osterwalder and pigneur, 2010; zott and amit, 2010). again, we find a research gap attributable to only a few research papers having systematically considered the dynamics of the development of the business model in its business context (markides, 2006; teece, 2010). given the above considerations, we argue that there is a need for a research approach that enables the contextual unfolding of the dynamics of business model creation and transformation. we want to emphasize the ways in which managers and entrepreneurs perceive the situations in which business models are created and transformed, and the processes involved. in this paper, we adopt the experiential learning perspective, which offers a new way of looking at business model creation and transformation as parallel practices of visioning, strategizing, performing, and assessing (torbert, 1991; meyer, 2003; torbert 2004). these parallel practices build upon the territories of experience—the outside world, self-sensed behaviors and feelings, the realm of thought, and the realm of vision/attention/intention (torbert and taylor, 2008)—that influence managers and entrepreneurs when they make judgments concerning action. scholars have noted that it can be difficult to learn from action without a continual shifting of awareness between and among these territories (fisher and torbert, 1995; meyer, 2003). further, the practice-oriented thinking applied in this paper introduces a fresh view on what is meant by the business context, as it highlights the focal actors’ knowledge and experience relevant to action, and indeed, experience and knowledge are rooted in action. by referring to both the creation and transformation of business models, we want to highlight that there is an experiential and time difference between the original creation of the business model and its subsequent transformation or change—even though the basic idea of the business model as a concept remains the same. the practices of visioning, strategizing, performing, and assessing involve the territories of managerial/ entrepreneurial experience, and through these practices the business model can lead the company to competitive advantage when exploiting a business opportunity in a business context. reflecting this processual approach, we adopt a strong orientation toward practices, where action (tikkanen et al., 2005), business context (teece, 2010), and experiential learning (sosna et al., 2010) all play an important role when researching business models and, especially, when researching the dynamics of creating and transforming business models. from these starting points, this conceptual paper seeks to explore the following question: how can business model creation and transformation be approached as practices? the term practice can itself be approached from several standpoints. in this paper we build mostly on the practice-based perspective (sole and edmondson, 2002; swan et al., 2007, corradi et al., 2010), which emphasizes the collective, situated, and provisional nature of knowledge, connotes doing, and involves the awareness and application of both explicit (e.g., theories, concepts, tools, procedures) and tacit (e.g., rules of thumb, shared worldviews, capabilities) elements of knowledge in the social, historical, and structural contexts in which action takes place. thus, we assume that business models are seldom the creations of, or transformed by, single individuals but are instead created and transformed by a group of journal of business models (2014), vol. 2, no. 1 pp. 6-18 8 individuals, since they require doing, i.e., action, and are rooted in the experience and knowledge of the focal actors. this paper aims to contribute by specifically discussing business models from the creation/transformation point of view, and by rooting that discussion in the fields of strategy and entrepreneurship. we begin by reviewing the business model literature from three standpoints by looking at how the business model concept has been approached in earlier research, how business models have been seen from a processual perspective, and how the context of business models has been understood. we continue by connecting the business model to the concepts of business opportunity and competitive advantage by paying particular attention to the exploration and exploitation of both opportunity and competitive advantage as the key elements of business model creation and transformation. we propose a framework for approaching business model creation and transformation as a managerial or entrepreneurial practice. the proposed framework relates business model creation and transformation practices to the exploration and exploitation of business opportunities and competitive advantages. we conclude by discussing the theoretical and managerial implications and the limitations of our research. 2. creating and transforming business models in extant research business models in current literature among the vast number of different definitions of the business model concept (zott et al., 2011 and onetti et al., 2012), two central issues appear repeatedly: the business model as a representation of the logic of value creation and capture (shafer et al., 2005; teece, 2010), and the structure, architecture, or framework of the business (teece, 2010; george and bock, 2011; mason and palo, 2012). these two areas aspects enable the business model concept to connect abstract-level strategy (i.e., theoretical thinking) to its implementation on a practical level (i.e., action) (osterwalder and pigneur, 2002; richardson, 2008). the reason the concept of the business model has attracted such attention among practitioners and academics is down to its impact on a firm’s competitive advantage; especially in today’s turbulent, global business environment (richardson 2008; mcgrath 2010; teece 2010). a business model connects the firm and its external business environment, customers, competitors, and society (teece, 2010). a business model can act as a pathway to competitive advantage (teece, 2010; zott et al., 2011) built upon a business opportunity. for example, zott and amit (2010) see the exploitation of a business opportunity as the overall objective of the firm’s business model. in the opportunity landscape, a business model can be viewed as the cognitive link between an entrepreneurial appraisal of the opportunity and its exploitation (fiet and patel, 2008). since the emergence of the business model concept within the e-business context (see timmers 1998; amit and zott, 2001; osterwalder 2004; wirtz, schilke and ullrich, 2010), the business model literature has generally been focused on identifying the central elements of the business model construct (see for example, onetti et al., 2012; shafer et al., 2005; richardson, 2008; osterwalder and pigneur, 2010; zott and amit, 2010; mason and spring, 2011). owing to the amount of attention paid to business model elements, business models have usually been regarded as static descriptions. however, a more dynamic and processual approach to the business model is needed to match today’s complex, turbulent, and uncertain business environment (kagermann, osterle and jordan, 2011). an important notion by morris et al. (2005) is that the business model is never static but develops continuously through specification, refinement, adaptation, revision, and reformulation. thus, when adopting or building a view of the business model, not only the content (i.e., the “what”), but also the process (i.e., the “how”) aspects of the business become important (zott et al., 2011). business model creation and transformation processes a processual approach calls for a closer examination of the business model creation and transformation journal of business models (2014), vol. 2, no. 1 pp. 6-18 9 processes. business model creation has usually been regarded as a complex and dynamic process characterized by uncertainty, experimentation, and learning (chesbrough, 2010; mcgrath, 2010; teece, 2010). for new businesses, the business model can be fairly informal and implicit, but it evolves gradually through trial and error (morris et al., 2005). in their case study, sosna et al. (2010) divided the evolution of a business model into two phases: the first involves experimentation and exploration, and the second is the exploitation phase. both are closely connected to, and shaped by, experiential learning. for established businesses, the transformation of an existing business model brings special challenges to the creation stage of a new business model. for example, an organization will often be forced to deal with conflicts (e.g., relationship conflicts) and trade-offs between the old and new ways of doing business (markides, 2006). the new business model may even demand that existing businesses be cannibalized in the course of the transformation process (teece, 2010). transforming the business model means changing the organization as well (linder and cantrell, 2000), and the activities and logic related to the new business model can be incompatible with the status quo (markides, 2006; chesbrough, 2010). owing to such difficulties, established organizations have favored an incremental form of business model transformation (linder and cantrel, 2000) in which, once again, experimentation and learning are crucial (mcgrath, 2010; sosna et al., 2010). as an alternative, firms have also been found to trial multiple business models at the same time (brown and gioia, 2002). thus, for both new and established businesses the need to evaluate the suitability of the business model means that it has to be evaluated against the business context and further calibrated in order to find an optimal fit with the environment (teece, 2010). it appears evident that the business context has a major impact on both business model creation and transformation. table 1 summarizes the current literature on the creation and transformation of a business model, building on the three elements of change proposed by pettigrew (1990): content, process, and context. when analyzing the business model literature through these elements, an interesting finding that arises is that the meaning of the context to business models has rarely been discussed, as the major part of the literature has focused on the content aspects to the extent that the process aspects of the business model remain relatively underexplored. business model: from opportunity to competitive advantage the processes through which new business models are created, and existing ones transformed, take place in a business context. the contemporary business model literature provides two concepts relating business models with the external business context, i.e., competitive advantage and business opportunity. as discussed, a business model can act as a pathway to competitive advantage (teece 2010; mcgrath 2010; zott et al. 2011) built upon a business opportunity. second, zott and amit (2010) see the exploitation of a business opportunity as the overall objective of the firm’s business model. consequently, more detailed discussion of the business model, and these two key concepts, business opportunity and competitive advantage, is merited. the business opportunity and competitive advantage are the key constructs to connect the business model to the dynamics of the business context when we are discussing business model creation and transformation as managerial or entrepreneurial practices. the opportunity-seeking behavior and processes are described in the field of entrepreneurship (alvarez and barney, 2007 and 2010; shane and venkataraman, 2000). eckhardt and shane (2003: 336) define entrepreneurial opportunities as “situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships.” the discussion around opportunities has largely focused on the ways in which entrepreneurs become involved with new opportunities (whether they are discovered or created), but what happens afterwards has rarely been discussed. identifying an opportunity is not enough since the opportunity must then be realized (mainela and puhakka, 2009). ardichivili et al. (2003) are among the few scholars to have discussed opportunity identification and development as a process. their basic argument is that elements of opportunities are recognized, but journal of business models (2014), vol. 2, no. 1 pp. 6-18 10 table 1. business model creation and transformation. business model creation business model transformation content business model conceptualizations: • an “architecture” (e.g. timmers, 1998; teece, 2010), a “recipe” (e.g. baden-fuller and morgan, 2010; sabatier et al., 2010), a “narrative” (magretta, 2002; george and bock, 2011), “cognitive map” (chesbrough, 2010), a “design” (smith, binns and tushman, 2010) or “actualization of decisions and actions” (tikkanen et al., 2005) for competitive advantage. business model definitions: • “a business model defines how the enterprise creates and delivers value to customers, and then converts payment received to profits” (teece, 2010; 173). • “...a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network” (shafer et.al., 2005: 202). • “...the design of organizational structures to enact a commercial opportunity” (george and bock 2011: 99). business model elements: • strategic choices, value network, create value, capture value (shafer et al., 2005) • value proposition, the value creation and delivery system, value capture (richardson, 2008) • focus (what?), modus (how?), locus (where?) (onetti et al, 2012) • no internal limitations to business model content • linked with external opportunity • innovativeness, novelty, efficiency, inimitability (e.g. teece, 2010; zott and amit, 2010; george and bock, 2011) • possible conflict with existing and new bm content à cognitive barrier for inventing new bm (e.g. markides, 2006; chesbrough, 2010) process • adapting / reacting to emergent changes in environment (wirtz et al. 2010) vs. proactively leading the industry evolution (demil and lecocq, 2010). • sequential, continuous process: specification, refinement, adaptation, revision, and reformulation (morris et al., 2005), exploration – exploitation duality (sosna et al., 2010). • experimenting, learning and managerial cognition shape the process (sosna et al., 2010) • design elements: content, structure and governance • breaking down the existing logic within the market • implementation as important as the content • uncertainty shape the process (e.g. chesbrough, 2010; teece, 2010; zott and amit, 2010) • change of cognitive frames needed • cannibalization of the existing bm • timing important • incremental vs. radical change • continuous process (e.g. shafer et al., 2005; chesbrough, 2010; mcgrath, 2010; teece, 2010; hacklin and wallnöfer, 2012). continues on next page journal of business models (2014), vol. 2, no. 1 pp. 6-18 11 table 1. business model creation and transformation. context • uncertain, turbulent, dynamic with increased power in business networks / ecosystems (kagermann et al., 2011), competitive advantage being temporary (d’aveni et al., 2010). • business models are calibrated in context (teece, 2010) and developed in interaction with their social context including the society, competitors and customers (tikkanen et al., 2005) • possibility of disrupting the current market with a new bm (e.g. chesbrough, 2010; teece, 2010) • threat of newcomers with novel bms • possible channel conflicts (e.g., chesbrough, 2010; mcgrath, 2010; teece, 2010) the actual opportunities are made, not found. this in turn is based on a cyclical and iterative process that involves the recognition, evaluation, and development of opportunity. ardichivili and colleagues describe how initially opportunities are just simple concepts, but are elaborated as the development process proceeds. through a more precise definition of market needs, customer benefits, users, and resources, the opportunity progresses first to become a business concept, and then ultimately matures into a business model. the key strength of their approach is that it goes beyond the first stage of the process, the discovery of the opportunity (see shane and venkataraman, 2000), and examines how that opportunity is developed into a real, established business. the important notion is that realizing the opportunity involves designing and implementing a business model (george and bock, 2011). however, success in the implementation of the business model is not enough to create a competitive advantage: the business model itself has to meet customer needs and be non-inimitable, as successful business models tend to be imitated rather quickly (teece, 2010). thus, if a firm is to establish a competitive advantage based upon an opportunity, its business model has to be differentiated, effective, and efficient. furthermore, the elements of the business model have to work as a system (teece, 2010), one that extends beyond organizational boundaries and involves the exchange partners of the focal firm (zott and amit, 2010; nielsen and bukh, 2011). the business model concept fosters a new, dynamic approach within strategic management in terms of competitive advantage. mcgrath (2010) discussed two traditionally recognized views of competitive advantage: industry positioning and the resourcebased or dynamic capability views. she argued that in today’s economy, competitive advantages are rarely sustainable and therefore continuous engagement with changing customer value creation, as well as experimentation with new business models (chesbrough, 2010), are necessary to complement the long-term development of an industry position, resources, and capabilities. the business model as a concept is closer to action, and therefore working on the business model improves the conditions managers work under when making decisions during the ongoing search for temporary competitive advantage in turbulent environments (mcgrath, 2010). in this field of opportunities and competitive advantage, it is important to address the processual dynamics of organizational development through the concepts of exploration and exploitation originating from march’s seminal work on organizational learning and adaptation (1991 and 2006). we argue that the tension between exploration and exploitation can improve our understanding and descriptions of the processes continued from previous page journal of business models (2014), vol. 2, no. 1 pp. 6-18 12 of business model creation and transformation. exploration refers to the pursuit of what might come to be known through creativity, experimentation, and learning. exploration is characterized by activities intended to recognize new ideas and opportunities that could become the foundation of future sources of competitive advantage. in contrast, exploitation is defined as the “application of established competence to problems” (march 2006: 205), which is centered on the refinement, focusing, and efficiency-based routines that are the foundation of the current competitive advantage (march, 1991). operating in an environment that is unfamiliar and ever changing requires both exploration and exploitation, but owing to limited resources within organizations there is a tension between the two and it is hard to find a balance between them (march, 1991 and 2006). exploration and exploitation can be seen as two interconnected processes running during the creation or transformation of the business model, where exploration leads to exploitation through learning, experimentation, and an explicit exploitation decision. thus, exploration can be seen as a “seeking” process and exploitation as a “doing” process (see shindehutte and morris, 2009). in this paper, we propose to connect the processes to the interplay between business opportunities and competitive advantage. following this, the seeking of opportunities (i.e., exploration) follows a decision to exploit those opportunities (see choi and shepherd, 2004). similarly, we argue that the creation of competitive advantage can be divided into exploration and exploitation phases, in other words, exploration of the competitive advantage leads to exploitation through experimentation, learning, and an exploitation decision. thus, we identify the exploration and exploitation of opportunity, and of advantage, as processes running in parallel with the creation and transformation of a business model. 3. business model creation and transformation as practices as in all organizational action, it is important to note that in reality there can be fundamental differences in business model creation and transformation, both between firms and within firms over time. we argue that the business model becomes fully comprehensible only by attaching it conceptually to action in its business context. this can be seen as one of the primary reasons why there is no consensus over the definition of a business model in the earlier research because without a contextual understanding, the definition of the concept inevitably remains vague. the territories of experience approach elaborated by torbert (1991 and 2004) and meyer (2003) offers a novel way to systematically approach business model creation and transformation as an organizational practice; visioning, strategizing, performing, and assessing business models in context. in this context, visioning is concerned with the long-term intentions, futures, purposes, and aims of the business; strategizing with planning and implementing the content and process of the business model; performing with doing business with the business model; and assessing with the observed consequences and effects of action. managers’ and entrepreneurs’ specific experiences of applying and developing business models (action) can be expected to stimulate reflection upon experience (kolb, 1984; saunders, 1997; meyer, 2003), thus leading to a refined understanding of business models, their conceptualizations, and the contexts of the businesses in question. any attempt to better understand business model creation and transformation means relating them to the practices—visioning, strategizing, performing, and assessing—that illuminate the exploration and exploitation of the opportunities and advantages of the business. figure 1 below depicts a conceptual framework for approaching business model creation and transformation as practices. we argue that from a practical (managerial or entrepreneurial) point of view, business model visioning is related to the exploration of opportunity and advantage; business model strategizing to the exploration of advantage and exploitation of opportunity; business model performing to the exploitation of opportunity and advantage; and business model assessing to the exploitation of advantage and exploration of opportunity. in addition, we argue that business model creation as a practice starts and ends with visioning, whereas the practice of business model transformation starts and ends journal of business models (2014), vol. 2, no. 1 pp. 6-18 13 with performing. these practices are examined in more detail below. picture 1. business model creation and transformation as practices. to start with visioning, business model creation as a practice can be seen to be concerned with the future (mcgrath, 2010) as it is about creating something new. it requires questioning whether the organization or the team has the opportunity and the advantages required to do business. the embryonic business model needs to be framed collectively by those involved in the possible future events envisioned (mayer, 2003) and that frame can then used to explore the opportunity and possible advantages needed or at hand. potentially there can be numerous opportunity–advantage combinations to be considered as possible options for doing business. during strategizing, the opportunity is shaped into a real business model description (ardichivili et al., 2003) once the business opportunity to be exploited has been chosen, but the advantages required to make doing business viable may not be evident. the focal actors’ lack of experience of the situation may thus strongly influence business model creation. only in the act of performing is the chosen business model tested against the exploited business opportunity and advantages at hand (sosna et al., 2010). during performing, the feedback from action can lead to a change of any of the practices related to the business model, be that a change of the business model, the strategy in question, or a change of emphasis in terms of what is important to those involved (torbert and taylor, 2008). in the assessing phase, the consequences of action based on the business model and the competitive advantages exploited are evaluated against business opportunities in a wider sense, not only against the exploited opportunity but also against possible alternative opportunities. during this process, the boundary between assessing and visioning practices may become blurred since all meaningful assessment of a business model should be made with an eye to the future, too. starting with performing, the practice of business model transformation is concerned with the organizational liabilities stemming from doing business with an existing business model (markides, 2006) that exploits the earlier chosen business opportunity with existing advantages. the pressures to change the practices related to the business model, to change the business model or strategy itself, or the attention of those involved are determined by the type and quality of feedback (torbert and taylor, 2008) available. assessing can be seen as a crucial element of business model transformation (teece, 2010), as the scope and scale of the re-explored business opportunities, the respective business model, and exploited advantages may exhibit planned or emergent systemic resistance. moreover, the business context, boundaries, and properties of the business model system may be difficult to change due to their complexity and dependencies, especially in uncertain and dynamic business contexts. in the visioning process, the concern with the future of the business model may vary across its different elements. in addition, there may be conflicting views on the future scale and scope of the re-explored business opportunities and advantages held by the firm, all stemming from prior action. in a similar manner, strategizing can be dependent on prior action and experience, leading to a more limited set of options for planning the implementation or for doing business. thus, the border between strategizing and performing may become blurred for those charged with ending the cycle of business model transformation. to summarize, we argue that the creation of a business model as a practice differs from the transformation of a business model as a practice. the practice of business model creation exists in a business context that may not be well known by those involved with that practice, journal of business models (2014), vol. 2, no. 1 pp. 6-18 14 therefore the opportunity and the advantages for business model creation may remain elusive and undiscovered for some time. in the practice of business model transformation, the liabilities stemming from the existing business model may provide a business context that is too constrained for those involved, and the business opportunities and advantages may be considered fixed. in addition, the business model creation and transformation practices have different starting and end points. in one sense, business model creation can be regarded as conceptually closer to entrepreneurial behavior, since it starts with opportunity-seeking behavior in the form of visioning. on the other hand, business model transformation resembles the traditional view of experiential learning in an organizational business context, where the cycle is started by performing (with the existing business model) and continues with assessing, visioning, and strategizing (meyer, 2003; mead, 2008). in sum, the key difference between the two practices is rooted in the managerial and entrepreneurial experience rooted in action in a business context. 4. discussion and conclusions this study discusses business model creation and transformation as practices, and presents a framework for approaching and understanding business models from the perspective of action. we relate business model creation and transformation as practices to the exploration and exploitation of both business opportunity and competitive advantage in firms, and argue that the business model as a concept becomes fully comprehensible only through action in the business context where it is created. we see business model creation and transformation practices as comprising visioning, strategizing, performing, and assessing with the goal of reaching a competitive advantage regarding a business opportunity. in addition, we relate visioning, strategizing, performing, and assessing to opportunity exploration and exploitation as well as to advantage exploration and exploitation in a specific business context. the exploration and exploitation of opportunities and advantages contribute to the evolution of the business model in a unique way. in practice, they help us to understand why business model transformation is so complex for established companies. ensuring balance and creating a fit between business opportunities and competitive advantage, as well as fostering both exploration and exploitation, present major challenges for companies. furthermore, neither business opportunities nor competitive advantages remain static, meaning that exploration and exploitation are continuous and involve uncertainties for managers and entrepreneurs. we argue that the complexity and uncertainty inherent in today’s business environment (yet which are largely absent from current business model conceptualizations) may be revealed by the framework presented in this paper. in addition, we believe that the framework will help researchers to capture the difference between business model creation and transformation processes as the creation of a new business model is free of the burden of the exploitation of current or previous advantages. we suggest this is a step forward from addressing only business model innovation. the visioning, strategizing, performing, and assessing processes bring a much needed action perspective to business-model-related processes. the driver of these practices that eventually shapes business model creation and transformation is experiential learning. learning and unlearning make the processes continuous; they foster the modification of the existing business model and also create the basis for the exploitation of opportunities and advantages, as well as further exploration related to possible new (or yet to be transformed) business models (sosna et al., 2010). to conclude, the ramifications of the practicebased approach to business model creation and transformation that we have presented include at least three interconnected notions for future research. first, we find a need to define the concept of the business model from a new perspective, that of action. we argue that business models have, in earlier research, often been presented as static and fixed even though the dynamism of all business has been recognized. we see that the contributions of chesbrough (2010), demil and lecocq (2010), zott et al. (2011), onetti et al. (2012), and sosna (2012) have paved the way to seeing business model creation and transformation as processes of experimentation and action, but the practice-based conceptualization of the business journal of business models (2014), vol. 2, no. 1 pp. 6-18 15 model is still in its infancy. second, with the adoption of the practice-based approach, a longitudinal, systemic, and systematic view of business model creation and transformation is unfolding. chesbrough (2010) argued that business models are often far from clear to managers; they typically involve trial and error and require experimentation. this highlights our third interconnected notion, the role of the business context where the business model is created or transformed and the experience of the managers and entrepreneurs involved. discussing opportunities, ardichivili et al. (2003) conceptualized business concepts as maturing into business models in a business context. similarly, teece’s (2010) argument that business models need to be calibrated illustrates the important role played by context, but to date no coherent contextual model or perspective has been presented within business model research. from the managerial or entrepreneurial viewpoint, this paper has several implications. first, it is important to note that the relationship between a firm’s business model and the business context is dynamic and, therefore, that all business models require continuous assessment against the business context and subsequent adjustment or improvement to retain competitiveness. second, the conceptual model presented in this paper reveals the difficulties related to business model creation and transformation, which in turn can help managers and entrepreneurs to better understand the threats and barriers to doing business. finally, the visioning, strategizing, performing, and assessing practices utilized in the framework highlight the importance of managerial action and experiential learning. the limitation of this research is that it presents a conceptual model of business model creation and transformation and does not present empirical data. empirical, longitudinal research on the business model creation and transformation processes would increase our understanding of those practices. we find that the concept of the business model in the context of understanding organizational dynamics remains promising, especially when combined with organizational action, business context, and experimental learning. adopting an action-oriented and practice-based approach to business model conceptualization opens up a processual dimension and brings the concept closer to managerial and entrepreneurial practice. furthermore, when viewed as encompassing the concepts of business opportunity and competitive advantage, the business model clearly has potential to advance our knowledge of contemporary business practices. references alvarez, sa., barney, jb. (2007). discovery and creation: alternative theories of entrepreneurial action. strategic entrepreneurship journal,1: 11-26. alvarez, sa., barney, jb. (2010). entrepreneurship and epistemology: the philosophical underpinnings of the study of entrepreneurial opportunities. the academy of management annals, 4 (1): 557-583. amit, r., zott, c. (2001). value creation in e-business. strategic management journal, 22: 493-520. ardichivili, a., cardozo, r., ray, s. (2003). a theory of entrepreneurial opportunity identification and development. journal of business venturing, 18: 105-123. baden-fuller, c. and morgan, ms. (2010). business models as models. long range planning, 43 (2-3): 156 -171. brown, m.e. and gioia, da. (2002). making things click: distributive leadership in an online division of an offline organization. the leadership quarterly, 13 (4): 397-419. chesbrough, h., (2010). business model innovation: opportunities and barriers. long range planning, 43 (2-3): 354 – 363. choi, yr., shepherd, da. (2004). entrepreneur’s decisions to exploit opportunities. journal of management, 30 (3): 377-395. journal of business models (2014), vol. 2, no. 1 pp. 6-18 16 corradi, g., gherardi, s., verzelloni, l. (2010). through the practice lens: where is the bandwagon of practice-based studies heading? management learning, 41 (3): 265–283. d’aveni, ra., dagnino, gb., smith, kg. (2010). the age of temporary advantage. strategic management journal, 31: 13711385. demil, b., lecocq, x. (2010). business model evolution: in search for dynamic consistency. long range planning, 43 (2-3): 227-246. eckhardt, jt., shane, sa. (2003). opportunities and entrepreneurship. journal of management, 29 (3): 333-349. fiet, jp., patel, pc. (2008). forgiving business models for new ventures. entrepreneurship theory and practice, 32 (4): 749761. fisher, d., torbert, wr. (1995). personal and organizational transformations: the true challenge of continual quality improvement. london: mcgraw-hill book company. george, g., bock, aj. (2011). the business model in practice and its implications for entrepreneurship research. entrepreneurship theory and practice, 35 (1): 83-111. hacklin, f., wallnöfer, m. (2012). the business model in the practice of strategic decision making: insights from a case study. management decision, 50 (2): 166-188. kagermann, h., osterle, h., jordan, jm. (2011). it-driven business models. global case studies in transformation. john wiley and sons, inc.: new jersey. kolb, d. (1984). experiential learning: experience as a source of learning and development. prentice-hall: englewood cliffs, nj. linder, j., cantrell, s. (2000). carved in water: changing business models fluidly. accenture institute for strategic change. mainela, t., puhakka, v. (2009). organising new business in a turbulent context: opportunity discovery and effectuation for ijv development in transition markets. journal of international entrepreneurship, 7 (2): 111-134. magretta, j. (2002). why business models matter. harvard business review, may: 86-92. march, j. (1991). exploration and exploitation in organizational learning. organization science, 2 (1): 71-87. march, j. (2006). rationality, foolishness, and adaptive intelligence. strategic management journal, 27: 201-214. markides, c. (2006). disruptive innovation: in need of better theory. journal of product innovation management, 23 (1): 19-25. mason, k., spring, m. (2011). the sites and practices of business models. industrial marketing management, 40: 1032-1041. mason, k., palo, t. (2012). innovating markets by putting business models to work. paper presented at the 28th imp conference, italy. mcgrath, rg. (2010). business models: a discovery driven approach. long range planning, 43 (2-3): 247–261. mead, g. (2008). muddling through: facing the challenges of managing a large-scale action research process. in: reason, p. and bradbury, h. the sage handbook of action research. participative inquiry and practice. sage: thousand oaks, ca. meyer, jp. (2003). four territories of experience: a developmental action inquiry approach to outdoor-adventure experiential learning. academy of management learning and education, 2 (4): 352-363. morris, m., schindehutte, m., allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research 58: 726-735. nielsen, c., bukh, pn. (2011). what constitutes a business model: the perception of financial analysts. international journal of learning and intellectual capital, 8 (3): 256–271. journal of business models (2014), vol. 2, no. 1 pp. 6-18 17 onetti, a., zucchella, a., jones, m., mcdougall-covin, p. (2012). internationalization, innovation and entrepreneurship: business models for new technology-based firms. journal of management and governance, 16 (3): 337-368. osterwalder, a., pigneur, y. (2002). an e-business model ontology for modeling e-business. paper presenter at the 15th electronic commerce conference, bled. osterwalder, a. (2004). the business model ontology – a proposition in a design science approach. ph.d. thesis, university of lausanne. osterwalder, a., pigneur, y. (2010). business model generation. john wiley and sons: new jersey. pettigrew, a. (1990). longitudinal field research on change: theory and practice. organization science, 1 (3): 267-291. richardson, j. (2008). the business model: an integrative framework for strategy execution. strategic change, 17: 133–144. sabatier, v., mangematin, v., rousselle, t. (2010). from recipe to dinner: business model portfolios in the european biopharmaceutical industry. long range planning, 43 (3/4): 431-447. saunders, pm. (1997). experiential learning, cases, and simulations in business communication. business communication quarterly, 60:1, 97-114. schinehutte, m., morris, mh. (2009). advancing strategic entrepreneurship research: the role of complexity science in shifting the paradigm. entrepreneurship theory and practice, 33 (1), 241-276. shafer, sm., smith, hj., linder, jc. (2005). the power of business models. business horizons, 48 (3): 199-205. shane, s., venkataraman, s. (2000). the promise of entrepreneurship as a field of research. academy of management review, 25 (1), 217-226. smith, wk., binns, a., tushman, ml. (2010). complex business models: managing strategic paradoxes simultaneously. long range planning, 43 (2-3): 448–461. sole, d. and edmondson, a. (2002) situated knowledge and learning in dispersed teams. british journal of management 13 (s2): 17-34. sosna, m., trevinyo-rodríguez, rn., velamuri, sr. (2010). business model innovation through trial-and-error learning: the naturhouse case. long range planning, 43 (2-3): 383-407. swan, j., bresnen, m., newell, s. and robertson, m. (2007) the object of knowledge: the role of objects in biomedical innovation. human relations 60(12): 1809-1837. teece, d. (2010). business models, business strategy and innovation. long range planning, 43 (2-3): 172 – 194. tikkanen, h., lamberg, j-a., parvinen, p., kallunki, j-p. (2005). managerial cognition, action and the business model of the firm. management decision, 43 (6): 789-809. timmers, p. (1998). business models for electronic markets. electronic markets, 8 (2): 3-8. torbert, b. (2004). action inquiry: the secret of timely and transforming leadership. berret koehler: san fransisco, ca. torbert, wr. (1991). the power of balance. sage: newbury park, ca. torbert, wr., taylor, s. (2008). action inquiry: interweaving multiple qualities of attention for timely action. in: reason, p. and bradbury, h. the sage handbook of action research. participative inquiry and practice. sage: thousand oaks, ca wirtz, b., schilke, o. ullrich, s. (2010). strategic development of business models. implications of the web 2.0 for creating value on the internet. long range planning, 43 (2-3): 272 -290. zott, c., amit, r. (2010). business model design: an activity system perspective. long range planning, 43 (2-3): 216-226. zott, c., amit, r., massa, l. (2011). the business model: recent developments and future research. journal of management, 37 (4): 1019-1042. journal of business models (2014), vol. 2, no. 1 pp. 6-18 18 about the authors petri ahokangas received his m.sc. (1992) and d.sc. (1998) degrees from the university vaasa, finland. he is a senior research fellow and adjunct professor at the university of oulu business school, department of management and international business, finland. prior to his university career he worked in the telecoms/software industry. his research interests lie in how innovation and technological change affect international business creation, transformation, and strategies in highly technologyand software-intensive business domains. jenni myllykoski received her m.sc. (2007) from oulu business school. she is currently a doctoral student at the university of oulu business school. prior to her university career, she worked in the telecoms/software industry. her research interests are in the field of company transformation, managerial sense making, and internationalization. br _goback 13 journal of business models (2023), vol. 11, no. 1, pp. 13-26 unique or adjustable business model for distributed ledger technology? efstathios papanikolaou1*, jannis angelis2,3, vassilis moustakis1 abstract we examine whether business model concepts, that demonstrate significant convergence to distributed ledger technology (dlt) attributes, fit to dlt ecosystem characteristics and identify similarities and deflections. we answer the question whether the appropriate dlt business model is totally unique or adjustable and what conditions need to be met. the study follows a conceptual approach that is based on critical examination of three business model types that demonstrate similarities to the business model that an organization needs to adopt in order to fit in dlt ecosystem characteristics. although each one of the network, digital and information business model types demonstrate similarities to dlt business model and reveal some resemblance with it, there are critical parameters that are neither addressed nor partially met. the main contribution of study is the exploration of the adjustable nature of the dlt business. moreover, we highlighted the challenge for dlt ecosystem sustainability, defined and reviewed the conditions that need to be considered for dlt business model design. key words: blockchain; business ecosystem; business model please cite this paper as: papanikolaou, e., angelis, j., and moustakis, v. (2023), unique or adjustable business model for distributed ledger technology?, journal of business models, vol. 11, no. 1, pp. 13-26 1 technical university of crete, dpt.. of production engineering and management, university campus, 73100, chania, greece 2 kth royal institute of technology, lindstedtsvägen 30, 11428, stockholm, sweden 3 ifn research institute of industrial economics, grevg 34, 11345 stockholm, sweden * corresponding author. orcid: 0000-0003-3987-6205 tel.: +30-28210-37251. e-mail address: epapanikolaou@isc.tuc.gr issn: 2246-2465 doi https://doi.org/10.54337/jbm.v11i1.7149 introduction technology itself has no singe objective value. when it is commercialized in some way by a business model, then its economic value becomes apparent (chesbrough, 2010). trust among interacting parties and data openness lie in the center of distributed ledger technology (dlt) innovation, which promises disintermediation, transparency and visibility through a new decentralized way of information processing and sharing (kuhn, yaga, voas, 2019). dlt, such as blockchain, creates attractive opportunities, since mailto:epapanikolaou@isc.tuc.gr https://doi.org/10.54337/jbm.v11i1.7149 journal of business models (2023), vol. 11, no. 1, pp. 13-26 1414 it changes the way that organizations interact, exchange information and create value (van rijmenam, 2019). there is a clear potential of dlt adoption but it has to make fit to the business model. business model can be exemplified as an activity system (amit and zott, 2012) conducted to address the customer, the value proposition, the organizational architecture and the economic dimensions (fielt, 2013). due to dlt traits and benefits that it brings at transactional level, such as disintermediation, transparency, data security, traceability and visibility triggered by near real time access to trusted information without the need of intermediaries and the significant impact that it has in ecosystem value generation, we recognize the need for either business model change or innovation to high level address all four business model basic notions mentioned earlier. dlt brings fundamental changes in the way that value is exchanged, the way the transactions that are executed among ecosystem actors, that way that ecosystems interact, the relationships among ecosystem actors and the way that resources and capabilities change based on capture of new knowledge. this study seeks to explore the potential uniqueness of dlt business model investigating whether existing typologies fully address dlt business model features. due to dlt characteristics we will emphasize dlt network facet and the dynamic character of the respective dlt business ecosystem. our study provides scholars an insight into how the extant business model literature addresses the traits of the dlt conceptualization and to what extent it fits to dlt business model semantics. it allows managers to identify to what extent the business model types that seem to be closer to dlt business model conceptualization fit to dlt business morphology. literature focuses into the technical aspect of technology and little research has been done on how dlt fits to the respective business model. literature that addresses business model and business model innovation mainly focuses on dlt benefits that impact business model redesign needs, such as those addressed through operational capabilities that can be supported by blockchain (li, xue, li and ivanov, 2022; morkunas, paschen, and boon, 2019). other studies focus on the adoption of blockchain and what it means in terms of triggering business model innovation (purusottama, simatupang & sunitiyoso, 2022; tiscini, testarmata, ciaburri, and ferrari, 2020). archetypal patterns of business models levering blockchain technology investigate how blockchain impacts the main pillars of business model literature, meaning value creation, value creation, value propositions (weking, mandalenakis, hein,et al.  2020; tönnissen, beinke, and teuteberg, 2020). to answer the question of whether the dlt business model is totally unique or adjustable, we need to address the conditions that stem from a sustainable dlt business ecosystem. a business model answers the question of how the benefits, driven by dlt adoption, flow back into the company in the form of revenue (schlecht, schneider and buchwald, 2021). it does not assess the attractiveness of the opportunity. while we intensively related to business model literature, we did not use a systematic literature review into business model definitions. business models have always been discussed and described in the context of the organizational concepts of value creation and design (bock and gerard, 2018). the organizational design aspect is defined by the interconnected and interdependent activities of each business dlt ecosystem actor and its directly related with the business model value logic. in a dlt business ecosystem the ‘how ’ dimension of an organization’s value logic is clearly designated by the organizational and ecosystem architecture. the ‘why ’ dimension of the value creation, is associated with the realization of network effects in the ecosystem. in short, a business model creates and captures value (chesbrough, 2007). the latter, for an organization that adopts dlt, is related with the information flow under a data-as-an-asset perception, that supports and reinforces the competitive advantage of the company. what is dlt and how it works dlt allows multiple parties to add cryptographically protected transactions to the ledger in an immutable way that promises decentralization. in short, when digitally signed transactions are posted to the ledger, competing nodes need to approve them and after their validity is verified group them into a block. the https://www.emerald.com/insight/search?q=ambara purusottama https://www.emerald.com/insight/search?q=ambara purusottama https://www.emerald.com/insight/search?q=togar mangihut simatupang https://www.emerald.com/insight/search?q=yos sunitiyoso journal of business models (2023), vol. 11, no. 1, pp. 13-26 1515 blocks are totally ordered, hence preventing a block from being appended if it contains transactions that conflict with transactions of the previous block (mohan, 2019). the latter along with the fact that each dlt network member holds a copy of the shared ledger promise decentralization and immutability in the peer-to-peer network created. decentralization is achieved since the block is broadcasted into the network using the consensus mechanism that, has been initially defined based on the dlt architecture. consensus mechanism is a vital characteristic of dlt architecture, since it represents the method used by network members to reach agreement on whether the information transmitted can be committed to the extant chain of blocks (zhang, xui and liu, 2020). dlt evolution introduced the idea of smart contracts and the development of decentralized applications (dapps), that extend the areas of dlt adoption through the new capabilities they promise. the former refers to the idea of a programmable dlt, where a computer program code stored in dlt blocks is self-executed when predetermined terms and conditions are met (salviotti et al. ,2018). due to the inherent characteristics of the dlt, in respect to its network facet and the network effects created, we approve a business ecosystem approach for our research. similar to the business ecosystem set up, dlt actors create value for actors, while at the same time they maintain their roles in the ecosystem and their loose interconnection. the business ecosystem approach that needs be conceptualized for a dlt network of interacting actors is also supported by the fact that in both formats the large number of interconnected participants and their interdependence for their mutual survival are among their foremost key characteristics (iansiti and levien, 2004). network effects are created in the dlt network, meaning that the more ecosystem actors, the higher the benefits perceived for each individual in the system and the higher the value created by the system define the dlt network facet. the latter is vital for dlt ecosystem sustainability, since dlt ecosystem expansion is crucial for the security of the network (mohan, 2019). the more the actors that adopt dlt and interact, the more value perceived by each individual and the higher the value created by the system. in turn this incentivizes more actors to join the network and therefore the network effects created fuel the expansion of the ecosystem (shapiro and varian, 1999). niche players, as referred in business ecosystem literature (moore 1993; cusumano and gawer, 2002), constitute the group of actors that do not hold a dominant position in the ecosystem, neither control the maximum number of nodes in it, nor aim for leadership by regulating it. however, their participation is critical for the ecosystem expansion and consequently its survival and that role is usually delivered by smes that complement the dominant actors in the dlt business ecosystem create the critical mass participants that its preservation and expansion is directly related with dlt ecosystem sustainability. dlt business model comparison against other business model types to identify the unique or adjustable nature of the dlt business model, we critically examined the business model types that are closer to dlt conceptualization (see table 1). due to its specific characteristics of information exchange, access and validation, dlt defines the type of transactions, interactions, relationships of an organization. it eventually affects decisively the value created and exchanged between interacting parties in the ecosystem. it is therefore evident that the networked and information business model types are concepts close to the dlt business model approach. in addition to that, we examined the digital business model concept, compared against the dlt business model perception due to the fundamental role of information technology in both notions. why dlt business model is not fully addressed by the networked business model type in business model literature there are studies that highlight the network perspective of business models. these studies identify the network of actors as an important business model substance (helander and rissanen, 2005; komulainen et al., 2006), which at first sight seems to be a good match to the dlt ecosystem concept. however, network business journal of business models (2023), vol. 11, no. 1, pp. 13-26 1616 table 1. business model types relative to dlt ecosystem and their main attributes dlt business model attributes that differ network business model coordinated cooperation between a finite set of parties that promote longterm strategic cooperation dlt ecosystem actor relationships can be cooperative, competitive and/or co-opetitive value creation in organization’s strategic business net dlt ecosystem expands beyond the strategic business net of each one of its members the scope is to gain or sustain competitive advantage through information access or technology information access is a value generator but the objective is not necessarily to gain competitive advantage digital business model platform organizes the wealth creating activities dlt architecture sets the boundaries of value creating activities but does not organize them customer, value, partner and financial dimensions are imposed by platform characteristics value creating system is affected by the platform but is not relied on it enterprises compete digitally with their content, customer experience and digitized platforms dlt actors do not necessarily compete on any of these traits. supplier, omnichannel, modular producer and ecosystem driver are the business model categories based on a “know-your-customer” perception only the platform provider in the dlt ecosystem may fall into one of those categories without the need of “know-your-customer” perception transaction validator actors perform a specific role that is not related to the platform provider business model role of complementors to digital or platform ecosystems there is not any such equivalent role in the dlt ecosystem information business model explains how information is collected stored and delivered internally and externally interconnectedness and interdependency is supported and powered by information system integration but value capture, creation and delivery is only partially defined by the architecture. table 1: comparison of dlt business model attributes against other business models journal of business models (2023), vol. 11, no. 1, pp. 13-26 1717 models describe the way that strategic business nets create value (palo and tähtinen, 2011). dlt business ecosystem is not necessarily the coordinated cooperation between a finite set of parties that promote long-term strategic cooperation (zhou et al.  2022). in dlt business ecosystem, member relationships can be cooperative, competitive and co-opetitive (carayannis et al., 2018). on the top of that, dlt business ecosystem expansion beyond the strategic business net of each member, is rather a fundamental factor for the ecosystem sustainability (kwame, kecheng and effah, 2019). why dlt business model is not fully addressed by the digital business model type platforms are considered to be the technological resources that organize the wealth creating activities (shaughnessy, 2016). an organization that adopts dlt, needs to acknowledge that the technology, meaning the dlt architecture, is vital to ecosystem value creation but it is not the driver of the ecosystem benefits that flow back to the company in the form of revenue. it is the leverage of data, seen as resources, that are considered as a value driver. in digital business models the customer, value, partner and financial dimensions are imposed by the platform characteristics (schallmo et al., 2017). in a dlt business net, the set of activities that define the value creating system is affected by the platform but is not relied on it (schlecht, schneider and buchwald, 2021). digital business model frameworks consider that enterprises compete digitally with one or more of three capabilities: their content, customer experience and digitized platforms (woerner and weill, 2018). although this approach can be perfectly applicable to e-business companies, it neither addresses the strategic intent nor can it be considered as measure of effectiveness of any organization that participates in the dlt business network. why dlt business model is not fully addressed by the information business model type information flow, knowledge management and data management are heavily determined by dlt infrastructure and are factors that promote ecosystem value creation (lacity and remko, 2021). however, the effect of the technology itself in dlt ecosystem should not be confused with the information model concept. at company level, the information model explains how information is collected, stored and delivered internally and externally (korpela et al., 2013). in digital business or other platform ecosystems, the information model is almost equivalent in value to the business model. it would describe how ecosystem members integrate their business processes in information systems. in dlt business ecosystems members’ interconnectedness and interdependency is supported and powered by information system integration (xiwei, weber, staples, 2019). trust created in the ecosystem, data management and knowledge creation prospects drive dlt ecosystem value genesis and share logic, irrespective of the dlt architecture adopted (moore, 2006). the need of a business model that addresses dlt ecosystem sustainability role changes, volatility in ecosystem member relationships and knowledge genesis form dlt business ecosystem dynamics (kandiah, and  gossain, 1998). subsequently, dlt business ecosystems are not static. the business model of a dlt business ecosystem member should be dynamic and constantly evolve. organizations that join the dlt business ecosystem constantly learn new and better ways of doing things. they are engaged in multiple differentiated relationships and have the prospect to take up different roles (kandiah, and gossain, 1998). dynamic capabilities literature recognizes that the external environment affects learning (burgelman et al., 2021). at network level, dlt ecosystem dynamics influence learning. new knowledge is created both through problem solving and inter-firm knowledge transfer. access to data and streamlined information flow are inherent characteristics of dlt, that when adopted lead to knowledge genesis in the ecosystem. on the top of that, dlt ecosystem sustainability depends on true member collaboration. we consider that there are specific dlt business ecosystem attributes and dynamics that foster business model changes for the members that need to sustainably participate in it. https://www.proquest.com/indexinglinkhandler/sng/author/lacity,+mary/$n https://www.proquest.com/indexinglinkhandler/sng/author/van+hoek,+remko/$n https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-0 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-1 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-2 https://www.emerald.com/insight/search?q=gajen kandiah https://www.emerald.com/insight/search?q=sanjiv gossain https://www.emerald.com/insight/search?q=gajen kandiah https://www.emerald.com/insight/search?q=sanjiv gossain journal of business models (2023), vol. 11, no. 1, pp. 13-26 1818 dimensions of dlt business model for ecosystem sustainability to conceptualize the dlt business model we need to consider not only the characteristics that it pertains from the business model concepts closer to it but also realize the dimensions of a sustainable dlt ecosystem. the ecosystem approach and its sustainability aspect are notions inextricably linked with the value created and shared through dlt due to the necessity of positive network effects. we reckon trust, power attitude of actors, value of data ownership and relationship type between ecosystem actors as the conditions for dlt ecosystem sustainability (see fig. 1). the dimension of trust in dlt business ecosystem, trust is established by collaboration, cryptography and some clever code, without the need of trusted intermediaries (xiwei, weber, staples, 2019). trust should be recognized not only as an outcome but also as a condition, which needs to be evaluated when an organization that adopts dlt forms or reviews its business model (conway and garimella, 2020). to preserve the dynamic attribute of dlt business ecosystem, we acknowledge that relationships among actors not only switch between competitive, co-opetitive and cooperative but also that these behavioral shapes coexist in the ecosystem (yoon, moon, and lee, 2022). based on literature, trust has been found to have positive effects on network performance (rus, 2005). for small medium-sized enterprise (sme) networks, trust has been proven to be essential for smes to become productive and deliver according to their innovation potential (pittaway et al., 2004). sme participation in dlt ecosystem is vital for its expansion and sustainability. since they hold the role of nondominant players, that create the critical mass for ecosystem safety and survival. collaboration among ecosystem actors requires some level of minimum trust. access to undisputable trusted evidence is precisely what dlt supports. we therefore set trust as the basis of the relationships required for an organization to collaborate and also to improve its efficiency (papanikolaou, angelis and moustakis, 2021). direct evidence, or else direct trust as mentioned in trust literature (mayer, davis, schoorman, 1995), is supported by the decentralized way that data are kept, shared and accessed, without the need of any intermediaries to validate their trustworthiness. data openness, decentralization, immutability, visibility and transparency promised by the nature of dlt transactions allow previously unknown actors to collaborate and set the basis for many forms of value creation for each individual dlt network member (angelis and ribeiro da silva, 2019). access of trusted data sets a strong trust base between interacting parties before they figure 1: pillars of dlt business model sustainability https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-0 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-1 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-2 journal of business models (2023), vol. 11, no. 1, pp. 13-26 1919 establish their relationship. moreover, during their interaction, irrespective of the relationship established among interacting parties, visibility and transparency achieved through dlt adoption due to trusted data access has been proven to be closely related both with their performance. the way that data are accessed, the transparency and visibility demonstrated offer dlt network members the perspective to exploit data and create new data driven knowledge. in dlt networks future participants are incentivized both by knowledge creation prospects and access to collaborative knowledge promised to reinforce the validity of their data driven decisions and evolve their capabilities (papanikolaou, angelis and moustakis, 2021). it is therefore obvious that trust among interconnected parties affects mainly the business model value creation aspect, due to advance opportunities for analysis based on trusted data and capabilities reinforcement through new knowledge creation. the dimension of cooperative relationships between ecosystem actors the combined effort of businesses, that bring together their values to achieve a common purpose of higher results, includes cooperative relationships between businesses with the same focus (lundan, 2002). in cooperative relationships ecosystem members act for common purpose and for common benefit. in a cooperative relationship enhanced by trust, the potential for organizations to share their expertise and knowledge for a common purpose and benefit is increased (ross and lacroix, 1996). although literature demonstrates inconsistent findings in respect to whether cooperation is promoted by trust or the other way round (yamagishi, 2005), it is evident that trust is positively correlated with cooperation (lewicki et al., 2003). dlt business ecosystem members engaged in a cooperative relationship enjoy trust benefits, which in turn leads to higher level of cooperation. that is more obvious in the early stages of the relationship, where cooperation drives trust (conway and garimella, 2020). this specific attribute can be considered as a high value motivational trait for dlt business ecosystem engagement (conway and garimella, 2020). trust boosts ecosystem actor cooperation, since it reduces control, coordination costs, conflict levels and influences knowledge sharing (mooradian et al., 2006). the latter plays a significant role for dlt business ecosystem value creation. the dimension of co-opetitive and competitive relationships between ecosystem actors working together with another ecosystem member that is a competitor in a way that benefits both parties or striving for a goal that cannot be shared, are actor’s traits present in the dlt business ecosystem (mäkinen and dedehayir, 2012). in a dlt business ecosystem, cooperation and trust reinforce each other and enhance its sustainability. complementary to that, competitive and / or co-opetitive relationships and trust in business model design need to be approached with attention. as the business network expands, the probability that disagreement and conflict among some of its member increases. apart from the obvious probability that cooperation between ecosystem system members might change to competitive or co-opetitive relationship, the designed dlt business model must meet another significant challenge. this is related to knowledge sharing (yoon, moon, and lee, 2022; xiwei, weber and staples, 2019). in dlt ecosystem, all economic operators gain better visibility along the network and enhance their information capture capabilities. in the case of non-cooperative relationships, the knowledge sharing attribute of the business network might lead ecosystem actors to reconsider their decision to join the respective dlt ecosystem. one of the benefits when participating in dlt business ecosystems is increased transparency. all economic operators gain better visibility along the network and enhance their information capture capabilities. it is therefore evident that trust not only facilitates but promotes and enhances knowledge sharing in dlt business ecosystem. in the case of non-cooperative relationships, such as competition and co-opetition, the knowledge sharing attribute of the business network might lead ecosystem actors to become more skeptical towards joining or even leaving the dlt ecosystem. in that case business model design should consider trust conditions under the prism of the type of the knowledge shared and the complementarity of business ecosystem actor interests. the underlying logic on that conclusion https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-0 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-1 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-2 journal of business models (2023), vol. 11, no. 1, pp. 13-26 2020 is that these two factors have a direct impact on the cooperative or non-cooperative initiatives (gausdal, svare and möllering, 2016). under those conditions, business model design should capture trust under the prism of shared knowledge and the complementarity of ecosystem actors’ interests (demaio, 2001). ecosystem actor’s power dimension although the concept of power is perceived quite differently by academic disciplines, we considered the definition of the power as an organization’s capacity to influence change in another company (phillips and srai, 2018). that approach refers to all kinds of influence, including those exercised in exchange transactions (hart and saunders, 1997). to achieve deep versus superficial collaboration, as a prerequisite for dlt business ecosystem sustainability, we need to consider dlt expansion but not under the logic of coercing the weaker actors. although in literature power is discussed as the functional equivalent to trust (luhmann, 1979), for dlt business ecosystem expansion trust and power should be examined separately. some authors see power as the greater deterrent to trust, while other researchers underline that when power is used for the purpose of dominance, it diminishes trust and weakens collaboration (kähkönen, 2014). the same applies on dlt ecosystem, where power exercised between two actors is relative to their current ecosystem position and the relationship they wish to develop, to gain a different position in the future (phillips and srai, 2018). rules of collaboration in a dlt business ecosystem are affected by the position and power dynamics developed in the network. power relations affect actors’ intentions to exercise influence other actors or partners, hence imposing a superficial collaboration. in addition to that it configures the motivation of the potential dlt business ecosystem participants to join the network. niche player participation is critical for the dlt ecosystem expansion and survival. dominant players in terms of network relationship, power dynamics, brand or financial strength are positioned at the center of the ecosystem and initially set the rules of collaboration (cusumano and gawer, 2002). this underlines primary the keystone, or else dominant, dlt ecosystem players need to consider the power dynamics that stems by their ecosystem position so that they do not impose superficial collaboration to niche players or allow them to enjoy a disproportionate amount of value created in the network that will eventually discourage their participation in it. value of data ownership increased transparency in a dlt business ecosystem raises some issues with respect to the incentives of its members to disclose formerly private information. one of the main challenges of dlt diffusion is the minimal data to be opened to network (beck et al., 2018). in dlt business ecosystem, certain parties might refuse to do business with each other because they might feel they are providing excess power to the entity that owns and manages data (conway and garimella, 2020). visibility of unique identifiers and related transactional histories raises privacy concerns (bφhme et. al, 2015). transparency is one of the major drivers and properties of dlt (lee and pilkington, 2017) ince digital records are auditable by a predefined set of participants, albeit they are more or less open. dlt applications are based on the benefits of the technology pertaining to decentralization and transparency (rφckeshφuser, 2017). they might see the value of participating in the ecosystem but due to data ownership and management by other entities they might also become skeptical in joining the ecosystem and request restrictions or specific legislation before doing so. it is beyond the scope of this study to dive deep into the mechanism of information interoperability, meaning the exchange and sharing information between distributed and random systems and entities. however, acknowledging that the real value stems from the ownership and management of the data shared, it is nonetheless important to consider that enabling access to and analysis of these new collections of data and information will enable ecosystem members to generate new knowledge (treiblmaier and beck, 2019). data is an asset to the company. data view and transaction driven data sharing among ecosystem journal of business models (2023), vol. 11, no. 1, pp. 13-26 2121 members leads to increased value to the entity that owns and manages data (lake and crowther, 2013). to explore data manipulation possibilities in relation to actor roles in dlt business ecosystem, we focused on the roles of data provider and data originator. data origination is related to data provenance. data provider role is held by the ecosystem actors that can retrieve data from relational data sources. in dlt business ecosystem data originators contribute to data providers’ value creation (janssen and zuiderwijk, 2014; zuiderwijk and janssen, 2014) since almost any dlt ecosystem actor can become a data provider, what is at stake is the visibility depth of data collected by its first tier partners (lee and pilkington, 2017). that will consequently define the value of analysis performed, the knowledge gained and finally the power gained from data access. on the other hand, data management alternatives in dlt business ecosystem give data originator the flexibility to select the level of openness of disclosed data. obviously, this will have a direct impact in data provider’s gained value (kitchin, 2014; grover et. al, 2018). we could therefore conclude, that in terms of the power gained from data ownership and management in a dlt business ecosystem, actors need to select which role they will adopt in it and how they will capture the network value stemmed from their data management approach. put differently, the condition that needs to be considered is what incentivizes data originators to feed data providers and what is the depth of visibility of the data granted. based on that decision the respective business model will acknowledge what routines need to be formulated to capture the value created by the data management approach, as described above. conclusion and discussion dlt is currently receiving significant attention but its commercialization through a business model will unveil its creating potential. in our study we discussed business models under the organizational concepts of value creation and design and adopted an ecosystem. we critically examined three business model types that demonstrate similarities to the business model that an organization needs to adopt in order to fit in the dlt ecosystem characteristics. we explored the main attributes, similarities and differences of each one of the network, digital and information business model types against the dlt business model. we conclude that although each one of those types demonstrates some resemblance with dlt business model, there are critical parameters that are neither addressed nor partially met. to explore the adjustable nature of the dlt business model we addressed the dynamic character of dlt ecosystem. we highlighted the challenge for ecosystem sustainability, defined and reviewed the conditions that need to be considered for dlt business model design that are: relationship type between ecosystem actors that co-exist in the dlt ecosystem, trust, power dynamics between actors and the value of data ownership based on the data provider and data originator traits of the interacting actors. further development of this study could focus on defining what elements could have been included in the dlt business model and how would they fit in an existing or a new business model ontology. organizations that adopt dlt need to decide what elements constitute the value creation and value capture aspect of their business, considering the conditions described in our study that address dlt ecosystem sustainability. journal of business models (2023), vol. 11, no. 1, pp. 13-26 2222 references amit, r. & zott, c. (2012). creating value through business model innovation. mit sloan management review. 53. 41-49. angelis j. & ribeiro da silva e. (2019). blockchain adoption: a value driver perspective. journal of business horizons. vol 62, issue 3,307-314, https://doi.org/10.1016/j.bushor.2018.12.001 beck, r. & müller-bloch, c. & king, j. (2018), governance in the blockchain economy: a framework and research agenda. journal of the association for information systems. 19. 1020-1034, doi:10.17705/1jais.00518 bock, a. & gerard g. (2018), the business model book: design, build and adapt business ideas that thrive. united kingdom: pearson education limited bφhme, r., et. al (2015). bitcoin: economics, technology, and governance. journal of economic perspectives, 29(2), 213–238, doi: 10.1257/jep.29.2.213 burgelman, r. & floyd, s. & laamanen, t. & mantere, s. & vaara, e. & whittington, r. (2021), strategy processes and practices. doi:10.1093/oso/9780190090883.003.0028. carayannis, e.g., grigoroudis, e., campbell, d.f.j., meissner, d. & stamati, d. (2018), the ecosystem as helix: an exploratory theory-building study of regional co-opetitive entrepreneurial ecosystems as quadruple/quintuple helix innovation models. r&d management, 48: 148-162. https://doi.org/10.1111/radm.12300 chesbrough, h. (2010), business model innovation: opportunities and barriers. long range planning. 43. 354363, (2010), doi:10.1016/j.lrp.2009.07.010 chesbrough, h. (2007), why companies should have open business models. mit sloan management review. 48. 22-28+91 conway d. & garimella k. (2020). enhancing trust in business ecosystems with blockchain technology,” in ieee engineering management review, vol. 48, no. 1, pp. 24-30, 1, doi: 10.1109/emr.2020.2970387 cusumano, m.a. & gawer, a., (2002). the elements of platform leadership. mit sloan management review. spring, 51-58 demaio h. (2001). b2b and beyond. new business models built on trust, p258-310 john willey & sons, us fielt, e. (2013). conceptualizing business models: definitions, frameworks and classifications. journal of business models. 1. 85-105 gausdal a., svare h.& möllering g. (2016) why don’t all high-trust networks achieve strong network benefits? a case-based exploration of cooperation in norwegian sme networks, journal of trust research, 6:2, 194-212, https://doi.org/10.1080/21515581.2016.1213173 hart, p. & saunders, c. (1997), power and trust: critical factors in the adoption and use of electronic data interchange. organization science 8 (1), 23–42. doi:10.1287/orsc.8.1.23 https://doi.org/10.1016/j.bushor.2018.12.001 http://dx.doi.org/10.17705/1jais.00518 https://doi.org/10.1111/radm.12300 http://dx.doi.org/10.1016/j.lrp.2009.07.010 https://doi.org/10.1080/21515581.2016.1213173 http://dx.doi.org/10.1287/orsc.8.1.23 journal of business models (2023), vol. 11, no. 1, pp. 13-26 2323 helander, n. & rissanen, t. (2005), value-creating networks approach to open-source software business models, frontiers of e-business research, pp. 840-54 iansiti m. & levien r. (2004). the keystone advantage: what the new dynamics of business ecosystems mean for strategy, innovation and sustainability. harvard business school press. janssen, m., & zuiderwijk, a. (2014). infomediary business models for connecting open data providers and users. social science computer review, 32(5), 694–711. https://doi.org/10.1177/0894439314525902 kähkönen, a.k. (2014), the influence of power position on the depth of collaboration, supply chain management: an international journal, vol. 19 no. 1, pp. 17-30., doi:10.1108/scm-03-2013-0079 kandiah, g.  and  gossain, s.  (1998), reinventing value: the new business ecosystem”,  strategy & leadership, vol. 26 no. 5, pp. 28-33. https://doi.org/10.1108/eb054622 kitchin. r (2014). the data revolution, p80-100, sage, us komulainen, h. & mainela, t. & sinisalo, j. & ta¨htinen, j. & ulkuniemi, p. (2006), business model scenarios in mobile advertising, international journal of internet marketing and advertising, vol. 3 no. 3, pp. 254-70, doi:10.1504/ijima.2006.010739 korpela, k. & kuusiholma, u. & taipale, o. & hallikas, j. (2013), a framework for exploring digital business ecosystems. proceedings of the annual hawaii international conference on system sciences, doi:10.1109/ hicss.2013.37 kuhn r. d. & yaga d., voas j, (2019) rethinking distributed ledger technology, in computer, vol. 52, no. 2, pp. 68-72, doi: 10.1109/mc.2019.2898162. kwame s.p & kecheng liu, & effah, j. (2019), digital business ecosystem: literature review and a framework for future research, international journal of information management, volume 47,p 52-64, issn 0268-4012, https://doi.org/10.1016/j.ijinfomgt.2019.01.002. lacity m. and remko v.h . (2021). what we’ve learned so far about blockchain for business, mit sloan management review, , cambridge vol. 62, iss. 3,  48-54. lake, p., crowther, p. (2013). data, an organisational asset. in: concise guide to databases. undergraduate topics in computer science. springer, london. https://doi.org/10.1007/978-1-4471-5601-7_1 lee, j. h., & pilkington, m. (2017), how the blockchain revolution will reshape the consumer electronics industry. ieee consumer electronics magazine, 6(3), 19–23, doi:10.1109/mce.2017.2684916 lewicki, r. j. & saunders, d. & barry, b. & minton, j. (2003), essentials of negotiation. new york, ny: mcgrawhill/irwin li, g., xue, j., li, n. and ivanov, d.(2022).blockchain-supported business model design, supply chain resilience, and firm performance, transportation research part e: logistics and transportation review, volume 163,102773, issn 1366-5545, https://doi.org/10.1016/j.tre.2022.10277 https://doi.org/10.1177/0894439314525902 http://dx.doi.org/10.1108/scm-03-2013-0079 https://www.emerald.com/insight/search?q=gajen kandiah https://www.emerald.com/insight/search?q=sanjiv gossain https://www.emerald.com/insight/publication/issn/1087-8572 https://doi.org/10.1108/eb054622 http://dx.doi.org/10.1504/ijima.2006.010739 http://dx.doi.org/10.1109/hicss.2013.37 http://dx.doi.org/10.1109/hicss.2013.37 https://doi.org/10.1016/j.ijinfomgt.2019.01.002 https://www.proquest.com/indexinglinkhandler/sng/author/lacity,+mary/$n https://www.proquest.com/indexinglinkhandler/sng/author/van+hoek,+remko/$n https://www.proquest.com/pubidlinkhandler/sng/pubtitle/mit+sloan+management+review/$n/26142/openview/2502933036/$b/cafe3bb826f94586pq/1 https://www.proquest.com/pubidlinkhandler/sng/pubtitle/mit+sloan+management+review/$n/26142/openview/2502933036/$b/cafe3bb826f94586pq/1 https://www.proquest.com/indexingvolumeissuelinkhandler/26142/mit+sloan+management+review/02021y04y01$23spring+2021$3b++vol.+62+$283$29/62/3 http://dx.doi.org/10.1109/mce.2017.2684916 https://doi.org/10.1016/j.tre.2022.10277 journal of business models (2023), vol. 11, no. 1, pp. 13-26 2424 luhmann, n. (1979), trust and power. chichester, uk: wiley lundan s.m. (2002). network knowledge in international business. cheltenham, uk, edgar mäkinen s. j. & dedehayir o. (2012) business ecosystem evolution and strategic considerations: a literature review, 2012 18th international ice conference on engineering, technology and innovation, pp. 1-10, doi: 10.1109/ ice.2012.6297653. mayer, r., davis, j. & schoorman, f. (1995). an integrative model of organizational trust. academy of management review, 20(3):709–734., https://doi.org/10.5465/amr.1995.9508080335 mohan c. (2019). state of public and private blockchains: myths and reality. in proceedings of the 2019 international conference on management of data (sigmod ’19). association for computing machinery, new york, ny, usa, 404–411. https://doi.org/10.1145/3299869.3314116 molm, l.d. (1997), coercive power in social exchange. cambridge university press, cambridge mooradian, t. & renzl, b. & matzler, k. (2006), who trusts? personality, trust and knowledge sharing. management learning, 37(4), 523–540, doi:10.1177/1350507606073424 moore j. (2006). business ecosystems and the view from the firm, the antitrust bulletin vol. 51, no. i, p. 53, 2006. moore j. f. (1993). the death of competition leadership strategy in the age of business ecosystem. ny. harper business morkunas, v.j., paschen, j. & boon, e. (2019). how blockchain technologies impact your business model, business horizons, volume 62, issue 3, pages 295-306, issn 0007-6813, https://doi.org/10.1016/j.bushor.2019.01.009 palo, t. & tähtinen, j. (2011), a network perspective on business models for emerging technology-based services, journal of business & industrial marketing. vol. 26. 377–388, doi:10.1108/08858621111144433 papanikolaou e, angelis j & moustakis v. (2021). implicit business model effects of dlt adoption, procedia cirp, volume 103, pages 298-304, https://doi.org/10.1016/j.procir.2021.10.048. phillips m. & srai j.s. (2018). exploring emerging ecosystem boundaries: ‘defining the game’, international journal of innovation management, vol. 22, no. 08, 1840012 ,https://doi.org/10.1142/s1363919618400121 pittaway, l. & robertson, m. & munir, k. & denyer, d., & neely, a. (2004), networking and innovation: a systematic review of the evidence. international journal of management reviews, 5–6(3–4),137–168, doi:10.1111/j.14608545.2004.00101.x purusottama, a., simatupang, t.m. & sunitiyoso, y. (2022), the spectrum of blockchain adoption for developing business model innovation, business process management journal, vol. 28 no. 3, pp. 834-855. https://doi. org/10.1108/bpmj-06-2021-0408 https://doi.org/10.5465/amr.1995.9508080335 http://dx.doi.org/10.1177/1350507606073424 https://doi.org/10.1016/j.bushor.2019.01.009 https://doi.org/10.1016/j.bushor.2019.01.009 http://dx.doi.org/10.1108/08858621111144433 https://doi.org/10.1016/j.procir.2021.10.048 https://www.worldscientific.com/doi/abs/10.1142/s1363919618400121 https://www.worldscientific.com/worldscinet/ijim https://www.worldscientific.com/worldscinet/ijim https://www.worldscientific.com/toc/ijim/22/08 https://doi.org/10.1142/s1363919618400121 http://dx.doi.org/10.1111/j.1460-8545.2004.00101.x http://dx.doi.org/10.1111/j.1460-8545.2004.00101.x https://www.emerald.com/insight/search?q=ambara purusottama https://www.emerald.com/insight/search?q=togar mangihut simatupang https://www.emerald.com/insight/search?q=yos sunitiyoso https://www.emerald.com/insight/publication/issn/1463-7154 https://doi.org/10.1108/bpmj-06-2021-0408 https://doi.org/10.1108/bpmj-06-2021-0408 journal of business models (2023), vol. 11, no. 1, pp. 13-26 2525 rφckeshduser, n. (2017). typology of distributed ledger based business models. in proceedings of the european conference on information systems (pp. 2202–2217), guimareas. available at. http://aisel.aisnet.org/ ecis2017_rp/140 ross, w. h., & lacroix, j. (1996). multiple meanings of trust in negotiation theory and research: a literature review and integrative model. the international journal of conflict management, 7(4), 314–360,   https://doi. org/10.1108/eb022786 rus, a. (2005). trust and performance: institutional, interpersonal and network trust. in k. bijlsma-frankema & r. k. woolthuis (eds.), trust under pressure: empirical investigations of trust and trust building in uncertain circumstances, pp. 80–104, cheltenham: edward elgar. salviotti, g. et al (2018). a structured framework to assess the business application landscape of blockchain technologies. proceedings of the 51st hawaii international conference in system sciences. 10.24251/hicss.2018.440. schallmo d. & williams c., boardman l. (2017), digital transformation of business models. international journal of innovation management vol. 21, no8, doi:10.1142/s136391961740014x schlecht l., schneider s. & buchwald a. (2021). the prospective value creation potential of blockchain in business models: a delphi study,technological forecasting and social change,volume 166, 120601,issn 00401625, https://doi.org/10.1016/j.techfore.2021.120601. shapiro c. & varian h.r (1999). information rules. harvard business school press. shaughnessy, h. (2016), harnessing platform-based business models to power disruptive innovation. strategy & leadership. 44. 6-14, doi:10.1108/sl-07-2016-0061 tiscini, r., testarmata, s., ciaburri, m. & ferrari, e. (2020). the blockchain as a sustainable business model innovation, management decision, vol. 58 no. 8, pp. 1621-1642. https://doi.org/10.1108/md-09-2019-1281 tönnissen, s., beinke, j.h. & teuteberg, f. (2020). understanding token-based ecosystems – a taxonomy of blockchain-based business models of start-ups. electron markets 30, 307–323 (2020). https://doi.org/10.1007/ s12525-020-00396-6 treiblmaier h. and beck r. (2019). business transformation though blockchain vol i. switzerland: palgrave macmillan, 152-156 van rijmenam, m. (2019). the organisation of tomorrow: how ai, blockchain and analytics turn your business into a data organisation (1st ed.). pg 87-93. routledge. https://doi.org/10.4324/9780429279973 varun grover v, chiang, r.h.l., liang, t & zhang d.  (2018)  creating strategic business value from big data analytics: a research framework,  journal of management information systems,  35:2,  388423, doi: 10.1080/07421222.2018.1451951 weking, j., mandalenakis, m., hein, a.  et al.  (2020). the impact of blockchain technology on business models – a taxonomy and archetypal patterns. electron markets 30, 285–305. https://doi.org/10.1007/s12525-01900386-3 https://doi.org/10.1108/eb022786 https://doi.org/10.1108/eb022786 https://doi.org/10.1142/s136391961740014x https://archive.org/details/informationrules00shap http://dx.doi.org/10.1108/sl-07-2016-0061 https://doi.org/10.1108/md-09-2019-1281 https://doi.org/10.1007/s12525-020-00396-6 https://doi.org/10.1007/s12525-020-00396-6 https://doi.org/10.4324/9780429279973 https://doi.org/10.1080/07421222.2018.1451951 https://doi.org/10.1007/s12525-019-00386-3 https://doi.org/10.1007/s12525-019-00386-3 journal of business models (2023), vol. 11, no. 1, pp. 13-26 2626 woerner s. & weill p. (2018), what’ your digital business model? six questions to help you build the net-generation enterprise. boston massachusetts: harvard business review press xiwei x., & weber i. & staples m.(2019). architecture for blockchain applications, pg3-25,45-79,149-172, springer, uk yamagishi, t. & kanazawa, s. & mashima, r. & terai, s. (2005), separating trust from cooperation in a dynamic relationship: prisoner’s dilemma with variable dependence. rationality and society, 17(3), 275–308, doi:10.1177/1043463105055463 yoon, c.; moon, s. & lee, h. (2022) symbiotic relationships in business ecosystem: a systematic literature review. sustainability, 14, 2252. https://doi.org/10.3390/su14042252 zhang r., xui r. & liu l. (2020). security and privacy on blockchain. acm computing surveys. vol52, issue 3, https://doi.org/10.1145/3316481 zhou, q., zhang, y., yang, w., ren, l. & chen, p. (2022), value co-creation in the multinational technology standard alliance: a case study from emerging economies, industrial management & data systems, vol. 122 no. 9, pp. 2121-2141. https://doi.org/10.1108/imds-12-2021-0782 zuiderwijk, a. & janssen,m. (2014). open data policies, their implementation and impact: a framework for comparison, government information quarterly, volume 31, issue 1, pages 17-29, issn 0740-624x, https://doi. org/10.1016/j.giq.2013.04.003. https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-0 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-1 https://link.springer.com/book/10.1007/978-3-030-03035-3#author-0-2 http://dx.doi.org/10.1177/1043463105055463 https://doi.org/10.3390/su14042252 https://doi.org/10.1145/3316481 https://www.emerald.com/insight/search?q=qing zhou https://www.emerald.com/insight/search?q=yue zhang https://www.emerald.com/insight/search?q=wei yang https://www.emerald.com/insight/search?q=liqin ren https://www.emerald.com/insight/search?q=ping chen https://www.emerald.com/insight/publication/issn/0263-5577 https://doi.org/10.1108/imds-12-2021-0782 58 journal of business models (2022), vol. 10, no. 1, pp. 58-66 documenting the contribution of people to successful business model implementation: an exercise in integrated reporting robin roslender1 and christian nielsen2 abstract the absence of people (employees) from the business model literature is at odds with their pivotal contribution to the value creation, delivery and capture process. as a resource that management is continually challenged to grow, their success in doing so has been identified as an outcome falling within the scope of integrated reporting, an approach currently touted as the new corporate reporting. this short paper suggests a number of employee attributes that might be documented in such reports. please cite this paper as: roslender, r., and nielsen, c. (2022), documenting the contribution of people to successful business model implementation: an exercise in integrated reporting, vol. 10, no. 1, pp. 58-66 1–2 aalborg university business school, denmark issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.7339 https://doi.org/10.54337/jbm.v10i1.7339 journal of business models (2022), vol. 10, no. 1, pp. 58-66 5959 introduction in their 2015 paper nielsen and roslender characterise a business model (bm) in the following way: “[a business model provides] a description of the organisation’s concept for ‘earning ‘money ’ [that] identifies the platform that connects value creation and delivery between the organisation, its stakeholders, and its customers in order to capture value.” (nielsen and roslender, 2015: 265, italics as in original). the context in which this characterisation was originally framed was a continuing lack of engagement with the bm concept by financial accounting and reporting researchers. by the time of publication the international integrated reporting council (iirc) was providing evidence that its integrated reporting (ir) approach to corporate reporting was being subscribed by a growing number of organisations across the globe. the iirc identified the bm as playing a central role within ir, in combination with the asserted necessity to focus on the underlying value creation process (iirc, 2013). as roslender and nielsen (2018) observed, what ir signposts is the need to rethink corporate reporting as “accounting through the business model” for value creation, delivery and capture. despite its potential importance, ir has continued to attract only limited interest from accounting researchers, arguably starving the iirc’s agenda of sufficient oxygen, and potentially hastening ir’s disappearance, much as its similarly iconoclastic predecessor business reporting had in the early 2000s. one field in which ir has attracted a measure of attention from accounting researchers is that of environmental and sustainability accounting. for the most part, however, the narrative is one of disappointment that while in its initial formulation the ir concept promised to ‘integrate’ environmental and sustainability considerations with those of a financial nature, in line with the triple bottom line perspective, following the publication of the iirc’s framework in 2013, such issues were evidently to be accorded less importance. flower (2015) provides an excoriating critique of the iirc’s motivations, becoming the ‘received wisdom’ for critical accounting researchers. roslender and nielsen (2021) reinforces the critique advanced by flower and subsequent researchers, including rowbottom and locke (2016) and humphrey, o’dwyer and unerman (2017). nevertheless, they also encourage colleagues to take a second look at ir, and in particular its hitherto weak engagement with both the bm concept and the value creation process. roslender and nielsen (2021) returns to the above characterisation of the bm, particularly the identification of the importance of customers to organisations seeking sustainable competitive advantage. they argue that during the past 40 years customers have become an increasingly important stakeholder for many organisations, to the point that some observers have identified them as their most important/valuable assets, e.g., peppers and rogers (2005). roslender and nielsen suggest that this should be viewed as a positive development as c21st customers have become more discriminating in their behaviours, thereby progressively wresting control of the marketplace from organisations. rather than abandon ir, the bm and the value creation process, accounting researchers should engage the challenge of taking customers into account (roslender, hart and nielsen, 2021). the value/importance of customers to organisations has been axiomatic to the development of the bm field since the late 1990s, with the value proposition identified as its central focus. not everyone believes customers are the most valuable organisational asset, however, with employees having long been regarded as deserving this accolade. they too are key stakeholders within an organisation, something the iirc acknowledges, identifying human capital as one of the six capitals that ir must now account for and report on. it is therefore surprising to find that the extant bm literature makes little explicit reference to employees. the purpose of this short paper is to promote a debate about how this oversight might be addressed. approach osterwalder and pigneur’s core message is that in order to fashion successful value propositions it is journal of business models (2022), vol. 10, no. 1, pp. 58-66 6060 necessary to understand how best to configure a growing range and diversity of business assets for that purpose. within their business model canvas when describing the key resources building block osterwalder and pigneur initially observe that: “the key resources building block describes the most important assets required to make a business model work……..key resources can be physical, financial, intellectual, or human”. (osterwalder and pigneur, 2010: 34). they continue by acknowledging that: “every enterprise requires human resources, but people are particularly prominent in certain business models.” (p.35). in a subsequent monograph osterwalder, pigneur, bernarda and smith (2014) affirm that an organisation’s key resources are its most important assets (p.xvi), although continuing to refrain from any further elaboration. with some justification, these authors may respond that focusing on employees is not their concern in these texts or that they lack the knowledge and understanding to provide the requisite insights. a more worrying explanation is that they believe the availability of such resources can largely be taken for granted. in the case of human resources, which are also the source of intellectual assets, this is both unfortunate and inaccurate. unfortunate because it is human resources that are the critical driving force in creating and delivering on customer value expectations, and thus should not be overlooked. inaccurate because it has become evident that the ready availability of sufficient key human resources can no longer be assured. in respect of the first observation, that human resources, or hereafter ‘people’, should never be taken for granted, it cannot be claimed that people are the only source of value – both nature and financial capital also have this capacity. nevertheless, as the source of labour power, people are the most critical factor in creating and delivering value for customers, as well as to the providers of financial wealth via the value capture mechanism, and to the broader society and its myriad stakeholders. during the past two generations we have become acquainted with porter’s value chain concept, which identifies the generic process of adding value through the performance of a series of activities undertaken within different business functions (porter, 1985). referring to activities and functions within the value chain in this way obscures the reality that activities are performed by people who are present within the functions in question. while there is now a much greater presence of technology within the workplace, it is under the control of people, having originally been fabricated by people. enthusiasm for extending the scope of artificial intelligence has also had the consequence of focusing on what such intelligence can, in many cases beneficially do, while overlooking what it cannot presently do but that people can. there are ready explanations of why documenting the cruciality of people is downplayed in several quarters, not least the challenge any rectification would pose to the prevailing social arrangements including the social organisation of work. there has never been a time when the demand for and supply of the most talented people have been in full alignment, as a result of which a minority of people has always been able to command higher rewards from employers. to counteract this situation systematic deskilling has been widely pursued, initially among skilled manual workers but subsequently for most blue-collar workers and thereafter many white-collar and professional workers (braverman, 1974). during the past half century a massive expansion of higher education opportunities has been funded to ensure that the supply of knowledge workers has not proved too problematic, combined where possible with their deskilling. the development and diffusion of information and communication technologies that characterise the existence of the information society has largely performed the same function. nevertheless, a ‘war for talent’ has been a continuing feature of the labour market throughout the c21st (michaels, handfield-jones and axelrod, 2001), with employers acknowledging that as the market becomes ever more competitive, it is imperative that organisations are able to attract, recruit, develop and retain the very best people available. although it might seem that such practices have long been a core component of the modus operandi of journal of business models (2022), vol. 10, no. 1, pp. 58-66 6161 the human resources function, the lengths to which many organisations are prepared to go nowadays to ensure that they consistently attract and retain the best talent are extraordinary. in the most progressive organisations such practices are likely to be widespread, consistent with people’s pivotal role in creating and delivering value to customers and the broader society alike. it is not people per se but the myriad attributes they bring to the organisation that constitutes their importance. the most fundamental attributes have been recognised for many years – educational attainments and practical training. over time the average level of individual competence has increased as jobs have required more skills, the continued existence of the generic deskilling process identified above notwithstanding. complementing this pair of attributes is a second pair, those of experience and expertise. these attributes are developed and accumulated over time as people pursue their careers, learning ‘on the job’ as opposed to in the classroom or training facility. in many cases as individuals develop their expertise they become highly specialised, as a result of which they may become more attractive to employers other than their current ones. equally it has also become more commonplace for occupations to become unnecessary, sometimes very suddenly, often in the wake of technological advance. consequently, a willingness to be flexible and prepared to engage in a process of continuous learning have emerged as desirable people attributes, possibly accompanied by a readiness to accept the need for geographical mobility. although always present among employees, nowadays there is often more focus on personal initiative, ingenuity, responsibility and creativity, for people who are comfortable to ‘just do it’. however, the importance of soft skills has become recognised in recent times, e.g., teamworking, ad hoc project leadership, enthusiasm for sharing skills and experience, etc, all of which contribute to the presence of integrated functioning within the workplace. these and similar people attributes constitute the substance of the human (capital) component of the key resources invoked by osterwalder and pigneur. their availability in abundance is required to ensure greater levels of value creation for and delivery to customers, and successful value capture on behalf of shareholders. although this is well-understood within the bm field, little attention continues to be afforded people, and in particular the contribution that reporting people-related information can make to society ’s assessment to the integrity of organisations. it is to this focus that we now move. key insights: ‘taking people into account’ however sincere the assertion that ‘our people are our greatest asset’ might be, in the absence of a robust demonstration of that status it is easy to dismiss these words as an exercise in rhetoric. a century ago paton, one of accounting’s founding theorists, observed that: “in the business enterprise, a well-organized and loyal personnel may be a more important “asset” than a stock of merchandise…….at present there seems to be no way of measuring such factors in terms of the dollar; hence they cannot be recognized as specific economic assets. but let us, accordingly, admit the serious limitation of the conventional balance sheet as a statement of financial condition.” (paton, 1922: 486-7) people were present in the income statement but as costs, and from a fundamental financial management perspective the challenge was to reduce these costs wherever possible. incorporating people in the balance sheet would recognise people as assets, which in turn suggested it was desirable to place a financial (“dollar”) value on them, i.e., on the attributes people brought to the organisation. it took several decades before hermanson identified some sound bases on which this might be done in the context of his human asset accounting approach (hermanson, 1963, 1964). ‘putting people on the balance sheet’ by means of robust financial valuations then became a fertile research field for much of the next decade. it the 1970s it was replaced by a managerial accounting approach focused on understanding the broader cost and benefit implications of human resource journal of business models (2022), vol. 10, no. 1, pp. 58-66 6262 decision-making, labelled human resource accounting. this proved a major research topic for a further decade but quickly waned in the early 1980s, in part because it was regarded as unlikely to deliver cost savings (flamholtz, johanson and roslender, 2020). in the view of its principal advocate, flamholtz, what it did urge managers to do was to “think people’, an imperative that resonates strongly with the content of the previous section. the emergence of human capital accounting (hca) in the later 1990s, and its challenge to continually strive to ‘grow ’ people, was consistent with flamholtz’s motivations. equally significant is that by this time managerial accounting had identified how it might be possible to take people into accounting without recourse to the cost and value calculus (sort and roslender, 2021). many of the key information needs of contemporary management were now recognised to be addressed using relevant non-financial metrics and in some instances contextualising narratives. beyond this, by embedding these within scoreboard frameworks provided a means to communicate information more widely within the organisation and, crucially, to those outside the organisation, i.e., to both shareholders and their advisors and to a variety of external stakeholders. for the most part, such developments have yet to find favour with many accounting practitioners, who remain comfortable with the cost and value calculus despite it acknowledged shortcomings. equally, the more inclusive nature of such reporting regimes means that the annual report package that has traditionally been the accepted preserve of the profession may become progressively colonised by competitor professions and functions. as we observed at the beginning of the paper, in its 2013 framework document the iirc commends accounting for and reporting on six capitals present within the value creation process, one of which is human capital, a second being somewhat confusingly referred to as intellectual capital. as essentially a think-piece, the iirc omits any specific guidance on how organisations might set about taking people into account. the choice is therefore left to individual organisations to do so in the light of their own critical success factors. the following categories of people information would seem to be of initial relevance in such exercises. 1. demographics many organisations already provide some information on workforce composition, e.g., by age, gender, level of education, category of employment, longevity of employment, etc. an additional metric might be staff turnover rate, supported by details of its possible impact on the future performance of the organisation. for example, if turnover is high amongst those people whose attributes are important to the organisation, some information on how this compares with previous turnover is important, as is information on any initiatives designed to moderate turnover. in the case of less valuable people, similar explanations may not be necessary. however, where such people leave the organisation as a result of structural changes or business reconfiguration, there may be merit in providing information on any assistance that was provided to departing people towards securing new employments, perhaps complemented by details of their subsequent employment status. disclosures of this sort can reinforce how seriously an organisation takes its people responsibilities. 2. training and development provision in the light of the importance that people have within the value creation and delivery process (and value capture), there is reason to expect that organisations would wish to retain the services of the majority of them. the existence of a wide range of development opportunities and ready access to these will usually be viewed positively by many people, while contributing to the longterm competitiveness of the organisation. providing information on such provision, including levels of investment, uptake, outcomes and impact on levels of employee engagement would seem to be desirable. the existence of unusual or ambitious initiatives would merit publicising, as would provision designed to benefit those with disabilities, learning difficulties or from recognised deprived socio-economic backgrounds. the introduction of provisions specifically designed to contribute to the availability journal of business models (2022), vol. 10, no. 1, pp. 58-66 6363 of future generations of people is something that organisations should also consider both pursuing and publicising. 3. corporate culture – “a great place to work” throughout most of the c19th and c20th work was widely regarded as a necessary commitment but not necessarily a source of enjoyment or fulfilment for the majority of people. understanding that when the workplace is a place where considerable enjoyment might be had, and indeed encouraged, has increased in recent times. ben and jerry ’s, microsoft, cisco, dhl and hilton have all attracted that designation, evidencing strong, inclusive, responsible, flexible and rewarding corporate cultures. in such organisations many inherently positive attributes have become the norm. a key attraction is a commitment to communication both from the top down and the bottom up. people are continuously kept apprised about what is happening within the organisation locally, nationally and globally. a comprehensive consultation process often complements this. recognition and rewards for exemplary levels of performance are commonplace, while generous discounts within the organisation and in partner organisations also feature extensively. increasingly these organisations have prioritised the pursuit and publicisation of corporate social responsibility activities, thereby documenting what measures have been taken to ensure that every employee is treated as well as they might be. 4. a healthy organisation in most more advanced societies decades of health and safety legislation have had the consequence of reducing their incidence to relatively stable, low levels. accidents continue to happen and people still become sick as a consequence of unfortunate oversights at a local level, resulting in pain and suffering for those affected. as one era appeared to be drawing to an acceptable conclusion, evidence of an equally unpalatable new era has begun to emerge – the health and safety couple has been replaced by the health and wellbeing couple as work health issues have begun to become more evident. levels of sickness absence rose to high levels in many european countries around the time of the millennium and although empirical evidence has indicated that days lost has been on a downward trajectory, the cost of absence has continued to edge up. the spread of presenteeism – continuing to work while unwell – has reached worrying levels, more recently complemented by increasing leaveism. over time there has been a move towards mental health conditions driving absence, often necessitating long-term absences. there is also some consensus about the underlying issues: understaffing; continual change; poor communication; dated management behaviour; and job security concerns, all of which are in principle addressable within a comprehensive, well-defined people strategy. such organisations might reasonably be designated as healthy. by providing a package of information of absenteeism, its extent and any provisions designed to reduce the loss of people’s input will allow an organisation to demonstrate its worthiness to be regarded as a healthy organisation. 5. employee value proposition this strangely familiar term was coined some time ago (minchington, 2006) to identify the specific package of conditions and benefits that an organisation makes available to its employees and, critically, prospective employees as part of its engagement in the war for talent. as with the customer value proposition, employee value propositions normally extend beyond financial aspects, reflecting the realisation that many people now expect a much broader range of attractive features from their employment and careers than simply money, a tolerable workplace environment and a measure of job security. discussion in an age where ever greater levels of transparency and accountability regarding corporate responsibility are becoming the norm, an increasing number of organisations recognise the many benefits that can flow from actively engaging with their various stakeholder groups. it might be deemed generous journal of business models (2022), vol. 10, no. 1, pp. 58-66 6464 to be suggesting that the iirc’s ir initiative has been strongly impacted by such thinking. despite ir’s shortcomings, in acknowledging that new capitals now need to be taken into account, it appears that there is indeed a powerful genie in the bottle that clearly demands to be released (‘let out’). ir’s conceptual framework incorporates the bm concept while focusing on a generic value creation process. unfortunately, although the bm literature acknowledges people to be among the most important assets of any organisation, to date it has very little more to say on this observation. by embedding people’s many attributes within bm thinking, we believe this will provide both fields with a much better understanding of what they bring to the organisation and an indication of what should be taken into account for the benefit of the generality of present-day stakeholder groups. journal of business models (2022), vol. 10, no. 1, pp. 58-66 6565 references braverman, h. (1974). labor and monopoly capital: the degradation of work in the twentieth century, new york: monthly review press. flamholtz, e.g., johanson, u. and r. roslender. (2020), “reflections of the progress in accounting for people and some observations for a more successful future”, accounting, auditing and accountability journal, 33(8): 1791-1813. flower j. (2015). “the international integrated reporting council: a story of failure”, critical perspectives on accounting, 47:1-17. hermanson, r.h. (1963). a method for recording all assets and the resulting accounting and economic implications, phd dissertation, michigan state university. hermanson, r.h. (1964). accounting for human assets, graduate school of business, michigan state university. humphrey, c., o’dwyer, b. and j. unerman. (2017). “re-theorizing the configuration of organizational fields: the iirc and pursuit of ‘enlightened’ corporate reporting”, accounting and business research, 47(2): 30-63. iirc. (2013) the international <ir> framework, international integrated reporting council, www.iirc.org. michaels, e., handfield-jones, h. and b. axelrod (2001). the war for talent, boston ma: harvard business press minchington, b. (2006). your employer brand – attract, engage, retain, collective learning australia. nielsen, c. and r. roslender (2015). “enhancing financial reporting: the contribution of business models”, british accounting review, 47(3): 262-274. osterwalder, a. and y. pigneur. (2010). business model generation, hoboken nj: john wiley & sons, inc. osterwalder, a., pigneur, y., bernarda, g. and a. smith. (2014). value proposition design: how to create products and services customers want, hoboken nj: john wiley & sons, inc. paton w. (1922). accounting theory. new york: ronald press. peppers, d. and m. rogers. (2005). return on customer: creating maximum value from your scarcest resource, new york: doubleday. porter, m.e. (1985). competitive advantage: creating and sustaining superior performance, new york: the free press. roslender, r. and c. nielsen. (2018). “accounting through the business model”, journal of business models, 6(2): 78-83. roslender, r. and c. nielsen. (2021). “accounting for the value expectations of customers: re-imagining the integrated reporting initiative”, critical perspectives on accounting, 81: 102244. http://www.iirc.org journal of business models (2022), vol. 10, no. 1, pp. 58-66 6666 roslender, r.. hart, s. and c. nielsen. (2021). “strategic management accounting revisited: insights from the business model field”, mimeo, business design center, aalborg university business school. rowbottom n. and j. locke. (2016). “the emergence of <ir>”, accounting and business research, 46(1): 83-115. sort, j. and r. roslender. (2021). “business models, accounting and reporting – two steps forward, one step backwards?”, journal of business models, 9(1): 52-59. 68 journal of business models (2023), vol. 11, no. 1, pp. 68-77 complementors’ coopetition-based business models in multiplatform ecosystems mahmoud mohamed1, petri ahokangas1, and minna pikkarainen1,2 abstract multi-platform ecosystems (mpes) are comprised of multiple platforms integrated to create and capture value together. the collective value creation and capture within mpes gives rise to coopetion, which impacts the business model configurations for both incumbents and entrants that provide complementary offerings. previous platform research has predominantly focused on incumbent platforms. this research focuses on the question of how entrant platforms configure their business models to endorse coopetition with incumbents in the mpes within the healthcare sector. our findings indicate that entrant platforms configure their business models to integrate into mpes and need to flexibly align with the complementarity requirements set by the incumbents, combine inter and intra-platform collaborative dynamics in their business models, and build on coopetition with incumbents. keywords: multi-platform ecosystems, coopetition, complementarity acknowledgement : this research received funding from the stroke-data project and a research grant from the foundation for economic education – liikesivistysrahasto. please cite this paper as: mohamed, m., ahokangas, p., and pikkarainen, m. (2023), complementors’ coopetition-based business models in multiplatform ecosystems, journal of business models, vol. 11, no. 1, pp. 68-77 1 university of oulu, oulu business school, martti ahtisaari institute, finland 2 oslo metropolitan university, department for rehabilitation science and health technology, norway issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7199 introduction digital platforms have become a prominent component of the digital economy (cusumano et al., 2020; hein et al., 2019; rietveld et al., 2019), including in healthcare. the increased adoption of digital health technologies globally brings new challenges for digital platforms operating in the healthcare domain. these challenges affect incumbent platforms, which must keep up with rapidly changing requirements and newness threats from the entrant platforms. meanwhile, entrant platforms lack sufficient resources to meet the regulatory requirements and sustain enough revenue streams to develop their https://doi.org/10.54337/jbm.v11i1.7199 journal of business models (2023), vol. 11, no. 1, pp. 68-77 6969 platforms (aerts et al., 2023). entrant platforms need extensive resources to get their technologies accredited by hospitals and establish trust mechanisms with them, as healthcare is a highly regulated domain. incumbent and entrant platforms need to configure their business models to find new value creation mechanisms outside their ecosystem boundaries and start collaborating with their competitors. in turn, these dynamics drive the competing platforms to collaborate and integrate their technologies into multi-platform ecosystems (mpes) for collective value co-creation and co-capture (mohamed et al., 2023). coopetition aggregates all actors in the mpes in the creation of shared value, and it affects the actors’ choice of competition outside the borders of the mpes. from the strategic perspective, integration into the mpes grants the incumbent platforms the autonomy to decide the governance mechanisms for the whole ecosystem, which triggers governance tensions between ecosystem actors in the later phases of integration (o’mahony and karp, 2020). the alignment of multi-layered relations between incumbent and entrant (complementing) platforms in mpes is complex and differs from the single multi-sided platform (mohamed et al., 2023; zhang and williamson, 2021). research on common value co-creation and business model configuration in complex domains like mpes is lacking. recent research on platform business models has focused on incumbent platforms, often referred to as platform owners. however, there is scant research on firms’ business models offering complementary platforms (ritala et al., 2014) or their business models and coopetition dynamics in multi-platform ecosystems. the extant research considered platform ecosystems as organizations where the leadership role was granted to the owner of the platform’s technological hub (hein et al., 2019; kretschmer et al., 2020). the platform leader orchestrates the governance mechanisms and designs the roles of admitting new complementors to the platform core (cusumano and gawer, 2002; gawer, 2014). the extant research has examined collaboration-competition dynamics in the platform setting from the platform leader’s perspective. however, most of the extant research used publicly available data for the platform companies, which may be considered biased and incomplete because it lacks data from managers and decision makers in the platform firms. in this study, we consider the managerial influence on the platform decision to configure their business model for establishing coopetition with the competing platforms.  in doing so, we use the digital stroke pathway as the context for this study, in which the implementation of cross-integration between multiple platform providers is required. the incumbent platform providers are the platform leaders who orchestrate the governance mechanisms for the overall platform ecosystem. given the complex entry requirements and regulations in the healthcare domain, entrant platforms are the complementors for the incumbent’s offering and collaborate with the incumbent platforms to get access to the healthcare domain. this study develops the following research question: how do entrants configure their business models to endorse coopetition with incumbents in mpes? we argue that platforms integrate into mpes to scale and renew their businesses through coopetition with a large base of stakeholders integrating into mpes. the paper concludes that entrant platforms configure their business models to endorse inter-platform coopetition and gain approval from incumbent platforms in highly regulated domains like healthcare. approach definition of key concepts platform business models at the single multi-sided platform level, the business model creates value by facilitating the exchange between the demand side (end-users) and the supply side (producers) (gawer, 2014). the network effect influences the dynamics of platform business models when users on the demand side grow to an extent that motivates complementors to join the supply side of the platform to add their complementary innovations and generate greater value for the platform (tiwana et al., 2010). the platform leader decides on the degree of platform openness through governance mechanisms by granting access to complementors on the supply side to the platform journal of business models (2023), vol. 11, no. 1, pp. 68-77 7070 to add their innovations (tiwana, 2013). depending on the degree of openness set by the governance mechanisms, when it becomes publicly known how to integrate complementary offerings to the leading platform, new complementors will be encouraged to join the platform and provide complementary offerings to the it (cusumano and gawer, 2002). as a starting point for building up the conceptual framework for mpe’s thinking, the extant research has examined the emergence of the digital platform from the single-sided platform perspective. the supply-side platform operates to fulfil the demand created by the end-users on the demand-side platform. the demand side aggregates the end-user group, and the supply side aggregates the platform complementors, and in some cases, it aggregates the third-party complementors. the digital multisided platform aggregates both demand-side and supply-side platforms around both sides. (tiwana et al., 2010; cusumano and gawer, 2002). the direct network effect occurs when the platform becomes favourable to many users on the demand side. the more it aggregates complementors on the supply side, the more it provides a complementary offering that matches the core of the central platform (economides, 1996; tiwana et al., 2010). yet unlike industrial/product-oriented platforms, digital multi-sided platforms establish complex ecosystem dynamics (cusumano et al., 2020; tiwana, 2013). the governance mechanisms determine the role of each complementor in the platform ecosystem, specifying who does what, and what types of innovation are needed, specifically when these innovations take place in the complementary modules (boudreau, 2010). furthermore, when it becomes publicly known how to integrate complementary modules to the leading platform, new complementors will be encouraged to join the platform ecosystem (cusumano and gawer, 2002). moreover, this increases competition in multi-sided markets, introducing challenging new forces for the platform leader to emphasise, adding innovations to the overall platform ecosystem and protecting the technology from imitation (zeng et al., 2019). as part of coping with the competition that might arise from the complement’s side or entrant platforms, the platform ecosystem can evolve as a meta-organisation in which the architecture design of the leading platform’s infrastructure can enable the aggregation of platforms around the technological core (kretschmer et al., 2020). mpes include leading and complementary platforms aggregated around the technological core of the leading platform (kretschmer et al., 2020). the architectural design of the platform ecosystem enables the central platform to provide the technical infrastructure for complementors to create their complementary offerings and expand their business scope (tiwana, 2013). further, it enables the central platform to orchestrate the value creation and capture for the entire platform ecosystem (baldwin, 2012; yrjölä et al., 2021). the platform ecosystem leverages the capabilities of complementors to add new features that the platform owner does not see (tiwana et al., 2010; isckia et al., 2020) and transform the business models of both incumbent and complementor platforms. inter-platform coopetition in mpes strategic management scholars define coopetition as the alignment of collaborative dynamics with competitors to achieve a more significant competitive advantage for both parties than a single firm could achieve alone (ritala and hurmelinna-laukkanen, 2009). in the digital platform setting, coopetition occurs when complements align their heterogeneous motives to join the platform ecosystem to use resources efficiently, share costs, risks, and resources for innovation and improve the competitive dynamics figure 1. the conceptual development of multi-platform ecosystems (mpes) journal of business models (2023), vol. 11, no. 1, pp. 68-77 7171 of the platform ecosystem. in this sense, the value is captured by involving competitors in the company ’s business model (ritala et al., 2014). although coopetition intensifies data sharing between complementors in mpes, it can stimulate tensions between complementors when the individual platform’s opportunistic behaviour becomes visible (mohamed et al., 2023; o’mahony and karp, 2020). the value proposition in digital platforms forms around end-user centricity and information exchange between end-users, platform leaders, and complementors (gawer, 2014). the integration between the platform leader and complementor enables the exchange of the platform leader’s internal resources and facilitates complementors in adding complementary innovation and expanding the scope of the platform (isckia et al., 2020; zeng et al., 2019). value creation thus depends on the degree of integration between both sides of the platform. moreover, it enhances platform leaders to establish a large base of users and complementors to enable the cross-side network effect between these two groups (tiwana, 2013). nevertheless, achieving the full integration dynamics between multiple complementors and leaders in multi-platform ecosystems is challenging. in mpes, incumbent platforms come at the centre of the platform ecosystem and design the integration roles for other complementors involved in them (cusumano and gawer, 2002; rietveld et al., 2019; teece, 2018). yet designing and managing complementarity becomes complex when multiple platforms have unequal leadership roles within the same ecosystem (mohamed et al., 2023). research method we opt for a qualitative case study approach (yin, 2015) to address the configuration of complementor’s business models when integrating into mpes. we collected the research data through 13 semi-structured interviews with project managers from the selected case companies between june 2020 and november 2021. we followed purposeful sampling in the selection of the case companies (patton, 1990), where all cases were part of the stroke-data consortium in finland, which aims to co-create a patient solution for stroke prevention, treatment, and rehabilitation. we discussed the following themes during interview rounds: the platform’s integration strategy to the mpes, the type of market opportunities driven by integration into the mpes, the configuration of the platform’s business model, complementarity with other partners, and the platform’s future business model and revenue model scenarios. we reached data saturation after the last interview round, and no further data collection could develop additional insights for this study. we anonymised any information that could affect the case company ’s future strategies. we transcribed all interviews to start the data analysis. we followed the thematic analysis approach to analyse our data (braun and clarke, 2006) and started the analysis with an in-depth reading of interview transcripts and highlighting the relevant themes for our study. we categorised the common themes into three categories, following zott and amit’s (2010) business model design elements of content, structure, and governance to analyse how the platform conducts business and delivers value to its customers. the content refers to the activities performed by the focal platform; the structure describes how various activities can be linked and what sequence is needed; and governance refers to who does what. key insights using zott and amit’s (2010) business model design elements, we identified what kind of adjustments entrant (complementing) platforms make to their business model to endorse coopetition and meet the integration requirements imposed by the incumbents in mpes. we consider the choice of our analysis approach justified, because the selected platforms configure their business models to integrate the external capabilities (i.e. coopetition with incumbents) with internal resources in support of innovation strategies (i.e. integration into mpes). further, the business model determines a firm’s bargaining power, which journal of business models (2023), vol. 11, no. 1, pp. 68-77 7272 means that the greater the value the focal firm has, the greater the bargaining power it will have, i.e. bargaining power between incumbents and entrants’ platforms integrating into mpes. in the analysis of our case study, we identified the content, structure, and governance of the complementing “entrant” and incumbent platforms. we found that complementing entrant platforms configured their business model to best align with the coopetition requirements set by the incumbents to achieve market entry into the healthcare domain. the licensing requirements to admit a new device is rather complex, and the initial cost required to run the piloting study to get a licensed medical device is beyond the resources of the newly born entrant firms. our findings indicate that incumbents design the governance mechanisms in mpes to control the platform’s central technological hub. in other words, incumbents facilitate the coordination and datamonetisation activities between complementors in mpes. whilst complementors agree to the governance mechanisms that define platform-to-platform openness strategies, coopetition dynamics within and outside mpes are difficult to identify by the complementors due to their limited financial resources and uncertainty about new markets. the key findings of our analysis are presented in table 1. table 1. complementors’ business model incumbent platform business model business model configuration in mpes p la tf or m b 1. content the platform applies cross-collaboration with all platforms integrating into mpes. the current usage of the platform focuses on the rehabilitation and prevention sides of the stroke treatment journey. the coopetition with all platforms is a renewed opportunity to expand into the treatment parts of the stroke. 2. structure a big data platform integrates and monetises sleep and rest periods with other platforms integrating into the stroke-data mpes. 3. governance coopetition with incumbents and other new entrant platforms to develop secondary prevention solutions for strokes. through the partnership with other new entrants, the company supplies platform e with their sensors to help build the ai-oriented platform. platform a 1. content the platform offers a preventive solution for medical care professionals and patients and regulatory experts to certify medical devices/solutions. 2. structure the platform is integrated into mpes to expand the business scope through collaboration with new entrants and develop an initial prototype for software as a medical device for clinical decision making through data integrations with other platforms. 3. governance platform-to-platform openness to developing software as a medical device that supports healthcare professionals in clinical decision making. also, personalised support for patients alongside their treatment journey. 1. complementor business models enable the establishment of collaborative relationships between competing firms as new entrants arrive with a radical innovation that may disrupt the market dominance for incumbents. the resource limitations and higher levels of market uncertainty are the drivers for new entrants to establish coopetition-based business models with incumbent platforms. 2. ‘complementors’ joint business models relieve some of the integration conflicts between complementors and platform leaders. deciding who designs the governance mechanisms and how to share data is related to platform-to-platform openness from the beginning of integration. table 1. complementors’ business model configuration in the mpes1 1 the italic font refers to coopetition in the business model elements. journal of business models (2023), vol. 11, no. 1, pp. 68-77 7373 table 1. complementors’ business model incumbent platform business model business model configuration in mpes p la tf or m c 1. content platform specialising in business intelligence, data reporting, warehousing and planning. 2. structure established collaboration with platform e to build the rehabilitation platform. 3. governance the platform unifies the stream analytics generated from the business analytics platform to the platform d concept and meets the integration requirements for mpes. platform g 1. content ai-based analytics platform to measure ecg. 2. structure coopetition with new entrants to further develop the ai-driven analytics platform. 3. governance the platform applies platform-toplatform openness as a data source for all platforms integrating into the mpes. the platform sensor monitors the patient status either from home or the hospital environment. 3. approval of the complementors’ business models for entry and the creation of new market opportunities coopetition with incumbents helps gain approval to “entrants’” business models in complex domains. entrants can find their place in mpes through collaboration and sharing the high costs of r&d. in parallel, coopetition-based business models enable incumbents to keep control of the propensity for sudden competition from entrant firms. p la tf or m d 1. content empathic building platform specialising in data visualisation from all possible data collection points. 2. structure collaboration with platform c for data visualisation and all other platforms to integrate solutions around the empathic building platform. 3. governance platform integration into all points on the digital care pathway for stroke prevention, treatment, and rehabilitation. 4. coopetition-based business model as an international market approach for complementor platforms resource limitations, market uncertainty, and competition drive new entrants to configure their business model based on the mechanisms set by incumbent firms. otherwise, they cannot establish collaborative dynamics with well-established incumbents. coopetition will guarantee entrant platforms a fair share of the business when expanding internationally. p la tf or m e 1. content ai platform developed based on the integration phases and complementors needs in the mpes. 2. structure the platform operates in the finnish market and collaborates with platform a to access other nordic countries. 3. governance the platform applies platform-to-platform openness through a partnership with platform a table 1. complementors’ business model configuration in the mpes (continued) journal of business models (2023), vol. 11, no. 1, pp. 68-77 7474 discussion and conclusion our motivation for this study was to understand how entrant platforms configured their business models to endorse coopetition with incumbent platforms when integrating into mpes. this paper enriches our understanding of the inter-platform coopetition when platforms shift from the single multi-sided platform ecosystem to multi-platform ecosystems. we emphasised healthcare as a complex, rapidly changing, and highly regulated domain that facilitated the competing platforms to engage in collaborative dynamics as the central part of their value creation and capture in healthcare. from the entrant platforms’ perspective, they lacked sufficient resources to meet the entry requirements set by healthcare. at the same time, incumbents collaborated with entrants as a strategic approach to overcoming possible competition in the future. we analysed the business model configuration for both entrant and incumbent platforms, with a particular emphasis on the entrant platforms during their integration into mpes – i.e. the ecosystem of multiple platforms working together to create a shared value for the whole platform ecosystem. the extant studies have examined mpes as a multi-layered system using modular design as a critical element for managing interdependencies between modules and bringing active cooperative dynamics to the ecosystem (e.g. yrjölä et al., 2021). tensions of managing modularity in multi-layered systems arise from battles for market dominance between different modules. the platform leader designs the modular business model to guarantee equal opportunities for all modules involved in the multi-layered system. four significant findings have emerged from our analysis. first, we argue that platforms’ need to configure their business models to integrate into mpes is common in complex domains like healthcare. incumbent platforms take the platform leader role and design the governance mechanisms for the whole ecosystem to guarantee market dominance and overcome sudden competition by complementors. this finding resonates with the platform leadership strategies in the single multi-sided platform setting, where the platform leader decides the level of platform openness that enables complementary innovations to expand the scope of the platform (den hartigh et al., 2016). further, we conclude that resource limitation and higher levels of market uncertainty drive entrant platforms to configure their business models for coopetition with regulated incumbents. table 1. complementors’ business model incumbent platform business model business model configuration in mpes p la tf or m f 1. content the platform develops its sensors to continuously monitor people at risk of stroke or stroke reoccurrence. 2. structure collaboration with the incumbent platforms to gain access to the asian market. 3. governance the platform seeks the approval of the incumbent platforms a and g to use their sensors in stroke rehabilitation and prevention. table 1. complementors’ business model configuration in the mpes (continued) journal of business models (2023), vol. 11, no. 1, pp. 68-77 7575 second, we argue that complementors configure their business models when integrating mpes to best align with the complementarity requirements set by incumbents, especially in complex domains like healthcare, where the integration and optimisation requirements for admitting new technologies and creating trust are complex. our findings extend kretschmer et al.’s (2020) view on the hierarchy and establishment of the incumbents that place a considerable hurdle for the platforms to enter specific markets unless the platform leader grants complementors the flexibility and autonomy to design their offerings. third, we find that complementor platforms must be flexible when configuring their coopetition-based business model with incumbents to gain their approval to verify the overlapping goals and decide the size of market share from the cooperative relations. our view is consistent with kretschmer et al.’s (2020) study on meta-organisation features, where control of the platform is granted to the central technological hub to facilitate the coordination between the existing and new complements, as entrants integrate into mpes to increase their opportunities in the ecosystem (isckia et al., 2020). this finding highlights that mpes grow when they become open and attract many complementors to integrate into the ecosystem. nevertheless, this raises cooperative tensions between complementors concerning future collaborations that may influence some complementors’ future market strategies (zhu and iansiti, 2007). in mpes, the dynamics of the ecosystem evolve, as many platforms decide to integrate their complementary technology or open their technical core for other platforms to build their offerings upon. the complementarity does not limit the layered setting. instead, some platforms can simultaneously have the complementor and owner roles, which means integrating into mpes combines interand intra-platform collaborative dynamics. we conclude that the coopetition in mpes conceptualizes two elements: (i) the number of complementors is bigger than the number of platform owners, and (ii) the platform owner decides the openness of the platform infrastructure to attract complementors who add complementary innovations and increase the value of the platforms. fourth, this study concludes that the complementors’ business models build on coopetition to benefit incumbent and new entrants integrating into mpes. platform-to-platform openness and governance mechanisms are the wheels for admitting new complementors to mpes. nevertheless, platform leaders decide the governance mechanisms in mpes, and they develop through multiple transitions. platform leadership activity varies between centralise-d and decentralised control over the complementors who integrate into the mpes. the transitions in leadership roles are generated from the platform leader strategy to maintain the same level of market dominance by not admitting platforms that might turn into sudden competitors in integrations’ later stages. finally, this case study has analysed complementors’ approaches to configuring their business models as part of their renewal strategy. further research could investigate the specifics of business models as the coopetition relationship emerges. in particular, an examination of the conditions in which the tensions of coopetition occur when new entrants have business opportunities outside the scope of mpes that may intensify the competition between new entrants and incumbents would be valuable. further, we encourage additional empirically grounded studies in different domains (instead of the healthcare domain used in this study) to investigate how the integration requirements and drivers may be formed in other settings. journal of business models (2023), vol. 11, no. 1, pp. 68-77 7676 references aerts, r., pikkarainen, m., xu, y. and andersson, s., 2023. overcoming hospital resistance in an international innovation co-creation. technological forecasting and social change, 187, p.122195. baldwin, c.y. and clark, k.b., 2002. the option value of modularity in design. harvard nom research paper, 1, pp.1–14. braun, v. and clarke, v., 2006. using thematic analysis in psychology. qualitative research in psychology, 3(2), pp.77-101. cusumano, m., yoffie, d. and gawer, a., 2020. the future of platforms. mit sloan management review. cusumano, m.a. and gawer, a., 2002. the elements of platform leadership.  mit sloan management review, 43(3), p.51. economides, n. and katsamakas, e., 2006. two-sided competition of proprietary vs. open-source technology platforms and the implications for the software industry. management science, 52(7), pp.1057–1071. gawer, 2014. bridging differing perspectives on technological platform: toward an integrative framework. research policy, 43(7), pp.1239–1249. hein, a., schreieck, m., wiesche, m., böhm, m. and krcmar, h., 2019. the emergence of native multi-sided platforms and their influence on incumbents. electronic markets, 29(4), pp.631–647. isckia, t., de reuver, m. and lescop, d., 2020. orchestrating platform ecosystems: the interplay of innovation and business development subsystems. journal of innovation economics management, (2), pp.197–223. kretschmer, t., leiponen, a., schilling, m. and vasudeva, g., 2022. platform ecosystems as meta‐organizations: implications for platform strategies. strategic management journal, 43(3), pp.405–424. mohamed, m., ahokangas, p. & pikkarainen, m. (2023). tensions of coopetition and integration into the multiplatform ecosystems in digital care. in marinova, s. & marin, m. (eds), reconfiguration of business models and ecosystems: decoupling and resilience. taylor and francis, uk. o’mahony, s. and karp, r., 2020. from proprietary to collective governance: how do platform participation strategies evolve? strategic management journal. patton, m.q., 1990. qualitative evaluation and research methods. sage publications, inc. rietveld, j., schilling, m.a. and bellavitis, c., 2019. platform strategy: managing ecosystem value through selective promotion of complements. organization science, 30(6), pp.1232–1251. ritala, p. and hurmelinna-laukkanen, p., 2009. what’s in it for me? creating and appropriating value in innovation-related coopetition. technovation, 29(12), pp.819–828. ritala, p., golnam, a. and wegmann, a., 2014. coopetition-based business models: the case of amazon. com. industrial marketing management, 43(2), pp.236–249. journal of business models (2023), vol. 11, no. 1, pp. 68-77 7777 teece, d.j., 2018. profiting from innovation in the digital economy: enabling technologies, standards, and licensing models in the wireless world. research policy, 47(8), pp.1367–1387. tiwana, a., 2013. platform ecosystems: aligning architecture, governance, and strategy. newnes. tiwana, a., konsynski, b. and bush, a.a., 2010. platform evolution: coevolution of platform architecture, governance, and environmental dynamics (research commentary). information systems research, 21(4), pp.675– 687. yin, r.k., 2015. qualitative research from start to finish. guilford publications. yrjölä, s.i., ahokangas, p. and matinmikko-blue, m., 2021. platform-based ecosystemic business models in future mobile operator business. journal of business models, 9(4), pp.67–93. zeng, j., khan, z. and de silva, m., 2019. the emergence of multi-sided platform mnes: internalization theory and networks. international business review, 28(6), p.101598. zhang, m.y. and williamson, p., 2021. the emergence of multiplatform ecosystems: insights from china’s mobile payments system in overcoming bottlenecks to reach the mass market.  technological forecasting and social change, 173, p.121128. zhu, f. and iansiti, m., 2007. dynamics of platform competition: exploring the role of installed base, platform quality and consumer expectations. division of research, harvard business school zott, c. and amit, r., 2010. business model design: an activity system perspective. long range planning, 43(2– 3), pp.216–226. 27 journal of business models (2023), vol. 11, no. 1, pp. 27-37 what makes your business model (un)investable? mehdi montakhabi1,2,3,4* abstract this paper seeks to find out what makes a business model (un)investable. in particular, the study explores the reasons for venture capitalists’ rejection decisions on entrepreneurs’ proposals. the study digs into rejected cases in the american shark tank tv show as the source of secondary data. data is transcribed, coded, synthesised, narratives are built, and storytelling techniques are applied to present the findings. the study deviates from the mainstream research on business models, based on primary data. in doing so, the study bridges between the business model research and communication sciences. key words: business model, venture capital, entrepreneur please cite this paper as: montakhabi, m. (2023), what makes your business model (un)investable?, journal of business models, vol. 11, no. 1, pp. 27-37 1 imec-smit, vrije universiteit brussel, pleinlaan 9, brussels, 1050, belgium 2 garwood center for corporate innovation, haas school of business, university of california, berkeley, 2220 piedmont ave, berkeley, ca 94720, united states 3 imperial college business school, imperial college london, london sw7 2az, uk 4 center of energy technologies (cet), department of business development and technology (btech), aarhus university, denmark *correspondence: mehdi.montakhabi@vub.be issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7166 introduction whether an innovation is likely to be successful is the holy grail of innovation management. frequently, investors in early stages of an innovation make their judgements based on heuristics (gigerenzer et al., 2011) based on a pitch: an idea that is brought forward by an entrepreneur (sabaj et al., 2020). the success of an investment in this setting depends on how an investor filters out success or failure signals from the pitch. on the entrepreneurs’ side, the art of pitching well is bringing forward the necessary elements to convince investors. therefore, idea evaluation based on a pitch is a communication process where an idea is sent from one side and interpreted by the other side. in communication studies, information theory suggests for the core message to be transferred successfully, any noise in the process needs to be filtered out (pierce, 2012). furthermore, the interpretation of the communication on the receivers’ side is prone to cognitive biases (hilbert, 2012). historically, innovation has been defined in very different ways (baregheh et al., 2009). in the last two decades the emphasis has been shifted to the role mailto:mehdi.montakhabi@vub.be https://doi.org/10.54337/jbm.v11i1.7166 journal of business models (2023), vol. 11, no. 1, pp. 27-37 2828 of the business model in capturing value from innovation (cf., chesbrough and rosenbloom, 2002). in this view, the business model is considered one of the core success factors of an innovation. following this approach, evaluation of an innovation from an investors’ point of view is tied to evaluation of the business model. prior research has gone to great lengths to understand investment decisions to help investors improve the decision and entrepreneurs to generate more successful ideas. authors have focused on how venture capitalists make investment decisions (pence, 1982) and what kind of investments are more attractive for which groups of venture capitalists (klonowski, 2005). others have investigated the criteria used by venture capitalists to evaluate proposals (macmillan et al., 1985). a stream in the entrepreneurship literature has studied the entrepreneurs’ side of investment deals and investigated “do and don’ts” in convincing potential investors (clark, 2008). some authors have explored the qualities of a successful pitch (komulainen et al., 2020) as well as how to frame and sell an entrepreneurial idea (dvouletỳ, 2017). furthermore, the literature has studied how the selection is influenced by the quality of ideas (boudreau et al., 2016), the use of portfolio approaches and stage gates (brasil and eggers, 2019), and several contextual factors—for example, the people pitching the ideas (brooks et al., 2014), the evaluators of the ideas (mueller et al., 2018), the presentation of ideas (lu et al., 2019), the interplay between idea generation and selection (harvey and kou, 2013), past and current decisions (helfat, 1994), and feedback (wooten and ulrich, 2017). one of the areas in idea evaluation that, despite its importance, has received less attention is evaluation of an innovation based on its business model. scholars have contributed to the early development of business model research by considering the business model concept first (massa et al., 2017) and then through business model innovation (foss and saebi, 2018) steadily progressing to open business models (brenk, 2020; montakhabi and van der graaf, 2021). business models have been studied through the lens of different theories such as transaction cost economics (zott et al., 2010), dynamic capabilities (leih et al., 2015), and the resource-based view of the firm (mangematin et al., 2003), just to name a few. there has also been interest in the application of the business model perspective in a variety of contexts such as innovation (chesbrough and rosenbloom, 2002), entrepreneurship (foss and saebi, 2016), and performance (kim and min, 2015). despite the popularity of business model discussions in academia and practice (fullenkamp et al., 2017) we observe little agreement not only on the foundations of business model research such as definitions and construct clarity (foss and saebi, 2018), but also the criteria for evaluating (successful) business models. regardless of the definition in use, the business model in itself is a cognitive tool that is used to communicate what an innovation is, rather than a recipe for success. therefore, a business model is a form of discourse. this makes it difficult to define and consequently to evaluate. evaluation of a business model requires knowledge from both the business and communication sides. taken as a whole, previous work has generated important insights into evaluation of ideas and investment decisions on innovation projects. however, this overview of contemporary scholarship on idea evaluation reveals a number of fundamental gaps. first, in order to understand how investment decisions take place and what convinces investors, the storytelling function of business models as a communication tool and associated cognitive biases needs to be incorporated. nevertheless, these aspects are under-explored in business economics. a frequent approach in communication studies is to look at phenomena as stories, or even more broadly as constructs. in this view, as long as a construct has been talked about, it exists even though it may not be real. second, at a theoretical level, the common practice in most previous studies focuses on success cases that consequently end in success-biased theory building. therefore, data on failures are rarely used. a look at the existing venture capital databases supports this claim as there is no record of rejected ideas in most of the credible venture capital databases. even though there are a few studies on exploring business model journal of business models (2023), vol. 11, no. 1, pp. 27-37 2929 changes based on false positives and false negatives (e.g., chesbrough and rosenbloom, (2002)’s study on xerox parc), there is still a considerable gap in the literature on systematically identifying cognitive biases in investment decisions. third, on a methodological level, when it comes to studying business models, most of the reasoning is inductive (klauer and phye, 2008) and studies are designed on single and multiple case studies. therefore, many of the insights on business model evaluation remain somewhat context dependent and difficult to implement out of the studied context. transferability and generalizability (hellström, 2008) of findings in these kinds of studies are sometimes questionable as well. to bridge the aforementioned empirical, theoretical, and methodological gaps, this study seeks to investigate the criteria for predicting business model failure in investors’ evaluations of business models. to achieve this overarching aim, we systematically identify rejection criteria in evaluating innovations with an emphasis on business models. not only will this study examine this very important question, but also use an ambitious theoretical approach and methodology as well as a unique data set. the study deploys discourse analysis techniques from communication studies to use the american shark tank tv show as the secondary source of data. a discourse analysis based on open coding is manually conducted on the content of the shark tank show. even though the method is very well founded in communication sciences it is used less frequently in the management context. the data allow us to draw deductive-based conclusions. the remainder of this paper is structured as follows. first, the methodological approach of the study is explained. this is followed by the summary of findings. findings are presented by applying the storytelling technique. then, contributions and novelties of the study are explained. this is followed by the introduction of the limitations of the study. finally, conclusion and opportunities for further research conclude the paper. methodological approach this is a qualitative study which utilises secondary data (johnston, 2017). the american shark tank tv show is the source of data in this research. we focused on the cases which did not succeed to get investment in the show. sharks represent venture capitalists who are investing their own money in their favorite business models pitched by entrepreneurs. this framing lets us have more than a thousand cases to study. in the majority of cases, there is no consensus between sharks when it comes to successful business models. even if one shark wants to invest, it is enough to make the case successful in attracting investment. however, for the rejected cases there is consensus among sharks. they may for different reasons but consensually reject a case. the study investigates the common features which are pointed out by venture capitalists as reasons for not investing in a business. in other words, a business model is uninvestable for venture capitalists if it suffers from the distilled rejection criteria. nevertheless, every business model which does not have the rejection symptomes gets venture capitalists’ money (for several reasons like each venture capitalist has its own interested areas to invest). data is transcribed, coded, synthesised, narratives are built, and storytelling techniques are applied to present the findings. we studied four hundred and forty-three rejected pitches from the first twelve years of the show. we followed gioia’s method, transcribed the data, and conducted a thematic analysis to code the data. this led to fifty-four codes in the first order of analysis. each code represents the main reasons to reject a case. subsequently, we conducted a second order of analysis and distilled fourteen secondary codes: fourteen things that appeared to turn off the investors. this is followed by building narratives for each secondary code. we applied the storytelling technique (boje and jørgensen, 2020) to build the narratives to present our findings. narratives are built by using quotes from the show. each pitch is evaluated by six venture capitalists. in total twenty-nine venture capitalists were involved journal of business models (2023), vol. 11, no. 1, pp. 27-37 3030 in the show. we made our cases by assigning each rejected pitch to the applied code _reason for rejection_ and the venture capitalist who used the code. therefore a case is a combination of i) a venture capitalist, ii) a code, and iii) a pitch. this led to two thousand seven hundred and seventy-one cases. table 1 shows the statistics of our analyzed data. figure 1 shows the research design and the steps we followed in this research. the overarching focus of coding is on the business model (massa et al., 2017) behind each pitch. a business model is considered as a means for value creation, delivery, and capturing (teece, 2010). we distinguish entrepreneurs’ personalities (chavez, 2016), venture capitalists’ preferences (carter and van auken, 1994), and the quality of the pitch (kunte et al., 2018) from the business model. figure 2 distinguishes the different elements in this study. summary of findings in the following the codes from our initial data analysis are presented. a narrative is built based on the relevant data for each code. for simplicity, we excluded the direct quotes in the presentation of our findings. • at what stage is your business model? although, it is assumed that businesses go for a venture capitalist at early stages but even in early stages of business there are differences between invention, proof of concept, and a running business. the closer an idea is to a running business, the more trustable entrepreneurs’ visions are for a very simple reason; there are numbers to support entrepreneurs’ claims. a considerable part of investment is on the entrepreneur and it is almost impossible to judge if the entrepreneur as a part of the idea is investable. table 1. number of rejected pitches 442 number of sharks in each pitch 6 total number of sharks in the show 29 number of codes in the first order of analysis 54 number of codes in the second order of analysis 14 total number of cases* 2771 * a case is a combination of a pitch, a shark, and a code from the first order of analysis table 1: statistics of the analyzed data figure 1: research design journal of business models (2023), vol. 11, no. 1, pp. 27-37 3131 • ownership structure (who owns how much?): for a venture capitalist it is important to know the ownership structure before and after owning a part of a business. if the ownership of a business is diluted before making a deal and entrepreneurs have lost control of their company, or even if they still have control but will lose control as a result of a venture capitalist’s investment, most probably they are not a good option for a venture capitalist’s investment. simply, if the entrepreneur is a part of investment, how can someone invest in a business that has already lost the entrepreneur’s control? • is it a business or your hobby? the entrepreneur believes it is a business and is doing it for a couple of years, not making money, and still continue doing, it is not a business, it is a hobby. no venture capitalist invests in hobbies, they invest in businesses. if the entrepreneurs are not all they will have a hard time finding a venture capitalist to invest. • ownership profile (second job, conflict of interest, bankruptcy, debt, etc.)? most times the idea of bringing in a venture capitalist is based on the fact: a slice of a watermelon is always bigger than a grape. as much as the idea is important, the profiles of the owners are also important for venture capitalists. some things like bankruptcy are dealt with like uranium by a venture capitalist. it implies there wouldn’t be any chance to access the banking system in the future. having a second job as well implies that the entrepreneur will split the attention between a venture capitalist’s investment and something else. carrying a lot of debt also implies a venture capitalist should wait a long time to get the investment back. after all, there shouldn’t be a conflict of interest between what the entrepreneur does and what a venture capitalist has invested in their portfolio. • is the business scalable (licensing potential, franchising, etc.)? if a business is not scalable for any reason, it would be hard to find a venture capitalist to invest. the business should have the potential for growth in order to be able to feed two mouths, entrepreneur’s and venture capitalist’s. some signs signal scalability, amongst them are potential for licensing or franchising. • is the business replicable? does the business have any proprietary assets in its possession? if a business is easily replicable, why should a venture capitalist pay to buy a part of the business? a convincing answer in a venture capitalist’s terminology is: the business has a design or utility patent, or at least has filed and is waiting for the patent. if being the first does not give a specific competitive advantage and there is nothing proprietary in the business, it implies the business will be copied at any time which is not a promising signal for a venture capitalist. • does the business have a fat profit margin? from the moment a venture capitalist invests in a business, even before making the investment, the question always is: how and when will the venture capitalists get their money back? the business should either increase the value of its shares or has a fat profit margin to be able to share money between shareholders. having a fat profit margin tempts any venture capitalist to get involved in the business. figure 2: positioning the study on business models rather than entrepreneur, venture capital, or the pitch journal of business models (2023), vol. 11, no. 1, pp. 27-37 3232 • which one is the entrepreneur ready to give: royalty or equity? although both seem like giving up a right in a business for perpetuity, there is a huge difference between the two. accepting to pay a royalty assures venture capitalists that they will get their money back but if paying the royalty stays for perpetuity it would look like a liability in case of an acquisition in the future. paying a royalty especially when a business has a tiny profit margin will suck the blood out of the business. • does the business have a realistic valuation? even if everything is right, a wrong valuation might not let a deal with a venture capitalist to be made. it is not easy to value a business in early stages. on the one hand entrepreneurs do not want to sell their businesses for cheap, on the other hand no one wants to pay a premium for a promise in the future. even if an entrepreneur can sell a business at a high valuation, it is not good in the long run to have a high valuation because it will stop the businesses’ growth. • do the entrepreneurs know their competitors? the entrepreneur should be the one who knows the competition better than anyone else and be able to convince venture capitalists that they have a comprehensive understanding of their competitors, either direct or indirect. imagine a venture capitalist asking if there is a similar product or service in the market and the entrepreneur answers no and then suddenly a similar product shows up. • is the entrepreneur decisive? it is also important to be able to process and make decisions fast. entrepreneurs never have all the information they would like to have but they have to make decisions based on what they have. this is also true for the other side of the deal, it is what venture capitalists also do, they make investment decisions based on the limited information they have. the point is an entrepreneur can not sleep on a decision forever. if entrepreneurs want to play with sharks, and stay alive, they better be fast. • what is the growth strategy? there are different types of venture capitalists. there should be a strategic fit between the requested resource, the business nature, and the growth strategy (retail, online, etc.) and the venture capitalists to whom an entrepreneur goes to. at the end of the day it is not just the venture capitalists who make the decision to choose a business to invest in, entrepreneurs should also select their venture capitalists. • is the business seasonal? if a business makes money but it is not working all year round, it would not be an appealing investment for most venture capitalists. if the business has a product which can only be sold in a specific period of time, the business is also carrying a lot of risks; if the business losees that window during the year, it will lose any potential earnings for that year. • does the business have a serious liability aspect? no venture capitalist looks for liability nightmares. if a business entails health claims, especially if it still does not have scientific evidence, fda approval, intervenes with the national financial system, etc., then the business will be looked at as a liability nightmare in the venture capitalist’s investment portfolio. as long as a business is small, nobody cares about its liabilities but the moment the business starts to grow, it will be visible on the radar. no venture capitalist wants to be the deepest pocket for the liabilities which a risky business carries. in presenting the findings we avoid using a predefined framework (e.g., business model canvas or using the three categories of value creation, delivery and capturing as framing devices) (sort and kristiansen, 2021) for one main reason. following a deductive approach and analyzing an extensive number of cases lets us to capture elements that do not fit into the existing frameworks. for example, the business model canvas does not capture seasonality nor the scalability aspects of a business. hence, following a predefined model would have limited our findings to the boundaries of the selected model. therefore, adhering the chosen methodology from the communication sciences we opt for open coding without a predefined framework. contribution and novelty in answering the research question, the study advances our understanding of the ways to better journal of business models (2023), vol. 11, no. 1, pp. 27-37 3333 evaluate and generate more successful ideas. this is achieveed by firstly deducing the reasons (related to the business models) of rejection of an idea from investors’ perspective that can also be examined failure cases in attracting venture capital investment from the entrepreneurs’ perspective. to do so, the study deploys a novel approach in which the content of the american shark tank tv show is creatively used as the secondary source of data as well as the methods from communication studies that are applied to answer the question that mostly belong in management research. in doing so, the study takes a risky and (arguably) novel approach that deviates from mainstream research in management studies that rely on success cases in theory building. the novel theoretical, methodological, and empirical contributions of the study are: at the conceptual-theoretical level, the study contributes to the business model literature, which so far has mostly ignored investment decision-making and how errors one way or the other in funding a venture might lead to false conclusions on business model success factors and thus the merits of an innovation.  at a methodological level, the study bridges between business model research and communication sciences by deploying methods from media studies that are rarely used in management studies. discourse analysis and open coding without following a predefined theoretical framework is a widely adopted approach in communication sciences in general and in media studies in particular. furthermore, such an approach has implications for future applications of this research to use artificial intelligence (ai) in order to evaluate crowdsourcing pitches over the internet. in the medium term, this may allow us to employ ai for theory building in management studies.  at an empirical level, the study advances knowledge on generation and evaluation of more successful innovations. this can be used to build a screening tool based on the reasons for acceptance and rejection of investment decisions. this will help managers enhance their decisions regarding investments on innovations, i.e., “how to avoid bad deals?” and “how to identify good deals?” the tool will be a checklist consisting of the obvious and non-obvious reasons for rejecting or accepting a proposal that we can distill. the tool can also be used by entrepreneurs to self-evaluate their investment proposals. limitations and remedies several limitations pertain to using the show as the context of this study (e.g., the bridge between a tv show and real life, representativeness of venture capitals as the sample, screenings to make the show attractive, etc.). nevertheless, there are two main reasons to choose the american shark tank tv show as the context of this study. first, this is a very iconic phenomenon that has influenced business model thinking over one and a half decades and is now running in more than 20 countries, providing a uniquely rich amount of data on the breadth of innovation evaluation by investors. secondly, pitching business models for attracting investment is basically an american format. historically, silicon valley has been the place where pitching as a way of communication has been used to evaluate new ideas by investors. therefore, there is no better way to investigate this format than to look at how entrepreneurs pitch and how investors interpret those pitches. using the content of a tv show in scientific studies is not new. for example “card sharks” (gertner, 1993), “jeopardy!” (metrick, 1995), “illinois instant riches” (hersch and mcdougall, 1997), “lingo”, “hoosier millionaire’’ (fullenkamp et al., 2003), “who wants to be a millionaire?” (lanot et al., 2006), and “deal or no deal’’ (post et al., 2008). several studies have been conducted on the shark tank show (e.g., lavanchy et al., 2022 and sanchez-ruiz et al., 2021). what has not been done before is focusing on the business model aspect of evaluations. conclusions and future research this study presents common reasons for rejecting a pitch by venture capitalists based on the results of using the american shark tank tv show. by identifying the criteria of rejected business models the paper highlights what mistakes should be avoided in an entrepreneur’s business model. to date, the literature on business models are mostly focused on single of multiple case studies based on primary data. here a controversial method in communication science journal of business models (2023), vol. 11, no. 1, pp. 27-37 3434 is applied to use secondary data for business model studying. by building narratives based on codes and applying storytelling techniques, it elaborates what and why should be avoided in a business model to attract venture capitalists’ investment. furthermore, the paper draws practical implications for venture capitalists to consider in their evaluation. the study uses the american shark tank tv show as the source of data. one interesting venue for future research is to conduct the same research on other available versions of the show (british, australian, mexican, and indian shows to name a few) and compare the results (hewitt-taylor, 2001) to see if the findings are universally applicable or context dependent. in later stages of this research the findings can be used together with machine learning to evaluate the quality of a business model. this is similar to the credit evaluation systems in banks. a big enough sample size can provide the minimum required data for this purpose. shark tank is a unique setting which eliminates the contextual effects caused by researchers. acknowledgements this work was supported in part by the flemish government through the fwo-sbo project snippet-s007619. i would like to thank prof. henry chesbrough, prof. christopher tucci, and prof. pieter ballon for their insightful comments and support. i would also like to thank the proofreaders of the article. journal of business models (2023), vol. 11, no. 1, pp. 27-37 3535 references baregheh, a., rowley, j., & sambrook, s. (2009). towards a multidisciplinary definition of innovation. management decision. boje, d., & jørgensen, k. m. (2020). a ‘storytelling science’approach making the eco-business modeling turn. journal of business models, 8(3), 9-26. boudreau, k. j., guinan, e. c., lakhani, k. r., & riedl, c. (2016). looking across and looking beyond the knowledge frontier: intellectual distance, novelty, and resource allocation in science. management science, 62(10), 2765–2783. brasil, v. c., & eggers, j. p. (2019). product and innovation portfolio management. in oxford research encyclopedia of business and management. brenk, s. (2020). open business model innovation–the impact of breadth, depth, and freedom of collaboration. academy of management proceedings, 2020(1), 21971. brooks, a. w., huang, l., kearney, s. w., & murray, f. e. (2014). investors prefer entrepreneurial ventures pitched by attractive men. proceedings of the national academy of sciences, 111(12), 4427–4431. carter, r. b., & van auken, h. e. (1994). venture capital firms’ preferences for projects in particular stages of development. journal of small business management, 32(1), 60. chavez, j. (2016). the personality characteristics of an entrepreneur and their effects on the performance of a new business venture. chesbrough, h., & rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change, 11(3), 529–555. clark, c. (2008). the impact of entrepreneurs’ oral ‘pitch’presentation skills on business angels’ initial screening investment decisions. venture capital, 10(3), 257-279. dvouletỳ, o. (2017). determinants of nordic entrepreneurship: a reverse engineered pitch. journal of accounting and management information systems, 16(3), 420–426. foss, n. j., & saebi, t. (2018). business models and business model innovation: between wicked and paradigmatic problems. long range planning, 51(1), 9–21. fullenkamp, c., teaversa, p., haefliger, s., & reza, d. g. (2017). building a winning business model portfolio. mit sloan management review, 58(4), 49–54. fullenkamp, c., tenorio, r., & battalio, r. (2003). assessing individual risk attitudes using field data from lottery games. review of economics and statistics, 85(1), 218-226. gertner, r. (1993). game shows and economic behavior: risk-taking on” card sharks”. the quarterly journal of economics, 108(2), 507–521. journal of business models (2023), vol. 11, no. 1, pp. 27-37 3636 gigerenzer, g. e., hertwig, r. e., & pachur, t. e. (2011). heuristics: the foundations of adaptive behavior. oxford university press. harvey, s., & kou, c.-y. (2013). collective engagement in creative tasks: the role of evaluation in the creative process in groups. administrative science quarterly, 58(3), 346–386. helfat, c. e. (1994). evolutionary trajectories in petroleum firm r&d. management science, 40(12), 1720–1747. hellström, t. (2008). transferability and naturalistic generalization: new generalizability concepts for social science or old wine in new bottles?. quality & quantity, 42(3), 321-337. hersch, p. l., & mcdougall, g. s. (1997). decision making under uncertainty when the stakes are high: evidence from a lottery game show. southern economic journal, 75–84. hewitt-taylor, j. (2001). use of constant comparative analysis in qualitative research. nursing standard (through 2013), 15(42), 39. hilbert, m. (2012). toward a synthesis of cognitive biases: how noisy information processing can bias human decision making. psychological bulletin, 138(2), 211. johnston, m. p. (2017). secondary data analysis: a method of which the time has come. qualitative and quantitative methods in libraries, 3(3), 619-626. kim, s. k., & min, s. (2015). business model innovation performance: when does adding a new business model benefit an incumbent? strategic entrepreneurship journal, 9(1), 34–57. klauer, k. j., & phye, g. d. (2008). inductive reasoning: a training approach. review of educational research, 78(1), 85–123. klonowski, d. (2005). how do venture capitalists make investment decisions in central and eastern europe? brandon university working paper. komulainen, k., siivonen, p., kasanen, k., & räty, h. (2020). “how to give a killer pitch?” performances of entrepreneurial narratives as identity models in higher education. entrepreneurship education and pedagogy, 3(3), 214–235. kunte, m., promsiri, t., & kampanthong, k. (2018). components of entrepreneurial idea pitch: a qualitative analysis from an entrepreneurial classroom. ajmi-asean journal of management and innovation, 5(2), 107–117. lanot, g., hartley, r., & walker, i. (2006). who really wants to be a millionaire? estimates of risk aversion from gameshow data. centre for economic research, keele university. lavanchy, m., reichert, p., & joshi, a. (2022). blood in the water: an abductive approach to startup valuation on abc’s shark tank. journal of business venturing insights, 17, e00305. leih, s., linden, g., & teece, d. j. (2015). business model innovation and organizational design. lu, s., bartol, k. m., venkataramani, v., zheng, x., & liu, x. (2019). pitching novel ideas to the boss: the journal of business models (2023), vol. 11, no. 1, pp. 27-37 3737 interactive effects of employees’ idea enactment and influence tactics on creativity assessment and implementation. academy of management journal, 62(2), 579–606. macmillan, i. c., siegel, r., & narasimha, p. s. (1985). criteria used by venture capitalists to evaluate new venture proposals. journal of business venturing, 1(1), 119–128. mangematin, v., lemarié, s., boissin, j.-p., catherine, d., corolleur, f., coronini, r., & trommetter, m. (2003). development of smes and heterogeneity of trajectories: the case of biotechnology in france. research policy, 32(4), 621–638. massa, l., tucci, c. l., & afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73–104.  metrick, a. (1995). a natural experiment in” jeopardy!”. the american economic review, 240–253. montakhabi, m., & van der graaf, s. (2021). open business models’ actionability in europe; eu competition policy analysis. journal of business models, 9(1), 29-34. mueller, j., melwani, s., loewenstein, j., & deal, j. j. (2018). reframing the decision-makers’ dilemma: towards a social context model of creative idea recognition. academy of management journal, 61(1), 94–110. pence, c. c. (1982). how venture capitalists make investment decisions. umi research press. pierce, j. r. (2012). an introduction to information theory: symbols, signals and noise. courier corporation. post, t., van den assem, m. j., baltussen, g., & thaler, r. h. (2008). deal or no deal? decision making under risk in a large-payoff game show. american economic rev., 98(1), 38–71. sabaj, o., cabezas, p., varas, g., gonzález-vergara, c., & pina-stranger, á. (2020). empirical literature on the business pitch: classes, critiques and future trends. journal of technology management & innovation, 15(1), 55–63. sanchez-ruiz, p., wood, m. s., & long-ruboyianes, a. (2021). persuasive or polarizing? the influence of entrepreneurs’ use of ingratiation rhetoric on investor funding decisions. journal of business venturing, 36(4), 106120. sort, j. c., & kristiansen, k. b. (2021). experiences from a decade: a universal approach to business model teaching. journal of business models, 9(3), 50-59. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2-3), 172-194. wooten, j. o., & ulrich, k. t. (2017). idea generation and the role of feedback: evidence from field experiments with innovation tournaments. production and operations management, 26(1), 80–99. zott, c., amit, r., & massa, l. (2010). the business model: theoretical roots, recent developments, and future research. iese research papers, 3(4), 1–43. 33 journal of business models (2020), vol. 8, no. 3, pp. 33-61 business model opportunities in brick and mortar retailing through digitalization harri hokkanen1*, charlotte walker2 and aaron donnelly3 abstract purpose: in current retailing, digitalization provides new value creation mechanisms that increase competition and offer customers myriad options to fulfil their needs. increasing complexities in the retail landscape have instigated restructuring, pressuring traditional retailers to reconsider their business models. the purpose of this study is to explore and identify how brick and mortar retailers are approaching opportunities presented by digitalization. design/methodology/approach: 26 semi-structured interviews were conducted with midand top-level retail managers from the uk and finland. this exploratory study analyzes the qualitative data through the key drivers of innovation (operational effectiveness and efficiency, lock-in, customer efficiency, effectiveness, and engagement). the opportunities are presented in terms of the three business model elements (format, activities, and governance). findings: the findings illustrate seven key business model opportunities enabled by digitalization. retailers are responding to competition, providing speed and convenience through multiple channels, leveraging digital tools to improve efficiencies and deliver customer experiences, rethinking management models, and adjusting organizational approaches. however, brick and mortar retailers should re-evaluate the business model elements collectively in order to seize opportunities that drive profits and gain competitive advantage. originality/value: this topic is pertinent due to the accelerated restructuring of retail markets, yet the subject is underexplored in the literature. this paper highlights retail managers’ perceptions and experiences of adapting through digitalization. guided by this enriched data, we provide contributions by developing existing theory and identifying opportunities in brick and mortar retail business models. keywords: business model, opportunities, digitalization, brick and mortar retailers acknowledgement: this research received supportive funding from the foundation for economic education. in addition, the authors wish to thank dr. mika yrjölä and prof. hannu saarijärvi from the faculty of management and business tampere university for comments and valuable feedback. please cite this paper as: hokkanen, h., walker, c., and donnelly, a. (2020), business model opportunities in brick and mortar retailing through digitalization, vol. 8, no. 3, pp. 33-61 1 tampere university, faculty of management and business, tampere, finland 2 stockholm school of economics, department of management and organization, stockholm, sweden 3 university of nottingham, school of education. nottingham, uk * corresponding author: harri.hokkanen@tuni.fi, tampere university, kalevantie 4, 33100 tampere, finland journal of business models (2020), vol. 8, no. 3, pp. 33-61 3434 introduction when framing business models, one cannot fail to acknowledge the influence of digitalization. the increased versatility of evolving digital technologies has initiated a series of changes in multiple businesses during the past decade (hänninen et al., 2018). the extent of retail digitalization cannot be overstated, witnessing the thrust of this typically low-technology sector into the digital era (willems et al., 2017). digitalization has enabled the creation of new mechanisms, forms, and models for trade. while it is uncertain if customer expectations are rising as a result of the myriad options available, or if they are indeed driving retailers to make changes, it is clear that customer behaviour is increasingly complex (huré et al., 2017; fuentes et al., 2017; helm et al., 2020). currently, the retail environment is unstable, witnessing the restructuring of markets and businesses, and changes in customer behaviour. due to digitalization, complexities have increased, placing pressure on actors and retail value chains. the questions: who sells? what is sold? to whom, where, and when? (hagberg et al., 2016) are persistent when designing retail business models, yet answers remain unresolved in the modern retail environment. the rise of e-commerce has extended traditional value chains by changing the logic of value creation, more specifically, influencing how retailers seek competitive advantage by proposing, creating, and capturing value (see timmers, 1998). this has led traditional retailers to find ways to integrate existing and extensive parts of the value chain, witnessing the influx of hybrid forms of multiple channel retailing (beck and rygl, 2015), such as multi-channel and omni-channel strategies (verhoef et al., 2015; yrjölä et al., 2018). however, this is only a short-term solution because striking a balance between a focus on competition, customer needs, and meeting global standards requires significant adjustments in the firm’s assets and resource allocation. changing the fundamentals is rarely a simple equation. examples show that formerly successful global retailers such as j.c penney, sears, and hmv, have struggled to meet modern requirements and to transform their business models. digitalization as a topic has gained interest among scholars and retail practitioners, and current developments indicate that significant retail restructuring has begun (see corkery, 2017; us census, 2020) which has been further accelerated by the covid-19 pandemic (e.g. mckinsey, 2020). this study is motivated by the idea that traditional retailers have much to lose in this restructuring. digital retailers such as amazon, ebay, and zalando have proved their ability to grow, stay, and gain solid positions within their markets (hänninen et al., 2018; reinartz et al., 2019). at the same time, consumer trust in online retailing has increased and the internet has become one important information source when evaluating purchase decisions (lubis, 2018; simonson and rosen, 2014; labrecque et al., 2013). additionally, in large retail markets such as the u.s and europe, online retailing is growing relatively faster than retail markets overall (statista a; statista b). as a result, these developments challenge the need and role of physical retail space and thus, traditional retailers. this forces traditional retailers to compete for market share that they originally possessed. consequently, the research purpose is to explore how traditional brick and mortar retailers approach opportunities in the current evolutionary phase of digitalization. to enable this exploration, we decided to adopt a business model lens. two reasons motivated this decision. first, the business model reflects management beliefs and assumptions of the actions of customers, competitors, and markets (teece, 2010); and second, the ability to seize these opportunities is strongly related to managements’ willingness and capabilities to modify the business model (teece and linden, 2017). moreover, with exception of a few studies (jocevski et al., 2019; matzler et al., 2018; sorecsu et al., 2011), the influence of the digital transformation from the retail business model perspective has been underexplored. to address this research gap, we conducted 26 semi-structured interviews in two fundamentally different retail markets with retail managers that belong to midand top management teams, in pursuit of covering current and future management of the industry. journal of business models (2020), vol. 8, no. 3, pp. 33-61 3535 theoretical background a turbulent retail environment: failures, competitive forces, and customers during the past five years, the european retail market has witnessed various bankruptcies. to explore this phenomenon, we gathered a list of traditional retail firms that held a solid market position at some phase in the past decade yet entered administration between 2015 to 2020 (appendix 1). the list highlights that retailers who predominantly sell consumer goods through physical stores, regardless of product category, have faced difficulties. department stores established over 100 years ago (british home stores, debenhams, and house of fraser), luxury brands (diesel, roberto cavalli), clothing and footwear retailers (blanco, karen miller, brantano), electronics and video game stores (maplin, hmv), and discounters (poundworld) serve as examples of retailers that were unable to adapt to current market developments. to verify this is not normal market behaviour, we scrutinized u.s retail markets to identify similar developments. european retailers have tended to follow u.s retail markets closely due to its size, diversity, technological improvements, and especially, its ability to provide a vision of future trends (helm et al., 2020; mcarthur et al., 2016). in the u.s, researchers and media both emphasize structural retail changes. digital advancements and the rise of e-commerce have led to disruption in the u.s retail industry (saghiri et al., 2018; davis-sramek et al., 2020; gupta, 2017). it is estimated (by bloomberg and new york times) that retailing has reached a “tipping point”, indicating permanent restructuring that is not yet visible but will lead to changes some physical retailers will not be able to endure (townsend et al., 2018; corkery, 2017). currently, 26 retail bankruptcies have been filed in 2020, including neiman marcus and j.c penney. we focused on 30 traditional retail firms (inc. sears, a&p, and toys “r” us) that filed for bankruptcy between 2015 and 2018 (appendix 2). the selected timeframe meant that we had access to firms’ obligatory management bankruptcy briefing. however, after further scrutiny, no common pattern was revealed between the firms, and importantly, no consistency in terms of the reasons for their downfall (see helm et al., 2020). in brief, the firms varied by size (turnover between $112 million to $17,5 billion), lifespan (less than 10 to more than 100 years), and offering (apparel and accessories, beauty, consumer goods, clothing, grocery, electronics, and toys). retailers highlighted the reasons for their downfall (bankruptcy briefings) included declined traffic in physical stores, increased competition against online retailers, and unsuccessful process management, among other reasons for their demise. this indicates that the inability to adapt through digitalization must have been at least one of the influential factors. historically, brick and mortar retailers have managed to engage and lock-in customers through strictly controlled value chain mechanisms, however, this luxury is seemingly fading away. as technologies continue to transform retailing, brick and mortar retailers have endured turbulent times in the highly competitive market. the most disruptive external competitive forces come from three different domains, 1) competition, 2) customer behaviour, and 3) global standards, placing traditional retailers in the middle of a riptide. the most notable of which has been the rise of online-based retailers, such as amazon, alibaba, and asos, who earned their positions as market leaders by operating with lower overheads (reinartz et al., 2019), offering cheaper pricing (brynjolfsson et al., 2013) and wider assortments (hänninen et al., 2018), and providing their customers with convenience and transparency (reinartz et al., 2019). these developments have reduced customer switching costs when considering shifting from one service provider to another. secondly, online channels have extended the market, leading to disintermediation as suppliers and manufacturers offer their products directly to the customer (doherty and ellis-chadwick, 2010). thirdly, new forms of trading, such as business models focusing on providing temporary access to goods (frenken et al., 2015; kumar et al., 2017) or consumer-to-consumer trade which extends product lifecycles (ariely and simonson, 2003; abdul-ghani et al., 2011; black, 2005) compete with and complete existing retailing. consequently, retailers face new digitally enabled competitive forces in addition to their regular local competition. simultaneously, consumers face multiple changes that influence their everyday lives. various journal of business models (2020), vol. 8, no. 3, pp. 33-61 3636 developments including the introduction of selfservice technologies (demirci orel and kara, 2013; inman and nikolova, 2017), adoption of mobile payments (holmes et al., 2013; taylor, 2015), last-mile delivery options (vakulenko et al., 2019), global offerings (hänninen et al., 2018), and the covid-19 pandemic, have shaped customer behaviour. alongside the extensive use of the internet and ramified globalization, there has been a growing emphasis on individual autonomy, individualization, and transparency (reinartz et al., 2019). this has, in turn, influenced the shift in power balance from the retailer to the customer, a notion referred to as consumer power (hagberg et al., 2017; helm et al., 2020; labrecque et al., 2013). moreover, limitless access to information and wider offerings have enabled consumers to use more straightforward decision-making mechanisms (e.g. bettman, 1998) and provided ample solutions to fulfill their needs. for example, google has earned a position as a trustworthy information distributor causing extensive use of heuristics in consumer decision making (see hauser, 2014). another explicit example is the rise of consumer-to-consumer interaction that has emerged through social media platforms, such as best buy (bassano et al., 2018). offerings such as this contribute towards the emergence of emphasized emotional, life-changing, and social values (see almquist et al., 2016). business models: retail business models and a look to the future although the term business model is over a halfcentury old, the concept has gained more attention since the millennium due to the rise of the internet (e.g. afuah, 2003; osterwalder, 2004). it has been used for multiple purposes in strategic planning, for example, to evaluate the commercial potential of innovations (doganova and eyquem-renault, 2009), to assess value creation in online businesses (amit and zott, 2001), and in re-organizing firm structures (teece, 2009; teece, 2010). however, it should be noted that the business model is often seen as a context-dependent tool, and consequently lacks a commonly approved definition. despite this, most popular business model definitions include proposing, creating, and capturing value. in business model literature, value creation consists of multiple streams focusing on internal (amit and zott, 2001; zott and amit, 2010), external (day and moorman, 2010; yrjölä, 2014), or hybrid value creation (kaplan et al., 2004; johnson et al., 2008). in the context of retailing, business models have not received great scholarly attention. in this regard, one of the most cited studies is sorescu et al. (2011) in which the researchers elaborated retail model innovations inspired by the work of amit and zott (2001). accordingly, “a business model is a well-specified system of interdependent structures, activities, and processes that serves as a firm’s organizing logic for value creation for its customers, and value appropriation for itself and its partners” (sorescu et al., 2011, s4). the authors emphasized that designing a retail business model is a rigorous consideration of interdependencies concerning choices of format, activities, and governance. the format refers to choices in interface selection and design that position a retailer in the market and enable customer touchpoint coordination for creating experiences. the activities define the exact selection of activities that enable and fulfill the experiences. governance sets rules for actors performing the activities by defining the roles and incentives to motivate them (sorescu et al., 2011). in the multi-channel retail literature, several streams touch on the concept of business models but only focus on certain areas concerning digitalization. for example, how the digital transformation influences the customer (labrecque et al., 2013), retail channels (picot-coupey et al., 2016; yrjölä et al., 2018; rangaswamy and van bruggen, 2005), retail workforce (huré et al., 2017; pantano and migliarese, 2014; rafaeli et al., 2017), or the future of retailing (grewal et al., 2017), leaving room for more comprehensive investigations, especially from a business model perspective. today, retailers should be described as orchestrators of multi-sided platforms that serve value creation and capture in ecosystems for customers, business partners, and the retailers themselves (sorescu et al., 2011). this statement appoints several transformative requirements on traditional retail business models. first of all, instead of linking products and consumers, retailers would act as an intermediary or marketplace that enables people and organizations to share information, access a variety journal of business models (2020), vol. 8, no. 3, pp. 33-61 3737 of goods and services, and buy or sell (cusumano et al., 2019). taking an intermediary role transits a retailer from dyadic (i.e. retailer and buyer) to triadic (i.e. between seller and buyer) relationships (gawer, 2014); secondly, instead of focusing on controlling efficiency and product assortment, an intermediary turns sight to establishing connections through value networks (seeking value through interactions) (shafer et al., 2005) and partner networks (seeking value through relationships) (amit and zott, 2011) to enable value creation. this causes a retailer to operate in networks instead of value chains (see achrol and kotler, 2011); and finally, as an intermediary operating in networks, a retailer seeks suppliers and manufacturers with product and service offerings (e.g. value) that link with demand, without controlling every part of the value chain between them. this suggests that the retail offering is co-produced (lusch et al., 2010), which leads to the integration of value co-creation (see grönroos, 2011; saarijärvi et al., 2013) as a central mechanism instead of internally controlled retail operations. van alstyne et al. (2016) stated three major shifts for businesses that increase dynamics significantly when moving towards platform business models. they suggested (1) shifting from resource control to resource orchestration, referring to a total change in asset management, resource allocation, and success indicators; (2) shifting from internal optimization to external interaction, emphasizing modifications in appropriation logic; and finally, (3) shifting a focus from customer value to ecosystem value, highlighting a need to abandon the value chain approach (van alystyne et al., 2016). these suggestions place pressure on traditional retail business models to undergo transformation. in this study, we are focusing on the main elements of the retail business model which include format, activities, and governance (sorescu et al., 2011). drivers that create incentives to modify the retail business model when evaluating business model relevancy, one should consider competitors’ models, sources of appropriation, external threats, and sustainability of the business (bertolini et al., 2016). successful businesses normally revise the business model four times before reaching profitability, indicating that traditional retailers must tolerate initial failures and course correction in shifting to a new business model (johnson et al., 2008). taking such a path may not sound attractive, especially if the current business is profitable. however, sorescu et al. (2011) defined six drivers related to capturing and creating value that motivate, incentivize, or force retailers to consider business model reconfiguration. first, they highlight opportunities to gain operational efficiency, this includes efforts to streamline back-end operations (e.g. sourcing, inventory levels), enhance the store environment (e.g. seeking cost reductions and increased profits in-store), and make cost savings (e.g. automation, process digitization). second, opportunities to gain operational effectiveness, such as finding ways to maximize probabilities in meeting organizational objectives (e.g. investments enabling longer-term profit, or market expansion). third, opportunities to design lock-in themes, which involve the development of mechanisms that minimize customer costs and increase switching costs (e.g. memberships, subscriptions, or guarantees). these drivers motivate retailers from a value capture perspective. fourth, opportunities to increase customer efficiency, which can be achieved through improving the convenience of service (e.g. store networks vs. online, pick-up services). fifth, opportunities to influence customer effectiveness, referring to how effectively a retailer can facilitate consumers to meet their consumption goals (e.g. depth of assortment or long tail). and sixth, opportunities to increase customer engagement, involving the ability to evoke emotional involvement that goes “beyond purchase” (e.g. customer experience design, brand perceptions). to explore the current opportunities for brick and mortar retailers brought to fruition by digitalization, we approach the data through the six drivers posited by sorescu et al. (2011). this enabled us to gain an understanding of what brick and mortar retailers currently have turned their sights towards. to aid this exploration we propose the following question: what do retail managers perceive as existing opportunities in the retail business model enabled by digitalization? journal of business models (2020), vol. 8, no. 3, pp. 33-61 3838 methodology to respond to our research question, qualitative research methods were employed, and an exploratory approach was adopted. qualitative research methods were selected to enable participants to share explanations, descriptions, and interpretations of the phenomenon (lichtman, 2017). moreover, we intended to explore our topic by “following wherever the informants lead us in the investigation” (gioia et al., 2013, p. 20), an aim which seemed best attained through qualitative methods. when considering countries that would provide comprehensive research settings according to the research topic, we were seeking markets that represent digitally advanced extremities from the european retail landscape. according to a study conducted by imd world competitive center (2019), the uk (13th) and finland (10th) represent high positions in a global comparison of digital competitiveness including evaluations of knowledge, technology, and futurereadiness. while these countries differ by size, market structure, infrastructure, and consumption habits, the uk retail market is significantly bigger, more competitive, and considered to be advanced in terms of retail digitalization (piotrowicz and cuthbertson, 2014). however, interestingly the imd study highlights finland as a forerunner in technology and future-readiness. as such, these countries provide a fruitful combination when researching digital opportunities concerning retail business models. to identify interviewees who could offer insights from the managerial perspective we conducted theoretical sampling. theoretical sampling enables researchers to create specifications so that experiences can be compared across accounts to gain a better understanding from a particular perspective (eisenhardt and graebner, 2007; given, 2008). thus, the following criteria were determined about the participants: a) the retailer they work for predominantly operates through physical stores, b) they hold midto top-level management positions and, c) they work for retailers in the uk or finland. to gain a broad understanding of how retail managers perceive opportunities presented by digitalization, it was considered advantageous to include a wide range of retailers. therefore, we sent 250 requests to linkedin members that met the selection criteria. from this number, 87 people accepted the request, 54 responded, and 24 people agreed to be interviewed (27% response rate). the other two interviewees were identified by participants during the interview through the snowball technique (noy, 2008). in total, 26 semi-structured interviews were conducted between april and july 2019 (see appendix 3). conducting semi-structured interviews enabled rich insights to be gained from retail managers and thus, create “rich opportunities for the discovery of new concepts rather than affirmation of existing ones” (gioia et al., 2013, p. 17). participants were asked questions around four key themes including managerial insight, digital strategy and management, customer experience, and omni-channel integration. the length of the interviews ranged from 30 to 60 minutes, which together totaled 16 hours and 42 minutes. the participants held highranking positions and their number of years of retail experience varied from two to 30 years, enabling us to gain insights from individuals who are expected to be involved in both current and future management of the retail industry. two of the participants were retail consultants, one from each country. moreover, various retail branches (e.g. home furnishings, electronics, beverages, cleaning supplies, grocery, pet supplies, fashion, sport, and optical) and physical store formats (e.g. discount stores, department stores, hypermarkets, specialty stores, and supermarkets) were represented in the data. the interviews were transcribed verbatim, resulting in 197 pages of interview transcription. the anonymity of participants was respected throughout the study, as such, each interviewee was assigned a code from m1 to m26 (appendix 3). once the transcripts were prepared, they were imported into atlas.ti, a program that facilitates the organization and analysis of qualitative data. qualitative content analysis was deployed to ensure the analysis process was structured and systematic. this process involved three main stages including 1) preparation (e.g. selecting unit of analysis), 2) organization (e.g. coding and categorizing) and 3) reporting (e.g. presenting results) (elo and kyngäs, 2008). journal of business models (2020), vol. 8, no. 3, pp. 33-61 3939 though there are different methods of content analysis, the process adopted in this study was inspired by directed qualitative content analysis (hsieh and shannon, 2005). in addition, to ensure vigor in the coding of the data, all the authors were involved in the data analysis process. as is advocated by eisenhardt (1989), the involvement of multiple investigators enables richer insights from the data to be gained and instills confidence in the findings. first, we adopted the three main elements of the retail business model format, activities, and governance (sorescu et al., 2011) to begin coding the data. at this stage we highlighted all the units of thought that were relevant to the retail business model elements, this resulted in the identification of 144 quotations that express the main issues discussed by the retail managers. once the relevant units of thought were coded according to the retail business model elements, we applied the second level of coding using the six drivers discussed in sorescu et al. (2011) operational effectiveness, operational efficiency, customer lock-in, customer effectiveness, customer efficiency, and customer engagement. this involved revisiting the 144 quotations to code the relevant drivers. during the analysis, we observed that two of the drivers, customer effectiveness and customer engagement, overlapped. as is discussed by sorescu et al. (2011), linkages between these two drivers exist through value creation. this can also be seen in other prior literature in which perceived customer value (e.g. retail mix combination) is recognized as an input to customer engagement (e.g. brand perception) (see gallarza et al., 2011; rintamäki et al., 2007). consequently, we combined these drivers in further analysis as customer effectiveness and engagement. steps were then taken to refine the list, this involved analyzing quotations with similar meanings and removing those which did not directly address the aims of this study, 35 key quotations emerged in this process. in the final step, quotations were interpreted, conceptualized, and grouped accordingly, enabling category formation. this resulted in the identification of the seven key areas of opportunity perceived by retail managers that will be elaborated in the section that follows. an illustration of the analysis process is provided in table 1. table 1 raw data unit of thought code 1 code 2 concepts category m7: “so having this digital reach... reaching our customers through digital channels, like instagram for example for example: facebook, twitter, advertisements in banners and in various websites. so, we create the need that people feel that... okay this is a dress i need to have because i can see it everywhere. it’s a trend now and everyone has it, or something. i need to recreate the need. that they actually need to buy it.” format oprational effectiveness – increased touchpoints –retailers influence customer behavior offer different retails channels table 1: illustration of the data analysis process journal of business models (2020), vol. 8, no. 3, pp. 33-61 4040 findings in this section, we present the data to illustrate how retailers are perceiving and seizing the opportunities presented by digitalization in formats, activities, and governance. opportunities for retail formats respond to pre-existing and extended competition if company management is not willing to change the business model, they may cannibalize their business (teece, 2010). according to the data, the digital environment provides multiple opportunities for traditional brick and mortar retail business models. however, opportunities may, in some cases, emerge from fundamental threats. this realization is greatly important, even if operating under the same conditions would not terminate business activities, increased awareness pushes companies to react and pursue opportunities. m8: “those [retailers] who don’t digitize, don’t have a website, don’t allow the customers to purchase at home or on the move on their mobile, factually, they will fail in the next few years. they will not survive. so being blunt about it, survival is the need to move there.” m19: “in the big picture the traditional brick and mortar stores have been…or at least if not yet, they are facing very strong pressure to change and modify their business models and distribution chains. the pressure coming from online companies are the big ones like amazon or really small ones like pure players then that really is making a huge need for everyone to change in terms of increased competition, more choices, and better prices for consumers. so, the ones that are not able to reach the same pace as these online players will eventually be banished out of the market unless they are able to make some kind of competitive advantage.” digital channels and new business forms have taken market share and have changed the dynamics of competition. while traditional competition has not vanished, developments have blurred industry boundaries and competition has increased. consequently, it is not necessarily clear who retailers are competing against these days. opportunities lie in brand eco-systems that enable retailers to compile information, build customer profiles, and create personalized experiences through combining channels. in brand eco-systems, customers interact more with the retailer which decreases the chances of them switching to a competitor, suggesting customer lock-in is a driver. an example is provided in the following quotation: m16: “it’s just not the case that everyone needs to do everything digital, you’ve got to think of your positioning in the market, you’ve got to think have you got a brand people really want, is it really authentic? so, you just can’t say we’ll have an online platform and we’ll sell to people, it’s not like that, you’ve got to work about which parts you want to integrate with, you’ve got to work out how to get your brand across and what’s your brand all about.” the current level of awareness and understanding of the digital influence on business has enabled retail management to regain confidence, emphasize opportunities, and seek competitive advantages over threats. as retailers continue to diversify, there has been a focus on building brand eco-systems (reinartz et al., 2019). offer and integrate various retail channels with the rise of the internet, brick and mortar retailers have broadened their customer offering through different channels, this effort has seen the proliferation of terms such as ‘cross-channel’ (chatterjee, 2010; picot-coupey et al., 2016), ‘multi-channel’ (verhoef et al., 2015), and most recently, the ‘omni-channel’ (brynjolfsson et al., 2013; huré et al., 2017; von briel, 2018; willems et al., 2017; yrjölä et al., 2018). the data indicates that managers consider the capability to combine various channels as an advantage and that through integrating channels they can enable seamless shopping for the customer, which will in turn enable the retailer to capture the most value. this thought is expressed in the following extract: m26: “because we can see, for example, that the brick and mortar stores, the value of them will change in the eyes of the customers. more and more people buy journal of business models (2020), vol. 8, no. 3, pp. 33-61 4141 online, but what we see is that we still need to have the store where the customers can come and get inspired, and then go back home and shop online.” it is also noteworthy that although online channels are growing, managers recognized that physical stores remain an integral part of the business. in recent years, retailers have turned their attention towards reinventing the purpose to visit physical stores. literature has already acknowledged the changing role of physical stores, claiming that they serve as ‘showrooms’ for customers (picot-coupey et al., 2016; piotrowicz and cuthbertson, 2014; verhoef et al., 2015). the findings illustrate that brick and mortar stores offer customers an experience that cannot be rivaled by online channels, and managers maintained that the demise of the physical store is not on the horizon. this point is captured in the following quotation: m23: “whereas historically it was all driven towards getting visits to the store, now we still want to do that, but we need to find other ways to do that rather than just be the product because you can get the product online and never visit a store. so, we have to find other ways to encourage people to visit, through workshops, home furnishing events, knowledge… experiences you can’t get online, because the store is still the most fundamental part.” brick and mortar retailers are in a prime position, presented with the opportunity to leverage their offline and online channels to their advantage. in the highly competitive market, operational effectiveness is clearly a driver for retailers to utilize all the channels at their disposal in order to reach their customer base. through combining different channels, retailers maintain numerous touchpoints with the customer which allows them to inspire, inform, upsell, and communicate with the customer on an ongoing basis. the findings suggest that retailers are aiming to deliver the same experience across channels, making for seamless shopping that meets customer expectations. provide speed and convenience as customer demands continue to increase, several managers noted that customers are most concerned with convenience. to provide ease of shopping, retailers are implementing digital technologies within stores to minimize customer sacrifices and maximize customer efficiency. these include tools such as saved shopping lists, scan and go devices, guided picking routes, and self-checkouts. in the following quotations, managers acknowledge the extension of different retail formats to offer convenience for the customer. m25: “when i started in this company, basically the customers’ buying journey was quite structured. if they wanted to buy a sofa, they had to buy it through self-serve, so they would find where it is located in the self-serve area and they basically picked it up, or a store co-worker would make a list for them. but today customers can choose all varieties of how they want to shop, services are more aligned to the shopping process, meaning that customers can also order the goods to their homes... they can order the goods to their homes by themselves after seeing the products.” m10: “most of our feedback is around […] how quickly they [the customer] could get through that checkout and get home. that is where a lot of our feedback is, so that is where a lot of our technology development and digitization are focused. so, we can make that experience easy and fast for them which is the technology side of it, which benefits us because they keep coming back, but it also benefits the customer because they walk out of the door with a smile on their face and say good things.” these quotations illustrate that digital developments taking place are not only for the benefit of the customer. managers noted that digitalization creates opportunities to decrease customer sacrifices while simultaneously increasing benefits for the retailer. an explicit example of this is the implementation of self-checkouts which enables customers to buy more efficiently while increasing retailers’ operational efficiency by reducing labor costs. opportunities for retail activities deliver customer experience customer experience is about stimulating consumers to respond in desirable ways (see becker and jaakkola, 2020) at touchpoints during the customer journal of business models (2020), vol. 8, no. 3, pp. 33-61 4242 journey (lemon and verhoef, 2016). in retail settings, customers traditionally perceived experiences through a cognitive approach, for instance, by assessing functionality or speed of service (kranzbühler et al., 2018). the data indicates that brick and mortar retailers are currently creating customer touchpoints (i.e. additional opportunities for interaction) outside the store environment. the very idea and opportunity is to enrich experiences and engage customers through social, emotional, and sensory aspects, in addition to cognition (keiningham et al., 2017). one manager explained how their branded mobile application is used to track customer fitness activities which consequently reveals customer needs: m17: “when you go into the store you can show them your qr code and it will show them everything that you have bought and the person in the store will be able to offer or suggest by looking at your [fitness activity] history and your purchase history, what would be a good sell for you. so, it kind of creates a through the line…not through the line, but basically a borderless experience for the consumer, at a marketing level, but also at a sales and crm level. so, it is kind of like the store is no longer just about when you get into the store, but it is also what’s happened before you get there.” retail activities such as this are driven by customer efficiency, effectiveness and engagement. by utilizing digital tools, retailers can identify customer needs and provide them with access to multiple touchpoints through which they can seek assistance, find new information, browse products, and make relevant purchases. while digital development has pressured traditional retailers, it has also broadened the horizons for firms, enabling them to push industry boundaries to seek competitive advantages (mendelson, 2000). former research indicates that creating experiences influences, for example, customer satisfaction, retention, loyalty, and consequently share-of-wallet (keiningham et al., 2017). utilize and implement digital tools the surge of digital developments has provided retailers with new sources of value creation and capture. digital tools offer retailers the opportunity to streamline processes and amplify their existing offerings by enhancing the customer experience (reinartz et al., 2019). retail managers discussed the various digital tools that their firms have implemented, these include employees using ipads on the shop floor to improve customer interactions, handheld devices that provide employees with real-time inventory data, and customers using their smartphones to scan their products as they shop. in the examples provided by the retail managers, operational efficiency was considered a driver. one manager gave an example of how digitalization has transformed stock management in the store and detailed the benefits of its implementation. this is referred to in the below quotation. m10: “rather the person walking up and down and just saying, oh i need to go and get a packet of this from the back, which in a store our size is quite a long job to go and get. if the first thing in the morning, the robot goes up and down the aisle and counts what is there and checks how much is there...it makes it much easier. that feed of information comes back out to a mobile device to then not have to count it, but just get it, and put it on the shelf and replenish. so, from a customer point of view, they won’t see that technology, but they feel the results because it’s always available. it is one of our phrases as well as strategies, you should have a full shelf all the time.” this quotation illustrates how digital tools enable firms to speed up their back-end operations while spending less on labor costs and indirectly improving the customer experience. opportunities for retail governance rethink the management model though retail digitalization has attracted much scholarly interest, to the best of our knowledge, the influence on the internal management models within brick and mortar retailers has been obscured (with the exception of mende and noble, 2019). managers discussed the various implications of digitalization on management, most notable of which include data-driven decision making and a change in managerial skill sets. journal of business models (2020), vol. 8, no. 3, pp. 33-61 4343 the power of data and the benefits it can bring to retailers is already a prevalent topic in research (grewal et al., 2017; hänninen et al., 2019) and the findings from this study complement the literature. managers claimed that data enables retailers to better understand the business and their customers, which aids and influences the decision-making process, as is illustrated below: m19: “what it has brought along is this sort of…how to take advantage of digitalization in making internal operations and usage of data to make management decisions and steer operations more efficiently. how can you make that a success story as well, because i think there is huge potential with many retailers and many challenges as well about how to exploit that opportunity in the best way. [...] let’s say for example a top store manager, a well-performing manager, might not be able to stay with the pace of digitalization. and once you are not being able to adapt and develop new ways of working and using digital tools it will make you actually go from being a high-performing store manager to a low-performing store manager.” this manager also discussed the need to adjust the existing managerial skill set. although this could be perceived as a threat, as digital literacy becomes a more important skill to possess in the job market, retailers can take the opportunity to train staff and maintain a skilled workforce who are capable of adapting to the digital environment. this illustrates that retailers are focusing their efforts on operational effectiveness and efficiency as drivers. adjust organizational approach exploiting digital opportunities requires dynamic capabilities from top management to recognize and seize the opportunities (teece et al., 2016). although, the way an organization approves, adapts, and executes changes remains uncertain. one could say that resistance to change is inevitable when combining digital business requirements into traditional retail business models, as it can lead to confrontations. m22: “[the company] is going through a big transformation at the moment, which is all based around the need to change and find ways to be more profitable in this new environment, because the business was based upon stores and the busier the stores got, the cheaper they were to run, and then the more we could reduce prices, and the more you would reduce prices the more people come and buy and the more you sell, the more you become efficient. it’s become this positive cycle. and i guess visitation drops in the stores because people are buying online, so we need to find other ways to bring them in, so that experience and exponential things in stores will be important in the coming years.” adapting to digitalization from an organizational perspective requires significant investments (helfat and martin, 2015; moorman and day, 2016). reconfiguring firm structure, metrics, and incentives/ controls (e.g. moorman and day, 2016) is a slow but essential process for companies to transform. recognition of this process was shared by managers in the following quotations: m26: “one big change which we are doing on an organizational level right now. it was like over 1 year ago, [...] we just talked about it, and now we have a digital function on a global level, and during the autumn we will have it in every country, so we will kind of move to ‘real digital thinking’.” m4: “so, digitalization has an impact actually on everything that we do; how we talk to our customers, how we improve our processes, how we try to understand the kind of 360 degrees of our customers, whether they are online or offline. it impacts on logistics, on how we buy…well our supply chain and so forth. and i think also it really changes the culture and... or at least, it should change how the company is managed.” to summarize, digitalization will inevitably influence how companies stay relevant, control their resources, and foster firm culture. retailers are faced with adopting necessary capabilities, ensuring continuously well-timed and efficient asset management, and managing to create a culture that supports resilience in a rapidly changing business environment. being unsuccessful in even one phase of the process may lead to failure. on the other hand, it should be considered more as an opportunity to learn, react, journal of business models (2020), vol. 8, no. 3, pp. 33-61 4444 and respond to the demands of current business requirements in retailing. in this regard, operational effectiveness is a driver for retailers when considering changing the organizational approach. to clearly express the findings, an illustration is provided that summarizes the key points discussed throughout this section (see figure 1). the figure represents the retail business model in terms of the three main elements. within each element, we present the opportunities and the ways in which retailers are pursuing them. discussion and conclusion this study aimed to explore how retail managers perceive opportunities presented by digitalization. in addition, we challenged ourselves to identify how these digitally enabled opportunities influence retail business models. we investigated the topic through the elements of the retail business model by sorescu et al. (2011) including format, activities, and governance. by conducting 26 semi-structured interviews we were able to gain an understanding of how brick and mortar retailer managers perceive opportunities through digitalization. focusing on business model opportunities also allowed us to interpret, reflect, and compare the findings against the view of the future of retail represented in the scientific literature. the topic is relevant for three reasons. first, views from current retail markets in europe show that traditional and formerly successful retailers (e.g. debenhams, house of fraser, diesel) have struggled to adapt to current market requirements. at the same time, evidence from other markets (u.s) draws a picture of acceleration in retail restructuring. second, current retail environments provide consumers with unlimited product offerings, low switching costs, and exceptional convenience, which can be seen through the increase in online consumption. third, assimilating digital technologies into the retail business requires a change concerning how companies approach organizational design in the future. indeed, these changes present challenges for brick and mortar retailers, however, the findings show explicitly that they see opportunities in each element of the business model. although some may see physical stores as unnecessary assets due to falling footfall, reinventing the purpose of the store to serve multiple channels and meet customer desires for traditionally offered value is considered a central source of competitive advantage. according to our findings, retailers are seeking opportunities for three critical purposes: 1) to differentiate, 2) to create, deliver and capture value, and 3) to manage the change. to differentiate in local, pre-existing, and extended global competition, retailers have turned their sights towards providing speed and convenience through multiple customer � � figure 1. retail business model opportunities enabbled by diggitalization�� � figure 1. retail business model opportunities enabled by digitalization journal of business models (2020), vol. 8, no. 3, pp. 33-61 4545 channels and brand ecosystems. rather than only focusing on cognition, brand ecosystems enable social, emotional, and sensory aspects to be engaged. to ensure that new and relevant value is created, an increasing number of customer touchpoints have been generated to deliver increasingly personalized experiences regardless of location. touchpoints located in store (e.g. self-service checkouts or integrated mobile apps) additionally enhance store operations, enabling retailers to increase the costbenefit ratio while decreasing customer sacrifices. furthermore, retailers are employing data-driven decentralized decision-making models and lowering hierarchical organizational structures. however, the influences of digitalization extend over management systems. ensuring organizational ability to deliver desired experiences in the changing business environment requires continuous evaluation of capabilities and assets, as well as fostering supportive company culture for fast adaptation. yet, the prerequisites of the retail business model reconfiguration demand significant changes in the organizational approach. this study makes several theoretical and practical contributions that are elaborated in the following paragraphs. three theoretical contributions are emphasized. first, this study makes a theoretical contribution to the literature through “providing connections among previous concepts” (corley and gioia, 2011, p. 15). hence, our main theoretical contribution lies in the further exploration of the existing theory presented by sorescu et al. (2011). in their article, sorescu et al. (2011) utilize two key concepts, the retail business model elements (format, activities, and governance) and six innovation drivers (operational effectiveness, operational efficiency, customer lock-in, customer effectiveness, customer efficiency, and customer engagement), which served as the basis for our data analysis. we applaud their work as it illustrates the highly interconnected nature of the retail business model and further provides an insight into business model innovation in the retail context. in the paper, sorescu et al. (2011) suggest that each business model element is connected to all drivers. however, by combining the elements and drivers in our analysis, further insights were gained, suggesting that certain drivers push specific business model elements in the context of brick and mortar retailing. more specifically, that format is driven by operational effectiveness and efficiency, and customer lock-in and efficiency. activities are driven by operational efficiency, customer efficiency, effectiveness and engagement. and governance is driven by operational efficiency and effectiveness. this illustrates that managers do not perceive all drivers in each business model element. second, it seems that a paradox exists in the retailing literature, on the one hand telling a story of the retail apocalypse (baggi, 2014; helm et al., 2020), and on the other recognizing new sources of competitive advantage (mende and noble, 2019; reinartz et al., 2019; saarijärvi, 2012). between these competing narratives, the threats and opportunities facing retailers are explored predominantly from the customer perspective (hagberg et al., 2016; picotcoupey et al., 2016; chatterjee, 2010; fuentes et al., 2017; helm et al., 2020; labrecque et al., 2017) and employee perspective (huré et al., 2017; pantano and migliarese, 2014; rafaeli et al., 2017). however, to the best of our knowledge, no other papers explore retail digitalization from the perspective of retail managers. as retail managers are responsible for transforming the retail business model and adapting to changes in the environment, managerial insights on this topic are important. the findings of this paper open new avenues to influence and impact restructuring, instead of identifying phenomenon related sub-phenomena. therefore, our paper serves as a foundation for building theory on the managerial perspectives on the retail business model through digitalization by linking opportunities and mechanisms. and finally, the current stage of retailing is extremely important revealing the speed at which traditional retailers are able to understand and respond to new competitive forces. however, when reflecting on the fundamental shifts (asset management, resource allocation, appropriation logic, and abandonment of the value chain approach) (van alstyne et al., 2016; helfat and martin, 2015; moorman and day, 2016) that take place when moving from traditional retailing toward platform business models (van alstyne et al., 2016) suggested by sorescu et al. (2011), only one journal of business models (2020), vol. 8, no. 3, pp. 33-61 4646 correlated. retailers have used ecosystem perspectives as a competitive tool to orchestrate internal processes and to ensure coherence in the customer experience (e.g. generating data from off-store environments). whilst, traditional retailers are far away from abandoning the value chain approach, in this study we found that digitalization influences every business model element (format, activities, and governance). thus, adopting a ‘business modelcentric’ approach in a manner that recognizes every business model element and develops the business model as a coherent entity is an important vehicle for traditional retailers to adapt to the rapidly changing business environment of restructuring. eventually, the forceful phase of digital evolution that we are witnessing will reveal the future directions of retailing and business model centricity may turn very beneficial. this study has various implications for retailers, consequently, we detail the three main practical contributions of this research to guide retailers seeking opportunities in the retail business model. first, the study shows how brick and mortar retailers perceive the opportunities from a business model perspective, covering format, activities, and governance in the analysis. as such, this study provides a valuable checklist for traditional retailers to ensure that they are staying relevant in the current business environment. second, it reveals that brick and mortar retailers are focused on the short-term rather than the long-term. the study participants recognized opportunities from capabilities or resources that exist at the moment, this is due to the need to react rapidly in the changing retail market. through interpreting these developments, it is possible to determine that brick and mortar retailers are far from pursuing a complete shift to new business models, such as platforms (sorescu et al., 2011) that have gained popularity and success due to different business model logic. we suggest that brick and mortar retailers turn sights towards their current and future competitor’s business models to seek opportunities. third, brick and mortar retailers have high confidence in competing against online retailers (e.g. amazon, alibaba) by centering competitive advantage around the stores as the heart of traditional retailing and the source of price-quality relation of offerings. however, when scrutinizing the profit equation of platform-based business models, it is clear that most traditional business model’s tied capital (e.g. in products or stores) has been liberated to enhance the customer experience. by focusing on experiences, traditional retailers may have selected to compete against new rivals with the same weapons, indicating that new rivalries are developing customer experience with extensive intensity while operating asset-light business models. the study suggests that brick and mortar retailers should evaluate distinct options for the value chain, enabling them to respond to current competition and anticipate the emergence of other forms of competition. these changes suggest a new retail paradigm is emerging, one which requires recognition in both theory and practice. limitations and future research this paper set out to extend the understanding of existing opportunities in the retail business model enabled by digitalization. as an ambitious aim, inevitably there are associated limitations, these relate to the data sample and research methods. although we endeavored to identify the opportunities across the retail industry, we only collected data from the uk and finland, which renders our findings and implications limited to retailers in developed european countries. though we assert that what we lack in scale, we compensate with rich managerial insights from multiple midand top-level managers working in various types and sizes of retailers. an additional limitation concerning the data sample is the focus on the retail manager’s perspective. as a retailer’s raison d’etre, it could have proven beneficial to include the customer perspective, however, due to limited resources, this was not possible. in terms of the research methods, qualitative data was generated through interviews which can present challenges for researchers in terms of influencing the data. when conducting interviews researchers are a part of the data generation which can restrict the discussion to predefined notions and ideas within the researcher’s knowledge. in this regard, gioia et al. (2013) advocate that researchers should emphasize the interviewee’s voice over their own to enable new insights to be gained. to ensure that the discussions were not impeded and to provide flexibility (queirós journal of business models (2020), vol. 8, no. 3, pp. 33-61 4747 et al., 2017), the semi-structured nature of the interviews meant that the questions played a supporting rather than leading role to enable the exploration of the topic through the eyes of the retail managers. while digitalization has presented businesses with multiple challenges, it is also important to highlight the opportunities to support organizations as they adapt to digital ways of working and reconfigure their business models. we maintain that adopting a business model lens uncovered profound influences on the retail business model. therefore, it is suggested that further research be conducted on the influence of digitalization on business models in other markets and industries. we selected digitally competitive markets for exploration, however it could be fruitful to examine countries that have yet to develop progressive attitudes and obtain business agility with cohesive technological integration. as a final note, we would like to mention that an abundant source of data was generated which unfortunately could not be fully explored within the scope of this study, as such, we suggest a direction for future research. an emerging theme within the data was business expansion, more specifically, that brick and mortar retailers are increasingly able to take advantage of digital technologies to reach new businesses, suppliers, and customers. digitalization has facilitated the burgeoning of international mergers, enabled the diversification of retail products as buyers video call suppliers to secure new products, and supported the growth of new markets as retailers sell their products to customers overseas. digitalization has opened up the world, initially instigating rising threats from competition ‘entering in’ the market, but going forward, brick and mortar retailers are well-placed to consider ‘expanding out’ to exploit the existing opportunities. journal of business models (2020), vol. 8, no. 3, pp. 33-61 4848 appendix 1 ”brick and mortar” retail examples founded categories annual turnover in the glorious times m$ number of stores before entering administration date of bankruptcy debenhams 1813 department store chain 3088 122 july 2020 poundworld 1974 discount retail store 1742 355 july 2018 house of fraser 1891 department store chain 1530 59 aug 2018 g-star raw 1989 luxury fashion 1002 400 july 2020 diesel 1978 luxury fashion 927 424 march 2019 hmv 1921 music, dvd, video games store 476 113 june 2020 (second bankruptcy) blanco 2009 clothing store 467 120 dec 2016 (second bankruptcy) british home store (bhs) 1928 department store chain 389 163 aug 2016 brantano 1962 footwear 348 286 june 2017 maplin 1976 electronics store 312 217 june 2018 roberto cavalli 1975 luxury fashion 231 51 march 2019 karen millen 1981 clothing store 232 57 march 2017 sonia rykiel 1968 luxury fashion 75 10 june 2019 appendix 1: examples of brick and mortar retail entered administration in the europe between 2015 and 2020 journal of business models (2020), vol. 8, no. 3, pp. 33-61 4949 appendix 2 ”brick and mortar” retail examples founded categories annual turnover in the glorious times m$ number of stores before chapter 11 date of bankruptcy sears 1886 retail chain 16700 434 october 2018 toys “r” us 1948 children’s toys 12400 807 september 2017 great atlantic and pacific tea (a&p) 1859 grocery 5500 296 july 2015 sports authority 1928 sportswear 3500 463 march 2016 radioshack 1963 electronics 3400 425 march 2017 (second bankruptcy) payless 1956 footwear 3000 3600 april 2017 bon-ton  1898 department store chain 2700 272 february 2018 hhgregg 1955 consumer electronics and home appliances 1960 220 march 2017 quiksilver 1960 surfwear apparel 1800 122 september 2015 nine west holdings inc. 1970 shoes, fashion, accessories 1600 70 date: april 2018 southeastern grocers 2011 grocery stores 1500 852 date: march 2018 appendix 2: examples of brick and mortar retail bankruptcies (chapter 11) in the u.s between 2015 and 2018 journal of business models (2020), vol. 8, no. 3, pp. 33-61 5050 ”brick and mortar” retail examples founded categories annual turnover in the glorious times m$ number of stores before chapter 11 date of bankruptcy gander mountain  1960 outdoor recreation 1300 162 march 2017 gymboree 1976 children’s apparel 1270 1100 date: june 2017 vanity  1955 women’s apparel 1200 140 march 2017 mattress firm 1986 mattresses 900 200 october 2018 rue21 1970 teen apparel 822 400 may 2017 pacsun 1980 teen apparel 797 645 april 2016 kiko usa 1971 beauty 700 28 january 2018 charming charlie 2004 apparel and accessories 620 67 december 2017 bcbg 1989 women’s apparel 600 259 february 2017 american apparel 1989 apparel 600 250 november 2016 (second bankruptcy) gordmans 1915 discount department store 579 68 march 2017 aerosoles 1987 footwear 550 80 september 2017 wet seal  1962 teen apparel 500 173 february 2017 (second bankruptcy) appendix 2: examples of brick and mortar retail bankruptcies (chapter 11) in the u.s between 2015 and 2018 (continued) journal of business models (2020), vol. 8, no. 3, pp. 33-61 5151 ”brick and mortar” retail examples founded categories annual turnover in the glorious times m$ number of stores before chapter 11 date of bankruptcy perfumania 1988 perfume and beauty 490 240 august 2017 true religion apparel inc. 2002 denim and jeans 419 27 july 2017 eastern outfitters 1967 outdoor apparel and gear 400 18 february 2017 brookstone 1965 gadgets and gifts 351 100 august 2018 the walking company 1991 footwear 272 69 march 2018 vitamin world 1977 vitamins 200 158 september 2017 hancock fabrics 1957 fabrics 200 185 february 2016 (second bankruptcy) cache 1975 women’s clothing retailer 200 150 february 2015 a’gaci 1971 apparel and accessories 136 76 january 2018 samuels jewelers inc. 1956 jewelry chain 112 121 august 2018 appendix 2: examples of brick and mortar retail bankruptcies (chapter 11) in the u.s between 2015 and 2018 (continued) journal of business models (2020), vol. 8, no. 3, pp. 33-61 5252 appendix 3 code position experience (years in industry) country m1 head of technology 21 finland m2 customer marketing manager 6 uk m3 chief information officer 8 finland m4 chief digital officer 20 finland m5 digital customer experience 5 finland m6 commercial manager 2.5 finland m7 store manager 10 uk m8 chief executive officer 30 uk m9 e-commerce manager 6.5 finland m10 project manager 25 uk m11 managing director 20 uk m12 chief technology officer 30 uk m13 regional manager 30 uk m14 digital business advisor 22 finland appendix 3. the characteristics of interviewees journal of business models (2020), vol. 8, no. 3, pp. 33-61 5353 code position experience (years in industry) country m15 marketing and communications manager 8 uk m16 general manager 20 uk m17 head of digital and technology 20 uk m18 head of digital marketing 11 finland m19 country manager 20 finland m20 chief digital officer 15 finland m21 strategy manager 7 finland m22 market manager 24 uk m23 head of customer experience 16 uk m24 country manager 19 finland m25 communications and insights manager 16 finland m26 country transformation manager 10 finland appendix 3: the characteristics of interviewees (continued) journal of business models (2020), vol. 8, no. 3, pp. 33-61 5454 references abdul-ghani, e., hyde, k. f., and marshall, r. (2011) ‘emic and etic interpretations of engagement with a consumer-to-consumer online auction site’, journal of business research, 64(10), p1060-1066. achrol, r. s., and kotler, p. (1999) ‘marketing in the network economy ’, journal of marketing, 63, p146-163. afuah, a., and tucci, c. l. (2003) internet business models and strategies: text and cases. vol. 2. new york: mcgraw-hill. almquist, e., senior, j., and bloch, n. (2016) ‘the elements of value’, harvard business review, september, p4753. amit, r., and zott, c. (2001) ‘value creation in e‐business’, strategic management journal, 22(6‐7), p493-520. ariely, d., and i. simonson. (2003) ‘buying, bidding, playing, or competing? value assessment and decision dynamics in online auction’, journal of consumer psychology, 13(1), p113-123. baggi, s. (2014) ‘the revolution will be digitized. journal of direct’, data and digital marketing practice, 16(2), p86–91. bassano, c., piciocchi, p., spohrer, j. c., and pietronudo, m, c. (2018) ‘managing value co-creation in consumer service systems within smart retail settings’, journal of retailing and consumer services, 45, p190–197. beck, n., and rygl, d. (2015) ‘categorization of multiple channel retailing in multi-, cross-, and omni‐channel retailing for retailers and retailing’, journal of retailing and consumer services, 27, p170-178. becker, l., and jaakkola, e. (2020) ‘customer experience: fundamental premises and implications for research’, journal of the academy of marketing science, 48(4), p630–648. bertolini, m., duncan, d., and waldeck, a. (2015) ‘knowing when to reinvent’, harvard business review, 93(12), p90-101. bettman, j. r., luce, m. f., and payne, j. w. (1998) ‘constructive consumer choice processes’, journal of consumer research, 25(3), p187-217. black, g. s. (2005) ‘is ebay for everyone? an assessment of consumer demographics’, sam advanced management journal, 70(1), p50. brynjolfsson, e., hu, y. j., and rahman, m. s. (2013) ‘competing in the age of omnichannel retailing’, mit sloan management review, 54(4), p23-29. chatterjee, p. (2010) ‘multiple-channel and cross-channel shopping behavior: role of consumer shopping orientations’, marketing intelligence and planning, 28(1), p9-24. corkery, m. 2017. ‘is american retail at a historic tipping point?’, the new york times, 16. (available at) https:// www.nytimes.com/2017/04/15/business/retailindustry.html (accessed 12 november 2019). journal of business models (2020), vol. 8, no. 3, pp. 33-61 5555 corley, k.g. and gioia, d.a. (2011) ‘building theory about theory building: what constitutes a theoretical contribution?’, the academy of management review, 36(1), p12-32. cusumano, m.a., gawer, a., and yoffie, d.b. (2019) the business of platforms: strategy in the age of digital competition, innovation, and power. harpercollins publishers. davis-sramek, b., ishfaq, r., gibson, b. j., and defee, c. (2020) ‘examining retail business model transformation: a longitudinal study of the transition to omnichannel order fulfillment’, international journal of physical distribution & logistics management, 50(5), p557-576. day, g., and moorman, c. (2010) strategy from the outside-in: profiting from customer value. new york: mcgraw hill professional. demirci orel, f., and kara, a. (2014) ‘supermarket self-checkout service quality, customer satisfaction, and loyalty: empirical evidence from an emerging market’, journal of retailing and consumer services, 21(2), p118129. doganova, l., and eyquem-renault, m. (2009) ‘what do business models do?’: innovation devices in technology entrepreneurship, research policy, 38(10), p1559-1570. doherty, n. f., and ellis-chadwick, f. (2010) ‘internet retailing: the past, the present and the future’, international journal of retail and distribution management, 38(11-12), p943-965. eisenhardt, k.m. (1989) ‘building theories from case study research’, academy of management review, 14(4), p532-550. eisenhardt, k.m., and graebner, m.e. (2007) ‘theory building from cases: opportunities and challenges’, the academy of management journal, 50(1), p25-32. elo, s. and kyngäs, h. (2008) ‘the qualitative content analysis process’, journal of advanced nursing, 62(1), p107-115. frenken, k., and schor, j. (2017) ‘putting the sharing economy into perspective’, environmental innovation and societal transitions, 23(3), p3-10. fuentes, c., bäckström, k., and svingstedt, a. (2017) ‘smartphones and the reconfiguration of retailscapes: stores, shopping, and digitalization’, journal of retailing and consumer services, 39, p270-278. gallarza, m. g., gil‐saura, i., and holbrook, m. b. (2011) ‘the value of value: further excursions on the meaning and role of customer value’, journal of consumer behaviour, 10(4), p179-191. gawer, a. (2014) ‘bridging differing perspectives on technological platforms: toward an integrative framework’, research policy, 43(7), p1239-1249. gioia, d. a., corley, k. g., and hamilton, a. l. (2013) ‘seeking qualitative rigor in inductive research: notes on the gioia methodology ’, organizational research methods, 16(1), p15-31. journal of business models (2020), vol. 8, no. 3, pp. 33-61 5656 given, l. m. (2008) the sage encyclopedia of qualitative research methods. vol. 1. thousand oaks, ca: sage publications inc. glaser, b. g., and strauss, a. l. (1967) the discovery of grounded theory: strategies for qualitative research. chicago: aldine. grewal, d., roggeveen, a. l., and nordfält, j. (2017) ‘the future of retailing’. journal of retailing, 93(1), p1-6. grönroos, c. (2011) ‘value co-creation in service logic: a critical analysis’, marketing theory, 11(3), p279-301. gupta, s. (2017) ‘why retail supply chain transformations fail--and how to get it right’, logistics management (2002), 56(9), p45-53. hagberg, j., jonsson, a., and egels-zandén, n. (2017) ‘retail digitalization: implications for physical stores’, journal of retailing and consumer services, 39, p264-269. hagberg, j., sundstrom, m., and egels-zandén, n. (2016) ‘the digitalization of retailing: an exploratory framework’, international journal of retail & distribution management, 44(7), p694-712. hauser, j. r. (2014) ‘consideration-set heuristics’, journal of business research, 67(8), p1688-1699. helfat, c. e., and martin, j. a. (2015) ‘dynamic managerial capabilities: review and assessment of managerial impact on strategic change’, journal of management, 41(5), p1281-1312. helm, s., kim, s., and van riper, s. (2020) ‘navigating the “retail apocalypse”: a framework of consumer evaluations of the new retail landscape’, journal of retailing and consumer services, p54. holmes, a., byrne, a., and rowley, j. (2013) ‘mobile shopping behaviour: insights into attitudes, shopping process involvement and location’, international journal of retail & distribution management, 42(1), p25-39. hsieh, h.-f., and shannon, s. e. (2005) ‘three approaches to qualitative content analysis’, qualitative health research, 15(9), p1277-1288. huré, e., picot-coupey, k., and ackermann, c. (2017) ‘understanding omni-channel shopping value: a mixedmethod study ’, journal of retailing and consumer services, 39, p314-330. hänninen, m., smedlund, a., and mitronen, l. (2018) ‘digitalization in retailing: multi-sided platforms as drivers of industry transformation’, baltic journal of management, 13(2), p152-168. hänninen, m., mitronen, l., and kwan, s. (2019) ‘multi-sided marketplaces and the transformation of retail: a service systems perspective’, journal of retailing and consumer services, 49, p380-388. inman, j. j., and nikolova, h. (2017) ‘shopper-facing retail technology: a retailer adoption decision framework incorporating shopper attitudes and privacy concerns’, journal of retailing, 93(1), p7-28. jocevski, m., arvidsson, n., miragliotta, g., ghezzi, a., and mangiaracina, r. (2019) ‘transitions towards omnichannel retailing strategies: a business model perspective’, international journal of retail and distribution management, 47 (2), p78-93. journal of business models (2020), vol. 8, no. 3, pp. 33-61 5757 johnson, m. w., christensen, c. m., and kagermann, h. (2008) ‘reinventing your business model’. harvard business review, 56(12), p50-59. kaplan, r. s., kaplan, r. e., norton, d. p., davenport, t. h., and norton, d. p. (2004) strategy maps: converting intangible assets into tangible outcomes. boston: harvard business press. keiningham, t., ball, j., benoit, s., bruce, h. l., buoye, a., dzenkovska, j., and zaki, m. (2017) ‘the interplay of customer experience and commitment’, journal of services marketing, 31(2), 148–160. kranzbühler, a. m., kleijnen, m. h., morgan, r. e., and teerling, m. (2018) ‘the multilevel nature of customer experience research: an integrative review and research agenda’, international journal of management reviews, 20(2), p433-456. kumar, v., lahiri, a., and dogan, o, b. (2017) ‘a strategic framework for a profitable business model in the sharing economy ’, industrial marketing management, 69, p147-160. labrecque, l. i., vor dem esche, j., mathwick, c., novak, t. p., and hofacker, c. f. (2013) ‘consumer power: evolution in the digital age’, journal of interactive marketing, 27(4), p257-269. lemon, k. n., and verhoef, p. c. (2016) ‘understanding customer experience throughout the customer journey ’, journal of marketing, 80(6), p69-96. lichtman, m. (2017) qualitative research for the social sciences. london: sage publications, inc. lusch, r. f., vargo, s. l., and tanniru, m. (2010) ‘service, value networks and learning’, journal of the academy of marketing science, 38(1), p19-31. lubis, a. n. (2018) ‘evaluating the customer preferences of online shopping: demographic factors and online shop application issue’, academy of strategic management journal, 17(2), p1–13. matzler, k., eichen, s., anschober, m., and kohler, k. (2018) ‘the crusade of digital disruption’, journal of business strategy, 39(6), p13-20. mcarthur, e., weaven, s., and dant, r. (2016) ´the evolution of retailing: a meta-review of the literature’, journal of macromarketing, 36(3), p272-286. mckinsey. (2020) adapting to the next normal in retailing: the consumer experience imperative [online]. available at: https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/adapting%20 to%20the%20next%20normal%20in%20retail%20the%20customer%20experience%20imperative/adapting-to-the-next-normal-in-retail-the-customer-experience-imperative-v3.pdf (accessed: 22 june 2020) mende, m., and noble, s. m. (2019) ‘retail apocalypse or golden opportunity for retail frontline management?’, journal of retailing, 95(2), p84-89. mendelson, h. (2000) ‘organizational architecture and success in the information technology industry ’, management science, 46(4), p513-529. moorman, c., and day, g. s. (2016) ‘organizing for marketing excellence’, journal of marketing, 80(6), p6-35. journal of business models (2020), vol. 8, no. 3, pp. 33-61 5858 noy, c. (2008) ‘sampling knowledge: the hermeneutics of snowball sampling in qualitative research’, international journal of social research methodology, 11(4), p327-344. osterwalder, a. (2004) the business model ontology a proposition in a design science approach. doctoral dissertation, université de lausanne, faculté des hautes études commerciales. pantano, e., and migliarese, p. (2014) ‘exploiting consumer–employee–retailer interactions in technology-enriched retail environments through a relational lens’, journal of retailing and consumer services, 21(6), p958965. picot-coupey, k., huré, e., and piveteau, l. (2016) ‘channel design to enrich customers’ shopping experiences: synchronizing clicks with bricks in an omni-channel perspective – the direct optic case’, international journal of retail and distribution management, 44(3), p336-368. piotrowicz, w., and cuthbertson, r. (2014) ‘introduction to the special issue information technology in retail: toward omnichannel retailing’, international journal of electronic commerce, 18(4), p5-16. queirós, a., faria, d., and almeida, f. (2017) ‘strengths and limitations of qualitative and quantitative research methods’, european journal of education studies, 3, p369-387. rafaeli, a., altman, d., gremler, d. d., huang, m. h., grewal, d., iyer, b., and de ruyter, k. (2017) ‘the future of frontline research: invited commentaries’, journal of service research, 20(1), p91-99. rintamäki, t., kuusela, h., & mitronen, l. (2007). identifying competitive customer value propositions in retailing. managing service quality: an international journal. reinartz, w., wiegand, n., and imschloss, m. (2019) ‘the impact of digital transformation on the retailing value chain’, international journal of research in marketing, 36(3), p350-366. ritter, m., and schanz, h. (2019) ‘the sharing economy: a comprehensive business model framework’, journal of cleaner production, 213, p320-331. saarijärvi, h. (2012) ‘the mechanisms of value co-creation’, journal of strategic marketing, 20(5), p381-391. saarijärvi, h., kannan, p. k., and kuusela, h. (2013) ‘value co-creation: theoretical approaches and practical implications’ european business review, 25(1), p6–19. saghiri, s. s., bernon, m., bourlakis, m., and wilding, r. (2018) ‘omni-channel logistics special issue’, international journal of physical distribution & logistics management, 48(4), p362–364. shafer, s. m., smith, h. j., and linder, j. c. (2005) ‘the power of business models’, business horizons, 48(3), p199-207. simonson, i., and rosen, e. (2014) ‘what marketers misunderstand about online reviews’, harvard business review, 92(1), p7. sorescu, a., frambach, r. t., singh, j., rangaswamy, a., and bridges, c. (2011) ‘innovations in retail business models’, journal of retailing, 87(1), p3-16. journal of business models (2020), vol. 8, no. 3, pp. 33-61 5959 statista. (2020a) ´retail market in the u.s’, available at: https://www.statista.com/study/78976/retail-marketin-the-united-states/ (accessed: 26 october 2020). statista. (2020b) ‘e-commerce in europe’, available at: https://www.statista.com/study/28488/e-commercein-europe-statista-dossier/ (accessed: 26 october 2020). taylor, e. (2016) ‘mobile payment technologies in retail: a review of potential benefits and risks’ international journal of retail & distribution management, 44(2), p159-177. teece, d. j. (2009) dynamic capabilities and strategic management: organizing for innovation and growth. oxford: university press on demand. teece, d. j. (2010) ‘business models, business strategy and innovation’, long range planning, 43(2-3), p172-194. teece, d. j., peteraf, m., and leih, s. (2016) ‘dynamic capabilities and organizational agility: risk, uncertainty, and strategy in the innovation economy ’, california management review, 58(4), p13-35. teece, d. j., and linden, g. (2017) ‘business models, value capture, and the digital enterprise’, journal of organization design, 6(1), p1-14. timmers, p. (1998) ‘business models for electronic markets’, electronic markets, 8(2), p3-8. townsend, m., surane, j., orr, e. and cannon, c. (2018) ‘america’s ‘retail apocalypse’: is really just beginning. bloomberg’, (available at) https://www.bloomberg. com/graphics/2017-retail-debt/ (accessed 26 october 2020). us census. (2020) quarterly retail-commerce sales, 1st quarter 2020 [online]. available at: https://www2. census.gov/retail/releases/historical/ecomm/20q1.pdf. (accessed: 28 may 2020). vakulenko, y., shams, p., hellström, d., and hjort, k. (2019) ‘online retail experience and customer satisfaction: the mediating role of last mile delivery ’ the international review of retail, distribution and consumer research, (3), p306–320. van alstyne, m. w., parker, g. g., and choudary, s. p. (2016) ‘pipelines, platforms, and the new rules of strategy ’, harvard business review, 94(4), p54-62. verhoef, p. c., kannan, p., and inman, j. (2015) ‘from multi-channel retailing to omni-channel retailing: introduction to the special issue on multi-channel retailing’, journal of retailing, 91(2), p174-181. von briel, f. (2018) ‘the future of omnichannel retail: a four-stage delphi study ’, technological forecasting and social change, 132, p217-229. willems, k., smolders, a., brengman, m., luyten, k., and schöning, j. (2017) ‘the path-to-purchase is paved with digital opportunities: an inventory of shopper-oriented retail technologies’, technological forecasting and social change, 124, p228-242. yrjölä, m. (2014) ‘value creation challenges in multichannel retail business models’, journal of business models, 2(1), p89-104. journal of business models (2020), vol. 8, no. 3, pp. 33-61 6060 yrjölä, m., saarijärvi, h., and nummela, h. (2018) ‘the value propositions of multi-, cross-, and omni-channel retailing’, international journal of retail and distribution management, 46(11-12), p1133-1152. zott, c., and amit, r. (2010) ‘business model design: an activity system perspective’, long range planning, 43(2-3), p216-226. zott, c., amit, r., and massa, l. (2011) ‘the business model: recent developments and future research’, journal of management, 37(4), p1019-1042. journal of business models (2020), vol. 8, no. 3, pp. 33-61 6161 about the authors harri hokkanen is a doctoral candidate at tampere university, finland. alongside his extensive practical experiences, his research interests focus on retail transformation including new retail forms, the changing role of companies and adaptive business models. charlotte walker is a phd student at the department of management and organization at stockholm school of economics, sweden. her research focuses on the influence of digitalization on organizations, business models, and sustainability. aaron donnelly graduated in april 2020 from the leadership for change programme at tampere university. he is currently enrolled at the university of nottingham studying his postgraduate certificate of education international. 38 journal of business models (2023), vol. 11, no. 1, pp. 38-57 performance indicators for business models: the current state of research montijn van de ven1, paola lara machado2, alexia athanasopoulou3, banu aysolmaz4, oktay turetken5 abstract organizations need to evaluate new and existing business models to innovate their business logic and remain competitive. one way to carry out this evaluation is through business model performance indicators. performance indicators for business models can support organizations in quantifying their business model objectives, monitoring business model performance during and after implementation, and benchmarking their business model against competitors. however, the current literature lacks a complete picture of performance indicators that can be used to evaluate business models and monitor their performance. therefore, we conducted a semi-systematic literature review to analyze which performance indicators are referred to in the academic literature related to business models. we provide an overview of the current state of research on this topic and discuss possible directions for further research. keywords: business models, performance indicators, literature review please cite this paper as: van de ven, m., lara machado, p., athanasopoulou, a., aysolmaz, b., and turetken, o. (2023), performance indicators for business models: the current state of research, journal of business models, vol. 11, no. 1, pp. 38-57 1–5 eindhoven university of technology, department of industrial engineering and innovation sciences, po box 513, 5600 mb eindhoven, the netherlands issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v11i1.7177 introduction to stay competitive in today ’s dynamic business environment, organizations increasingly focus on innovating the way they do business. in this regard, the business model functions as a useful conceptual tool to represent, analyze, and innovate an organization’s business logic (osterwalder, pigneur and tucci, 2005). as a result, the business model concept has gained increasing interest in both academia and practice (johnson, christensen and kagermann, 2008; fielt, 2014; wirtz et al., 2016; massa, tucci and afuah, 2017). in this study, we consider business models as “the design or architecture of the value creation, delivery, and capture mechanisms” of an organization (teece, 2010, p. 172). although organizations need to rethink and adapt their business model continuously, business model https://doi.org/10.54337/jbm.v11i1.7177 journal of business models (2023), vol. 11, no. 1, pp. 38-57 3939 innovation is a major challenge for most organizations (frankenberger et al., 2013). they are faced with several challenges throughout the innovation process, including identifying change drivers and managing the implementation of the new business model through pilots and experimentation (frankenberger et al., 2013). to reduce uncertainty during the innovation process, organizations need to evaluate new and existing business models (gilsing et al., 2022). one possible way to carry out this evaluation is through performance measurement, for which organizations can use business model performance indicators (heikkilä et al., 2016; gilsing et al., 2021). performance indicators are measurable constructs that enable organizations to monitor the extent to which their objectives are fulfilled (lebas and euske, 2007). in the context of business models, organizations need to use performance indicators to formulate measurable objectives related to the expected performance of a new business model (heikkilä et al., 2014; gilsing et al., 2021). moreover, organizations can use business model performance indicators to monitor the performance of an organization’s business model during and after its implementation (di valentin et al., 2013) or benchmark the business model performance of the organization against that of competitors (afuah and tucci, 2003; montemari, chiucchi and nielsen, 2019). while existing literature focuses mainly on developing methods and frameworks for representing business models, less attention has been paid to identifying performance indicators for monitoring business model performance (burkhart et al., 2011; nielsen et al., 2018). a few studies present catalogs of performance indicators to support organizations in selecting and defining indicators for their business models. however, these catalogs mainly cater to a specific domain or context, such as electronic business (dubosson-torbay, osterwalder and pigneur, 2002) and networked organizations (heikkilä et al., 2016). to the best of our knowledge, no structured review of business model performance indicators currently exists in the literature. the main objective of this paper is to review business model performance indicators referred to in the academic literature to depict the current state of research and discuss future research directions in this field. to fulfill this objective, we conducted a semi-systematic literature review following the guidelines of snyder (2019) and classified the identified indicators. we contribute to the existing body of knowledge by providing an overview of performance indicators for business models and categorizing them into a catalog consisting of relevant business model dimensions. the catalog can support organizations that are in the process of selecting and concretizing performance indicators for their business models to adopt and tailor these indicators for their specific business context and needs. the remainder of this paper is structured as follows. first, we describe the methodological approach used to identify performance indicators in the literature. next, we present our key insights regarding the categorization and frequency of the identified indicators. finally, we discuss the key insights about the review and present our conclusions and possible directions for further research in the last section. methodological approach we conducted a semi-systematic literature review following the guidelines of snyder (2019). accordingly, our review process comprised four main steps: design, conduct, analyze, and structure and write (snyder, 2019). first, we defined the objective of our review (as depicted in section 1) and established a review protocol that all authors followed during the literature search and selection process. to find relevant studies, we specified the following search string: “business model*” and (“performance indicator*” or “performance measure*” or “performance metric*” or “kpi*”). we included the terms (key) performance indicator, measure, and metric in the search string as these are often used interchangeably in the literature (neely, gregory and platts, 2005). in this paper, we adopt the definition of lebas and euske (2007) and use the term ‘performance indicator’, as it is most commonly used in the performance measurement literature (neely, gregory and platts, 2005). in addition, we decided only to include studies that (1) adopt a non-trivial definition of business journal of business models (2023), vol. 11, no. 1, pp. 38-57 4040 models, in line with our interpretation as outlined in section 1, (2) present clearly defined business model performance indicators, measures, or metrics, and (3) are published in academic venues, such as journals, conference proceedings, or academic book chapters. we conducted our search in the following digital libraries that publish research studies on business models: web of science, scopus, and ais elibrary. next, we performed a title, abstract, and keyword search using the specified search string in the selected libraries. this search resulted in an initial set of 879 studies published between 1988 and december 2021. in the next step, we excluded 236 duplicates from the initial set and conducted a title, abstract, and keyword screen on the remaining studies. we excluded 423 studies based on this initial screening, after which we read the full text of the remaining 220 papers. finally, we selected 18 studies that were relevant based on our inclusion criteria. we used google scholar to snowball back and forth on the selected studies, which allowed us to find an additional 13 relevant studies. as a result, our final set consists of 31 publications (15 journal articles, 12 conference papers, and 4 book chapters) that present performance indicators for business models. the initial results of this literature review have been reported in van de ven et al. (2022). appendix i presents the selected publications resulting from the literature review. next, we performed several review iterations on the selected papers to extract and categorize the indicators. this iterative process resulted in an unstructured set of 951 performance indicators, including duplicates. when specified in the paper, we also extracted the way in which the indicators were operationalized, for example, through a qualitative question or mathematical formula. qualitative questions are used to measure performance in a subjective way (e.g., on a likert scale), while mathematical formulas are used to calculate performance indicators objectively based on quantitative data. 16 of the 31 selected studies did not present a clear operationalization for the proposed indicators. in the next step, we defined the initial conceptual dimensions of the catalog. since the business model canvas (bmc) (osterwalder and pigneur, 2010) is the most widely used framework to represent business models in both research and practice (massa, tucci and afuah, 2017), the nine building blocks of the bmc were selected as the initial catalog dimensions: value propositions, customer relationships, customer segments, channels, key activities, key resources, key partners, revenues streams, and cost structure (osterwalder and pigneur, 2010). moreover, we adopted the term ‘business model pillar’ (osterwalder, pigneur and tucci, 2005) to describe the meta-dimensions of the catalog, and categorized the initial nine bmc dimensions into the business model pillars ‘frontstage’, ‘backstage’, and ‘profit formula’ (osterwalder et al., 2020). the frontstage pillar (osterwalder et al., 2020) includes performance indicators related to the value proposition that the organization offers to its customers (i.e., products and services), the relationships that the organization establishes and maintains with customers, the different customer segments and their characteristics, and the channels used to deliver the value proposition (i.e., communication, distribution, and sales). next, the indicators categorized in the backstage pillar (osterwalder et al., 2020) are concerned with the performance of key activities performed by the focal organization to deliver value to the customer, the resources required to perform these activities, and the network of partners that the organization relies on. the third pillar, the profit formula (osterwalder et al., 2020), contains indicators related to the value capture mechanisms of the business model, including its revenue streams resulting from the delivery of the value proposition, and costs associated with performing activities, acquiring resources, and collaborating with partners. subsequently, we iteratively categorized the identified indicators in the selected business model dimensions. in this step, we merged similar indicators and rephrased them into more general terms. examples of two specific indicators are ‘(website-related) conversion rate’ (heikkilä et al., 2016) and ‘premium conversion rate’ (nielsen, lund and thomsen, 2017). these two indicators were merged into the more general indicator ‘conversion rate’. the authors frequently met to align on the tentative categorization of the indicators. we discovered that several journal of business models (2023), vol. 11, no. 1, pp. 38-57 4141 indicators presented in the literature were related to the profitability of business models during this iterative process of categorization and synthesis. to account for profit-related indicators mentioned in the literature, we added the new dimension ‘profitability ’ to the profit formula pillar. we also identified indicators related to market performance (for example, shareholder expectations) and the environmental sustainability and societal impact of business models. we added these categories as two distinct dimensions to the catalog, ‘market’ and ‘sustainability & society ’, respectively, and categorized them in a new pillar called ‘environment’. the environment pillar includes indicators related to a business model’s ‘contextual logic’ (lüdeke-freund et al., 2017), which refers to the larger stakeholder environment in which the business model is embedded. during this phase, we also adapted and refined the operationalizations of the indicators. we attempted to define the operationalizations as close as possible to the original definition and context of the selected publications. if an indicator’s operationalization was not provided in the original publication, we looked for appropriate definitions in the literature and discussed them to reach an agreement. our final step was to reorder and refine the indicators in the catalog until all authors agreed on the final form. this required several meetings until an agreement about the synthesis and categorization of the indicators was reached. key insights to analyze the business model performance indicators referred to in the academic literature, we extracted the performance indicators related to business models from selected publications and categorized them. the final catalog consists of 215 performance indicators for business models, including an operationalization for each indicator. an excerpt of the catalog is presented in appendix ii. the indicators are categorized along four pillars and 12 dimensions relevant to business models (table 1). figure 1 presents the number of identified indicators per business model pillar and dimension. it shows that the majority of indicators are related to the profit formula pillar of business models (73 indicators), while the frontstage pillar (69 indicators) and backstage pillar (51 indicators) also cover many indicators. according to these numbers, the majority of indicators in the literature are aimed at these three original pillars of the business model canvas (osterwalder et al., 2020). however, we discovered only 22 indicators related to the environment pillar of business models. as such, performance indicators related to the environment of business models appear to be overlooked in the current literature. furthermore, the number of identified performance indicators varies greatly across business model dimensions. figure 1 shows that the cost structure dimension has the highest number of indicators (n=31). this number could be explained by the fact that costs are important in evaluating the business case of new business models (turetken et al., 2019) and controlling the performance of an existing business model (wirtz, 2020). the channel performance dimension accounts for the second-highest number of indicators, with a total of 28 performance indicators, and is part of the frontstage pillar, which has the second-highest number of indicators. these numbers align with the argument by wirtz et al. (2016) that an organization’s customer interface design is critical to the success of a business model. at the same time, only a few indicators were discovered related to the environmental and societal context of business models (six indicators, respectively), despite the growing interest in evaluating these contextual dimensions of business model performance (schaltegger, hansen and lüdeke-freund, 2016; lüdeke-freund et al., 2017; turetken et al., 2019; ortuño and dentchev, 2021). a few performance indicators were frequently referred to in the business model literature. the most used performance indicators for business models are ‘product or service quality’ (part of the value proposition dimension) and ‘customer satisfaction’ (customer relationships dimension), which both appeared in 14 studies. the second-most used performance indicators are ‘perceived customer benefit’ and ‘satisfaction of customer needs’, both part of the value proposition dimension, which were mentioned in 13 studies. journal of business models (2023), vol. 11, no. 1, pp. 38-57 4242 table 1. business model pillars business model dimensions focus of performance indicators frontstage value proposition performance product and service performance, perceived customer value, price-related performance customer relationship performance customer acquisition, customer satisfaction, and relationship-building performance customer segment performance performance of different customer segments, customer characteristics, and behavioral performance channel performance communication, distribution, and sales channel performance, including the performance of marketing and post-purchase customer support backstage key activity performance development, production, service provision performance key resource performance performance related to physical assets, financial resources, intellectual resources, human resources key partner performance performance of the partner network related to relationships, outsourcing, knowledge sharing profit formula revenue stream performance financial performance regarding sales and recurring fees cost structure performance fixed and variable costs incurred by the company to deliver the value proposition profitability performance value capture performance related to profit margins environment market performance strategic positioning and shareholder-related performance sustainability & societal performance environmental sustainability performance, societal impact, and non-economic environmental or societal costs and benefits table 1: business model dimensions and corresponding pillars. journal of business models (2023), vol. 11, no. 1, pp. 38-57 4343 discussion and conclusions this paper reviews the academic literature to analyze the performance indicators related to business models. to this end, we conducted a semi-systematic literature review, resulting in a sample of 31 relevant studies. based on the identified indicators in the selected literature, we developed a catalog consisting of 215 performance indicators, categorized into four business model pillars (frontstage, backstage, profit formula, and environment) and 12 dimensions relevant to business model performance (value proposition, customer relationships, customer segments, channels, key activities, key resources, key partners, revenue streams, cost structure, profitability, market, and sustainability and society). a number of performance indicator catalogs for business models are presented in the literature (e.g., dubosson-torbay, osterwalder and pigneur, 2002; heikkilä et al., 2016). however, we discovered that more than half of the identified studies in our review did not present a clear operationalization (i.e., question or formula) to measure and calculate the suggested indicators. thus, existing research often fails to provide specific guidance for concretely measuring business model performance indicators. we aim to go beyond the state-of-the-art by providing a catalog of 215 business model performance indicators, including an operationalization for each indicator. our research thereby responds to the multiple calls in the literature to investigate performance indicators for monitoring business model performance (burkhart et al., 2011; nielsen et al., 2018). business professionals who aim to select and specify performance indicators for the business models of their organization can use the catalog. the indicators can be modified to fit a particular organization and business context. the additional key contribution of our work compared to existing catalogs is that we provide an explicit operationalization for most of the indicators that can be used to measure the performance of existing or novel business models. it can serve as a starting point for selecting figure 1: number of performance indicators per business model pillar and dimension journal of business models (2023), vol. 11, no. 1, pp. 38-57 4444 indicators for each dimension of an organization’s business model, which can be further concretized based on its specific context and needs. as with any research endeavor, our work is subject to limitations. first, as the catalog developed in this study is still conceptual, future research should focus on empirically evaluating the structure of the catalog. researchers can apply the catalog to improve and validate its applicability in different business settings. secondly, during the review process, we found that authors of existing studies use and interpret the terms performance indicator, measure, and metric in different ways. because we interpreted these different terms as synonyms in this study, there may have been some subjectivity involved in the process of reviewing papers and categorizing the identified indicators. we mitigated this by actively involving different authors of this paper in all research steps and by iteratively developing the categorization and synthesis of indicators. based on our findings, we outline several possible future research directions. first, our research showed that the profit formula pillar of business models has received the greatest attention in terms of the number of performance indicators. the other business model pillars (i.e., frontstage, backstage, and environment) need greater focus by researchers in order to identify relevant indicators and formalize their operationalizations. second, we found that existing studies contain very few indicators dedicated to the environmental sustainability and societal performance of business models. therefore, future research can investigate what indicators are relevant to these emerging dimensions related to the contextual logic of business models, which are quickly becoming important (schaltegger, hansen and lüdeke-freund, 2016; lüdeke-freund et al., 2017; turetken and grefen, 2017; ortuño and dentchev, 2021). third, researchers can evaluate the validity and utility of the catalog by conducting empirical case studies with business model professionals in various business settings. fourth, future research can investigate how the catalog can be used during different phases of the business model innovation and management process (wirtz, 2020; taran, boer and nielsen, 2021; lara machado et al., 2022) and how the performance indicators are possibly evolving during the development of the business model over time (heikkilä et al., 2016). journal of business models (2023), vol. 11, no. 1, pp. 38-57 4545 references afuah, a. and tucci, c.l. (2003) internet business models and strategies: text and cases. 2nd edn. new york: mcgraw-hill. burkhart, t., krumeich, j., werth, d. and loos, p. (2011) ‘analyzing the business model concept – a comprehensive classification of literature’, in icis 2011 proceedings. dubosson-torbay, m., osterwalder, a. and pigneur, y. (2002) ‘e-business model design, classification, and measurements’, thunderbird international business review, 44(1), pp. 5–23. available at: https://doi.org/10.1002/ tie.1036. fielt, e. (2014) ‘conceptualising business models: definitions, frameworks and classifications’, journal of business models, 1(1), pp. 85–105. frankenberger, k., weiblen, t., csik, m. and gassmann, o. (2013) ‘the 4i-framework of business model innovation: a structured view on process phases and challenges’, international journal of product development, 18(3–4), pp. 249–273. available at: https://doi.org/10.1504/ijpd.2013.055012. gilsing, r., turetken, o., grefen, p., ozkan, b. and adali, o.e. (2022) ‘business model evaluation: a systematic review of methods’, pacific asia journal of the association for information systems, 14(4), p. 2. available at: https://doi.org/10.17705/1pais.14402. gilsing, r., wilbik, a., grefen, p., turetken, o., ozkan, b., adali, o.e. and berkers, f. (2021) ‘defining business model key performance indicators using intentional linguistic summaries’, software and systems modeling, 20, pp. 965–996. available at: https://doi.org/10.1007/s10270-021-00894-x. heikkilä, m., bouwman, h., heikkilä, j., solaimani, s. and janssen, w. (2016) ‘business model metrics: an open repository ’, information systems and e-business management, 14(2), pp. 337–366. available at: https://doi. org/10.1007/s10257-015-0286-3. heikkilä, m., solaimani, s., soudunsaari, a., hakanen, m., kuivaniemi, l. and suoranta, m. (2014) ‘performance estimation of networked business models: case study on a finnish ehealth service project’, journal of business models, 2(1), pp. 71–88. johnson, m.w., christensen, c.m. and kagermann, h. (2008) ‘reinventing your business model’, harvard business review, 86(12), pp. 57–68. lara machado, p., van de ven, m., aysolmaz, b., athanasopoulou, a., ozkan, b. and turetken, o. (2022) ‘bridging business models and business processes: a systematic review of methods’, in mcis 2022 proceedings. lebas, m. and euske, k. (2007) ‘a conceptual and operational delineation of performance’, in a. neely (ed.) business performance measurement: unifying theories and integration practice. cambridge: cambridge university press, pp. 125–139. lüdeke-freund, f., freudenreich, b., schaltegger, s., saviuc, i. and stock, m. (2017) ‘sustainability-oriented business model assessment—a conceptual foundation’, analytics, innovation, and excellence-driven enterprise sustainability, pp. 169–206. available at: https://doi.org/10.1057/978-1-137-37879-8_7. journal of business models (2023), vol. 11, no. 1, pp. 38-57 4646 massa, l., tucci, c.l. and afuah, a. (2017) ‘a critical assessment of business model research’, academy of management annals, 11(1), pp. 73–104. available at: https://doi.org/10.5465/annals.2014.0072. montemari, m., chiucchi, m.s. and nielsen, c. (2019) ‘designing performance measurement systems using business models’, journal of business models, 7(5), pp. 48–69. available at: https://doi.org/10.5278/ojs.jbm. v7i5.1905. neely, a., gregory, m. and platts, k. (2005) ‘performance measurement system design: a literature review and research agenda’, international journal of operations and production management, 25(12), pp. 1228–1263. available at: https://doi.org/10.1108/01443570510633639. nielsen, c., lund, m. and thomsen, p. (2017) ‘killing the balanced scorecard to improve internal disclosure’, journal of intellectual capital, 18(1), pp. 45–62. available at: https://doi.org/10.1108/jic-02-2016-0027. nielsen, c., lund, m., thomsen, p.p., kristiansen, k.b., sort, j.c., byrge, c., roslender, r., schaper, s., montemari, m., delmar, a.c.p., lorenzo, s., paolone, f., massaro, m. and dumay, j. (2018) ‘depicting a performative research agenda: the 4th stage of business model research’, journal of business models, 6(2), pp. 59–64. ortuño, c.a. and dentchev, n.a. (2021) ‘we need transdisciplinary research on sustainable business models’, journal of business models, 9(2), pp. 72–86. available at: https://doi.org/10.5278/jbm.v9i2.3573. osterwalder, a. and pigneur, y. (2010) business model generation: a handbook for visionaries, game changers, and challengers. john wiley & sons. osterwalder, a., pigneur, y., smith, a. and etiemble, f. (2020) the invincible company: how to constantly reinvent your organization with inspiration from the world’s best business models. john wiley & sons. osterwalder, a., pigneur, y. and tucci, c.l. (2005) ‘clarifying business models: origins, present, and future of the concept’, communications of the association for information systems, 16. available at: https://doi. org/10.17705/1cais.01601. schaltegger, s., hansen, e.g. and lüdeke-freund, f. (2016) ‘business models for sustainability: origins, present research, and future avenues’, organization & environment, 29(1), pp. 3–10. available at: https://doi. org/10.1177/1086026615599806. snyder, h. (2019) ‘literature review as a research methodology: an overview and guidelines’, journal of business research, 104, pp. 333–339. available at: https://doi.org/10.1016/j.jbusres.2019.07.039. taran, y., boer, h. and nielsen, c. (2021) the business model innovation process: preparation, organization and management. 1st edn. london: routledge. available at: https://doi.org/10.4324/9781003215097. teece, d.j. (2010) ‘business models, business strategy and innovation’, long range planning, 43(2–3), pp. 172– 194. available at: https://doi.org/10.1016/j.lrp.2009.07.003. turetken, o. and grefen, p. (2017) ‘designing service-dominant business models’, in proceedings of the 25th european conference on information systems (ecis). guimarães, portugal, pp. 2218–2233. journal of business models (2023), vol. 11, no. 1, pp. 38-57 4747 turetken, o., grefen, p., gilsing, r. and adali, o.e. (2019) ‘service-dominant business model design for digital innovation in smart mobility ’, business and information systems engineering, 61(1), pp. 9–29. available at: https://doi.org/10.1007/s12599-018-0565-x. di valentin, c., emrich, a., werth, d. and loos, p. (2013) ‘architecture and implementation of a decision support system for software industry business models’, in amcis 2013 proceedings. van de ven, m., lara machado, p., athanasopoulou, a., aysolmaz, b. and turetken, o. (2022) ‘key performance indicators for business models: a review of literature’, in ecis 2022 research papers. wirtz, b.w. (2020) business model management. 2nd edn. cham: springer international publishing (springer texts in business and economics). available at: https://doi.org/10.1007/978-3-030-48017-2. wirtz, b.w., pistoia, a., ullrich, s. and göttel, v. (2016) ‘business models: origin, development and future research perspectives’, long range planning, 49(1), pp. 36–54. available at: https://doi.org/10.1016/j. lrp.2015.04.001. journal of business models (2023), vol. 11, no. 1, pp. 38-57 4848 appendix i selected publications resulting from the literature review id year authors title source title type 1 2003 afuah a., tucci c. internet business models and strategies mcgraw-hill book chapter 2 2018 augenstein d., fleig c. towards increased business model comprehension principles for an advanced business model tool ecis 2018 proceedings conference paper 3 2017 batocchio a., minatogawa v.l.f., anholon r. proposal for a method for business model performance assessment: toward an experimentation tool for business model innovation journal of technology management and innovation article 4 2003 bouwman h. designing metrics for business models describing mobile services delivered by networked organizations workshop on concepts, metrics & visualization, at the 16th bled conf. conference paper 5 2004 bouwman h., van den ham e. business models and emetrics, a state of the art e-life after the dot.com bust book chapter 6 2012a di valentin c., emrich a., werth d., loos p. conceiving adaptability for business models: a literature-based approach conf-irm 2012 proceedings conference paper 7 2012b di valentin c., werthe d., loos p., weiblen t. quantifying the quality of business models int. conference in human-oriented and personalized mechanisms, technologies and services. conference paper 8 2017 díaz-díaz, r., muñoz, l., péréz-gonzalez, d. the business model evaluation tool for smart cities: application to smartsantander use cases energies article journal of business models (2023), vol. 11, no. 1, pp. 38-57 4949 id year authors title source title type 9 2002 dubosson-torbay m., osterwalder a., pigneur y. e‐business model design, classification, and measurements thunderbird international business review article 10 2021 gilsing r., wilbik a., grefen p., turetken o., ozkan b., adali o.e., berkers f. defining business model key performance indicators using intentional linguistic summaries software and systems modeling article 11 2010 heikkilä j., tyväinen p., heikkilä, m. designing for performance a technique for business model estimation proceedings of ebrf 2010 conference paper 12 2016 heikkilä m., bouwman h., heikkilä j., solaimani s., janssen w. business model metrics: an open repository information systems and e-business management article 13 2014 heikkilä m., solaimani s., soudunsari a., hakanen m., kuivaniemi l., suoranta m. performance estimation of networked business models: case study on a finnish ehealth service project journal of business models article 14 2008 johnson m.w., christensen c.m., kagermann h. reinventing your business model harvard business review article 15 2013 kastalli i.v., van looy b., neely a. steering manufacturing firms towards service business model innovation california management review article 16 2007 khoshalhan f., kaldi a. skills brokerage performance measurement through bsc int. conf. on computer and information technology conference paper 17 2010 kijl b., boersma, d. developing a business model engineering & experimentation tool–the quest for scalable 'lollapalooza confluence patterns' amcis 2010 proceedings conference paper journal of business models (2023), vol. 11, no. 1, pp. 38-57 5050 id year authors title source title type 18 2021 kostin, k.b., steinbiss, k., petrinovic, o. determining the kpis of the german engineering industry based on the evaluation of contemporary business models strategic management article 19 2016 kriegel j., auinger k., reckwitz l., schmitt-rüth s., weissenberger s., tuttle-weidinger l. aal service performance measurement cube key criteria for aal new service development proceedings of ehealth2016 conference paper 20 2017 lüdeke-freund, f., freudenreich, b., saviuc, i., schaltegger, s., stock, m. sustainability-oriented business model assessment—a conceptual foundation analytics, innovation, and excellence-driven enterprise sustainability book chapter 21 2020 minatogawa v.l.f., franco m.m.v., rampasso i.s., anholon r., quadros r., durán o., batocchio a. operationalizing business model innovation through big data analytics for sustainable organizations sustainability article 22 2019 montemari, m., chiucchi, m.s., nielsen, c. designing performance measurement systems using business models journal of business models article 23 2018 mourtzis d., papatheodorou a.-m., fotia s. development of a key performance indicator assessment methodology and software tool for product-service system evaluation and decisionmaking support journal of computing and information science in engineering article 24 2017 nielsen c., lund m., thomsen p. killing the balanced scorecard to improve internal disclosure journal of intellectual capital article journal of business models (2023), vol. 11, no. 1, pp. 38-57 5151 id year authors title source title type 25 2001 palanisamy, r. evolving internet business model for electronic commerce using flexible systems methodology global journal of flexible systems management article 26 2015 rodríguez-rodríguez r., alfaro-saiz j.-j., verdecho m.-j. a performance-based scenario methodology to assess collaborative networks business model dynamicity working conference on virtual enterprises conference paper 27 2022 stalmachova k., chinoracky r., strenitzerova m. changes in business models caused by digital transformation and the covid‐19 pandemic and possibilities of their measurement—case study sustainability article 28 2021 udo y., ishino y. two-stage lean startup model for subscription business kes international conference conference paper 29 2020 wirtz b.w. business model management: design instruments success factors springer book chapter 30 2014 yu c.-c. developing value-centric business models for mobile government egov 2014 conference paper 31 2006 yu c.-c. a hybrid modeling approach for strategy optimization of e-business values bled 2006 proceedings conference paper journal of business models (2023), vol. 11, no. 1, pp. 38-57 5252 appendix ii catalog of performance indicators for business models (excerpt) business model pillars business model dimensions performance indicators operationalization frontstage value proposition perceived customer benefit extent to which the product or service is better than current alternatives of competitors (qualitative scale from high to low) which can be measured based on various dimensions (e.g., security, protection of privacy, skills or learning provided, comfort, ease of use of the service, brand image, trust) and scales (e.g., customer effort score, cse) satisfaction of customer needs • extent to which the product or service meets the requirements or needs of the customer (qualitative scale from high to low) • number of customer requirements satisfied divided by total number of requirements requested by the customer (e.g., performance according to service-level agreement) • number of additional and value added services offered on top of the main product or service offering product diversification • number of different products or services, • number of different product or service categories • percentage of specific type of products (e.g., fresh products) of total product portfolio customer relationships conversion rate number of conversions of free customers to paying customers divided by total number of interactions per time period customer satisfaction • customer satisfaction index (csi) • satisfaction barometer journal of business models (2023), vol. 11, no. 1, pp. 38-57 5353 business model pillars business model dimensions performance indicators operationalization frontstage customer relationships recommendation ratio or willingness to refer • net promotor score (nps) (i.e., willingness of customers to recommend the service to their friends) • number of referrals divided by total number of customers per time period customer segments profitable customers number of customers that are profitable divided by total number of customers online customers number of customers who order products or service online / total number of customers average order size or customer expenditure • average amount of money a customer spends in one transaction • average amount spend by a customer per purchase multiplied by the purchase frequency over a certain time period channels website performance • average number of page-views over a certain time period • number of click-throughs on the website divided by the number of times the website is shown to the customer • ease of finding and navigating through the website (qualitative scale from high to low) • average time to load a web page • maximum number of users logged in at the same time on the website on-time delivery • number of on-time deliveries divided by total number of deliveries • percentage of late deliveries journal of business models (2023), vol. 11, no. 1, pp. 38-57 5454 business model pillars business model dimensions performance indicators operationalization frontstage channels sales performance • number of companies contacted by the commercial department over a certain time period • number of deals closed with companies by the commercial department over a certain time period • time to first proposal • average sales per sales person (monetary value) • number of sales orders received but not completed yet) backstage key activities process throughput number of completed cases per time period (e.g., customer complaints) product or service development speed or time-tomarket • average time from idea to prototype (i.e., development time of new product or service concept) • time from product development to product or service placement on the market (i.e., product or service launch) production performance • time to produce a single product (i.e., completion time) • number of products that are built-to-order per time period key resources system architecture or information technology (it) infrastructure performance • 24-7 availability and downtime • response time (e.g., api response) • number of help desk calls per time period • number of disaster recoveries per time period • mean time between failures • data security or integrity • number of applications • extensibility of applications • percentage of service providers' data base visits • percentage of cross-system collaboration (i.e., interoperability of systems) journal of business models (2023), vol. 11, no. 1, pp. 38-57 5555 business model pillars business model dimensions performance indicators operationalization backstage key resources internal collaboration performance • number of units and departments involved in the business model • number of organizational layers involved • number of different roles and responsibilities workforce size • number of employees • number of full-time equivalent (fte) employed key partners partner network control or coordination • type of coordination (middle, high, none) • centrality of specific actors in value exchange vertical integration of activities • degree of coor outsourcing of activities (e.g., logistics, manufacturing) • owned activities compared to outsourced activities partner collaboration and innovation • number of new projects started with partners per time period • percentage of cross-unit or organizational collaboration • improvement of the degree of collaborative innovation per time period profit formula revenue streams volume or value of traded goods • number of products and/or services sold per time period • value per product multiplied by total number of products traded per time period" sales growth net sales of the prior period minus net sales of the current period, divided by net sales of the prior period (premium) subscription revenue revenue from customers through recurring (premium) fees multiplied by number of time period intervals (often regular intervals, e.g., weekly, monthly, or annually) journal of business models (2023), vol. 11, no. 1, pp. 38-57 5656 business model pillars business model dimensions performance indicators operationalization profit formula cost structure personnel costs average costs per working hour, total salary costs operating expenses (opex) direct costs of goods sold and other operating expenses over a certain period of time sales and marketing expenses • total expenses made to market and sell products and services • total costs of sales (e.g., distribution costs, marketing costs, wages, commissions)" profitability return on investment (roi) profit divided by total capital (i.e., efficiency of the total capital) net profit margin revenue minus cost, divided by revenue earnings before interest and taxes (ebit) annual net profit plus or minus taxes and interest (operating profit excluding tax and interest) environment market positioning extent to which business model is affected by competitive forces from (qualitative scale from high to low): rivalry, customers, complementors, suppliers, potential new entry, substitutes (porter's five forces) earnings per share (eps) net income minus preferred dividends, divided by outstanding shares shareholder value total (monetary) value delivered to the equity owners of a company due to management's ability to increase sales, earnings, and free cash flow journal of business models (2023), vol. 11, no. 1, pp. 38-57 5757 business model pillars business model dimensions performance indicators operationalization environment sustainability & society unit energy consumption all energy consumed in a production cycle divided by production quantity wastage degree scrap quantity divided by planned scrap quantity non-economic benefits non-economic aspects of the business model that are beneficial to society and the environment (e.g., development goals related to knowledge development, innovation productivity, creativity, social cohesion) 78 journal of business models (2023), vol. 11, no. 1, pp. 78-81 the role of digital technologies in a data-driven circular business model: a systematic literature review malahat ghoreishi1,2 abstract the circular economy (ce) has been identified as a promising solution for reducing emissions, waste, and achieving sustainable development goals while offering economic values for companies. however, the move towards ce requires managers and decision-makers to rethink and redesign their business models (bms) incrementally or radically. in order to achieve proper decisions on resource usage, product designs, material flows, and recirculation of materials, data plays a significant role in ce. accessible data is considered as an essential enabler of circular solutions and at the heart of circular business models. in this regard, digital transformation can offer innovative tools for efficient execution and sharing of data to help companies generating new business models and to increase their competitive advantages. this study explores different data-driven bms enabled by digital technologies in ce. keywords: circular economy, data-driven business model, digital technologies please cite this paper as: ghoreishi, m. (2023), the role of digital technologies in a data-driven circular business model: a systematic literature review, journal of buisness models, vol. 11, no. 1, pp. 78-88 1 lut university, finland, malahat.ghoreishi@lut.fi 2 lab university of applied sciences, finland issn: 2246-2465 doi https://doi.org/10.54337/jbm.v11i1.7245 introduction the move towards circular economy (ce) requires systemic change in how companies create and deliver value to customers (value proposition) and how they can capture and generate revenue (value capture) (bocken et al., 2016). therefore, innovating business models (bms) are the fundamentals of the ce concept (centobelli et al., 2020). bocken and ritala (2021) defined two strategic choices in developing circular bm initiatives as innovation and resource strategies. while resource strategy focuses on narrowing, slowing, closing, and regenerating resource and energy loops (geissdoerfer et al., 2018), innovation strategy focuses on firmdriven internal processes (closed innovation) and collaboration with external partners and stakeholders (open innovation). the value creation in circular bms for narrowing the loops happens by delivering https://doi.org/10.54337/jbm.v11i1.7245 journal of business models (2023), vol. 11, no. 1, pp. 78-88 7979 value to customers through efficient design and production, reducing the extraction of virgin materials and resources (li et al., 2010). in slowing the loops, circular bms aim to create value by extending products’ life by designing products that can have more than one use cycle and are more durable, upgraded, repairable, and easy to disassemble recyclable (zhu et al., 2010). finally, bms for closing the loops generate value through recycling and recovering materials for reuse in new production processes (bocken and ritala, 2021). processes such as resource optimisation, manufacturing products, extending the lifetime of products, offering new use cycles, and improving material flow, include highvolume data, which, if implemented efficiently, can enhance circularity (ingemarsdotter et al., 2020). data can create value when transferred to information, which can be integrated with other data sources and interpreted as knowledge. when knowledge is further enriched and developed, it forms wisdom (kristoffersen et al., 2020). a data-driven ce gives companies more opportunities to develop innovative bms, create networks and partnerships, as well as expanding ecosystems (kauppila, 2022). transparent data on material and components enables measuring the impact of production and operations on material, creating pure and high-quality feedstock by preventing toxic, contaminant and non-renewable material, as well as reducing the cost of material extraction and usage (blomsma et al., 2020). hence, it helps companies to make more efficient and accurate decisions on material and process choices to achieve ce goals. in addition, accurate data on material flow internally and across the whole value chain can ensure proper recycling opportunities at the end of product’s life while enhancing the recovery processes of materials (sitra, 2021). accordingly, data for circular bms can be categorised as follows: data on product design and production, data on use phase and customer behaviour, data on product and service lifetime, data on system performance, and data on material flows. implementing such data in circular value creation develops bms such as servitisation-based models, product as a service model, sharing economy models, collaborative consumption models, product life extension models, and resource recovery models (luoma et al., 2021). as shown in figure. 1, data is at the core of the ce model, which can be collected, stored, measured and analysed by digital technologies such as big data, artificial intelligence (ai), blockchain and the internet of things (iot), also known as industry 4.0 • figure 1. role of data and digital technologies in ce ( based on ghoreishi et al., 2022) waste sorting optimization, recycling material supply circular design distribution & use end of first life reverse logistics optimize, share, reuse repair, maintenance 1 remanufacturing 2 3 4 1 durable design tool big data, ai, digital twin 2 customer services, service-based models ai, machine learning, iot, blockchain 3 4 value assessment tool for used products big data, iot, blockchain, ai value-based return incentives, revers logistics optimization big data, iot, blockchain, ai, machine vision figure 1: role of data and digital technologies in ce ( based on ghoreishi et al., 2022) journal of business models (2023), vol. 11, no. 1, pp. 78-88 8080 (ghoreishi et al., 2022). digital technologies are revolutionising bms in ce by: • enabling tracking and tracing products and materials to develop product-as-a-service system which reduces product ownership while increasing reuse, repair and refurbishment opportunities (alcayaga et al., 2019); • enabling data sharing within the whole supply chain that improves retaining of value from products and materials (de sousa jabbour et al., 2019); • enabling higher efficiency and circularity in manufacturing products and material processes (ranta et al., 2021); • enabling platforms that connect companies and customers, support development of service and dematerialisation, and facilitate industrial symbiosis (täuscher and laudien, 2018); • enabling shared databases for sharing waste information and reusing waste as a resource (radamaekers et al., 2011). although research on the role of data in ce has recently gained the attention of practitioners and researchers (luoma et al., 2021), only limited studies were conducted on the role of digital technologies in data-driven circular bms (ranta, 2021). therefore, the research questions of this study are as follows: rq1. what are the existing data-driven business models in ce? rq2. what is the role of digital technologies in data-driven circular bms? methodological approach to answer the research question and to understand the existing literature on the role of digital technologies on data-driven circular bms, a systematic literature review was conducted in this study (xiao and watson, 2019). scopus and ebsco business source complete were the selected academic databases. the search was conducted using the main terms ‘circular business model’, ‘digitalization’, and ‘datadriven business model’. the set of keywords for each term was selected based on the domain literature (table 1). the search terms were selected in the title, abstract, keywords, or subject, with ‘data’ chosen as any part of the text. in addition, the search was limited to articles and reviews published in peer-reviewed journals, english language, between january 2000 and march 2022 (1.1.2000-31.03.2022). table 1. terms keywords circular business model (circular*) and “business model*” or “value creat*”) digitalization (digitali*ation or “digital technolog*” or “digiti*ation” or “digital transformation” or “big data” or “it” or “industry 4.0” or “internet of things” or “iot” or “remote control” or “remote monitoring” or “rfid” or “artificial intelligence” or “data analytics” or “predective analytics” or “machine learning” or “ automat* robots” or “smart robots” or “smart data” or “ digital manufacturing”) data-driven business model (data or “data collection” or “data gathering” or “data analysis” or “data analytics” or “data mining” ) table 1: keywords used in the search settings journal of business models (2023), vol. 11, no. 1, pp. 78-88 8181 after removing duplicates, the screening process was continued by reading titles, keywords, and abstracts. to ensure the final sample, the articles should 1) include the concepts of circular bms and circular value creation, 2) address the digital technologies and ce, 3) address the utilisation of data in circular bms by digital technologies. accordingly, the articles that did not meet these criteria were excluded. furthermore, the author read the full articles for a more accurate decision, specifically the results sections. the literature search process is shown in figure 2, based on which 47 articles were selected for full article screening. after reading the full text of each article carefully, the irrelevant articles were excluded and resulted in 22 selected articles for a systematic review regarding the theoretical, conceptual and empirical contribution to answering the rqs of this study. furthermore, the relevant data was collected manually and documented systematically in an excel sheet. the aspects of the articles related to the role of data in circular bms and value creation by digital technologies were assessed and identified. the main terms of circular bms, the definition of the bms, the role of data in circular bms and the description of how digital technologies enable data for circularity in these bms were identified and coded after the data analysis. this way, the contents of articles were classified and compared to form a systematic finding. results of the literature review the role of digital technologies as an enabler of circular strategies, resolve strategies, and circular bms has been discussed in various research and studies since 2017 (alcayaga et al., 2019; blomsma et al., 2020). however, according to the results of this study, the vital role of data, how data creates value in circular bms through digital technologies, has only been argued by limited researchers since 2018. the results from the systematic literature review indicate the increasing trend in research on this topic, with three publications in 2018, two publications in 2019, three publications in 2020, seven publications in 2021, and seven publications by the spring of 2022 (figure 3). moreover, the journals with the highest publications are respectively as follows: sustainability open access journal with six publications, four publications in business strategy and the environment journal, two publications in journal of cleaner production and two publications in journal of resources, conservation and recycling, and the rest were published in various journals (figure 4). according to the results, as illustrated in figure 5, iot is the most discussed digital technologies in different research due to the capability of iot sensors and links in connecting physical products and online services. therefore, it can enable tracking, tracing and transferring of real-time data, which results in saving resources, optimisation of processes, transportation and material flows, as well as minimizing unnecessary expenses on material extraction throughout the entire network of supply chains (ivanov et al., 2022; chauhan et al., 2022; ranta et al., 2021; ingemarsdotter et al., 2020). furthermore, data-based services are a rising trend aiming at increasing transparency and creating new value from supply chain data. according to the results, 13 publications discussed the “product-service system (pss)” bm in the concept of ce and highlighted the significant role of digital technologies, specifically iot. servitisation and pss model provides services and performance instead of products, search the databases with the strings elimination of duplicates reading titles, keywords, abstracts reading the full articles export of meta data 470 excluded: 31 selected: 439 excluded: 392 selected: 47 excluded: 25 selected: 22 figure 2: research design for the literature review. journal of business models (2023), vol. 11, no. 1, pp. 78-88 8282 3 2 3 7 7 0 1 2 3 4 5 6 7 8 1 n um be r o f p ub lic at io n year of publication 2018 2019 2020 2021 2022 figure 3 figure 3: figure 4: 0 1 2 3 4 5 6 7 sustainability business strategy and the environment journal of cleaner publication journal of resources, conservation and recycling number of publications journals figure 4 journal of business models (2023), vol. 11, no. 1, pp. 78-88 8383 which increases resource and material optimisation. various authors emphasized the role of data in extending the life of products for creating value and developing service-based bms. in this regard, data enables repair, reuse, maintenance services and recycling while helping companies to optimize product design. the second vital circular bm highlighted by the authors was “blockchain-based supply chain”, with the important role of blockchain technology in creating a transparent and trustable data transaction throughout the entire supply chain. many authors mentioned that the tight connections between blockchain and iot sensors, create a trustworthy environment for different actors within the supply chains and enable safe and visible transactions without the need for a third party. “sharing economy”, “digital remanufacturing”, “digital recycling ecosystem”, and “pull demand-driven model” were respectively the most discussed circular bms, highlighting the role of digital platforms and cloud-based technologies. table 2 below includes an overview of the data-driven bms in ce identified through the literature review. discussions and conclusions the findings of this paper offer a greater understanding of the role of data in ce and why data is crucial in developing circular bms. the existing data-driven bms have been identified and why data is important in circular bms has been discussed through this research. data is the source of value in various decision-making processes in ce and enables material and process optimisation. precise and accurate data supports the best choices and decisions in changing supply chains, ecosystems, and networks dynamically. the results from the systematic review show the increasing trends in this topic and the increasing potential for more emperical studies in future. there is huge potential for research in identifying the benefits of data by utilizing digital technologies data-driven circular business model supply-chain-as-aservice (blockchainbased supply chain) product-service systems (pss) sharing economy pull demand driven model digital recycling ecosystem digital remanufacturing (robot control-asa-service) digital technologies iot ai blockchain big data cloud computing digital capabilities tracking products and assets through embedded sensors remote monitoring & controlling smart robots with intelligent sensors accessibility and exchange of reliable data data integration digital platforms connecting objects sensors transferring real-time data automated production predictive analytics traceability and transparency source of data in ce data on lifecycle of products data on waste stream data on consumer behavior and demands data on location, availability and status of products data on use of products data on infrastructures data on purity of recycled material data on feedstock data on product design and prototyping data on material flow data on connected products data on recycling partners data on payments data on recycled materials and test process figure 5. data-driven bms, source of data and digital technologies journal of business models (2023), vol. 11, no. 1, pp. 78-88 8484 table 2. data-driven circular bm definition of circular bm role of data industry 4.0 technologies reference examples supply-chainas-a-service (cloud-based enabled supply chain) , blockchain-based supply chain supply chain-as-a-service enables major principles of resilience and viability. main resilience strategies such as multi-sourcing, collaboration, visibility, and flexible re-routing. viability is the ability of a supply chain to survive in a changing environment through a redesign of structures and replanning of performance with long-term impacts. data on each stage of product's life enhances transparency and visibility in the supply chains which is highly important for efficiency, resilience and sustainability while tracing performances. data from connected products, plants and systems enables operation optimization and create better quality products. tightly connected iot sensors and platforms to blockchain technology allow contracting in the platform context and creating improvements in performance through transferring real-time data, visibility and trust. blockchain registers each transactions of products and materials throughout the value chain, thus enabling access and exchanging of reliable data without the need for third party operators. ai and big data analytics can enable visibility and outsourcing in pricing and revenue decisions. ivanov et al., 2022, huynh 2021 product-service systems (pss) the pss business model offers products entirely as a service or supportive services in addition to products such as maintenance contracts. support services that can improve and extend lifecycle of the products through reuse, recycling, and remanufacturing operations. pss enables resource efficiency. data on lifecycle of products helps in prolonging life of products. data on waste stream, data on consumer behavior. data on location, availability and status of products. data on product facilitates decision making. iot enables tracking of the products during and after use, enables durability in products, connects objects and enables service-based model. utilizing data enables remote monitoring and controlling of products. big data, and cloud computing enable digital platforms that manage operational activities and services. blockchain enhances the sorting process. cloud technologies integrate and show data to the company and consumer, enabling the potential for offering context-specific maintenance services. chauhan et al., 2022, huynh 2021, langley 2022, subramoniam et al., 2021, cetin et al., 2021, okorie 2020, ranta et al., 2021., ingemarsdotter et al., 2020., rossi et al., 2020., lieder et al., 2020, garcia et al 2018, bressanell et al., 2018, lindström et al 2018 journal of business models (2023), vol. 11, no. 1, pp. 78-88 8585 table 2. data-driven circular bm definition of circular bm role of data industry 4.0 technologies reference examples sharing economy (se) sharing economy business model aims to optimize resource consumption through collaborative consumption (sharing, exchangin, and renting resources leads to reduction in resource and energy usage). improving operation mangement. enables sharing access to assets and resources instead of owning assests. data on entire lifecyle of product, data on consumer behavior, data on use of products, data on products and systems demand, data on infrastructures. big data platforms, embedded sensors and iot enabling data collection for products and services. installing sensors on assets enables tracking and monitoring the condition of products, allowing predictive maintenance. artificial intelligence enables new product development, preventive maintenance services . vecchio et al., 2021, massaro eta l., 2020 digital recycling ecosystem (extended blockchain service) reducing waste and carbon footprint across the supply chain.creating a closed-loop supply chain by innovating products from post-consumer materials which are fully certified through a traceable and transparent supply chain. data on purity of recycled material for customers' trust. accurate data on payments for waste collectors and other partners. data on recycling partners' capacities. data for choosing the right feedstock and how to use it for which end product. data for handling types of feedstock. data for test process of the content of recycled materials. blockchain secures transparent process and cost of the entire value chain. blockchain system enables tracing post consumer recycled materials to their source. private blockchain with a customized token system enables setting transparent rules as well as a tokenizer reward system. chaudhuri et al., 2022 pull demanddriven model facilitating a radical shift in the entire productionconsumption paradigm of supply and demand as well as upstream/downstream businesses. the pull demanddriven business model reforms the linear model to a more collaborative and integrative circular process. this model increases the speed from design to delivery, producing more personalized products and more flexible for smallscale production. real-time data helps to solve two main problems: overproduction and underuse. data on design and prototyping help in prodcut development and production phases, making involve all the stakeholders from the first stage. digital plaforms enable communication and interaction between end-users and designers and business partners. ai enables automated production which reduces labour costs while increasing higher acuracy in production. huynh 2021 journal of business models (2023), vol. 11, no. 1, pp. 78-88 8686 table 2. data-driven circular bm definition of circular bm role of data industry 4.0 technologies reference examples digital remanufacturing business model (power-by-thehour, robot control-as-aservice) provides remanufacturing companies the capacity to gain access to the customer base and to enable rapid respond to the changes in demands, reducing resource consumption while increases competitiveness. integration of digital remanufacturing is crucial for product development, process development, production, and after sales in ce. improves real-time inventory management. data on different parts' condition enables high quality remanufacturing. historical data enhances decision-making to qualify or separate the returned products. data on product design (design for disassembly, design for repair, design for upgrade…) enhances taking consideration parameters for better remanufacturing. data on material flow and returns improves design processes, lack of information results in enhanced processing of the product. data on customers' behavior and demand reduces response time to drive changes. iot enables tracking the parts to ensure availability of replacement parts. sensors enables tracking part performances and facilitating predictive analytics such as predictive maintenance. transferring real-time data on returned product defects and demands helps plant managers to schedule operations. a cloud-based service supports the development of distribution process planning in decentralized dynamic remanufacturing environment. smart robotic remanufacturing using intelligent sensing and real-time adaptation. subramoniam et al., 2021, kerin and pham 2019 in supply chains, ecosystems and various value creation strategies in ce with the focus on different industries such as textile and fashion which have more complex supply chain. this research is limited to understanding the role of data and digital technologies in circular bms. hence, the study only examined the papers that included the term “data” and excluded articles that only focused on digital circular bms and not mentioned data utilization. moreover, the concepts “circular bms” and “digital technologies” are showing strong and fast development recently, especially from the data-driven perspectives. future research will benefit from a comprehensive study on the role of data on different ce strategies, process and product designs. moreover, a deeper understanding of the role of data as a driver of circular bm innovation and configuration, the role of data in enhancing collaborative ecosystems, and the role of data in creating and capturing value in the circular supply chain are required through studies of different cases. finally, although the role of iot has been identified considerable as an enabler of data-driven bms in ce, there is still potential to explore the capabilities of ai, analytics and blockchain technologies in this field. journal of business models (2023), vol. 11, no. 1, pp. 78-88 8787 references alcayaga, a., wiener, m. and hansen, e.g. (2019), towards a framework of smart-circular systems: an integrative literature review, journal of cleaner production, vol. 221, pp. 622-634. blomsma, f., pieroni, m., kravchenko, m., pigosso, d.c., hildenbrand, j., kristinsdottir, a.r., kristoffersen, e., shahbazi, s., nielsen, k.d., jönbrink, a.k. and li, j. (2019), developing a circular strategies framework for manufacturing companies to support circular economy-oriented innovation, journal of cleaner production, vol. 241. bocken, n., miller, k. and evans, s., (2016), assessing the environmental impact of new circular business models, proceedings of the “new business models”—exploring a changing view on organizing value creation, toulouse, france, vol.1, pp.16-17. bocken, n. & ritala, p. (2021), six ways to build circular business models, journal of business strategy, vol. 43, no. 3, pp. 184-192. centobelli, p., cerchione, r., chiaroni, d., del vecchio, p. and urbinati, a. (2020), designing business models in circular economy: a systematic literature review and research agenda, business strategy and the environment, vol. 29, no.4, pp.1734-1749. chaudhuri a., subramanian n., dora m. (2022), circular economy and digital capabilities of smes for providing value to customers: combined resource-based view and ambidexterity perspective, journal of business research, vol. 142, pp. 32-44. chauhan c., parida v., dhir a. (2022), linking circular economy and digitalisation technologies: a systematic literature review of past achievements and future promises, technological forecasting and social change, vol. 177. geissdoerfer, m., morioka, s. n., de carvalho, m. m. & evans, s. (2018), business models and supply chains for the circular economy, journal of cleaner production, vol. 190, pp. 712–721. ghoreishi m., treves l., kuivalainen o. (2022), artificial intelligence of things as an accelerator of circular economy in international business, in: batas s., kuivalainen o., sinkovics r.r. (eds) megatrends in international business. the academy of international business. palgrave macmillan, cham , pp 83–104. hyunh, p.h. (2022), enabling circular business models in the fashion industry: the role of digital innovation, international journal of productivity and performance management, vol. 71, no. 3, pp. 870-895. ingemarsdotter, e., jasmin, e., balkenende, r. (2020), opportunities and challenges in iot-enabled circular business model implementation – a case study, resources, conservation and recycling, vol. 162. ivanov d., dolgui a., sokolov b. (2022), cloud supply chain: integrating industry 4.0 and digital platforms in the “supply chain-as-a-service”, transportation research part e: logistics and transportation review, vol. 160. kauppila, t (ed.). (2022), handbook for a data-driven circular economy in finland data sources, tools, and governance for circular design, vtt technology 401. journal of business models (2023), vol. 11, no. 1, pp. 78-88 8888 kerin m., pham d. (2019), a review of emerging industry 4.0 technologies in remanufacturing, journal of cleaner production, vol. 237. kristoffersen, e., blomsma, f., mikalef, p. and li, j. (2020), the smart circular economy: a digital-enabled circular strategies framework for manufacturing companies, journal of business research, vol. 120, pp.241-261. li, h., bao, w., xiu, c., zhang, y. and xu, h. (2010), energy conservation and circular economy in china’s process industries, energy, vol. 35, no. 11, pp. 4273-4281. massaro m., secinaro s., dal mas f., brescia v., calanra d. (2020), industry 4.0 and circular economy: an exploratory analysis of academic and practitioners’ perspectives, business strategy and the environment, vol. 30, no. 2, pp. 1213-1231. lopes de sousa jabbour, a.b., jabbour, c.j.c., godinho filho, m. and roubaud, d., (2018), industry 4.0 and the circular economy: a proposed research agenda and original roadmap for sustainable operations, annals of operations research, vol. 270, no. 1, pp. 273-286. luoma, p., toppinen, a. & penttinen, e. (2021), the role and value of data in realising circular business models – a systematic literature review, journal of business models, pp. 44–71. radamaekers, k., asaad, s.s.z., berg, j. (2011), study on the competitiveness of european companies and resource efficiency ecorys, rotterdam, the netherlands. ranta, v., aarikka-stenroos, l. and väisänen, j.m. (2021), digital technologies catalyzing business model innovation for circular economy—multiple case study, resources, conservation and recycling, vol. 164. sitra, (2020), the winning recipe for a circular economy, available at :https://www.sitra.fi/en/publications/ the-winning-recipe-for-a-circular-economy/. (accessed 20 jan 2023). subramoniam r., sundin e., subramoniam s., huisingh d. (2021), riding the digital product life cycle waves towards a circular economy, sustainability, vol. 13, no. 16. suocheng, d., zehong, l., bin, l. and mei, x. (2007), problems and strategies of industrial transformation of china’s resource-based cities, china population, resources and environment, vol. 17, no. 5, pp. 12-17. täuscher, k. and laudien, s.m. (2018), understanding platform business models: a mixed methods study of marketplaces, european management journal, vol. 36, no. 3, pp. 319-329. vecchio p., malandugno c., passiante g., sakka g. (2022), circular economy business model for smart tourism: the case of ecobnb, euromed journal of business, vol. 17, no. 1, pp. 88-104. xiao, y. and watson, m. (2019), guidance on conducting a systematic literature review, journal of planning education and research, vol. 39, no. 1, pp. 93-112. zhu, q., geng, y. and lai, k.h., (2010), circular economy practices among chinese manufacturers varying in environmental-oriented supply chain cooperation and the performance implications, journal of environmental management, vol. 91, no. 6, pp. 1324-1331. https://www.sitra.fi/en/publications/the-winning-recipe-for-a-circular-economy/ https://www.sitra.fi/en/publications/the-winning-recipe-for-a-circular-economy/ journal of business models (2013), vol. 1, no. 1 pp. 13-37 13 keywords: business model, business model innovation, business model warfare, strategy, business strategy, business history, creative destruction, innovation, innovation targets, innovation labs, langdon morris, 1: innovationlabs, innovationlabs.com please cite this paper as: morris, l. 2014. “business model warfare”, journal of business models, vol. 1, no. 1, pp. 13-37. business model warfare the strategy of business breakthroughs langdon morris1 abstract there’s a story behind every business success and every business failure, sometimes the story of a great idea; sometimes one that failed. sometimes it’s a story of insightful management, or management that failed. but almost always it’s a story about change. change in the market; change in the economy; change in a particular product or service that transformed a failure into a success, or vice versa. hidden behind many of these changes, or sometimes as a result of them, there is change in what customers experience, and as a result, a change in their perceptions and attitudes, and then in their buying habits. companies soar, or collapse, as a consequence. while we study the stories to learn about the specific changes, events, insights, and breakdowns in each case, we also look for broader and deeper explanations that show how change applies across industries and the whole of the economy. the broader patterns are often business model innovations, the subject of this white paper. here we propose a specific model explaining how large companies create and sustain market leadership in today’s market, or the traps that they fall into that prevent them from doing so. journal of business models (2013), vol. 1, no. 1 pp. 13-37 1414 introduction the average lifespan of a major corporation isn’t very long. the rate of change throughout the economy is such that a surprising number of new companies are being born and then growing to be quite large very quickly. at the same time, many older and well established firms are falling by the wayside just as fast, or faster. hence, just because a company is listed in the s&p 500 or the fortune 500, or any other of the biggest and most powerful and influential firms does not mean that it can look forward to a long and happy life ahead, as the mortality rate is high, and increasing. many companies that we today consider to be leaders will be gone by tomorrow, or the day after, while companies that we haven’t yet heard of, and indeed which may not even exist today, may will in many cases become next week’s industry giants.1 this problem of accelerating change is one of the most challenging issues facing business and government leaders today, not only in the developed world, but everywhere. in these turbulent markets where companies that were once dominant are struggling to survive, managers are constantly probing to understand what makes the difference between success and failure. looking at the recent past, for example, we might ask what happened to nokia, or blackberry, or kodak, or sony, sears, xerox, blockbuster, pontiac, lehman brothers, and so many other great brand names. why was gm’s saturn subsidiary a breakthrough in the 1990s and 100% dead in 2008? at the same time, how did google, facebook, amazon, fedex, charles schwab, and home depot become so big so fast, so widely admired? there’s a story behind every business success and every business failure, sometimes the story of a great idea; sometimes one that failed. sometimes it’s a story of insightful management, or management that failed. but almost always it’s a story about change. change in the market; change in the economy; change in a particular product or service that transformed a failure into a success, or vice versa. hidden behind many of these changes, or sometimes as a result of them, there is change in what customers experience, and as a result, a change in their perceptions and attitudes, and then in their buying habits. companies soar, or collapse, as a consequence. while we study the stories to learn about the specific changes, events, insights, and breakdowns in each case, we also look for broader and deeper explanations that show how change applies across industries and the whole of the economy. the broader patterns are the subject of this white paper. here we propose a specific model explaining how large companies create and sustain market leadership in today’s market, or the traps that they fall into that prevent them from doing so. part i: the mortality of companies the capacity of organizations to adapt to rapid and unexpected change is frequently discussed, but managing for adaptability is a little understood and poorly practiced art even as the pace of change continues to accelerate. in reality more big companies are going out of business faster than ever before. in searching for hard data about company mortality we found three sources: the fortune 500 list, the forbes 100 list, and the s&p 500 list. from the first year the fortune 500 was created, 1955, and continuing through 2001 we identified the companies that were on the list one year but not the subsequent year as living examples of what we might call the relentless progression of competition. over this span of 46 years, an average of 30 companies per year left the list.2 in some years there were more departures, in some years fewer, but the overall trend showed consistent turnover of about 6% each year. if the impact of decay was random among companies, then over a period of only about 17 years the entire list would turn over and an entirely new set of companies would be listed. but of course it doesn’t happen that way. instead, some companies are ephemeral visitors to the fortune 500, while others endure for decades. a journal of business models (2013), vol. 1, no. 1 pp. 13-37 1515 study by planners at shell found that by 1983, one-third of the companies listed among the 500 in 1970 had not only fallen from the list, but had gone out of business altogether.3 that’s an average mortality rate of 12 very large companies per year, or one per month. they also found that a multi-national corporation comparable in size to a fortune 500 company could only be expected to survive for between 40 and 50 years. in 1917, forbes magazine created its own list of the largest 100 us companies, and over the seventyyear span an average of about one company per year disappeared. of the remaining 39 original companies, 18 were still large enough to remain on the list in 1987. however, of the 18 companies, only two had managed to perform better than the overall stock market during the seventy-year period. while the combined annual growth rate (cagr) of us public companies from 1917 to 1987 was 7.5%, the 18 surviving companies managed a combined average of only 5.3%. in other words, an investor in market index funds would have done substantially better than an investor in these 18 companies. (this assumes, of course, that any investor would have had the incredible foresight to pick the 18 surviving big companies from the original list of 100.) the s&p 500 list provides a third reference point. the mortality rate s&p 500 companies has been steadily increasing, and the average life span has steadily decreased from more than 50 years to fewer than 25 today.4 the three slices of history convey a clear pattern, and projecting the pattern forward suggests that about a third of today’s major corporations will survive as significant businesses for the next twenty-five years. richard foster and sarah kaplan comment that, “most will die or be bought out and absorbed because they are too slow to keep pace with change in the market.”5 that’s the key issue – keeping page with change in the market; and of course it’s very difficult to do. where, then, to focus? part ii: it’s the business model the context of business strategy is the marketplace in which it is played out, so discussions of strategy must begin with reference to market dynamics. today, the most external critical factors are accelerating change, increasing competition, new technology, and increasing complexity, while the two major internal drivers are innovation and corporate decision making. while each of the external ones presents its own particular problems, the impact of all four acting together significantly compounds the problem, composing a “change conspiracy” that increases the danger exponentially. the results are a drastically compressed planning horizon for every company, the need for faster responses throughout the organization, and the accelerating rate of corporate failure as leaders simply fail to master these dynamics. indeed, these conditions are taking a heavy toll on companies, industries, and entire nations, and bringing severe stress to the business leaders who grapple with these issues day after day. on the news you’ll hear a long list of struggling enterprises, notable not only for the steep slide that many have recently endured, but also because it was not so long ago that they were held in high esteem. among them are, as mentioned, nokia, sony, kodak, sears, xerox, and many others. while these companies struggle to right themselves, even entire nations struggle to keep their economies viable in the new and demanding framework of global markets. a decade ago argentina, brazil, and their south american neighbors were caught in a deep decline; currently greece, spain, and ireland are notable for their struggles, while japan struggles with an economic restructuring that has already lasted nearly two decades. the parade of failures makes for dramatic stories that are illustrated by the sad losses suffered by individuals and families struggling to survive the economic and emotional strains, but as more and more companies fail, it is becoming clear that these are no longer unusual events. in spite of the attempts by governments, central banks, and multilateral organizations such as the imf, wto, and the world bank to reduce the impacts of change, it’s evident that the forces of change are far stronger than ever before. turbulence continues to increase, journal of business models (2013), vol. 1, no. 1 pp. 13-37 1616 which means that business failures will continue to be common occurrences going forward. and managers wonder obsessively deep into the night, what should i be doing differently? creative destruction while the sense of crisis and the time compression caused by the change conspiracy is certainly real, the underlying dynamics of the competitive marketplace are not new. in the 1940s the brilliant economist joseph schumpeter described the overall capitalist process as “creative destruction,” and he pointed out that the natural behavior of capitalist systems brings revolution not as the result of vague external factors, but from within. change, schumpeter observed, is the common condition of capitalism, not stability. and in an utterly prescient comment about prevalent management practices at the time (and still today), he wrote, “the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them.”6 the significance of this comment is nearly impossible to overstate. while so many observers and leaders focus their attention on how businesses perform in today’s markets, schumpeter points out that it is in the very nature of market evolution to weaken some companies while creating enticing opportunities for others. therefore, just as important as today’s market structures, or today’s technologies, or today’s competitive advantage, is how the forces of change will affect a firm tomorrow and the day after. but unfortunately, the instinctive habit of management is to look forward at a 90 day sales forecast and the next quarterly report, or backwards to the past, to guide a course into the future. neither approach is adequate to the challenge that is the focus of this paper. we call this short-term mentality the “logic of operations,” and it is characterized by a pattern of behavior whose goal is to create a stable, scalable enterprise that returns strong, steady profits to its stakeholders. the qualities that are important from this perspective include predictability, the capacity to forecast future growth, revenues, and profits, and as a result tremendous emphasis is placed on management of today’s business. standardization, policy, procedure, organization structure, and short-term decision making are tuned and fine tuned. the problem, of course, is that the obsession with predictable scalability ignores the realities of external change, and in an era characterized by the nasty change conspiracy, the obsession with the short term cannot and does not succeed. to take nokia as a poignant example, it does no good to be far and away the globe’s leading cell phone maker, the firm with 9 of the top 10 selling phones worldwide, as nokia was in 2007, when the iphone comes along. since the introduction of the iphone, nokia’s market capitalization has dropped from a nice high of $150 billion in 2007, to a rather sad $27 billion today (february 2014). that’s $123 billion erased as its prospects transformed from bright to dismal. with top management looking backward instead of into the future, nokia did not have a ready response to the iphone. it quickly became a sad story for a lot of people. nokia’s 2007 annual report is written in glowing language that is highly optimistic. military leaders are familiar with this problem, which they refer to as “preparing to fight the last war.” such preparations, even fully implemented with rigor and discipline, consistently fail if the style of warfare has in the interim changed. whether it’s armored knights slaughtered by the long bow, france’s maginot line, the 20th century’s iconic monument to backward thinking, the polish horse cavalry that rode out to face hitler’s blitzkrieg, the american army confounded by viet cong guerrilla fighters, civilian aircraft hijacked and turned into guided terrorist missiles, or a new class of weapon based on the cell phone, the “ied,” “improvised explosive device,” the history of warfare is the history of innovations that render past strategies ineffective. this is also the history of business. hence, the relevant question is, what is your strategy for dealing with accelerating change? part of the challenge with this type of thinking is that the misplaced focus is usually evident only in hindsight, journal of business models (2013), vol. 1, no. 1 pp. 13-37 1717 when wars, market share, jobs, or stock value have already been lost. you have to find a different way of thinking, and a different way of working. when things are moving so fast, in fact it’s a new kind of radar that you need, along with a different approach to making decisions. for business leaders as for generals, hindsight does not provide sufficient preparation, and it is therefore essential to have an effective way not only to look toward the future, but even better, to create it. it is on this imperative of innovation that this report will now concentrate. innovation the term “creative destruction” gives us a warning, a name, and a general explanation for the waves of change that move continually through the marketplace, and “fighting the last war” warns us as well that we have do it differently if we’re going to survive. both help us direct our attention toward understanding the forces of change rather than supporting the illusion of stability, and also remind us that the waves of change are themselves created, either intentionally or unintentionally, not by mysterious forces, but as a result of purposeful innovation in the competitive arena of the market. that’s right … your rivals in the marketplace or the battlefield are targeting you. there is a business, or more than one, whose innovative thinkers are working right now to take away your share of the market, for innovation is indeed the weapon of choice. what is your best response? innovations of your own. in fact, innovation may be your only possible valid response. however, innovation is a term that means different things to different people. since it’s a critically important concept to this report and to your business, we’ll pause here to define it carefully. we note, first of all, that the word “innovation” refers to an attribute, a process, and a result. innovation is a process that happens somewhere in your company, or perhaps in someone’s mind. the result, in each case, can be an insight, a new idea, a product, a strategy, a new or improve business process, or perhaps a new business model (we’ll get to defining “business model” shortly). it may be a question, a theory, or just a fear. but whatever it is, one of the qualities that will distinguish the new thing is its “innovativeness.” this innovativeness refers to its distinctiveness, its originality, perhaps its usefulness, and most importantly its value.7 the label “innovation” also refers specifically to that new thing itself that the innovation process has produced. to be considered an innovation in business, the result must be increased value in the form of new or improved functionality, reduced cost, a price increase (good for the seller), a price decrease (good for the buyer), better margin for the seller, or some combination of these. according to this definition not every new or different idea qualifies as an innovation. in fact only a small percentage qualify. innovative ideas, by definition, create value for their users and valuable competitive advantage for their owners, as well as economic rewards. however, even innovations that have only minor impact on the market can be significant and critically important, especially if they help a company to provide its customers with a superior experience. in this context innovation can be used to defend, to block competitors from gaining our share even as it can also be used to attack.8 hence, the approach that peter drucker labeled as “fast-follower” is a useful defensive strategy employed by companies to block the growing effectiveness of a competitor’s offering. for example, netscape navigator had a strong head start in the browser market, but microsoft’s internet explorer became a fast follower and quickly overtook netscape, forcing it to seek refuge as a subsidiary of aol. (aol grew dominant for a short time, acquired time-warner, and then itself collapsed into near-irrelevance before being reinvented.) journal of business models (2013), vol. 1, no. 1 pp. 13-37 1818 in high tech and particularly software markets, a variant on this strategy is known derisively as “vaporware.” here the defense consists of product announcements, not actual products. in the early days of the database market, vaporware announcements were prolific, while actual new products came trotting along sometimes years later. in the course of one of these transitions borland died a quick death long before its promised software reached the market. while these aspects of innovation and the innovation process occur in the life cycles of individual companies, innovation is also a significant factor in macroeconomics at the level of nations and the economy as a whole. economists know that it is only through effective innovation that real economic growth occurs, because the underlying economic impact of innovation is to make resources more productive, which literally creates wealth for society. hence, innovation is crucial to the economic viability of nations. but when discussing innovation the focus must remain on individuals and individual companies because it is their work that drives the economy forward. thus, just as innovators drive microeconomic change in specific markets and macroeconomic change in economies, it is innovators who trigger creative destruction in their search for commercial success and competitive advantage. among the companies widely admired today and we have so far mentioned google, amazon, facebook, charles schwab, home depot, and fedex most have attained success precisely because they have innovated. through their innovations they brought structural change to their markets; their motivation was to gain advantage within the capitalist process precisely as schumpeter described, and they succeeded in doing so. but the innovator’s role is only half of the equation. customers are the ones who determine the value of innovations, because they are the ones who pay for them. market behavior is an aggregate reflection of each consumer’s drive to find the most attractive offers, and to maximize value received for cost incurred. as innovation is the process of creating higher value offerings, buyers naturally gravitate to innovative products. but perhaps “gravitate” is the wrong word. it is more accurate to say that capitalist markets devour innovations, hungrily consuming them the way a very hungry lion consumes a fresh kill. the capitalist system depends for its dynamism on the market’s appetite for innovation, which has shown itself to be generally insatiable. inherent in the dynamics of market demand is the process that drives competition through innovation. the waves of change launched by innovators are countered by competitors who innovate in order to defend their existing positions, or to attack with ambitions of their own. it’s an endless cycles that serves only to drive the process of change still that much faster and more widely throughout the economy. accelerating change and the convergence in the marketplace of many competing innovators results in greater complexity for all, a landscape of acute danger and astonishing challenge. any enterprise that intends to survive must somehow innovate, because innovation itself is the only defense against innovation. through innovation you may catch up if you are behind, or even take the lead. thus, we see clearly that the future of each and every firm is determined largely as a function of its ability to innovate effectively. innovation is therefore a mandate, an absolute requirement for survival. and it is a problem. an enormous, thorny problem for enterprises, because managing the innovation process is one of the most challenging issues facing any of them. it is extraordinarily difficult to do well, in part because, as with top management, r&d organizations are often focused on the wrong objectives, as we will discuss below. the many dimensions of innovation creative destruction is fascinating from a macroeconomic perspective, and it raises tough microeconomic questions about change and change management in journal of business models (2013), vol. 1, no. 1 pp. 13-37 1919 individual firms. in particular, it brings focus to how leaders and managers handle change, and it highlights the necessity of constant regeneration of the business from within through the r&d process and other creative and innovation-seeking endeavors, that is, on activities that are directly intentionally at creating innovations. while leaders of successful companies show a knack for reinventing their organizations in clever ways, among the failures we see repeatedly the consequences of not understanding or following schumpeter’s advice. too many managers assume that change is the aberration, and they behave as if the market is stable. perhaps the business school curriculum is partly at fault, for the very notion of a masters in business administration assumes that the critical competence is administration, implying that continuing and well-controlled operation under managerial control is the focus, intent, and purpose of management. for most managers, however, the ability to create is far more important to their companies than skills related to administrating and controlling. furthermore, as russ ackoff points out, a serious flaw in the traditional mba curriculum is that in the real world managers are not presented with tidy and objective “cases” to solve9 they must first figure out what the problem is, which can itself require a great deal of insight and creativity. and for the most part, textbooks don’t help. in today’s markets change is the norm and stability is an aberration. leaders grapple with the disruptive forces of change and they figure out for themselves what lessons and challenges present in the current situation, and what responses will be most effective in harnessing change so that their organizations can survive. somewhere in the competitive environment it’s likely that a new innovation is about to appear that will dramatically impact on the current structures that your business depends on. and yet the relentless day to day demands on every manager’s time immerses them in a flood of pressing issues, and many simply fail to recognize important underlying factors that portend significant disruption. consequently, they tend not to account adequately for systemic change, and they are surprised and unprepared when they should not be. did personal computers and networked workstations surprise the computer industry? absolutely. did the high performance sport shoe surprise the staid sneaker marketplace when nike invented the category? did efficient and high quality japanese cars surprise the detroit automakers? did the cellular telephone shock the entrenched telcos? and did the smart phone radically disrupt the cell phone makers? the answer to all of these questions, of course, is “yes.” this can happen only because leaders are looking in the rear view mirror, gazing backwards at what they have accomplished, instead of forward at what must be accomplished. occasionally we even see a company whose leaders, judging by the evidence of their behavior, prefer to go out of business rather than do the work of adapting to change. it can be intellectually as well as psychologically difficult to shift the focus from the operations mentality and actually confront the need to do things in a very different way. during his tenure as ceo of ibm, during which he turned the company from a disastrous decline, lou gerstner commented that, “many successful companies that fall on hard times – ibm, sears, gm, kodak, xerox – saw clearly the changes in the environment. but they were unable to change highly structured organizational cultures that had been born in a different world.”10 even today, the local sears store appears to be caught in a time warp, its merchandising showing all the leading edge ideas of 1975. have their merchandising directors never seen an ikea store, much less an apple store? i don’t have much confidence that sears will be around much longer. what, one wonders, could they possibly be thinking? but they’re not alone, for as we noted at the very beginning of this paper, companies are dying every day, even big ones that you’d think would know better. and as mr. gerstner points out, a primary reason seems to be that some leaders actually make the choice for their enterprise to fail, to die, rather than confronting the need to change and adapt, that is, to innovate. and while it is imperative for organizations to be continually engaged in the process of innovation, an journal of business models (2013), vol. 1, no. 1 pp. 13-37 2020 important question concerns where those efforts to innovate should be focused. because there are, it turns out, a great many possibilities. to examine this we devised an imaginary and archetypal large organization with products and services in many different markets, extensive operations in numerous locations, and a predominantly internal support structure. we suggest that in such an organization there are at least 38 distinctive opportunities for innovation. 38 possible innovation targets the first thing that jumps out from this list is that the vast majority of these opportunities do not involve new technologies embedded in existing or new products. in spite of the widely-held assumption to the contrary, “innovation” is by no means limited to “technology.” one of the lessons is that technology innovation by itself has rarely been sufficient to ensure the future, and it is certainly not today. nokia, to go back to that sad story, has mountains of great new technology. in its halcyon days, it was one of the world’s greatest technology innovators, and its massive r&d budgets were the envy of companies worldwide. but in fact, nokia’s collapse was one of the most effective messengers of an important lesson, which is that it’s not a question of how much you spend on innovation, but rather the process you use to manage that effort. booz & co. has shown us through some great research that spending a lot on r&d is surely no guarantee of future business success: table 1: possible innovation targets business structure alliances capital formation administration information flow automation insourcing / outsourcing services organization structure type facilities infrastructure it infrastructure employee / contractor mix employee experience decision making processes facilities effectiveness process to improve processes customer experience communication process crm brand / image advertising feedback customer service service process communication supply chain distribution system manufacturing communication automation product product offering product availability technology (hidden) technology (evident) manufacturing r&d user interface packaging functionality life cycle model sales model sustainability after-sale service distribution journal of business models (2013), vol. 1, no. 1 pp. 13-37 2121 “yearly r&d spending among the world’s 1,000 largest public corporate r&d spenders has hit a record high of us$638 billion, according to global management consulting firm booz & company in its ninth annual global innovation 1000 study. however, despite the sustained overall increase in r&d budgets over the last decade, this year’s findings show once again that higher spending doesn’t guarantee bigger payoffs. indeed, the 10 most innovative companies our study identified this year financially outperformed the world’s top 10 spenders, despite actually spending significantly less on r&d.”11 interestingly, this is the case even when innovative technology is at the core of the offering. a good example is xerox. chester carlson’s technological innovation was a stunning breakthrough, and a testimony to his insight and persistence. the xerox story is also testimony to the difficulties of forecasting the market for genuinely new products. many industrial giants of the day, including ibm, kodak, and ge each rejected the opportunity to acquire carlson’s technology at bargain prices. when he finally did find a partner, it was tiny haloid company that stepped up, and together they found that getting the technology to market entailed far more than simply building new machines. the success of haloid-become-xerox in its early years was largely due to its innovative approach to distribution leasing the machines on a per-use basis, instead of selling them outright. this brilliant insight propelled xerox into the top echelon of american business, where it remained, however, only for a few decades. today xerox is a company in difficulty, threatened by far more creative competitors whose own innovations in distribution and technology have largely surpassed xerox’s. again and again we see the inexorable power of creative destruction. did xerox top management believe that the market was stable, and that their incumbent competitive advantages would persist? if so, they were clearly mistaken, and now another generation of top managers has the task of rebuilding the company.12 but the problem was not that xerox failed to recognize the importance of innovation. in fact, they generously funded technical r&d that surpassed the efforts of most other companies, creating the legendary palo alto research center, parc, from which sprang an amazing string of enormous breakthroughs in many dimensions of technology. it was at parc, in fact, that the personal computer as we know it today was invented. not only was the investment substantial, but so were the results. and even as the company entered its period of decline, it was still producing astonishing technological breakthroughs. it’s docutech system, for example, a self-contained digital printing plant and bindery, did what no copier had done before. but within a relatively short period of time, xerox competitors had machines that matched or surpassed the docutech. this illustrates one of the most vexing problems associated with technological innovation: in today’s environment, technology is one thing that a determined and adequately-financed competitor may readily replicate or bypass. patents offer limited protection, but sometimes they simply provide stimulus and insight for others determined to be still more inventive. thus, a focus on technology breakthroughs to the exclusion of other aspects of innovation is misplaced. given the complexity inherent in today’s technologies, you simply can’t count on being able to out-r&d the market on a consistent enough basis to sustain a competitive advantage. sooner or later, and probably sooner, every technology meets its match or its superior, and it’s probably coming from a competitor. but for the brief interval while a particular technology is superior, it can be the basis upon which to build something of truly critical importance: strong relationships with customers. innovation efforts must therefore include the creation of new approaches that help strengthen the bonds with customers, and they should draw from each of the 38 dimensions that might provide differentiation. strong customer relationships help companies survive the inevitable periods when their technology will not be the best. the experience ibm underscores the significance of innovation that is not just technological. over the years, many of ibm’s successes have come not as a journal of business models (2013), vol. 1, no. 1 pp. 13-37 2222 result of technological leadership, but because of its close relationships with its customers. ibm was not actually a technology leader in many of its product areas, but for the decades of the 1970s, ‘80s, and ‘90s, it managers struggled with the choice between leading edge technology offered by ibm’s competitors, and ibm’s own systems, which were often just slightly above average. because even though its technology may not have been the best, ibm made sure that it was a “safe choice” for customers because the company made consistent and unsurpassed efforts to provide exemplary service. the adage among it executives was that, “nobody ever got fired for choosing ibm.” over the years an increasing proportion of ibm’s revenues and profits have come from its services organization, and the major transformation led by louis gerstner was a massive shift from product-based revenues to services. by 2002, services accounted for more than 50% of revenues. so is ibm a computer company? well, yes. its high profile research efforts in areas such as super high-density magnetic storage drives and the deep blue chess-playing supercomputer are well publicized initiatives that keep this idea in the public’s mind. but the ibm services organization is far more significant today because the relationships that are created and sustained through services are the real key to the company’s future. ford provides another clear example. the original ford cars of the early 1900s were certainly innovative for automotive engineering, but equally important to the company’s success was the innovative production process (the first vertically integrated assembly line), the distribution system (the dealer network), and the company’s pricing model that ensured affordability. all of these innovations enabled ford to create an enduring relationship with american car-buyers and build a significant share of the market. by the 1920s, however, gm had copied and largely caught up with ford’s innovations, and began introducing some of its own. a minor gm innovation with major impact was the availability of cars in colors other than black.13 ford suffered steady decline thereafter, and was rescued from what might have been fatal demise only by the enormous demand for military vehicles caused by world war ii. after the war, the company soon staggered again, and was nearly bankrupt by the late 1950s. the ford story illustrates two important aspects of competition in nearly every market. first, each industry has its own rhythm of technical innovation, driven largely by advances in materials and methods. these advances often lead to cycles of changing market dominance. in the auto industry, ford was supplanted by gm, and more recently gm by toyota and honda. today, we wonder if tesla will be a future industrial giant. and what new car company that we haven’t heard of yet will be the leader in 2025, or 2035? the second aspect, however, is what seriously complicates the focus on technology. ford’s choice of black paint was an economic one, part of a relentless strategy of minimizing costs. from 1903 through world war i, this strategy was a significant contributor to the company’s growth. but in the 1920s, the nature of the market itself was changing, and ford’s success as a cost-cutting pioneer did not serve so well when market dynamics began to favor factors related to comfort and style. the point is that within the framework of any given market cycle, a company can grasp and sustain leadership. but the greater challenge is managing what happens when a new cycle begins. as it turns out, very few companies sustain leadership positions beyond a single cycle because they don’t grasp the significance of change. and this is what makes the work of gerstner so significant at ibm. in the face of a major shift in the market, the company faced the choice to reinvent itself or collapse, and gerstner in fact led the process of reinvention with great success. many of the negative examples already mentioned confirm how extraordinary this was. xerox led the copier market, but has nearly collapsed in the age of the pdf. kodak was the world’s number one manufacturer of film, but collapsed when digital cameras displaced film cameras. journal of business models (2013), vol. 1, no. 1 pp. 13-37 2323 nokia led the cell phone market, but was not prepared for the smart phone market. sears led american retail for decades, but lost out to wal-mart when discounting and supply chain management became the key differentiators. between 1995 and 2004, coca-cola dropped 50% of its share price when customers switched their preference to healthier beverages (and much as ibm did, it has since recovered). there were many happy and charming bookstores all over america until amazon.com undercut their prices by 20 or 30%, and now there are almost none. so the point is clear – just because the current structure of the market favors your solution absolutely today, does not mean that the structure of the market tomorrow will also favor you. while one set of products and services may be exceptionally well-suited to the market at a particular point in time, it’s surprisingly rare for a company to successfully adapt its products and services to changing market conditions quickly enough to sustain its leadership position. chances are they have positioned their defenses in a way that leaves them vulnerable, and indeed it is common for companies to cede market dominance when clever competitors attack them in areas where they are not prepared to defend themselves. sears, for example, allowed wal-mart to establish itself in smaller rural markets that sears had thought unfeasible. wal-mart then applied innovation processes throughout its growing supply chain to significantly lower its overall operating costs, at which point it went after sears and k-mart in their urban markets. sears became a second-tier player almost before it realized what had happened, while k-mart soon found itself in bankruptcy. (and then, strangely, ceo edward lampert decided that a merger of the two failed companies was the best solution for both. so far the results have not been so good.) similarly, by focusing on annual style changes in their competition with one another, the detroit automakers largely ignored the importance of underlying quality improvements. when quality suddenly became an important attribute for american buyers in the 1970s, the japanese manufacturers began taking market share. before 1980, gm didn’t take the japanese seriously as competitors at all, and it didn’t take the issue of quality seriously either. today gm is still struggling to catch up to japanese quality standards, and as a result gm’s share of the american car market declined from 50% to less than 35% between 1980 and 2000, to 18 % today. during his unsuccessful 10 years as ceo of gm between 1998 and 2008, rick wagoner saw the company’s market valuation drop by 90%, and losses totaled more than $80 billion. this, together with the story of nokia, shows just how bad things can get when a company loses its fit with the market, and competitor innovations take hold in the market. it takes exceptional discipline and clarity of vision to defend a competitive advantage and carry it through to a next generation of offerings, and not to be cruel to mr. wagoner, but in hindsight he just wasn’t the right guy for the job. the challenge, particularly for a board of directors, is to know who is the right guy, or woman, for the job, because the ceo must look after both the current business and also the future, and these two facets require quite different expertise and viewpoints. with success comes growth, and as a company increases in size and scope, the nature of management’s challenges change considerably. managing xerox at the start-up stage was an entirely different problem than steering the global copier colossus. when a company is small, top managers are often in direct contact with customers as a natural part of their role in the company. but as they deal with the complexities of larger enterprises and multiplying layers of organization, they often become further and further removed from direct experience of the market. without direct contact they are intuitively forced to rely on past experiences, and they have a progressively more difficult time hearing the voice a changing market that was different than the one they remember. journal of business models (2013), vol. 1, no. 1 pp. 13-37 2424 in addition, the need for extensive administration ultimately distracts management from the business of innovation. at the same time, dysfunctional and bureaucratic behaviors grow endemic inside of large organizations, and result in huge distortions to the flow of critical information about the changing external market. corporate politics gets more and more attention, and emphasis shifts to internal events, while key external factors become obscured from view. meanwhile, change waits for no organization, and innovations from competitors are introduced without sufficient response. hence, it’s one thing to be an innovator in a small market, and quite a different matter to bring creative drive to a large operation. as a company grows and the stakes become higher, the risks that the small company has taken as a matter of course are now subjected to a lot more scrutiny, and reaction times slow. sometimes they slow disastrously. more levels of management have a stake in major decisions; time lags in decision making are longer. in extreme cases, “analysis paralysis” sets in. smaller, more nimble competitors have less to lose, fewer people to convince, and often a sense of desperation that sharpens top management’s perception of market needs. in fact, the well-tuned senses of entrepreneurial top managers become magnets for capital – small, new companies are founded specifically to attack new market niches that only their entrepreneurs and the capitalists that back them even recognize. the result of this complex process is a pattern that repeats with astonishing regularity. as innovative companies grow, they tend to become followers rather than leaders. nevertheless, their sheer size, combined with control of distribution channels, makes them formidable competitors even when their subsequent innovations are really copies. another factor heavily influencing market evolution is that at any given time in any given market, only a few critical value dimensions yield the key combination that proves most attractive to customers. whichever company happens to have just the right mix available gains a temporary advantage, but the emphasis remains on “temporary” because the market’s need change and very few companies sustain leadership over a long period of time. we find countless examples of companies that have distinguished themselves by focusing on one or another of the many dimensions of innovation, but then faded into obscurity when the dimension in which they were particularly strong became a secondary or tertiary concern, or a non-concern, of customers. from a manager’s perspective, however, 38 dimensions of innovation presents a daunting challenge. for old school giants such as ge, gm, or ibm and new school leaders such as apple, google, or cisco, 38 arenas for innovation are clearly too many to address at once, which brings us to a critical dilemma that confronts managers every day: how to choose? in what aspects of a business should efforts at innovation be focused? should a company apply itself to innovation in its products and services, or its brand, or its organization, its leadership team, its technology, its capital structure, or any of the others among the possible targets. or should it choose any of them? individual factors may explain the success achieved by this or that company in this or that market, but it’s obvious that while any of the 38 areas may be important, no one of them consistently explains emerging success and failure. wouldn’t it be far more useful to have a robust explanation of the emergent successes as well as the astonishing failures, and thereby a better way to both examine the competition and to direct innovation efforts? of course. in search of such an explanation we could ask, what makes apple, apple? what makes fedex, fedex? or, what makes schwab, schwab? or, what makes home depot, southwest airlines, or any flourishing company successful? is there a way to accurately describe success and to explain how success emerges? if we take this question seriously, what we’re really looking for is more than innovation localized to a particular dimension, but rather a comprehensive innovation framework. journal of business models (2013), vol. 1, no. 1 pp. 13-37 2525 the business model when you look at our list of 38 possible innovation targets you see interesting potentials, but you also see a fragmented world. viewed as a list of possibilities, each target stands separately, interesting perhaps, but alone. this may be useful for analytical purposes, but it’s also fundamentally distorted, because by looking at an inventory parts you’ll surely not get a real appreciation for the whole. but what if you could look at the problem of innovation as a whole, as one process? what would you see? you might see this: yesterday a whole range of tough competitors were creating new products, services, distribution systems, brands, and infrastructures that are bringing change to the market today. recognizing the imminence of the creative destruction that will result from this, we accept the absolute imperative of innovation. and now we are confronted with the following question: how do we innovate with a clear focus not on the parts of the system, but the system as a whole? to accomplish this we would first have to understand what the “whole system” is. it’s not a particular department, a product, a service, or a brand. it is the entire organization together as one thing, working together to deliver value. for this new integrated whole to be a useful managerial concept we need to give it a name, and design a process through which it can help us manage the enterprise more effectively. this whole is the “business model,” a comprehensive description of business as an integrated system functioning in an intimate relationship with the broader market. in this concept, the individual components of an organization do not matter as much as the way they work together to enable the organization to create value and deliver it to customers. a business model is therefore a description of a whole system, a combination of products and services delivered to the market in a particular way, or ways, supported by an organization, positioned according to a particular branding that, most importantly, provides experiences to customers that yield a particular set of strong relationships with them. further, a business model describes how the experiences of creating and delivering experiences and value may evolve along with the changing needs and preferences of customers. to make this approach useful we will need to understand some critical characteristics of the whole. in particular, we need to know how this whole is different from the parts that comprise it. a key insight is that the distinguishing characteristic of any system is that its outputs emerge not as a result of any single part. but as a result of the way the parts are connected together. an excellent example of such connectedness is an airplane. each of an airplane’s component parts, and even its major sub-assemblies, has the absolute tendency to fall towards the ground. take them up to 35,000 feet and let go, and they invariably tumble straight down. it is only – only, only, only – when all the parts are assembled just so, and working together properly, that the system we call the airplane manifests “airplaneness,” and actually flies.14 similarly, a system we call “a company” consists of many different parts. it participates in other systems we call “markets,” which in turn are part of a still larger system we call “the economy.” if you take a part of a company – say the accounting department – and put it into a market by itself, what you have is approximately … nothing (unless you want to run an accounting services company). the accounting department has no relevance outside of the larger company because accounting is only meaningful when there are transactions that have to be accounted for. similarly, manufacturing requires a sales force, distribution, and customers. marketing has no purpose independent of a company’s identity, its products and services, and the perceptions of outsiders. this tells us that the success of a company is not attributable just to one or another part, even as the reality of flight is most assuredly not an attribute of any single part of the airplane. journal of business models (2013), vol. 1, no. 1 pp. 13-37 2626 there’s another aspect of the airplane analogy that’s also important, one that has to do with the process of optimization. let’s say we have a nicely functioning airplane and we want to improve it. we might want to make the engines more powerful so the plane can go faster. but that might put too much stress on the airframe, or the wings, or it might change the control properties of the plane, and make it unflyable. hence, the ability of the system to function is entirely dependent on the mutual fitness of the parts. no part can possibly be optimized except in the context of all the rest. instead, we must direct our efforts toward optimizing the system as a whole. the product that cannot reach the customer provides no value; the service that cannot be delivered provides no value; distribution systems lacking effective products provide no value. indeed, coca cola discovered this a decade age, when the world’s most proficient marketing machine lost half of its market valuation because … the market for coca cola stopped growing. this misfit between product and market was devastating to stock price, partly because mired in its past, the company’s leadership failed to notice what was happening. this oversight enabled pepsi to shoot ahead in terms of market capitalization; it also cost the ceo of coke his job. certainly the optimal approach to marketing depends on the actual products that you’re manufacturing and the customers for whom they’re intended. product design, manufacturing, marketing, and sales have to fit together, and the definition of this fitness is the business model. consider another example of what happens when the parts don’t fit together well. imagine a company with an amazing breakthrough technology, but a sales force that is incapable of selling it and a senior management that is largely indifferent to prospective buyers. actually, that’s not so difficult to imagine; xerox had this experience. after all, xerox is the company that literally invented the personal computer at parc back in the early 1970s. naturally, xerox wanted to make money from this profound invention, but because xerox management didn’t actually understand who would use the product, or what for, they tried to push it through an entirely unsuited distribution channel, to a market that was neither prepared for it nor able to understand it. it went nowhere. well, it went nowhere for xerox that is. but a few other companies did make excellent use of xerox technology, and in subsequent years they have made billions – yes, billions – by applying xerox inventions to their own products and services. in particular, apple and microsoft were big beneficiaries. now imagine a company with a brilliant sales force that is also adept at bringing back news from the marketplace, but the company ignores the warnings? this happened to ibm, when it overlooked the emerging computer workstation market, a device occupying a market niche between the pc and the mainframe, and allowed sun to become the market leader when ibm failed to even make an attempt to address the new client-server it paradigm. (sun, it should be noted, also subsequently faltered, and became part of oracle.) or let’s look at cars. gm has a vast dealer network that is deeply embedded in the commercial fabric throughout north america (and in fact the entire world), but the company somehow couldn’t manage to produce an oldsmobile-branded car that enough people actually want to buy. although its headquarters was packed with thousands of very bright minds, gm was compelled by a persistent lack of innovation and a chronically worsening shortage of capital to shut down the olds line. and then it did the same with saturn, pontiac, and hummer; the death of these brands was another aspect of rick wagoner’s unsuccessful legacy. to repeat, then, a “business model” is a description of the entire marketplace and the relationship of the company to that commercial environment. it is a precise definition of who customers are, and how the company intends to satisfy their needs, both today and tomorrow. a business model also provides a specific assessment of today’s competitors, and tomorrow’s, and the technologies that are and will be embedded in various competing versions of products and services. if xerox had been thinking about its personal computer technology in terms of a business model, perhaps the results would have been different. if ibm had understood that workstation computing was a new and important business model, perhaps sun would never journal of business models (2013), vol. 1, no. 1 pp. 13-37 2727 have attained prominence. if gm had considered the business model underlying its oldsmobile line, perhaps it would still be viable. in each of these examples it is impossible to know the root causes of the problem without knowing the actual people involved, but the results strongly suggest that top management was probably not asking the right questions, and they were probably not having the right kind of conversations about the future and how to adapt to it. the realization is that for the company it is the business model that matters, and which must drive any new approach the competitive marketplace as well as how it should organize itself to compete. this gives us a new way to think about adapting to change, or how to create it. today and going forward what we’re talking about is not just competition between companies, but competition between business models. or, in other words, business model warfare. business model warfare characterizes the process of winning and losing that marks the creatively destructive marketplace, and enables us to define a set of principles and skills that will allow managers to be effective at this game. not that it’s a new game, however. this is the way business has always been; and for just as long, managers have been falling into the trap of focusing too much on today and not enough on tomorrow. winning and losing at business model warfare as we have noted, in addition to erroneous assumptions about stability, managers also fall into the trap of focusing too much of their attention inside their own organizations. this is a particular danger with middle managers who are under pressure from upper levels in the hierarchy of organizational authority. their instinctive and entirely logical sense of self-protection forces them to pay great attention to the behavior and desires of senior management, but sadly less attention is often paid to customers. to engage in business model warfare, managers cannot be internally focused on products, services, or administration to the exclusion of the critical relationships between these elements, and the even more crucial interactions between a company and its customers. remember the metaphor of the airplane, and the critical role of the connections in its capacity to fly. thinking about innovation in the business model as a matter of the overall relationship between the company and its customers, rather than innovation isolated in this or that aspect, may therefore yield greater insight and better management performance: it’s not a coincidence that the winners in business model warfare are usually those who manage their customer relationships in the most effective ways possible, by creating compelling experiences across many different dimensions. some examples: japanese auto manufacturers are the source of many business model innovations, and when they applied their increasing expertise in manufacturing quality to create new, affordable high-end product lines, and now lexus, acura, and infiniti, they created products among the most admired cars worldwide, and enormously profitable segments of their businesses. they continue to steadily increase their share of the american auto market. further, toyota’s innovations in alternative fuels with they hybrid prius line, far in advance of american manufacturers, won it added market share as buyers develop a preference for fuels other than oil. the prius was the best selling car in california in 2013. looking to europe, retailing giants auchan and carrefour redefined the french grocery business in the 1960s by applying new cash register technology to create the hypermarket, and at about the same time novotel introduced a new kind of hotel. in the 1970s, nike redefined the nature of competition in the sports shoe and sports apparel business by transforming star athletes into marketing icons, first with runner steve prefontaine and later with michael jordan. in so doing, nike created new markets for its shoes and clothing, and surpassed adidas to become the global leader in a ruptured market. nike’s core business model innovation was turning its own brand journal of business models (2013), vol. 1, no. 1 pp. 13-37 2828 into a key element in the self-identity of its customers, which comes pretty close to the ideal when we’re talking about the company-customer relationship. nike, in fact, elevated brand management to unprecedented heights, and has demonstrated how central the concept of brand management is in today’s market. american express once dominated the credit card industry, and carefully cultivated an image of prestige and exclusivity. visa entered into competition by creating a global network that was far more fluid, flexible, and low cost, and has far surpassed american express. visa charges lower rates to merchants, making its services more attractive, and built its brand on ubiquity – visa cards are available and accepted everywhere. visa’s first forty years prior to its recent ipo were built on an organizational innovation of the first caliber, developed by dee hock and now articulated by him as an example of the “chaordic” organization, one that effectively balances chaos and order in service to continuous innovation and adaptation. dell created a commercial powerhouse by completely re-inventing the manufacturing and distribution process and building machines to order, rather than to inventory, thereby introducing an entirely new business model to the personal computer industry. mass customization at a competitive price defined a new kind of customer relationship in the pc industry. but in an impressive display of changing market structures, the company’s unique business model lost its charm, and founder michael dell took the company private in 2013 in his attempt to recreate the magic of its past. southwest airlines developed an approach to the airline business unlike any of the airlines that were established when the company was founded, and has sustained its unique business model to become the most financially successful company in a highly troubled industry for the decades leading up to the systemic crisis in airline industry that resulted from the terror attacks of september 11, 2001. one of the most interesting things about southwest is that there isn’t much technology evident in the business. what is apparent is that the leaders of southwest thought through the air travel business in a comprehensive way, and avoided falling into traps that hurt others. the company is not burdened by restrictive labor agreements that now weigh so heavily on its competitors; by design, the company did not operate out of airports that charged high fees; and it still does not participate in centralized reservations systems. the company has not attempted to be something that it is not, a mighty global airline, but has instead focused on understanding its niche and serving it profitably. exemplars as we examine industry after industry, we see that wherever there is an exemplar, a company that stands head and shoulders above others, that company is almost always a business model innovator, and is applying creativity across many dimensions of customer experience to become that market leader. this does not, however, mean that every business model innovator is also a market leader, for innovation is a risky enterprise. many new business models fail, just as old ones do. like southwest, fedex is most notable not so much for the pioneering idea of overnight delivery, nor for its innovative use of information technology to track packages, nor its positioning as a reliable, courteous, and service-oriented alternative to the post office. no, it is all of these factors, and more, integrated together, as a coherent system. the fusion of these elements into an effective organization is precisely what we mean by the business model. and when we compare the fedex model with the us post office model, we see consistent innovativeness on one side and astonishing stagnation on the other. fedex has a history of change and development that the post office lacks. certainly the post office is hampered by its own history as a government agency, its rigid labor relations, and even by its extremely broad mission. just as certainly we see a business model that is failing, one that is losing market share and buckets of money, and facing a host of competitors as it becomes marginalized on the fringe of economic viability. it’s interesting to see how the post office did attempt to defend itself from fedex. in the mid-1990s the post office introduced a guaranteed 2-day delivery service in a package very similar to fedex’s, and available at just 25% of the cost. after a while, however, it became apparent that 2-day service wasn’t actually a guarantee, journal of business models (2013), vol. 1, no. 1 pp. 13-37 2929 just an intention. while for many customers this may have been acceptable, it shows how little the post office management understood that fedex’s reputation for reliable execution was as important as the fact of its timely deliveries. aside from its questionable notion of what constitutes acceptable delivery, it’s probably a moot point until the post office realizes that another element of its business model is obsolete, namely the requirement that customers must wait in long lines to get service. if the post office ever wises up and solves either or both of these two problems, fedex will have someone besides the brown trucks of ups to worry about. home depot also exemplifies the successful integration of numerous factors to create a business that is so appealing to customers and so devastating to competitors. impressive scale on two dimensions – gigantic stores and a huge number of them – leads to high sales volume that enables the company to pay and charge the lowest prices. the local hardware store or lumber yard can’t compete unless it, too, undertakes its own business model innovation and positions itself as something that home depot cannot be. which would be highly personalized service, fast transactions, proximity, better selection, different products …. ace has recognized this as its niche, in which it is doing quite well, positioned as the anti-home depot, and also demonstrating how the evolution of business models creates new opportunities. so what we see consistently across all of these examples, and with widespread consistency across the entire history of business, is the following: it’s rarely, if ever, a single innovation that propels a business to success. it is, instead, a suite of innovations that complement one another and work together to provide a novel or distinctive value proposition that underlies success. the key is not necessarily the product or service itself – which could be highly innovative or even just acceptable – but something brought to market in an innovative way, supported in an innovative way, branded in an innovative way, and in the end always an approach that builds enduring relationships between the company and its customers. furthermore, the core of the innovation value proposition need not be built around a technology per se. in the examples cited above – toyota, honda, nike, visa, fedex, home depot, southwest airlines, and ford (in the early days) – proprietary technologies do play a part in the company’s success, but there is always much more later. the key to success is a focus not only on technology itself, but technology applied in a business process to optimize the relationship between the company and its customers. in today’s environment nearly any technology can be, has been, and will be copied, so the important competitive advantage is knowing how to use the technology in a way that adds the greatest value for customers. when enough people believe that a $45,000 lexus performs as well as or better than a $65,000 mercedes, it is then that the structure of the market undergoes a profound change. with all of this in mind, we now have a better way to characterize marketplace competition, creative destruction, and innovation. we see that effective innovation is not a matter of exploiting individual technologies, nor of exceptional performance in any other individual element of a business, but rather a matter of harnessing the business model itself, which may but does not necessarily include technologies among its many possible dimensions. to state it more simply, what’s happening continuously in the marketplace is competition between business models themselves. the lexus business model is different than ford’s business model, or that of mercedes, etc. what this means is that the winners at business model warfare have generally applied innovation to create competitive advantages, building stronger relationships with customers by developing business models that fit closely with customer needs and preferences across multiple dimensions. winners who have figured out these principles then seek to sustain their advantages through further business model innovations that defend newly-won territory and extend into new domains. it is therefore the business model itself that must be the focus of innovation, and innovation in any or all of the 38 possible dimensions must be undertaken in service to a larger framework that is defined by the business model itself. journal of business models (2013), vol. 1, no. 1 pp. 13-37 3030 part iii: mapping the future as i mentioned above, during the last ten years we’ve had ample opportunities to explore business model innovation in our work with organizations in a great many industries, and to develop tools and models that our clients have used to help them chart their future course. one of those tools has proven particularly useful, and i would like to introduce it to you here. we like it because it is both an analytical and a predictive tool, and because it seems to explain a great deal of what’s actually happening. in particular, we wish to address these questions: where are we today, where are our competitors, and in which direction lies our future? what business models will be successful in the future? in which direction should we direct our innovation efforts? in response to these questions we have devised a market map as a simple matrix. we label the horizontal axis “market size,” and the vertical axis “customization” (or “differentiation”). by accident, but a central element of the company’s value proposition. hence, the lower right hand corner of the matrix designates the largest mass market, the one with the lowest prices and the least customization. in the us we have a company called “the dollar store” that occupies that spot. everything in the store, predictably, costs $1. moving from bottom to top, meanwhile, means increasing customization and differentiation. therefore, the upper left corner is where you’ll find the exclusive products that only the richest people in the world can buy. private yachts and jets, picasso and van gogh paintings, mountain-top estates and private islands. the lower left corner of the matrix is a therefore a dead zone – if there were such a thing as high prices and no customization, this is where you would find it. c u s t o m iz a t io n market size m o r e bigger luxuries; differentiated markets commodoties; mass market small n o n -c o s t u m iz e d dead zone c u s t o m iz a t io n market size m o r e bigger figure 1 figure 2 moving from left to right means accessing more customers, which in turn implies that the price decreases. hence, the business model intent of both wal-mart and ikea is to move progressively to the right. “lower prices every day” is not a wal-mart advertising slogan no business would consciously choose to occupy this spot. what this map enables us to do, therefore, is to determine our relative place in the market, to study the behavior of our competition, and then to help us plot our future course. as an example of how we can use the model, let’s take the hypothetical example of sears, which as i noted, journal of business models (2013), vol. 1, no. 1 pp. 13-37 3131 sears 1980 c u s t o m iz a t io n market size m o r e bigger luxuries; differentiated markets commodoties; mass market small n o n -c u s t o m iz e d dead zone was at one time the dominant american retailer, an innovative company that grew to enormous size and influence. sears did this by offering great value, and it was very specifically targeted at the core of the market. in cr ea si ng cu st om er ex pe ct at io ns sears 2000 c u s t o m iz a t io n market size m o r e bigger luxuries; differentiated markets small n o n -c u s t o m iz e d dead zone commodoties; mass market customer expectations put it squarely in the expanding dead zone. both as a matter of its business design and its marketing, it strived to be the iconic american retailer. headquartered in the center of the country, in chicago, the company exuded confidence and reliably produced handsome profits for many years. figure 3 shows sears happily at core in 1980. however, sears had a young rival at that time, and within 20 years the rival had far surpassed it. walmart out-innovated sears, and while sears suffered significant declines, wal-mart grew very fast, both in the us and throughout the world. our market map of 2000 shows that the overall size of the market has grown significantly, which reflects the normal process of economic growth. the map also mentions a key factor, which is that overall customer expectations changed from 1980, and parts of the market that were quite viable in 1980 have been overtaken by the dead zone by 2000. sears, which stayed resolutely where it was, and therefore did not adequately innovate its business, was simply swallowed up by the staying the same. changing wal-mart, however, demonstrated the qualities necessary for continued success. by developing new innovations in its supply chain, product designs, and in fact across the entire scope of its business model, it succeeded in moving its business model both upward, with higher quality products, and to the right, with progressively lower prices. (figure 5) (it should be noted that wal-mart’s employment policies remain controversial, and one can argue that its success is based in part on a practice of underpaying its employees by manipulating the labor laws of the us. for the purposes of this paper we leave this issue aside, but we acknowledge the ethical problems associated with this practice, and the likelihood that future changes to its business model may be forthcoming as a result.) wal-mart, and another successful business model innovator ikea, both continue to aspire to move both up, toward more customization, and to the right, toward ever lower prices. and so do all of their competitors. including, of course, amazon. by 2020 we can easily imagine sears totally buried in the dead zone, and indeed with a massive infusion of innovation it’s hard to imagine sears surviving at all, while wal-mart will probably continue to move up figure 4 figure 3 journal of business models (2013), vol. 1, no. 1 pp. 13-37 3232 and to the right, even as the dead zone chases it up and outward. hence, the wal-mart of 2020 will be the same as the wal-mart of 1980 in name only, as creative destruction chases it ever forward. so they will ask themselves how else they can customize the experience of shopping with them? amazon does so through its delivery services, and its offer to get your purchase to you within two days, or a day, or even hours in some cases. amazon also offers recommendations customized to your interests, based on statistical analysis of the behavior of millions of its customers. how will wal-mart do that? netflix does the same thing, and because viewer recommendations are so important to its business, in 2009 the company netflix sponsored a contest in which it paid a prize of $1 million to the programmers that best improved the accuracy of user recommendations. it’s quite obvious that the goal of the prize is also to move netflix up on the map, toward still better customization. you might also be able to use this map to help you think about the future of your business, and to compare your own company’s performance to your competitors, as we have compared sears and wal-mart. as another example, let’s look at mercedes and lexus. earlier i mentioned that a $45,000 lexus competes successfully with a $65,000 mercedes, which on the map looks something like this. the $20,000 chevrolet, meanwhile, purposefully sits in the center of the market, similar in brand identity and corporate culture to sears. for a long time this was a profitable spot, but no more. so like sears it was swallowed up by growing customer expectations. the failure of chevrolet to innovate was indeed a big part of the problems that rick wagoner was unable to fix, and a significant contributor to the drastic decline of gm. the point of all this is obviously that you can also use this framework to think about the aspects or dimensions of your business where customization can be offered, and where it can be improved by lowering prices, thereby moving your entire business model continually upward and to the right. this may not be optional, and indeed, when we look at the companies that have failed, we often see that their competitors offered either lower prices, or more customized solutions, or both. for example, you may remember that in its early days, google had a lot of search engine competitors, but over time they have all fallen away simply because the search results that google provided were simply better, i.e., more customized to the specific requirements of searchers. remember, though, that this does not mean that google will forever be entrenched as the exemplary occupant of the g-spot (in which case the name of that spot on the matrix may have to be changed), because there is no end to the business factors that could become important in a future market, and which some firm other than google may master. as i noted above, it is very often when the key drivers of competition change that old companies are pushed aside, and new ones take their places as leaders. and this happens precisely because it is the new firms that master then new competitive factors first. to take the example of but one company, we may be looking at such a process right now with microsoft. the company is a tech colossus, dominant in many fields, but still struggling to adapt to change. sales of the pc are declining worldwide, down 10% from 2012 to 2013. sales of tablets, on the other hand, increase, but microsoft is not benefitting significantly from this because it did not foresee that market, and came quite late with its surface. microsoft office and microsoft windows remain dominant software products for pcs, but if pc sales continue to fall, then the company will find itself fighting a rear guard action to preserve the past, rather in cr ea si ng cu st om er ex pe ct at io ns sears 2020? c u s t o m iz a t io n market size m o r e bigger luxuries; differentiated markets small n o n -c u s t o m iz e d dead zone commodoties; mass market walmart 2020? 1980 2000 figure 6 journal of business models (2013), vol. 1, no. 1 pp. 13-37 3333 than a proactive one to create the future. we could well foresee that when pc sales drop below some currentlyunknown threshold that microsoft may follow in the footsteps of nokia or kodak, passing the threshold of non-sustainability below which the company implodes. but the leaders of microsoft are obviously very smart, and they see what’s happening as well or better than us outsiders. so will they lead their company to create the next generations of products and services and business models to sustain microsoft in the years ahead? will they be able to create better business model and new products and services that move up and to the right on the matrix, faster and better than their competitors? the hypothesis of this paper, and the logic of business model warfare, suggests that this should be one of their overriding objectives, and perhaps a convenient (although certainly quite simplified) way to assess any given decision or proposed initiative. we will follow this closely, but no matter what happens, it seems that concepts and principles explored here may be useful as we seek to understand the patterns of change in the marketplace, and to predict the outcomes of decisions yet to be made. the upper right corner, meanwhile, remains an interesting sort of business nirvana. here you might find an entirely customized product, which is affordable by literally everyone, because it’s free. but surely this could not be the location of any company, for how would it survive? in fact, however, there are currently two companies occupying that corner, and their astounding success has been achieved precisely because their product (well, service really) is utterly free and yet totally customized to the uniqueness of your specific requirements. one of these companies is google, which is happy to provide you with a fully customized web search at any time, day or night. it takes only milliseconds, and it did this approximately 2 trillion times in 2013, or 6 billion times per day, 4 million per minute, and thus 70,000 per second. (i found that out by doing a google search, of course.15) it is in honor of google that i have named the sweet spot in the upper right corner, somewhat tongue in cheek, the “g-spot.” (i hope they don’t mind.) google’s business model has created a good number of billionaires precisely because it is so well and uniquely positioned, and also because they do seem to fully understand the extraordinary position they occupy, and because they are managing the firm to exploit and extend their significant advantage. in cr ea si ng cu st om er ex pe ct at io ns sears 2000 c u s t o m iz a t io n market size m o r e bigger luxuries; differentiated markets small n o n -c u s t o m iz e d dead zone commodoties; mass market the sweet spot: google (g-spot) customized search results market size: everyone figure 7 microsoft’s bing, meanwhile, plays fast follower. (it is a position we are accustomed to seeing a microsoft product occupy.) the other company now occupying the g-spot, beside google, is facebook (the “f-spot”?), which is also free. interestingly, facebook is also built entirely on the concept of total customization, but in facebook’s case, the customization is provided by you, the user. and nearly a billion of us are happy to oblige. facebook has also created billionaire owners, and they also seem to understand their unique situation. actually, google also relies on us to customize, as we are the one who are creating the 180 million + web sites that google then searches for us, for free. this profound partnership between content creators (us), platform creators such as facebook, and content locators such as google and bing, constitutes a hugely journal of business models (2013), vol. 1, no. 1 pp. 13-37 3434 significant phenomenon for future business model innovators to understand, exploit, and further develop. it is here that we can anticipate many surprises in the future, particularly as computers become faster, more powerful, and less expensive. oh, wait… there’s another example where the model shows its validity. the pc itself, as s device, has gotten considerably less expensive, massively more powerful, and exceptionally more customizable, over the last 30 years. the entire pc industry has moved significantly up and to the right, especially if you consider your smart phone to be a pc, which would be an accurate characterization. today’s iphone, for example, is the rough equivalent in computing power of a supercomputer from three decades ago. now, if the folks at nokia had been thinking about their product in these terms, rather than as “cell phone,” then perhaps they would have been better prepared for what the iphone did to their business model. so you get the point. for the majority of companies that operate in the physical world of products and services, for which they must charge money to survive, the g-spot is an enticing destination that they will never actually attain, but toward which they must always strive. although i have indeed tried, i have yet to identify any competitive advantage that cannot be represented on the map, which suggests that it may valid very broadly. (if you can think of counterexamples, i would be happy to learn about them from you.) e-world companies, meanwhile, can and quite happily do occupy that coveted spot. summary of business model warfare there is of course a lot more that could be said, but we’ll leave that for another time. for now, i’ll summarize the concept of business model warfare in these propositions: one: a “business model” defines a broad competitive approach to business, and articulates how a company applies processes and technologies to build and sustain effective relationships with customers. the experiences that customers have, and the relationships that companies build with customers, are the most critical factors. creating them, understanding them, preserving them, enriching them, and extending them are the critical attributes of success. everything that is done must be in service to these relationships; they are the point. two: every successful business model earns some sort of competitive advantage to the extent that it serves successful relationships. however, any advantage may disappear overnight should a competitor devise a superior model, thereby displacing the company in the relationship with the customer. we can visualize that relationship by understand the market as a twodimensional map, on which we plot market size (i.e., price), and product//service customization. these two dimensions tell us a great deal about the value proposition underlying any business model. due to competitive forces, the life span of every business model is therefore limited, and due to the general unpredictability of change, its time frame is indeterminate. leaders who have the good fortune to preside over a successful business model should never lose sight of the ephemeral nature of their advantages, and must focus not only on administering the (illusory) stability of today, but on preparing for or precipitating the inevitable change of tomorrow by understanding how costs can be lowered while customization is simultaneously increased. three: since business models themselves are a more comprehensive way of understanding the focus of competition, they must also become a focus of innovation itself. relentlessly changing conditions means that business models evolve rapidly, and business model innovation is therefore not optional. while innovations in any area within an organization may be important, innovations that pertain broadly and directly to the business model will be life-sustaining. four: the model tells us that we must aspire to move upward and to the right, and that the dead zone is chasing us that way. if we stop, the dead zone threatens to swallow us, as indeed it has done for so many failed business models. journal of business models (2013), vol. 1, no. 1 pp. 13-37 3535 five: based on what we have discussed here, the pattern of company mortality is a real and significant phenomenon, a result of the acceleration of change throughout the economy that operates on both demand and supply. demand is enormously influenced by innovation new products and services coming into the market significantly affect the fate of all market participants. the perspective from the supply side is a bit more complicated, but the pattern is also evident. because the market is so transparent and the performance of every public company is subject to detailed scrutiny by investors and analysts, subtle changes in an organization’s performance can lead to broad swings in stock price. improving performance and increasing stock price are both self-feeding cycles that create more favorable conditions for companies to develop and implement future innovations, both by improving stock currency for making acquisitions and by lowering the overall cost of capital. conversely, declining performance and a falling stock price can lead to a downward spiral that makes it progressively more difficult for companies to compete for attractive acquisition fodder, and which can also increase the cost of capital that could be invested in innovation-related activities such as r&d and product development. get ahead and push farther ahead; get behind and fall farther behind. the data cited here show that over the medium term the majority of companies will get trapped in the downward spiral and one way or another most will disappear. the prevalence of this trap suggests that while leaders may be thinking and worrying about change and its impact on their companies, about competition and about competitive advantage, many have been doing so in a way that is simply not effective. hence, we suggest that thinking about and enacting business model innovation may be a productive exercise for established businesses. and the need for good thinking about business models is as important for new businesses as it is for old ones, and among the many examples consider the spectacular rise and equally spectacular collapse of webvan, in which more than a billion dollars of capital was invested … and lost. its management team – including a renowned ceo who had formerly been the head of andersen consulting – was so confident of what they were doing (i.e., their business model) that they invested hundreds of millions of dollars of capital in a distribution infrastructure, even though market demand that would generate a return was completely unproven. they believed that they could make the business work, and apparently fooled themselves into thinking that their own belief was sufficient basis for betting massive capital on a business model that had never actually been fully tested. in the end, hundred-million-dollar warehouses were built but never used, never generating even a cent of return. thus, in spite of abundant talk about change, the temptation to build a business according to a fixed structure that is expected to endure for the long term remains strong. never mind that the long term is completely unpredictable. another way to say this is that such a management approach that remains unrepentantly focused on stability and continuity, instead of on disruption and change, will be unpleasantly surprised in the end. for these reasons it will remains imperative to discuss managing for change as an absolute requirement, but many (most?) business leaders nevertheless still aren’t very good at dealing with it. recognizing change in the marketplace, anticipating, and adapting to its turbulent evolution, these are the challenges that confront all executives, for although we remember periods that seemed stable, they are in fact long gone and never to return. as markets continue to evolve and competition becomes ever more demanding, engaging in business model warfare therefore becomes not just an interesting possibility, but perhaps a requirement. to survive, all organizations must develop comprehensive innovation frameworks, and perhaps the perspective offered by the business model warfare framework can help leaders to be more effective. in the end, when we look at the business world it’s clear that the story of change is still the important story to tell, and the process of leading an organization in the face of change remains the critical skill. journal of business models (2013), vol. 1, no. 1 pp. 13-37 3636 endnotes 1 richard foster and sarah kaplan. creative destruction. currency doubleday, 2001. p. 14. 2 this research was conducted at the university of pennsylvania by project team member geraldine sawula. 3 arie de geus. the living company. harvard business school press, 1997. p 1. 4 richard foster and sarah kaplan. creative destruction. currency doubleday, 2001. p. 8. 5 richard foster and sarah kaplan. creative destruction. currency doubleday, 2001. p. 14. 6 joseph schumpeter, capitalism, socialism, and democracy, harper & brothers, 1942, 1947, 1950 p. 84. 7 langdon morris. the innovation master plan. innovation academy, 2010. 8 don wilson has contributed this insight, and many others that have substantially improved this report. 9 russell ackoff. the democratic corporation. oxford university press, 1994. p. 210. 10 louis gerstner. who says elephants can’t dance. harpercollins, 2004 11 booz & company. “booz & company announce its ninth annual global innovation 1000 study” oct 28, 2013. http://www.booz.com/cn/home/press/displays/2013-global-innovation-1000-cne 12 a small, but important footnote to the xerox story is that at one time in its history the company was so suc cessful and so dominant that it was literally forced by federal government regulators to license its technology to competitors. with this strange turn of events, utterly not of its own doing, the company’s downward slide began. hence, some blame for xerox’s demise does fall on misguided us government regulators. 13 a minor but interesting detail is that fords were originally brown, until a company engineer pointed out to mr. ford that black paint covered better and would therefore be less expensive. the point for ford was thus not the color, but the principle of cost control. he understood well that lowering the cost of manufacture was the key to developing the market in the early years, but when this changed in the more mature market of the 20s, his company lagged as its business model lagged. 14 john gall, systemantics: the underground text of systems lore. 1986. p. 158. 15 http://www.statisticbrain.com/google-searches/ journal of business models (2013), vol. 1, no. 1 pp. 13-37 3737 about the author since 2001, langdon morris has led the innovation consulting practice of innovationlabs llc, where he is a senior partner and cofounder. his work focuses on developing and applying advanced methods in innovation and strategy to solve complex problems with very high levels of creativity. he is recognized as one the world’s leading thinkers and consultants on innovation, and his original and ground-breaking work has been adopted by corporations and universities on everycontinent to help them improve their innovation processes and the results they achieve. his breakthrough white paper, business model warfare is a landmark in the field, and is used as astandard reference at universities and corporations worldwide. his book fourth generation r&d, coauthored with william l. miller, is considered a classic in the field of r&d management, and his more recent works the innovation master plan and permanent innovation are recognized as two of the leading innovation books of the last 5 years. he is formerly senior practice scholar at the ackoff center of the university of pennsylvania. he has taught mba courses in innovation and strategy at the ecole nationale des ponts et chaussées (france) and universidad de belgrano (argentina), and has lectured at universities on 4 continents, including chaoyang university of technology (taiwan), conservatoire nationale des arts et métiers (france), university of colorado, university of north carolina, and rochester institute of technology (usa), and shanghai jao tong university (china). working paper aalborg university business school ready, but challenged: diffusion and use of artificial intelligence and robotics in danish firms allan næs gjerding jacob rubæk holm edward lorenz jørgen stamhus abstract this working paper explores the diffusion and effects of artificial intelligence and robotics on work organization and skills formation in danish private and public companies. the main focus is on how humans and technology interact, the extent to which employees have the skills to engage in this interaction, and the interplay between job content and technology. the main findings are the following: artificial intelligence is more diffused and diffuses more rapidly than robotics, and this diffusion is uneven across danish regions; danish employees are very confident in using artificial intelligence and robotics, but half of the employees lack the necessary skills; skills are to an important extent acquired through on-the-job learning, which are insufficient in the long run; artificial intelligence involves a larger variety of learning than robotics and has a greater impact on tasks and work organization. the working paper concludes with recommendations for policy and management. important recommendations are that there is a need for policy makers to focus on developing new formal education and training and to innovate existing education in order to ready current and future employees for technological change, and that management needs to focus more on continuous development of their human capital. lifelong learning and strategic human resource management become increasingly important. keywords: ai, robotics, sociotechnical system, skills, work organization. please cite as: gjerding, a.n., holm, j.r., lorenz, e. & stamhus, j. (2020), ready, but challenged: diffusion and use of artificial intelligence and robotics in danish firms, aalborg: aalborg university business school working paper series, november. 2 table of contents 1. executive summary ....................................................................................................................... 4 2. introduction ...................................................................................................................................5 3. diffusion of artificial intelligence and robotics ................................................................................... 9 3.1. ai is more diffused than robotics and diffuses more rapidly .......................................................... 9 3.2. ai and robotics are more diffused in eastern denmark ................................................................ 12 4. effects on skills ............................................................................................................................... 14 4.1. employees are very confident in using ai and robotics ................................................................. 14 4.2. ai requires more learning arenas than robotics ........................................................................... 16 5. effects on work organization ............................................................................................................ 17 5.1. jobs are complex, empowering, and require self-reliance ........................................................... 17 5.2. ai has a broader impact on job content that robotics ................................................................... 19 6. needs for skills formation ................................................................................................................. 22 6.1. half of danish employees lack skills for future use of ai and robotics ........................................... 22 7. recommendations for policy and management ................................................................................. 25 7.1. issues regarding diffusion ........................................................................................................... 25 7.2. issues regarding skills and opportunities .................................................................................... 26 references .......................................................................................................................................... 28 appendix 1 full tables ........................................................................................................................... 31 a. introduction ................................................................................................................................. 31 b. work organization ........................................................................................................................ 37 c. organization ................................................................................................................................. 39 d. job satisfaction .......................................................................................................................... 40 e. social interaction ......................................................................................................................... 41 f. robots ........................................................................................................................................ 44 g. advanced technologies ................................................................................................................ 46 h. job seekers .................................................................................................................................50 j. ending ......................................................................................................................................... 51 appendix 2 methods ............................................................................................................................. 53 3 population ....................................................................................................................................... 53 the sample ...................................................................................................................................... 53 dataset and post stratification weights ............................................................................................ 54 acknowledgements we thank participants at the ike seminar at aaubs, november 2020 for feedback, and peter nielsen and jørgen goul andersen for being important sparring partners in the development of the task questionnaire. student assistant emma munk did a lot of work on appendix 1. all errors and omissions are our own. data collection was funded by the dean’s office at the faculty of social science, aalborg university, and by the obel family foundation. 4 1. executive summary the present working paper explores the diffusion and effects of artificial intelligence and robotics on work organization and skills formation in danish private and public companies. the main focus is on  how humans and technology interact,  the extent to which employees have the skills to engage in this interaction,  the interplay between job content and technology. five main findings appear in the present working paper.  artificial intelligence is more diffused than robotics and diffuses more rapidly.  there is an uneven diffusion of artificial intelligence and robotics across denmark. the technology is more diffused in eastern denmark and in regional capital cities.  danish employees are very confident in using artificial intelligence and robotics. however, only half of the employees feel that they have the necessary skills.  skills are to an important extent acquired through on-the-job learning, which will be insufficient in the long run for securing that employees have the necessary skills. policy makers and management need to focus more on developing formal training and education, and make sure that formal training and education is implemented through work place practices and on-the-job learning.  artificial intelligence involves a larger diversity of learning than robotics, and it impacts more tasks than robotics. this means that artificial intelligence affects work organization to a larger extent than robotics. in effect, implementing artificial intelligence is more challenging for management than robotics. there are many ways of organizing work with artificial intelligence and robotics. we argue that firms can differentiate themselves from other firms in the way in which they combine humans and technology. different combinations may exist within the same firm, and it is likely that the ability to create different combinations within the same firm becomes a source of competitive advantage. new types of jobs are gradually appearing, and a number of current types of jobs will disappear. especially middle-range skilled jobs may be affected. there is a need for policy makers to focus on developing new formal education and training and to innovate existing education in order to ready current and future employees for technological change. there is a need for management to focus more on continuous development of their human capital. lifelong learning and strategic human resource management become increasingly important. the uneven diffusion of artificial intelligence and robotics across the danish regions may call for concern. policy makers need to contemplate policy schemes that promote technology diffusion in peripheral areas. 5 2. introduction in late february, a fortnight before the world was struck by corona lockdown, josh dzieza asked in a feature on the internet media the verge “how hard will the robots make us work?” (dzieza, 2020). reflecting on recent work practices in a number of american retail corporations including amazon and google, the main message of the feature was that the deployment of artificial intelligence and robotics deteriorates work conditions in terms of higher work pace and more stress. the misery occurs, because people are managed by automated systems that take dehumanising fordism to its next stage, including supervision of work pace, assessment of professionalism at work, and surveillance of social interaction among workers. this is a grim picture of the role that human capital plays in automated or semi-automated environments, and it calls for concern about the effects on working conditions caused by robotics and artificial intelligence. however, the picture is to some extent contested by research pointing to the opportunities which artificial intelligence and robotics imply for job enrichment and the creation of new jobs. surveying studies on the impact on the number and content of jobs, frontier economics argues that job losses will occur in types of jobs where low levels of skills and/or non-complex interaction with other people prevail, and that job creation will mainly appear in types of jobs that support and complement the use of artificial intelligence and robotics, evaluate and judge the output, and create the conditions within which artificial intelligence and robotics operate (frontier economics, 2018). this will favour the need for upskilling of the workforce and, in some job roles, autonomy and learning opportunities. in a recent report (world economic forum, 2020a), world economic forum points to the creation of a wide range of new job types that will emerge in the near future, implying the need for accommodating new skills requirements at rapidly changing labour markets. while the portfolio of skills requirements differ substantially across the new job types which are identified, the common denominator is the high-skilled ability to create, engage, interpret, judge, and act upon data and activities involving artificial intelligence and robotics.1 while the public discourse on artificial intelligence and robotics is mainly positive in terms of promises for upskilling, growth, and welfare, these promises are still in the making, and it is important to remember that positive effects of technological progress do not occur by themselves, but require human agency (caruso, 2018). the way in which work is organized and leadership applied is important to the impact of artificial intelligence and robotics, especially regarding work content and working conditions. workers may be substituted by new technology, or the application of new technology may be complemented by changes in work content. what happens depends on how job content and technological development are combined, and this implies that the effects of artificial intelligence and robotics do not necessarily follow a predestined path, but are shaped by managerial intent and decision making. as explained by nielsen, lorenz and 1 the opening up of new opportunities alongside the displacement of certain types of jobs associated with artificial intelligence and robotics may lead to increasing inequality in terms of job opportunities and earnings. while this is an issue that calls for major concern, it is, however, outside the scope of this working paper. 6 holm in a forthcoming contribution (nielsen et al., 2021), the way in which artificial intelligence and robotics are implemented is sensitive to how management creates opportunities for upskilling and development of new competencies, and how employees embrace and accommodate to these opportunities.2 in a similar vein, neuburger and fiedler (2020) point out that there is a potential for dehumanization as well as empowerment and inclusion, and within this continuum the actual effects of implementing artificial intelligence and robotics depend on how the socio-technical system is composed and thus how humans and technology co-exist. the needs for it skills, skills in machine-human interaction, problem-solving skills, skills in organizing own work, and the exercise of social skills in interaction with colleagues are all shaped by this implementation. in most cases, the actual socio-technical system will be located at some point at the continuum between dehumanization and empowerment. during recent years, the implementation of artificial intelligence and robotics has been associated with the evolution of industry 4.0, which is mostly described as a new technological paradigm. the term industry 4.0 was coined by a german initiative for industrial policy aimed at developing and utilizing a wide range of new opportunities based on how the internet-of-things (iot) allows for new methods of communication and collaboration among technology, humans, and value chains.3 iot enables machines to communicate and collaborate with machines, and systems with systems, without human interference, and it enables new ways of communication and collaboration among machines and humans, e.g. in the form of activities in virtual reality. machines and systems can undertake decentralized decision making based on artificial intelligence, robots can substitute human labour to a higher extent than before, and new technologies such as 3d print and prototyping in virtual reality radically change existing activity systems and value chains. data on products, processes, and quality can be integrated across companies throughout the value chain, providing enhanced opportunities for just-in-time and build-to-demand production systems. in its most extreme form, industry 4.0 will lead to completely automated cyber-physical systems that operate without human beings, but we are yet a long way off from achieving this promise. within research on industry 4.0, the implementation of artificial intelligence and robotics is often discussed in terms of how prepared the organization is for such implementation. to some extent, being prepared is associated with maturity for adopting new technology, e.g. models for digitalization or smart manufacturing. a number of maturity models have been developed in order to distinguish between different levels of maturity, ranging from three to seven dimensions that to some extent can be associated with 2 nielsen et al. (2021) point to the fact that there are relatively few studies on this issue. among others, they refer to dauth et al. (2017), and to bessen, et al. (2019). 3 most of the literature on industry 4.0 assumes that we have experienced three prior paradigms since the industrial revolution hence the use of ”4.0”. industry 1.0 is associated with the evolution of mechanization powered by steam and water during the 18-19th century, which in the 19-20th century was replaced by industry 2.0 in terms of electricity-powered machinery integrated in mass production targeting mass consumption markets. during the 20th century, industry 3.0 developed in the form of automation based on electronics and it, and now industry 4.0 is emerging as intelligent production based on iot, cloud technology, and big data. a thorough account of this development and the wide array of new technologies is given by oztemel, & gursev (2020). examples of how industry 4.0 technologies are implemented across a large variety of industries can be studied in frank et al., (2019). how industry 4.0 is treated within a large number of social science disciplines is analysed in an extensive literature survey by erro-garcés, (2019). 7 different types of organizational maturity.4 the concept of maturity can also be applied at the macro level, e.g. by focussing on a country’s composition of industries and the associated potential for automation5, or by analysing the extent to which the it infrastructure of a country is conducive to industry 4.0 practices6. this working paper relies on the data from the 2019 task survey (see box 1). it delves into the diffusion of artificial intelligence and robotics in denmark and its effects on work organization and skills, including the extent to which the danish work force lacks the skills needed for operating in an artificial intelligence and robotics working environment. in doing so, it gives an impression of how socio-technical dimensions have evolved during 2016-2019 and the current status of technology-human interaction in the field. based on the reflections that we have presented above, it is expected that denmark as an industry 4.0 frontrunner is characterized by work organizational arrangements and skills formation that are conducive to the exploitation of artificial intelligence and robotics. this involves a certain amount of employee discretion in problem solving and an increasing degree of complexity embedded in the task environment, causing demands on problem solving skills and social interaction. while these trends are observed in the following account, we also notice that the observed trends differ across high and low skilled employees, and that there is a need for investing in human capital. as the use of artificial intelligence and robotics is maturing in the danish economy, human capital formation becomes critical to the way in which socio-technical systems are build, especially if there is a managerial intent to avoid dehumanization of the work force. we conclude the working paper by identifying a number of areas for policy intervention to that effect. in the following, section 3 digs into the diffusion of artificial intelligence and robotics and shows that artificial intelligence is more diffused than robotics, diffuses more rapidly, and that the eastern part of denmark is taking a lead in this development. sections 4 and 5 discuss the effects on, respectively, skills and work organization. section 4 shows that danish employees are very confident in using artificial intelligence and robotics, and that the use of artificial intelligence requires a broader range of types of learning than robotics. section 5 points to jobs in danish firms as being predominantly complex, empowering, and requiring self-reliance among employees, and that artificial intelligence has a broader impact on job content than robotics. section 6 points out that half of the danish employees lack skills for the future use of artificial intelligence and robotics and calls for a more prominent role of formal training and education. finally, section 7 presents a number of policy recommendations. 4 a brief overview is presented by mittal et al. (2018). the authors suggest a model with five archetypes, i.e. novice, beginner, learner, intermediate, and expert. 5 an example of this can be found in the previously mentioned frontier economics (2018), pp. 34-37. 6 an extensive analysis exemplifying this approach can be found in castelo-branco et al., (2019). they conclude that the scandinavian countries with finland as a leader are frontrunners on industry 4.0 readiness. 8 box 1: the task survey the technology and skills (task) survey was initiated in 2018 as part of a research project funded by the aalborg university social science talent programme for younger researchers. additional funding was obtained through the redy project, which was funded by the obel family foundation. the task questionnaire was developed over 2018 with inspiration from eurofound’s european working conditions survey (ewcs) and oecd’s programme for the international assessment of adult competences (piaac) survey to ensure comparability. unique questions on the use of technology at work were also developed for task. the data collection process was outsourced to statistics denmark, who ran a pilot in late 2018. the final task data were then collected by statistics denmark in the first half of 2019. statistics denmark constructed the sample from census level registry data on both firms and employees, and stratified the sample by region and size of workplace from the registries. they also supply post-stratification weights created from the registry data. the survey had a response rate of 39.9 percent and the final dataset consists of 1244 observations appendix 1 contains the full tables of the survey, and appendix 2 contains further details on the methods used for collecting the data 9 3. diffusion of artificial intelligence and robotics in this section we show that artificial intelligence is more diffused than robotics, and it diffuses more rapidly. to some extent, this difference may be caused by the composition of the danish economy, which is an economy dominated by services rather than production. furthermore, artificial intelligence and robotics are comparatively more used in the eastern part of denmark. the main provincial capitals in denmark, i.e. aarhus, aalborg and odense, can potentially be catalysers of a more rapid diffusion outside the eastern part of denmark. in the following, the diffusion of artificial intelligence and robotics is measured by the frequency of interaction between human workers and this type of technology. we have asked our respondents how frequent they interact with artificial intelligence and robotics in certain ways and whether this frequency has increased or not since 2016.7 if the frequency has increased, we interpret it as an increased rate of diffusion of the technology in question. regarding robotics, we ask about two types of interaction, i.e. how often the respondent (1) delivers inputs or receives output from a robot, and (2) start, monitor and stop a robot in order to accomplish a specific task. regarding artificial intelligence, we ask about three types of interaction, i.e. how often the respondent (1) makes use of information compiled automatically by a computer or computerized machinery for making decisions or for advising clients or customers, (2) receives orders or directions generated automatically by such technology, and (3) use such technology that has the ability to automatically learn and improve from experience. 3.1. ai is more diffused than robotics and diffuses more rapidly the public debate on human-technology interaction often yields the impression that robotics is a pervasive type of technology throughout the economy. however, as can be seen in figure 1, this is not the case in terms of the share of employees using the technologies. furthermore, robotics cannot compare to artificial intelligence in this respect. regarding robotics, 6.75 % of our respondents report that they deliver inputs or receive output from robots at least once a week, and 5.05 % tell that they start, monitor and stop a robot in order to accomplish a task at least once a week. these are rather small numbers of human-technology interaction when we compare with artificial intelligence. almost one out of five respondents, i.e. 18.00 %, indicates that they make use of information compiled automatically by computers or computerized machinery for decision making, or for advising clients or costumers. furthermore, when it comes to receiving orders from computers or computerized machinery, or to use technology that is able to learn and improve machinery, respectively 11.14 % and 12.02 % answer that this happens at least once a week. in addition, when compared to 2016, incidents of human-technology interaction in the case of artificial intel 7 see questions f1-f2 and g1-g3 in the appendix. the frequency is divided into “every day”, “at least once a week”, “1-3 times a month”, “less than a month”, and “never”. in section 3, we only report incidents that occur at least weekly, i.e. we have merged the first two categories. 10 ligence occurs much more. the wording of this question on the task survey entails that this increase includes both increases at the intensive and extensive margins – i.e. both increased use for existing users and the addition of new users. figure 1. ai is more diffused than robotics and diffuses more rapidly source: appendix, f1-f2 and g1-g3 one might suspect that the more widespread and faster diffused use of artificial intelligence reflects the industrial composition of the economy, i.e. that a relatively high proportion of service industries would cause a more diffused utilization of artificial intelligence.8 as can be seen from table 1, this is not the case, since the use of artificial intelligence is almost as frequent in manufacturing as in private service. 8 while manufacturing and construction account for, respectively, about 12 % and 6 % of danish employment, private service accounts for almost 45 %. if we include the public sector (31 %) and culture and leisure (5 %), the danish economy proves to be highly service-driven. (source: calculations from statistics denmark, ras300, https://www.statistikbanken.dk/10310). 0 2 4 6 8 10 12 14 16 18 20 …deliver inputs or receive output such as raw materials, final goods or semi-manufactures to or from a robot? … start, monitor and stop a robot to accomplish a specific task? … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? … receive orders or directions generated automatically by a computer or by computerized machinery? … use a computer or computerized machinery that has the ability to automatically learn and improve from experience? % in your main job how often do you usually… at least weekly in 2019 more often compared to 2016 11 table 1. diffusion of ai and robotics across main sectors at least weekly questions manufacturing construction private services health and education input or outputs to/from robot 17.8 1.9 7.6 2.7 start, monitor and stop robot 17.3 0.0 4.0 2.8 ai information 25.7 4.7 23.8 11.5 ai directions 20.2 1.9 14.7 5.6 automatically learning ai 15.9 5.2 13.1 11.3 more often compared to 2016 input or outputs to/from robot 7.4 4.2 4.7 0.7 start, monitor and stop robot 9.3 0.0 3.1 2.2 ai information 14.3 0.0 14.2 6.5 ai directions 13.4 0.0 8.8 3.6 automatically learning ai 8.3 3.6 8.5 5.3 source: figure 1 divided into main sectors it is not surprising that advanced technologies, not least robots, are predominantly used in manufacturing, and that they are relatively infrequently used on construction, cf. table 1. the use of robots and artificial intelligence in health and education is less frequent compared to private services but it must be kept in mind that while people in some jobs may use new technologies very frequently, the sectors for health and education contain a wide variety of different jobs. the discussion here focusses on the share of employees working with new technologies. in principle the share of output produced with a new technology or the share of the total capital stock consisting of a new technology may differ significantly from the share of employees working with the technology, if for example the technology is more diffused in the relatively capital intensive and high labour productivity manufacturing industries. 12 3.2. ai and robotics are more diffused in eastern denmark the diffusion of artificial intelligence and robotics is to some extent unevenly distributed across regions in denmark, as presented in figure 2. robotics are more used in the eastern and northern parts of zealand, while the use at fyn outside the island’s capital city odense is quite low. artificial intelligence is more used at the eastern parts of zealand, while fyn outside odense once again distinguishes itself at the low end of the continuum. the main provincial capitals of aarhus, aalborg and odense exhibit higher uses than the regions in which they serve as capital cities. the capital of denmark, copenhagen, deviates from the provincial cities in the sense that it tends to exhibit lower use than the region in which it is situated. figure 2. uneven diffusion of ai and robotics across regions source: figure 1 divided into nuts3 regions with aalborg, odense and aarhus indicated separately bornholm (nuts3: 1d) has been excluded because of too few observations. the city of copenhagen and the copenhagen region (nuts3: 1a and 1b) are merged. 13 the high diffusion of both artificial intelligence and robotics in east and north zealand probably reflects that a lot of relatively large manufacturing plants in knowledge intensive industries such as pharmaceuticals are located in the regions. outside of the main cities it can be seen that robotics are relatively more diffused in west and south jutland, while artificial intelligence is relatively more diffused in north jutland. this probably reflect that jutland is home to a large share of danish manufacturing, and the relatively lower diffusion in east jutland can reflect a somewhat diversified industry structure in that region where the manufacturing sector may be large in absolute terms but is complemented by a large range of activities in other sectors. we may conclude from this that there is a need for diffusing artificial intelligence and robotics outside the eastern and northern parts of zealand, and that regional capitals could serve as catalysers to that effect. 14 4. effects on skills in this section we show that danish employees are very confident in using artificial intelligence and robotics, because they feel that they have the necessary skills for doing so. this is especially the case when using robots for accomplishing a specific task, and when interaction with artificial intelligence is focused on using information and receiving orders or directions that are automatically generated. training by peers at work is extremely important in order for employees to have the skills necessary to use artificial intelligence and robotics. however, artificial intelligence requires a broader range of learning arenas, and learning by doing and formal training are more important when using artificial intelligence than when using robotics. in the following, we look further into the sentiments among those respondents that are frequent users of artificial intelligence and robotics, i.e. the proportion of respondents that indicates that they use artificial intelligence and robotics at least weekly. we show the extent to which they feel that they have the skills necessary for undertaking the kind of human-technology interaction that were explored in the previous sections, and the way in which they have acquired these skills. this exploration reflects our previous reflections in section 2 that the implementation of artificial intelligence and robotics is sensitive to upskilling and development of new competencies, and how employees embrace and accommodate to these opportunities. 4.1. employees are very confident in using ai and robotics figure 3 displays how the frequent users of artificial intelligence and robotics feel about their skills in relation to artificial intelligence and robotics. in general, nine out of ten respondents feel that they have the necessary skills to operate artificial intelligence and robots. this is a high level of individual efficacy9 especially in the cases of operating a robot, make use of information, and receive orders and directions, where the proportion of respondents answering “to a high extent” is significantly larger than the proportion of respondents indicating “to some extent”. the high level of self-efficacy in the case of artificial intelligence and robotics may reflect a high level of self-efficacy in general. overall, a huge proportion of our respondents report that they are “very satisfied” (42,2 %) or “satisfied” (46,3 %) with working conditions in their current main paid job (appendix, d1). furthermore, we have also taken the opportunity to ask our respondents about the kind and frequency of social interaction in their job in general (appendix, section e). social interaction is defined in terms of four types of activities, i.e. that the employee (1) advice, instruct, train or teach people individually or in groups, (2) sell a product or sell a service, (3) negotiate contracts or terms more generally with people inside or 9 individual efficacy, also known as perceived self-efficacy, is understood as “people’s domain-specific perceptions of their ability to perform the actions necessary to achieve desired outcomes”, cf. gallagher (2012). the concept, which is a core concept in organization psychology studies on work organization, was originally proposed in bandura (1977). self-efficacy is an important determinant for the effort and persistence by which employees pursue new and unfamiliar tasks, set goals for themselves, and engage in learning, e.g. bandura (1997). 15 outside the firm, or (4) share work related information with people inside or outside the firm. frequent social interaction occurs mainly in the case of (1) advice, instruct, train or teach and (4) share work related information, where, respectively, 46.2 % and 56.9 % of the respondents report that this kind of social interaction occurs at least weekly (appendix, e1-e4). in all four cases, frequent social interaction is characterised by the fact more than nine out of ten respondents feel that they have the skills necessary for performing these activities to a high or some extent (appendix, e1c-e4c). figure 3. employees feel confident in using ai and robotics source: appendix, f1c-f2c and g1c-g3c 0 10 20 30 40 50 60 70 80 90 100 …deliver inputs or receive output such as raw materials, final goods or semi-manufactures to or from a robot? … start, monitor and stop a robot to accomplish a specific task? … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? … receive orders or directions generated automatically by a computer or by computerized machinery? … use a computer or computerized machinery that has the ability to automatically learn and improve from experience? to what extent do you feel that you have the skills to perform this activity at the level required in the main job? to a high extent to some extent 16 4.2. ai requires more learning arenas than robotics self-efficacy in performing a task depends on the employee’s experience with the results of performing that task, which is both a result of the frequency by which the task is undertaken, and the knowledge that accumulates while performing the task more than once. so, when performing a task occurs more frequent, and when learning occurs during task execution, self-efficacy increases. while figure 1 reveals that performing the tasks in question related to artificial intelligence and robotics has increased during 2016-2019, figure 4 shows the kind of learning that has been associated with using artificial intelligence and robotics during that period of time. figure 4. training by peers and learning by doing are more important than formal training source: appendix, f1b-f2b and g1b-g3b learning is conceived in three forms, i.e. (1) formal training such as classroom and online courses, (2) training by peers at work such as experienced colleagues and supervisors, and (3) the employee’s own learning by doing, possibly using teaching materials such as books and videos etc. training by peers is by far the predominant kind of learning when it comes to robotics and is also quite dominant in the case of artificial intelligence. however, learning by doing and formal training appears to be more important when using artificial intelligence than when using robotics. in sum, it appears that artificial intelligence requires a broader range of learning arenas than robotics. 0 10 20 30 40 50 60 70 80 90 …use a computer or computerized machinery that has the ability to automatically learn and improve from experience? …receive orders or directions generated automatically by a computer or computerized machinery? …make use of information complied automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? …start, monitor and stop a robot to accomplish a specific task? …deliver inputs or receive output such as raw materials, final goods or semi-manufactures to or from a robot? how have you primarily acquired the skills to... formal training learning-by-doing training by peers 17 5. effects on work organization in general, jobs in denmark tend to be complex, empowering, and requiring self-reliance on behalf of the employees. while artificial intelligence and robotics imply a potential for dehumanization as well as empowerment and inclusion, the task environment in danish firms favour the latter rather than the former. as argued in section 2, the actual effects of implementing artificial intelligence and robotics depends on the socio-technical system and thus how humans and technology co-exist. our survey shows that artificial intelligence has more applications than robotics, and that artificial intelligence to a higher extent than robotics is relevant to complex social interaction, problem-solving, and decision making. this is especially the case for managers and white collar, and for high and medium skilled employees. in the following, we describe the work organization that characterises our sample, and explore the relationship between types of job content and human-technology interaction. types of job content appear in three dimensions, i.e. (1) various tasks that our respondents’ jobs involve (appendix, b1-b11), (2) various sources of the pace of work (appendix, b12-b15), and (3) various forms of social interaction incurred in the job (appendix, e1-e4). the human-technology interaction is represented by the form of interactions that were explored in figure 1 and onwards. finally, we show the use of artificial intelligence by types of occupation and skills (appendix, a2). regarding occupation, we distinguish between management, white collar, and blue collar, while skills are divided into high, medium, and low.10 5.1. jobs are complex, empowering, and require self-reliance figure 5 reports on various aspects of job content, ranging from monotonous and repetitive tasks to tasks that requires high levels of individual judgement and decision making. it appears that meeting precise quality standards, assessing the quality of their own work, and solving unforeseen problems on their own are job contents that are always or often experienced by our respondents. in contrast, monotonous tasks, and short, routine and repeated tasks are more likely to be experienced only sometimes or rarely. the remaining types of job content, which have to do with teamwork and opportunities for influencing the speed and execution of work, are always or often experienced by more than half of the respondents. in sum, these observations indicate that danish workplaces are predominantly characterised by a relatively high level of complexity requiring empowerment and inclusion, when it comes to the actual execution of job content. 10 we use nine of the ten job titles in a2 in order to construct these types, omitting armed forces occupation because of zero respondents. the job titles are. (1) managers, (2) professionals, (3) technicians and associated professionals, (4) clerical support workers, (5) service and sales workers, (6) skilled agricultural, forestry and fishery workers, (7) craft and related workers, (8) plant and machine operators, and assemblers, and (9) elementary occupations. management is defined as job title (1), white collar as job titles (2)-(5), and blue collar as job titles (6)-(9). high skill is defined in terms of job titles (1)-(3), medium skill in terms of job titles (4) and (7)-(8), and finally low skill in terms of job titles (5) and (9). see also figure 8. 18 figure 5. jobs are complex, empowering, and require self-reliance source: appendix, b1-b11. figure 6. the pace of work is mainly regulated by targets and colleagues source: appendix, b12-b15 0 10 20 30 40 50 60 70 80 90 …that you work in group or team that has common tasks … …that you have the option to change your speed at work? …that you are able of choose or change your methods? …rotating tasks between yourself and colleagues? …short, routine and repeated tasks of less than 10 minutes? …learning new things? …complex tasks? …monotonous tasks? …solving unforseen problems on your own? …assessing yourself the quality of your own work? …meeting precise quality standards? how often do your job involve.... always/often sometimes/rarely 0 10 20 30 40 50 60 70 …direct control of superiors? …automatic speed of a machine or movement of a product? …measurable production targets or performance targets? …the work done by colleagues? how often does your pace of work depend on... always/often sometimes/rarely 19 when the execution of job content takes place within a context that is complex, empowering, and require self-reliance on behalf of the employee, we might expect that the pace of work is less regulated by control exerted by supervisors or technology and, vice versa, more regulated by interaction with colleagues and targets that need to be met. as figure 6 shows, this is actually the case. less than one out of five respondents report that their pace of work depends on direct control of supervisors or the automatic speed of equipment or machinery , while more than one out of three tell that the pace of work is always or often regulated by targets or work done by colleagues. 5.2. ai has a broader impact on job content that robotics our previous observation that artificial intelligence involves more learning arenas than robotics may reflect that artificial intelligence to a larger extent is applicable to more organizational activities than robotics. while robotics primarily pertain to the physical aspects of organizational life in terms of processing and handling physical objects, artificial intelligence is relevant to both physical and non-physical aspects of organizational life. artificial intelligence enters the planning, execution and controlling of physical processes as well as the planning, execution and controlling of services, problem finding, problem solution, and decision making. in effect, artificial intelligence serves more purposes than robotics. in consequence, it can be expected that artificial intelligence has a broader impact on job content than robotics. to some extent, our survey points in that direction, cf. figure 7 that reports our findings on the association between the different types of job content that have been discussed so far and the different types of human-technology interaction that is reported in figure 1 and onwards. three important observations appear in figure 7. first, artificial intelligence is positively correlated with far more types of job content than robotics. second, robotics are mostly associated with types of job content that concerns execution and controlling of work, while artificial intelligence is also associated with types of job content that reflect complex social interaction. third, solving unforeseen problems through human-technology interaction only occurs in the case of artificial intelligence and not in the case of robotics. these observations indicate that artificial intelligence to a larger extent than robotics is instrumental in supporting managerial intentions that work against dehumanisation of work and favours empowerment and inclusion. or, it could be argued that in order to get the most out of using artificial intelligence, managerial intentions must focus on how to create work organizations that allow for human creativity, problem solving, and decision making. while artificial intelligence has a broader impact on job content than robotics, there is, nevertheless, a marked difference in human-technology interaction across occupational lines and levels of skills, cf. figure 8. 20 figure 7. artificial intelligence has a broader impact on job content than robotics f1-f2, g1-g3 b1-b15 e1-e4 deliver inputs or receive outputs to/from robots start, monitor, and stop a robot use automatic information for decisions or advise receive orders or directions automatically generated use technology that learns and improve automatically meeting quality standards *** *** *** *** *** assessing quality of own work solving unforeseen problems *** monotonous tasks complex tasks ** learning new things ** *** *** short, routine, repeated tasks ** ** rotating tasks ** choose or change methods option to change speed of work teamwork ** ** ** work done by colleagues *** ** measurable targets *** *** *** *** *** automatic speed *** *** *** *** *** direct control ** ** *** *** *** advice, instruct, or train *** *** *** sell a product or service ** ** ** negotiate contracts or terms *** *** ** share work related information *** *** *** the left column contains the different types of job content that appears in questions b1-b15 and e1-e4 in the appendix, while the top row contains the types of human-technology interaction that were presented in figure 3 and appears in questions f1-f2 and g1-g3 in the appendix. regarding b1-b15, respondents answering “always” or “often” are included. regarding e1-e4, f1-f2 and g1g3, respondents that indicate at least weekly are included. the number of * indicate the strength of a positive correlation ** indicates significant at 5 % while *** indicates significant at 1 %. no negative correlations were found. 21 figure 8. ai use reflects the organizational hierarchy source: see footnote 16. the respondents are those who indicate that they use artificial intelligence at least once a week, i.e. the same group of respondents who enter figure 1. figure 8 shows that the use of artificial intelligence for, respectively, decision making and receiving directions varies with organizational hierarchy and skill levels. while the use of artificial intelligence for decision making is predominant in the case of management and white collar employees as compared to the use of artificial intelligence for receiving directions, this is less so the case for blue collar employees, where the use of artificial intelligence is evenly spread across decision making and receiving directions. this reflects, of course, that we are observing different types of organizational roles where decision making is more relevant at higher levels of the organizational hierarchy, while directions are more relevant at lower hierarchical levels. in the case of skills, high and medium skilled employees show similar patterns, where artificial intelligence for decision making is used more often than for receiving directions. however, both types of use are more frequently observed among medium skill workers. low skilled employees have an even distribution across the two types of use. this may reflect that decision making is a more important part of job execution in high and medium skilled occupations than in low skilled occupations. 0 5 10 15 20 25 s h a re a t le a st w e e k ly … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? … receive orders or directions generated automatically by a computer or by computerized machinery? 22 6. needs for skills formation this section shows that there is a need for focussing on future skills formation. in the present situation, the use of artificial intelligence and robotics is associated with a high level of self-efficacy, as previously discussed in section 4.1 which showed that danish employees are very confident in using artificial intelligence and robotics, and nine out of ten find that they have the necessary skills for the types of humantechnology interaction that we have explored in this working paper. however, there is a need for focussing on future skills formation, because the demands on skills formation is bound to increase, as the use of artificial intelligence and robotics diffuses further and becomes more advanced. in the following, we look further into the need for future skills requirement among those respondents that are users of artificial intelligence and robotics. the discussion is a mirror of the previous discussion in sections 4.1-4.2, where we showed the extent to which our respondents feel that they have the necessary skills to a high or some extent (figure 3), and the source of how these skills were acquired (figure 4). in this section we focus on the respondents that do not feel that they have the necessary skills to a high extent. 6.1. half of danish employees lack skills for future use of ai and robotics the primary labour market effect of using artificial intelligence and robotics is that the future proliferation of new types of jobs will be accompanied by the disappearance of current types of jobs. even if the net effect of these changes is that the number of job increases, there is no guarantee that current employees will benefit from the changes, unless their qualifications keep up with the skills requirement entailed in the new types of jobs. as explained in section 2, the common denominator for the new types of jobs is the highskilled ability to create, engage, interpret, judge, and act upon data and activities involving artificial intelligence and robotics (world economic forum, 2020a). the world economic forum (world economic forum 2020b) argues that the change of the composition of tasks is to some extent driven by transformation of value chains in which deep technological integration plays an important role, consequently pushing the frontier in the human-technology interaction in a way that gradually renders a number of current traditional job roles obsolete.11 obsolescence of jobs is related to information handling and data processing, technical/physical/manual work activities, communication and interaction, reasoning and decision making, and activities concerning coordination, management, advising and development. in consequence, skills gaps are expected to occur in these task areas, unless upskilling of human capital takes place. this means that employees who find that they do not or only to some extent have the skills necessary for the required human-technology interaction may be challenged in terms of future needs for upskilling of 11 the traditional job roles mentioned in the world economic forum (2020b) fig. 22, p. 30 are: data entry clerks; administrative and executive secretaries; accounting, bookkeeping and payroll clerks; accountants and auditors; assembly and factory workers; business services and administration managers; client information and customer service workers; general and operation managers; mechanics and machinery repairers; material-recording and stock-keeping clerks; financial analysts; postal service clerks; sales representatives; relationship managers; bank tellers and related clerks; door-to-door sales, news and street vendors; electronics and telecom installers and repairers; training and development specialists; and construction laborers. 23 human capital. as shown in figure 9, the proportion of respondents who find that they to a high extent has the necessary skills for the human-technology interactions in question is in the range of 40-60 %, which indicates that about half of the respondents are, to some extent, challenged by future needs for upskilling. figure 9. only half of the respondents feel that they have the necessary skills to a high extent, and these skills have primarily been acquired through peer learning source: appendix, f1c-f2c, g1c-g3c, f1b-f2b and g1b-g3b the main source of upskilling is peer learning, i.e. “training by peers at work such as experienced colleagues and supervisors”. this is especially the case when it comes to robotics, where 70-80 % of the respondents report this kind of learning as their main source of upskilling. in the case of artificial intelligence, peer learning is reported by less than 50 % of the respondents, reflecting that artificial intelligence requires a broader range of learning arenas than robotics, as previously argued in section 4.2. the dominant role of peer learning as an avenue for upskilling may, in the long run, not be sufficient for developing and sustaining the level of upskilling that is necessary for adopting robotics and artificial intelligence. the new types of job roles that are gradually appearing will require more formalized training and education, not only in technical and hard skills, but also in soft skills like team, analytical thinking, multitasking, and documentation skills.12 while skills for the new job types can be refined in practice through 12 an interesting analysis of skill gap in robotics is found in shmatko & volkova. (2020. data mining open access vacancies and conducting a number of expert interviews, they compare requirements for robotics professionals, i.e. engineers and researchers, in usa and russia. pointing to a general shortage of this kind of labour, they argue in favour of lifelong learning and education. as robotics become more diffused throughout the economy, we might expect that the skill gap identified for professionals might reflect a more general skill gap throughout the workforce. 0 10 20 30 40 50 60 70 80 90 …deliver inputs or receive output such as raw materials, final … … start, monitor and stop a robot to accomplish a specific task? … make use of information compiled automatically for you by … … receive orders or directions generated automatically by a … … use a computer or computerized machinery that has the … % in your main job how often do you usually… has the necessary skills to a high extent skills primarily acquired through peer learning 24 peer learning, they still need a formalized and systematic education and training framework in order to be acquired, implying sequential or simultaneous use of a range of learning arenas. since the rate of technological change in the fields of artificial intelligence and robotics seems to increase, there might be a tendency to either reduce the human side of the human-technology interaction or increase the quality of human input to the interaction, which might imply that middle-range skilled jobs are the ones most likely to be destroyed by robotics and artificial intelligence, while low-skilled and high-skilled jobs may proliferate.13 in effect, firms and society must focus on how to upskill middle-range positions in order to create more professionals, which implies that formal training and education becomes important prerequisites for learning while working.14 in sum, there is a need for society and firms to focus on upskilling for using artificial intelligence and robotics. this need arises from the fact that only half of the respondents feel that they have the skills necessary for the types of human-technology interaction that we have analysed in this working paper. as technological change progresses at an increasing rate, these respondents risk being left behind or degraded to human assistants for hardand software operations. in the long run, this may hamper the development of the knowledge base of private and public firms, and the society’s ability to take part in the economic growth created by the new types of jobs and activities entailed in the diffusion of artificial intelligence and robotics. 13 this possibility is pointed out by many researchers and observers in the field, cf. makridakis (2017). 14 in their large scale survey on the determinants of 21st-century digital skills, ester van laar and colleagues find that formal training to some extent eliminates the need for help from colleagues at the workplace, and that help from colleagues primarily contributes to the development of collaboration and problem-solving skills, see van laar et al. (2019). this might indicate that the most important contribution from peer learning is the refinement and sustained development of skills acquired through formal training and education. in general, however, research is still needed in order to determine the synergy from combining different types of learning arenas, and in order to understand which determinants are important for which types of skills, cf. van laar et al. (2017; 2020). 25 7. recommendations for policy and management the present working paper has shown that artificial intelligence and robotics imply changes of work organization and skills, because it creates new varieties of socio-technical systems. of course, we have known for many years that technology poses demands on the type of organizational structure that is needed for the effective use of the technology in question, and following upon the seminal work by joan woodward on the interplay between management, technology and industrial organization (woodward, 1958; 1965; 1970) the idea of a technological imperative even enjoyed prominence for years to come.15 during her studies of multiple cases in post war industrial britain, woodward, among other things, showed that empowerment and employee discretion were more prominent in cases of unit or process production than in cases of mass production where line-staff organization and top-down decision making prevailed. however, in order to make such clear delineations, we need to be able to define technology uniformly and assume a direct link between technology and organizational structure. this is far from trivial since we find different technologies with different uses within the organization, where the application of technology is influenced by the nature of tasks that technology helps to solve, and by the principles of control and coordination that are applied. the present study has focused on types of technology-human interaction and what we can learn from these types, and what we have learned can be grouped into two broad categories of observations, which are issues regarding diffusion and issues regarding skills and opportunities. 7.1. issues regarding diffusion we observed that artificial intelligence seems to be more diffused than robotics, and that it apparently diffuses more rapidly. this tendency was prevalent in both manufacturing and service. what this implies for both policy and management is that there is a need to be more focused on the benefits and challenges that artificial intelligence entails for technology-human interaction and managerial discretion. in particular, our findings indicate that artificial intelligence has a broader impact on job content than robotics, which means that the organizational set-up and the composition of task environments within firms and organizations are more sensitive to the application of artificial intelligence than robotics. so, as artificial intelligence continues to diffuse, we might expect an increasing variety of sociotechnical systems. this is a potential source of competitive advantage by which firms can differentiate themselves in terms of how they develop and exploit dynamic capabilities, and how processes are being optimized. in order to reap the benefits accruing from this development, management must focus on how to develop and sustain human capital. as argued in section 2, a large variety of new types of jobs are likely to appear, which effects how sociotechnical systems are planned and evolve, and in order to develop and sustain the human capital warranted by this development management must strategically plan for continuous learning. the concomitant 15 see e.g. “the south essex experience” (pp. 11-15) in gjerding (1996. it is fair to say, of course, that the idea of a technological imperative or something similar to that effect can be traced back to times long before joan woodward, e.g. henry ford’s studies on work organization in ford (1911) and karl marx’s studies on value chains and division of labour within different types of manufacturing in the first volume of marx (1867), notably chapter 12. 26 implications for policy making is that new types of vocational and academic education and training need to be developed and implemented, including improved conditions for lifelong learning. it appeared from our findings that artificial intelligence and robotics are more diffused in eastern denmark as compared to other parts of the country, and that larger danish cities serving as regional capital cities are more extensive users of artificial intelligence and robotics than the regions to which they belong. this might call for policy schemes for technological diffusion to be more focused on targeting peripheral areas. our analysis has focused on human-technology interaction as an endogenous phenomenon within firms. in doing so, we have not contemplated the implications of regarding human-technology interaction as a phenomenon that spans organizational borders. however, this type of technological fit is widely disputed in terms of the creation of a precariat that is characterized by freelancing and short term contractual employment (standing, 2011). the precariat is associated with what sarah kessler calls the gig economy where permanent employment and full-time jobs disappear in favour of various types of temporary, part-time or contract-based jobs (kessler, 2018). this kind of fragmentation of sociotechnical systems may benefit people who are up to speed with recent technological trends and high-skilled job requirements, but also create an impoverished labour force. this calls for more elaborate policy schemes for training and re-education as well as new vocational and academic educations that empower people to take part in ongoing and upcoming technological and social trends.16 7.2. issues regarding skills and opportunities the preceding analysis also addressed the need for skills for the future in terms of our finding that even though employees are very confident in using artificial intelligence and robotics, many employees lack the skills for future use of these technologies. peer learning appeared to be a dominant form of upskilling, especially in the case of robotics, while artificial intelligence required a broader range of learning arenas. however, the new types of jobs that gradually appear call for more formalized training and education in both hard and soft skills. peer learning will still be important as an avenue to knowledge exchange and the development of practice at work, but the effect of peer learning will be increasingly contingent on the extent and quality of formalized training and education. middle-range skilled jobs are likely to be destroyed to a larger extent than other job types, so firms and society must focus on how to create more professionals by upskilling middle-range positions. as argued in the preceding section, creating opportunities for acquiring new skills and occupying new types of jobs is a lifelong achievement. our findings point to a need for not only developing new types of educations and upgrading existing ones, but also for a stronger focus on how formal training and education interact with practice-based learning at work. while formal training and education may be a prerequisite for learning at work, learning at work 16 the covid-19 situation may speed up the creation of a precariat. in a recent analysis of 2,000 tasks in 800 jobs and 9 countries, mckinsey finds that the proliferation of hybrid models of remote work that has occurred during the covid-19 lockdowns is likely to persist after the end of the pandemic. we might hypothesize that there is but a small leap from hybrid models of remote work to gig economy conditions. the analysis in question is lund et al. (2020). 27 can also serve as an important arena for translating formal training and education into practice. reaping the benefits from formal training and education combined with learning at work requires that management must create favourable conditions for developing and sustaining human capital. this calls for structural and processual arrangements that enable learning organizations17, where technology-human interaction enjoys opportunities for continuous adjustment.18 in sum, the diffusion of artificial intelligence and robotics requires policy makers and the educational system to rethink current educations and develop new ones. how formal education and training can be exercised through learning on the job and how learning on the job can benefit from formal education and training must be an integral part of how current educations are renewed and new educations are developed. how sustained development of human capital within firms can benefit from these changes is an important managerial task that probably calls for an upgrading of strategic human resource management. 17 learning organizations can take many forms. peter senge described the learning organizations in terms of the exercise of five disciplines: systems thinking, personal mastery, mental models, building shared vision, and team learning, cf. senge (1990). karl wiig focused on structures and procedures for knowledge management in wiig, (1993). nonaka and takeuchi described the learning organization in terms of how knowledge is externalized and internalized through processes of socialization and combination of elements of knowledge in nonaka & takeuchi (1995. in a recent interview, silvia gherardi argues that in contemporary research the idea of a learning organization often appears in the disguise of dynamic capabilities, knowledge management or change management, see cuel, (2020). 18 in a recent contribution, salima benhamou shows how forms of work organization that stimulates learning contributes to complementarity between technology and humans in the health, transport and banking sectors, see benhamou (2020). 28 references bandura. a. (1977), “self-efficacy: toward a unifying theory of behavioral change”, psychological review, 84: 191-215. bandura, a. (1997), self-efficacy: the exercise of control, new york: w.h. freeman. benhamou, s. (2020), “artificial intelligence and the future of work”, revue d'économie industrielle, 169: 57-88 bessen, j. et al. (2019), “automatic reaction – what happens to workers at firms that automate?”, law and economics series paper, no. 19-2, boston university school of law. caruso, l. (2018), “digital innovation and the fourth industrial revolution: epochal social changes?”, ai & society, 33(1): 379-392. castelo-branco, i., cruz-jesus, f. & oliveira, t. (2019), “assessing industry 4.0 readiness in manufacturing: evidence for the european union”, computers in industry, 107: 22-32. cuel, r. (2020), “a journey of learning organization in social science: interview with silvia gherardi”, the learning organization, 27(5): 455-461. dauth, w. et al. (2017), “german robots – the impact of industrial robots on workers”, iab discussion paper 30/2017, nürnberg: institut für arbeitsmarktund berufsforschung (iab) dzieza, j. (2020), “how hard will robots make us work?”, the verge, feb. 27, 2020. erro-garcés, a. (2019), “industry 4.0: defining the research agenda”, benchmarking: an international journal, ahead-of-print, https://doi.org/10.1108/bij-12-2018-0444. frank, a.g., delenogare, l.s. & ayala, n.f. (2019), “industry 4.0 technologies: implementation patterns in manufacturing companies”, international journal of production economics, 210: 15-26. frontier economics (2018), the impact of artificial intelligence on work. an evidence review prepared for the royal society and the british academy, september 2018. the delivery report is published as the impact of artificial intelligence on work. an evidence synthesis on implications for individuals, communities, and societies, british academy & the royal society, september 2018. gallagher, m.w. (2012), “self-efficacy”, in ramachandran, v.s. (ed.), encyclopedia of human behaviour, london: academic press/elsevier, pp. 314-320. gjerding, a.n. (1996), technical innovation and organizational change, aalborg: aalborg university press. ford, h. (1911), the principles of scientific management, new york: harper & brothers. kessler, s. (2018), gigged: the end of the job and the future of work, new york: st. martin’s press. lund, s., madgavkar, a., manyika, j. & smit, s. (2020), what’s next for remote work: an analysis of 2,000 tasks, 800 jobs, and nine countries, mckinsey global institute, november. 29 makridakis, s. (2017), “the forthcoming artificial intelligence (ai) revolution: its impact on society and firms”, futures, 90: 46-60. marx, k. (1867), das kapital, hamburg: verlag von otto meissner. mittal, s., romero, d. & wuest, t. (2018), “towards a smart manufacturing maturity model for smes (sm3e)”, moon, i. et al. (eds.), advances in production management systems. smart manufacturing for industry 4.0, springer: ifip international federation for information processing, pp. 155-163. neuburger, r. & fiedler, m. (2020), “zukunft der arbeit – implikationen und herausforderungen durch autonome informationssysteme”, schmalenbachs zeitschrift für betriebswirtschaftliche forschung, forthcoming, springer professional. https://doi.org/10.1007/s41471-020-00097-y, published online 18 september 2020. nielsen, p., lorenz, e. & holm, j.r. (2021), ”work policy and automation in the 4th industrial revolution”, christensen, j.l. et al. (eds.), globalization, new and emerging technologies, and sustainable development – the danish innovation system in transition, london: routledge, ch. 10. nonaka, i. & takeuchi, h. (1995), the knowledge creating company, oxford: oxford university press. oztemel, e. & gursev, s. (2020), “literature review of industry 4.0 and related technologies”, journal of intelligent manufacturing, 31:127–182. senge, p. (1990), the fifth discipline: the art and practice of the learning organization, new york: doubleday currency shmatko, n. & volkova, g. (2020), “bridging the skill gap in robotics: global and national environment”, sage open, 10(3): 1-13. standing, g. (2011), the precariat: the new dangerous class, london: bloomsbury academic. wiig, k. (1993), knowledge management foundations: thinking about thinking how people and organizations create, represent, and use knowledge, arlington, tx: schema press. van laar, e., van deursen, a., vand dijk, j. & de haan, j. (2017), “the relation between 21st-century skills and digital skills: a systematic literature review”, computers in human behavior, 72: 577-588. van laar, e., van deursen, a., vand dijk, j. & de haan, j. (2019), “determinants of 21st-century digital skills: a large-scale survey among working professionals”, computers in human behavior, 100: 93-104. van laar, e., van deursen, a., vand dijk, j. & de haan, j. (2020), “determinants of 21st-century skills and 21st-century digital skills for workers: a systematic literature review”, sage open, january-march: 1-14. woodward, j. (1958), management and technology, london: hmso woodward, j. (1965), industrial organization: theory and practice, london: oxford university press woodward, j. (1970), industrial organization: behaviour and control, london: oxford university press 30 world economic forum (2020a), jobs of tomorrow. mapping opportunity in the new economy, geneva. world economic forum (2020b), the future of jobs report 2020, october 2020, geneva 31 appendix 1 full tables this appendix reports the data from the task survey. the occupations in questions a2 and a5_1 are manually coded by experts at statistics denmark based on two questions each. the first question is “what is the job title of your job” and the second is “what type of job do you perform most of the time in your job”. the experts created 4-digit isco codes but they are here reported as 2-digit codes.19 questions a3 and j1 pertain to municipalities but here the data are aggregated to the regional (nuts3) level. a. introduction this survey concerns the use of technology in danish jobs. yes no refuse don’t know a1. do you currently have a main paid job? 87.87 11.54 0.12 0.47 weighted pct. unweighted n=1244. yes no a1a. have you ever had a main paid job? 63.03 36.97 weighted pct. unweighted n=115. filter: a1=” no”. a2. what is the job title of your main job? 19 the original dataset has an error where some of these manually coded isco classes only have 3 digits. thus, any users of the dataset need to make sure that a trailing zero is added so that, for example, 234 becomes 2340. 0 armed forces occupations 03 armed forces occupations, other ranks 0.08 1 managers 11 chief executives, senior officials and legislators 1.57 12 administrative and commercial managers 2.12 13 production and specialised services managers 1.82 14 hospitality, retail and other services managers 0.05 32 2 professionals 21 science and engineering professionals 1.99 22 health professionals 5.94 23 teaching professionals 15.21 24 business and administration professionals 5.33 25 information and communications technology 3.96 26 legal, social and cultural professionals 1.76 3 technicians and associate professionals 31 science and engineering associate professionals 4.38 32 health associate professionals 2.10 33 business and administration associate professional 8.40 34 legal, social, cultural and related associate professionals 1.45 35 information and communications technicians 0.57 4 clerical support workers 41 general and keyboard clerks 6.11 42 customer services clerks 0.96 43 numerical and material recording clerks 3.47 44 other clerical support workers 0.38 5 service and sales workers 51 personal service workers 1.85 52 sales workers 2.67 53 personal care workers 6.17 54 protective services workers 0.51 6 skilled agricultural, forestry and fishery workers 61 market-oriented skilled agricultural workers 0.19 62 market-oriented skilled forestry, fishery and hunt 0.20 7 craft and related trades workers 71 building and related trades workers, excluding electricians 2.71 72 metal, machinery and related trades workers 1.96 33 weighted pct. unweighted n=1048. filter: a1=” yes”. missing: 73. a3. in which municipality is the address of your main job? copenhagen 14.88 copenhagen environs 13.69 north zealand 4.99 bornholm 0.81 east zealand 2.97 west and south zealand 8.09 funen 7.83 south jutland 13.40 east jutland 17.18 west jutland 6.22 north jutland 9.94 weighted pct. unweighted n= 1121. filter: a1=” yes”. 73 handicraft and printing workers 0.16 74 electrical and electronic trades workers 1.31 75 food processing, wood working, garment and other 0.52 8 plant and machine operators, and assemblers 81 stationary plant and machine operators 2.09 82 assemblers 0.26 83 drivers and mobile plant operators 4.44 9 elementary occupations 91 cleaners and helpers 2.50 92 agricultural, forestry and fishery labourers 0.26 93 labourers in mining, construction, manufacturing 2.47 94 food preparation assistants 1.42 96 refuse workers and other elementary workers 0.62 34 a4. in your own opinion what was the main reason you lost your previous job? (if yes in a1a) work pressure was too high 7.68 i was offered a better job 5.02 my job was outsourced to another country 2.60 other reason 84.13 don’t know 0.56 weighted pct. unweighted n=77. filter: a1a=” yes”. yes no refuse don’t know a5. did you have a main paid job in 2016? 90.08 9.76 0.16 weighted pct. unweighted n= 1121. filter: a1=” yes”. a5_1. what was the job title of your main job in 2016? 0 armed forces occupations armed forces occupations, other ranks 0.00 1 managers 11 chief executives, senior officials and legislators 1.70 12 administrative and commercial managers 2.54 13 production and specialised services managers 2.20 14 hospitality, retail and other services managers 0.13 2 professionals 21 science and engineering professionals 2.13 22 health professionals 6.54 23 teaching professionals 13.76 24 business and administration professionals 6.37 25 information and communications technology 4.34 35 26 legal, social and cultural professionals 1.90 3 technicians and associate professionals 31 science and engineering associate professionals 4.24 32 stationary plant and machine operators 2.61 33 health associate professionals 8.32 34 business and administration associate professional 1.22 35 information and communications technicians 0.45 4 clerical support workers 41 general and keyboard clerks 5.12 42 customer services clerks 0.82 43 numerical and material recording clerks 2.73 44 other clerical support workers 0.70 5 service and sales workers 51 personal service workers 2.09 52 sales workers 2.81 53 personal care workers 6.38 54 protective services workers 0.45 6 skilled agricultural, forestry and fishery workers 61 market-oriented skilled agricultural workers 0.49 62 market-oriented skilled forestry, fishery and hunt 0.25 7 craft and related trades workers 71 building and related trades workers, excluding electricians 2.50 72 metal, machinery and related trades workers 2.73 73 handicraft and printing workers 0.05 74 electrical and electronic trades workers 0.81 75 food processing, wood working, garment and other 1.13 8 plant and machine operators, and assemblers 36 weighted pct. unweighted n=970. filter: a5=1. missing=61. a7-a9. when thinking about your current main job and your main paid job in 2016 are these then: yes no don’t know at the same employer? 76.32 23.61 0.06 at the same workplace? 71.67 28.27 0.06 the same position? 76.86 23.07 0.06 weighted pct. unweighted n=1031. filter: a1=” yes” and a5=” yes”. 81 stationary plant and machine operators 1.51 82 assemblers 0.32 83 drivers and mobile plant operators 4.20 9 elementary occupations 91 cleaners and helpers 2.28 92 agricultural, forestry and fishery labourers 0.32 93 labourers in mining, construction, manufacturing 2.13 94 food preparation assistants 1.13 96 refuse workers and other elementary workers 0.00 91 cleaners and helpers 0.62 37 b. work organization the following questions concern work organization in your main job. b1.-b11. how often does your job involve? always often sometimes rarely never refuse don’t know meeting precise quality standards? 50.32 28.90 11.40 5.36 3.34 0.11 0.58 assessing yourself the quality of your own work? 42.30 42.71 9.66 3.08 1.89 0.11 0.24 solving unforeseen problems on your own? 35.83 49.10 12.22 2.12 0.63 0.11 monotonous tasks? 8.64 21.63 36.98 25.44 7.20 0.11 complex tasks 14.59 45.55 30.36 7.76 1.26 0.11 0.37 learning new things? 12.75 45.33 32.62 8.16 0.91 0.22 short, routine and repeated tasks of less than 10 minutes? 6.64 27.76 29.02 23.79 12.24 0.22 0.33 rotating tasks between yourself and colleagues? 15.35 41.26 26.58 11.23 4.88 0.22 0.47 that you are able of choose or change your methods? 18.52 37.26 28.19 11.92 3.62 0.22 0.27 that you have the option to change your speed at work? 21.89 34.78 22.95 14.90 4.66 0.22 0.60 that you work in group or team that has common tasks and plan its work? 22.39 34.84 21.60 12.57 7.96 0.22 0.41 weighted pct. unweighted n=1121. filter: a1=” yes”. 38 b12.-b15. how often does your pace of work depend on? always often sometimes rarely never refuse don’t know the work done by colleagues? 8.11 28.48 32.25 20.83 9.83 0.22 0.27 measurable production targets or performance targets? 16.15 24.94 23.02 20.10 15.02 0.22 0.54 automatic speed of a machine or movement of a product? 7.19 9.97 9.20 15.07 57.89 0.29 0.39 direct control of superiors? 3.79 9.55 25.80 35.78 24.70 0.29 0.09 weighted pct. unweighted n=1121. filter: a1=” yes”. 39 c. organization c1.-c5. compared to your main job in 2016, does your current main job more or less often involve? more often less often unchanged refuse don’t know solving unforeseen problems on your own? 30.84 5.33 63.43 0.29 0.10 complex tasks? 28.23 7.76 63.63 0.29 0.10 short, routine and repeated tasks of less than 10 minutes? 11.43 19.22 68.63 0.36 0.36 that you are able to choose or change your methods of work? 22.53 9.51 67.48 0.36 0.11 that you have the option to change your speed of work? 21.91 10.87 66.82 0.36 0.04 weighted pct. unweighted n=1031. filter: a1=” yes” and a5=” yes”. 40 d. job satisfaction d1. on the whole, how satisfied are you with the working conditions in your main paid job? very satisfied satisfied not very satisfied not at all satisfied refuse don’t know 42.19 46.30 9.63 1.43 0.36 0.09 weighted pct. unweighted n=1121. filter: a1=” yes”. d2.-d4. how much do you agree or disagree with the following statements describing some aspects of your main job? strongl y agree agree neither/nor agree disagree strongl y disagree refuse don’t know i might lose my job in the next 6 months 2.24 4.61 10.47 24.84 56.72 0.42 0.67 considering all my efforts and results in my job i feel that i am paid justly 8.22 39.82 20.96 22.83 8.07 0.43 0.11 my job offers good prospects for career advancement 8.95 36.51 30.15 16.49 7.06 0.43 0.41 weighted pct. unweighted n=1121. filter: a1=” yes”. 41 e. social interaction the following questions concern interaction with colleagues and others in the job. e1-e4. in your main job how often do you usually… every day at least once a week 1-3 times a month less than once a month never refuse don’t know … advice, instruct, train or teach people individually or in groups? 23.50 22.67 17.20 25.50 10.32 0.43 0.38 … sell a product or sell a service? 20.91 6.09 5.01 8.62 58.78 0.36 0.23 … negotiate contracts or terms more generally with people inside or outside your firm or organisation? 4.72 5.01 8.80 18.86 62.19 0.41 0.00 … share work related information with people inside or outside your firm or organisation? 35.94 20.97 12.77 11.27 18.01 0.41 0.63 weighted pct. unweighted n=1121. filter: a1=” yes”. e1a-e4a. compared to your main job in 2016 does your current main job entail that you more or less often… more often less often unchanged refuse don’t know … advice, instruct, train or teach people individually or in groups? 24.21 11.11 63.82 0.36 0.50 … sell a product or sell a service? 8.73 8.10 82.63 0.36 0.18 … negotiate contracts or terms more generally 8.55 6.38 84.32 0.41 0.34 42 with people inside or outside your firm or organisation? … share work related information with people inside or outside your firm or organisation? 15.17 4.82 79.07 0.41 0.53 weighted pct. unweighted n=1031. filter: a1=” yes” and a5=” yes”. e1b-e4b. how have you primarily acquired the skills to… by formal training such as classroom and online courses training by peers at work such as experienced colleagues and supervisors own learning-by-doing, possibly using teaching materials such as books, videos etc. refuse don’t know … advice, instruct, train or teach people individually or in groups? 22.88 30.24 46.86 0.02 … sell a product or sell a service? 19.59 33.00 46.51 0.44 0.46 … negotiate with people inside or outside your firm or organisation? 18.91 31.58 49.51 … share work related information with people inside or outside your firm or organisation? 17.71 31.34 50.17 0.78 weighted pct. unweighted n: [e3b, e4b, e1b, e2b] = [740, 323, 217, 782]. filter: [e3, e4, e1, e2] =” every day”, “at least once a month” or “1-3 times a month”. e1c-e4c. to what extent do you feel that you have the skills to perform this activity at the level required in the main job? 43 to a high extent to some extent to a lesser extent not at all don’t know … advice, instruct, train or teach people individually or in groups? 65.70 32.91 1.17 0.22 … sell a product or sell a service? 65.96 28.29 5.39 0.36 … negotiate with people inside or outside your firm or organisation? 56.28 39.99 2.77 0.97 … share work related information with people inside or outside your firm or organisation? 63.80 30.30 4.49 0.97 0.43 weighted pct. unweighted n: [e3c, e4c, e1c, e2c] = [740, 323, 217, 782]. filter: [e3, e4, e1, e2] =” every day”, “at least once a month” or “1-3 times a month”. 44 f. robots the following questions concern the use of robots in your job. a robot is a programmable and movable machine, which performs tasks in manufacturing or services. robots can be stationary using an arm for example doing welding, assembling or packing, or they can be mobile robots for example doing cleaning, maintenance or warehouse work. f1-f2. in your main job how often do you usually… every day at least once a week 1-3 times a month less than once a month never refuse don’t know …deliver inputs or receive output such as raw materials, final goods or semimanufactures to or from a robot? 4.62 2.13 1.18 3.08 88.06 0.48 0.45 … start, monitor and stop a robot to accomplish a specific task? 3.62 1.43 1.79 3.06 89.51 0.48 0.10 weighted pct. unweighted n=1121. filter: a1=” yes”. f1a-f2a. compared to your main job in 2016, does your current main job entail that you more or less often… more often less often unchanged refuse don’t know …deliver inputs or receive output such as raw materials, final goods or semimanufactures to or from a robot? 3.46 2.07 93.31 0.41 0.74 … start, monitor and stop a robot to accomplish a specific task? 3.41 2.51 93.26 0.54 0.28 weighted pct. unweighted n=1031. filter: a1=” yes” and a5=” yes”. f1b-f2b. how have you primarily acquired the skills to… 45 by formal training such as classroom and online courses training by peers at work such as experienced colleagues and supervisors own learningby-doing, possibly using teaching materials such as books, videos etc. refuse …deliver inputs or receive output such as raw materials, final goods or semi-manufactures to or from a robot? 14.56 66.99 18.45 … start, monitor and stop a robot to accomplish a specific task? 5.38 83.02 9.90 1.70 weighted pct. unweighted n= [f1b, f2b] = [93, 77]. filter: [f1, f2] =” every day”, “at least once a month” or “13 times a month”. f1c-f2c. to what extent do you feel that you have the skills to perform this activity at the level required in the main job? to a high extent to some extent to a lesser extent not at all refuse …deliver inputs or receive output such as raw materials, final goods or semi-manufactures to or from a robot? 48.11 40.79 7.60 3.49 … start, monitor and stop a robot to accomplish a specific task? 59.45 34.89 3.95 1.70 weighted pct. unweighted n= [f1c, f2c] = [93, 77]. filter: [f1, f2] =” every day”, “at least once a month” or “13 times a month”. 46 g. advanced technologies the following questions focus on the use of advanced technologies such as artificial intelligence, machine learning and internet connected sensors in your job. such systems are programmed in so-called algorithms and they can be taught and learn continuously by feeding data and information in the form of observations and signals from sensors. the tasks performed by the systems include analysis and recognition of patterns in pictures, sound or text, and they are often able to improve their learning over time in an independent fashion. g1-g3. in your main job how often do you usually… every day at least once a week 1-3 times a month less than once a month never refuse don’t know … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? 12.56 5.44 4.54 8.42 68.16 0.59 0.29 … receive orders or directions generated automatically by a computer or by computerized machinery? 7.90 3.24 2.82 7.26 77.59 0.59 0.60 … use a computer or computerized machinery that has the ability to automatically learn and improve from experience? 9.15 2.87 2.33 6.11 78.25 0.59 0.69 weighted pct. unweighted n= 1121. filter: a1=” yes”. g1a-g3a. compared to your main job in 2016 does your current main job entail that you more or less often … more often less often unchanged refuse don’t know … make use of information compiled automatically for 10.24 2.56 86.21 0.54 0.44 47 you by a computer or by computerized machinery for making decisions or for advising clients or customers? … receive orders or directions generated automatically by a computer or by computerized machinery? 6.77 2.05 89.57 0.54 1.06 … use a computer or computerized machinery that has the ability to automatically learn and improve from experience? 6.76 2.43 89.04 0.54 1.23 weighted pct. unweighted n=1031. filter: a1=” yes” and a5=” yes”. g1b-g3b. how have you primarily acquired the skills to… by formal training such as classroom and online courses training by peers at work such as experienced colleagues and supervisors own learning-by-doing, possibly using teaching materials such as books, videos etc. refuse don’t know … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? 25.36 44.71 29.93 … receive orders or directions generated automatically by a computer 24.98 49.37 25.11 0.54 48 or by computerized machinery? … use a computer or computerized machinery that has the ability to automatically learn and improve from experience? 24.52 32.72 41.03 0.48 1.25 weighted pct. unweighted n= [g1b, g2b, g3b] = [265, 164, 171]. filter: [g1, g2, g3] =” every day”, “at least once a month” or “1-3 times a month”. g1c-g3c. to what extent do you feel that you have the skills to perform this activity at the level required in the main job? to a high extent to some extent to a lesser extent not at all refuse don’t know … make use of information compiled automatically for you by a computer or by computerized machinery for making decisions or for advising clients or customers? 55.29 38.24 5.61 0.85 … receive orders or directions generated automatically by a computer or by computerized machinery? 58.92 31.20 5.42 4.16 0.30 … use a computer or computerized machinery that has the ability to automatically learn 46.03 44.67 5.60 2.47 0.48 0.75 49 and improve from experience? weighted pct. unweighted n= [g1c, g2c, g3c] = [265, 164, 171]. filter: [g1, g2, g3] =” every day”, “at least once a month” or “1-3 times a month”. 50 h. job seekers h1-h4. in the following there is a list of statements. please indicate to which degree you agree with each statement. strongly agree agree neither/nor agree disagree strongly disagree refuse don’t know my skills are obsolete compared to the jobs being offered. 0.29 9.27 21.50 29.42 32.78 6.74 i receive the necessary continuing education such that i can fill the jobs being offered. 7.22 25.29 7.38 6.94 46.52 6.65 my union helps me acquire the skills required for me to find employment again. 5.85 13.26 7.18 10.23 52.06 11.43 government assistance helps me acquire the skills necessary for me to find employment again. 7.96 13.09 10.93 9.80 47.33 10.88 weighted pct. unweighted n=115. filter: a1=” no”. 51 j. ending j1. in which municipality do you have your official address? copenhagen 13.82 copenhagen environs 10.12 north zealand 8.15 bornholm 0.85 east zealand 3.41 west and south zealand 10.20 funen 8.07 south jutland 12.26 east jutland 17.10 west jutland 6.03 north jutland 9.98 weighted pct. unweighted n= 1213. missing=31. yes, doing it now yes, but not doing it anymore no refuse don’t know j2. have you ever established and managed your own business, either alone or together with others? 5.37 11.03 82.50 0.80 0.29 weighted pct. unweighted n= 1244. j3. if there were a general election tomorrow, which political party would you most likely vote for? socialdemokratiet 17.99 dansk folkeparti 6.41 venstre 13.14 enhedslisten 4.32 52 liberal alliance 3.15 alternativet 2.27 radikale venstre 6.71 socialistisk folkeparti 4.79 det konservative parti 3.44 kristendemokraterne 0.69 nye borgerlige 1.15 other political party 1.21 don’t know 29.13 i would not vote 1.97 i cannot vote 1.83 refuse 1.79 weighted pct. unweighted n= 1244. 53 appendix 2 methods an introduction to the technology and skills (task) survey is given in box 1 in the main text and further details are elaborated in this appendix. the survey was primarily funded by the aalborg university social science talent programme for younger researchers and additional funding was obtained through the redy project, which was funded by the obel family foundation. the task questionnaire was developed over 2018 with inspiration from eurofound’s european working conditions survey (ewcs) and oecd’s programme for the international assessment of adult competences (piaac) survey to ensure comparability. the questionnaire for the task survey was developed in late 2018 in collaboration with statistics denmark (dst), who also ran a pilot survey to test the questionnaire. the questionnaire was developed with inspiration from eurofound’s european working conditions survey (ewcs) and oecd’s programme for the international assessment of adult competences (piaac) survey to ensure comparability. the unique questions on the use of new technologies (blocks f and g) where developed specifically for task. dst then collected the data in the spring of 2019 through a web-based survey distributed through the public e-mail system ‘eboks’, and telephone interviews. the sample was created from dst’s registries in late 2018 as described below. population the relevant population consists of 2,076,617 observations. each observation is a person with an employment relation to a workplace as described in the following. the starting point for constructing the population is dst’s register of employment relations in denmark in november 2018. for each person, the employment relation with the most working hours or latest end date was chosen. observations in the bottom decile for hours worked or wage income in november 2018 are excluded. this means people working less than 17.09 hours or earning less than 2727 dkk (approximately 365 euros). the result was 2,651,297 observations, which were then merged with dst’s registry for businesses in the third quarter of 2018 by workplace. observations that could not be merged were excluded. observations connected to workplaces with less than 5 full time equivalent employees on average over the previous four quarters, and observations connected to workplaces in industry “o public administration and defence” were also removed. finally, the dataset is limited to individuals in the population of denmark on 31 december 2018 who are at least 18 years old on 1 march 2019. this results in the final population of 2,076,617 observations of employees. the sample the gross sample consists of 3162 randomly selected observations from the population. 54 the population was divided into ten strata by the address and size of the workplace. the ten strata are defined by the five administrative regions of denmark and two size groups: 5-49 fulltime equivalent employees and 50+ fulltime equivalent employees. 2/3 of the sample are drawn from the five strata for workplaces of 50+ employees. the sample is proportional to the population across the regions. 45 individuals were not contacted because of protected address, unknown address, death or emigration. the remaining 3117 observations is the net sample. dataset and post stratification weights 1244 individuals responded to the survey, which means that the response rate is 39.9 percent. 65.4 percent of the responses were obtained through the web-based questionnaire while the remaining 34.6 percent were obtained through telephone interviews. dst supplies post stratification weights based on gender (two categories), age (three categories), wage (two categories) and education (three categories) by each of the ten strata, allowing statistics constructed from task to be representative for the population. frontpage the effect of self-efficacy on learning innovation among food vendors 2019 text the effect of self-efficacy on learning innovation among food vendors 2019 62 journal of business models (2020), vol. 8, no. 3, pp. 62-90 sustainable value creation through business models: the what, the who and the how florian lüdeke-freund1, romana rauter2, esben rahbek gjerdrum pedersen3, and christian nielsen4 abstract purpose: we discuss traditional assumptions about value creation and confront these with current views on sustainable value creation (svc). against this backdrop, the articles contained in the special issue ‘sustainable value creation through business models’ are introduced, and their contributions to the exploration of svc are highlighted. methodology: assumptions about value creation are summarised and turned into an initial theoretical framework concerning the what, who and how of value creation. this framework is used to structure and discuss current views on svc that have been presented in the sustainable business model (sbm) literature. findings: the proposed framework identifies cornerstones for theorising about svc in regard to the what, who and how of value creation. a main finding is that, although value creation and svc are widely discussed in the literature, there are huge gaps in terms of the who, what and how of value creation, particularly in the sbm field. research implications and limitations: the major implication is that the sbm discourse still lacks clear svc concepts, and closing this gap may enable the creation of a new multiand interdisciplinary research programme. a major limitation of this paper is the mainly theoretical and preliminary nature of the presented discussion and framework. originality and value: there is a surprising dearth of definitions and concepts of value creation in both the traditional business model and sbm research. the originality and value of this paper lie in its potential to stimulate further research on the theoretical foundations of svc. various theoretical propositions are developed, including notions such as stakeholder-responsive and relational interpretations of value creation. keywords: sustainable value creation, business model, sustainability, stakeholder, triple bottom line, framework acknowledgements: our guest editorial team is deeply thankful to all the authors who submitted and contributed to our special issue, thereby entrusting us with their work, and the many reviewers who helped our authors and the journal of business models to publish rigorous, relevant and timely research papers. we also thank the editor-in-chief, robin roslender, for his constructive feedback on this guest editorial. special issue reviewers: deborah andrews, henning breuer, niels faber, tobias froese, sönnich dahl sönnichsen, martin geissdoerfer, stefanie hatzl, moritz loock, janaina macke, lorenzo massa, laura michelini, josua oll, salvatore ruggiero, josef-peter schoeggl, marcello tonelli, mats williander please cite this paper as: f. lüdeke-freund, r. rauter, e. pedersen, and c. nielsen, (2020), sustainable value creation through business models: the what, the who and the how, journal of business models, vol. 8, no. 3, pp. 62-90 1 escp business school berlin, fluedeke-freund@escp.eu 2 university of graz, romana.rauter@uni-graz.at 3 copenhagen business school, ergp.msc@cbs.dk 4 aalborg university business school, chn@business.aau.dk mailto:fluedeke-freund@escp.eu mailto:romana.rauter@uni-graz.at mailto:ergp.msc@cbs.dk mailto:chn@business.aau.dk journal of business models (2020), vol. 8, no. 3, pp. 62-90 6363 introduction the discussion presented in this paper, which also serves as a guest editorial for the special issue ‘sustainable value creation through business models’ (journal of business models, 2019, vol. 7, no. 1), was motivated by an observation that has kept us wondering for quite some time. the whole business model discourse, including both its traditional and sustainability-oriented streams, receives its legitimacy and urgency from its focus on value, which is proposed, delivered, created and captured through business models (massa, tucci and afuah, 2017; richardson, 2008; stubbs and cocklin, 2008; upward and jones, 2016; zott, amit and massa, 2011). the notion of value creation is fascinating as it implies the emergence (or creation) of something valuable that did not exist previously. but surprisingly, although it is a key concept in business model research, the notion of value creation remains a black box in most publications issued in the past two decades. it is remarkable that a whole field of research gains its legitimacy from the need to better understand how firms create value, but it neither offers nor uses clear definitions and explanations of this concept. at best, value creation is articulated as the ‘value chain’ part of a company, or the difference between revenues and costs. the same applies to the notion of sustainable value creation (svc), which is increasingly used and discussed in the literature, but hardly defined and explained. extensions of the concept of value creation to include sustainability considerations have been discussed in various fields, including corporate sustainability, sustainable and social entrepreneurship and marketing. however, this idea is of particular importance to sustainable business model (sbm) research (dentchev, rauter, jóhannsdóttir, snihur, rosano, baumgartner, nyberg, tang, van hoof and jonker, 2018; lüdeke-freund and dembek, 2017), as svc is its major reference point and the core of its identity. despite the obvious interest in and increasing use of the notion of svc, its definitions and theoretical foundations are still weak, possibly because of the variety of theories and concepts underlying discussions and explorations of sbms in general and svc in particular (e.g. dentchev et al., 2018; stubbs and cocklin, 2008). we are not saying that a single theory or concept – or some other form of monism – is what is needed, but we argue that starting to open up the black box of svc is crucial for stimulating progress in sbm research. value creation is an inherently normative concept. even though many scholars may think that they are working on ‘values-free’ or ‘neutral’ grounds, they are not and cannot. however, this is not problematic per se. the issue is whether ‘the normative’ is made transparent and accessible to criticism and systematic investigation (cf. albert, 1985). assumptions, such as that companies must make superior profits or that the economy must grow quantitatively, are neither neutral nor laws of nature. these assumptions reflect man-made properties of social systems that can be critically debated and designed, either in this way or another (cf. mazzucato, 2018). of course, the same holds true for svc. the assumption that companies should consider stakeholders and the natural environment in their value-creating activities is grounded in certain normative positions, such as prioritising a just distribution of benefits (howsoever this is defined) or giving a voice to nature. such assumptions can and should be critically debated, which requires making them transparent. we therefore start by briefly acknowledging the inherently normative characteristics of value creation. this has two purposes: first, to clarify that not only sustainability-related concepts are grounded in certain norms, values and judgements; and second, to show that moving from traditional assumptions about value creation to svc can be guided, for example, by ‘triple bottom line’ and stakeholder theory approaches. to address the research gaps and opportunities that exist in this area, we develop an initial theoretical framework for the what, who and how of sustainable value creation that enables us to propose cornerstones for future theorising about this concept. the articles contained in the special issue are introduced and their contributions to the exploration of svc are highlighted against the backdrop of the proposed theoretical framework. this paper concludes with a brief summary of the theoretical propositions presented in this paper and suggestions for future research. journal of business models (2020), vol. 8, no. 3, pp. 62-90 6464 value creation as a normative concept from a traditional strategic management perspective, customers’ willingness to pay decides whether the value proposed by a company, which is embedded in the products and services it offers, materialises as benefits for customers and monetary earnings for the company (bowman and ambrosini, 2000; garcia-castro and aguilera, 2015). however, this commercial logic of value exchange (customer benefits in exchange for monetary payments), which forms the underlying rationale of the strategy and business model literature (laasch, 2018; teece, 2010), is reducing the concept of value creation, typically, to value for customers and the company. the field of sbm research (e.g. dentchev et al., 2018; lüdeke-freund and dembek, 2017), which is the context of the special issue, tries to extend this traditional understanding of value and how it is created. scholars from this field call for business models and business model innovation that incorporate sustainability principles (e.g. efficiency, consistency and sufficiency) (geissdoerfer, vladimirova and evans, 2018; lüdeke-freund, schaltegger and dembek, 2019), sustainability concepts (e.g. social responsibility, stakeholder inclusiveness and systems thinking) (breuer, fichter, lüdeke-freund and tiemann, 2018; schaltegger, lüdeke-freund and hansen, 2012, 2016) and broader notions of value creation that consider the needs and interests of various stakeholders (bocken, short, rana and evans, 2013). more recent works also highlight the different roles that these stakeholders can play. there can be important differences between value creation with stakeholders (e.g. making employees work for a company and contribute to its value creation processes) and value creation for stakeholders (e.g. considering and satisfying the needs of these employees) (e.g. freudenreich, lüdeke-freund and schaltegger, 2020). one result of this normative call for sbms is the extension of the financial bottom line of business towards ecological and social bottom lines (e.g. boons and lüdeke-freund, 2013; breuer et al., 2018; stubbs and cocklin, 2008; upward and jones, 2016). generally speaking, it also results in the requirement of mutual value creation with and for all stakeholders of a company (freeman, 2010; freudenreich et al., 2020). while some authors offer examples of such forms of value creation (e.g. den ouden, 2012; evans, vladimirova, holgado, van fossen, yang, silva and barlow, 2017; lepak, smith and taylor, 2007; upward and jones, 2016) and corresponding business model designs and patterns (lüdeke-freund, carroux, joyce, massa and breuer, 2018), our understanding of svc is still very limited. typical definitions of this idea refer to ‘a promise on the economic, environmental and social benefits that a firm’s offering delivers’ (patala, jalkala, keränen, väisänen, tuominen and soukka, 2016, p. 144), ‘economic, social and environmental benefits conceptualized as value forms’ (evans et al., 2017, p. 601) or ‘stakeholder value creation’ (freudenreich et al., 2020, p. 3). the notion of the triple bottom line, which considers the planet, people and profit (elkington, 1997), is one of the most common foundations of current svc definitions in the sbm field (e.g. evans et al., 2017; stubbs and cocklin, 2008). however, sustainable value creation, as dealt with in the sbm field, remains as unclear as the notion of value creation in traditional business model research. all these definitions, including traditional utilitarian ones, are difficile as they are inherently – but often not explicitly or even knowingly – normative (cf. hahn, figge, pinkse and preuss, 2018; santos, 2012). this is not problematic per se; values, norms and subjectivity are always elements of scientific, economic and other social processes. however, we must be aware of what normative and value-laden notions, such as ‘sustainable’ or ‘stakeholder-inclusive’, do to the theories and concepts we use, and vice versa. acknowledging this idea leads to a series of questions, such as the following: how can we define ecological and social value, and how can we distinguish these concepts from economic value? how can we define which form of value creation is desired and which is not, both currently and in the future? does any form of economic value creation inherently lead to social benefits, as some authors argue? if so, why distinguish between economic and social value creation, and later argue that it has to be (re-)integrated? journal of business models (2020), vol. 8, no. 3, pp. 62-90 6565 the situation becomes even more complex when one claims that nature is a stakeholder. which kinds of value does nature ‘prefer’: relative improvements in resource use and toxic waste or the absolute avoidance of both? how can business model designers make sure that their organisations save trees from being cut and animals from becoming extinct while contributing to gross domestic product and promoting social wellbeing? how can we account for all these forms of value creation? even if we were able to associate all this with certain business model designs and had access to all the key performance indicators needed to measure and manage them (cf. montemari, chiucchi and nielsen, 2019; nielsen, lund, schaper, montemari, thomsen, sort, roslender, brøndum, byrge, delmar, simoni, paolone, massaro and dumay, 2018), how would we know which kind of value creation is more or less relevant for a certain stakeholder group in a certain geographical or cultural context? the list of theoretical and practical problems goes on and on. towards the what, who and how of sustainable value creation we have to face it: so far, we have failed to properly define svc. it is clear that the complex, ambiguous and elusive nature of value creation becomes even trickier by adding the call for business contributions to sustainable development. in its current form, the discourse on sbms and svc is clearly facing the socalled münchhausen trilemma (cf. albert, 1985). many definitions build on circular arguments (defining svc by referring to something done ‘in a sustainable way ’), infinite regress (as the theoretical propositions underlying svc require further supportive propositions, which require further supportive propositions, and so on) and dogmatism (when svc is posited as a self-evident and ultimate necessity). the third aspect highlights the thin line between embracing the normativity of social issues in a constructive and systematic way on the one hand and simply declaring how things ought to be on the other hand. therefore, the aim of the special issue was to invite authors from various disciplines to improve our understanding of svc and what it could mean in the context of business model research (dentchev et al., 2018; lüdeke-freund, freudenreich, schaltegger, saviuc and stock, 2017, nielsen, montemari, paolone, massaro, dumay and lund, 2019; roslender and nielsen, 2019) to contribute to several goals. first, to closely look at theories, concepts and cases that apply comprehensive notions of value creation to better understand what svc entails (cf. freeman, 2010; freudenreich et al., 2020). second, to consider various forms of value (e.g. economic, ecological, social, cultural, relational, psychological), their underlying subjective and normative values (breuer and lüdeke-freund, 2017) and who might benefit from these forms of value. third, to explicitly connect comprehensive notions of value creation to business models and business model innovation in order to explore how svc functions from methodical, instrumental and practical points of view (cf. buser and carlsson, 2020; foss and saebi, 2017; massa et al., 2017; wirtz, göttel and daiser, 2016). a major finding of the special issue is that our field has only just started to open the black box regarding the what, who and how of svc. in addition, many new questions have emerged as a result of the research presented here. we therefore extended the scope of this guest editorial to contextualise the articles contained in the special issue and offer a more structured view of svc guided by the following questions: • what is value and what are its sources? • for whom is value created? • how is value created? • who captures value? traditional assumptions about value creation value creation is typically associated with how companies create and offer products and services for which customers are willing to pay and how they try to capture a share of the total value that is created in the corresponding economic exchange processes (e.g. bowman and ambrosini, 2000; freudenreich et al., 2020; garcia-castro and aguilera, 2015). from the inception of business model research, certain streams of the literature have been concerned with how firms can increase customer satisfaction, develop a competitive advantage and achieve above-normal returns within changing business environments that journal of business models (2020), vol. 8, no. 3, pp. 62-90 6666 are characterised by, for example, the emergence of e-business and hyper competition (e.g. amit and zott, 2001; zott and amit, 2007). a major issue is how companies can maintain and improve their ability to create and capture value through business models (foss and saebi, 2017; massa et al., 2017; wirtz et al., 2016). as these streams of business model research address core topics and concerns of classic strategic management studies, it seems appropriate to use one of the most-cited strategic management articles to introduce the notion of value creation (bowman and ambrosini, 2000). what is value and what are its sources? the main forms of value are typically defined as value for customers (i.e. use value and customer surplus) and value for the company (i.e. exchange value and financial profit). if other stakeholders are considered, they are typically employees, who are paid wages, and capital providers and shareholders, who receive interest and dividend payments. to understand the sources of these forms of value, starting from the basic assumptions of resource-based theory, bowman and ambrosini (2000, p. 2; orig. emphasis) posit that ‘resources have value in relation to their ability, inter alia, to meet customers’ needs’. a resource that is valuable, rare, inimitable and organised (vrio) allows a company to meet customer needs better or at a lower cost than its competitors, and it helps the company to exploit market opportunities and/or neutralise threats in its business environment (barney, 1991). as a result, applying vrio resources and corresponding capabilities (teece, 2018) allows companies to offer valuable products and services and improve their market positions. hence, resources and capabilities are traditionally seen as the sources of value. for whom is value created? typically, two stakeholders are considered. first, customers are interested in obtaining use value, which is the usefulness of products and services offered by companies. bowman and ambrosini (2000) argue that use value is a subjective notion and thus can be referred to as perceived use value. the perceived usefulness of an offering is based on, for example, customers’ beliefs about the offering, their unique experiences and expectations and their personal needs and wants. perceived use value can be translated into monetary value by evaluating the price customers are prepared to pay (which is based on, e.g., their willingness to pay, their economic circumstances, awareness of competing offerings). the difference between the monetary value and the actual price to be paid leads to customer surplus (‘value-for-money ’), assuming that the actual price is lower than the monetary value assigned by customers.1 second, the company offering products and services is mainly interested in exchange value, which is the actual price paid by the customer to obtain the perceived use value (‘money-for-value’). these or comparable definitions of value creation for customers and companies are typical of strategic management and business model studies (e.g. garcia-castro and aguilera, 2015). how is value created? value creation is defined as the provision of new use value resulting from the application of organisational resources and capabilities. the provision of new use value – and corresponding perceived use value – is a precondition of new or additional monetary value from the customer perspective as well as new or additional exchange value for the company (cf. bowman and ambrosini, 2000; mazzucato, 2018). the exchange value resulting from the new use value can only be determined at the time of sale, when the new use value is actually appreciated by a customer and a certain price is paid. this is because ‘we cannot assert that, in the process of new use value creation, “value” has [actually] been added. different use value has been created which may or may not yield added exchange value’ (bowman and ambrosini, 2000, p. 5; orig. emphasis changed). a company achieves financial profit if the exchange value, or price, exceeds the costs of, for example, resources, wages and opportunity costs. profit can only be attributed to the labour performed by organisational members (‘human capital resources’, according to barney, 1991), as their activities are the ‘only input into the production process that has the capacity to create new use values, which are the source of the realized exchange value’ and, hence, profit (bowman and ambrosini, 2000, p. 5). from a 1 this conception of perceived use value, monetary value and consumer surplus holds true not only for private customers (b2c) but also for firms’ purchasing decisions, in which managers assess various offers on behalf of their organisation (b2b). journal of business models (2020), vol. 8, no. 3, pp. 62-90 6767 traditional strategic management perspective, value creation refers to the provision of new use value to customers, which is a precondition for companies to yield a financial profit from exchange value. resources, including certain types of labour, are required to create value for customers and companies. who captures value? for a company, value capture involves obtaining exchange value (and thus profit) by realising a price (and thus revenue) at the moment of selling. the ability to capture value by appropriating a share of the total value created (the latter approximated by customers’ willingness to pay) is determined by the perceived power relationships between actors on the market (bowman and ambrosini, 2000). of major importance are the relationships between the company and its customers (who has the power to determine the price of the product or service?) and resource suppliers (who has the power to determine the costs of resources, including labour and financial capital?). finally, due to the limited bargaining power of employees, a company can capture value by employing labour (ibid.). typically, labour suppliers are paid a fixed amount for their labour power, without a specified number of outputs (although models with a specified number of outputs have always existed and might spread in the future due to the rapid growth of the ‘gig economy ’). this creates an opportunity for firms to benefit from employees’ variable contributions to the creation of new use value. variable in the sense that the amount of outputs can vary, e.g. increase, while the labour costs remain constant. hence, due to increasing labour productivity, the value of labour suppliers’ contributions may exceed the share of the exchange value they capture in the form of wages. however, the bargaining power of labour suppliers typically depends not (only) on their productivity, but on their ability to help a company achieve superior profits relative to competing firms. as a consequence, different types of labour suppliers have different possibilities to capture value (bowman and ambrosini, 2000). in summary, value capture has different meanings for different stakeholders (freudenreich et al., 2020). traditionally, for customers, it means realising new use value and customer surplus; for the company, it means obtaining exchange value and financial profit; for labour suppliers, it means being paid wages; and for capital suppliers and shareholders, it means receiving interest and dividend payments based on a share of the exchange value created by the company. this overview of traditional assumptions about value creation shows that, first, value creation is a complex and non-trivial phenomenon, and second, both value creation and svc require conceptual clarity. where do we stand in this endeavour? the following section gives a brief overview of some of the developments in the sbm field that have aimed to extend our understanding of value creation. figure 1: traditional assumptions about value creation. what is value and what are its sources? • value is defined as the surplus realised from a particular actor’s point of view. • for customers and companies, typically, customer surplus and financial profits. • value results from the use of resources and capabilities. for whom is value created? • customers: new use value leads to customer surplus (value-for-money). • companies: exchange value leads to financial profits (money-for-value). • employees: wages. • capital suppliers and shareholders: interest and dividend payments. how is value created? • a value proposition to customers is perceived as offering new use value. • if the price is lower than customers’ willingness to pay, customer surplus is realised. • in the moment of exchange a company realises exchange value through the price paid. • if the total costs are less than the exchange value, financial profits are realised. who captures value? • typically, a company and its customers are considered to capture value. • the share of value capture depends on power relationships, which are often asymmetric. • important power relationships are considered between the focal company, its customers, suppliers and employees. traditional assumptions about value creation (illustrated from a strategic management perspective) journal of business models (2020), vol. 8, no. 3, pp. 62-90 6868 extended assumptions about value creation: triple bottom line and stakeholder theory perspectives although traditional business model research sometimes refers to value creation for various stakeholders (e.g. zott and amit, 2010), this notion is mostly limited to the value created for customers, business partners (such as suppliers) or investors. the aforementioned distinction of value creation with and value creation for stakeholders is also typically ignored. these limitations lead to correspondingly limited perspectives on business models and business model innovation, which are insufficient to deal with pressing sustainability issues (in particular, see the critique presented in upward and jones, 2016). following stubbs and cocklin’s (2008) seminal article on their ‘sustainability business model ideal type’, the new field of sbm studies started to develop alternative approaches to framing business models and value creation. researchers have used certain propositions to distinguish their research questions, theoretical approaches, ontologies and epistemologies from those of traditional business model studies (lüdeke-freund and dembek, 2017, p. 1670): ‘these features are (i) an explicit sustainability orientation, integrating ecological, social and economic concerns, (ii) an extended notion of value creation, questioning traditional definitions of value and success, (iii) an extended notion of value capture in terms of those for whom value is created, (iv) an explicit emphasis on the need to consider stakeholders and not just customers, and (v) an extended perspective on the wider system in which an sbm is embedded’. different approaches to defining svc can be found in the sbm literature. first, some approaches build on the triple bottom line (tbl) or comparable concepts based on the argument that svc requires contributions to all dimensions of sustainable development (typically, ecological, social and economic value). second, some approaches have been framed by stakeholder theory, arguing that mutual value creation with and for stakeholders (i.e. considering and integrating all stakeholders’ needs and interests) is a precondition for svc. third, some approaches merge both arguments, both explicitly and implicitly. an emphasis on svc resonates well with previous attempts to move beyond traditional assumptions about value creation and identify common features of the sustainability, stakeholder theory and business model literature (cf. wheeler, colbert and freeman, 2003). a central underpinning of the sbm field is a more holistic understanding of value that goes beyond customers, companies and their owners and includes a broader range of stakeholders and tbl performance (bocken, rana and short, 2015; boons and lüdeke-freund, 2013; pedersen, gwozdz and hvass, 2018). indeed, schwartz and carroll (2008) explicitly highlight value as a core concept (along with balance and accountability) that ties together business and society in fields such as corporate social responsibility, business ethics, stakeholder management, sustainability and corporate citizenship. more specifically, the authors argue that ‘the fundamental element underlying the entire business and society field appears to be the generation of value. value is primarily created when business meets society ’s needs by producing goods and services in an efficient manner while avoiding unnecessary negative externalities’ (schwartz and carroll, 2008, p. 168). below, we briefly discuss the tbl and the stakeholder theory perspectives as these are, according to our reading of the literature, the most developed and prominent approaches in the sbm field. the aim is to offer a first, although admittedly very rough, overview of the existing views on svc within the sbm field. some authors argue for deliberate consideration of all stakeholders’ needs and interests – often presenting non-exclusive lists of stakeholders that include, for example, customers, employees, investors, the natural environment (typically represented by other stakeholders), society, non-governmental organisations and so on (e.g. bocken et al., 2013; evans et al., 2017; upward and jones, 2016) (see table 3) – and the resultant need to consider and integrate diverse forms of value creation and dimensions of journal of business models (2020), vol. 8, no. 3, pp. 62-90 6969 performance (freudenreich et al., 2020; tapaninaho and kujala, 2019). here, the reference to stakeholders serves as a frame for identifying who should be considered in the context of value creation, both as beneficiary (value creation for stakeholders) and contributor (value creation with stakeholders). the more stakeholder-sensitive this notion, the more types of value – and their tensions and trade-offs – must be considered. as a consequence, the whole concept of ‘business success’ fundamentally changes (upward and jones, 2016). the tbl perspective is based on consideration of different types of value and what is to be achieved (elkington, 1997), specifically the ecological, social and economic performance of companies. sustainable development (wced, 1987) underpins the tbl approach, extending accounting systems to cover non-financial dimensions as well (lamberton, 2005). while no singular theory serves as the backbone of sustainable development (and hence the tbl approach), the arguments for svc by companies are often rooted in theories concerning the social responsibility of businesses (cf. bansal and song, 2017; carroll and shabana, 2010; garriga and melé, 2004). related to these theories are strategic approaches, such as the natural-resource-based view of the firm (hart, 1995); approaches that combine considerations of social justice and inclusion with new business opportunities, such as the base of the pyramid (prahalad, 2005); or primarily instrumental approaches that reconcile corporate social and financial performance (cf. busch and friede, 2018). some authors, such as stubbs and cocklin (2008), suggest that alternative paradigms, such as ecological modernisation, underpin sbms and svc. this diversity of theories offers various opportunities to merge two or more arguments in favour of svc, as several authors have done (see table 1). it can be argued that, in the business context, the tbl and stakeholder theory perspectives present overarching views with different yet complementary foci. the tbl approach adds additional performance dimensions to traditional financial accounting and emphasises which types of value are created (the what), while the stakeholder theory approach focuses on for whom value is created (the who), which affects the ways in which value is created (the how). in the absence of an integrative and holistic theory of svc, bringing these propositions together in the form of multiple value creation (or tbl value creation) and value creation for stakeholders allows for further theorising about svc. a future theory of svc could embrace the tbl and stakeholder theories of value creation, but it might also go beyond these and merge them with further theoretical streams. this understanding of svc, which implies different types of value as well as varying roles and expectations for different stakeholders, distinguishes sbm from traditional business model studies (lüdeke-freund and dembek, 2017). in other words, from the point of view of sbm research, the notion of value creation is not limited to customer surplus or financial profits, but includes ecological, social and other types of nonfinancial value (cf. schaltegger et al., 2016; upward and jones, 2016). as stated above, we must consider that both the traditional and sustainability-oriented views are normatively grounded (e.g. agle and caldwell, 1999; breuer and lüdeke-freund, 2017). the most important difference between these views lies in their scope and the content of their normative underpinnings. while some may say that the sustainability and stakeholder-oriented view is normative and values-driven, the (implicit) decision to focus on certain stakeholders’ interests (e.g. customers, companies and investors) and not others’ (e.g. civil society, local communities, fringe stakeholders or organisations representing the natural environment) is always a normative decision. as upward and jones (2016, p. 101) state, ‘no designed artefact, such as a business model or an ontology of business models, is value-neutral’. even if an explicit normative positioning is missing from most of the traditional business model literature, this ‘can be read as implicitly profit-normative’ (ibid.) studying sbms and svc is one way to make the inherently normative characteristics of business activities explicit and transparent and to use them in a systematic and constructive way. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7070 table 1 sources (alphabetically) definitions, main assumptions and references to sustainable value creation (svc) literature streams/origins theoretical foundation/scope of value creation bocken et al., 2013 the scope of value creation results from the relationships, exchanges and interactions that take place among stakeholders (allee, 2011), which are represented by value flows within networks of stakeholders (den ouden, 2012). developing sustainable value propositions includes considering the value that is destroyed (negative outcomes), the value that is missed (currently non-captured value) and new value creation opportunities. sustainable business model innovation primarily stakeholderbased; the scope of value creation includes the value that is proposed, the value that is destroyed and missed and new value opportunities brennan and tennant, 2018, p. 622 ‘sustainable value is created when tangible factors of production (structural resources), including processes, business models, products, services and infrastructure, are brought into particular combinations with ideas of sustainability impact and sustainability values (cultural resources). sustainability cultural resources include important concepts such as net positive benefits and the creation of “common good” value (dyllick and muff, 2016) and sustainability values, which have recently been recognized as pivotal to sustainable business model innovation (bmi) (breuer and lüdeke‐freund, 2017)’ (orig. emphasis). network-centric business model innovation structural and cultural resources as origins of value; negotiating the strengths of different stakeholders and situational logics results in (un-) sustainable value dembek, york and singh, 2018 implicitly, svc is defined as value creation for multiple stakeholders and the natural environment, considering non-financial forms of value as well as the value that is destroyed and uncaptured (bocken et al. 2013; yang, evans, vladimirova and rana, 2017). business models at the base of the pyramid tbl and stakeholderbased; the scope of value creation includes the value that is destroyed and uncaptured table 1: exemplary definitions of sustainable value creation. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7171 sources (alphabetically) definitions, main assumptions and references to sustainable value creation (svc) literature streams/origins theoretical foundation/scope of value creation evans et al., 2017, p. 600 similar to bocken et al. (2013), evans et al. (2017) propose that the scope of value creation results from relationships, exchanges and interactions that take place among stakeholders (allee, 2015), which are represented by value flows within networks of stakeholders (den ouden, 2012). this leads to ‘a holistic view of sustainable value integrating economic, environmental and social value forms’ (see also figure 1, p. 600). sustainable business model innovation tbl and stakeholderbased; the scope of value creation results from value flows within stakeholder networks lüdeke-freund, 2020, pp. 668–669 business cases for sustainability are co‐constructed by diverse stakeholders, and thus they can take different forms (schaltegger, hörisch and freeman, 2019). this implies that value portfolios can consist of different kinds of value (e.g. dividends, customer solutions, employment, reduced environmental harm). additionally, ‘business cases for sustainability leading to value creation with and for stakeholders should be synonymous with sustainable value creation’ (orig. emphasis). sustainable entrepreneurship business models primarily stakeholderbased; the scope of value creation results from different types of business cases for sustainability upward and jones, 2016, pp. 105-106 upward and jones (2016) propose that value can be defined as ‘the perception by a human (or non-human) actor of a “fundamental need” (max-neef, elizalde and hopenhayn, 1991, p. 8) being met measured in aesthetic, psychological, physiological, utilitarian, and/or monetary terms’ (p. 105). svc should be measured as a ‘single tri-profit metric [that] would be calculated as the conceptual net sum of the costs (harms) and revenues (benefits) arising as a result of a firm’s activities in each of the environmental, social, and economic contexts in a given time period measured in units appropriate to each. a tri-profitable firm creates sufficient financial rewards, social benefits, and environmental regeneration, with sufficiency defined by stakeholders with the governance rights (power) to do so’ (p. 106). sustainable business model innovation tbl and stakeholderbased; the scope of value creation results from stakeholders’ fundamental needs and all harms and benefits of business activity table 1: exemplary definitions of sustainable value creation journal of business models (2020), vol. 8, no. 3, pp. 62-90 7272 sustainable value creation through business models: the what, the who and the how current research directions: articles in the special issue the primary goal of the special issue was to motivate novel approaches to define and study svc through business models, typically understood as the integration of ecological, social and economic value creation with and for stakeholders, as discussed above. such approaches take into account the negative impacts on ecological systems and human societies, and, as a logical consequence, the tensions and trade-offs between different forms of value creation and different stakeholders (cf. hahn, figge, pinkse and preuss, 2010, 2018). this, in turn, leads researchers to extend the notion of value creation to include forms of value destruction. ‘truly ’ sustainable value creation is not only about reducing or avoiding harm by overcoming value destruction but also about achieving net-positive effects for a prospering natural environment and human livelihoods (dyllick and muff, 2016). this is a perspective that we can label as strong sustainability or strongly sustainable value creation (upward and jones, 2016). last but not least, the challenge of surviving as a company (i.e. acknowledging the necessity of value capture at the level of organisations) would also be an element of svc through business models. as manifold research questions can be derived from these issues, we were open to any kind of theory, methodology or epistemology that could improve our understanding of svc through business models. the articles contained in the special issue offer valuable insights into defining svc more holistically through value proposition design (vladimirova, 2019), studying svc from a process and social practice perspective (boons and laasch, 2019), investigating the role of business models for sustainable technologies in dynamic business environments (wadin and ode, 2019) and motivating sustainable organisational transformation through circular business model innovation (guldmann, bocken and brezet, 2019). doroteya vladimirova (2019) presents a new tool and workshop facilitation process, the so-called sustainable value proposition builder, which has been developed and tested to support the development and communication of value propositions for multiple stakeholders. this tool builds on a definition of sustainable value that comprises ecological, social and economic forms of value and considers the positive and negative value perceptions of stakeholders. this paper contributes to the special issue by offering a more holistic view of how value propositions can be designed and communicated to multiple stakeholders. it points to possibilities of integrating various forms of value creation and various stakeholder needs and interests. frank boons and oliver laasch (2019) propose a new way of seeing business models. drawing upon theories of practice, an approach stemming from sociology, these authors develop a process-oriented conceptualisation of business models. in their theory, business models are assemblages of pre-existing social practices that are continuously perpetuated by inclusive processes of enrolment (e.g. by members of an organisation). furthermore, business models constantly compete (e.g. for resources), and thus all business models have relationships with other business models, whether symbiotic, competitive or parasitic. this paper contributes to the special issue by preparing a new theoretical ground on which svc can be studied and understood as an emergent process of social practices. jessica lagerstedt wadin and kajsa ahlgren ode (2019) provide detailed insights into how business models for sustainable (i.e. solar photovoltaic) technologies can adapt to their dynamic environments. the authors use a contingency framework to study business model dynamics in terms of business model adaptation and innovation. environmental contingencies, such as changing policies and customer expectations, are related to business model elements (e.g. value proposition and revenue model) and how these can be used to adapt to environmental contingencies. rich insights are derived from studying two different contexts: california and germany. introducing and scaling new technologies, such as solar photovoltaic, and being able to sustain these in dynamic business environments is an important way of creating sustainable value through business models. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7373 the fourth paper in the special issue, by eva guldmann, nancy bocken and han brezet (2019), introduces an empirically grounded framework to assist circular business model innovation. the authors provide indepth insights into the use of design thinking and a number of tools that can be used for circular business model innovation within existing organisations. important stages and activities of introducing such innovation process within organisations are identified. the ability of companies to engage in transformational innovations that follow alternative paradigms, such as moving towards the circular economy, is crucial to enhance their capabilities to leave ‘business as usual’ behind and contribute to svc. by relating these articles to the key topics proposed in the original call for papers (see table 2), we see that adopting a relational perspective (e.g. stakeholder relationships, inter-organisational relationships and network settings) seems to be a common and fruitful approach. we also see that various theories (e.g. theory of practice and contingency theory) table 2 topics addressed in the call for paper vladimirova (2019): building sustainable value propositions for multiple stakeholders: a practical tool (short paper) boons and laasch (2019): business models for sustainable development: a process perspective (short paper) wadin and ode (2019): business models for sustainability: change in dynamic environments (full paper) guldmann, bocken, and brezet (2019): a design thinking framework for circular business model innovation (full paper) what is sustainable value and how is it created? x n.a. n.a. n.a. which instruments can support sustainable value creation? x n.a. (x) x how can sustainable value be created in relationships? x x x x how can sustainable value creation be studied with novel approaches? theoretical considerations of value creation applied in tool development and practitioner workshops theories of practice used to develop a process perspective on business models for sustainable development contingency theory applied to case studies of business model change in dynamic environments design thinking framework for circular business model innovation derived from case studies table 2: articles contained in the special issue. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7474 and research methods (e.g. conceptual framework development, case studies, tool design and workshops) can be used to study svc through business models. less studied are more fundamental questions related to defining sustainable value and svc and how it can be supported by certain instruments. although our special issue offers innovative and rich insights into svc through business models, there are plenty of open questions – and thus opportunities for future research. cornerstones of theorising about svc based on our reading of the literature and the contributions to the special issue of journal of business models, we discuss some cornerstones of theorising about svc. this is not an attempt to offer one-sizefits-all definitions or to present a full-fledged theory. rather, to address the research gap described in the introduction, we aim to think about how to structure a more systematic discussion of svc through business models and how to prepare the ground for future theoretical work on this topic. according to lepak et al. (2007), some reasons for the lack of ‘consensus on what value creation is or on how it can be measured’ are the plurality of targets and sources as well as the fact ‘that value creation refers both to the content and process of new value creation’ (pp. 180–181). in response to these challenges, we propose, first, that it is necessary to acknowledge that the tbl and stakeholder theory perspectives are important foundations for the sbm discourse and, hence, svc. second, we propose thinking about the what, who and how of svc using the four guiding questions introduced above. third, as an underlying assumption, we propose embracing the inherently normative characteristics of value creation and using these in a systematic and constructive way. the final proposal is more than just a philosophical exercise. it has become clear that the tbl and stakeholder theory perspectives require explicit acknowledgement of norms, values and subjectivity (e.g. that value should be defined in ecological and social terms and that all of a company ’s stakeholders should be considered). going beyond these two streams in particular and accepting the implications of normativity in general leads to an approach in which a ‘consensus on what value creation is’ (ibid.) cannot be the primary goal of theorising – or at least performed at only a very high level of abstraction. a more appropriate goal would be to develop cornerstones that allow researchers to see and theorise about the pluralistic, relativistic and relational characteristics of svc (e.g. the realist social theorybased approach to studying svc proposed by brennan and tennant, 2018). in the following, svc is understood as a process that is embedded in various stakeholder relationships and requires various stakeholders’ needs to be satisfied in various ways (cf. upward and jones, 2016). thinking about svc involves coping with plurality, relativism and relationships. more detailed guiding principles to define ‘local truths’ or ‘local monism’ (cf. baghramian, 2004) can only be found in negotiations about, for example, the meaning of sustainable development, ecological and social justice and what is desirable. therefore, the following discussion can offer only a general frame with which to think about the theoretical properties and process of svc. study of the actual content of svc (i.e. the actual forms of value that are created) is left to other kinds of investigation that consider the local truths, norms, values and subjectivity of those involved as what they are: values-based expressions of what people really care about (cf. breuer and lüdeke-freund, 2017). what is value and what are its sources? the notion of value has been subject to historical debates in philosophy, economics, psychology, sociology and many more areas (den ouden, 2012; ueda, takenaka, váncza and monostori, 2009). it is one of those concepts for which, as a result of embracing its inherently normative characteristics, we must accept that ‘it depends’ is part of its definition. while more traditional approaches reduce the problem of defining value to concepts such as value for customers and the company, as mentioned above, the tbl and stakeholder theory perspectives demand a broader and more inclusive conceptualisation of value, which we term a stakeholder-responsive interpretation of value. such a conceptualisation is proposed by upward and jones (2016, p. 104): ‘[a] strongly sustainable journal of business models (2020), vol. 8, no. 3, pp. 62-90 7575 firm requires the central concept of value is revised from the current “thin” definition as a source of individual or organizational enrichment, measured uniquely in monetary units’. building on max-neef et al. (1991), who argue for ‘a sociological and human sciences conception of value and human values’ (upward and jones, 2016, p. 104), upward and jones (2016) introduce two notions to the sbm discourse that have been hardly considered to date. first, there are fundamental needs that must be met in aesthetic, psychological, physiological, utilitarian and/or monetary terms. second, so-called satisfiers are the means of satisfaction (e.g. a well-crafted product, a safe home) and are aligned with the recipient’s worldview and needs. as an initial explanation, we can say that value is created whenever the activities of a company help to satisfy a fundamental need of a stakeholder or other beneficiary, which occurs when someone perceives a net benefit and, hence, additional utility, joy or so on. the potential net benefit of a company ’s offerings is perceived from the customer’s perspective, which is based on the customer’s fundamental needs, values, beliefs, opportunity costs and so on. these net benefits result from the different kinds of value, such as exchange value, use value, experience value, sign value and ideal value, that a customer associates with an offering (bowman and ambrosini, 2000; breuer and lüdeke-freund, 2017; lepak et al., 2007). even if we limit the conceptualisation of value to customer value, it is a complex bundle of different forms of value, which in turn leads to perceived net benefits. these bundles and their perceptions can vary from customer to customer and from stakeholder to stakeholder, which calls for a stakeholder-responsive conceptualisation of forms and sources of value. this is a significant extension of the concept of value, which traditionally focused on mere surplus and considered a limited number of stakeholders. offerings to customers are just one of many possible starting points. if we follow the relational view of stakeholder theory (bridoux and stoelhorst, 2016), we can easily identify numerous other stakeholder relationships (e.g. with employees, suppliers, financiers, local communities and civil society organisations) in which companies are engaged (freudenreich et al., 2020; upward and jones, 2016). all of these relationships require specific forms and sources of value, or stakeholder-responsive ways of satisfying fundamental needs through satisfiers. correspondingly, in the sbm discourse, different stakeholders are typically associated with different forms of value. these forms are often labelled as ecological, social and economic, roughly following a tbl-based approach. however, this is not an exclusive list, but a placeholder for the value pluralism that must be acknowledged when a stakeholder-responsive interpretation of value is applied (cf. breuer and lüdeke-freund, 2017; castellas, stubbs and ambrosini, 2018; davies and chambers, 2018). much research needs to be done to really understand the plurality of stakeholder relationships and the forms and sources of value that lead to ‘truly ’ sustainable value creation. the sustainable value proposition builder proposed by vladimirova (2019) in the special issue adopts a qualitative approach to identifying different forms of value, interpreted as benefits to and contributions from stakeholders. this view highlights the mutuality of stakeholder relationships and the notion of value creation with and for stakeholders (freudenreich et al., 2020). the aim of this new tool is to support value proposition design and facilitate stakeholder engagement to better understand the positive and negative aspects perceived by stakeholders and identify potential risks and opportunities for them in the early stages of business model development. such an approach addresses the fundamental question of what value is and for whom it should be created. for whom is value created? in an early article on sustainable value creation, hart and milstein (2003) define svc as maintaining and increasing shareholder value through business contributions to sustainable development. their sustainable value framework considers time, management of current and future performance and management of internal and external stakeholders. however, it remains focused on benefits for the focal firm, which implies a rather narrow definition of the notion of sustainable value (for the firm) (cf. hahn et al., 2018). the current understanding of sbms goes further and requires one to consider the journal of business models (2020), vol. 8, no. 3, pp. 62-90 7676 broader systems and stakeholder networks in which a company is embedded as well as acknowledge these as potential recipients of value (e.g. abdelkafi and täuscher, 2016). an sbm spans and is managed beyond organisational boundaries (schaltegger et al., 2016; upward and jones, 2016), which is a prerequisite for creating value for a broader range of stakeholders (geissdoerfer et al., 2018). hence, the ‘total value created’ (lüdeke-freund, massa, bocken, brent and musango, 2016) by a company is a function of the boundaries of the value creation system under consideration (e.g. in terms of time, space and actors), which also determine which stakeholders are directly or indirectly involved and affected (baumgartner and rauter, 2017). when considering the resulting variety of stakeholders, it is important to also scrutinise different value creation processes and different forms of value at different levels (e.g. from local markets to global ecosystems). while many have acknowledged this call to consider the plurality of stakeholders (freudenreich et al., 2020; lüdeke-freund and dembek, 2017), the resulting necessity of a pluralistic (brennan and tennant, 2018) and relativistic approach to defining value creation has not been considered to the same degree. the same can be said for the various levels of analysis (e.g. individuals, organisations, networks and society). while there seems to be a general awareness for the need to reflect upon different analytical levels, substantial multi-level analyses of value creation are rare. den ouden (2012), for example, lists users, the organisation, the ecosystem and society as levels at which value creation can be studied. likewise, freudenreich et al. (2020) propose an analytical stakeholder value creation framework that includes various typical stakeholder groups, including customers, employees, business partners, financial stakeholders and societal stakeholders. however, in most cases, researchers still struggle to extend their investigations beyond typical stakeholders (see table 3). additionally, there is a general lack of detailed and theoretically informed analyses of whether and how value is created for typical and non-typical stakeholders. such analyses require tools and metrics that most likely exceed the scope of traditional performance measurement systems. based on the above discussion, svc is a level-spanning, inter-temporal and spatially open notion (cf. hahn et al., 2018) that requires a systems approach to define and measure which form of value is created for whom (starik, stubbs and benn, 2016; stubbs and cocklin, 2008; upward and jones, 2016). based on an analysis of multi-attribute utility functions, tantalo and priem (2016) demonstrate ‘how value can be created for multiple essential stakeholder groups simultaneously ’ (p. 315). this highlights promising research directions for svc studies to extend our ability to define and study value creation with and for ‘all’ stakeholders on ‘all’ levels. another important issue resulting from this systemic view of the recipients of value are tensions, trade-offs and paradoxes. these occur as companies have to cope with multiple and often conflicting goals simultaneously (hahn, pinkse, preuss and figge, 2015; hahn et al., 2010, 2018), which can lead to situations in which ‘organizations promote their own economic growth at the expense of environmental and social goals’ (brennan and tennant, 2018, p. 623). this means that the value captured by a focal company or another actor dominates all other needs and interests within a value creation system. such situations are likely to occur as ‘[d] ifferent business models […] bring partners together with differing access to resources and place them in particular power relations and situational logics’ (ibid.). therefore, ‘organizations must direct time and effort toward recognizing and, to some degree, reconciling these differences’ (lepak et al., 2007, p. 200). continuing in a more proactive and constructive direction, a ‘paradox perspective on corporate sustainability ’ has been proposed to overcome the typical subordination of sustainability goals to company goals (hahn et al., 2018). this is a new and inspiring approach that could inform future theorising about who can benefit from svc. approaches dealing with value destruction and ignored value creation opportunities (e.g. bocken et al. 2013; yang et al., 2017) could be combined with a paradox perspective to better understand the tensions and trade-offs that occur with sbms and svc. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7777 table 3 publication (alphabetically) stakeholder groups explicitly considered value created for stakeholder group bocken, short, rana and evans, 2014 customers use value network actors transaction value society societal benefits and impacts environment environmental benefits and impacts boons and lüdeke-freund, 2013 customers/users/consumers value proposition – measurable ecological and/or social value in concert with economic value; balanced fulfilment of customer needs suppliers n.a. regulators n.a. competitors n.a. actors involved in the business model (distribution of) economic costs and benefits ngo n.a. society n.a. evans et al., 2017 key stakeholder segments (including society, natural environment, customer, supplier, shareholders) forms of environmental value forms (renewable resources, low emissions, low waste, biodiversity, pollution prevention), social value (equality and diversity, community development, secure livelihoods, labour standards, health and safety) and economic value (profit, return on investments, financial resilience, long-term viability, business stability) policy makers n.a. table 3: stakeholder groups and value creation for stakeholders considered in the sbm literature (freudenreich et al., 2020). journal of business models (2020), vol. 8, no. 3, pp. 62-90 7878 table 3. stakeholder groups and value creation for stakeholders considered in the sbm literature (freudenreich et al., 2020). (continued) publication (alphabetically) stakeholder groups explicitly considered value created for stakeholder group joyce and paquin, 2016 customer segments n.a. partners n.a. clients functional value employees working conditions and personal growth initiatives local communities n.a. suppliers n.a. society as a whole promoting positive values end users value proposition stubbs and cocklin, 2008 board, management, staff, shareholders and customers resources (people, profit, time or natural resources) shareholders economic, social, environmental outcomes ceos n.a. nature n.a. future generations n.a. upward and jones, 2016 actors for whom the organisation exists n.a. actors affected value created or value destroyed actors involved n.a. journal of business models (2020), vol. 8, no. 3, pp. 62-90 7979 table 3. stakeholder groups and value creation for stakeholders considered in the sbm literature (freudenreich et al., 2020). (continued) publication (alphabetically) stakeholder groups explicitly considered value created for stakeholder group yang et al., 2017 multiple stakeholders (such as customers, end users, suppliers, shareholders, governments and partners) monetary value as well as wider value for the environment and society what has not been considered so far is the processual nature of value creation, or how value creation emerges, unfolds, changes and disappears. investigations of the paradoxes of value creation would benefit from a processual perspective, as the occurrence of tensions and trade-offs – and possible solutions – could be explored in processes; such a processual perspective would add the dimension of time and the possibility of different alternative trajectories. in the special issue, boons and laasch (2019) propose such a processual understanding of business models. understanding value creation as a ‘multi-stranded dynamic process’ in which ‘normative criteria for business models for sustainable development are inherently processual’ (ibid., p. 10) offers not only a new way of seeing, developing and studying business models but also new approaches to svc. how is value created? the traditional view, introduced above, posits that value creation implies the provision of new use value and customer surplus to customers as well as the realisation of exchange value and financial profits for companies (bowman and ambrosini, 2000). this view focuses on the moment of exchange – implying a mainly transactional interpretation of value creation – and the conditions under which this exchange leads to value creation. however, our discussion so far has revealed that theorising about svc requires a relational interpretation of value creation as the notions of stakeholder-responsive value creation and the embeddedness of business in systems and stakeholder networks require a much stronger focus on the relationships between those involved in value creation (freudenreich et al., 2020). the way in which value is created is often associated with processes in which new value is generated and in which stakeholders play different roles (cf. lepak et al., 2007). different theories and concepts are used to describe and analyse these processes. massa and tucci (2013, p. 9), for example, describe a business model as a ‘systematic and holistic understanding of how an organization orchestrates its system of activities for value creation’. this view emphasises the activities underlying certain business processes as well as the notion of the value chain (dasilva and trkman, 2014; porter, 1985; ritter and lettl, 2018). rooted in traditional theories of value creation, supply-side value creation is based on the available resources (barney, 1991; wernerfelt, 1984) and the dynamic capabilities of a company (teece, 2018). more recently, new perspectives offer insights into demand-side value creation (massa et al., 2017; priem, wenzel and koch, 2018), a process in which value is created ‘by customers and other members of their ecosystems’ (massa et al., 2017, p. 92). thus, the how of value creation can be studied from both the supply and demand side, with a focus on resources, capabilities, activities and business processes and how these are orchestrated in value chains and whole stakeholder networks. the moment in which value is created (i.e. a fundamental stakeholder need is met by an appropriate satisfier) cannot be limited to the moment in which new use value and money are exchanged or the employment of resources and capabilities to create a product or service. rather, value journal of business models (2020), vol. 8, no. 3, pp. 62-90 8080 creation must be understood to include a plurality of moments and processes in which new value can be created (cf. the ‘situational logics’ of value creation discussed by brennan and tennant, 2018). this is an immediate consequence of the various stakeholder relationships in which a company is engaged and the various forms of value it can create with and for its stakeholders. in the special issue, wadin and ode (2019) well illustrate the need to understand the plurality of moments and processes in which value can be created. by analysing cases in which companies adapted their solar business models to dynamic business environments, the authors found that different adaptations are needed for different business model elements. while a company ’s whole business model is subject to environmental dynamics, adaptations may be necessary in some of its elements (e.g. the value proposition and revenue model) but not others. in other words, maintaining the ability to create value requires differentiated adaptations of business model elements and stakeholder relationships to situational dynamics. in addition to how value is created, it is important to consider who creates value, as those involved and their respective roles partly differ from the traditional view. in the context of svc, an understanding of stakeholders as both contributors to and beneficiaries of value creation seems to be appropriate ‘since the source that creates a value increment may or may not be able to capture or retain the value in the long run’ (lepak et al., 2007, p. 181, italics added). there might be discrepancies between those stakeholders who contribute to value creation processes, those who are defined as beneficiaries and those who are able to capture a share of the total value created. thus, processes of value creation need to be understood as collaborative and mutual processes in which stakeholders are not only recipients or providers of something valuable, but can be both co-beneficiaries and co-creators (freudenreich et al., 2020; khmara and kronenberg, 2018). the relational interpretation of value creation proposed above, which suggests a pluralistic perspective on value-creating processes, is thus complemented by the notions of co-beneficiary and co-creator and collaborative value creation. acknowledging the multiple roles played by different stakeholders is supposedly a major shift in perspective compared to traditional assumptions about value creation, which are typically based on narrow (but non-trivial) cost– benefit considerations. who captures value? the traditional view typically assumes that a company and its customers are those who capture value. all other stakeholders, such as employees, suppliers, owners and other financiers, are often indirectly considered as costs (cf. bowman and ambrosini, 2000). this approach would suffice if financial value were the only relevant value. in this case, the costs of labour, supplies and capital would represent the value captured by the respective stakeholder. however, employees, suppliers and others are not only interested in financial income. employees, for example, may also feel the need to belong to a group of people and to identify with an organisation’s purpose, mission and vision. this fundamental need cannot be satisfied with a paycheck. likewise, suppliers might wish to not only deliver goods to a customer but also cooperate with admirable companies. reviewing the list of stakeholders and their potential non-financial needs and interests clearly shows that value capture cannot be limited to a company and its customers while the rest is seen as costs. rather, thinking about value capture from a stakeholder-responsive, systemic and collaborative perspective requires one to think about value capture from each single stakeholder’s point of view. it requires one to consider the particular forms of value that particular stakeholders wish to capture. this way of looking at value capture has been partly established in the strategic management literature. garcia-castro and aguilera (2015), for example, propose a model to analyse total value creation and the shares of this value that different stakeholders can appropriate. their model considers value in economic terms (e.g. willingness to pay, price, costs and opportunity costs) and allows researchers to study the total value created (defined as the difference between willingness to pay and opportunity costs) and how it is allocated amongst those involved in value creation (e.g. customers, capital providers, management and employees). it also allows trade-offs between journal of business models (2020), vol. 8, no. 3, pp. 62-90 8181 stakeholders to become visible. although this model is clear and stringent, due to many simplifications, it shows that even analyses in economic terms ‘only ’ are already quite complex. extending such models in line with the aforementioned principles of stakeholderresponsive, systemic and collaborative value creation will inevitably lead to even more complex analyses. however, if developing a theory of svc and methods for its analysis are deemed important, this complexity must be accepted. finally, it has already been mentioned that the share of value capture by a particular stakeholder depends on the power relationships in which this stakeholder is involved and that these power relationships are typically asymmetric. any analysis of value creation and capture should therefore be flanked by an analysis of the power relationships that lead to certain patterns of value capture (i.e. certain allocations of value within a stakeholder network). the normative principles that guide any theory and analysis of svc, be it tbl-based, stakeholder theory-based or framed in any other way, will inevitably indicate which patterns of value creation and capture are more desirable and which are not. the circular economy is such a case. here, ecological value creation is typically seen as one of the main goals of changing the way in which business is done. however, in the special issue, guldmann, bocken and brezet (2019, p. 47) argue that it is ‘clear that cbmi [circular business model innovation] involves challenges at the employee, organisational, value chain and institutional levels […] [and that] [t]hese challenges relate to lock-ins in terms of value creation logic and structures and result in organisational inertia’. this often results from vested interests and established power relationships (cf. chesbrough, 2010) regarding who captures value from ‘business as usual.’ changing this is a very difficult task, but as shown by guldmann et al. (2019), new ways of developing business models may help new value creation and capture patterns to emerge. summary and outlook the notion of value creation is fascinating for various reasons. not only does it imply that something valuable is newly emerging, or that needs are satisfied in a way not seen before, but also is it a key concept in domains such as strategic management and business model research. sustainable value creation, which is an extension of the traditional understanding of value creation developed in fields such as corporate sustainability, sustainable and social entrepreneurship and sbm research, is no less fascinating. however, it seems to be less clear and understood. figure 2: theoretical framework of sustainable value creation. what is value and what are its sources? • value is defined as the net benefits perceived by stakeholders from their perspective, leading to value pluralism. • a stakeholder-responsive definition of value is needed (i.e. relational stakeholder theory). • fundamental needs of stakeholders and their satisfiers must be identified. • satisfiers, and the ability to provide these, are sources of value. for whom is value created? • the boundaries of the systems and stakeholder networks in which a company is embedded must be considered • this includes different levels, spatial and temporal aspects. • the recipients of value result from these boundaries. • tensions and trade-offs between the recipients of value are inevitable (i.e. paradox theory). how is value created? • a relational interpretation of value creation processes is needed. • plural processes and moments of value creation must be distinguished – new value is created in various stakeholder relationships and corresponding exchange processes. • collaborative value co-creation acknowledges the various roles played by stakeholders. who captures value? • value capture must be seen from each single stakeholder’s point of view. • this makes it necessary to develop composite measures of total value creation. • allocations of value amongst stakeholders – value capture patterns – result from power relationships. • analyses of power relationships complement analyses of value capture patterns. cornerstones of theorising about sustainable value creation (some indications from the literature + insights from the special issue articles) journal of business models (2020), vol. 8, no. 3, pp. 62-90 8282 although svc is increasingly used and discussed in the literature, there are huge gaps in terms of the who, what and how of value creation, particularly in the sbm field. this was the motivation for the ‘sustainable value creation through business models’ special issue of journal of business models (2019, vol. 7, no. 1). this paper serves as a guest editorial for the special issue, and it attempts to offer an initial theoretical framework of sustainable value creation based on our reading of selected publications from the sbm field as well as the articles contained in the special issue. we discussed traditional assumptions about value creation from a strategic management perspective and confronted these with current views on svc in sbm research, particularly the tbl and stakeholder theory perspectives. to open up the black box of svc, support the development of conceptual clarity and facilitate future theories of svc, it is proposed that traditional and sustainability-oriented views on value creation be contrasted and linked. the first result of this paper is an initial theoretical framework of svc whose key themes are the what, who and how of value creation. by offering four dimensions along which svc can be systematically studied and defined, the framework can structure the discussion of svc. the following four guiding questions represent these theoretical dimensions. what is value, and what are its sources? while more traditional approaches reduce the definition of value to concepts such as value for customers and the company, the tbl and stakeholder theory perspectives demand a broader and more inclusive definition, which we term a stakeholder-responsive interpretation of value. furthermore, different forms of value (e.g. relational or psychological value) at different levels (e.g. individuals, ecosystems) need to be created if multiple stakeholders are to be considered and their needs are to be satisfied. this shifts the focus from a company ’s resources and capabilities as sources of value to so-called satisfiers as necessary for responding to stakeholders’ needs (e.g. products, social relationships or infrastructures). for whom is value created? as a direct consequence of the tbl and stakeholder theory perspectives, a greater variety of stakeholders need to be considered and partly engaged in value creation. this results in an understanding of svc as a level-spanning, inter-temporal and spatially open notion, which in turn requires a systems approach to defining and measuring which forms of value are created for whom. such a conceptualisation of svc will inevitably require researchers to deal with tensions, trade-offs and, in some cases, paradoxical situations. future research is needed to better understand the attributes of the created value that are required to speak of ‘sustainable value’. how can we know that the new value created, i.e. the value added perceived from various stakeholders’ points of view, has positive ecological, social and so on impacts? how is value created? as argued above, theorising about svc requires a relational interpretation of value creation that places more attention on the systems and stakeholder networks in which companies are embedded as well as the relationships between stakeholders. value creation, therefore, needs to be understood from each stakeholder’s point of view (value creation with stakeholders), acknowledging the multiple ways and moments in which new value can be provided to them as well as the various roles played by stakeholders (collaborative value co-creation). an important question that was only indirectly discussed in this paper and calls for further research is whether and how value creation as such, i.e. the processes needed to satisfy certain stakeholder needs, can be designed in more sustainable ways. how can value creation – from a process perspective – become more sustainable? who captures value? again, as a consequence of the aforementioned assumptions, thinking about value capture from a stakeholder-responsive, systemic and collaborative perspective requires one to think about value capture from each single stakeholder’s point of view. this requires consideration of the specific forms of value that particular stakeholders wish to capture (value creation for stakeholders) as well as the power relations among various stakeholders. power relationships – a topic addressed by a small number of authors only – may be critical for understanding the journal of business models (2020), vol. 8, no. 3, pp. 62-90 8383 what, who and how of value creation in general and the resulting patterns of value capture among stakeholders in particular. as a result, it is necessary to develop composite measures of total value creation in conjunction with methods to analyse power relationships among stakeholders. as a conclusion, we summarise some of the main propositions contained in the theoretical framework introduced in this paper. sustainable value creation requires (i) a stakeholder-responsive definition and understanding of value; (ii) a systems approach that includes spatial and temporal aspects to identify the recipients of value; (iii) a relational interpretation of and collaborative approach to value co-creation; and (iv) measures of total value creation that consider power relationships and value capture patterns that occur among stakeholders. with the propositions and theoretical framework outlined in this paper, we hope to inspire various avenues of future research on svc, especially critical studies that replace our initial thoughts with more refined assumptions about svc through business models. our work so far is, and will remain, just preliminary. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8484 references abdelkafi, n. and täuscher, k. (2016), “business models for sustainability from a system dynamics perspective”, organization & environment, vol. 29 no. 1, pp. 74–96. agle, b.r. and caldwell, c.b. (1999), “understanding research on values in business”, business & society, vol. 38 no. 3, pp. 326–387. albert, h. (1985), treatise on critical reason, princeton university press, princeton, nj. allee, v. (2015), value networks and the true nature of collaboration, meghan-kiffer press, tampa, fl. amit, r. and zott, c. (2001), “value creation in e-business”, strategic management journal, vol. 22 no. 6-7, pp. 493–520. baghramian, m. (2004), relativism, problems of philosophy, routledge, london. bansal, p. and song, h.-c. (2017). “similar but not the same: differentiating corporate sustainability from corporate responsibility”, the academy of management annals, vol. 11 no. 1, pp. 105–149. barney, j. (1991), “firm resources and sustained competitive advantage”, journal of management, vol. 17 no. 1, pp. 99–120. baumgartner, r.j. and rauter, r. (2017), “strategic perspectives of corporate sustainability management to develop a sustainable organization”, journal of cleaner production, vol. 140, pp. 81–92. bocken, n.m.p., rana, p. and short, s.w. (2015), “value mapping for sustainable business thinking”, .journal of industrial and production engineering, vol. 32 no. 1, pp. 67–81. bocken, n.m.p., short, s.w., rana, p. and evans, s. (2013), “a value mapping tool for sustainable business modelling”, corporate governance: the international journal of business in society, vol. 13 no. 5, pp. 482–497. bocken, n.m.p., short, s.w., rana, p. and evans, s. (2014), “a literature and practice review to develop sustainable business model archetypes”, journal of cleaner production, vol. 65, pp. 42–56. boons, f. and laasch, o. (2019), “business models for sustainable development: a process perspective”, journal of business models, vol. 7 no. 1, pp. 9–12. boons, f. and lüdeke-freund, f. (2013), “business models for sustainable innovation: state-of-the-art and steps towards a research agenda”, journal of cleaner production, vol. 45, pp. 9–19. bowman, c. and ambrosini, v. (2000), “value creation versus value capture: towards a coherent definition of value in strategy”, british journal of management, vol. 11 no. 1, pp. 1–15. brennan, g. and tennant, m. (2018), “sustainable value and trade-offs: exploring situational logics and power relations in a uk brewery ’s malt supply network business model”, business strategy and the environment, vol. 27 no. 5, pp. 621–630. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8585 breuer, h., fichter, k., lüdeke-freund, f. and tiemann, i. (2018), “sustainability-oriented business model development: principles, criteria and tools”, international journal of entrepreneurial venturing, vol.  10 no.  2, p. 256. breuer, h. and lüdeke-freund, f. (2017), “values-based network and business model innovation”, international journal of innovation management, vol. 21 no. 3, article 1750028 (35 pages). bridoux, f. and stoelhorst, j.w. (2016), “stakeholder relationships and social welfare: a behavioral theory of contributions to joint value creation”, academy of management review, vol. 41 no. 2, pp. 229–251. busch, t. and friede, g. (2018), “the robustness of the corporate social and financial performance relation: a second-order meta-analysis”, corporate social responsibility and environmental management, vol. 25 no. 4, pp. 583–608. buser m. and carlsson, v. (2020), “developing new sustainable strategy: the struggle of small and medium swedish contractors companies to experiment with business models”, journal of business models, vol.  8 no. 2, pp. 101–114. carroll, a.b. and shabana, k.m. (2010), “the business case for corporate social responsibility: a review of concepts, research and practice”, international journal of management reviews, vol. 12 no. 1, pp. 85–105. castellas, e.i., stubbs, w. and ambrosini, v. (2019), “responding to value pluralism in hybrid organizations”, journal of business ethics, vol. 159 no. 3, pp. 635–650. chesbrough, h. (2010), “business model innovation: opportunities and barriers”, long range planning, vol. 43 no. 2/3, pp. 354–363. dasilva, c.m. and trkman, p.(2014), ”business model: what it is and what it is not”, long range planning, vol. 47 no. 6, pp. 379-389. davies, i.a. and chambers, l. (2018), “integrating hybridity and business model theory in sustainable entrepreneurship”, journal of cleaner production, vol. 177, pp. 378–386. dembek, k., york, j. and singh, p.j. (2018), “creating value for multiple stakeholders: sustainable business models at the base of the pyramid”, journal of cleaner production, vol. 196, pp. 1600–1612. den ouden, e. (2012), innovation design: creating value for people, organizations and society, springer, london. dentchev, n., rauter, r., jóhannsdóttir, l., snihur, y., rosano, m., baumgartner, r., nyberg, t., tang, x., van hoof, b. and jonker, j. (2018), “embracing the variety of sustainable business models: a prolific field of research and a future research agenda”, journal of cleaner production, vol. 194, pp. 695–703. dyllick, t. and muff, k. (2016), “clarifying the meaning of sustainable business: introducing a typology from business-as-usual to true business sustainability”, organization & environment, vol. 29 no. 2, pp. 156–174. elkington, j. (1997), cannibals with forks: the triple bottom line of 21st century business, capstone, oxford, u.k. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8686 evans, s., vladimirova, d., holgado, m., van fossen, k., yang, m., silva, e.a. and barlow, c.y. (2017), “business model innovation for sustainability: towards a unified perspective for creation of sustainable business models”, business strategy and the environment, vol. 26 no. 5, pp. 597–608. foss, n.j. and saebi, t. (2017), “fifteen years of research on business model innovation”, journal of management, vol. 43 no. 1, pp. 200–227. freeman, e. (2010), “managing for stakeholders: trade-offs or value creation”, journal of business ethics, vol. 96, pp. 7–9. freudenreich, b., lüdeke-freund, f. and schaltegger, s. (2020), “a stakeholder theory perspective on business models: value creation for sustainability”, journal of business ethics, vol. 166 no. 1, pp. 3–18. garcia-castro, r. and aguilera, r.v. (2015), “incremental value creation and appropriation in a world with multiple stakeholders”, strategic management journal, vol. 36 no. 1, pp. 137–147. garriga, e. and melé, d. (2004), “corporate social responsibility theories: mapping the territory”, journal of business ethics, vol. 53 no. 1/2, pp. 51–71. geissdoerfer, m., vladimirova, d. and evans, s. (2018), “sustainable business model innovation: a review”, journal of cleaner production, vol. 198, pp. 401–416. guldmann, e., bocken, n. and brezet, h. (2019), “a design thinking framework for circular business model innovation”, journal of business models, vol. 7 no. 1, pp. 39–70. hahn, t., figge, f., pinkse, j. and preuss, l. (2018), “a paradox perspective on corporate sustainability: descriptive, instrumental, and normative aspects”, journal of business ethics, vol. 148 no. 2, pp. 235–248. hahn, t., pinkse, j., preuss, l. and figge, f. (2015), “tensions in corporate sustainability: towards an integrative framework”, journal of business ethics, vol. 127 no. 2, pp. 297–316. hahn, t., figge, f., pinkse, j. and preuss, l. (2010), “trade-offs in corporate sustainability: you can’t have your cake and eat it”, business strategy and the environment, vol. 19 no. 4, pp. 217–229. hart, s.l. (1995), “a natural-resource-based view of the firm”, academy of management review, vol. 20 no. 4, pp. 986–1014. hart, s.l. and milstein, m.b. (2003), “creating sustainable value”, academy of management executive, vol.  17 no. 2, pp. 56–69. joyce, a. and paquin, r.l. (2016), “the triple layered business model canvas: a tool to design more sustainable business models”, journal of cleaner production, vol. 135, 1474–1486. khmara, y. and kronenberg, j. (2018), “degrowth in business: an oxymoron or a viable business model for sustainability?”, journal of cleaner production, vol. 177, pp. 721–731. laasch, o. (2018), “beyond the purely commercial business model: organizational value logics and the heterogeneity of sustainability business models”, long range planning, vol. 51 no. 1, pp. 158–183. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8787 lamberton, g. (2005), “sustainability accounting—a brief history and conceptual framework”, accounting forum, vol. 29 no. 1, pp. 7–26. lepak, d.p., smith, k.g. and taylor, m.s. (2007), “value creation and value capture: a multilevel perspective”, academy of management review, vol. 32 no. 1, pp. 180–194. lüdeke‐freund, f. (2020), “sustainable entrepreneurship, innovation, and business models: integrative framework and propositions for future research”, business strategy and the environment, vol. 29 no. 2, pp. 665–681. lüdeke-freund, f., carroux, s., joyce, a., massa, l. and breuer, h. (2018), “the sustainable business model pattern taxonomy—45 patterns to support sustainability-oriented business model innovation”, sustainable production and consumption, vol. 15, pp. 145–162. lüdeke-freund, f. and dembek, k. (2017), “sustainable business model research and practice: emerging field or passing fancy?”, journal of cleaner production, vol. 168, pp. 1668–1678. lüdeke-freund, f., freudenreich, b., schaltegger, s., saviuc, i. and stock, m. (2017), “sustainability-oriented business model assessment—a conceptual foundation”, in carayannis, e.g. and sindakis, s. (eds.), analytics, innovation, and excellence-driven enterprise sustainability, vol. 17, palgrave macmillan us, new york, pp. 169–206. lüdeke-freund, f., massa, l., bocken, n., brent, a. and musango, j. (2016), business models for shared value main report, network for business sustainability south africa, cape town. lüdeke-freund, f., schaltegger, s. and dembek, k. (2019), “strategies and drivers of sustainable business model innovation”, in boons, f. and mcmeekin, a. (eds.), handbook of sustainable innovation, edward elgar publishing, pp. 101–123. massa, l. and tucci, c.l., “business model innovation”, in dodgson, m., gann, d.m. and phillips, n. (eds.), the oxford handbook of innovation management, oxford university press, oxford, u.k., pp. 420–441. massa, l., tucci, c. and afuah, a. (2017), “a critical assessment of business model research”, academy of management annals, vol. 11 no. 1, pp. 73–104. max-neef, m.a., elizalde, a. and hopenhayn, m. (1991), human scale development: conception, application and further reflections, apex press, new york. mazzucato, m. (2018), the value of everything: making and taking in the global economy, first us edition, public affairs, new york. montemari, m., chiucchi, m.s. and nielsen, c. (2019), “designing performance measurement systems using business models”, journal of business models, vol. 7 no. 5, pp. 48–69. nielsen, c., lund, m., schaper, s., montemari, m., thomsen, p., sort, j., roslender, r., brøndum, k., byrge, c., delmar, c., simoni, l., paolone, f., massaro, m. and dumay, j. (2018), “depicting a performative research agenda: the 4th stage of business model research”, journal of business models, vol. 6 no. 2, pp. 59–64. nielsen, c., montemari, m., paolone, f., massaro, m., dumay, j. and lund, m. (2019). business models: a research overview. london, routledge. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8888 patala, s., jalkala, a., keränen, j., väisänen, s., tuominen, v. and soukka, r. (2016), “sustainable value propositions. framework and implications for technology suppliers”, industrial marketing management, vol. 59, pp. 144–156. pedersen, e.r.g., gwozdz, w. and hvass, k.k. (2018), “exploring the relationship between business model innovation, corporate sustainability, and organisational values within the fashion industry”, journal of business ethics, vol. 149, pp. 267–284. porter, m.e. (1985), competitive advantage: creating and sustaining superior performance, free press, new york. prahalad, c.k. (2005), the fortune at the bottom of the pyramid, wharton school pub., upper saddle river, nj. priem, r.l., wenzel, m. and koch, j. (2018), “demand-side strategy and business models: putting value creation for consumers center stage”, long range planning, vol. 51 no. 1, pp. 22–31. richardson, j. (2008), “the business model: an integrative framework for strategy execution”, strategic change, vol. 17 no. 5-6, pp. 133–144. ritter, t. and lettl, c. (2018), “the wider implications of business-model research”, long range planning, vol. 51 no. 1, pp. 1–8. roslender, r. and nielsen, c. (2019), “performative research in the business model field: exploring the underpinnings of studying business models in action”, journal of business models, vol. 7 no. 2, pp. 31–36. santos, f.m. (2012), “a positive theory of social entrepreneurship”, journal of business ethics, vol.  111 no.  3, pp. 335–351. schaltegger, s., lüdeke-freund, f. and hansen, e.g. (2012), “business cases for sustainability: the role of business model innovation for corporate sustainability”, international journal of innovation and sustainable development, vol. 6 no. 2, pp. 95–119. schaltegger, s., hörisch, j. and freeman, r.e. (2019), “business cases for sustainability: a stakeholder theory perspective”, organization & environment, vol. 32 no. 3, pp. 191–212. schaltegger, s., lüdeke-freund, f. and hansen, e.g. (2016), “business models for sustainability: a co-evolutionary analysis of sustainable entrepreneurship, innovation, and transformation”, organization & environment, vol. 29 no. 3, pp. 264–289. schwartz, m.s. and carroll, a.b. (2008), “integrating and unifying competing and complementary frameworks: the search for a common core in the business and society field”, business & society, vol. 47 no 2, pp. 148–186. starik, m., stubbs, w. and benn, s. (2016), “synthesising environmental and socio-economic sustainability models: a multi-level approach for advancing integrated sustainability research and practice”, australasian journal of environmental management, vol. 23 no. 4, pp. 402–425. stubbs, w. and cocklin, c. (2008), “conceptualizing a ‘sustainability business model’”, organization & environment, vol. 21 no. 2, pp. 103–127. journal of business models (2020), vol. 8, no. 3, pp. 62-90 8989 tantalo, c. and priem, r.l. (2016), “value creation through stakeholder synergy”, strategic management journal, vol. 37 no. 2, pp. 314–329. tapaninaho, r. and kujala, j. (2019), “reviewing the stakeholder value creation literature: towards a sustainability approach”, in leal filho, w. (ed.), social responsibility and sustainability, world sustainability series, vol. 29, springer international publishing, cham, pp. 3–36. teece, d.j. (2010), “business models, business strategy and innovation”, long range planning, vol. 43 no. 2-3, pp. 172–194. teece, d.j. (2018), “business models and dynamic capabilities”, long range planning, vol. 51 no. 1, pp. 40–49. ueda, k., takenaka, t., váncza, j. and monostori, l. (2009), “value creation and decision-making in sustainable society”, cirp annals, vol. 58 no. 2, pp. 681–700. upward, a. and jones, p. (2016), “an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science”, organization & environment, vol. 29 no. 1, pp. 97–123. vladimirova, d. (2019), “building sustainable value propositions for multiple stakeholders: a practical tool”, journal of business models, vol. 7 no. 1, pp. 1–8. wadin, j.l. and ode, k.a. (2019), “business models for sustainability change in dynamic environments”, journal of business models, vol. 7 no. 1, pp. 13–38. wernerfelt, b. (1984), “a resource-based view of the firm”, strategic management journal, vol. 5 no. 2, pp. 171– 180. wheeler, d., colbert, b., and freeman, r.e. (2003), “focusing on value: reconciling corporate sustainability, sustainability and a stakeholder approach in a network world”, journal of general management, vol. 28 no. 3, pp. 1–28. wirtz, b., göttel, v. and daiser, p. (2016), “business model innovation: development, concept and future research directions”, journal of business models, vol. 4 no. 2, pp. 1–28. yang, m., evans, s., vladimirova, d. and rana, p. (2017), “value uncaptured perspective for sustainable business model innovation”, journal of cleaner production, vol. 140, pp. 1794–1804. zott, c. and amit, r. (2007), “business model design and the performance of entrepreneurial firms”, organization science, vol. 18 no. 2, pp. 181–199. zott, c. and amit, r. (2010), “business model design: an activity system perspective”, long range planning, vol. 43 no. 2/3, pp. 216–226. zott, c., amit, r. and massa, l. (2011), “the business model: recent developments and future research”, journal of management, vol. 37 no. 4, pp. 1019–1042. journal of business models (2020), vol. 8, no. 3, pp. 62-90 9090 about the authors florian lüdeke-freund is professor for corporate sustainability at escp business school, berlin, germany, where he holds the chair for corporate sustainability. he is a research fellow at escp’s sustbusy research center and leuphana university ’s centre for sustainability management (csm). he is editorial review board member at organization & environment and journal of business models, and guest editor of several journal special issues (e.g., business & society, organization & environment, journal of cleaner production, int. journal of innovation management, journal of business models). romana rauter is assistant professor at university of graz, austria. her research and teaching interests include sustainability innovation, new and sustainable business models as well as strategic sustainability management. romana has (co)authored numerous scientific publications in these fields, and recently became co-chair of the new business models conferences board. esben rahbek gjerdrum pedersen is professor at copenhagen business school. his research focuses on new business models and the operationalization of corporate sustainability. his work has appeared in a variety of journals, including journal of business ethics, management decision, business & society, supply chain management, and international journal of operations and production management. christian nielsen, ph.d., is professor at aalborg university in denmark. he currently serves as head of aalborg university business school. christian is a global thought leader in the design of disruptive and scalable business models. his work combines business model design with corporate performance and benchmarking. he is also the founding editor of the journal of business models as well as editorial board member of accounting, auditing and accountability journal and journal of behavioural economics and social systems. journal of business models (2014), vol. 2, no. 1 pp. 56-70 56 using an innovative price model to leverage the business model – the case of price model innovation in the largest swedish taxi company dr. carl-johan petri1 abstract purpose: the purpose of the paper is to describe how the biggest swedish taxi company (taxi kurir) developed an innovative price model to leverage the business model. design/methodology/approach : the empirical data in the article describe taxi kurir’s development of a new price model. data about the swedish taxi market and about taxi kurir has been compiled though interviews and document studies. detailed information about the background, development and implementation of taxi kurir’s new price model has been captured through interviews with representatives from taxi kurir. findings : based on both the empirical example, and other investigations, we have found that a company can create substantial changes in their price model, by just changing some of its basic characteristics. a well designed price model can contribute to leveraging the intentions of the business model. practical implications : most academic and practical texts about business models consider pricing to be an important component. however, they typically do not refer to the specifics of the priceor revenue models. according to the literature review in this paper, and the empirical findings, the configuration of a company’s price model should be aligned with its business model. this will contribute to leveraging the business model. originality/value: the swedish taxi market is one of the most deregulated in the world. differently from most other countries, any individual or company can start and operate a taxi business. this case offers a unique description on how the biggest company in the market responded to the competition by introducing a fundamentally new price model, by making a small change in one of the dimensions in their existing price model. keywords: price models, price model transformation, pricing, taxi, business model 1: e-mail: carl-johan.petri@liu.se, department of management and engineering, linköpings universitet, 581 83 linköping acknowledgements: the author wants to thank all respondents that have offered valuable time to make this study possible. he also wants to thank his colleagues at casip for their intellectual support and two anonymous reviewers that helped to improve the quality of the paper. please cite this paper as: petri, c. 2014 ‘using an innovative price model to leverage the business model – the case of price model innovation in the largest swedish taxi company’, journal of business models, vol. 2, no. 1, pp. 56-70. journal of business models (2014), vol. 2, no. 1 pp. 56-70 57 introduction pricing and revenues are a fundamental component in every definition of what a business model is (zott, 2011; teece 2010; osterwalder and pigneur, 2005; chesbrough and rosenbloom, 2002). some even indicate that it is the core of the business model: “the essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit” (teece, 2010, emphasize added). however, most texts about business models only refer to the specifics of the priceand revenue models superficially. pricing is considered important by all, but few present any systematic approach on how to design the specific parameters of the price model. in this paper i take a closer look at the issues of pricing, in the business model context. my aim is to describe how an innovative price model can be designed to leverage the business model. the theoretical foundation is based on 1) a brief overview of some influential business model articles and 2) a summary of a framework that can be used to analyze and configure price models. the result of the theoretical part is a greater understanding of how price models can be designed to leverage the business model. the empirical content is based on how the largest swedish taxi company (taxi kurir) developed an innovative price model. the new price model offers, opposite to all competitors, customers a binding fixedprice quote – for any arbitrary itinerary – prior to the booking. no other taxi company offers an equivalent price model. i argue that the specific configuration of the price model affects the sustainability of the business model. based on the findings in this paper, and previous research, i also suggest that the configuration of a company’s price model should be aligned with its business model. hence, it will contribute to leveraging the business model. conceptual elaboration on the pricing component in the business model the term “business model” has gained an almost exponential popularity in the last 10 years1. still, several authors claim that there is no clear definition of what the concept refers to (e.g. george and bock, 2010; teece, 2010; osterwalder and pigneur, 2005). nevertheless, there is something appealing about the term. its use in the corporate world hints at an applicability and usefulness beyond the buzzword and as with any new term, we should not be surprised by its ambiguity. a plausible explanation for this is given in the academic literature. baden-fuller and morgan (2010) suggest that business models can be used for several purposes; as role models, scale models, scientific models and even recipes (in any combination) by different firms. since the term can be used in so many different ways an exact definition becomes difficult. and it might not even be necessary. osterwalder seems to be one of the more popular references among practitioners. especially his co-created handbook (which is underpinned by his more thorough investigation of the concept a year earlier in “the business model ontology”; osterwalder 2004). together with his co-authors, he proposes that a business model is a blueprint of how a company does business (osterwalder and pigneur, 2005). they describe nine building blocks that constitutes the business model. one reason why osterwalder may have gained such popularity outside academia, is his way of illustrating the components in the business model. the illustrations confer a content structure on the term business model and turns it into a tool. through the detailing of the aspects of the business model, a firm can use the concept to understand, analyse and manage the business logic as well as to innovate. 1 chesbrough and rosenbloom (2000) performed a google search on the term ”business model” in may 2000, resulting in 107 000 hits. our own search in january 2012 resulted in 31 900 000 hits. journal of business models (2014), vol. 2, no. 1 pp. 56-70 58 furthermore, osterwalder and pigneur (2005) suggest that the business model is a conceptual tool linking strategy, business organisation and systems together. in this, they elaborate that a business model focus on how the business works as a system, while the strategy is more action oriented and includes execution and implementation. however, the authors note that the distinction between the terms is unclear and the literature divided on this issue. this is obvious in casadesus-masanell and ricart (2010) who discuss the difference between business model and strategy (as well as tactics). they present a framework for distinguishing the terms from each other, arguing that the object of strategy is the choice of business model and thus a business model in action is a reflection of the realised strategy. chesbrough and rosenbloom (2002) also note the ambiguous nature of the term business model and compare it with the term strategy. they conclude that the concepts overlap to some degree. the business model’s main concern is what mechanism to use in order to make money. strategy, on the other hand, focuses on sustainability versus competitors and creating shareholder value. more specifically, they argue that the functions of a business model is to articulate the value proposition, identify a market segment, define the value chain, estimate the cost structure and profit potential, position the firm in the value network and formulate the competitive strategy. as we can see, there are some striking similarities with the business model canvas. this is no coincidence since the two authors are referred to numerous times by osterwalder and pigneur (2005) and included among the contributors of the building blocks. yet another viewpoint is held by teece (2010), who argues that a business model contains the financial ‘architecture’ for value creation and that it is, in essence, a conceptual model used to describe how customer value is created. and how the value is monetized. the inherent transparency of a business model seems to be a problem to teece; a successful business model risk to be copied by competitors. this is where strategy enters the game, according to teece. a business model is more generic than the strategy. hence the strategy is a tool to protect the successful business model from being copied. by segmenting the market, creating a value proposition and delivery mechanisms, a firm will ensure that the business model survives. again we can see the similarities with osterwalder and pigneur (2005), who, however, are not cited by teece. while there are several other sources that provide interesting discussions about business models, much of those views are considered by osterwalder and pigneur (2005). their nine principles are based on a literature review of 14 authors. from my perspective, the business model canvas is a suitable starting point to explore some of the details that i find lacking in the business model research. leaving the question of the relationship between business models and strategy for now, i use the definition from osterwalder and pigneur (2005) as a starting point: a business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. it is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. (p 10) osterwalder’s and pigneur’s (2005) model is based on an simple value stream view, where the partners and suppliers are described to the left, the “core” of the business in the middle and the customers to the right. in the bottom, the business is underpinned by its financial infrastructure (capturing revenues and costs). in this article, i will mainly focus on the box in the lower right corner of the model: the revenue stream. i believe pricing deserves more attention and elaboration than it usually gets in the business model literature. “business” in business models and business strategies invariably involves contracting between firms, and in modern society it presents a huge range of alternatives on how to define what is sold and how the seller is remunerated. therefore, we now turn our attention to pricing. journal of business models (2014), vol. 2, no. 1 pp. 56-70 59 coststructure revenuestream the specifics of the price model in the business model context as noted above, revenue is one of the fundamental components in every definition of what a business model is; in addition to the previous example “the essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit” (teece, 2010) it can be illustrated by quotes like this: “the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams” (osterwalder and pigneur, 2005). (emphases added by us) however, when studying how different authors elaborate on the way a company can price its offering, there is a need for improvements. pricing is recognised as important by all, but no one presents a systematic approach on how to design and align the parameters in the price model with the surrounding business model. i believe that the design of the price model is of great importance to entice the customers to pay for the offering. the price model should be configured so that customers want to pay for the company’s offering in a way that both assures the necessary cash flows in the short perspective and continues to monetise the offering as it continues to create value for the customers in the long run. in our previous work we have suggested a systematic approach on how to configure the properties of a price model (iveroth et al, 2013; olve et al, 2013a, 2013b). when applying this model, it has become apparent that very small changes in the price model can result in radical transformation of the business model itself. a small shift in one of the dimensions in a company’s price model can result in a totally different cash flow situation. hence, the price model is a very important component in the business model. unless the structure of the price model is aligned with the more explicit characteristics of the offering, there is a risk that the revenues will not increase when the offering delivers value to the customers, i.e. the price model risks to “leave money on the table” (dolan and simon, 1996). in an emj article, and a subsequent book, we suggest a model with five dimensions that can be used to flesh out the characteristics of a price model (iveroth et al, 2012; olve et al, 2013b). this analytical model can both be used to analyze and to configure price models such that they contribute to leveraging the business model. a price model is a system of price-related aspects of figure 1 simplified description of osterwalder’s and pigneur’s (2005) nine generic components in the business model canvas key partners key activities key resources value proposition customer segments customer relationships channels journal of business models (2014), vol. 2, no. 1 pp. 56-70 60 an agreement between a seller and a buyer. any agreement between a buyer and a seller uses some kind of price model. we propose that such models can be described through five dimensions. together, they constitute a meta-model for price models. the first dimension refers to the scope of the offering. at one end of the spectrum, a complete package (bundle) of products and services is the object that is priced. at the other end, each attribute is priced individually and may be bought individually. for example, cunard cruise line offers a complete package when they price their seven-day cruises in europe. the customers pay for a bundle of products and services (e.g. travelling, accommodation, food, spa and entertainment) irrespective if the customers choose to consume them or not (see for example shapiro and varian’s seminal work on bundles). opposite to this, ryanair splits their offering into different products, such as flight, method of payment, priority boarding, luggage allowance, food and beverages, insurance et cetera. in this way, the customers can choose among the attributes and influence the total price by deciding what to include. the second dimension focuses on what information is used to inform the pricing decision. the most classical alternative is to base the price on information about the cost of (developing, producing, distributing and selling) the products and services (malmer, 1996). this has lately been criticized by many pricing researchers, who claim that prices should rather be based on the competitors’ price levels or customer value (ingenbleek, 2007). regardless if the company has any explicit policy on what shall govern pricing decisions, it is fairly easy to get an idea of the current state after just a few interviews. more common than not, “costs” still seems to be the most common foundation for pricing decisions. the third dimension is concerned with the extent to which the seller or the buyer influences the price. in the most extreme situation, the seller has the power to set the price. as the customers’ power increase, the pricelist is not absolute anymore. instead, the price is set in a negotiation. the next type along this dimension is based on some observable outcome of the use of the product. we refer to this as result-based prices. the fourth type, on the influence dimension, is when the price level is set by the buyer: pay-what-you-want, which is sometimes also referred to as pay-if-you-like (kim, 2009). the next step along this dimension is when both the seller and each customer hand over the right to determine the price level to an auction. finally, exogenous pricing is the case when circumstances beyond the influence of both the provider and the figure 2 five key dimensions in configuring a price model journal of business models (2014), vol. 2, no. 1 pp. 56-70 61 customers determine the realised price level, e.g. when creating an index of exogenous factors that establish the price level. the fourth dimension focuses on the price formula. it connects price and volume; from fixed price (regardless of volume) to a per unit price. in between, there are several alternative combinations of fixed and variable price components that can be used to calculate the final price level (dolan and simon, 1996). the fifth, and last, dimension focuses on the customers’ temporal right to the offering. to the left we find perpetual rights. the further we move to the right, the shorter the time the customer may use the product. lease and rent are offerings for a specified period of time. subscription is also a transfer of rights for a specified period of time, but the product’s characteristics may change (day by day) as it is upgraded or enhanced during the contract period. finally, at the right-hand side, we find pay per use, which means that the buyer pays for every individual use of the product or service. any particular business contract can be characterised along these five dimensions. depending on the design of the price model, obligations, risks, and likely financial outcomes are shifted between the buyer and the seller. to summarise, i agree with most business model writers that pricing and revenue issues are of great importance to make the business model sustainable. however, in the growing body of literature on business models, we have not found any systematic approach on how to configure a price model. i argue that the model we have described above, can assist in generating profitable and sustainable revenue streams, hence leveraging the business model. methodology in this paper i suggest that the details of the “pricing box” (revenue stream), embedded in most business model frameworks, can be better understood and designed by using the five dimensions presented above. our model was developed in a collaborative research project together with the global telecommunication company ericsson. for three years, we worked together with practitioners from ericsson to develop an understanding of the pricing challenges they face. the model, presented in the emj article and in a subsequent book, is one of the results from the research project. it has been presented in academic forums (westelius et al, 2010; iveroth et al, 2012) as well as practitioneroriented texts (olve et al, 2013a; olve et al, 2013b). i like to emphasise that the focus in this paper is on price model design. not on determining price levels. the latter is the typical focus in pricing literature, and pricing of taxi services is no exception (see for example wong’s calculations on taxi prices in the chinese market; wong et al, 2002; wong et al 2008; wong et al, 2010). neither do i focus on the more accountingoriented topics of pricing, for example how revenues are reported in the accounting and financial reporting systems when customers are billed in advance, instead of in retrospect. the empirical data in this article describe how the largest swedish taxi company designed a new price model. data about the swedish taxi market and about taxi kurir has been compiled though interviews and document studies. opinions about the taxi market have been compiled through interviews with persons in the swedish taxi association, the swedish transport agency, the swedish tax authority and the swedish police. more detailed information about the industry has been compiled from governmental investigations about the industry, the taxi association’s trendand future outlooks, and academic studies of the taxi market. information about the background, development and implementation of taxi kurir’s new price model has been captured through interviews with representatives from taxi kurir, interviews with taxi drivers, interaction with taxi kurir’s it-based booking system (mainly the booking app) and consumption of the offering as such (using taxis as a mode of transportation). how taxi kurir introduced an innovative price model to leverage the business model the swedish taxi market is one of the most deregulated in the world. differently from most other countries, any journal of business models (2014), vol. 2, no. 1 pp. 56-70 62 individual or company can start and operate a taxi business, as long as they comply with a basic set of rules regarding e.g. traffic safety, driver competence, visible declaration of terms and conditions, etc. there is, differently from most other countries, no restrictions regarding the number of taxi cars that are allowed to operate in the market or any regulations regarding price levels. the swedish taxi market turns over approximately 800 million euros. it is operated by some 16,000 taxi cars. most of the cars belong to a national or local taxi company. however, the cars are not owned by the taxi company, instead they franchise the brand name (the name and colour that is striped on the car), access to a central booking system (via telephone, the web and smartphones) and a set of contracts with large customers (like big companies and important travel hubs like airports, railway stations, hotels and entertainment arenas). the market is dominated by a few big taxi companies. in stockholm, for example, the three biggest brands capture almost 60% of the market. the taxi companies do not own any cars. instead, the cars are owned by independent taxi owners. they typically own a handful of cars (1-5 cars). the owners, in turn, employ the drivers. the financial structure of the industry is thus two tiered; there is one financial structure in the umbrella organization, the taxi company. and one for the taxi owner operating the car(s). the taxi owners absorb the capital cost of the car and the risk of running the car. the “switching cost” for a taxi owner – to move from one taxi company to another, or to go completely independent – is fairly low. it caters for a volatile market where taxi owners move between brands as soon as they believe that the costs of belonging to one brand are higher than the benefits of staying with it. the taxi companies are typically membership organizations. they are founded, “owned” and controlled by the taxi owners that belong to it. the size of the brand (measured as number of members) is typically restricted by the fact that existing members often want to limit the number of taxi cars operating in the market (i.e. shortening the supply of taxi cars). this type of taxi company is often organized as federations where the taxi owners populate the board; hence – simultaneously – act as superiors to the management team (being their owners) and “subordinates” being the “agents” in the network. the alternative structure is to operate the taxi company as an independent business – on its own merits. such brands are typically owned by someone else than the taxi owners. these companies rather view their business model as a franchise concept where the brand is the franchise owner and the individual taxi owners are the franchisees that utilize the resources from the franchiser (e.g. the brand name, the booking gateway, education, quality control, contracts with large customers, etc). developing a new price model taxi kurir is the largest swedish taxi company. its business model is of the second type above. they are the only nationwide taxi company in sweden and operate in 43 cities. their turn over is almost 100 million eur. the company is privately owned by the family karlsson. the prime reason for taxi kurir to re-think the design of their price model was the turbulence in the swedish taxi industry, following from the de-regulation of the market in the early nineties. over the years, especially big city taxi markets (like stockholm) had been flooded with solitaire taxi owners that deliberately, and legally, skimmed the market (charging up to 400% more than the “standard price” in the market – some times even more), operating under a legitimate taxi license. visitors have been “fooled” by these independent taxis, and there was an intense debate in sweden whether to re-regulate the market again. taxi kurir saw this problem and found that they had to act on it. they understood that the large price spread was provoking to many customers and that it could harm the taxi market as such. one way to deal with the challenge was to rethink the design of the dominant price model in the market – charging customers ex post, after the trip. a price model that was disliked by many customers. taxi kurir decided to take opportunity of this and introduce a completely new price model: offering ex ante fixed prices for any trips, between any two addresses. regardless of origin and destination, customers can book a taxi and get a binding price quote from the system before the booking. regardless of journal of business models (2014), vol. 2, no. 1 pp. 56-70 63 circumstances during the trip (traffic jams, the driver’s choice of route etc), the price stays fixed. in designing the new price model, taxi kurir could leverage two important features in their business model. first, they could leverage their advanced computerized booking system (a key resource) that served as their prime channel to the market. in the system, taxi kurir’s customers book taxis directly (mainly large organizations that use taxi kurir’s services repeatedly, like travel agencies and travel departments within large organizations). second, the owner’s passion for customer demands – and how to align these with the value proposition – paved the way for the new price model. for a long time, many customers had complained about the variable price model. however, the industry had been reluctant to listen to this. fixed prices were mainly regarded as an exception. they were only offered (officially) on trips to and from travel hubs, e.g. airports and railway stations2. the owner of taxi kurir had noticed that customers (both large public and corporate customers, and private persons) wanted to know the price for the whole trip in advance. in a large survey, it was observed that an astonishing 92% of the customers would like to know the price before the trip. in the same study it was also revealed that 81% of the customers didn’t even understand the underlying bases for how taxi prices are calculated. the owner of taxi kurir saw this problem as a business opportunity. to develop and implement a new price model, a set of different requirements had to be met. first; the calculation of the ex ante price (for each of the infinite number of trips that can be booked; from any swedish address to any other swedish address) had to be automated. it would not be possible for any human agent to immediately calculate these prices and give the customer a binding offer. instead, it needed to be executed by a price engine. 2 fixed prices can of course also be negotiated, by exception and bi-laterally, between driver and passenger. in these negotiates, no explicit reference price is available, so the actual price level is a result of a negotiation between supply and demand. the price engine could be developed, thanks to detailed digital maps that hade become available in the market (which happened just recently, as a consequence of the wide dispersion of gps-systems). to calculate a robust price, the engine needed 1) correct information about available roads, 2) a computerized optimization tool to identify potential routes and 3) information about speed limits throughout the whole route. given a route, the price algorithm could calculate a “perfect” price. but, during the day – especially in larger cities, with a bad traffic infrastructure – there are periods when the conditions are everything but perfect. the price engine also had to take these dynamic aspects of the city’s traffic situation into consideration. these were the new key resources that had become available, that a team of business developers and analysts used to develop the new price model. it resulted in a price engine that was accepted by the board and the owner of taxi kurir. implementing the new price model the ability to actually deliver the new price model – in practice – required more than just a valid price engine (key resources). to “deliver” the new price model (to the customers), taxi kurir used its original booking system (channels). only modest changes needed to be made in the system to allow customers to book the trip at a fixed ex ante price (instead of the variable ex post price). the new price model was simply added as an alternative to the conventional price model. some customers still wanted to “bet” that the variable price would be lower than the fixed, others valued the certainty (i.e. knowing the price in advance, even though it might be a little higher than the variable price). the customer base for the new price model was initially taxi kurir’s corporate customers (that subscribed to the booking system). in 2012 taxi kurir believed that the new price model was robust enough to be released to a wider audience. instead of making the booking system available on taxi kurir’s website, they decided to use smartphones as the delivery platform (a new channel to the market). an app was developed for both iphones/ipads and android telephones. in addition to presenting a fixed ex ante price, the app also gives priority access to available taxi cars. journal of business models (2014), vol. 2, no. 1 pp. 56-70 64 adding a new price model in a taxi company does not only require external marketing – convincing the customers about its merits. existing internal structures also had to be challenged, as the taxi owners and the drivers had to be convinced about the new price model’s qualities (convincing key partners about its merits). the internal revenue structure in a taxi company is purely based on billing. the taxi owners pay a percentage of their revenue to the taxi company. the prices, however, are set for all vehicles that belong to the taxi company, hence the individual taxi owner can not choose whether to comply with the taxi company’s new price model and price levels or not. when the taxi company reconfigures the price model, it has immediate effects for all taxi owners’ financial results. the reward structure between the taxi company and the taxi owners is also mirrored in the relationship between the taxi owners and taxi drivers. the drivers are rewarded based on the money they generate. shifting price model, from a variable to a fixed price, moved “the risk” from the customer to the supplier. in the traditional model, the taxi company, the taxi owners and the drivers were always compensated for the trip; regardless of their choice of route and the traffic situation. they got paid for every kilometre and every minute they were occupied with a customer. the customer, on the other hand, had to bear the full risk; if a driver took a longer route than necessary, the customer had to pay a higher price. switching the risk from customers to taxi owners and drivers, of course, met some criticisms. however, the owner of taxi kurir was determined; he was certain that the market will reward companies that are aligned with their customers’ preferences (aligning the value proposition with customer demands). having seen the customers’ opinions in the survey about the established price model convinced him that a “price model innovation” would 1) attract new customers, 2) grow the business, and even 3) put pressure on the internal efficiency of the business model. in meetings with taxi owners (the franchisees), taxi kurir argued that the new model would generate higher revenues and profits (in the long run). when presenting the new model, taxi kurir’s owner ended every meeting saying that the new price model was mandatory. if the franchisees didn’t believe in it, they could always join another taxi company or go independent. no taxi owner left taxi kurir. however, getting the taxi owners’ acceptance for the new price model was not enough. the drivers also needed to be convinced. the challenge in the taxi industry is that the drivers can not be forced to accept the new price model. the dispatch system is designed as a market: a booking is released in the system and the driver that first confirms it will get it. the dispatch system, and the internal salary structure, is based on the assumption that every driver will try to grab any available booking (within her economic reach) as quickly as possible. supply and demand, so to speak, meet in the dispatch system. the price level is set to promote drivers to pick up bookings. in essence, the price model and the reward structure affects the performance of the key activities. the drivers are key partners in the business model, but still autonomous agents. they always make their own calculations on which booking to take (for example estimating the cost of getting to the pick up address as well as the chance of getting a new passenger close to the drop off address). when releasing the new price model, one of the challenges was to make sure that the drivers’ increased risk (of a fixed price booking) did not surpass the revenue from that booking. if all drivers ignored the fixed price bookings, because they’d rather hover (waiting for a traditional booking), the customers using the new price model would risk not being picked up at all, which would harm the brand tremendously. through internal education and explicit reporting on the effects of the new price model the drivers gradually accepted it as part of the value proposition. taxi kurir also made an effort to develop the drivers’ knowledge about the geography. when evaluating driver behaviour, it was obvious that many drivers didn’t take the shortest and fastest route to the destination. instead they often took routes they were accustomed to. when the drivers understood that this eroded their margins, many of them saw an immediate reason for changing to better routes (the ones that were suggested by the optimization system). the fixed price model hence increased internal efficiency. journal of business models (2014), vol. 2, no. 1 pp. 56-70 65 taxi kurir’s new fixed price model was initiated by an awareness about the customers’ preferences, specifically their wish to know the price before the product is consumed. the price model was first launched in taxi kurir’s booking system. later it was released to the broader audience through smartphones. the challenge was not to get acceptance for the new model from the customers, but to convince the taxi owners and drivers that it would be beneficial to them to employ the new price model – even though it would shift the risk from customer to supplier. analysis of the price model’s importance to the business model based on the presentation of taxi kurir’s new price model there are some aspects that become particularly interesting. to start with, the perceived differences between taxi kurir’s new and old price model is much greater than actual change in the dimensions of the price model. we have seen similar patterns in other industries. for example, ryan air positions themselves as a low-fare airline, but when we analyze their price model we see that it is mainly a questions of scoping. many observers have commented on the “real” price of a ryan air ticket, showing that the price is not as low as it is claimed if you include all the fees that ryan air charges separately for (which are typically included in the incumbents offerings). hence, ryan air’s innovation was rather a new price model than a new price level. their scope lever is far to the right, compared to their competitors. for all other sliders, however, their configuration is identical with the other airlines. a similar pattern becomes apparent in taxi kurir’s new price model. scope, price base, influence and rights are the same as for the traditional price model. it is only the price formula that has shifted: from fixed fee + per unit price to a solid fixed price for the trip. one small change, in just one of the dimensions, has resulted in a completely new price model that extends taxi kurir’s value proposition. we can also see some interesting interactions between the components in the business model. taxi kurir’s prime focus, in the business model, is the customer. it was the customer’s opinion regarding the traditional price model that led to the development of a new way to price taxi trips. 92% of the customers claimed that they would rather get a binding quote prior to the booking, than paying a variable price based on the time and distance travelled. compared to taxi kurir’s competitors, their business model is one-directional; they figure 3 the minor change in taxi kurir’s price model, that resulted in a fundamentally new price model journal of business models (2014), vol. 2, no. 1 pp. 56-70 66 only have one customer (the travellers). the competitors, however, often operate as cooperative where the taxi company (the brand) has two equally important “customers”: both the travellers and the taxi owners. i suggest that this is one important explanation why no other brand has picked up the new price model, since it shifts the risk from customers to the supplier. this is not in the interest of the owners (of the taxi company). on a more detailed business-model level we can see three flows of events within the business model. all are an effect of the introduction of the new price model. the first flow is a result of the observation above; the main focus in taxi kurir’s business model is the customer. the customers’ opinion regarding the price model resulted in an assessment of how the price could be more aligned with their preferences. the new price model was not added as just a new pricing tactic. it essentially became the core message in the communication of the company’s value proposition. most of taxi kurir’s marketing efforts during the last years have focused on fixed prices. the flow hence went from customer preference, via redesign of the price model to an extension of the value proposition. the second flow focuses on taxi kurir’s development of the new offering. the new offering could not have been created (at a reasonable cost) if there had not all ready been a robust infrastructure of key resources. the new price model could be implemented in taxi kurir’s existing dispatch system. the system was the prime channel for corporate customers and travel agencies to order taxis from taxi kurir. only a few new functions needed to be added in the booking system. also the concept of a customer-centric price models was easy to explain in relation to taxi kurir’s value proposition. the additional investments were minor; purchase of digital maps and routing, programming of the price engine, and finally development of a smartphone app. the new price model, hence leveraged some key resources and existing channels to reach the customers. the existing business model hence served as platform for delivering the new price model. finally, the third flow focuses on the operation of the new price model in the business model. it started of as a new feature in the value proposition (following from explicit customer preferences, which was made available though existing key resources and channels). however, it required special attention to assure that the key activities were carried out. the dispatch system in a taxi company emulates a market. when a booking is made in the system it is published in the dispatch system. the driver that first picks it up will get it. there is no overall controller that allocates cars to orders. the underlying assumption is that drivers will figure 4 the minor change in taxi kurir’s price model, that resulted in a fundamentally new price model coststructure revenuestream key partners key activities key resources value proposition customer segments customer relationships channels 1 2 3 journal of business models (2014), vol. 2, no. 1 pp. 56-70 67 want to get every booking, since their compensation is based on the revenue they generate. as long as they know that they will get a risk-free revenue from every booking, they will be prepared to take them. but, as the new price model shifted the risk, the individual driver will not know that she will get compensated for the time and distances she spends in delivering a fixed fee booking. some drivers, in worst case all drivers, might come to the conclusion that the risk of taking a fixed booking is too high (i.e. that the revenue will be lower than the alternative revenue they would get if they picked another booking). hence, the new price model has dramatic consequences on the performance of the key activities in the business model and the priorities among the key partners. implications to further business model and price model development following from the patterns i have observed in taxi kurir’s development of a new price model i believe that there are interesting issues to address in the interaction between business models and price models. this should be obvious from a business-model perspective, where most frameworks address revenue, pricing, income, etc as one important concept in the broader framework. following from my reading of the business model literature, i believe our five dimensions can add to the understanding of how the price model can be configured to entice customers to pay for the value proposition. typically, the pricing types and tactics in the business model literature do not offer a systematic approach to price model design, as our five dimensions do. based on both the empirical example in this paper and other investigations we have made, we have seen that a company can create substantial changes in the price models they offer. just moving the slider one position, in any of the dimensions, will result in a new price model. more important, however, is that the redesign of existing price models should be based on the content of the business model. the price model should be configured to leverage and promote the core features of the business model: leveraging the value proposition and assuring that key activities are performed and that the key partners accept the changes. it is important to remember that small changes in the price model do not necessary translate into small and easy changes in the organizational setting. this became apparent in taxi kurir’s case where the design of the new price model led to repercussions throughout the business model, following from the way the “production system” and the relationships to the key partners were structured. therefore we sometimes like to compare the price model’s five dimensions with the sliders in an equalizer in a hifi stereo. depending on what music you listen to, you should enhance the right frequencies to enhance the experience. different music require different configuration of the equalizer. the same goes for the dimensions in the price models; different configurations of the business model should result in different configurations of the price models. taxi kurir has been able to configure a new fixed price model that leverages the core concepts in their business model. it is however not obvious that a competing taxi company could have introduced (or copied) the same price model since they do not focus on the same value proposition, they may use different channels to the market and they may rely on a different resource base. but more important, their relationship to their key partner (the taxi owners and drivers) is different. in future research i would like to extend our knowledge of the contingent relationships between the business model and the price model. are there any generic configurations of business models that would align neatly with equivalent standard configurations of the price model? and more specifically: are there some specifics in the business model that contradict particular configurations of the price model. i would also like to explore the usefulness of an equalizer as a metaphor to indicate the need for adapting the price model to the surrounding business model. this indicates that further research on the relationship between innovative price models and business model is of great importance. journal of business models (2014), vol. 2, no. 1 pp. 56-70 68 references anderson, c. (2009) free: the future of a radical price. hyperion, new york. baden-fuller, charles and morgan, mary s. (2010) “business models as models”, long range planning, apr2010, vol. 43 issue 2/3, p156-171 bromwich, michael and alnoor bhimani (1994) management accounting: pathways to progress. cima. casadesus-masanell, ramon and joan enric ricart (2010) from strategy to business models and onto tactics. long range planning, apr 2010, vol. 43 issue 2/3, 195-215. chesbrough, henry and richard s rosenbloom (2002) the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial & corporate change, jun 2002, vol. 11 issue 3, 529-555. dolan robert. j. and simon hermann (1996) power pricing: how managing price transforms the bottom line. the free press, new york. hedberg, bo, göran dahlgren, jörgen hansson and nils-göran olve (1997) virtual organizations and beyond: discover imaginary systems. wiley. ingenbleek, p. (2007) “value-informed pricing in its organizational context: literature review, conceptual framework, and directions for future research”. journal of product & brand management, 16(7), 441-458. iveroth, e., westelius, a., petri, c.j., olve, n.g., cöster, m. & nilsson, f. (2013) “how to differentiate by price: proposal for a five-dimensional model”, european management journal, 31(2), 109-123. johnson, thomas h. and robert s. kaplan (1987) relevance lost: the rise and fall of management accounting. harvard bsp. kaplan, robert s. and robin cooper (1998) cost and effect: using integrated cost systems to drive profitability and performance. harvard bsp. kim, ju-young, martin natter and martin spann (2009) pay what you want: a new participative pricing mechanism. journal of marketing, vol. 73, issue 1, 44-58. malmer, s. (1996) kommunal prissättning mot bakgrund av självkostnadsprincipen. en problemanalys. (in swedish: municipal pricing and full costing) licentiate thesis. gothenburg university, the school of public administration, gothenburg. ng, i.c.l. (2010), “the future of pricing and revenue models”. journal of revenue & pricing management, 9 (3), s. 276–281. nilsson, fredrik, nils-göran olve and anders parment (2011) controlling for competitiveness: strategy formulation and implementation through management control. liber and copenhagen bsp. normann, r. and ramírez, r. (1993) “from value chain to value constellation: designing interactive strategy”. harvard business review, 71(4), 65-77. olve, n-g, cöster, m., iveroth, e., petri, c-j, westelius, a (2013) ”prismodeller som strategiskt verktyg”, bonnier ledarskapshandböcker journal of business models (2014), vol. 2, no. 1 pp. 56-70 69 osterwalder, alexander (2004) the business model ontology a proposition in a design science approach, phd thesis, university of lausanne. osterwalder, alexander and pigneur, yves (2005) “clarifying business models: origins, present, and future of the concept”, communications of ais, 2005, vol. 2005 issue 16, p1-25, 25p osterwalder, alexander, yves pigneur and tim clark (2010). business model generation: a handbook for visionaries, game changers, and challengers. hoboken, n. j.: wiley. porter, michael e. (1985) competitive advantage: creating and sustaining superior performance. free press. sakurai, michiharu (1997) integrated cost management: a companywide prescription for higher profits and lower costs. productivity press. shapiro, c. and varian, h.r. (1999) information rules: a strategic guide to the network economy. harvard business school, boston, mass. teece, d.j. (2010) “business models, business strategy and innovation”. long range planning, 43(2-3), 172-194. westelius, alf, carl-johan petri, mathias cöster, fredrik nilsson and nils-göran olve (2010) prismodeller en taxonomi (in swedish: price models a taxonomy), ekonomiska samfundets tidskrift, 2010:3, 175-190. wong, k. i., wong, s. c., yang, h., & wu, j. h. (2008). modeling urban taxi services with multiple user classes and vehicle modes. transportation research part b: methodological, 42(10), 985-1007. yang, h., fung, c. s., wong, k. i., & wong, s. c. (2010). nonlinear pricing of taxi services. transportation research part a: policy and practice, 44(5), 337-348. yang, h., wong, s. c., & wong, k. i. (2002). demand–supply equilibrium of taxi services in a network under competition and regulation. transportation research part b: methodological, 36(9), 799-819. journal of business models (2014), vol. 2, no. 1 pp. 56-70 70 about the author carl-johan petri holds a ph.d. from linköping university. his main research interests are within the fields of strategy, management control and pricing. he has written several books about balanced scorecard (for example making scorecards actionable, wiley 2003, that has been translated into eight languages). during the last years he and his colleagues at the centre for advanced studies of innovative price models have published several articles and a book about how to design innovative price models. 110 journal of business models (2022), vol. 10, no. 2, pp. 110-128 framing a maturity model for business model innovation erik steinhöfel1,*, henri hussinki2, karl joachim breunig3 abstract purpose: the aim of this conceptual study is bridging established theory on maturity models and business model innovation. the paper identifies boundary conditions and necessary steps for the design of an integrated maturity model for business model innovation. thus, this contribution establishes a foundation for assessing, improving and benchmarking corporate business model innovation capabilities. design/methodology/approach: the paper systematically assesses the extant literature to establish ontological consistency in the bridging attempt and defines the boundary conditions and specific steps for subsequent model development. findings: prior published research only to a limited degree relates maturity models to business model innovation. our assessment of extant literature reveals how innovation related maturity models exhibit an extensive variety with regard to their application domain, number, and descriptors of dimensions, level of granularity, the design process, as well as empirical validation and the consideration of business model aspects. based on these insights, the focus, scope, and steps towards a maturity model for business model innovation are defined. originality/value: the results of the research provide an important foundation for further research and development steps towards a maturity model for business model innovation. furthermore, the detailed analysis of innovation related maturity models has potential to be used as a basis for the development of other maturity models in the innovation domain and as a blueprint for analysing future maturity models in detail. keywords: business model innovation, business model, maturity model, innovation management please cite this paper as: steinhöfel, e., hussinki, h., and breunig, k. j. (2022), framing a maturity model for business model innovation, journal of business models, vol. 10, no. 2, pp. 110-128 1 lut school of business and management, lappeenranta-lahti university of technology lut yliopistonkatu 34, 53850 lappeenranta, finland 2 lut school of business and management, lappeenranta-lahti university of technology lut mukkulankatu 19, 15210 lahti, finland 3 oslo business school, oslo metropolitan university – oslomet, pilestredet 35, 0166 oslo, norway * corresponding author email: erik.steinhoefel@lut.fi doi: https://doi.org/10.54337/jbm.v10i2.7024 issn: 2246-2465 https://doi.org/10.54337/jbm.v10i2.7024 journal of business models (2022), vol. 10, no. 2, pp. 110-128 111111 introduction business model innovation (bmi) has recently attracted attention as a promising approach for providing a sustainable competitive advantage, particularly in the context of saturated markets, interindustry competition, and substitutability of product and process innovations (brasseur, mladenow and strauss, 2017; steinhöfel and inkinen, 2016; steinhöfel, kohl and orth, 2016). extant literature highlights how products, services, and processes tend to rapidly become obsolete due to imitation, therefore innovations in these areas depend on bmi to enable competitive advantages beyond the shortto medium-term (amit and zott, 2010; chesbrough, 2010). thus, the extant literature discusses bmi as a main determinant of competition and simultaneously as the most challenging type of innovation (brasseur et al.; 2017; minatogawa, franco, pinto and batocchio, 2018) with a high rate of failure (christensen, bartman and van bever, 2016), particularly due to the lack of the required skills, knowledge, and suitable processes and mechanisms to support bmi (brasseur et al.; 2017). any innovation, including bmi, must be ubiquitous, controlled, measurable, and strategically implemented, which is why it must be supported by suitable analytical models, processes, and instruments (de fazio, 2017). based on the assumption that organizational change and development occur in predictable patterns, maturity models (mms) represent theories about how organizational maturity evolves in a stage-by-stage manner along an anticipated, desired, or logical maturation path (becker, knackstedt and pöppelbuß, 2009; gottschalk, 2009; kazanjian and drazin, 1989; röglinger and pöppelbuß, 2011). accordingly, van steenbergen, bos, brinkkemper, van de weerd and bekkers (2010) define mms as “means to support such […] development, as they distinguish different maturity levels that an organization successively progresses through. as such they can be used as a guideline for balanced incremental improvement of a functional domain” (van steenbergen et al.; 2010, p.  317). the mm is thus a helpful tool to assess the competency, capability, level of sophistication, and degree of progress of a selected domain based on a more or less comprehensive set of criteria. (becker et al.; 2009; de bruin, freeze, kulkarni and rosemann, 2005; ofner, hüner and otto, 2009; röglinger and pöppelbuß; 2011). despite a large number of different types of mms in various application domains and different levels of detail, mms share similar structures: they define a number of discrete stages or maturity levels for one or multiple dimensions, with descriptions of the characteristic performance per level building upon each other (fraser, moultrie and gregory, 2002). the value for organizations applying such models varies according to the application-specific purpose. first, mms are diagnostic tools that enable organizations to describe maturity in the context of a current assessment. secondly, a mm provides guidelines on how to reach the next, higher maturity level. descriptions of higher maturity levels can be regarded as best-practice guidance. finally, mms can be used for the purpose of comparison and facilitate, for example, internal and external benchmarking (de bruin et al.; 2005; ofner et al.; 2009; röglinger and pöppelbuß; 2011). in spite of the academic interest in mms (becker et al.; 2009) and the existence of various maturity models that focus on corporate innovation and support companies in fostering innovation systematically(e.g. demir, 2018; enkel, bell and hogenkam, 2011; igartua, retegi and ganzarain, 2018), there is, to the best of the authors’ knowledge, no holistic mm available focusing on bmi. a study by rübel, emrich, klein and loos (2018) develops a mm for business model management, which “links existing organizational and operational knowledge [to] new concepts and makes it accessible through a modified business model for industry 4.0” (rübel et al.; 2018, p. 2040). even though the term “new concepts” implies novelty which is a key factor where innovation is concerned, rübel et al. (2018) mainly focus on the design and further improvement of a specific bm by means of the single building blocks of the business model canvas (see osterwalder and pigneur, 2010) in the very specific context of industry 4.0. the business model in its entirety the combination of the different building blocks and further important aspects related to its innovation such as required superordinate knowledge, structures, and processes are neglected though. this study provides a targeted assessment of how journal of business models (2022), vol. 10, no. 2, pp. 110-128 112112 theory on mms can be fused with theory on bmi. our aim is to foster holistic conceptual integration between mms and bmi based on an assessment of extant published research. thus, providing a foundation for further research as well as for allowing managers to assess their organisations with regard to their current bmi status, identify potential for improvement on this basis, promote bmi through pre-defined measures and benchmark their organisations. accordingly, this paper contributes to the ongoing discussion by establishing ontological consistency in our bridging attempt, as well as by defining boundary conditions and steps for subsequent model development. relevance and challenges of business model innovation as outlined above the business model (bm) has recently been established as another promising innovation object in research (foss and saebi, 2017; wirtz, pistoia, ullrich and göttel, 2016). bms have a much higher complexity than products, services and processes and are thus much more difficult to imitate by competitors (von den eichen, matzler, freiling and füller, 2014; wirtz, 2021). in literature various different definitions of the term bm exist (e.g. badenfuller and morgan, 2010; casadesus-masanell and ricart, 2010; teece, 2010; wirtz et al.; 2016; wirtz; 2021; zott, amit and massa, 2011). in this context, zott et al. (2011) note that researchers repeatedly adopt idiosyncratic definitions that fit the purpose of their research, but are difficult to reconcile and prevent progress. based on existing definitions and their underlying differences and commonalities we define bm as follows: a bm summarises the complexity of an organisation by reducing it to its essential components and their interrelations. it describes how an organisation achieves its overall goals by systematically designing and combining the components and thus enables the targeted description, analysis and development of organisations. analogous to the diversity of definitions with regard to bm, the concept of bmi is also not uniformly defined and a broad spectrum of synonymously used terms and definitions exists (achtenhagen, melin and naldi, 2013; andries, debackere and van looy, 2013; charitou and markides, 2003; demil and lecocq, 2010; doz and kosonen, 2010; hamel, 2002; johnson, christensen and kagermann, 2008; kim and mauborgne, 1999; osterwalder and pigneur, 2010; reymen, berends, oudehand and stultiëns, 2017; saebi, lien and foss, 2017; velu, 2017; wirtz; 2021). building up on the differences and similarities of existing definition we define bmi as follows: bmi refers to both, the process of consciously and continuously adapting an existing bm and the proactive design of a completely new bm for an organisation. the objective of bmi is to secure the existence of an organisation and to achieve its overriding goals by maintaining or gaining competitive advantages. these are realised by adapting or designing individual or several components of a bm and/or their interrelations. the relevance of bmi for research and practice is reflected on the one hand in the steadily increasing number of related publications (steinhöfel, 2022) and on the other hand in its influence on corporate success (al-nimer, abbadi, al-omush and ahmad, 2021; anwar, 2018; aspara, hietanen and tikkanen, 2010; bornemann, 2010; clauss, abebe, tangpong and hock, 2019; heij, volberda and van den bosch, 2014; lindgardt, reeves, stalk and deimler, 2009; pohle and chapman, 2006; zott and amit, 2007) as well as the perception of bmi by managers (becker, 2011; economist intelligence unit, 2005; ibm institute for business value, 2021; pohle and chapman; 2006). however, this is contradicted by the fact that bmi is one of the greatest challenges for today ’s organisations due to differing reasons, of which a variety are outlined in the following. accordingly, for companies, especially small and medium sized enterprises, bmi is a challenging, very complex and difficult task to manage, for which time, financial and human resources are scarce (buliga, 2014; lindgren, 2012; rieger, bodenbenner, wagner, tilly, schoder and seltitz, 2015). moreover, bmi in companies is largely reactive, intuitive and unstructured and no uniform, structured approach exists (buliga; 2014; halecker, hölzle and sittner, 2014; lindgren; 2012; marolt, lenart, maletič, borštnar and pucihar, 2016; rieger et al.; 2015; wagner, tilly, bodenbenner, seltitz and schoder, 2015). in this context, according to halecker journal of business models (2022), vol. 10, no. 2, pp. 110-128 113113 et al. (2014) the initiation of bmi, which might be triggered through internal and external forces (becker, ulrich and stradtmann, 2018; pucihar, lenart, kljajić borštnar, vidmar and marolt, 2019) and the evaluation as well as implementation of bmi options represent further major challenges. adding to that, especially small and medium-sized companies are mostly unaware of available methods and tools for bmi (bouwman, molina-castillo and reuver, 2016; heikkilä, bouwman, heikkilä, solaimani and janssen, 2016) and if known they are only used to a limited extent (marolt et al.; 2016; wagner et al.; 2015) as they are partly perceived as too academic or complex to go through a full cycle of bmi (heikkilä, bouwman, heikkilä, haaker, lopez-nicolas and riedl, 2016). an in depth-analysis of well-established methods (bucherer, 2010; gassmann, frankenberger and choudury, 2021; osterwalder and pigneur; 2010; schallmo, 2018; wirtz; 2021) identifies further relevant methodological shortcomings (steinhöfel; 2022). these mainly consist in the lacking consideration of companies’ existing resources in the design process and of its systematic documentation, the exclusive focus on a single bm as the design objective instead of the elaboration of a potential development paths for continuous bmi (roadmap) and limitations regarding the consistent allocation of roles and implementation orientation in the course of bmi as well as the systematic application of bm patterns (steinhöfel; 2022). furthermore, established companies fail in bmi due to conflicts with existing technologies, which is also due to the lack of clarity regarding bmi itself and the associated inability to innovate bm (chesbrough; 2010). on top, managers are also cognitively constrained by path dependencies, which keep them close to what they already know when it comes to bmi (bohnsack, pinkse and kolk, 2014). another shortcoming persists in the limited involvement of relevant stakeholders in the bmi process, as their involvement represents a decisive success factor (ibarra, bigdeli, igartua and ganzarain, 2020; rieger et al.; 2015; wagner et al.; 2015). while some companies advocate the involvement of heterogeneous teams from all areas of the company others prefer the exclusive involvement of senior management (wagner et al., 2015). furthermore, external stakeholders such as customers and partners are, if at all, only involved indirectly in the bmi processes so that their potential insights remain largely untapped (rieger et al.; 2015). the broad spectrum of the selected challenges outlined above suggests that enabling companies to innovate their bms requires considering a number of different structural, process, knowledge and capability-related aspects. against this backdrop, holistic maturity models, which allow the current bmi status to be recorded along various dimensions, systematically provide targeted measures for further development along these dimensions and thereby ultimately enable companies to reap the benefits of bmi, are a suitable approach. in the following the first steps for developing a suitable mm for bmi are described. methodology this conceptual study builds on steinhöfel, hussinki and breunig’s (2020) analysis of existing mms as a basis for defining boundary conditions and additional steps for the development of a mm for bmi. the study was conducted by applying the framework for mm development created by röglinger and pöppelbuß (2011), as well as knackstedt, pöppelbuß and becker’s (2009) procedural model for developing mm, which was referred to by röglinger and pöppelbuß (2011). the framework was selected from a variety of articles focusing on methodologies for systematically developing mm based on literature research using practical and pragmatic support for mm development as well as the number of citations as selection criteria. the framework proposed by röglinger and pöppelbuß (2011) consists of general design principles (dps) and several related sub-aspects of dps that are helpful for designing useful mms for specific application domains and purposes of use. according to the different application-specific purpose of mms, the proposed dps are grouped into (1) basic principles, (2) principles for a descriptive purpose of use, and (3) principles for a prescriptive purpose of use (see table 2). röglinger and pöppelbuß (2011) have deliberately not considered the comparative purpose of use in their framework. in their opinion, dps for this purpose of journal of business models (2022), vol. 10, no. 2, pp. 110-128 114114 table 1. group design principles (1 ) b a s ic 1.1 basic information a) application domain and prerequisites for applicability b) purpose of use c) target group d) class of entities under investigation e) differentiation from related maturity models f) design process and extent of empirical validation 1.2 definition of central constructs related to maturity and maturation a) maturity and dimensions of maturity b) maturity levels and maturation paths c) available levels of granularity of maturation d) underpinning theoretical foundations with respect to evolution and change 1.3 definition of central constructs related to the application domain 1.4 target group-oriented documentation (2 ) d e s c r ip ti v e 2.1 intersubjectively verifiable criteria for each maturity level and level of granularity 2.2 target group-oriented assessment methodology a) procedure model b) advice on the assessment of criteria c) advice on the adaptation and configuration of criteria d) expert knowledge from previous application (3 ) p r e s c r ip ti v e 3.1 improvement measures for each maturity level and level of granularity 3.2 decision calculus for selecting improvement measures a) explication of relevant objectives b) explication of relevant factors of influence c) distinction between an external reporting and an internal improvement perspective 3.3 target group-oriented decision methodology a) procedure model b) advice on the assessment of variables c) advice on the concretization and adaption of the improvement measures d) advice on the adaptation and configuration of the decision calculus e) expert knowledge from previous application table 1: framework of general design principles for maturity models according to röglinger and pöppelbuß (2011) journal of business models (2022), vol. 10, no. 2, pp. 110-128 115115 use largely depend on external factors, such as standardised and publicly available specifications, and can therefore only be partially influenced during mm design (röglinger and pöppelbuß; 2011). the relevant mms for analysis were selected based on a literature review whereas focus was put on maturity models that aim at fostering corporate innovativeness, specifically with focus on bms (steinhöfel et al.; 2020) to cover the domain of bmi to the most possible extent. google scholar and the metasearch engine fraunhofer elib, which covers scientific databases such as econis (zbw), scopus and wiley online library, were used for literature search. in accordance with the analysis focus for the search, the following terms and combinations of terms using the operator “and” were applied: “innovation maturity model”, “innovation maturity models”, “innovation” and “maturity model”, “innovation management” and “maturity model”, “business model innovation” and “maturity model”, and “business model” and ‘maturity model”. after initial search, 26 mms were discerned. based on number of citations and year of publication, the six most relevant mms were considered for in-depth analysis. these collectively comprise the strategic management maturity model for innovation (s3m-i) by demir (2018), the open innovation maturity framework (oimf) by enkel et al. (2011), the innovation capability maturity model (icmm) by essmann and du preez (2009), the business innovation maturity model (bimm) by carlson and gupta (2014), the innovation maturity model (im2) by igartua et al. (2018), and the maturity model for business model management in industry 4.0 by rübel et al. (2018). thus, five maturity models with focus on corporate innovation and one with focus on bm management built the foundation for the analysis. analysis of selected maturity models we analyse the six selected mms according to the categories of basic, descriptive, as well as prescriptive dps and their related sub-aspects proposed by röglinger and pöppelbuß (2011) illustrated in table 2. in the context of basic dps, emphasis is placed on the design process and the extent of empirical validation (dp1.1f) to gain specific insights into the definition of steps towards a mm for bmi. moreover, the mms are analysed regarding the explicit consideration of aspects related to the bm concept in order to gain insights in that regard. 4.1 basic design principles dp 1.1 basic information the analysis regarding the application domain (dp 1.1a) revealed that the major domain of the mms is innovation management apart from strategic management, with a focus on innovation in terms of products, services, and bms (demir; 2018) and bm management regarding industry 4.0 (rübel et al.; 2018). in this context, the mms with the domain of innovation management focus on open innovation (enkel et al.; 2011), innovation of products, processes and/or strategies (essmann and du preez; 2009), product, service, process, and bmi (carlson and gupta; 2014), as well as services, products as well as bms in the light of innovation (igartua et al.; 2018). regarding the intended purpose of use (dp 1.1b), it was found that most mms pursue a descriptive, prescriptive, and comparative purpose of use. exclusively, demir (2018) and rübel et al. (2018) do not consider the comparative purpose. with regards to the target group (dp 1.1c), the analysis revealed that focus is mainly on executives and on decision makers in smes (igartua et al.; 2018), or more broadly practitioners (rübel et al.; 2018). the analysis of the mms regarding the class of entities under investigation (dp 1.1d) demonstrates that the majority of mms are intended for any type of organisation in any industry (carlson and gupta; 2014; demir; 2018; enkel et al.; 2011; essmann and du preez; 2009). however, rübel et al. (2018) refer to organisations which can implement industry 4.0 components and igartua et al. (2018) refer to microenterprises and small smes. in line with the aforementioned application domains (1.1a), which are often indicated by the name of the respective mm, all mms elaborate on differences regarding related mms (dp 1.1e) of the same or similar journal of business models (2022), vol. 10, no. 2, pp. 110-128 116116 domains. a major difference can be observed with regard to the documentation and communication of the design process and extent of the empirical validation (dp 1.1f). some authors document and communicate the design process in detail (enkel et al.; 2011; essmann and du preez; 2009; rübel et al.; 2018), whereas others only touch on the design process briefly (carlson and gupta; 2014; igartua et al.; 2018) or do not elaborate on it at all (demir; 2018). empirical validation has so far been provided for 50% of the mms. this demonstrates that while all authors consider existing mms and the majority conducts literature research to some degree for developing their mm, the scope of the design process differs greatly, as outlined in the following section. dp 1.2 definition of central constructs related to maturity and maturation the analysis regarding maturity and dimensions of maturity (dp 1.2a) reveals that only one mm is onedimensional (carlson and gupta; 2014), whereas the other mms are multi-dimensional (table 2). the multi-dimensional mms differ greatly in terms of the number of dimensions, which ranges from three to eleven dimensions, as well as in terms of descriptors and the respective descriptions. these differences can be assigned to differences of the mms with regard to the respective application domain and the purpose of use. in this context, it is noteworthy that it is difficult to determine the number of dimensions for the mm created by essmann and du preez (2009). according to röglinger and pöppelbuß (2011), a onedimensional mm comprises for example process or object maturity (one axis) whereas a multi-dimensional model comprises multiple dimensions for which maturity levels are defined individually (two axes). thus, each dimension has a different description for each maturity level (own maturity path). the mm by essmann and du preez (2009) does not comply with either of these descriptions, as it combines maturity with an innovation capability construct and an organisational construct (three axes). in this context, both constructs comprise dimensions as determined by röglinger and pöppelbuß (2011), which are further broken down in the case of the innovation capability construct, for which maturity levels are defined. apart from this, the content analysis of the various dimensions of the mms shows that both internal and external factors are consistently considered and that certain aspects such as processes, knowledge and capabilities as well as leadership are almost consistently taken into account through differently termed dimensions (table 2). with regard to maturity levels and maturation paths (dp 1.2b), it can be observed that all mms end at level five, whereas demir’s (2018) mm can be considered a minor exception as it formally suggests six maturity levels, starting at level 0. with regard to the descriptors and the description of the maturity levels, there are differences depending on the application domain and purpose of use. therefore, with the exception demir (2018), the only common feature is that they start at level 1, and end at level 5. the available levels of granularity of maturation (dp 1.2b) exhibit a high degree variance. essmann and du preez (2009) provide several levels of granularity of maturation and thereby a very high level of detail. as outlined above, the framework comprises three axes whereas the innovation capability construct is further broken down into three capability areas and 11 underlying items, while the organisational construct comprises five items. the mm of enkel et al. (2011) presents a high level of detail with a detailed matrix, in which a maturity level description is provided for each dimension and the operationalisation of dimensions occurs through underlying sub-elements. similarly, rübel et al. (2018) measure maturity through underlying items of the bm building blocks. a lower level of detail can be determined for the mm of demir (2018) and carlson and gupta (2014) as they assess maturity on the dimension level by providing different level descriptions for each dimension. igartua et al. (2018) provide the lowest level of detail, as maturity levels apply to all dimensions and are only listed in the form of key points. the analysis regarding the theoretical foundations with respect to evolution and change (dp 1.2d) is complied with by all selected models as they build up on previous work and extant literature from the respective application domain as well as in terms of drivers and barriers of maturation. journal of business models (2022), vol. 10, no. 2, pp. 110-128 117117 table 2. dimensions of maturity maturity levels author/s model name dimensions descriptors levels descriptors demir (2018) strategic management maturity model for innovation (s3m-i) 7 (multi-d.) (1) leadership (2) planning & executing (3) processes & tools (4) structure & model (5) people & culture (6) performance management (7) innovation 6 0: undefined 1: initial 2: planned 3: performed 4: optimized 5: excellent enkel et al. (2011) open innovation maturity framework (oimf) 3 (multi-d.) (1) climate for innovation (2) partnership capacity (3) internal processes 5 1: initial/arbitrary 2: repeatable 3: defined 4: managed 5: optimizing essmann and du preez (2009) innovation capability maturity model (icmm) 8 (multi-d.) innovation capability construct (1) innovation process (2) knowledge and competency (3) organizational support organizational construct (4) strategy and objectives (5) functions and processes (6) organisation and management (7) data and information (8) customers and suppliers 5 1: ad hoc innovation 2: defined innovation 3: supported innovation 4: aligned innovation 5: synergised innovation carlson and gupta (2014) business innovation maturity model (bimm) 1 (one-d.) not explicitly stated 5 1: sporadic 2: idea 3: managed 4: nurtured 5: sustained igartua et al. (2018) innovation maturity model (im2) 11 (multi-d.) (1) strategy (2) competitiveness (3) manufacturing excellence (4) innovation (5) value propositions and business model (6) internationalization (7) advanced management (8) digitalization (9) sustainability (10) people (11) territory 5 1: unaware 2: aware 3: manage 4: defined 5: performance rübel et al. (2018) maturity model for business model management in industry 4.0 9 (multi-d.) (1) key partners (2) key activities (3) key resources (4) value proposition (5) customer relationship (6) channels (7) customer segment (8) cost structure (9) source of income 5 1: implicit 2: defined 3: validated/ standardized 4: analyzed 5: optimized table 2: dimensions and maturity levels of maturity models journal of business models (2022), vol. 10, no. 2, pp. 110-128 118118 dp 1.3–1.4 definition of central constructs & target group-oriented documentation the definition of central constructs related to the application domain (dp 1.3) is predominantly considered by the different authors. in this context, it demonstrates that the different constructs are not all explicitly defined though. often constructs are explained and thereby defined to some degree. as outlined by röglinger and pöppelbuß (2011), the definition of central constructs secures intelligibility and language adequacy. the analysis regarding target group-oriented documentation (dp 1.4) revealed that for all mms basic information and central constructs (dp 1.1–1.2) as well as their interrelations are primarily documented in a target group-oriented manner complying with the requirement of communication. design principles for a descriptive purpose of use dp 2.1 intersubjectively verifiable criteria for each maturity level and level of granularity intersubjectively verifiable criteria are provided to a differing degree. while carlson and gupta (2014), demir (2018) and enkel et al. (2011) combine maturity levels and dimensions of their models in a matrix and provide a criterion for each cell igartua et al. (2018) only describe such a combination without providing a matrix with respective criteria. in this context, enkel et al. (2011) operationalise their three dimensions via 10 elements and 31 associated items with related questions for the assessment, whereas for each item a specific maturity scale is provided. rübel et al. (2018) also combine levels and dimensions in a matrix, but only provide examples regarding criteria for maturity levels of one dimension. additionally, essmann and du preez (2009) combine their organisational construct and innovation capability construct in a matrix and provide 42 requirements and related questions as well as requirement-specific maturity scales for assessing maturity. dp 2.2 target group-oriented assessment methodology the analysis regarding the provision of a procedural model (dp 2.2a) revealed that only carlson and gupta (2014) explicitly mention a procedural model, while some studies do not mention such a model at all (demir; 2018), some touch upon related steps (enkel et al.; 2011; rübel et al.; 2018), and some solely describe their model’s application in practice (essmann and du preez; 2009) or provide an illustration of the assessment procedure without further elaboration (igartua et al.; 2018). similarly, advice on the assessment of criteria and particularly on how to elicit the criteria’s values (dp 2.2b) is only provided by carlson and gupta (2014) and enkel et al. (2011). essmann and du preez (2009) also cover this aspect by providing requirement or item specific scales for their respective maturity assessment, whereas only an exemplary scale for one requirement is provided. advice on the adaptation and configuration of criteria (dp 2.2c) according to different situational characteristics is only touched upon by enkel et al. (2011) who explicitly elaborate on the modularisation and adaption of their assessment according to organisations’ requirements. among the three models that have been empirically verified, knowledge from previous applications of mms (dp 2.2d) is explicitly mentioned by two (enkel et al.; 2011; essmann and du preez; 2009). design principles for a prescriptive purpose of use dp 3.1 improvement measures for each maturity level and level of granularity specific improvement measures for each maturity level and level of granularity (dp 3.1) are generally not provided. rather, the models are used to identify areas of improvement and derive related measures based on the respective maturity assessment. dp 3.2 decision calculus for selecting improvement measures a decision calculus for selecting improvement measures is not provided by any model either (dp 3.2). this also applies to the explication of relevant objectives for selecting measures (dp 3.2a). enkel et al. (2011) exclusively touch upon this aspect by referring to their model as a means to achieve corporate objectives. factors that influence corporate performance and the effect of measures on such factors (3.2b) are also not considered. in general, the models are focused on the internal improvement perspective and neglect the external reporting perspective (dp 3.2c). only carlson and gupta (2014) hint at this aspect by mentioning that journal of business models (2022), vol. 10, no. 2, pp. 110-128 119119 a first version of their model is targeted towards an internal audience. dp 3.3 target group-oriented decision methodology in accordance with the minor consideration of the decision calculus (dp3.2), aspects of the target grouporiented decision methodology for selecting measures (dp 3.3a–3.3e) are not considered by any mm. consideration of business model aspects the analysis regarding bm aspects determined that four of the six mms consider bms to some degree. demir (2018) considers the bm as an aspect of one of seven dimensions, namely the dimension “structure & model”. here, organisational structure and bm are understood as tools to foster innovation and to support corporate strategies. the maturity levels of this dimension with regard to bm aspects are defined as follows: at level 0 the bm is unknown, at level 2 some of its components are known, at level 3 the bm is not innovative, and strategies are not supported, at level 4 the bm is redesigned to foster innovation and empower strategies, and at level 5 the bm is unique/innovative and fully integrated into strategies. rübel et al. (2018) use the building blocks of the business model canvas according to osterwalder and pigneur (2010) as the structure for their mm. in this context, maturity of a bm with regard to industry 4.0 is determined by the degree of process mastery of 28 bm elements underlying the nine building blocks. each element is assessed using five generic maturity levels defining the overall maturity of the bm in focus. in this context, the five levels range from implicit where an element is simply described to optimized where the optimal state of an element is achieved and related control mechanisms are in place. thus, the levels relate to how well an element is managed. igartua et al. (2018) consider the bm through the mm category “value propositions and business model,” which is focused on the definition of the offered products and services as well as the related benefits for customers and differentiation potential. to assess the maturity of each of the total 11 dimensions, five generic maturity levels are defined ranging from unaware where little to no knowledge is available to performance where an open innovation approach is followed. carlson and gupta (2014) state that their model aims at innovating products, services, and bms; additionally, in the frame of the first (lowest) stage’s description, it is mentioned that organisations must develop a dynamic portfolio of innovations that includes product, process, services, and bmis. furthermore, the description of the fourth stage states that most departments are innovating new solutions on an activity, process, product, or bm level as a lever of that stage. besides, no specific bm aspects are considered. definition of boundary conditions and further steps towards a mm for bmi the analysis revealed several important insights that can be used to define a first set of boundary conditions and outline potential further steps to design an integrated mm for bmi. in the following section, the structure of design principles for mm according to röglinger and pöppelbuß (2011) is employed and the procedural model developed by knackstedt et al. (2009) is considered. in the context of the latter model, the preceding analysis and the following explanations cover the following steps of mm development: problem definition, comparison of existing mms, and definition of development strategy. the application of the envisioned mm focuses on the domain of bmi putting the process of innovating bms in the foreground (dp 1.1a). the purpose of the model persists in enabling the analysis of organisations or organisations’ units’ bmi maturity and in providing them with guidance on how to prosper regarding bmi as well as to allow benchmarking (dp 1.1b). the target demographic of such an analysis, derivation of measures and comparisons may comprise executives, managers, business developers, as well as entrepreneurs and researchers (dp 1.1c). in this context, the bmi maturity of organisations regardless of age, size, and industry, ownership, public or private, and units of such organisations are potential entities under investigation (dp 1.1d). considering that no mm to date holistically focuses on the domain of bmi and following the previously described purpose of use, a clear differentiation from existing mms is evident and will become even clearer once maturity, respective dimensions, and maturity levels are defined (dp 1.1e). journal of business models (2022), vol. 10, no. 2, pp. 110-128 120120 at this point of the mm conceptualisation, the design process of the mm is not concluded and has so far been documented in detail. the research and development process of the envisioned mm will be guided by the framework developed by röglinger and pöppelbuß (2011) and the procedural model to develop mm created by knackstedt et al. (2009), as well as other approaches to mm development. in this context, the empirical validation is planned as a fundamental step in the sequence to conceptualising an initial version of the envisioned mm for bmi (dp 1.1f). the conceptualisation of maturity and dimensions of maturity should be extended with different aspects related to the application domain of bmi. on the one hand, the content and architecture of bms (business model components and interrelations), the process of innovating bms (e.g., analysis and design), and organisational (e.g., culture, knowledge and leadership) as well as external aspects (e.g., partners and competition) will be considered. for this purpose, the procedure of mm development detailed by essmann and du preez (2009) should be used as a guideline as it combines different approaches to dimension definition and outlines specific steps for an iterative model development in this context. thus, the application of topic modeling techniques such as latent dirichlet allocation on bmi literature and literature of related fields as well as qualitative, explorative research represent promising approaches. as a multidimensional approach facilitates the definition of assessment criteria for a descriptive purpose of use and the classification of improvement measures for a prescriptive purpose of use according to röglinger and pöppelbuß (2011), maturity will be operationalised in a multidimensional manner (dp 1.2a). maturity levels should be oriented around existing models for ease of understanding and be complemented by detailed maturation paths for the same purpose (dp 1.2b). as the mm for bmi is intended to support organisations in applying it, the available levels of granularity of maturation should allow a detailed analysis but should not be complicated by unnecessary complexity (dp 1.2c). throughout this study, the underpinning theoretical foundations with respect to evolution and change (dp 1.2d) are commensurable between the two domains of maturation and bmi, and thus the ambition to fuse the two withheld. central constructs related to the application domain that will be defined in detail in the course of the conceptualisation comprise the bm construct and the construct of bmi (1.3). in the frame of the conceptualisation, all results will be documented in a target-oriented manner to comply with the requirement of communication (1.4). in order to comply with the descriptive dps, according to röglinger and pöppelbuß (2011), the operationalisation of mm through specific assessment criteria (dp 2.1) and the target group-oriented assessment (dp 2.2a–2.2d) will be predominantly guided by the mm of enkel et al. (2011) and essmann and du preez (2009), as well as carlson and gupta (2014) in the case of dp 2.2a–2.2b. complementary to the analysed models’ approach of providing the basis for the derivation of company specific improvement measures, the mm for bmi should provide generic measures for each maturity level and available level of granularity (dp 3.1). in addition, a decision calculus for selecting measures and the possibility to be used internally and for external reporting (dp 3.2a–3.2c). going beyond the analysed models, the model to be developed should also provide a target group-oriented decision methodology for selecting improvement measures. conclusion the objective of this paper was to provide a conceptual integration between mms and bmi based on an assessment of extant published research. this approach constitutes a first step towards the conceptualization of a mm for bmi and provides some initial valuable insights for how to proceed. for this purpose, the relevance and challenges of bmi were outlined before six relevant mms were analysed using an established framework for mm development. one fundamentally important finding is that no holistic mm exists to date that is dedicated to bmi. furthermore, the analysis showed that the majority of mms considers bms to some extent and thus confirm their general relevance for corporate innovativeness. in this context, bms are mainly taken into account rather superficial as one of many determinants in the frame of assessing corporate innovativeness journal of business models (2022), vol. 10, no. 2, pp. 110-128 121121 though. guidance on how to foster improvements with regard to bms is so far only provided by one mm focusing on bm management, whereby bmi is essentially neglected here as well. against this background and in the light of the absence of a holistic mm for bmi this research endeavour is justified. in order to provide the foundation for a holistic mm for bmi we defined fundamental boundary conditions in the form of design principles according röglinger and pöppelbuß (2011) and outlined steps in accordance with knackstedt et al. (2009), which will guide the subsequent development of the model. this study thus contributes an important foundation for subsequent model development for a mm for bmi, which will eventually enable organisations to assess, improve and benchmark their bmi capabilities as a means to ultimately achieve competitive advantages. furthermore, the detailed analysis of mms has potential to be used as a basis for the development of other mms in the innovation domain and as a blueprint for analysing future mms in detail. journal of business models (2022), vol. 10, no. 2, pp. 110-128 122122 references achtenhagen, l., melin, l. and naldi, l. (2013), dynamics of business models: strategizing, critical capabilities and activities for sustained value creation, long range planning, vol. 46, no. 6, pp. 427–442. al-nimer, m., abbadi, s. s., al-omush, a. and ahmad, h. (2021), risk management practices and firm performance with a mediating role of business model innovation: observations from jordan, journal of risk and financial management, vol. 14, no. 3. amit, r. h. and zott, c. (2010), business model innovation: creating value in times of change”, working paper 870, iese business school university of navarra, navarra, july 2. andries, p., debackere, k. and van looy, b. (2013), simultaneous experimentation as a learning strategy: business model development under uncertainty, strategic entrepreneurship journal, vol. 7, no. 4, pp. 288–310. anwar, m. (2018), business model innovation and smes performane: does competitive advantage mediate?, international journal of innovation management, vol. 22, no. 07. aspara, j., hietanen, j. and tikkanen, h. (2010), business model innovation vs replication: financial performance implications of strategic emphases, journal of strategic marketing, vol. 18, no. 1, pp. 39–56. baden-fuller, c. and morgan, m. s. (2010), business models as models, long range planning, vol.  43, 2-3, pp. 156–171. becker, j., knackstedt, r. and pöppelbuß, j. (2009), developing maturity models for it management, business & information systems engineering, vol. 1, no. 3, pp. 213–222. becker, w., ulrich, p. and stradtmann, m. (2018), geschäftsmodellinnovationen als wettbewerbsvorteil mittelständischer unternehmen, wiesbaden, springer gabler. bohnsack, r., pinkse, j. and kolk, a. (2014), business models for sustainable technologies: exploring business model evolution in the case of electric vehicles, research policy, vol. 43, no. 2, pp. 284–300. bornemann, m. (2010), die erfolgswirkung der geschäftsmodellgestaltung: eine kontextabhängige betrachtung, wiesbaden, gabler. bouwman, h., molina-castillo, f.-j. and reuver, m. de (2016), business model innovation in european smes: some preliminary findings, in versendaal, j., kittl, c., pucihar, a. and m. k. borstnar (eds.), in proceedings of the 29th bled econference, bled, slowenien, 19.06.2016–22.06.2016, pp. 527–538. brasseur, t.-m., mladenow, a. and strauss, c. (2017), open business model innovation: literature review and agenda for future research, business informatics, vol. 2017, no. 4, pp. 7–16. bucherer, e. (2010), business model innovation: guidelines for a structured approach (dissertation universität st. gallen 2010), aachen, shaker verlag. buliga, o. (2014), measures for innovating business models: an empirical study of german smes, wiesbaden, springer gabler. journal of business models (2022), vol. 10, no. 2, pp. 110-128 123123 carlson, c. r. and gupta, p. (2014), business innovation maturity model, in gupta, p. and trusko, b. e. (eds.), global innovation science handbook, new york, mcgraw-hill education, pp. 785–794. casadesus-masanell, r. and ricart, j. e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, pp. 195–215. charitou, c. d. and markides, c. c. (2003), responses to disruptive strategic innovation, mit sloan management review, vol. 44, no. 2, pp. 55–63. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, 2-3, pp. 354–363. christensen, c. m., bartman, t. and van bever, d. (2016), the hard truth about business model innovation, mit sloan management review, vol. 58, no. 1, p. 31. clauss, t., abebe, m., tangpong, c. and hock, m. (2019), strategic agility, business model innovation, and firm performance: an empirical investigation, ieee transactions on engineering management, vol. 68, no. 3, pp. 767–784. de bruin, t., freeze, r., kulkarni, u. and rosemann, m. (2005), understanding the main phases of developing a maturity assessment model, in australasian conference on information systems 2005 proceedings, sydney, australia, 30 november 2 december, 109. de fazio, e. (2017), why it is important to build an innovation strategy through the project management maturity model, ieee aerospace and electronic systems magazine, vol. 32, no. 5, pp. 54–59. demil, b. and lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 43, 2-3, pp. 227–246. demir, f. (2018), a strategic management maturity model for innovation, technology innovation management review, vol. 8, no. 11, pp. 13–21. doz, y. l. and kosonen, m. (2010), embedding strategic agility, long range planning, vol. 43, 2-3, pp. 370–382. economist intelligence unit (2005), business 2010: embracing the challenge of change [online], london, the economist intelligence unit ltd. available at http:// graphics.eiu.com / files/ ad_ pdfs/ business%202010_ global_ final.pdf. enkel, e., bell, j. and hogenkam, h. (2011), open innovation maturity framework, international journal of innovation management, vol. 15, no. 6, pp. 1161–1189. essmann, h. e. and du preez, n. (2009), an innovation capability maturity model: development and initial application, international journal of industrial and manufacturing engineering, vol. 3, no. 5, pp. 382–393. foss, n. j. and saebi, t. (2017), fifteen years of research on business model innovation, journal of management, vol. 43, no. 1, pp. 200–227. journal of business models (2022), vol. 10, no. 2, pp. 110-128 124124 fraser, p., moultrie, j. and gregory, m. (2002), the use of maturity models/grids as a tool in assessing product development capability, in 2002 ieee international engineering management conference, cambridge, uk, 18-20 august, institute of electrical and electronics engineers (ieee), pp. 244–249. gassmann, o., frankenberger, k. and choudury, m. (2021), geschäftsmodelle entwickeln: 55+ innovative konzepte mit dem st. galler business model navigator, 3rd edn, münchen, hanser. (2011), geschäftsmodelle im mittelstand, deloitte mittelstandsinstitut an der universität bamberg, bamberger betriebswirtschaftliche beiträge 175. gottschalk, p. (2009), maturity levels for interoperability in digital government, government information quarterly, vol. 26, no. 1, pp. 75–81. halecker, b., hölzle, k. and sittner, m. (2014), business development und geschäftsmodellinnovation: status quo und zukünftige entwicklungen [online]. available at https:// www.researchgate.net / publication/ 271501065_ business_ development_ und_ geschaftsmodellinnovation_-_ status_ quo_ und_ zukunftige_ entwicklungen ? channel= doi& linkid= 54c8f6510cf22d626a3a7d5b& showfulltext= true (accessed 29 january 2017). hamel, g. (2002), leading the revolution: how to thrive in turbulent times by making innovation a way of life [online], new york, plume. available at http:// www.loc.gov / catdir/ enhancements/ fy0718/ 2003267645b.html. heij, c. v., volberda, h. w. and van den bosch, f. a. (2014), how does business model innovation influence firm performance: the effect of environmental dynamism, academy of management proceedings, vol. 2014, no. 1, p. 16500. heikkilä, m., bouwman, h., heikkilä, j., haaker, t., lopez-nicolas, c. and riedl, a. (2016), business model innovation paths and tools, in versendaal, j., kittl, c., pucihar, a. and m. k. borstnar (eds.), in proceedings of the 29th bled econference, bled, slowenien, 19.06.2016–22.06.2016, pp. 571–587. heikkilä, m., bouwman, h., heikkilä, j., solaimani, s. and janssen, w. (2016), business model metrics: an open repository, information systems and e-business management, vol. 14, no. 2, pp. 337–366. ibarra, d., bigdeli, a. z., igartua, j. i. and ganzarain, j. (2020), business model innovation in established smes: a configurational approach, journal of open innovation: technology, market, and complexity, vol. 6, no. 3, p. 76 [online]. doi: 10.3390/joitmc6030076. ibm institute for business value (ibv) (ed) (2021), find your essential: how to thrive in a post-pandemic reality, c-suite series [online]. available at https:// www.ibm.com / downloads/ cas/ wvpwgpye (accessed 4 may 2021). igartua, j. i., retegi, j. and ganzarain, j. (2018), im2, a maturity model for innovation in smes, dirección y organización, no. 64, pp. 42–49. johnson, m. w., christensen, c. m. and kagermann, h. (2008), reinventing your business model: one secret to maintaining a thriving business is recognizing when it needs a fundamental change, harvard business review, vol.  86, no.  12, pp.  50–59 [online]. available at https:// hbr.org / 2008/ 12/ reinventingyourbusiness model. journal of business models (2022), vol. 10, no. 2, pp. 110-128 125125 kazanjian, r. k. and drazin, r. (1989), an empirical test of a stage of growth progression model, management science, vol. 35, no. 12, pp. 1489–1503. kim, w. c. and mauborgne, r. (1999), strategy, value innovation, and the knowledge economy, mit sloan management review, vol. 40, no. 3, s. 41–54. knackstedt, r., pöppelbuß, j. and becker, j. (2009), vorgehensmodell zur entwicklung von reifegradmodellen, in hansen, hans robert, dimitris karagiannis and fill, hans-georg (eds.), in 9. internationale tagung wirtschaftsinformatik, vienna, austria, 25 27 february 2009, österreichische computer gesellschaft, vienna, pp. 535–544. lindgardt, z., reeves, m., stalk, g. and deimler, m. (2009), business model innovation: when the game gets tough, change the game”. lindgren, p. (2012), business model innovation leadership: how do sme’s strategically lead business model innovation?, international journal of business and management, vol. 7, no. 14, pp. 53–66. marolt, m., lenart, g., maletič, d., borštnar, m. k. and pucihar, a. (2016), business model innovation: insights from a multiple case study of slovenian smes, organizacija, vol. 49, no. 3, pp. 161–171. minatogawa, v. l. f., franco, m. m. v., pinto, j. d. s. and batocchio, a. (2018), business model innovation influencing factors: an integrative literature review, brazilian journal of operations & production management, vol. 15, no. 4, pp. 610–617. ofner, m. h., hüner, k. and otto, b. (2009), dealing with complexity: a method to adapt and implement a maturity model for corporate data quality management, in proceedings of the fifteenth americas conference on information systems, san francisco, usa, 6-9 august, 491. osterwalder, a. and pigneur, y. (2010), business model generation: a handbook for visionaries, game changers, and challengers, new york, wiley & sons. pohle, g. and chapman, m. (2006), ibm’s global ceo report 2006: business model innovation matters, strategy & leadership, vol. 34, no. 5, pp. 34–40. pucihar, a., lenart, g., kljajić borštnar, m., vidmar, d. and marolt, m. (2019), drivers and outcomes of business model innovation: micro, small and medium-sized enterprises perspective, sustainability, vol. 11, no. 2. reymen, i., berends, h., oudehand, r. and stultiëns, r. (2017), decision making for business model development: a process study of effectuation and causation in new technology-based ventures, r&d management, vol. 47, no. 4, pp. 595–606. rieger, v., bodenbenner, p., wagner, t., tilly, r., schoder, d. and seltitz, a. (2015), geschäftsmodellinnovationen: neue wege für nachhaltigen erfolg, detecon consulting [online]. available at https:// www.detecon. com / sites/ default/ files/ detecon%20studie_ gesch%c3%a4ftsmodellinnovation.pdf (accessed 21 october 2017). journal of business models (2022), vol. 10, no. 2, pp. 110-128 126126 röglinger, m. and pöppelbuß, j. (2011), what makes a useful maturity model?: a framework for general design principles for maturity models and its demonstration in business process management, in proceedings of the nineteenth european conference on information systems (ecis 2011), helsinki, finland, 9-11 june, association of information systems (ais), 28. rübel, s., emrich, a., klein, s. and loos, p. (2018), a maturity model for business model management in industry 4.0, in drews, paul, funk, burkhardt, niemeyer, peter and xie, lin (eds.), in multikonferenz wirtschaftsinformatik 2018, lüneburg, germany, 6-9 march, leuphana universität lüneburg, lüneburg, pp. 2031–2042. saebi, t., lien, l. and foss, n. j. (2017), what drives business model adaptation?: the impact of opportunities, threats and strategic orientation, long range planning, vol. 50, no. 5, pp. 567–581. schallmo, d. r. (2018), geschäftsmodelle erfolgreich entwickeln und implementieren: mit aufgaben, kontrollfragen und templates [online], 2nd edn, berlin, springer gabler. available at http:// dx.doi.org / 10.1007/ 9783662 576052. steinhöfel, e. (2022), geschäftsmodellentwicklung in kmu: eine ressourcenund implementierungsorientierte methode zur kontinuierlichen anpassung und innovation von geschäftsmodellen (dissertation technische universität berlin), stuttgart, fraunhofer verlag. steinhöfel, e., hussinki, h. and breunig, k. j. (2020), toward a conceptualisation of a maturity model for business model innovation, in schiuma, giovanno (ed.), in proceedings of 15th international forum on knowledge asset dynamics, knowledge in digital age, matera, italy, 9-11 september, arts for business institute, pp. 133–147. steinhöfel, e. and inkinen, h. (2016), business model innovation: an intellectual capital perspective, in spender, j. c., schiuma, giovanni and noennig, joerg rainer (eds.), in 11th international forum on knowledge asset dynamics (ifkad) proceedings, towards a new architecture of knowledge, dresden, germany, 15-17 june, institute of knowledge asset management, pp. 1415–1432. steinhöfel, e., kohl, h. and orth, r. (2016), business model innovation: a comparative analysis, in aaltio, iiris and eskelinen, minna tunkkari (eds.), in proceedings of the 11th european conference on innovation and enrepreneurship, jyväskylä, finland, 15-16 september, academic conferences and publishing international, reading, uk, pp. 770–780. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol.  43, 2-3, pp. 172–194. van steenbergen, m., bos, r., brinkkemper, s., van de weerd, i. and bekkers, w. (2010), the design of focus area maturity models, in hutchison, d., kanade, t., kittler, j., kleinberg, j. m., mattern, f., mitchell, j. c., naor, m., nierstrasz, o., pandu rangan, c., steffen, b., sudan, m., terzopoulos, d., tygar, d., vardi, m. y., weikum, g., winter, r., zhao, j. l. and aier, s. (eds.), global perspectives on design science research, berlin, heidelberg, springer nature, pp. 317–332. velu, c. (2017), a systems perspective on business model evolution: the case of an agricultural information service provider in india, long range planning, vol. 50, no. 5, pp. 603–620. journal of business models (2022), vol. 10, no. 2, pp. 110-128 127127 von den eichen, s. f., matzler, k., freiling, j. and füller, j. (2014), woran geschäftsmodellinnovationen scheitern, in granig, p., hartlieb, e. and lercher, h. (eds.), innovationsstrategien, von produkten und dienstleistungen zu geschäftsmodellinnovationen, wiesbaden, springer gabler, pp. 147–159. wagner, t., tilly, r., bodenbenner, p., seltitz, a. and schoder, d. (2015), geschäftsmodellinnovation in der praxis: ergebnisse einer expertenbefragung zu business model canvas und co., in thomas, oliver and teuteberg, frank (eds.), in tagungsband 12. internationale tagung wirtschaftsinformatik (wi 2015), wi 2015, osnabrück, 04.03.2015–06.03.2015, universität osnabrück, osnabrück, pp. 1298–1312. wirtz, b. w. (2021), business model management: design, instrumente, erfolgsfaktoren von geschäftsmodellen, 5th edn, wiesbaden, springer gabler. wirtz, b. w., pistoia, a., ullrich, s. and göttel, v. (2016), business models: origin, development and future research perspectives, long range planning, vol. 49, no. 1, pp. 36–54. zott, c. and amit, r. (2007), business model design and the performance of entrepreneurial firms, organization science, vol. 18, no. 2, pp. 181–199. zott, c., amit, r. and massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37, no. 4, pp. 1019–1042. journal of business models (2022), vol. 10, no. 2, pp. 110-128 128128 about the authors erik steinhöfel, dr.-ing., is a visiting scholar at the school of business and management, lut university, finland. previously, he was a researcher at the fraunhofer institute for production systems and design technology, division corporate management, germany and lead the institute’s competence center for knowledge management. his research concentrates on knowledge management, strategic management and business model innovation. he refined his expertise in these fields during several public and industry projects across europe, asia and south america. henri hussinki, d.sc. (bus. adm. & economics), is an assistant professor (tenure track) of business analytics at the school of business and management, lut university, finland. his research and teaching focus on the role of information technology and business analytics in the firm’s decision making and business development. his research has been published in journals such as the journal of knowledge management, journal of intellectual capital, critical perspectives on accounting, and accounting, auditing & accountability journal. karl joachim breunig, phd, is a full professor of strategic management at the oslo business school, oslo metropolitan university – oslomet, where he is heading the research group on digital innovation and strategic competence in organizations (disco). his research concentrates on the interception of strategy and innovation theory, and involves topics such as serviceand business model innovation as well as digitalization in knowledge intensive firms. 67 journal of business models (2022), vol. 10, no. 1, pp. 67-77 building resilient and innovative business models in the era of covid-19: a process approach marco montemari1 and marco gatti2 abstract the role that the business model (bm) concept and bm-related tools may play during times of crisis have been insufficiently investigated. this paper presents a process aimed at supporting companies in building resilient and original bms through continuous innovation based on the existing bm literature. the present study highlights the role that bm tools may play during crisis situations, providing managers and entrepreneurs with an alert system (i.e., bm measurements) capable of signaling when a change should be implemented; a “library” of potential changes (i.e., bm pivots) to be generated in the bm; and a portfolio of potential available options when considering how the bm should be changed (i.e., bm configurations). the paper additionally highlights how tools for bm mapping, control, and innovation can provide one another with information and can be connected in a way that allows companies to achieve a synergetic effect in the face of instability and uncertainty. please cite this paper as: montemari, m. and gatti, m. (2022), building resilient and innovative business models in the era of covid-19: a process approach vol. 10, no. 1, pp. 67-77 keywords: business models, resilience, covid-19, crisis 1 department of management, università politecnica delle marche, ancona, italy issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i1.7340 https://doi.org/10.54337/jbm.v10i1.7340 journal of business models (2022), vol. 10, no. 1, pp. 67-77 6868 introduction the crisis associated with the covid-19 pandemic has disrupted the ways in which companies operate and the business models (bms) that they implement (bagnoli, dal mas, biancuzzi and massaro, 2021). supply chain access, production processes, channel management, and customer relationships have changed radically over the last two years, exerting pressure on revenues and cash flow and, ultimately, putting business continuity at risk (seetharaman, 2020). in managing the impacts of the lockdowns and health crisis, companies must prepare for the mid and long-term effects of the covid-19 pandemic. the ways in which business is conducted will be dramatically altered, and achieving stability in the new “normal” will not be easy; many after-shocks are anticipated and, following gradual exits from severe lockdowns, restrictive measures will fluctuate to mitigate new outbreaks. the base case setting will thus be a bumpier path with persistent disruptions to the environment in which companies operate over the coming years, creating fluid and continuously changing scenarios. in such settings, society will likely oscillate between imposing and lifting rules and policies (e.g. travel restrictions, social distancing, hygiene requirements), and shifts will occur on many fronts, such as regulation (e.g., new privacy laws), technology (contactless transactions), and channels (universal home delivery), to name a few. overall, significant instability may be expected, and new scenarios will regularly bring new risks that must be faced but also new opportunities to be seized (ritter and pedersen, 2020). successful companies in the covid-19 era will be those that will manage to remain flexible and innovate swiftly to work amid the scenarios that are likely to emerge over time (aagaard and nielsen, 2021). in such a context, the bm concept may play a key role since research has acknowledged that companies’ approaches to designing, changing, and innovating their bms provide key leverage points for performance and competitive advantage (chesbrough, 2010) in hyper-competitive, unstable, and turbulent business environments (achtenhagen, melin and naldi, 2013) such as those that emerged during the pandemic. despite this, the roles that the bm concept and bm-related tools may play during times of crisis remain poorly investigated, with few exceptions (oleksiy and dewald, 2018; breier, kallmuenzer, clauss, gast, kraus and tiberius, 2021). as such, company managers and consultants are left relatively empty-handed by the existing literature and the limited available frameworks when it comes to refining, redefining, or renewing bms in crisis situations. this consideration lends itself to this paper’s aim, which is to provide a process aimed at supporting companies in building resilient and original bms through continuous innovation by drawing on the existing bm literature. in doing so, this paper also reflects on the role that bms and their tools can play in assisting companies to navigate the covid-19 era. the remainder of the paper is structured as follows: section 2 provides an overview of the bm tools proposed in the literature for bm mapping, control, and innovation; section 3 demonstrates how these tools can be combined and organized within a process that can support companies in navigating in the covid-19 era. finally, section 4 concludes the paper by detailing its main contributions. business model tools: an overview the business model canvas the business model canvas (osterwalder and pigneur, 2010) is a popular tool that companies use to design and map their bms. it may be deconstructed into nine basic building blocks that provide a complete and structured overview of a company ’s bm and illustrate the logic according to which value is created, delivered, and captured. the nine blocks cover the four main areas of a business: customer interface (customer segments, channels, customer relationships), products and services (value proposition), infrastructure (key activities, key resources, key partnerships), and financial viability (revenue streams, cost structure). aside from being a powerful tool for designing and mapping the “as-is” bms of both start-ups and established companies, the business model canvas has become a particularly popular tool for assessing a given bm’s strengths and weaknesses, thus journal of business models (2022), vol. 10, no. 1, pp. 67-77 6969 triggering discussion around how best to challenge and change the current way in which a company creates, delivers, and captures value (athanasopoulou and de reuver, 2020). business model measurements research has shown that bms significantly affect companies’ performances (rédis, 2009; zott and amit, 2007, 2008) and thus represent fruitful platforms for identifying key performance indicators (kpis) (mcgrath, 2010; montemari and chiucchi, 2017; nielsen and montemari, 2012). mcgrath (2010) and nielsen and montemari (2012) acknowledged that bms help managers design kpis that reflect the critical dimensions of firm performance and provide information on how a company ’s competitiveness may be increased or decreased. montemari, chiucchi and nielsen (2019), in particular, demonstrated that bms help uncover the crucial aspects of the value creation, delivery, and capture process, and this helps direct the measurement process toward what is actually worth measuring, thus enhancing the resulting kpis’ relevance. moreover, nielsen and roslender (2015, p. 265) further argued that bms have the potential to enable the “entangling of indicators”. entanglement is an important process that reduces the risk that individual kpis will ultimately be uncoordinated and unrelated to the company ’s means of value creation, delivery, and capture. overall, bm-designed kpis have the potential to guide managerial decision making toward the pursuit of the company ’s strategy by defining strategic objectives, identifying actions aimed at achieving those objectives and assessing the extent to which the objectives have been achieved (montemari et al., 2019). moreover, they provide information that can help identify and manage the bm’s strengths and weaknesses and evaluate its validity (i.e., reveal opportunities to innovate the bm) (nielsen, lund, montemari, paolone, massaro and dumay, 2019). business model pivots over the last 15 years, bm innovation has attracted increasing attention in management research and among practitioners (foss and saebi, 2017). the ever-shorter lifecycles of products and services along with the hyper-competitive and global business landscape have led companies to more frequently and radically rethink and innovate their bms (sosna, trevinyo-rodríguez and velamuri, 2010). as such, it often happens that one or more assumptions underlying the current bm must be altered, and it was within this context that ries (2011) coined the concept of the “pivot”, intended as a change in a fundamental aspect of the bm. a pivot may entail a simple change, such as recognizing that the product’s price was inappropriate, or it may entail a more complex change, such as switching the target customers or repackaging a monolithic product into a family of products (blank and dorf, 2012). ries (2011) identified ten types of pivot: − zoom-in pivot: this occurs when a single feature of a product becomes the entire product, resulting in a simpler and streamlined solution. it is fruitful when the company recognizes that a single feature of a product achieves greater traction and interest than the other features. − zoom-out pivot: this is the zoom-in pivot in reverse and occurs when the existing product becomes just a single component in a suite of features as part of a larger product. it is fruitful when the existing product is insufficient to support a customer set. − customer segment pivot: the products or services can attract real customers but not the customers it originally planned to serve. this pivot type thus entails a switch from the original customer segment to a new one and is optimized for this new target. it is likely that the value proposition, pricing, and channels will all need to be reviewed. − customer need pivot: the products or services can solve an actual problem for the customers that the company aims to target but not the problem it originally planned to solve. other relevant problems prove to be more important, and the customers are willing to pay to solve them. pivots of this type thus take place within the original customer segment but may require that existing value proposition be repositioned or that a completely new value proposition be developed. journal of business models (2022), vol. 10, no. 1, pp. 67-77 7070 − platform pivot: this involves a change from an application to a platform or vice versa. pivots of this nature may occur when individual applications converge and become a platform that third parties may also use to create their own related products. − business architecture pivot: either of two basic logics will underpin a given bm: the complex systems model (low volumes, high margins) or the volume operations model (high volumes, low margins). performing a business architecture pivot means moving from one logic to the other. this switch typically impacts other aspects of the bm, particularly with respect to the customer interface. − value capture pivot: this entails changing how the company monetizes or earns revenues (i.e. changing the revenue model). pivots of this type may also impact other areas of the bm, such as the features of the value proposition and sales and marketing operations. − engine of growth pivot: this entails a change in the growth strategy to achieve faster or more profitable growth. there are three basic engines of growth: viral, paid, and sticky. the viral engine occurs when current customers recommend the company to other potential customers; the paid engine is the traditional means of growing by investing in marketing to acquire new customers; and the sticky engine focuses on existing customers and aims to enhance customer loyalty and retention. pivots of this type entail switching from one engine to another and typically require a change in the revenue model. − channel pivot: this entails changing how and where the company delivers its products or services to customers (own stores, partner stores, websites, apps, sales agents, wholesalers, etc.) to promote greater effectiveness. pivots of this nature typically require adjustments to many elements of the bm, such as the product’s price, features, and competitive positioning. − technology pivot: this means using a new technology to achieve the same solution with benefits in terms of lower costs, superior prices, and improved performance. such pivots do not typically entail major changes in the targeted customer segments, the problem to be solved, the revenue model, and the channels used. business model configurations increased awareness of bm innovation’s vital importance to companies has driven research efforts toward the creation of frameworks and tools that could assist managers and entrepreneurs in renewing and updating their organizations’ existing bms (foss and saebi, 2017). one promising approach is to leverage creative imitation and build on reoccurring bestselling solutions as a blueprint for bm innovation (weking, hein, böhm and krcmar, 2020; montemari, taran, schaper, nielsen, thomsen and sort, 2022) since research has shown that 90% of successful bm innovations actually recombine existing bms (gassmann, frankenberger and csik, 2014). following this line of reasoning, innovation lies in the understanding, translation, recombination, and transfer of successful patterns from one industry to another (remane, hanelt, tesch and kolbe, 2017). this approach to bm innovation is based on the concept of bm configurations, i.e., ideal-type examples that describe and distinguish the behavior of companies that have proven successful in the past in different industries or contexts, thus providing managers, practitioners, and academics with formulas that have already been tried and tested in the real world (baden-fuller and morgan, 2010). these bm configurations have the advantage of inspiring other companies to adopt alternative ways of designing their logic to create, deliver, and capture value (taran, nielsen, montemari, thomsen and paolone, 2016). for example, the bm configuration called “multisided platform” (osterwalder and pigneur, 2010) creates value by facilitating interactions between two or more distinct but interdependent customer journal of business models (2022), vol. 10, no. 1, pp. 67-77 7171 segments. the value proposition differs for each customer segment served, and each customer segment produces a different revenue stream, even though one or more segments may enjoy free offers or reduced prices subsidized by revenues from other customer segments. the key resource required for this configuration is the platform, and creative human resources to manage and to promote the platform are also vital. this bm configuration is used by google to connect internet users and advertisers and by nintendo to connect gamers and game developers. “inside-out” (osterwalder and pigneur, 2010) is a bm configuration through which companies generate revenues by selling or licensing their own unused or underused intellectual properties or technologies to firms operating in other industries. this bm configuration requires a strong patenting strategy and is used by knowledge-intensive companies, such as glaxosmithkline or basf, to monetize r&d that cannot be directly applied to new products in the core business. it is worth noting that real-life companies tend to represent mixtures of different bm configurations. for example, dell combines the following: − “mass-customized commodity”, as it offers “have it your way” models along with competitive prices and fast delivery; − “disintermediation”, as the models are delivered directly to the customer rather than through intermediaries; − “long tail”, as the company sells a wide range of customized models in relatively low quantities; − “upfront payments”, as the customers pay upfront and generate high liquidity; − “outside-in”, as it gathers competences and electronic components from its network of partners. the most complete bm configuration approaches, to date, are those of gassmann et al. (2014) and taran et al. (2016), who presented lists of 55 and 71 bm configurations, respectively. combining and organizing business model tools: a process to build resilient and innovative bms in the era of covid-19 this section will show how the abovementioned tools can be combined and organized within a seven-step process to support companies in navigating the covid-19 era and in building resilient and original bms through continuous innovation. a) map the current bm: the first step of the process involves mapping the “as-is” bm to understand its main features and idiosyncrasies. to perform this step, the business model canvas (osterwalder and pigneur, 2010) can be used to quickly and simply map the company ’s current bm as a fundamental prerequisite to performing the next steps in the process. b) assess the impact of the new scenario on the current bm: this step investigates which building blocks are most affected by the new scenario in which the company must operate. entrepreneurs’ and managers’ perceptions should be confirmed through the use of two or three kpis for each building block. overall, the business model canvas can be used as a platform for establishing kpis, as suggested by montemari et al. (2019), and the weekly/monthly trend of these kpis must be analyzed to provide information on what is happening within each building block, thus identifying those that merit closer managerial attention. typically, building blocks pertaining to the customer interface and infrastructure include non-financial (quantitative-physical and qualitative) kpis (i.e., leading measures that capture the causes of the company ’s success) (eccles, 1991), while building blocks pertaining to financial viability include financial lagging kpis, meaning that they merely measure outcomes of managerial actions, shifting the focus away from what actually generates the results (kaplan and norton, 1996). journal of business models (2022), vol. 10, no. 1, pp. 67-77 7272 table 1 below provides a platform to perform this step and some exemplar kpis. table 1. building blocks kpis trend customer segments orders per segment, sales per segment very negative value proposition % of orders delivered with damaged products, % of overdue orders steady customer relationships customer retention rate, customer acquisition rate mildly negative channels average sales per channel, average sales per salesman mildly negative revenue streams total sales, ros very negative key activities efficiency and effectiveness kpis mildly negative key resources staff turnover, training hours per employee mildly negative key partnerships average spend per supplier, average spend per purchase order very positive cost structure average production cost of items, average handling cost per order mildly positive table 1: exemplar kpis within each building block journal of business models (2022), vol. 10, no. 1, pp. 67-77 7373 it is likely that the building blocks will be affected in different ways and, depending on the kpis’ trend, the impact can be very negative, mildly negative, mildly positive, or very positive; alternatively, the new scenarios can have no effect on some of the current bm’s building blocks. all in all, the aim of this step is to understand where to intervene and which building blocks need to be innovated because the new scenario poses them, and the bm as a whole, at risk, or because the new scenario offers new opportunities to be caught. c) decide what kind of pivot or combination of pivots the bm needs: step b raises managers’ and entrepreneurs’ awareness of where they should intervene and which building blocks are at risk or present new opportunities and thus require innovation. the question now is what to do next. step c aims to provide an answer to this question through pivots. pivots indeed provide managers with a “library” of potential changes that may be generated in the bm based on the outcomes of step b. it is likely that a pivot on customer segments or needs will be appropriate when kpis demonstrate that customers are under pressure. a channel pivot is suitable when the way in which the company delivers its products is no longer effective in the new scenario; when customer relations have been identified as an area in distress, an engine of growth pivot can be used to improve this building block’s performance. d) decide how to operationalize the pivots through bm configurations: based on the concept of bm configurations, step d provides companies with a portfolio of available potential options with which to perform the pivots or a combination of pivots defined in step c. for example, when it comes to performing a value capture pivot, several bm configurations are available to change the revenue model of a company: leasing, subscription, bait and hook, pay-as-you-go, cell phone, to name a few. thus, in such a context of change, a company might decide to modify the way it earns revenues by adopting a bm configuration based on the pay-as-you-go logic (johnson, 2010) that is, by charging the customer for metered services based on actual usage (e.g., zipcar). another option would be to adopt bait and hook logic (osterwalder and pigneur, 2010), which entails offering customers an inexpensive or free initial product and then have them pay more for additional related products (e.g., gillette). a channel pivot can be performed through bm configurations such as disintermediation, channel maximization, e-shop/shop, or e-mall/mall. in particular, how and where a company delivers its value proposition to customers might be changed by adopting a disintermediation logic (johnson, 2010) that is, by delivering a product or service directly to the customer rather than through intermediary channels (e.g., dell). another logic that could be adopted is entry into an e-mall (timmers, 1998)—a constellation of e-shops, typically under the common umbrella of a well-known and trusted brand (e.g., ebay). e) assess the impact of innovation on the current bm: the decision to perform one or more pivots and adopt new bm configurations entails a change in the current bm. it is relevant at this stage to understand the items (resources, activities, partnerships, etc.) that must be added to execute the innovated bm, those that are no longer useful and that should be eliminated from the innovated bm, and those that remain unchanged in the move from the current bm to the innovated bm. some building blocks will be significantly impacted by the pivoting process and the adoption of new bm configurations, while for others the impact will be lower or even non-existent. it is likely that the building blocks identified in step b will undergo major changes, since they are at the epicenter of the pivot process (i.e., the building blocks at risk that needed closer managerial attention). these changes are known as first-order changes. however, since the bm is a system of interconnected items (massa et al., 2018), it is also relevant to understand second-order changes that is, the impacts of the pivot process and the adoption of new bm configurations on the remaining building blocks. f) execute and measure: this step leads the company to provide itself with the missing items journal of business models (2022), vol. 10, no. 1, pp. 67-77 7474 required to perform and execute the innovated bm. at this stage, the trend of kpis particularly those that were proven to be under pressure in step b should be monitored to determine whether the pursued innovations have generated the desired improvements. g) restart the process from step b when a new scenario pops up. discussion and conclusions drawing on the bm literature, this paper aimed to provide a process capable of supporting companies in building resilient and original bms through continuous innovation. this seems to be particularly relevant in highly dynamic contexts, such as that which characterizes the covid-19 era. through a combination of the business model canvas (osterwalder and pigneur, 2010), bm measurements (montemari et al., 2019), bm pivots (ries, 2011), and bm configurations (gassmann et al., 2014; taran et al., 2016), this process provides a structured approach to unveiling the main features of the current bm, to regularly assessing the impacts of new scenarios on the bm, to identifying the areas that require innovation, and to choosing a course of action for adapting the bm to new scenarios that will emerge over time. this paper’s theoretical contribution is twofold. first, the paper connects, organizes and systematizes within a structured process several bm tools that have been proposed in the bm literature. the paper thus highlights how tools for bm mapping, control, and innovation can convey information to one another and can be connected in a way that allows companies to obtain a synergy effect when it comes to face instability and uncertainty. overall, the paper shows that the combined and organized use of such tools is more valuable and useful than the application of single tools in isolation, thus highlighting that silo mentalities should be avoided. in doing so, this paper contributes to the extant literature by providing a holistic view of the different bm tools while research hitherto has analyzed them individually to show their usefulness along with their organizational implications. this contributes to our knowledge with respect to bms and opens up new opportunities for research in which benefits resulting from the adoption of bm tools are observed from a holistic rather than an individual perspective. second, given the scarcity of the literature on the role played by bm in times of crisis, this paper contributes to this stream of research by highlighting that bm tools can play a key role in responses to crisis situations since they provide managers and entrepreneurs with − an alert system (i.e., bm measurements) capable of signaling when to change; − a “library” of potential changes (i.e., bm pivots) to be generated in the bm; − a portfolio of potential options available to decide how to change the bm (i.e., bm configurations). this is relevant from both the theoretical and practical perspectives. at a theoretical level, it offers preliminary insights on the ways in which managerial tools such as bm-related ones can be crucial when faced with uncertainty like that which characterizes the covid-19 era. from a practical perspective, the paper proposes a tool-based process that companies can adopt to face the crisis linked to the spread of covid-19 and that may also be useful in other crisis situations not directly related to the current pandemic. in fact, bm tools, if used in combination, have the potential to increase companies’ resilience when faced with crises since they can help managers and entrepreneurs to shift their trajectory and adopt original and innovative solutions. this may help support managers in their decision making activities, which are even more critical during crisis situations such as the ongoing one. future research should seek to apply the abovementioned process in practice to explore its functioning and, in particular, its effects, and eventually its criticisms, within organizations. journal of business models (2022), vol. 10, no. 1, pp. 67-77 7575 references aagaard, a., nielsen, c. (2021), the fifth stage of business model research: the role of business models in times of uncertainty, journal of business models, vol. 9, n. 1, pp. 77-90. achtenhagen l., melin l., naldi l. (2013), dynamics of business models – strategizing, critical capabilities and activities for sustained value creation, long range planning, vol. 46, n. 6, pp. 427-442. athanasopoulou a., de reuver m. (2020), how do business model tools facilitate business model exploration? evidence from action research, electronic markets, vol. 30, n. 3, pp. 495-508. baden-fuller c., morgan m.s. (2010), business models as models, long range planning, vol. 43, n. 2, pp. 156171. bagnoli c., dal mas f., biancuzzi h., massaro m., business models beyond covid-19. a paradoxes approach, journal of business models, vol 9, no 4, pp. 112-124. blank s., dorf b. (2012), the startup owner’s manual – the step-by-step guide for building a great company, k&s ranch, pescadero, ca. breier m., kallmuenzer a., clauss t., gast j., kraus s., tiberius v. (2021), the role of business model innovation in the hospitality industry during the covid-19 crisis, international journal of hospitality management, vol. 92, 102723. chesbrough h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43, nos 2-3, pp. 354-363. eccles r.g. (1991), the performance measurement manifesto, harvard business review, vol. 69, n. 1, pp. 131–137. foss n. j., saebi t. (2017), fifteen years of research on business model innovation: how far have we come, and where should we go?, journal of management, vol. 43, n. 1, pp. 200-227. gassmann h., frankenberger k., csik m. (2014), the business model navigator, pearson education limited, harlow. johnson m.w. (2010), seizing the white space: business model innovation for growth and renewal, harvard business school press, boston, ma. kaplan r.s., norton d.p. (2004), how strategy maps frame an organisation’s objectives, financial executive, vol. 20, n. 2, pp. 40–45. massa l., viscusi g., tucci c. (2018), business models and complexity, journal of business models, vol. 6, n. 1, pp. 59-71. mcgrath r.g. (2010), business models: a discovery driven approach, long range planning, vol. 43, nos. 2–3, pp. 247–261. journal of business models (2022), vol. 10, no. 1, pp. 67-77 7676 montemari m., chiucchi m.s. (2017), enabling intellectual capital measurement through business model mapping: the nexus case, in guthrie j., dumay j., ricceri f., nielsen c. (eds.), the routledge companion to intellectual capital, routledge, london. montemari m., chiucchi m.s., nielsen c. (2019), designing performance measurement systems using business models, journal of business models, vol. 7, n. 5, pp. 48-69. montemari m., taran y., schaper s., nielsen c., thomsen p., sort j. (2022), business model innovation or business model imitation – that is the question, technology analysis & strategic management, doi: 10.1080/09537325.2022.2034780. nielsen c., montemari m. (2012), the role of human resources in business model performance: the case of network-based companies, journal of human resource costing & accounting, vol. 16, n. 2, pp. 142–164. nielsen c., roslender r. (2015), enhancing financial reporting: the contribution of business models, british accounting review, vol. 47, n. 3, pp. 262–274. nielsen c., lund m., montemari m., paolone f., massaro m., dumay j. (2019), business models – a research overview, routledge, new york. osiyevskyy o., dewald j. (2018), the pressure cooker: when crisis stimulates explorative business model change intentions, long range planning, vol. 51, n. 4, pp. 540-560. osterwalder a., pigneur y. (2010), business model generation. a handbook for visionaries, game changers and challengers, john wiley and sons, hoboken, nj. rédis j. (2009), the impact of business model characteristics on it firms’ performance, international journal of business, vol. 14, n. 4, pp. 291–307. remane g., hanelt a., tesch j. f., kolbe l. m. (2017), the business model pattern database a tool for systematic business model innovation, international journal of innovation management, vol. 21, n. 1. ries e. (2011), the lean start up, currency, new york. ries e. (2011), the lean startup: how today ’s entrepreneurs use continuous innovation to create radically successful businesses, crown business, new york. ritter t., pedersen c. l. (2020), analyzing the impact of the coronavirus crisis on business models, industrial marketing management, vol. 88, pp. 214-224. seetharaman p. (2020), business models shifts: impact of covid-19, international journal of information management, vol. 54. sosna m., trevinyo-rodríguez r.n., velamuri s.r. (2010), business model innovation through trial-and-error learning: the naturhouse case, long range planning, vol. 43, nos 2-3, pp. 383-407. journal of business models (2022), vol. 10, no. 1, pp. 67-77 7777 taran y., nielsen c., montemari m., thomsen p., paolone f. (2016), business model configurations: a five-v framework to map out potential innovation routes, european journal of innovation management, vol. 19, n. 4, pp. 492-527. timmers p. (1998), “business models for electronic markets”, journal on electronic markets, vol. 8, no. 2, pp. 3-8. weking j., hein a., böhm m., krcmar h. (2020), a hierarchical taxonomy of business model patterns, electronic markets, vol. 30, n. 3, pp. 447–468. zott c., amit r. (2007), business model design and the performance of entrepreneurial firms, organization science, vol. 18, n. 2, pp. 181–199. zott c., amit r. (2008), the fit between product market strategy and business model: implications for firm performance, strategic management journal, vol. 29, n. 1, pp. 1–26. journal of business models (2013), vol. 1, no. 1 pp. 85-105 85 abstract the business model concept is gaining traction in different disciplines but is still criticized for being fuzzy and vague and lacking consensus on its definition and compositional elements. in this paper we set out to advance our understanding of the business model concept by addressing three areas of foundational research: business model definitions, business model elements, and business model archetypes. we define a business model as a representation of the value logic of an organization in terms of how it creates and captures customer value. this abstract and generic definition is made more specific and operational by the compositional elements that need to address the customer, value proposition, organizational architecture (firm and network level) and economics dimensions. business model archetypes complement the definition and elements by providing a more concrete and empirical understanding of the business model concept. the main contributions of this paper are (1) explicitly including the customer value concept in the business model definition and focussing on value creation, (2) presenting four core dimensions that business model elements need to cover, (3) arguing for flexibility by adapting and extending business model elements to cater for different purposes and contexts (e.g. technology, innovation, strategy) (4) stressing a more systematic approach to business model archetypes by using business model elements for their description, and (5) suggesting to use business model archetype research for the empirical exploration and testing of business model elements and their relationships. keywords: business model, business model classification, business model concept, business model definition, business model element, business model framework, customer value, value creation. please cite this paper as: fielt, e. 2014, ‘conceptualising business models: definitions, frameworks and classifications’, journal of business models, vol. 1, no. 1, pp. 85-105. conceptualising business models: definitions, frameworks and classifications dr. erwin fielt journal of business models (2013), vol. 1, no. 1 pp. 85-105 86 introduction every company has a business model, whether that model is explicitly articulated or not (chesbrough, 2006; teece, 2010). examples of companies with well-known business models are southwest airlines’ low-cost carrier model, rolls royce’s ‘power-by-the-hour’ model and threadless’ ‘customer is the company’ model. business models matter; the same idea or technology taken to market through two different business models will yield two different economic outcomes (chesbrough, 2010). business models are required because of the features of market economies where there is consumer choice, transaction costs, heterogeneity amongst consumers and producers, and competition (teece, 2010). according to ghaziani and ventresca (2005) the public talk about ‘business models’ commenced in the early 1970s and rose to prominence halfway the 1990s, at the same time as the digital economy. academic research on business models started appearing late 1990s with early work from, for example, timmers (1998), weill and vitale (2001) and afuah and tucci (2001). however, related concepts have appeared earlier such as drucker’s ‘theory of business’ (drucker, 1994). the business model concept has been applied in studies as a basis for enterprise classification, as a factor for enterprise performance and as a focal point for innovation (lambert & davidson, 2013). business models have received attention from different disciplines, such as e-business, information systems, management, entrepreneurship, innovation, strategy and economics (amit & zott, 2001; bouwman & fielt, 2008; hedman & kalling, 2003; morris, schindehutte, & allen, 2005; pateli & giaglis, 2004; teece, 2010; zott & amit, 2013). however, while many researchers stress the importance of business models, the concept is still fuzzy and vague and there is little consensus on its definition and compositional elements (al-debei & avison, 2010; morris et al., 2005; shafer, smith, & linder, 2005). while defining the business model concept has been among the first tasks of early researchers in the area (osterwalder, pigneur, & tucci, 2005), the definitions themselves have been subject to much debate (pateli & giaglis, 2004) and a general accepted definition has not yet emerged (morris et al., 2005; zott, amit, & massa, 2011). the objective of this paper is to increase our foundational understanding of the business model concept by addressing three areas of research: business model definitions, business model frameworks and elements, and business model classifications and archetypes. these three areas are important for the conceptualisation of business models and have been a core focus of research (osterwalder et al., 2005; pateli & giaglis, 2004). we conclude that a business model can be defined as the value logic of an organization in terms of how it creates and captures customer value and can be concisely represented by an interrelated set of elements that address the customer, value proposition, organizational architecture and economics dimensions. moreover, we argue that the three areas of business model research complement each other in advancing our understanding of the business model concept. the business model definition can provide us with a generic and abstract conceptualization. specifying the compositional elements of a business model can make the business model concept more specific and concrete and makes it suitable for different purposes and contexts (e.g. e-business, strategy, or innovation). business model classifications and archetypes provide a more empirical and practical perspective and can provide insights into the relationships between business model elements. a better understanding of the business model concept can improve the quality of business model research and enable a more cumulative research tradition in this relatively young field of research. while we will intensively relate to business model literature, this paper does not use a systematic literature review as main approach as we think that the further advancement of the business model concept benefits more from the underlying reasoning than from the systematic canvassing of a still developing and murky field. moreover, when relevant we will make use of existing literature reviews on business models (e.g., al-debei & avison, 2010; morris et al., 2005; shafer et al., 2005; zott et al., 2011). the remainder of this paper is organized as follows. firstly we discuss the business model definitions in more details. thereafter, we address business model frameworks and elements. next, we discuss business model classifications and archetypes. finally, we present some concluding remarks and identify opportunities for future research. journal of business models (2013), vol. 1, no. 1 pp. 85-105 87 business model definitions while defining the business model concept has been among the first tasks of early researchers (osterwalder et al., 2005), the definitions have been subject to much debate (pateli & giaglis, 2004) and a general accepted definition has not yet emerged (al-debei & avison, 2010; morris et al., 2005; shafer et al., 2005; zott et al., 2011). table 1 provides an overview of some of the prominent definitions over time. we will first explore these definitions and highlight some of the similarities and differences to increase our understanding of the business model concept. thereafter, we will specific zoom into the notion of value creation. we will end this section with a working definition explicitly targeting customer value and some specific considerations that need to be taken into account when developing or using business model definitions. researchers have come up with different definitions in an attempt to explain what the essence and purpose of a business model is (pateli & giaglis, 2004). definitions have had different foci and have been more and less inclusive. timmers (1998, p. 4) provides one of the first business model definitions. this definition influenced the definition of weill and vitale (2001) and is quite similar to the definitions of mahadevan (2000) and tapscott (2001). these definitions see the business model as an architecture and address the busitable 1: a selective overview of business model definitions (ordered by year and author name). author(s) definition timmers (1998) definition of a business model: (a) an architecture for the product, service and information flows, including a description of the various business actors and their roles; and (b) a description of the potential benefits for the various business actors; and (c) a description of the sources of revenues. (p.4) mahadevan (2000) a business model is a unique blend of three streams that are critical to the business. these include the value stream for the business partners and the buyers, the revenue stream, and the logistical stream. (p. 59) rappa (2000) in the most basic sense, a business model is the method of doing business by which a company can sustain itself -that is, generate revenue. the business model spells-out how a company makes money by specifying where it is positioned in the value chain. afuah and tucci (2001) a business model is the method by which a firm builds and uses its resources to offer its customers better value than its competitors and make money doing so. it details how a firm makes money now and how it plans to do so in the long-term. the model is what enables a firm to have a sustainable competitive advantage, to perform better than its rivals in the long term. (p. 3-4) amit and zott (2001) a business model depicts the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities. (p. 511) tapscott (2001) a business model refers to the core architecture of a firm, specifically how it deploys all relevant resources (not just those within its corporate boundaries) to create differentiated value for customers. (p. 5) continues on next page journal of business models (2013), vol. 1, no. 1 pp. 85-105 88 table 1: a selective overview of business model definitions (ordered by year and author name). author(s) definition chesbrough and rosenbloom (2002) the business model provides a coherent framework that takes technological characteristics and potentials as inputs, and converts them through customers and markets into economic inputs. the business model is thus conceived as a focusing device that mediates between technology development and economic value creation. (p. 532) it “spells out how a company makes money by specifying where it is positioned in the value chain” (p. 533) morris et al. (2005) a business model is a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets. (p. 727) shafer et al. (2005) we define a business model as a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network. (p. 202) chesbrough (2006) at its heart, a business model performs two important functions: value creation and value capture. first, it defines a series of activities that will yield a new product or service in such a way that there is net value created throughout the various activities. second, it captures value from a portion of those activities for the firm developing the model. (p. 108) johnson, christensen, and kagermann (2008) a business model, from our point of view, consists of four interlocking elements that, taken together, create and deliver value. the most important to get right, by far, is the customer value proposition. the other elements are the profit formula, the key resources and the key processes. (p. 52-53) demil and lecocq (2010) generally speaking, the concept refers to the description of the articulation between different bm components or ‘building blocks’ to produce a proposition that can generate value for consumers and thus for the organization. (p. 227) osterwalder and pigneur (2010) a business model describes the rationale of how an organization creates, delivers, and captures value. (p. 14) teece (2010) in short, a business model defines how the enterprise creates and delivers value to customers, and then converts payments received to profits. (p. 173) zott and amit (2010) a business model can be viewed as a template of how a firm conducts business, how it delivers value to stakeholders (e.g., the focal firms, customers, partners, etc.), and how it links factor and product markets. the activity systems perspective addresses all these vital issues [...]. (p. 222) george and bock (2011) [...] a business model is the design of organizational structures to enact a commercial opportunity. (p.99) [...] three dimensions to the organizational structures noted in our definition: resource structure, transactive structure, and value structure. (p.99) continued from previous page journal of business models (2013), vol. 1, no. 1 pp. 85-105 89 ness network with a focus on the different roles of the actors and their interactions and relationships. another early definition comes from rappa (2000) who emphasises the monetary aspects, which is also is also prominent in some other definitions (e.g., afuah & tucci, 2001; mullins & komisar, 2009; teece, 2010). this often comes with a stronger emphasis on the organization and strategic aspects (e.g., afuah & tucci, 2001; morris et al., 2005). most authors do stress that a business model does not cover the full strategy (e.g., chesbrough & rosenbloom, 2002). others quite explicitly differentiate between business models and strategy (e.g., magretta, 2002; mansfield & fourie, 2004). more comprehensive definitions combine the ideas of an architectural representation of the business network and the generation of revenues for the focal organization (dubosson-torbay, osterwalder, & pigneur, 2002; morris et al., 2005). however, others are less inclusive in their business model definition and explicitly differentiate it from other concepts (e.g. strategy) or exclude some specific elements. for example, timmers (1998) differentiates the business model from the marketing model, which addresses the commercial viability via the competitive advantage, positioning, marketing mix, and product-market strategy. amit and zott (2001) see the revenue model as a distinct, yet complementary concept to the business model. there is quite some confusion about the organizational entity as business model definitions refer to the firm level (e.g., afuah & tucci, 2001; osterwalder et al., 2005; rappa, 2000) as well as the network level (e.g., mahadevan, 2000; tapscott, 2001; timmers, 1998; weill & vitale, 2001). while some position it as a new level of analysis nested between the firm and the network level (e.g., amit & zott, 2001). some definitions do not include an explicit reference to the organizational entity (e.g., chesbrough & rosenbloom, 2002; morris et al., 2005). most authors do include both levels in their conceptualization based on their further discussion, operationalization and application of the business model concept (see also the discussion below on business frameworks and elements). most firm level definitions do not differentiate between the corporate entity and the business unit although most seem to imply the business unit. a notable exception is chesbrough and rosenbloom (2002), who explicitly relate the business model to the business unit strategy. some definitions follow from, or are influenced by, the specific context in which the business model concept is used. for example, amit and zott (2001) focus on value creation in e-business and see the business model as depicting the design of transaction content, structure, and governance transactions. chesbrough and rosenbloom (2002) focus on technological innovation and position the business model as mediating between technology development and economic value creation. the business model concept is also applied for organizations that have less of a profit focus such as sociallyoriented organizations (e.g., yunus, moingeon, & lehmann-ortega, 2010) and government organizations (e.g., janssen, kuk, & wagenaar, 2008). this use of business models for different purposes and in different contexts, such as start-ups and established companies, different types of innovation, different kinds and varying importance of technology, for-profit and not-for-profit, etc. may also explain why there is no widely agreed upon definition. some researchers have tried to address the problem of different business model definitions by identifying categories or themes reflecting the different origins or meanings of the concept (table 2). osterwalder et al. (2005) distinguish between an activity/role-related approach, which is more inward looking and a value/ customer-oriented approach, which is more outward looking. the categories of morris et al. (2005) represent a hierarchy where the perspective increases in comprehensiveness as one progressively moves from the economic to the operational to the strategic levels. wirtz (2011) suggests that definitions developed from a technology orientation to an organization orientation to a strategic orientation. given this wide variety of origins and meanings of the business model concept, it is not surprising that a general accepted definition has not yet emerged. therefore, it will be important for the definition to provide a generic and abstract conceptualization that can be applied for different purposes and in different contexts (e.g. technology, innovation, strategy). many (earlier) definitions summarize what a business model is made off (e.g., bouwman, de vos, & haaker, 2008; osterwalder et al., 2005; timmers, 1998); these definitions are very close to the frameworks and elejournal of business models (2013), vol. 1, no. 1 pp. 85-105 90 table 2: categorizations or themes for business model definitions (ordered by year and author name). authors categories/themes morris et al. (2005) • strategic level • operational level • economical level osterwalder et al. (2005) • activity/role-related approach (inward looking) • value/customer-oriented approach (outward looking) george and bock (2011) • organizational design • the resource-based view of the firm • narrative and sense-making • the nature of innovation • the nature of opportunity • transactive structures wirtz (2011) • strategy-oriented approaches • organization-oriented approaches • technology-oriented approaches zott et al. (2011) • e-business and it • strategy • technology and innovation management ments discussed below and are less useful for deriving a generic and abstract definition. other (later) definitions are more formulated around the value logic in terms of creating, delivering and/or capturing value (e.g., chesbrough, 2006; johnson, 2010; osterwalder & pigneur, 2010; teece, 2010). for example, chesbrough (2006, p. 108) states that a business model performs two important functions: value creation and value capture. ‘first, it defines a series of activities that will yield a new product or service in such a way that there is net value created throughout the various activities. second, it captures value from a portion of those activities for the firm developing the model.’ ghaziani and ventresca (2005) concluded that the business model discourse is mostly framed around value creation. even if the meaning is framed differently, these frames still embody the same idea, namely, ‘the question of how to create value in the face of a changing business environment’ (p. 545). ‘the different frames emphasize different aspects of the same problem. generating revenues and managing relationships, although ostensibly different, both have something to say about the challenge of creating value in the unsettled digital economy’ (p. 545). while most authors are not very explicit about what they mean with value, most definitions seem to refer to customer value (i.e. value for the customer) (e.g., afuah, 2004; dubosson-torbay et al., 2002; osterwalder & pigneur, 2010; tapscott, 2001; teece, 2010). because most authors do not discuss what they mean with ‘value’ and ‘customer value,’ it is hard to comprejournal of business models (2013), vol. 1, no. 1 pp. 85-105 91 hend a definition of business model without a better understanding of the value concept. the concept of value has a long history in axiology or ‘the theory of value’ (holbrook, 1999) and has been of interest to many different fields in the social sciences, including economics, strategic management and marketing (khalifa, 2004; sanchez-fernandez & iniesta-bonillo, 2006). we will take a closer look at the value concept in marketing literature (and related management literature) as this is the most obvious source for customer value. in addition, we will briefly discuss the ideas on value creation in strategic management as this is the field where most business model authors rely on for their theoretical foundation. however, as will follow from the brief overview below, there are no straight answers to be found here either as customer value is a complex and multi-dimensional concept and value creation is still ill understood from a strategic perspective. conceptualizations of customer value range from more simplified, uni-dimensional to more complex and holistic, multi-dimensional approaches (sánchez-fernández & iniesta-bonillo, 2007). woodruff (1997) defines it as ‘a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations’ (p. 142). woodruff’s definition reflects the richness and complexity of the concept, but may not be readily translated into an effective operational definition (parasuraman, 1997). holbrook (1999) emphasizes that consumer value is an ‘interactive relativistic preference experience’ (p. 5). an ‘interactive’ approach entails that ‘value depends on the characteristics of some physical or mental object but cannot occur without the involvement of some subject who appreciates these characteristics’ (p. 6). it is ‘relativistic’ because it depends on relevant comparisons, it varies between people and it changes among situations. and ‘experience’ means that consumer value resides in the consumption experience rather than in the product purchased. customer value in the use context is also described as use value (or value-in-use), which is value created with and determined by the user during the consumption process (bowman & ambrosini, 2000; dixon, 1990). this is differentiated from exchange value (or value-in-exchange), which is value embedded in the product itself (i.e. added during the production process) and determined at the point of exchange process (bowman & ambrosini, 2000; dixon, 1990). bowman and ambrosini (2000) see use value as being defined by customers, based on their perceptions of the usefulness of the product on offer. in monetary terms it is the amount the customer is prepared to pay for the product. they explicitly refer to perceived use value to stress that it is subjectively assessed by the customer. exchange value is realized when the product is sold and it is the amount paid by the buyer to the producer. in general, (strategic) management literature has not paid a lot of attention to consumers (brief & bazerman, 2003). the emphasis has traditionally been on the supply side where the producers (solely) create value as reflected in the common term ‘added value’ (priem, 2007). so far there is little consensus on what value creation is and how it can be achieved in the management literature (lepak, smith, & taylor, 2007). a notable exception is priem (2007), who introduces an orientation on consumers and value creation – the ‘consumer benefit experienced’ viewpoint – as an alternative for the dominant orientation on producers and value capture in strategic management approaches based on firm positioning, transaction cost, and resource-based view. one of the fundamental ideas behind this perspective is that consumers experience value during their consumption activities. so products and services are not ‘value laden’ as they are without value when they are unconsumed. in subsequent work, priem, li, and carr (2012) refer to ‘demand-side’ research that looks at explaining and predicting managerial decisions that increase value creation within a value system based on product markets and consumers (downstream from the focal firm) instead of factor markets and producers (upstream of the focal firm). a demand-side approach recognizes that consumer’s heterogeneity of demand contributes to firm heterogeneity and emphasizes that firms first must compete to create more consumer value (to join the value system) and only then compete to capture that value. adner and zemsky (2006) also argue that value creation presents a distinct set of challenges and stress the role of demand-side factors in sustainable competitive advantage. following the discussion of the business model definition and the value concept, we conclude that from a generic and abstract perspective a business model provides an integral view on the value logic of an orjournal of business models (2013), vol. 1, no. 1 pp. 85-105 92 ganization by bringing together customer (use) value and value creation with business (exchange) value and value capture. we propose the following definition: a business model describes the value logic of an organization in terms of how it creates and captures customer value. this definition is similar to most of the more recent definitions of other authors, in particular osterwalder and pigneur (2010), chesbrough (2006), and johnson (2010), except our explicit reference to customer value. moreover, we excluded ‘delivering’ value from our definition as we see the separation of creating value and delivering value as a supply-side perspective focussing on producers adding value. customer (use) value cannot be created without involving the user and considering the use context. our business definition is abstract and generic enough to cover the use of the business model concept for different purposes and in different contexts and to cater for the evolution of the business model concept over time within this relatively young and emerging field. this is facilitated by not including a comprehensive list of elements but leaving that to more specific and operational frameworks (as discussed below). our definition reflects the current business model discourse, which is mostly framed around value creation (ghaziani & ventresca, 2005).the core reasoning of the business model is about the creation of customer value and linking this to the capture of customer value (for the creation of business/exchange value). this aligns well with the ideas of peter drucker who states that ‘there is only one valid definition of business purpose: to create a customer’ and ‘it is the customer who determines what a business is’ (drucker, 2007, p. 31). while most business model authors nowadays emphasise value creation this does, however, not mean that value capture is ignored (zott, amit, & massa, 2010). but while there is some attention to capturing the customer value created, business value and sustainable competitive advantage are stressed in strategy (chesbrough & rosenbloom, 2002). our definition model focuses on the firm level, but this does not exclude taking the network level into account. the specific firm can be the focal organization of a business network that plays a prominent role in creating and capturing customer value. in this way the business model can become a new level of analysis positioned between the firm and the network level (zott et al., 2011). based on the discussion of the business model definition, we also see opportunities for further developing the definition. because most authors do only limitedly address what is meant with customer value and value creation, we suggest that business model research pays more attention to other literature in this area, in particular from marketing and strategic management. however, the current literature on customer value and value creation will not provide any straight answers either as customer value is a complex and multi-dimensional concept and value creation is still ill-understood, in particular from a strategic perspective. moreover, there is an opportunity for business model research to contribute to the strategy literature as the business model can contribute to an expanded boundary model that includes value creation and integrates a demand side perspective (priem, butler, & li, 2013) business model frameworks and elements closely related to the business model definitions are the compositional elements describing what a business model is made-off. the elements are also referred to as, for example, building blocks (e.g., osterwalder & pigneur, 2010), components (e.g., pateli & giaglis, 2004), (key) questions (e.g., morris et al., 2005), or functions (e.g., chesbrough & rosenbloom, 2002). business model elements are sometimes presented as part of the definitions and other times described in separate lists, frameworks or ontologies. gordijn, osterwalder, and pigneur (2005) state that this kind of research has evolved from ‘shopping lists’ of components, to components as building blocks, to reference models and ontologies. this means the description of elements has become more explicitly conceptualized, shared and formal. business model frameworks and ontologies do not only define the elements, they also define the relationships between the elements (e.g., gordijn et al., 2005). they often also introduce some hierarchal structure, in particular a two-layered model with higher-level and lower level elements (e.g., johnson et al., 2008; morris et al., 2005; osterwalder, 2004). table 3 presents a selective overview of business model frameworks to briefly introduce the topic by describing a few prominent examples and highlight journal of business models (2013), vol. 1, no. 1 pp. 85-105 93 some communalities and differences. note that it is not our intention to be comprehensive here but to mainly focus on a representative set of well-known frameworks from different origins (in particular e-business, innovation, and entrepreneurship). see for more complete overviews, for example, shafer et al. (2005) and zott et al. (2011). the most well-known and widely used framework is the business model canvas (osterwalder & pigneur, 2010). the business model canvas is presented as a shared language for describing, visualizing, assessing and changing business models. it is focussed on design and innovation, in particular by using visual thinking which stimulates a holistic approach and storytelling. the canvas is a follow up of the business model ontology (osterwalder, 2004). in this ontology the elements are grouped into four pillars: customer interface (segments, relationships and channels), product (value proposition), infrastructure management (activities, resources, and partners) and financial aspects (revenues and costs). osterwalder (2004) shows how the ontology synthesize most of the other business model frameworks and elements at that time (e.g., afuah & tucci, 2001; hamel, 2000; magretta, 2002). the four-box business model (johnson, 2010; johnson et al., 2008) has many similarities with the business model canvas. johnson stresses the interdependencies between the boxes in terms of consistency and complementarily and sees this as the way in which a simple framework can become quite complex. however, there is not much further discussion of these interdependencies or support for dealing with them. the main difference between the business model canvas and the four-box business model is that the former has a customer pillar while the latter does not have a separate customer box but covers customer aspects to some extent in the value proposition box. moreover, while the business model canvas has key partnerships as a separate element, the four-box business model puts it under key resources. the four-box business model includes more detailed operational (business rules, behavioural norms and success metrics) and financial (target unit margin and resource velocity) aspects than the business model canvas. chesbrough and rosenbloom (2002) discuss business models in relation to technological innovation. they position the business model as a heuristic logic and focusing device that mediates between technology development and economic value creation. chesbrough and rosenbloom state that ‘the business model provides a coherent framework that takes technological characteristics and potentials as inputs, and converts them through customers and markets into economic inputs’ (p. 532). the elements of chesbrough and rosenbloom are quite similar to the business model canvas and the four-box business model. they do explicitly mention the value network as one of the elements, which includes customers, suppliers, complementors, and competitors. moreover, chesbrough and rosenbloom also see the competitive strategy as an element in the business model, which is not the case for the business model canvas and the four-box business model. however they do stress that this does not cover the full strategy and that there are differences between the business model and strategy, such as the fact that the business model emphasizes value creation while the strategy emphasizes value capture. morris et al. (2005) approach the business model from an entrepreneurship perspective. similar to the fourbox business model, they also include more details on the financial aspects (operating leverage, volumes, and margins). in line with chesbrough and rosenbloom, morris et al. also include competitive strategy as an element in the business model. moreover, one of their elements addresses the personal factors of the entrepreneur or investor in relation to their time, scope, and size ambitions, which they also refer to as ‘the investment model.’ this takes into account that there are different venture types possible such as the subsistence, income, growth and speculative models. in addition, morris et al. also stress the importance of internal and external fit with respect to the six elements. while internal fit (consistency and reinforcement between the components) is required for a working model, a strong internal fit can undermine adaptability and result in a poor external fit when the environment is turbulent. morris et al. also note that the components interact with each other and that the investment model (component 6) effectively delimits decisions made in all other areas. journal of business models (2013), vol. 1, no. 1 pp. 85-105 94 table 3: a selective overview of business model frameworks and elements (ordered by year and author name). author(s) list/framework and elements weill and vitale (2001) business model schematics atomic e-business model • roles and relationships (electronic and primary – including the firm of interest, its customers, suppliers and allies) • major flows of product, information, and money • revenues and other benefits each participant receives • strategic objectives & value proposition • sources of revenue • critical success factors • core competencies e-business initiative • combination of atomic models • targeted customer segments • channels to the customer • it infrastructure capability osterwalder (2004); osterwalder and pigneur (2010) business model canvas • customer segments • customer relationships • communication, distribution & sales channels • value propositions • key resources • key activities • key partnerships • revenue streams • cost structure chesbrough and rosenbloom (2002) technology-market mediation • value proposition • market segment • value chain • cost structure & profit potential • value network • competitive strategy morris et al. (2005) entrepreneur’s business model • how do we create value? (factors related to the offering) • who do we create value for? (market factors) • what is our source of competence? (internal capability factors) • how do we competitively position ourselves? (strategy factors) • how we make money? (economic factors) • what are our time, scope, and size ambitions? (personal/investor factors) continues on next page journal of business models (2013), vol. 1, no. 1 pp. 85-105 95 weill and vitale (2001) introduce e-business model schematics for describing e-business models. this framework uses the elements in timmers’ definition (timmers, 1998) as starting-point and adds a visual representation to it. moreover, weill and vitale differentiate between atomic e-business model and ebusiness initiatives that are based on combinations of atomic models and identify specific elements for both. what is notable about the approach of weill and vitale is its focus on e-business, which comes with special attention for information flows, electronic relationships, and it infrastructure. some other frameworks even have a separate, higher-order element addressing technology (e.g., bouwman et al., 2008; mason & spring, 2011). moreover, the network perspective on the organizational architecture is very prominent in ebusiness model schematics with a description of roles, relationships and flows. business model frameworks address what a business model is made-off. as the framework overview above shows, there are significant similarities in terms of the elements that can be used to represent how an organization (in a network setting) creates and captures customer value. from a comparison of 18 frameworks and lists, morris et al. (2005) state that the number of elements mentioned varies from four to eight and that a total of 24 different items are mentioned as possible elements, with 15 receiving multiple mentions. they conclude ‘that the most frequently cited are the firm’s value offering (11), economic model (10), customer interface/relationship (8), partner network/ roles (7), internal infrastructure/connected activities (6), and target markets (5). some items overlap, such as customer relationships and the firm’s partner network or the firm’s revenue sources, products, and value offering’ (p. 727). al-debei and avison (2010) suggest a unified business model conceptual framework with the dimensions value proposition, value architecture, value network, and value finance. based on our description and discussion of business model frameworks, the findings of morris et al. (2005) and the unified model of al-debei and avison (2010), we suggest that the core elements of a business model should address the customer, value proposition, organizational architecture and economics dimensions. the customer dimension identifies the target customers and articulates their problem (a difference between the current and desired situation). this problem (or opportunity) is sometimes also described as the job-to-be-done (johnson et al., 2008; ulwick, 2005). the value proposition dimension presents the organization’s solution to deal with the customer problem often in terms of an offering and its potential benefits. the value proposition is the first amongst equals and can be seen as the central dimension of the business model, as also argued by, for example, zott et al. (2011). the organizational architecture dimension addresses how the value proposition can be effectuated by the capabilities and resources of the focal organization and the other actors in the busitable 3: a selective overview of business model frameworks and elements (ordered by year and author name). johnson et al. (2008); johnson (2010) four-box business model • customer value proposition • job-to-be-done • offering • profit formula • revenue model • cost structure • target unit margin • resource velocity • key resources • key processes • processes • business rules & success metrics • behavioural norms continued from previous page journal of business models (2013), vol. 1, no. 1 pp. 85-105 96 ness network. there can be differences between the representation of the organizational architecture at the organizational and network level, for example the value chain and the value system (porter, 1985). the economics dimension focuses on financial considerations (how to make money) in terms of the revenues and costs and their drivers (e.g. margin, economies of scale). economics can also include non-financial considerations related to social and environmental considerations (e.g. the triple bottom line). together these business model dimensions cover the core questions about creating and capturing customer value in terms of who, what, why and how. the identification of four dimensions advances our understanding of the business model concept from the earlier discussion on definitions and moves the conceptualisation from abstract and generic to more concrete and specific. a business model describes the value logic of an organization in terms of how it creates and captures customer value and can be concisely represented by an interrelated set of elements that address the customer, value proposition, organizational architecture and economics dimensions. we suggest to include the business model dimensions as high-level core elements and to make use of business model frameworks as multi-level structures specifying a (limited) number of higher-order elements (or pillars, boxes, questions, etc.) and elaborating these in more detail as lower-level elements (or building blocks, components, factors, etc.). this means that depending on the specific purpose, context and/or theoretical foundations of a business model study, a more specialised framework can be used that may have additional higher-order elements and/or more specific lowerorder elements. in this way business model research can, on the one hand, build on a cumulative body of knowledge and, on the other hand, be flexible enough to adapt to specific purposes and circumstances. for example, some frameworks may have additional higher-order elements addressing strategy or technology. or some frameworks may cover the economics dimension by a financial higher-order element and revenues and costs as lower-order elements while others add volume, growth and resource velocity as additional lower-order elements. this flexibility does mean that when developing or using a business model framework, it is required to address the origin and foundation of the framework and elements and discuss assumptions and limitations. a business model framework should not only define the elements, but also define the relationships between the elements. according to morris, minet, richardson, and allen (2006, p. 47) ‘a useable business model framework captures the ways in which key decision variables are integrated, including the need for unique combinations that are internally consistent.’ it is important to recognize that a business model framework ‘more than the sum of its parts, the model captures the essence of how the business system will be focused’ (morris et al., 2005, p. 727). this is in line with suggestions that the business model is a system (afuah & tucci, 2001) with complex interdependencies between its elements (johnson, 2010). moreover, there should be a blend (mahadevan, 2000) or balance (bouwman et al., 2008) between the different dimensions. we suggest to take this one step further, more than a consistency or fit between the business model elements, the strongest business models create synergies between them going beyond tensions and trade-offs between customer and business perspectives and between value creation and capture. however, while the importance of the relationships and consistency between the elements in a business model framework is recognized, this topic is hardly addressed by literature so far except at the even more concrete level of business model archetypes. moreover, there is also a lack of empirical testing of the business model frameworks and elements. here also research on business model archetypes can be of great value as this research is often based on empirical studies. business model classifications and archetypes business model research has been addressing the identification and description of different types of business models. these archetypes are discussed individually or collectively as part of a classification (hedman & kalling, 2003; osterwalder et al., 2005; pateli & giaglis, 2004).an archetype can refer to a full business model, often an exemplar based on a specific company such as the ‘low-cost carrier model’ of southwest airlines, or a simplified, basic model, such as the ‘full service projournal of business models (2013), vol. 1, no. 1 pp. 85-105 97 vider’ atomic business model (weill & vitale, 2001), or a specific aspect or element of a business model, for example, the ‘free’ business model pattern (osterwalder & pigneur, 2010) for the revenue model. in this section we will discuss a number of these archetypes and classifications to get an impression of this area of research and link it to the business model conceptualization. it is not intended as being comprehensive with respect to the full range of archetypes or classifications but is representative and in particular covers e-business research, which has been most prolific in this area. authors in academic literature as well as popular press identify and discuss generic representations of specific types of business models and/or specific instantiations of these specific types. common examples are the ‘razor-and-blades model’ of gillette, the ‘power-by-thehour model’ of rolls royce, the ‘low-cost carrier model’ of southwest airlines, the ‘direct sales with build-toorder model’ of dell, and the ‘the customer is the company model’ of threadless. the in-depth descriptions of business model archetypes often address interesting business models of well-known firms or innovative business models of upcoming firms based on empirical studies. for example, with the rise of the internet, there was a lot of attention for e-business models, which later on got refined to pure-play and clicks-andmortars models (e.g., afuah & tucci, 2003). another example, anderson (2009) discusses how companies can be successful by giving away things for free and using more indirect revenue sources like cross-subsidies or freemium. the in-depth descriptions of business model archetypes are often presented as engaging stories of real world examples or in-depth case studies. this makes the business model concept very concrete and practical. while some authors focussed on individual business model archetypes, others started producing classifications of multiple business model archetypes in the form of lists or typologies (table 3). the rise of the internet resulted in an increase in business model choices (pateli & giaglis, 2004) with new e-business models and adapted versions of traditional ‘bricks-and-mortar’ models. there were many authors trying to describe and understand different e-business models, for example timmers (1998), rappa (2000) and weill and vitale (2001). later the specific focus on e-business models lessened, although many of the newer models are still associated with technology as driver or enabler. osterwalder and pigneur (2010) and johnson (2010) are examples of newer lists that are not e-business focussed. sometimes classifications make use of business model frameworks to systematically describe each business model archetype, as abstract presentation or exemplary instantiation, with the help of a business model framework. this is, for example, done by weill and vitale (2001), afuah and tucci (2003), and osterwalder and pigneur (2010). while most business model classifications are lists that present an unordered set of business model archetypes, some provide business model typologies that position archetypes relative to each other based on underlying criteria. for example, timmers (1998) uses 2 criteria for classifying his internet business models: (1) functional integration (form single function to multiple functions/integrated) and (2) degree of innovation (from lower to higher). while the typologies provide insights into different types of business models and their relative positioning, there is little integration or consolidation of the different criteria and model types presented by different authors. moreover, the criteria used to classify business models overlap to some extent with the elements in the business model frameworks, for example, weill and vitale (2001) and afuah and tucci (2003). it is unclear what the relation between the criteria and elements is. moreover, there is no holistic and exhaustive business model taxonomy available yet (lambert, 2006; pateli & giaglis, 2004). whereas a typology is an arbitrary/artificial classification that suits a specific need with categories that are conceptually derived and based on a limited number of variables, a taxonomy is a general/natural classification providing a basis for generalisation with categories that are empirically derived and based on a large number of variables (lambert, 2006). the classifications and archetypes can be applied for the design and management of business models, for example, business model composition (weill & vitale, 2001), business model decision-making (morris et al., 2005) and business model maturity (chesbrough, 2006). moreover, this kind of research is also important for business model innovation as it can help assessing the novelty of a business model. weill and vijournal of business models (2013), vol. 1, no. 1 pp. 85-105 98 table 4: a selective overview of business model classifications (ordered by year and author name). author(s) classification comments timmers (1998) internet business models classified by 2 criteria: (1) functional integration; (2) degree of innovation • e-shop • e-procurement • e-auction • 3rd party marketplace • e-mall • virtual communities • value chain integrator • information brokers • value chain service provider • collaboration platforms rappa (2000) business models on the web • brokerage model • advertising model • infomediary model • merchant model • manufacturer model • affiliate model • community model • subscription model • utility model weill and vitale (2001) atomic e-business models described by 4 elements (see atomic e-business model in table 3) • content provider • direct to consumer • full service provider • intermediary • shared infrastructure • value net integrator • virtual community • whole of enterprise/ government afuah and tucci (2003) (internet) business models (based on dominant revenue models) described by 4 elements: (1) profit site (role in value network), (2) revenue model, (3) commerce strategy and (4) pricing model • commission • advertising • mark-up • production • referral • subscription • fee-for-service johnson (2010) business model analogies • affinity club • brokerage • bundling • cell phone • crowdsourcing • disintermediation • fractionalization • freemium • leasing • low touch • negative operating cycle • pay-as-you-go • razors-and-blades • reverse auction • reverse razors-andblades • product-to-service • standardization • subscription club • user community osterwalder and pigneur (2010) • unbundling • long tail • multi-sided platforms • free (freemium, bait & hook) • open described by 9 elements (see business model canvas in table 3) journal of business models (2013), vol. 1, no. 1 pp. 85-105 99 tale (2001) discuss how atomic e-business models can be seen as pure types or as building blocks for more complex compositions in business model design and innovation. they also address how compositions need to take the synergies and conflicts between atomic e-business models into account, for example, while direct-to-customer and virtual community go well together, direct-to-customer should not be combined with content provider. the business model framework of morris et al. (2005) includes 3 levels: foundation, proprietary and rules levels. the business models archetypes can be used at the foundation level to help making generic decisions regarding what the business is and is to ensure that such decisions are internally consistent. chesbrough (2006) presents different business models archetypes as part of a maturity model for open innovation. it moves from very basic models with little advantages for the company to highly sophisticated models that drive the innovation activities of a company and form a platform for leading its industry. business model classifications and archetypes are important for the conceptualisation of business models, as they are more concrete and empirical than the definitions and frameworks. however, research into classifications and archetypes is very fragmented and not yet well developed, often lacking a systematic approach. business model archetypes can benefit from more rigorously applying business model frameworks to systematically describe an archetype and specify its scope (i.e. does it cover the complete business model or only certain elements). an archetypical description of a complete business model should at least address the customer, value proposition, organizational architecture, and economics dimensions to provide a holistic understanding of how a certain way of doing business creates and captures customer value. research into classifications and archetypes can also be used to validate and enrich our understanding of business model definitions and frameworks; in particular it can help to empirically test the business model frameworks and explore the relationships and consistency between business model elements. this also means that research into business model archetypes can make contributions that go beyond identifying and describing a particular archetype. concluding remarks the business model concept is still criticized for being fuzzy and vague and lacking consensus on its definition and compositional elements. in this paper we set out to advance our understanding of the business model concept by addressing three areas of research: business model definitions, business model elements, and business model archetypes. we conclude that a business model describes the value logic of an organization in terms of how it creates and captures customer value and can be concisely represented by an interrelated set of elements that address the customer, value proposition, organizational architecture and economics dimensions. business model definitions are converging around describing how organizations can create and capture customer value. these kinds of definitions are abstract and generic enough to cover the use of the business model concept for different purposes and in different contexts (e.g. technology, innovation, strategy). we explicitly include the customer value (or use value) where other definitions are less clear by referring to value in general or include business value (or exchange value). the focus is on the value creation from the customer perspective and linking value creation to value capture. however, a more strategic perspective is required to fully understand value capture and business value. moreover, while the focus is on the organization, the business network needs to be included as well when it plays a critical role in creating and capturing customer value. advancing the business model definition will require further research into customer value and value creation and needs to address related research in marketing and strategic management. moreover, there is an opportunity for a unique contribution of business model theory focussing on the integration of customer (use) value and value creation with business (exchange) value and value capture. while the business model definition is abstract and generic, business model frameworks and elements can make the business model concept more specific and operational. we suggest that a business model framework needs to include four dimensions that address the customer, value proposition, organizational architecture and economics. the value proposition can be seen journal of business models (2013), vol. 1, no. 1 pp. 85-105 100 as the central dimension. organizational architecture can be both at the firm and network level. economics can also include non-financial considerations. together these dimensions cover the basic who, what, why, and how questions about creating and capturing customer value. we suggest using a multi-level structure, which is used by many business model frameworks, and include the business model dimensions as high-level core elements. additional high-level elements (e.g. technology, competitive strategy) can be included depending on the purpose and context. also the elaboration into low-level elements can provide additional flexibility. however, there should be a minimal agreed upon set of low-level elements for each high-level (core) element (e.g. revenues and costs for economics). future research should empirically test the business model framework and elements. moreover, the development of theory or guidelines about when and how to extent or adapt a framework could greatly contribute to the quality and consistency of the development and application of business model frameworks. in addition, research into the relationship between the business model elements is needed to further advance the frameworks. business model classifications and archetypes describe different types of business models more fully or partially (i.e. covering only certain elements or aspects). while some authors have focussed on specific archetypes, others have developed lists or typologies. this research is of great value for better understanding the business model concept due to its empirical nature and practical approach. the classifications and archetypes can be applied for the innovation, design and management of business models. however, research on business model classifications and archetypes has so far been not very systematic and is quite fragmented. this research can benefit from the systematic use of business model frameworks for describing business model archetypes and determining their scope. moreover, a better understanding of the use of typologies and their underlying criteria is also required. the development of a more holistic and exhaustive business model taxonomy is also seen as an important area of future research. research into business model archetypes can also help to empirically test the business model frameworks and to further explore the relationships and consistency between business model elements. our understanding of the business model concept advanced greatly from the foundational research into business model definitions, business model frameworks and elements, and business model classifications and archetypes. moreover, we argue that these three areas complement each other in advancing our understanding of the business model concept and creating consensus on its definition and compositional elements. the business model definition can provide us with a generic and abstract conceptualization. specifying the compositional elements of a business model can make the business model concept more specific and operational and can offer the flexibility to cater for different purposes and contexts. business model classifications and archetypes can benefit greatly from the use of business model frameworks. business model definitions and frameworks can be validated and enriched by the empirical research into classifications and archetypes. as we did not use a comprehensive, systematic literature review, there are limitations to the paper in terms of it covering all business model definitions, business model frameworks and elements, and business model classifications and archetypes in academic literature. however, we did make use of the insights from systematic literature review by others (e.g., zott & amit, 2013) to complement the papers that we included in our selective overviews. moreover, we left a discussion of the theoretical foundation of the business model concept out of this paper. for a full understanding of the concept this should also be addressed. different theoretical perspectives are indirectly included by their influence on the business model definitions and the business model frameworks and elements. acknowledgement this research was carried out as part of the activities of, and funded by, the smart services cooperative research centre (crc) through the australian government’s crc programme (department of innovation, industry, science and research). an earlier version of this paper was published as a smart services crc whitepaper (fielt, 2011). journal of business models (2013), vol. 1, no. 1 pp. 85-105 101 references adner, r., & zemsky, p. (2006). a demand-based perspective on sustainable competitive advantage. strategic management journal, 27(3), 215–239. afuah, a. (2004). business models: a strategic management approach. new york, ny: mcgraw-hill/irwin. afuah, a., & tucci, c. l. (2001). internet business models and strategies: text and cases. new york, ny: mcgrawhill/irwin. afuah, a., & tucci, c. l. (2003). internet business models and strategies: text and cases (2 ed.). new york, ny: mcgraw-hill/irwin. al-debei, m. m., & avison, d. (2010). developing a unified framework of the business model concept. european journal of information systems, 19(3), 359-376. amit, r., & zott, c. (2001). value creation in e-business. strategic management journal, 22(6-7), 493-520. anderson, c. (2009). free: the future of a radical price. new york, ny: hyperion. bouwman, h., de vos, h., & haaker, t. (eds.). (2008). mobile service innovation and business models. heidelberg, germany: springer. bouwman, h., & fielt, e. (2008). service innovation and business models. in h. bouwman, h. de vos & t. haaker (eds.), mobile service innovation and business models (pp. 9-30). heidelberg, germany: springer. bowman, c., & ambrosini, v. (2000). value creation versus value capture: towards a coherent definition of value in strategy. british journal of management, 11(1), 1-15. brief, a. p., & bazerman, m. (2003). editor’s comments: bringing in consumers. academy of management review, 28(2), 187-189. chesbrough, h. (2006). open business models: how to thrive in the new innovation landscape. boston, ma: harvard business school press. chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2-3), 354363. chesbrough, h., & rosenbloom, r. s. (2002). the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial and corporate change, 11(3), 529-555. demil, b., & lecocq, x. (2010). business model evolution: in search of dynamic consistency. long range planning, 43(2-3), 227-246. dixon, d. f. (1990). marketing as production: the development of a concept. journal of the academy of marketing science, 18(4), 337-343. drucker, p. f. (1994). the theory of the business. harvard business review, 72(5), 95-104. drucker, p. f. (2007). the practice of management (butterworth-heinemann ed. classic drucker collection edition ed.). dubosson-torbay, m., osterwalder, a., & pigneur, y. (2002). e-business model design, classification, and measurements. thunderbird international business review, 44(1), 5-23. fielt, e. (2011). understanding business models business service management whitepaper series. brisbane, australia: smart services crc. journal of business models (2013), vol. 1, no. 1 pp. 85-105 102 george, g., & bock, a. j. (2011). the business model in practice and its implications for entrepreneurship research. entrepreneurship theory and practice, 35(1), 83-111. ghaziani, a., & ventresca, m. (2005). keywords and cultural change: frame analysis of business model public talk, 1975–2000. sociological forum, 20(4), 523-559. doi: 10.1007/s11206-005-9057-0 gordijn, j., osterwalder, a., & pigneur, y. (2005). comparing two business model ontologies for designing e-business models and value constellations. in d. r. vogel, p. walden, j. gricar & g. lenart (eds.), proceedings of the 18th bled electronic commerce conference (beld 2005). bled, slovenija: university of maribor. hamel, g. (2000). leading the revolution: how to thrive in turbulent times by making innovation a way of life. boston, ma: harvard business school press. hedman, j., & kalling, t. (2003). the business model concept: theoretical underpinnings and empirical illustrations. european journal of information systems, 12(1), 49-59. holbrook, m. b. (1999). introduction to consumer value. in m. b. holbrook (ed.), consumer value: a framework for analysis and research (pp. 1-28). london: routledge. janssen, m., kuk, g., & wagenaar, r. (2008). a survey of web-based business models for e-government in the netherlands. government information quarterly, 25(2), 202-220. johnson, m. w. (2010). seizing the white space: business model innovation for growth and renewal. boston, ma: harvard business press. johnson, m. w., christensen, c. m., & kagermann, h. (2008). reinventing your business model. harvard business review, 86(12), 50-59. khalifa, a. s. (2004). customer value: a review of recent literature and an integrative configuration. management decision, 42(5), 645-666. lambert, s. c. (2006). do we need a general classification scheme of business models. in s. spencer & a. jenkins (eds.), proceedings of the 17th australasian conference on information systems (acis 2006). adelaide, australia. lambert, s. c., & davidson, r. a. (2013). applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. european management journal, 31(6), 668-681. lepak, d. p., smith, k. g., & taylor, m. s. (2007). ‘value creation and value capture: a multilevel perspective. academy of management review, 32(1), 180-194. magretta, j. (2002). why business models matter. harvard business review, 80(5), 3-8. mahadevan, b. (2000). business models for internet-based e-commerce: an anatomy. california management review, 42(4), 55-69. mansfield, g. m., & fourie, l. c. h. (2004). strategy and business models strange bedfellows? a case for convergence and its evolution into strategic architecture. south african journal of business management, 35(1), 35-44. mason, k., & spring, m. (2011). the sites and practices of business models. industrial marketing management, 40(6), 1032-1041. morris, m., minet, s., richardson, j., & allen, j. (2006). is the business model a useful strategic concept? conceptual, theoretical, and empirical insights. journal of small business strategy, 17(1), 27-50. morris, m., schindehutte, m., & allen, j. (2005). the entrepreneur’s business model: toward a unified perspective. journal of business research, 58(6), 726-735. journal of business models (2013), vol. 1, no. 1 pp. 85-105 103 mullins, j., & komisar, r. (2009). getting to plan b: breaking through to a better business model. boston, ma: harvard business press. osterwalder, a. (2004). the business model ontology: a proposition in a design science approach. university of lausanne, lausanne, switzerland. osterwalder, a., & pigneur, y. (2010). business model generation: a handbook for visionaries, game changers, and challengers: (self-published). osterwalder, a., pigneur, y., & tucci, c. l. (2005). clarifying business models: origins, present, and future of the concept. communications of ais, 16(1). parasuraman, a. (1997). reflections on gaining competitive advantage through customer value. journal of the academy of marketing science, 25(2), 154-161. pateli, a. g., & giaglis, g. m. (2004). a research framework for analysing ebusiness models. european journal of information systems, 13(4), 302-314. porter, m. e. (1985). competitive advantage: creating and sustaining superior performance. new york, ny: the free press. priem, r. l. (2007). a consumer perspective on value creation. academy of management review, 32(1), 219-235. priem, r. l., butler, j. e., & li, s. (2013). toward reimagining strategy research: retrospection and prospection on the 2011 amr decade award article academy of management review, 38(4), 471-489. priem, r. l., li, s., & carr, j. c. (2012). insights and new directions from demand-side approaches to technology innovation, entrepreneurship, and strategic management research. journal of management, 38(1), 346-374. rappa, m. (2000). managing the digital enterprise: business models on the web. retrieved 2000, february 18, from http://ecommerce.ncsu.edu/business_models.html sanchez-fernandez, r., & iniesta-bonillo, m. a. (2006). consumer perception of value: literature review and a new conceptual framework. journal of consumer satisfaction, dissatisfaction and complaining behavior, 19, 40-58. sánchez-fernández, r., & iniesta-bonillo, m. á. (2007). the concept of perceived value: a systematic review of the research. marketing theory, 7(4), 427–451. shafer, s. m., smith, h. j., & linder, j. c. (2005). the power of business models. business horizons, 48(3), 199-207. tapscott, d. (2001). rethinking strategy in a networked world: or why michael porter is wrong about the internet. strategy + business, 24, 1-8. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2-3), 172-194. timmers, p. (1998). business models for electronic markets. electronic markets, 8(2), 3-8. ulwick, a. w. (2005). what customers want: using outcome-driven innovation to create breakthrough products and services. new york, ny: mcgraw-hill. weill, p., & vitale, m. r. (2001). place to space: migrating to ebusiness models. boston, ma: harvard business school press. wirtz, b. w. (2011). business model management: design, instruments, success factors (1 ed.). wiesbaden: gabler verlag. http://ecommerce.ncsu.edu/business_models.html journal of business models (2013), vol. 1, no. 1 pp. 85-105 104 woodruff, r. (1997). customer value: the next source for competitive advantage. journal of the academy of marketing science, 25(2), 139-153. yunus, m., moingeon, b., & lehmann-ortega, l. (2010). building social business models: lessons from the grameen experience. long range planning, 43(2-3), 308-325. zott, c., & amit, r. (2010). business model design: an activity system perspective. long range planning, 43(2-3), 216-226. zott, c., & amit, r. (2013). the business model: a theoretically anchored robust construct for strategic analysis. strategic organization, 11(4), 403-411. zott, c., amit, r., & massa, l. (2010). the business model: theoretical roots, recent developments, and future reseach (rev. september 2010 ed.). madrid, spain: iese business school. zott, c., amit, r., & massa, l. (2011). the business model: recent developments and future research journal of management, 37(4), 1019-1042. journal of business models (2013), vol. 1, no. 1 pp. 85-105 105 about the author dr erwin fielt is a senior lecturer in the information systems school of the science and engineering faculty at the queensland university of technology (qut), brisbane, australia. in his research and teaching, he focuses on the intersection between business and it, where information systems have to create value for individuals and organizations, in particular in relation to strategy, business models, and innovation. as researcher and practitioner, dr erwin fielt has been involved in many business model projects in particular in relation to it innovation (e.g., electronic business, mobile business, software as a service, social media, ubiquitous computing). his interests are in the conceptual and theoretical issues of business models as well as in the practical use of business model by start-ups and established companies. dr erwin fielt has published in numerous academic journals, such as the journal of strategic information systems, communications of the association for information systems, electronic markets, and info. before starting his academic career, he worked in different roles in the it industry, in particular in r&d projects. dr. fielt has a phd from the delft university of technology and a msc from the university of twente, both in the netherlands. _enref_1 _enref_3 _enref_4 _enref_5 _enref_6 _enref_7 _enref_8 _enref_9 _enref_10 _enref_11 _enref_12 _enref_13 _enref_14 _enref_15 _enref_16 _enref_17 _enref_18 _enref_19 _enref_20 _enref_21 _enref_22 _enref_23 _enref_24 _enref_25 _enref_26 _enref_27 _enref_28 _enref_29 _enref_30 _enref_31 _enref_32 _enref_33 _enref_34 _enref_35 _enref_36 _enref_37 _enref_38 _enref_39 _enref_40 _enref_41 _enref_42 _enref_43 _enref_44 _enref_45 _enref_46 _enref_47 _enref_48 _enref_49 _enref_50 _enref_51 _enref_52 _enref_53 _enref_54 _enref_55 _enref_56 _enref_57 _enref_58 _enref_59 _enref_60 _enref_61 _enref_62 _enref_63 _enref_64 _enref_65 _goback _goback _goback journal of business models (2014), vol. 2, no. 1 pp. 19-32 19 charging customers or making profit? business model change in the software industry margit malmmose peyton1, rainer lueg1 *, sevar khusainova1, patrick sønderskov iversen1 & seth boampong panti1 abstract purpose: advancements in technology, changing customer demands or new market entrants are often seen as a necessary condition to trigger the creation of new business models, or disruptive change in existing ones. yet, the sufficient condition is often determined by pricing and how customers are willing to pay for the technology (chesbrough and rosenbloom, 2002). as a consequence, much research on business models has focused on innovation and technology management (rajala et al., 2012; zott et al., 2011), and software-specific frameworks for business models have emerged (popp, 2011; rajala et al., 2003; rajala et al., 2004; stahl, 2004). this paper attempts to illustrate business model change in the software industry. design: drawing on rajala et al. (2003), this case study explores the (1) antecedents and (2) consequences of a business model-change in a logistics software company. the company decided to abolish their profitable fee-based licensing for an internet-based version of its core product and to offer it as freeware including unlimited service. findings: firstly, we illustrate how external developments in technology and customer demands (pricing), as well as the desire for a sustainable business model, have led to this drastic change. secondly, we initially find that much of the company’s new business model is congruent with the company-focused framework of rajala et al. (2003) [product strategy; distribution model, services and implementation; revenue logic]. value: the existing frameworks for business models in the software industry cannot fully explain the disruptive change in the business model. therefore, we suggest extending the framework by the element of ‘innovation’. keywords: business model change; software; innovation; freeware; logistics; lock-in. 1: aarhus university, school of business and social sciences, department of economics and business, fuglesangsallé 4, 8210 aarhus v *: corresponding author acknowledgement: we thank malene sofie kramer hansen and christian brændsgård madsen for their contributions to this work. please cite this paper as: peyton, m.m. et al 2014 ‘charging customers or making profit? business model change in the software industry’, journal of business models, vol. 2, no. 1, pp. 19-32. journal of business models (2014), vol. 2, no. 1 pp. 19-32 20 introduction  during the last two decades, business models have attracted considerable attention both from research and practice. a major focus has been on innovation and technology management (chesbrough and rosenbloom, 2002; rajala et al., 2012; zott et al., 2011). rajala et al. (2003) emphasize that most research in the software industry has  focused on product development, financing, and product life cycles or the industry as a whole or within defined business models. some authors argue that the business model of the company should be revisited regularly (johnson et al., 2008) and that its operative tactics have to be adapted to changing environmental conditions (casadesus-masanell and ricart, 2010; rajala et al., 2012). however, the definition of a business model in the software industry, as well as its exact pattern of changes are puzzling issues for both practitioners and academics, and there are only few attempts to address this particular topic. popp (2011) seeks to explain some software companies successes by applying hybrid business models where the software company is acting both as an inventor and as an lessor. rajala et al (2012) study the effects of applying open innovation to the software business model. open innovation is here defined as shared internal and external (customers) innovation. advancements in technology, changing customer demands or new market entrants are often seen as a necessary condition to trigger the creation of new business models (business models) or disruptive change in existing ones. yet, the sufficient condition is often determined by pricing and customers’ willingness to pay for the technology (chesbrough and rosenbloom, 2002) which is identified through an increased tendency of freeware strategies (haruvy and prasad, 2005; riehle, 2012). as a consequence, much research on business models has focused on innovation and technology management (zott et al., 2011), and software-specific frameworks for business models have emerged (rajala et al., 2003). building on this previous evidence (esp. rajala et al., 2003; rajala and westerlund, 2007), the focus of this paper is twofold. first, we attempt to further identify the elements of a business model in the software industry. second, we aim at identifying the antecedents that lead to a business model change and then assess the consequences of this change. we pose the overall research question: “what are elements of a business model in the software industry, and what are the antecedents and consequences of a business model change in the software industry?” to investigate this question, we conduct a case study at the danish division of a small norwegian company (apollon) specialized in outbound logistics software. we want to explain how the business model of the software company has evolved over apollon’s life span, what caused the recent changes in the business model, and what the consequences and future opportunities are. drawing on rajala et al. (2003), this case study explores the (1) antecedents and (2) consequences of a business model-change in a logistics software company. the company decided to abolish their profitable fee-based licensing for an internet-based version of its core product and to offer it as freeware including unlimited service. firstly, we illustrate how external developments in technology and customer demands (pricing), as well as the desire for sustainability of the business model, have led to this drastic change. secondly, we initially find that much of the company’s new business model is congruent with the company-focused framework of rajala et al. (2003) [product strategy; distribution model, services and implementation; revenue logic]. nevertheless, the framework cannot fully explain the disruptive change in the business model. constantly changing market conditions forces software companies to continuously rethink their business model. therefore, we argue in line with zott et al. (2011) to extend the framework of rajala et al. (2003) by the element of ‘innovation’ (also see the more recent source of rajala et al., 2012). the remainder of the paper is structured as follows: section 2 depicts the theoretical background of business models in the software industry. section 3 explains the advantages and limitations of our chosen methodology, i.e., a case study. section 4 presents our findings. we critically assess the case in section 5, and also emphasize our contributions and avenues for future research. journal of business models (2014), vol. 2, no. 1 pp. 19-32 21 business models in the software industry the literature offers a wide range of definitions for a business model (e.g., chesbrough and rosenbloom, 2002; magretta, 2002; osterwalder and pigneur, 2005). zott et al. (2011) structure this literature on business models since the first appearance of the concept in the 1990s. they find that three fields of research have emerged, which are (1) innovation in business models, (2) strategic aspects and performance management, and (3) e-business including information technology. as a finding across all three fields, they summarize that business models are individually tailored to companies and the environment in which they operate. despite the importance of business models in connection with information technology, conceptualizations of business models in the software industry are so far non-existing. a notable exception are rajala et al. (2003) who build theory from five case studies they conducted in the software industry (glaser and strauss, 1967; strauss and corbin, 1990). based on their empirical findings, they suggest that a business model in the software industry comprises the interdependent elements of a product strategy; a revenue logic; a distribution model; and a service and implementation model. competitors, resources, shareholders and customers are seen as direct stakeholders, who—however—operate outside the company’s business model. we will apply this framework to apollon, see figure 1 for details. figure 1: elements of a business model (rajala et al., 2003) product offering business strategy revenue logic services & implementation model distribution model product strategy customers resource environment competing environment finincing environment & stakeholders’ utilities business model journal of business models (2014), vol. 2, no. 1 pp. 19-32 22 rajala and westerlund (2007) suggest that these four elements of a business models can be combined differently and thereby select a space along the two continua of degree of involvement of customer relationships and the level of the homogeneity of the offering. the resulting four high/low combinations indicate four feasible business models in the software industry. these include software project businesses  (type i) with high level of product customization and close client-company relationships;  system solutions businesses  (type ii) with high level of customer involvement combined with a highly standardized product;  transactional services and semi-finished solutions  (type iii), which normally serve as a platform for a bigger value creation framework to a small number of clients and typically as a part of a network; and last, standard offerings (type iv), with low involvement in a customer relationships and economies of scale due to homogeneity. we will classify apollon in this framework and depict the four business models in figure 2. methodology research method  we opted to conduct an explanatory case study in a single company, which allows us to understand the phenomenon of business models in its real-life context (burns and scapens, 2000; scapens, 1990). it is our goal to understand how exactly the elements of a business model work together in the software industry, and to illustrate practices from the field (ryan et al., 2002). thereby, we are open for interpretations that would lead us to adjust or further contribute to the theories that explain the phenomena under investigation (arbnor and bjerke, 2008; lukka and modell, 2010). data collection we draw on three sources of data to illustrate our case: interviews, observations and archival data. our first and primary sources are two interviews with carefully selected key informants. the first interview was conducted with the ceo of apollon’s danish division. we selected him for his thorough understanding of the international software market, his long experience, and his holistic overview of all operations in the company. additionally, we conducted a phone interview with a sales representative in order to gain a better understanding of the direct interactions with customers (ryan et al., 2002). by selecting key informants from different hierarches within the company, we also follow the call of morgeson et al. (2010) for more multi-level case study research that provides a deeper understanding of the researched figure 2 classification of different types of business models in the software industry (rajala and westerlund, 2007; rajala et al., 2004) level of homogeneity of offering d e g r e e o f i n v o l v e m e n t i n c u s t o m e r r e l a t io n s h ip s high l o w h ig h low i software project business ii system solutions business iii transactional services and semi-finished solutions business iv standard offerings business journal of business models (2014), vol. 2, no. 1 pp. 19-32 23 phenomena. interviews included mostly openended questions, and were semi-structured where we asked elaborating questions when appropriate. interviews were originally conducted in danish and lasted approximately one hour each. they were taperecorded, transcribed and analyzed for patterns. quotes in the text are our own translations into english (bouchard, 1976; brislin et al., 1973; oppenheim, 1992). we did not predetermine the number of interviews but stopped when we felt saturated (flick, 2002; glaser and strauss, 1967). our first hint toward saturation was that the key informants started to only reinforce what we had found out through external analysis of the company beforehand. second, we did not notice any contradicting evidence during our observations, which lent validity to the data. third, we carefully selected the most knowledgeable key informants in the company such as the ceo; it is highly unlikely that there are other informants that would be more knowledgeable on a topic like apollon’s business model. second, we use observations as a source of data that were gathered during our visits at the company site. these data sources include our general impressions of the research site; participation in diverse meetings; interaction of employees; the times that employees needed to perform tasks; the location and conditions of the building; work space arrangements and furnishing of offices; observations on the technology products of the company and the presentation on products given by apollon’s managers. this data is very fuzzy, and we analyzed them by identifying patterns through discussions in our research group (yin, 2009). third, we collected archival data on the company to corroborate our interviews and observations. we did this by asking apollon’s management for documentation, and we also searched what was publicly available on the internet. these archival sources include internal documents, brochures, bulletins, annual report, reviews, presentation materials, and apollon’s website. again, we analyzed the data through pattern matching in group discussions (yin, 2009). they support our understanding of apollons specific situation. limitations this study has limitations that need to be considered. as this is a single company case study, it might not be generalizable beyond the specific parameters of its context, such as its industry, the company size, or the competitive situation in which this business model has emerged. moreover, we only investigated the danish division of apollon. though the research and development department is situated in romania, the small size of the company and the fluent and transversal communication existing across the national departments enables us to identify and discuss the company’s product development processes which are essential for the business model understanding. last, this study mainly focuses on the business model. future studies could focus more on the external, competitive environment. despite the limitations, we aim for sufficient validity and reliability (ryan et al., 2002): we ensure construct validity by using established frameworks and definitions on business models to reason for our results. internal validity is increased by corroborating diverse sources of data. as to external validity, we already alerted that this study has an explanatory, illustrative character and ask for careful consideration when generalizing our conclusion. last, we consider reliability by depicting our research protocol. findings the software company apollon1 was founded in norway in 1997 and expanded with national divisions to denmark (2002), sweden (2008) and finland (2011). national divisions are in charge of selling, marketing and supporting apollon’s main product, dispatch. dispatch tracks consignments. we will elaborate on the products in section 4.1. the danish division employs 20 people. the programming department, where a majority of the coding and product development is done, is located in romania and has 23 employees. apollon operates in a niche market for outbound-logistics software. it has approximately 8,000 customers of which 1,600 are located in denmark. apollon has only small and insignificant competitors in denmark that have about 100 customers’ altogether. yet, apollon estimates that it just has 15% of the total possible market. supposedly, there are still about 9,000 danish 1 we changed the name of the company and its products to offer more anonymity. journal of business models (2014), vol. 2, no. 1 pp. 19-32 24 companies who could switch from their in-house software solution to the dispatch product family. product strategy the product strategy of apollon revolves around a product family, of which dispatch is the core. dispatch helps companies to manage their outbound logistics. all other products are built on it or are complementary. we also describe the recent changes to the product strategy. dispatch targets large company as customers who run an erp-system, where dispatch gets invisibly integrated. the software accesses the widely different it-systems of the customer’s carriers. it is pre-programed to automatically comply with the varying demands of known carriers, such as their complex printing formats. thereby, dispatch decreases human errors, lowers the risk of delays and saves time by automatic compliance, avoidance of entering data twice, and one integrated erp-system. as a recent change, apollon added the ‘dispatch portal’ feature, which enables senders and receivers to trac the consignment via an online portal. another recently added feature is dispatch filedrop. filedrop enables customers to ‘drag and drop’ files created by the erpsystem and to use them dispatch. this is the simplest solution as no integration with the erp-system is necessary. apollon has recently introduced several new products: the recently added products ‘dispatch online’, ‘dispatch mobile’, and ‘dispatch scanapp’ focus on a different customer group. online has the exact same features as the parallel existing product dispatch, the only difference being that it runs fully online. thereby, it targets a new customer base that does not have an erp-system, especially small, newly started companies, often web-shops. mobile has also been recently added to the product group. it targets the completely new customer segments that lack the financial strength to afford their own system: small carriers, i.e., the companies that apollon’s current customers work with to ship their own products. by establishing business relations with them, apollon locks them in and thereby protects its business model against potential new entrants. scanapp is the online version of mobile and also targets small carriers. thereby, apollons product strategy is gradually changing from a traditional product approach aiming at a well-established customer segment to a diversified product approach aiming at a different customer segment with new types of products. revenue logic as apollon has currently no competitor in denmark except for in-house solutions for outbound-logistics software, it has relatively high discretion in pricing. apollon’s sources of revenues are one-time installations as well as monthly fees from customers using dispatch. the cost installation for dispatch varies according to the number of days apollon employees are at the customer’s site, the hourly rate for external consultants, the number of printers, and the sophistication of desired integration (filedrop, sql or api). the monthly fee paid for dispatch varies with the number of consignments per year. licenses range from up to 2,000 until 50,000 consignments per year. each license covers one location and an unlimited number of users, along with unlimited service and support on phone or email.  apollon operates profitably and its revenues exceed its costs by far. the costs structure has three main categories: first, there are development costs. a software product is the fact that it requires large investments in the development of software, and  low or non-existent marginal cost afterwards (shapiro and varian, 1998).  despite the fact that dispatch was initially developed by the division in romania, the danish division contributed substantially to the developments of online, portal and scanapp. a second major cost category is the helpdesk to which all customers have unlimited access to foster high loyalty. the third cost category is the administrative expenses,  including office rent, traveling, salaries, marketing material, and pr related expenses. it is highly noteworthy that—to get access to new customer segment of smaller companies—apollon made a radical rupture in its business model. now, it gives away a newer, more modern version (online) of its highly profitable older core product (dispatch) for free. astonishingly, apollon also grants the same, free service and maintenance to all of these non-paying customers. this try-before-you-buy has been a fundamentally new paradigm for apollon. the decision to create this online version of the product was journal of business models (2014), vol. 2, no. 1 pp. 19-32 25 associated with the decision to target new customer segments, i.e. to cover small and medium size companies in addition to large businesses they used to have as clients. among others, the differences between the two solutions are the lack integration into customers’ erp system and easy access to the system via the internet. moreover, online version does not require manpower to install the system and train the staff. as for the try-before-you-buy option, it was not offered for the apollon users, and it is not available to everyone, but rather to small newly established businesses, who might become their potential clients. this is a major difference to similar business models like gillette, where the product (razor) is free but customers are charged for the maintenance (blades) (johnson et al., 2008; zott and amit, 2010). however, by offering the product and service for free for smaller companies, apollon thereby create sustainable value for these companies, as said by the ceo: “the idea is to capture the small customers who are just starting their businesses. they don’t have any capital, so we have a business model that can assist in that particular situation.” online is already popular in norway, and the danish market is expected to pick up. from the limited data available, it seems as if approximately 90% of online-customers default within one year. while the marginal cost of the product is irrelevant, apollon never recovers the incurred costs of service and maintenance. apollon tries to retain the remaining 10% of surviving customers. as they grow, apollon charges them as soon as they reach a certain number of consignments. apollon anticipates that customers—who felt well-treated in the past by having access to all features for free as well as unlimited service—will stick to apollon’s products later. the network effect as well as switching costs would suggest this opportunity. having introduced new products to new customer segments, apollon has switched its marketing strategy from concentrated to diversification integrated new products in new markets (ansoff, 1958). this exact phenomenon is closely linked to that of innovation (ansoff, 1968). accessing a new market (i.e. the small companies) through a new channel (the internet) using a different strategy (freeware) is increasingly common among software suppliers (riehle, 2012) and can be categorized as a commercial open source business model with the aim of gaining revenue at a later point in time when the free open source does no longer provide the full utility (riehle, 2012). this type of business model is often seen within the software industry and examples are linux, mysql, apache and eclipse (ebert, 2007). another example is skype who offers free calls online, but have a variety of additional features that cost a little such as phone calls to land lines and business group video calls (skype, 2013). distribution model (marketing and sales) the marketing of apollon has changed from traditional advertising to a network-based ambassadorship. in the sales division, apollon has switched from informal customer contacts to a more formalized crmsystem. we describe the changes in the following. as to previous marketing practices, apollon has relied heavily on traditional advertising to market its products during its first years in denmark, such as newspaper advertisement. besides the high costs incurred, apollon did not see the return-on-marketing for these initiatives. advertisements did not target the right customers in the appropriate way. most of the successful sales were either made to customers who apollon identified and contacted directly (push strategy). another marketing initiative that apollon still pursues is the use of an external pr consultant who tries to get apollon into the media with topics that are not necessarily related to its products, e.g., as an innovative employer in the danish market. marketing practices have changed over the last three years. as apollon established itself more in the danish market, customers independently contacted apollon as they were referred to the dispatch product by their carriers. this led apollon to stop advertising and to switch to a pull-strategy that involves ‘ambassadors’. apollon defines an ambassador as someone that can credibly recommend the dispatch product family to a company, such as carriers, sellers of erp-software, and logistics experts who switch jobs. by using ambassadors, apollon also hopes to get access to smes. however, we did not identify initiatives that allowed apollon to actively steer this ambassadorial process. journal of business models (2014), vol. 2, no. 1 pp. 19-32 26 concerning sales, apollon employees a sales force of four people (out of 20). in the beginning, the sales pitches were informal and relied strongly on the characteristics of the sales person. as it grew to 20 employees, apollon found that sharing knowledge about product features became increasingly difficult. this led to a formalized customer relationship management (crm). for instance, it comprises the mode of contact, information packages for the customer, sales demonstration, technical requirements, and documentation of the customer relationship. introducing the new online and mobile products aiming at the small entrepreneurial customers, the marketing and sales can be linked to the revenue logic; by giving the new products away for free is in fact a specific marketing and sales technique which is also highlighted by the ceo “the idea of focusing on the small startups is to capture them later in their development. it is marketing, a way of capturing customers”. it is an investment in potential customers just like traditional marketing costs, and this is exactly how apollon sees it. services and implementation model service and crm are essential parts of apollon’s business model because apollon generates most of its revenues from existing customers. the number of customers has not grown substantially over the last 3 years, but apollon has successfully managed to increase revenues from the existing customers. the stalled growth, however, is a problem for the sustainability of the business model, given that competitors might be interested in entering the market, and only 15% of the whole market potential is yet accessed. as described, apollon attempts to gain a larger market share during the next years with its new products. customers have unlimited access to service and maintenance free of charge, as the ceo implies: “of course we create profit from our software, but ultimately we create a good profit because we provide good customer service.” the employees in the service department are evaluated based on a “customers served ratio”, which encourages the quick resolution of problems and shortens waiting time for the customers in line. while new customers naturally require service more often, there is no sign that companies make excessive use of the service. on average, apollon provides service to a customer four times a year, where the service load is highest after the regular updates of the software. to underscore the importance of service, we observed that the number of employees in the service department (8)—a cost center—is twice as high as the revenue-generating sales department (4). also, the service department occupies the most prominent and central office space at apollon. however, this may very well be linked to both product and marketing strategy. the service provided is part of the knowledge based product. likewise, the service provided is a further sustainable marketing approach used to keep the customers. innovation so far, we have documented how the business model of apolln has evolved over the past 10 years. specifically, we have emphasized substantial changes in the product strategy, the revenue logic, and the distribution model. nevertheless, our chosen framework from rajala et al. (2003) cannot explain why these changes happened. we therefore suggest expanding this framework by the element of ‘innovation’ as suggested by zott et al. (2011), because innovation happens due to external and internal impulses (also see the more recent work of rajala et al., 2012). external impulses: customer focus innovation in the product strategy received impulses from the sales force. they described the customer needs and thereby provided the basis for new products like portal or mobile. they were supported by the service department, whose employees could contribute experiences with problems that customers frequently encountered. this way, apollon could not only satisfy current needs of customers but also anticipate their current necessities. this phenomena can be referred to what zott (2011) describes as a commercialization of innovative ideas and technologies where free products becomes part of the innovation process and commercialization. journal of business models (2014), vol. 2, no. 1 pp. 19-32 27 the revenue logic is further connected to this type of innovation, and the case study shows a changing revenue model due to external impulses. sales representatives and top management suggested that also carriers could be targeted as customers. another change was that the previously profitably sold product dispatch was released in a more modern and better version (online) but then given away for free, including all necessary service and maintenance. this—at first sight—counterintuitive move will grant apollon a stronger position in the market, more market share, more locked-in customers, and higher customer loyalty. the idea also signals that in order to access smes, apollon has to adjust to the initially weak cash flows of these smes and postpone generating revenue to a later stage. innovations in distribution were moreover triggered by external impulses. apollon closely observed how dispatch spread in the market, how new customers heard about it, and how the decisions to buy were made. this led to the abandonment of advertisement (push marketing) and the introduction of ambassadors (pull marketing). internal impulses: knowledge sharing the external impulses for innovation had to be processed by apollon through internal knowledge sharing or open innovation (rajala et al., 2012). knowledge sharing occurs informally, e.g. through the culture of openness, egalitarianism and communication that apollon’s top management promotes. formalized processes include the monthly “second friday meeting” that takes an efficient 90 minutes only. the intention of the meeting is that employees understand what is going on in the company, and to encourage debates and dialogues beyond the meeting. typical topics include the explanation of financial and non-financial key performance indicators by ceo and cfo, state of affairs with new or large customers, practical problems of everyday work, and productrelated improvements. also, apollon has joined this electronic platform ‘yammer’ to facilitate knowledge exchange within and across all divisions in scandinavia and romania, and the headquarters in norway. the high degree of innovation processes in apollon is further sustained by both the ceo and his assistant: “[…] i would definitely highlight that we test a lot of different things. and there are many things which do not succeed of course, but then there are other things where we prove ourselves and we can see that we are really good. we are quick in capturing new ideas, but also quick in testing them.” exactly these elements highlight a sustainable and integrated degree of innovation in the organizational culture. discussion this study addresses elements of a business model as well as the antecedents and consequences of a business model change in the software industry. following the framework of rajala et al. (2003), we demonstrate how changes in technology, shifting customer demands as well as the possibility of new market entrants change the business model of a software company, specifically its product strategy, its revenue model towards turning profitable core products into freeware, as well as its distribution model. in the following, we will discuss if apollon has successfully managed to switch from its previous business model to a new one (rajala and westerlund, 2007), and what its future opportunities and challenges are. the current and future challenges for apollon relating to rajala and westerlund’s (2007) four suggested business models in the software industry, our analysis suggests that apollon has moved from a type iv business model (standard offerings business) to a type ii business model (system solution business). the latter implies offering of uniform core solution (dispatch) that can be modified for customers through modular components. but apollon still has some characteristics of its previous business model. according to popp (2011), multiple business model characteristics—defined as a hybrid business model—are often necessary within the software industry. however, this type of hybrid business model refers to the dual value creation of software companies’ product strategy: the journal of business models (2014), vol. 2, no. 1 pp. 19-32 28 software as a product and the software as a service. in this respect, apollon has a well-defined hybrid business model with a high level of service and expertise offered to the customers, along with sustainable software products. regarding the revenue logic and customer segmentation, we suggest that apollon should focus on a type ii business model by improving its capabilities on the two decisive factors of business model choice in the software industry: the level of homogeneity of offering and the degree of involvement in customer relationships (rajala and westerlund, 2007): to begin with, apollon achieved higher profitability with their new business model. the increase in costs for additional sales staff had been more than recovered in the following year by substantially increased sales. as to homogeneity, apollon has diversified its product strategy by responding to the new internet-based and portable-device-related demands of customers. the change is not so fundamental that it could become a type i or iii business model, but sufficient to give customers a reason to intensify their relationships. rajala and westerlund (2007) emphasize that more heterogeneous offerings are an appropriate solution for companies with a smaller number of customers such as apollon, whose danish market is estimated at not more than 10,600 customers. besides the different products that apollon currently possess, there are more levers of heterogeneity, such as the different possible integrations into erp using sql, api and filedrop. this higher degree of customization creates entry barriers for the competition from sweden by increasing the switching costs of the customers. as to customer relationships, apollon should use the higher degree of customization to deepen relationships. at the moment, apollon has contact with each customer on average every three month. first, crm is a feasible way of increasing the frequency of these contacts and to secure apollon a more sustainable type ii business model. second, apollon could improve is its new marketing strategy of ambassadors. while we agree that it seems as a clear improvement over the previous advertising strategy, apollon could employ more pro-active strategies to steer the development of its word-of-mouth networks into the right direction. third, the new revenue model where mobile is given away for free needs to be secured by creating longterm bonds to the relevant smes. that way, the likelihood of generating future revenue increases. the freeware strategic option, according to the apollon model increases future revenues, but according to haruvy and prasad (2005) two additional factors play an increasing role in freeware solutions; it is a beneficial strategy in order to deter a rival from entering the market and it contributes to rapid access and growth within a particular market. these factors are naturally interrelated with the long-term bond established to relevant smes. however, according to riehle (2012) caution in this business model should be taken in this approach for product managers to carefully plan the interface of the free open access customers and the paying customers in order to avoid customer dissatisfaction. the costing structure is relevant in these considerations since it naturally establish the maneuverable possibilities for apollon. an additional challenge for apollon is to consider the type of innovation implied in their business model. the current business model has several closed innovation attributes. this means that the research and development is internal and not open towards external stakeholders (rajala et al., 2012). the advantage of using a closed innovation mode is being the first to the market, securing future revenues. on the contrary, an open innovation mode reveals research and development ideas, but simultaneously innovations emerges from stakeholders needs and apollon could thereby create a more sustainable business model (chesbrough, 2003; chesbrough and appleyard, 2007; ebert, 2007; rajala et al., 2012). though apollon also indicates some open innovation, this could be more prominent, for example by sharing yammar with the different freight companies or some of the major customers. zott (2011) identifies several areas of literature within business model innovation. in particular, open innovation and collaborative entrepreneurship (miles et al., 2006) are highlighted as emergent strategies within knowledge based companies like apollon. likewise, the open innovation is closely related to possibilities of facing business model changes due to an incorporated flexibility in the organizational culture which has been proven essential in sustaining global competitiveness (calia et al., 2007; rajala et al., 2012). this type of injournal of business models (2014), vol. 2, no. 1 pp. 19-32 29 novation due to increased competition which directly forces organizations to change some of their core business model is similar to evolutionary change where survival in a competitive environment forces organizations to adapt their business concepts accordingly (ven and poole, 1995). though at this point, apollon appears to purposely adopt the freeware approach, the innovative approach to other markets with diversified products is not necessarily similar to other evolutionary companies like sap who became a market leader through cooperation with ibm (leimbach, 2008). similarities, however, can be found in the adaptability of capture opportunities at the right moments which exactly represent the dynamic transformational strategy approach found in evolutionary business models (demil and lecocq, 2010). contributions more specifically, our study has several implications for business models in the software industry. first, we demonstrate that the framework of rajala et al. (2003) can reasonably well describe a business model in the software industry. our case study suggests that this framework should be extended by the element of innovation to be better able to explain where innovation comes from and why business models change. this can successfully be combined with elements from the business model change literature which through, for example, evolution capture some of the emergent strategies in software companies. most notably, the case has illustrated that the product change was induced by new technological possibilities and client needs, rather than by the general desire to be innovative in the field. this is because apollon does not face fierce competition, which does not require them to be highly innovative. we did not find any indication that apollon considered competitive forces or other companies’ experiences. the innovation was mainly driven by technology and clients. second, we use the four business model types suggested by rajala and westerlund (2007) to categorize the business model of apollon. our case study illustrates that the switch from one business model to the other such as apollon did not require a rearrangement of the elements of the business model, such as different products, revenue models or distribution models. we thereby contribute that the focus on the practical implementation of business models deserves the attention of future research. additionally, this witnesses a neglected importance of flexibility and adaptation in the organizations business model where the business model frequently is identified as a static description of how the organization create value for consumers which partly supports the findings of johnson, christensen and kagermann (2008), casadesus-masanell and ricart (2010), and rajala, westerlund and møller (2012). this particular case has demonstrated how increased organizational complexity, rapid growth in software industry and lack of entry barriers to the software market supports a growing need for emergent strategy tools which should be incorporated in the business model design in order to capture a holistic approach and management control system for the organizations. future research innovation was a central driver of change in the case study presented here. we suggest that this element should be added to the framework of rajala et al. (2003). yet, there are several other elements that are seen either as external to a business model in the software industry, or that not mentioned yet. future research could investigate such elements, e.g., the role of different employee capabilities, dealing with uncertainty by the top management, or mechanisms by which the networks of sales representatives function. conclusion this study contributes by illustrating a business model in the software industry, as well as the antecedents and consequences of business model change. thereby, we challenge existing theory in this field and suggest that innovation has not been sufficiently addressed when explaining business model change in the software industry. our case study gives an example how business model change can be better understood if both the origin and the role of innovation are more appreciated. journal of business models (2014), vol. 2, no. 1 pp. 19-32 30 references ansoff, h.i. (1958), a model for diversification, management science, vol. 4 no. 4, pp. 392-414. ansoff, h.i. (1968), the innovative firm, long range planning, vol. 1 no. 2, pp. 26-27. arbnor, i., bjerke, b. (2008), methodology for creating business knowledge, sage, thousand oaks, ca. bouchard, t.j.j. (1976). field research methods: interviewing, questionnaires, participants observation, unobtrusive measures, in: dunnette, m.d. (ed.), handbook of industrial and organizational psychology, chicago, pp. 363-413. brislin, r.w., lonner, w.j., thorndike, r.m. (1973), cross-cultural research methods, john wiley & sons, new york, ny. burns, j., scapens, r.w. (2000), conceptualizing management accounting change: an institutional framework, management accounting research, vol. 11 no. 1, pp. 3-25. calia, r.c., guerrini, f.m., moura, g.l. (2007), innovation networks: from technological development to business model reconfiguration, technovation, vol. 27 no. 8, pp. 426-432. casadesus-masanell, r., ricart, j.e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43 no. 2-3, pp. 195-215. chesbrough, h., rosenbloom, r.s. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, vol. 11 no. 3, pp. 529-555. chesbrough, h.w. (2003), the era of open innovation, mit sloan management review, vol. 44 no. 3, pp. 35-41. chesbrough, h.w., appleyard, m.m. (2007), open innovation and strategy, california management review, vol. 50 no. 1, pp. 57-76. demil, b., lecocq, x. (2010), business model evolution: in search of dynamic consistency, long range planning, vol. 43 no. 2–3, pp. 227-246. ebert, c. (2007), open source drives innovation, ieee software, vol. 24 no. 3, p. 105. flick, u. (2002), an introduction to qualitative research, 2nd ed., sage, thousand oaks, ca. glaser, b.g., strauss, a.l. (1967), the discovery of grounded theory, aldine, chicago, il. haruvy, e., prasad, a. (2005), freeware as a competitive deterrent, information economics and policy, vol. 17 no. 4, pp. 513-534. johnson, m.w., christensen, c.m., kagermann, h. (2008), reinventing your business model, harvard business review, vol. 86 no. 12, pp. 57-68. leimbach, t. (2008), the sap story: evolution of sap within the german software industry, annals of the history of computing, ieee, vol. 30 no. 4, pp. 60-76. lukka, k., modell, s. (2010), validation in interpretive management accounting research, accounting, organizations and society, vol. 35 no. 4, pp. 462-477. magretta, j. (2002), why business models matter, harvard business review, vol. 80 no. 5, pp. 86-92. journal of business models (2014), vol. 2, no. 1 pp. 19-32 31 miles, r.e., miles, g., snow, c.c. (2006), collaborative entrepreneurship: a business model for continuous innovation, organizational dynamics, vol. 35 no. 1, pp. 1-11. morgeson, f.p., dierdorff, e.c., hmurovic, j.l. (2010), work design in situ: understanding the role of occupational and organizational context, journal of organizational behavior, vol. 31 no. 2‐3, pp. 351-360. oppenheim, a.n. (1992), questionnaire design, interviewing and attitude measurement, 2nd ed., continuum, london, new york. osterwalder, a., pigneur, y. (2005), clarifying business models: origins, present, and future of the concept, communications of ais, vol. 2005 no. 16, pp. 1-25. popp, k. (2011), software industry business models, ieee software, vol. 28 no. 4, pp. 26-30. rajala, r., rossi, m., tuunainen, v.k., 2003. a framework for analyzing software business models, european conference on information systems. rajala, r., westerlund, m. (2007), a business model perspective on knowledge-intensive services in the software industry, international journal of technoentrepreneurship, vol. 1 no. 1, pp. 1-20. rajala, r., westerlund, m., moller, k. (2012), strategic flexibility in open innovation designing business models for open source software, european journal of marketing, vol. 46 no. 10, pp. 1368-1388. rajala, r., westerlund, m., rajala, a., leminen, s., 2004. business models and value nets as the context of knowledge-intensive service activities in the software business, ltt research series b-170, helsinki. riehle, d. (2012), the single-vendor commercial open course business model, inf syst e-bus manage, vol. 10 no. 1, pp. 5-17. ryan, b., scapens, r.w., theobald, m. (2002), research methods and methodology in finance and accounting, 2nd ed., cengage learning, stamford, ct. scapens, r.w. (1990), researching management accounting practice: the role of case study methods, the british accounting review, vol. 22 no. 3, pp. 259-281. shapiro, c., varian, h.r. (1998), versioning: the smart way to, harvard business review, vol. 107 no. 6, p. 107. skype (2013), how does skype make money?, https://support.skype.com/en/faq/fa335/how-does-skype-makemoney. stahl, s. (2004), rethinking business models, informationweek, no. 985, pp. -88. strauss, a.i., corbin, j. (1990), basics of qualitative research. grounded theory procedures and techniques, sage publications, inc., london. ven, a.h.v.d., poole, m.s. (1995), explaining development and change in organizations, the academy of management review, vol. 20 no. 3, pp. 510-540. yin, r.k. (2009), case study research: design and methods, 4th ed., sage, thousand oaks, ca. zott, c., amit, r. (2010), business model design: an activity system perspective, long range planning, vol. 43 no. 2-3, pp. 216-226. zott, c., amit, r., massa, l. (2011), the business model: recent developments and future research, journal of management, vol. 37 no. 4, pp. 1019-1042. journal of business models (2014), vol. 2, no. 1 pp. 19-32 32 about the authors margit malmmose is an assistant professor in management accounting & control at aarhus university. she has previously worked as a financial controller for cim gruppen a/s. her publications include the journal of critical perspectives in accounting. her research interests include business models and management accounting in the health care sector. rainer lueg is associate professor for management accounting & control at aarhus university. previously, he worked as a consultant with mckinsey & company. he has published in a number of journals, including academy of management learning & education, management accounting research and business strategy and the environment. his research interests include business models and strategic performance measurement systems. sevar khusainova holds degrees in law, economics and international management. she has worked for a number of international organizations. she is an experienced trainer and facilitator. her professional and academic interests lie within the domain of strategic business development and corporate legal strategy. journal of business models (2014), vol. 2, no. 1 pp. 89-104 89 keywords: business model; value creation; retail; multichannel retailing 1 university of tampere, finland, mika.yrjola@uta.fi. please cite this paper as: “yrjölä, m., 2014, ‘value creation challenges in multichannel retail business models’, the journal of business models, vol. 2, no. 1, pp. 89-104.” value creation challenges in multichannel retail business models mika yrjölä1 abstract purpose: the purpose of the paper is to identify and analyze the challenges of value creation in multichannel retail business models. design/methodology/approach: with the help of semi-structured interviews with top executives from different retailing environments, this study introduces a model of value creation challenges in the context of multichannel retailing. the challenges are analyzed in terms of three retail business model elements, i.e., format, activities, and governance. findings: adopting a multichannel retail business model requires critical rethinking of the basic building blocks of value creation. first of all, as customers effortlessly move between multiple channels, multichannel formats can lead to a mismatch between customer and firm value. secondly, retailers face pressures to use their activities to form integrated total offerings to customers. thirdly, multiple channels might lead to organizational silos with conflicting goals. a careful orchestration of value creation is needed to determine the roles and incentives of the channel parties involved. research limitations/implications: in contrast to previous business model literature, this study did not adopt a network-centric view. by embracing the boundary-spanning nature of the business model, other challenges and elements might have been discovered (e.g., challenges in managing relationships with suppliers). practical implications: as a practical contribution, this paper has analyzed the challenges retailers face in adopting multichannel business models. customer tendencies for showrooming behavior highlight the need for generating efficient lock-in strategies. customized, personal offers and information are ways to increase customer value, differentiate from competition, and achieve lock-in. originality/value: as a theoretical contribution, this paper empirically investigates value creation challenges in a specific context, lowering the level of abstraction in the mostly-conceptual business model literature. journal of business models (2014), vol. 2, no. 1 pp. 89-104 90 introduction the development of online services and the diffusion of information technology have enabled new ways for consumers to interact with retailers. for example, forrester research predicted in a 2012 report that electronic commerce would grow 62 percent by 2016 in the united states and 78 percent in europe (trendwatching, 2012). in addition to online retailing, smartphones and other mobile devices have thoroughly altered the retail landscape. mobile devices have changed the way customers seek products, pay for them and tell others about them (grewal, roggeveen, compeau and levy, 2012). for instance, according to a recent study by comscore two thirds of smartphone owners have undertaken shopping activities (e.g., comparing prices, using coupons or locating stores) on their phones (retail customer experience, 2012). online and mobile shopping and communication mechanisms, or channels, are frequently used by customers. channels are “mechanisms for communication, service delivery, and transaction completion” (berry, bolton, bridges, meyer, parasuraman and seiders, 2010, 155). channels are, for example, brick-and-mortar stores, vending machines, kiosks, mobile devices, catalogs, and online storefronts (berry et al., 2010). the multichannel customer group is found to be increasing in size and importance to retailers (wakolbinger and stummer, 2013; rangaswamy and van bruggen, 2005; verhoef, neslin and vroomen, 2007), but traditional retailers have failed to react to the emergence of new channels. walmart and target, for example, have online sales under two percent of total sales (rigby, 2011). multichannel customers tend to spend more money than single-channel customers (rangaswamy and van bruggen, 2005; neslin, grewal, leghorn, shankar, teerling, thomas and verhoef, 2006), at least those customers who purchase products from multiple categories or from more hedonic categories, such as cosmetics and video games (kushwaha and shankar, 2013). however, former studies have suggested that multichannel customers have higher expectations for the quality of service than single-channel customers (wallace, giese and johnson, 2004). traditional retailing formats simply won’t suffice any longer (rigby, 2011), because forerunner retailers are exploiting cross-channel synergies to create unique value propositions for customers. thus, retailers are faced with the challenge of reconfiguring their conventional business models. existing research on multichannel retailing has mainly compared channels without contributing to a holistic understanding of how different channels coexist in the same business model. it has also largely explored customer behavior in multichannel settings, focusing on channel usage, channel migration over time, and channel switching behavior. for example, goals, needs, customer inertia, perceived risk and situational factors affect the selection and use of different shopping channels (neslin et al., 2006; ansari, mela and neslin, 2008; thomas and sullivan, 2005; valentini, montaguti and neslin, 2011). at the same time the company perspective has been largely neglected in empirical studies (with the exception of avery, steenburgh, deighton and caravella, 2012). it is not known how retailers are adopting multichannel business models and what challenges they meet. a multichannel retail business model utilizes multiple channels in the creation of customer and firm value. a single-channel business model, in contrast, only utilizes one channel for value creation. the adoption of multichannel business models increases complexity in terms of creating value for both parties. to better understand how retailers are responding to changes in technology as well as customer behavior, this study’s purpose is to identify and analyze the challenges of value creation in multichannel retail business models. this objective is addressed through semi-structured interviews with top executives from different retailing environments. an analysis of the challenges of multichannel business models will enable retailers to avoid or solve these challenges and develop the academic understanding of business models in general. theoretical background value creation can be understood through the business model concept. it is “a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network” (shafer, smith and linder, 2005, 202). doganova and eyquem-renault (2009) see business models as “market devices”, journal of business models (2014), vol. 2, no. 1 pp. 89-104 91 i.e. calculative and narrative tools that allow entrepreneurs to explore a market and to materialize their innovation, e.g. a new product. they build on magretta’s (2002) view of business models as “stories that explain how enterprises work” (with a plot, characters and their motivations). a business model captures managerial choices and their consequences, e.g. contracts, decisions, and practices related to policies, assets, and governance (casadesus-masanell and ricart, 2010). a business model thereby is based on management’s expectations regarding sales, costs, and the behavior of customers and competitors, which is why it needs to be constantly updated in evolving markets (teece, 2009). for a business model to be successful, it also has to be coherent, and the calculations need to work, i.e. the economics behind the value creation logic need to result in profits (magretta, 2002). value creation in business models a business model describes customer and firm value creation as well as the value creation of all stakeholders. thus, a business model is more than a revenue model, i.e. “the specific modes in which a business model enables revenue generation” (amit and zott, 2001, 515). for the purposes of this paper, customer value is seen as the result of customers’ subjective evaluations of a product, experience or any other offering (holbrook, 1999; zeithaml, 1988; noble, griffith and weinberger, 2005). this evaluation is based on benefits and sacrifices related to the offering. the evaluation can be related to monetary aspects as well as social interaction, symbolism, and experiential aspects (balasubramanian, raghunathan and mahajan, 2005). customers then choose the alternative which leads to the most customer value (holbrook, 1999; zeithaml, 1988). the sources of value creation, or value drivers, are factors that enhance the total value created by the business. for example, in electronic business, value drivers are novelty, lock-in, complementarities, and efficiency (amit and zott, 2001). in the retailing context, the creation of customer value is tightly connected to creation of shopping experiences (sorescu, framback, singh, rangaswamy and bridges, 2011). customer value is created when the customer and the retailer utilize and combine different resources during the shopping experience. these resources can be tangible, such as the products and the retail space, or intangible, like the creativity of a customer or the competence of a salesclerk. firm value in turn is created by the achievement of company goals, such as acquiring customer information, achieving high customer satisfaction, or earning profits. business model elements various categorizations of business model elements exist in the literature. for example, chesbrough (2010) lists value proposition, market segment, value chain structure and assets, revenue mechanism, cost structure and profit potential, firm position within the value network and competitive strategy as functions for the business model. johnson, christensen and kagermann (2008) argue that the business model consists of a customer value proposition, a profit formula, key resources, and key processes. shafer, smith and linder (2005) in turn classify business model components into four categories: strategic choices, the value network, creating value, and capturing value. yet another categorization is presented by doganova and eyquem-renault (2009). they group business model components into three building blocks: the value proposition (the offering), the architecture of value (partners and channels), and the revenue model. amit and zott (2001) see the business model as consisting of transaction structure, content, and governance. the content of transaction refers to the goods or information exchanged, and the resources and capabilities required in the transaction. the structure refers to the participating parties, their links, and how they interact. transaction governance “refers to the ways in which flows of information, resources, and goods are controlled by the relevant parties. it also refers to the legal form of organization, and to the incentives for the participants in transactions” (amit and zott, 2001, 511). table 1 presents selected business model definitions that in addition to being perhaps the most accepted ones, highlight the variety and similarity of different definitions in the literature. from the definitions, a few generalizations can be made. first, it is clear that the business model describes both customer and firm value creation (e.g. value propositions, value delivery, exploitation of opportunities, and revenue models). second, business models are strategic tools for innovation and journal of business models (2014), vol. 2, no. 1 pp. 89-104 92 differentiation. third, business models describe the selection and coordination of activities, i.e. they take an ‘activity system perspective’ (zott and amit, 2010) to value creation. retail business models in the retail context, sorescu et al. (2011) build on amit and zott’s (2001) business model definition, and argue that the retail business model “requires explicit consideration of interdependencies among, and choices of:(1) the format that describes the way in which the key retailing activities will be sequenced and executed, (2) the diverse activities that need to be executed to design, manage, and motivate the customer experience, and (3) the governance of actors that perform these activities, the roles they play and the incentives that motivates them.” (sorescu et al. 2011, s5). thus, sorescu et al. (2011) propose that the retail business model consists of three interconnected elements: retailing format, activities, and governance. these elements and their interdependencies define “a retailer’s organizing logic for value creation and appropriation” (sorescu et al. 2011, s5). retailing formats position the retailer to meet the preferences of desired customer segments. formats entail decisions about location, opening hours, products, price level, promotions, level of service, the customer interface, and store atmosphere. the structure of value creation directly affects the scalability, adaptability and flexibility of the customer experience (amit and zott, 2001). the chosen format sets the boundaries and content of retailing activities (sorescu et al., 2011). activities are the processes needed to create customer value within a particular format. activities are for example purchasing, logistics, warehousing, displaying of products, customer service, selling, data mining, and branding. retailing governance concerns the roles table 1: selected business model definitions authors definition implications amit and zott, 2001 “a business model depicts the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities.” (p.511) business model innovation can be achieved through value drivers: novelty, lock-in, complementarities, and efficiency. teece, 2010 a “business model defines how the enterprise creates and delivers value to customers, and then converts payments received to profit.” (p.173) a business model should be non-imitable and honed to meet specific customer needs. chesbrough, 2010 (based on chesbrough and rosenbloom, 2002) a business model’s elements are (p.355): value proposition; market segment; value chain structure and assets; revenue mechanism; cost structure and profit potential; firm position within the value network; and competitive strategy business model innovation is a tool to achieve competitive advantage, but managerial emphasis, such as experimentation and leadership of culture, is needed to drive the organizational change. journal of business models (2014), vol. 2, no. 1 pp. 89-104 93 and motivations of the participants of value creation. roles can for example mean, how much self-service is expected from customers (sorescu et al., 2011). key retailer stakeholders are customers, employees, competitors, suppliers, it and other service providers and governmental stakeholders. governance describes the ways in which information, product and resource flows are managed by the parties of value creation. value creation in multichannel business models to exploit the best features of channels, multichannel retail business models are adopting new formats, such as ”click-and-mortar” (rangaswamy and van bruggen, 2005) or the “online-and-mobile retail” business model (lin, 2012). for example, the option to return products to the stores might lower the barrier to order online. channel characteristics include for example, availability, possibility of real-time communications, adaptability of the customer interface, and ease of use. channels also vary in terms of how easily customers can change to a competitive retailer’s channel (lock-in), and their ability to capture information on customer behavior (dholakia, kahn, reeves, rindfleisch, stewart and taylor, 2010). multichannel business models can enhance value creation through segmentation, efficiency or customer satisfaction (neslin and shankar, 2009). for example, adding new channels to the business model can be an efficient way to reach new market segments, enhance customer satisfaction or customer loyalty (berman and thelen, 2004; zhang, farris, irvin, kushwaha, steenburghe and weitzf, 2010). to achieve efficiency, a multichannel business model is used to lower expenses related to serving customers. the goal is to guide customers into using low-cost channels. from the segmentation point of view, a multichannel business model is a way of segmenting the market, i.e. serving different segments in different channels. customers are categorized according to their channel preferences (neslin and shankar, 2009). however, there are myriad possible criteria for segmentation, such as channel purchases (konuş, verhoef and neslin, 2008), other metrics of channel use, or responsiveness to marketing activities (ansari et al., 2008; thomas and sullivan, 2005). customers do not always choose the channel that is most optimal for the retailer, so directing marketing activities are needed (neslin and shankar, 2009). the multichannel business model can also be a way of increasing customer satisfaction, for example by encouraging customers to use the channels that best suite them in different phases of their shopping process. this type of model requires close integration of channels (neslin and shankar, 2009). the objective is to encourage customers to make use of all retailer-provided channels. this broader interaction, for example purchases from different channels, can be seen as the development of the customer relationship (venkatesan, kumar and ravishanker, 2007). if the channels support each other, customers will make additional purchases and the customer relationships are utilized more efficiently. method the purpose of this study is to identify and analyze the challenges of value creation in multichannel retail business models. to meet this purpose, qualitative interviews with top executives from different retailing environments were used to generate the data. these environments differed in terms of the offering (e.g. specialty products like videogames and fishing equipment; products for larger audiences, like electronics; department stores with wide product ranges), amount of competition (high or low), and the adoption of multichannel business models by firms (common or uncommon). the interview is a way to quickly generate data from a practical phenomenon. it is also a suitable method when studying complex phenomena such as multichannel business models. however, the interview data does not describe actual behavior, but the interviewees’ thoughts, evaluations and reasoning (silverman, 2005). overall, seven interviews were made between december 2011 and march 2012. the interviewees were ceos, heads of business units, and senior consultants. purposive sampling was used to select the interviewees in order to gather varied views on the phenomenon. the interviewees’ amount of experience, role within their organization, as well as the organization’s business model and environment were considered in the selection. both female and male interviewees were included in the data generation. interviews were made until no new themes emerged in the following interjournal of business models (2014), vol. 2, no. 1 pp. 89-104 94 views. the interviews lasted an hour on average, with the interview transcripts being 12-18 pages in length in the word processing program’s default settings. the interview form used in this study was semi-structured, i.e. it had narrow, confirmatory questions as well as explorative ones that acted as a list of themes to discuss. first of all, the interviewees were asked to describe their current position in the organization and how they saw the current retailing environment. secondly, the interviewees were asked how the multichannel environment is affecting retailers’ business models. thirdly, the interviewees were asked to discuss the major challenges their organization or retailers in general are facing in the multichannel environment. it is worth mentioning, however, that the nature of the interviews was open-ended, meaning that the interviewees were encouraged to speak from their own perspective and introduce themes and opinions they considered important to multichannel retailing. follow-up questions relating to these themes were asked. the data analysis began by organizing data into three categories representing the retail business model elements (i.e. format, activities, and governance). comments relating to retailing formats, for example, were grouped into the format category. data that did not fit into the categories (e.g. answers to questions about the interviewee’s role in the organization) was used as background information in the analysis. the analysis continued by separating value creation challenges from the rest of the data and then exploring these challenges further. finally, the identified challenges were labeled as value mismatch, customer experience integration, and internal conflict. in the next section, the findings are discussed in more detail. findings the multichannel environment presents a host of challenges for retail business models. the findings suggest that adopting a multichannel retail business model requires critical rethinking of the basic building blocks of value creation. first of all, the structure of value creation, i.e. the retail format, becomes more complex as retailers use and combine different channels to create new types of customer interfaces. secondly, the activities that enable value creation have to be integrated to manage value creation across channels. thirdly, governance of the value creation has to be realigned to avoid internal conflict among channels. these findings will be presented in the following sections. challenge for retailing formats: value mismatch in a multichannel business model, the retailer chooses a mix of customer value-adding or cost-lowering channels to create company value. however, as customers effortlessly move between multiple channels, multichannel formats can lead to a mismatch between customer and company value. multichannel customers might change retailers as they move from one channel to another (see for example van baal and dach, 2005). customers can “cherry-pick” benefits, like customer service and advice, from different channels and retailers. this form of customer behavior is dubbed “showrooming” or “research shopping” (neslin et al., 2006; konuş et al., 2008). the value creation challenge, therefore, is to choose a mix of channels that not only create customer value but also capture the economic value equivalent to the customer value created. as one interviewee observes, a combination of high-reach and low-cost channels might be a viable multichannel business model: “if your prices are competitive, then you should go multichannel. people go to electronics stores and check the shelves. and if they could find lower prices from competitors in an easy way, then they would go there. but in the future, people’s use of time will be emphasized. so that if you’re easily reachable and the competition is not, you will have more sales because of it.” -development director, specialty retailer the multichannel environment can have negative consequences on loyalty, since it is easier to find and compare alternatives. for example customers that migrate from traditional channels to the online channel are found to have smaller purchases and loyalty over time, possibly due to decrease in interaction between the retailer and its customers (ansari et al., 2008). mobile applications have also made customers more price-sensitive by being able to compare prices anywhere (grewal et al., 2012). on the other hand, multichannel customers are argued to be more loyal than single-channel customers (kumar and venkatesan, journal of business models (2014), vol. 2, no. 1 pp. 89-104 95 2005), and they might be willing to pay higher prices to interact with retailers and brands they know and trust (neslin et al., 2006). thus, a business model aimed at fostering customer loyalty might be effective against showrooming: “i don’t know if it’s a threat. it is possible and it happens. […] but if you’re a patron of a certain retailer, you tend to concentrate your purchases. you stay in those assortments, chains, formats. but of course if you’re looking for a certain service or a product that is easy to compare among different retailers, then it is possible that when you switch channels, you also switch retailers.” -ceo, grocery retailer some interviewees did not view showrooming as a major concern. they saw customer loyalty schemes as tools for motivating and engaging customer to the value creation. this lock-in via loyalty schemes (amit and zott, 2001) might then be an effective way to fight showrooming. another way to motivate customers is to stage superior shopping experiences, as one interviewee comments: “if you succeed in that, the degree of engagement will grow. what i mean is, when you can make the interaction with us… when the customer feels the interaction is effortless, easy. he or she can do it at a convenient time. i think the result is a higher brand image and engagement.” -development director, specialty retailer while the interviewees recognized showrooming behavior as a challenge to value creation, they also proposed that it could be managed by developing rational and emotional ties between the customer and the retailer. retailing format decisions such as positioning, offering selection, pricing, service, and store atmosphere are means of developing ties to specific customer segments. another problem with showrooming behavior is the difficulty in proving whether it happens and to what degree (stephens, 2013): “it’s difficult to say. we have this […] customer loyalty system and if we look at the average customer, he or she visits our stores two times a year [in offline store chain]. and the [online store chain] customer surfs the website frequently, but only makes purchases a couple of times a year. the problem is this: how many times the [offline store chain] customer visits the store without buying anything?” -ceo, electronics retailer retailers do not have the abilities to measure customer visits to stores, especially when customers only visit the store to browse items. measurement difficulties also apply to online channels, when customers do not login to the retailer’s service. retailers therefore should avoid over-relying on their existing measures of customer behavior, and utilize additional information sources, such as in-store surveys or market research, to acquire a more complete view of customer paths to purchase. challenge for retailing activities: customer experience integration the second value creation challenge is the integration of different channels. that is, retailers face pressures to use their activities to form integrated total offerings to customers. retailers must choose which valuecreating activities are coordinated across channels to utilize synergy effects and create more value for the customer. in many cases, customers use multiple channels to look for and evaluate products before committing to a purchase decision (balasubramanian et al., 2005; rangaswamy and van bruggen, 2005; mcgoldrick and collins, 2007). for many customers the online channel has become a useful information tool for comparing prices, checking availability and evaluating different brands, but the actual purchases are made in the store channel (berman and thelen, 2004; rangaswamy and van bruggen, 2005). according to the interviewees, this change in customer behavior creates a need to coordinate value propositions and other marketing activities across channels: “the promise that is given there, for example about product information or availability, naturally must be kept. that’s the core of the business. that whatever is promised online is also kept. -director, retail consulting journal of business models (2014), vol. 2, no. 1 pp. 89-104 96 “with the online store, we want to highlight what we’re selling in our offline stores. and that is, that we are a department store. you can have anything. and if we have those products in our online store, then you’ll probably realize that we have the same products at our offline stores.” -head of online channel, department store customers form expectations from all encounters with the retailer, and these expectations must be met on each channel. retailers can also use these effects to promote other channels, like in the quotes above. likewise, an experience at a single channel will affect the image of the whole retailer. the elements needing integration discussed in the interviews were: pricing, offering, the overall customer experience, and information systems. “some of our competitors have different pricing strategies, but we have consistent prices. what you see online, you can get it at the same price offline.” -managing director, specialty retailer in general, retailers tend to use the same pricing scheme across all channels, because price differences might lead to customer confusion or cannibalization and conflict between channels. however, in some cases retailers can use different prices, by using channelspecific promotions, additional payments for collection and delivery, and selling different products at different channels (neslin and shankar, 2009). nonetheless, the overall opinion was that most activities and elements should be integrated: “in finland a lot of retailers start going multichannel by opening online stores. to me that scenario is risky. because if you start your online operations in a way that the end experience is bad for the online customers… if the pilot is using a too narrow offering or a different brand so that it doesn’t appeal to the customers like the brick-and-mortar brand… if that experience is bad, then it can result in rejection and going to the competitors’. “ -senior retail consultant retailers develop their channel-specific capabilities through pilot projects. the pilot is usually a new, standalone business unit, so that it can be eliminated quickly if necessary. the new pilots as standalone units face the risk of frustrating customers, if they are too distant in terms of the customer experience: “the important thing is that there aren’t just a lot of channels. […] the most important thing is how the customer experiences it. does she view the online channel as a different thing than the traditional way to interact? many are saying that the retailer should appear similar in all channels. whether the customer goes to a store or views the mobile device or the internet, the “look and feel” should be the same. the experience should be the same. -senior retail consultant we should serve the customer how and where he or she wants. […] i mean we should be available in an easy way in all channels that our customers use. and the activities between these channels should be seamless. you order a product with your smartphone, and then return it to the offline store. the experience for the customer should be such that customer sees it as a coherent and seamless service.” -development director, specialty retailer instead of only focusing on having the same “look and feel” across channels, the activities performed should also be integrated to allow flexible customer journeys. the design of the customer journey involves decisions about how and in which channels sales and customer service takes place (peterson et al., 2010). in an integrated business model, sometimes called cross-channel retailing (chatterjee, 2010), information, money and products can move freely across channels from the customer’s point of view, and the customer can also be seen as being in charge of the process. the customer can exploit channel-specific benefits and avoid channel-specific sacrifices throughout the shopping process (chatterjee, 2010): “the overall offering, that is being multichannel, is the thing. you have to enable the customer to act in a multichannel way. that’s the catch: that you give the option. the customer can go to our website and find a nice product, so he or she can check that it is available in these two stores, but it can also be delivered to him or her.” -ceo, electronics retailer this integrated model creates great demands for rejournal of business models (2014), vol. 2, no. 1 pp. 89-104 97 tailers in terms of product logistics, identification of customers and information system integration. the channels cannot be too different in terms of offerings, prices and other elements, which might lower the channels’ ability to respond to local customer needs and competition (chatterjee, 2010). for example, the need for cross-channel customer information was apparent in the interviews: “in order to serve your multichannel customers, you would need information from all the channels and it would have to be in real time. […] if the customer has for example bought a product online or from the stores and there’s a problem with it the next day... so he or she calls the retailer’s customer service. if the customer service doesn’t know what’s up, it won’t leave a good purchase experience. the different channels really must be closely integrated in the sense of information systems.” -director, retail consulting customer information should be available to each channel in real-time, which requires integration of information systems. however, too much integration might lead to inability to exploit the distinct nature of different channels and to adapt to differing customer needs: “you can’t tie down the online store in any way. the connection needs to be loose. you cannot set your goals too closely, because customers’ shopping habits are changing so rapidly. but whether the online and physical stores should have the same assortment… there are a lot of opinions. some small adjustments, like what is specific to the current market, like what can be done in in-store marketing, is acceptable. but if you stray too far, you lose the concept. but i do emphasize that you can’t shackle the border of online and offline stores, because the situation is evolving so quickly.” -ceo, electronics retailer the challenge is to find the right degree of integration between channels. the interviewees emphasized that customer behavior is so complex and in constant change, that the retailers are facing great challenges in keeping up with the change. as a solution, the business model could be designed so adaptable that it could serve a variety of customer needs and situations. on the other hand, too loosely integrated channels might lead to customer frustration, if the offerings, prices and activities differ significantly across channels. the shared view was that the company should find the optimal degree of integration through a process of trialand-error. challenge for retailing governance: internal conflict adopting multiple channels might lead to the creation of organizational silos with conflicting goals, lowering the firm value created when serving customers. hence, the creation of the right kind of organizational structure is said to be the most pressing challenge in multichannel retailing (zhang et al., 2010). the same view was apparent in the interviews. however, decentralized governance of channels might be a viable option in some cases: “first retailers are piloting and keeping the online store separate. that way it’s easier to establish and experiment. and you gain evidence of the implications. this way you don’t have to solve these channel conflicts yet.” -senior retail consultant “governance can be decentralized to business units. if the units have high growth goals, they are given the liberty to arrange their own activities. then a certain business unit can have differing strategies from the rest of the business. for example, in these large retailers that are heavily investing in combining the online and brickand-mortar channels, there are certain forerunner business units leading the change. in those business units, the managers are in charge of implementing this strategy.” -director, retail consulting a large number of retailers use decentralized governance models so that each channel has its own logistics, marketing and other functions. another common governance mechanism is to separate channels into remote and store channels, because they differ so greatly in their value creation activities (zhang et al., 2010). the decentralized organization enables a better focus and flexibility to respond to channel-specific competition and customer needs. when establishing online operations, for example, many retailers give the new channel’s management freedom to adapt the business to channel-specific characteristics. nonetheless, dejournal of business models (2014), vol. 2, no. 1 pp. 89-104 98 centralized governance might be inefficient, because each channel has to organize its own activities (zhang et al., 2010). it might also create situations where different channels of the same retailer compete: “this channel conflict or jealousy between channels is a problem. we need tools to fight things like resistance to change. the activities at the traditional, physical stores are… they’ve been the same forever. and we need change in a lot of places. resistance to change is normal for people. but we need to start thinking in terms of the whole.” -development director, specialty retailer the elements related to managing internal conflict were work assignments and training, attitudes, measurement, and incentives. some interviewees expressed the opinion that conflict arises from not understanding the other channels. where possible, employees could have work assignments that let them see how different channels are part of the same business: “the same employees run the brick-and-mortar store and the online store. everyone’s doing everything.” -managing director, specialty retailer “so far everything is going well. the stores are really motivated. they feel that this change is also bringing them more customers. of course it is a challenge to train 2,500 store employees. it is a challenge, but so far it is going well for these stores.“ -head of online channel, department store the employees will be more motivated, if they see the multichannel business model as creating more value for not only the company, but also their specific channel. the right attitude should be oriented around the customers and the business as a whole rather than having a business unit-centered view: “the employees need to be taught the right attitude, so that… in a way, the people at our stores need to realize that the online store isn’t the enemy, that they both have the same goals. in many cases the viewpoint is centered on business units, so they only see their own unit… they don’t see the company’s benefit. i guess this is common.” -development director, specialty retailer business unit or channel-centered views to business were seen as harmful to the overall value creation in the business model. beyond training and attitudes, performance measurement was named as a challenge to the governance of the multichannel business model: “broadly speaking, the principle is that we should measure the company through the total development of revenues, not from the view of a single channel’s evolution. because it can’t be based on anything other than the total company’s volumes in sales, customer visits, purchase times and so on. whether that is developing positively independent of whether the purchases are made online or in-store. there are a lot of ways in which to distribute resources for development, but the overall view is the starting point.” -director, retail consulting more important than performance measurement are the reward policies and incentives of managers and staff. the incentives should be aligned to meet the retailer’s overall goals: “the organizational incentives are one of the most critical elements. the leadership and management of people and the whole concept should begin with personnel incentives and the right triggers to drive the organization into being multichannel. […] of course, also training and communications and other kinds of leadership are needed as well, but in my opinion the incentives are the critical element.” -director, retail consulting a careful orchestration of value creation is needed to determine the roles and incentives of the channel parties involved. the choice of retailing governance is not a simple choice between the dispersed and the integrated business model. rather, it is about finding the right degree of integration, i.e., which activities are coordinated at the corporate level and which at the channel level (zhang et al., 2010). the main findings and their implications are summarized in table 2. first of all, multichannel formats face the threat of customer showrooming behavior, i.e. customers utilize a retailer’s services to determine the best products and then purchase the products from low-price competitors. to add to the challenge, the exjournal of business models (2014), vol. 2, no. 1 pp. 89-104 99 table 2: value creation challenges in multichannel retail business models retail business model element multichannel value creation challenge implications format how to align firm and customer value creation? the channel mix should balance customer value creating (e.g., high level of service) and firm value creating channels (e.g., low costs, high reach). the channels should be designed to create rational or emotional ties between the retailer and its customers, so that customers utilizing high-cost channels would purchase from one of the retailer’s channels. activities how to enable value creation that utilizes multiple channels? retailers should coordinate some activities across channels to allow customer value creation from cross-channel synergies (e.g. order online and pick up at store, or compare in-store and order online). this customer experience integration requires harmonizing positioning, branding, pricing, and offering across channels, as well as investments in centralized information systems and logistics. governance how to avoid internal conflict in organizing value creation across multiple channels? designing performance measures, incentives, rewards, and internal culture to motivate internal coordination and discourage harmful competition between channels. tent of showrooming behavior is very difficult to measure. secondly, retailing activities should be coordinated and integrated to a degree that enables customers to seamlessly interact with the retailer across channels. this would require the coordination and integration of pricing, offerings, customer experience, and information systems across channels. thirdly, the adoption of new channels and the integration of existing ones forces retailers to rethink their governance models. the governance model (e.g. performance measurement and incentives) should motivate employees and managers to maximize the total value created by the business instead of maximizing value in certain channels. discussion and conclusions the aim of this paper was to explore the challenges of value creation in multichannel retail business models. the challenges were analyzed in terms of the retail business model elements, i.e. the retailing format, activities and governance. first of all, retailing formats, that have traditionally been the stages for both servjournal of business models (2014), vol. 2, no. 1 pp. 89-104 100 ing customers (customer value creation) as well as receiving customer information and payments (company value creation), are now facing pressures as customers switch to other purchasing channels after receiving benefits, such as advice or product information. this form of customer behavior, dubbed “research shopping” or “showrooming”, is forcing retailers to reinvent their formats. what is needed is a better way to tie-in the customers to the retailer so as to allow for company value creation (sometimes referred to as value capture). creating such ties in retailing is challenging, because retailers ultimately sell customer experiences. this business model design theme of lock-in (amit and zott, 2001) is difficult to achieve, because the ties are not contractual or technological in nature but more based on customer satisfaction and motives for repeat patronage. secondly, retailing activities needed to create superior customer experiences have to be coordinated across channels and formats. the elements discussed were, for example, pricing, offerings, and the overall customer experience. the degree of integration seems to be a choice between higher adaptability to channel-specific characteristics and a more coherent customer experience / brand image. third, in line with earlier research (zhang et al., 2010), retailing governance is perceived as the greatest challenge for value creation in multichannel retail business models. if the value creation is managed separately among channels and business units, internal conflicts can emerge to hinder value creation. as a theoretical contribution, this paper empirically identifies value creation challenges in a specific context, lowering the level of abstraction in the mostlyconceptual business model literature. the business model reflects a firm’s logic of value creation for itself and its customers, but due to the complex nature of multichannel business models, aligning these two goals becomes challenging. this challenge of value mismatch can be enlarged in situations where retail executive’s focus too much on the customer value creation logic of their business models, ignoring or downplaying the role of firm value creation (shafer et al., 2005). for example, retailers might create a lot of value for their customers through value-adding format and activity choices, such as service, product demonstrations, long opening hours, and store atmosphere, but end up losing sales to low-cost competitors. as a practical contribution, this paper has analyzed the challenges retailers face in adopting multichannel business models. customer tendencies for showrooming behavior highlight the need for generating efficient lock-in strategies. customized, personal offers and information are ways to increase customer value, differentiate from competition, and achieve lock-in. retailers have utilized their loyalty schemes, crm activities and analytical capabilities to create such offers (grewal et al., 2012). on the other hand, price-driven retailers can find ways to benefit from the situation by encouraging showrooming. conflicts can be avoided with clearly defined roles and incentives. managers should think of the company in terms of the whole and set performance measurement as well as incentives accordingly. in contrast to previous business model literature, this study did not adopt a network-centric view. by embracing the boundary-spanning nature of the business model (chesbrough, 2010), other challenges and elements might have been discovered (e.g. challenges in managing relationships with suppliers). however, the focus of this study was on the value creation of retailers and their customers, and the interaction between these parties. future research could therefore concentrate on investigating value creation drivers and challenges in a broader scope that encompasses more stakeholders. journal of business models (2014), vol. 2, no. 1 pp. 89-104 101 references amit, r. & zott, c. (2001), value creation in e-business, strategic management journal, vol. 22, no. 6/7, pp. 493–520. ansari, a., mela, c.f. & neslin, s.a. (2008), customer channel migration, journal of marketing research, vol. 45, no. 1, pp. 60–76. avery, j., steenburgh, t.j., deighton, j. & caravella, m. (2012), adding bricks to clicks: predicting the patterns of cross-channel elasticities over time, journal of marketing, vol. 76, no. 3, pp. 96–111. van baal, s. & dach, c. (2005), free riding and customer retention across retailers’ channels, journal of interactive marketing, vol. 19, no. 2, pp. 75–85. balasubramanian, s., raghunathan, r. & mahajan, v. (2005), consumers in a multichannel environment: product utility, process utility, and channel choice, journal of interactive marketing, vol. 19, no. 2, pp. 12–30. berry, l.l., bolton, r.n., bridges, c.h., meyer, j., parasuraman, a. & seiders, k. (2010), opportunities for innovation in the delivery of interactive retail services, journal of interactive marketing, vol. 24, no. 2, pp. 155–167. casadesus-masanell, r. & ricart, j.e. (2010), from strategy to business models and onto tactics, long range planning, vol. 43, no. 2/3, pp. 195–215. chatterjee, p. (2010), multiple-channel and cross-channel shopping behavior: role of consumer shopping orientations, marketing intelligence and planning, vol. 28, no. 1, pp. 9–24. chesbrough, h. & rosenbloom, r.s. (2002), the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies, industrial and corporate change, vol. 11, no. 3, pp. 529–555. chesbrough, h. (2010), business model innovation: opportunities and barriers, long range planning, vol. 43 no. 2/3, pp. 354–363. dholakia, u. m., kahn, b. e., reeves, r., rindfleisch, a., stewart, d. & taylor, e. (2010), consumer behavior in a multichannel, multimedia retailing environment, journal of interactive marketing, vol. 24, no. 2, pp. 86–95. doganova, l. & eyquem-renault, m. (2009), what do business models do? innovation devices in technology entrepreneurship, research policy, vol. 38, no. 10, pp. 1559–1570. grewal, d., roggeveen, a.l., compeau, l.d. & levy, m. (2012), retail value-based pricing strategies: new times, new technologies, new consumers, journal of retailing, vol. 88, no. 1, pp. 1–6. holbrook, m.b. (1999), introduction to consumer value, in holbrook, m.b. (ed.), consumer value: a framework for analysis and research, routledge, new york, ny, pp. 1–28. johnson, m. w., christensen, c. m. & kagermann, h. (2008), reinventing your business model, harvard business review, vol. 86, no. 12, pp. 50–59. konuş, u., verhoef, p.c. & neslin, s.a. (2008), multichannel shopper segments and their covariates, journal of retailing, vol. 84, no. 4, pp. 398–413. kumar, v. & venkatesan, r. (2005), who are the multichannel shoppers and how do they perform? correlates of multichannel shopping behavior, journal of interactive marketing, vol. 19, no. 2, pp. 44–62. journal of business models (2014), vol. 2, no. 1 pp. 89-104 102 kushwaha, t. & shankar, v. (2013), are multichannel customers really more valuable? the moderating role of product category characteristics, journal of marketing, vol. 77, no. 4, pp. 67–85. lin, h.-h. (2012), the effect of multi-channel service quality on mobile customer loyalty in an online-and-mobile retail context, the service industries journal, vol. 32, no. 11, pp. 1865–1882. magretta, j. (2002), why business models matter, harvard business review, vol. 80, no. 5, pp. 86–92. mcgoldrick, p.j. & collins, n., (2007), multichannel retailing: profiling the multi-channel shopper, the international review of retail, distribution and consumer research, vol. 17, no. 2, pp. 139–158. neslin, s.a., grewal, d., leghorn, r., shankar, v., teerling, m.l., thomas, j.s. & verhoef, p.c. (2006), challenges and opportunities in multichannel customer management, journal of service research, vol. 9, no. 2, pp. 95–112. neslin, s.a. & shankar, v. (2009), key issues in multichannel customer management: current knowledge and future directions, journal of interactive marketing, vol. 23, no. 1, pp. 70–81. noble, s.m., griffith, d.a. & weinberger, m.g. (2005), consumer derived utilitarian value and channel utilization in a multi-channel retail context, journal of business research, vol. 58, no. 12, pp. 1643–1651. peterson, m., gröne, f., kammer, k. & kirscheneder, j. (2010), multi-channel customer management. delighting consumers, driving efficiency, booz and company. rangaswamy, a. & van bruggen, g.h. (2005), opportunities and challenges in multichannel marketing: an introduction to the special issue, journal of interactive marketing, vol. 19, no. 2, pp. 5–11. retail customer experience (2012), top 100. retailers, issues and trends that are making an impact, available at: http://www.retailcustomerexperience.com/whitepapers/5180/2012-retail-customer-experience-top-100 (accessed 15 august 2013). rigby, d. (2011), the future of shopping, harvard business review, available at: http://hbr.org/2011/12/the-futureof-shopping/ar/pr (accessed 15 august 2013). shafer, s.m., smith, h.j. & linder, j.c. (2005), the power of business models, business horizons, vol. 48, no. 3, pp. 199–207. silverman, d. (2005), doing qualitative research, sage, trowbridge wiltshire. sorescu, a., framback, r.t., singh, j., rangaswamy, a. & bridges, c. (2011), innovations in retail business models, journal of retailing, vol. 87, supplement 1, s3–s16. stephens, d. (2013), commentary: is showrooming like restless leg syndrome? retail customer experience, available at: http://www.retailcustomerexperience.com/article/215093/ commentary-is-showrooming-like-restless-leg-syndrome? (accessed 17 august 2013). teece, d.j. (2009), dynamic capabilities and strategic management. organizing for innovation and growth, oxford university press, new york, ny. teece, d. j. (2010), business models, business strategy and innovation, long range planning, vol. 43, no. 2/3, pp. 172–194. thomas, j.s. & sullivan, u.y. (2005), managing marketing communications with multichannel customers, journal of marketing, vol. 69, no. 4, pp. 239–251. journal of business models (2014), vol. 2, no. 1 pp. 89-104 103 trendwatching (2012), (r)etail (r)evolution. monthly trend briefing (may 2012), available at: http://trendwatching. com/trends/etailevolution/ (accessed 10 august 2013). valentini, s., montaguti, e. & neslin, s. a. (2011), decision process evolution in customer channel choice, journal of marketing, vol. 75, no. 6, pp. 72–86. varadarajan, r., srinivasan, r., vadakkepatt, g.g., yadav, m.s., pavlou, p.a., krishnamurthy, s. & krause, t. (2010), interactive technologies and retailing strategy: a review, conceptual framework and future research directions, journal of interactive marketing, vol. 24, no. 2, pp. 96–110. venkatesan, r., kumar, v. & ravishanker, n. (2007), multichannel shopping: causes and consequences, journal of marketing, vol. 71, no. 2, pp. 114–132. verhoef, p. c., neslin, s. a. & vroomen, b. (2007), multichannel customer management: understanding the research-shopper phenomenon, international journal of research in marketing, vol. 24, no. 2, pp. 129–148. wakolbinger, l. m. & stummer, c. (2013), multi-channel management: an exploratory study of current practices, international journal of services, economics and management, vol. 5, no. 1/2, 112–124. wallace, d.w., giese, j.l. & johnson, j.l. (2004), customer retailer loyalty in the context of multiple channel strategies, journal of retailing, vol. 80, no. 4, pp. 249–263. zeithaml, v. a. (1988), consumer perceptions of price, quality, and value: a means–end model and synthesis of evidence, journal of marketing, vol. 52, no. 3, pp. 2–22. zhang, j., farris, p.w., irvin, j.w., kushwaha, t., steenburghe, t.j. & weitzf, b.a. (2010), crafting integrated multichannel retailing strategies, journal of interactive marketing, vol. 24, no. 2, pp. 168–180. zott, c. & amit, r. (2010), business model design: an activity system perspective, long range planning, vol. 43, no. 2/3, pp. 216–226. journal of business models (2014), vol. 2, no. 1 pp. 89-104 104 about the author mika yrjölä is a researcher at the school of management in the university of tampere, finland. his research experience is mostly in the context of retail and in the areas of marketing strategy, customer experience and service business. he has published in journal of business and industrial marketing and journal of retailing and consumer services. journal of business models (2014), vol. 2, no. 1 pp. 105-121 105 th e evolution of network-based business models illustrated through the case study of an entrepreneurship project morten lund1 & christian nielsen1 abstract purpose: existing frameworks for understanding and analyzing the value configuration and structuring of partnerships in relation such network-based business models are found to be inferior. the purpose of this paper is therefore to broaden our understanding of how business models may change over time and how the role of strategic partners may differ over time too.  design/methodology/approach: a longitudinal case study spanning over years and mobilising multiple qualitative methods such as interviews, observation and participative observation forms the basis of the data collection.  findings: this paper illustrates how a network-based business model arises and evolves and how the forces of a network structure impact the development of its partner relationships. the contribution of this article is to understanding how partners positioned around a business model can be organized into a network-based business model that generates additional value for the core business model and for both the partners and the customers. research limitations/implications: the results should be taken with caution as they are based on the case study of a single network-based business model.  practical implications:  managers can gain insight into barriers and enablers relating to different types of loose organisations and how to best manage such relationships and interactions originality/value: this study adds value to the existing literature by reflecting the dynamics created in the interactions between a business model’s strategic partners and how a how a business model can evolve in a series of distinct phases keywords: network-based business models, stakeholders, strategic partners, longitudinal case study 1 university of aalborg please cite this paper as: “lund, m. & nielsen, c. 2014, ‘th e evolution of network-based business models illustrated through the case study of an entrepreneurship project’, the journal of business models, vol. 2, no. 1, pp. 105-121.” journal of business models (2014), vol. 2, no. 1 pp. 105-121 106 introduction in the near future, when markets are expected to become truly globalized and where technological developments potentially will enable even micro-companies to tap into global supply chains with great ease and flexibility, and where the same companies have the ability to reach global consumers and business-to-business marketplaces through the internet, established companies will need to understand new ways of collaboration in order to sustain their businesses. the overall trend clearly points towards more collaboration between organizations (gulati & gargiulo 1999). in such a setting, the ability to create profitable network-based business models will become ever more crucial. the ongoing global financial crises illustrates that in a global business cycle downturn, companies tend to focus on cutting their costs to a minimum, in turn reducing key resources and activities in their respective business models. inevitably, such cost-cutting exercises will result in restrictions to the value proposition for customers. however, imagine the case where creating a networkbased business model leads to both lower unit costs and a higher value proposition seen from the perspective of the customers. it is the objective of this longitudinal case study to understanding how partners positioned around a business model can be organized into a network-based business model that generates additional value for the core business model for both the partners and the customers. the ability to create such a structure ought to be the primary objective of any network-based business model in order to outweigh deficiencies such as lacking control, trust and inefficiencies. in most cases when a company cuts it cost-base, take for example an airline carrier, it will have an impact on the service-level provided to the customers. routes may be closed, flight-frequency reduced, service desks in local airports closed, in-flight service reduced etc. and all of these factors have a very direct impact on the value proposition towards the customer. in a recent contribution, rindova et al. (2012) identifying three mechanisms linking partnering portfolios in strategic entrepreneurial networks that have an impact on firm growth: 1) configuring partnering portfolios to pursue distinctive logics for sourcing external resources, 2) aligning resource-sourcing and resource-linking logics in new product development, and 3) embarking on different growth trajectories, which contribute to different performance patterns. hence, it is an interesting proposition to study whether new network-based business models factoring in openness, peering, sharing, and global positioning, could enable the possibility of enhancing the value proposition while at the same time reducing costs through partnering. this article reports the study of a network-based business model with precisely this ambition. in studying the development of a network-based business model, eye in the sky (henceforth eis), from an explorative perspective, we are able to map out a number of phases over which the business model developed and the barriers and enablers related to each phase. the results of this longitudinal research project provide insight into the implications of collaborating on delivering value to customers from a network-based perspective and provide valuable insight into the interdependent innovation (kleinbaum & tushman 2007) from inter-firm perpsective. furthermore, this research provides a strong theoretical contribution relating to the tools for analyzing, developing and optimizing business models, in that the study finds weaknesses in relation to properly understanding and modeling the value creation that takes place between existing business models in the form of strategic partnerships and transactions. this study accentuates previous studies in the field. in particular, we advance the findings of demil and lecocq (2010), who also consider business model evolution. while demil and lecocq (2010) are specifically concerned with the dynamics created by interactions between a business model’s components, this study adds value by reflecting the dynamics created in the interactions between a business model’s strategic partners. the remainder of the paper is structured as follows: section two provides theoretical insight into, and discusses the value configuration of business models while the subsequent section reviews the notion of modeling network-based business models. section four accounts for the methodology and provides a description of the case, while section five illustrates the evolution of “eye in the sky” network. finally, the results are discussed and related back to theory in section six. journal of business models (2014), vol. 2, no. 1 pp. 105-121 107 understanding the value configuration of business models new types of value creation. we have heard that song before. in the mid 1990’s there was an overflow of literature documenting how new types of value creation spawned several new fields of interest such as e.g. intellectual capital, networks and e-business as important “new” drivers of value creation (cf. zott et al. 2011) in the wake of the dot.com era. however, neither intellectual capital, networks nor e-business are by themselves new types of business models. rather, they represent important sub-elements of business models. intellectual capital has e.g. become a greater part of competitive advantage, while networks and e-business represent choices for customer contacts and customer-targeting strategies respectively. another way of denoting this is that the value configurations that companies apply to become successful have altered as sweet pointed out already in 2001. our postulate here is that as new types of value configuration emerge, so do new business models. therefore, new models and tools for working with the identification, analysis and development of value are needed in order to illustrate the effects of managerial decisions on value creation. accordingly, managers must recognize that business models are made up of portfolios of very different resources such as networks, competences, customer loyalty, and not merely traditional physical and financial assets. therefore, “every company needs to create a business model that links combinations of assets to value creation” (boulton, libert, & samek 1997, 33). the rising interest in understanding and evaluating business models (nielsen 2011) can to some extent be traced to the fact that new value configurations are starting to outcompete existing ways of doing business. already a decade ago, sandberg argued that changes in the competitive landscape had given rise to a variety of new value creation models within industries where previously the “name of the industry served as shortcut for the prevailing business model’s approach to market structure” (sandberg, 2002; 3) and that competition was increasingly between competing business concepts (hamel, 2000) and not between firms with different strategies. one attempt at defining what a business model is states that “a business model describes the coherence in the strategic choices which makes possible the handling of the processes and relations which create value on both the operational, tactical and strategic levels in the organization. the business model is therefore the platform which connects resources, processes and the supply of a service which results in the fact that the company is profitable in the long term” (anon.). as such this idea correlates with hamel’s arguments and emphasizes that a business model is the platform, which enables the strategic choices to become profitable (see also seddon et al. 2004). resources are often mentioned as central aspects in business model frameworks (betz 2002). klaila (2000) explains how the description of a business model helps, e.g. managers and employees, to identify the critical behaviors, competencies, and market conditions and account for the key resources that are present in the company. from such a resource-based perspective these resources are key inputs to the value creation process of the company (boulton et al., 1997). as it, for some organisations at least, can be rather complex to understand the roles of the many different resources in the total value creation of the company (covin & stivers, 1997), the business model approach becomes advantageous, because it, in the words of miller, eisenstat & foote (2002) visualizes the capability configurations of the company, understood as the cohesive combination of resources and capabilities embedded within its infrastructure that generate value. the value chain is a typical example of a value configuration. porter defines the value chain as a tool for analyzing the sources of competitive advantage of the firm because “the value chain enables a systematic examination of all the activities a firm performs and how these activities interact” (porter, 1985; p. 33). every firm is essentially a collection of interdependent activities that are performed to create value. according to shank and govindarajan (1992) the value chain is “the linked set of value-creating activities all the way from basic raw materials to the ultimate end-use product delivered into the final consumers’ hands” (ibid., 179). within the notions of business models, the value chain is argued to comprise the activities and organization journal of business models (2014), vol. 2, no. 1 pp. 105-121 108 of the company (hedman & kalling 2003) and the structure of the company (alt & zimmermann 2001). in bell et al.’s (1997) client business model framework for example, core business processes and activities, and the analysis hereof, are also viewed from a value chain perspective. likewise, chesbrough & rosenbloom (2002) imply that the value chain perspective leads to the identification of the activities and assets (inputs) that are necessary to deliver the value proposition of the company (outputs). however, there are alternative value configuration models to that of the value chain. stabell & fjeldstad (1998, 414) suggest that the value chain is but one of three generic value configuration models. based on thompson’s (1967) typology of long-linked, intensive and mediating technologies, they define the value chain as a value configuration that models the activities of long-linked technology. stabell & fjeldstad (1998) argue that the distinction between these three generic value configuration models is the key to being able to analyze firm-level value creation. sweet (2001) identifies four strategic value configuration logics: value-adding, -extracting, -capturing, and -creating and argues that it is the ability to manage these logics well, rather than the ability to create new business models that leads to sustainable success. by stating this, he confirms the necessity of understanding how the business model and its value creating elements work, as a prerequisite for managing the company. ramirez (1999) too, offers an alternative view to that associated with value creation in industrial production, arguing that technical breakthroughs and social innovations in actual value creation render the alternative, a so-called value co-production framework. the first of the two alternative generic value configuration models proposed by stabell & fjeldstad (1998) is the value network logic. it models firms that create value by facilitating a network relationship between their customers using a mediating technology, e.g. like an infomediary or innomediary, as sawhney et al. (2003) explicates. the second alternative to the value chain is the value shop logic. it concerns firms where value is created by mobilizing resources and activities to resolve a particular customer problem. hence, both of these value configuration logics have significant similarities to our network-based business model setting. this discussion naturally leads us to the field of networks, which has rendered much attention in recent years (cf. castells 2000) and network analysis in order to frame an understanding of network-based business models. a network consists of specific roles and value interactions oriented toward the achievement of a particular task or outcome (allee, 2008). despite the fact that there has been a significant amount of attention directed towards understanding the role of interorganizational networks and alliances (gulati 1998) and for example which contingencies that affect the success or failure of a relationship, (cf. batonda & perry, 2003; p. 1), very little attention has been directed towards the evolution of networks (anderson et al., 1994; håkansson & snehota, 1995). batonda & perry (2003) describe three schools in relation to network evolution: stage-theory, state-theory and joinings theory. the stage-theory contains two main theories: life cycle models and growth-stages models (batonda & perry, 2003; 1458), both focusing on how inter-firm networks gradually develop through sequential stages, and over a period of time (see also ford, 1980; van de ven, 1992). state-theory comes from a different school of thought, and is in opposition to the sequenciality thoughts on which stage-theory is based. instead, state-theory suggests that actors in a collaboration move randomly from one state to another (anderson et al., 1994; håkansson & snehota, 1995). joining-theory is more centered on what happens at the beginning of a network and how the entry has a major influence on the further development of the network (thorelli 1986, batonda & perry 2003). this could for example be the case when the way in which partners are identified and recruited has an influence on the outcome of the network. batonda & perry (2003) conclude that companies that are new in network settings often tend to think of the collaborations as following a sequence of stages, while more established companies or companies that are network-based themselves tend to accept the approach of the state-theory. finally, batonda & perry (2003) argue that joining-theory is not applicable when focusing on inter-firm network development. this journal of business models (2014), vol. 2, no. 1 pp. 105-121 109 study will utilize these experiences when conducting the research, but before outlining the specific use, it is necessary to describe the context of network analysis. according to lazzarini, chaddad and cook (2001), network analysis is based on the recognition that network structure constrains and at the same time is shaped by firms’ actions (granovetter, 1973; nohria, 1992), and provides a series of techniques to map out the structure of interorganisational relationships. lazzarini et al. (2001) introduce the concept of netchain analysis, which provides a framework, which is able to encompass the value-shop and value-network configurations of stabell and fjellstad (1998) and thereby constitutes a viable framework for analyzing network-based business models. a netchain analysis explicitly differentiates between horizontal (transactions in the same layer of the value chain) and vertical ties (transactions between layers), mapping how agents in each layer are related to each other and to agents in other layers (lazzarini et al., 2001; p. 7). the framework distinguishes between three types of interdependence in the network, namely sequential, pooled and reciprocal each of which spurs distinctly different types of value creation sources. allee (2008) argues that in order to facilitate the analysis of the value of a network, knowledge and intangible value exchanges must become an integrated part of the models applied in visualizing value configurations along side that of information, physical and monetary transactions. even if network analysis is becoming more and more important, only few studies have contemplated how the intangible resources of companies interact to create value for the whole network (allee, 2008; solitander and tidström, 2010; peng, 2011; anon.). in the words of zott and amit (2009), business models go well beyond traditional views on network theory and emphasize the inclusion of factors such as purpose, acceptance, fairness, coherence and viability. our synthesis here is therefore that the business model constitutes a value creation “core” based on the interaction of a number of generic building blocks (cf. chesbrough, 2006; osterwalder & pigneur 2009), and that it is embedded in a network of partners and alliances that contribute to value creation through supplying resources or performing activities and that these partners are not only restricted to interacting on the traditional value chain perspective, but can perform downstream customer activities and even core value proposition enhancing activities. this is much in accordance with zott and amit (2010), who argue that a business model is a system of interdependent activities that transcends the focal firm and spans its boundaries and that the activity system enables the firm, in concert with its partners, to create value. the process of designing networkbased business models one way of visualizing a business model is through the business model canvas, a conceptual tool developed by osterwalder & pigneur from ca. 2003 to 2009 (osterwalder & pigneur 2009). the business model canvas describes a business model as being based on nine interrelated building blocks where the centrally placed value proposition links the infrastructure of the company (down-stream activities) with the customer (distribution and after sales relationships). osterwalder & pigneur’s work (cf. osterwalder 2004, osterwalder, pigneur and tucci 2004; osterwalder and pigneur 2009) has provided a popular framework for describing, understanding and developing business models. this is primarily due to the fact that the canvas is an intuitively applied template from which to discuss the “how’s” and “why’s” of the activities and choices made by a company in order to achieve a sustainable position in their industry. the model does not prescribe any particular starting point for the analysis, or any particular order of discussion. rather, it prompts the user(s) to focus on natural connectivities between the nine building blocks that make up the model. osterwalder & pigneur (2009) propose a process of applying the canvas to describe the “as-is” model of the organization, and thereafter to focus on strengths and weaknesses and finally try to narrow down potential “could-be’s” and evaluating this business model innovation in a swot-like manner. a limitation to the framework is the static nature of the business model canvas, in view of the desire to generate new innovative business models. journal of business models (2014), vol. 2, no. 1 pp. 105-121 110 furthermore, the business model canvas framework encounters limitations in cases where several companies and individuals form a network in a new business model. there seems to be a need to develop an additional layer to the framework for each partner (stakeholder) and for the network at a whole so that it may encompass the network of partners and alliances that contribute to value creation through supplying resources or performing activities as described in section 2 above. a network-based business model is a business model where two or more, and often several, stakeholders create a joint value proposition or jointly affect a value proposition based on the key activities and resources of all stakeholders. the partners are not only restricted to interacting in a traditional value chain manner i.e. sequentially (lazzarini et al. 2001), but can perform downstream customer activities and even core value proposition enhancing activities. a company’s ability to tap into and again tap out of these networks, interorganisational relationships and processes and its ability to innovate across the network capabilities that present themselves; will become a competitive advantage in itself. the notable success of several innovative network-based business models in recent years ,such as apples network of app-companies and groupon’s success with merging sellers and buyers, supports the notion of including business partners in the design and innovation process of business models. network-based business models may be constructed in a variety of ways. below we provide a number of examples that illustrate this. figure 2: partners can influence value creation a network-based business model in the context of the business model canvas (osterwalder and pigneur 2009) seems to lack an additional layer to capture the network dimension. the business model canvas it self contains a building block entitled “network partners” enabling the user to identify who the key partners and suppliers are, which resources they are providing and which activities they perform. in the business model canvas, the partners have a direct effect on the key resources and activities affecting the cost structure of figure 1: the business model canvas journal of business models (2014), vol. 2, no. 1 pp. 105-121 111 the company. if we take the example of an oil driller that offers owners of oilfield to develop, drill and produce oil they become a key partner in the business model of the oilfield owner. figure 2 illustrates that the oil driller provides key resources; pioneering technologies, experienced personnel and machinery. they can implement key activities; preforming all tasks in drilling and processing the oil affecting the cost structure and the value to the customers in the oilfield owner’s business model. in this case the business model canvas describes how the use of partners affects the value creation delivered to the customers. in other words it describes how partners or suppliers interact with the case company’s business model. it can be argued that the above example is a network-based business model, hence, two or more partners affect the value proposition based on the key activities and resources of all stakeholders. in the case above, it is the oilfield owner’s business model that is at the core and the business model canvas provides a good platform for understanding the key attributes of their business model. in another type of business model, two or more companies may pool their resources and activities into a joint business model providing a joint value proposition for the customer as illustrated in figure 3. figure 3: partners as substitutes on the back-end business model such a setup occurs in various contexts like for example joint ventures, business collaborations, co-branding of products etc. in such cases, the limitations of the business model canvas become clear in the context of describing network-based value creation. the business model canvas does not provide a detailed enough description of the actions and relationships occurring between the stakeholders, nor the financial structure and risk between the stakeholders. figure 4: several business model add value a third example of a network-based scenario is the “equal partnership model” where two or more partners (in figure 4 exemplified by six business model canvasses) add relevant core resources and activities into a joint business model creating a new “pure” network-based business model. these brief examples indicate a potential weakness of the business model canvas when it comes to treating partners in relation to network-based business models, because the partners are creating business models in the network relationship itself. furthermore, it may be problematic for understanding value creation flows that some customers also can be treated as strategic partners. the dna of a network-based business model we hypothesize that network-based business models can be structured in different patterns, much like the existing literature on singular business models denotes (cf. osterwalder and pigneur 2009). however, in the network-based setting the characteristics of the stakeholders and the structure between them define the stakeholder patterns and are a part of what might be denoted the business model dna. in this dna, the stakeholders are the companies, organizations and individuals that make up the core company’s business model. journal of business models (2014), vol. 2, no. 1 pp. 105-121 112 methodology and case description methods in this section a case study is introduced to illustrate how a network-based business model arises and evolves and how crucial the awareness of the dimension of multiple collaborators is for the creation of a new business model. a danish research program “international center for innovation” (ici) was initiated in 2007, ending in march 2013. the project aimed to inspire and assist participants in a development process of innovating new network-based global business models and in providing a solid base for relevant qualitative data, parallel to a business and industry ambition of creating sustainable business models for the companies involved. the collaborating companies were structured into networks consisting of at least 5 companies. each network was followed for at period of at least two years. ici has since 2007 followed and documented the development of 10 network-cases including a total of 92 companies that were in the process of understanding their business model with the ambition to innovate their existing business models to become new global network-based business models. the case study presented in this article is based on a longitudinal case study over a period of 3 years of a danish start-up called sky-watch and its network partners in the ici project called eye in the sky (eis). the network of companies and individuals behind core company developed a new business model for drone helicopters. sky-watch has about 20 employees and has an annual turnover of an estimated € 10 million. the longitudinal study of eis was a longitudinal interventionist  research project (lukka 2005) which was combined with a series of non-interventionist type semi-structured interviews (cf. yin 2003). the research group mainly followed the whole network, including the founders of sky-watch, the ceo and senior staff from the company, as well as selected partners, consultants and researchers. the project had a defined goal to globalize its drone helicopter product. during the research project, there have been numerous meetings, workshops, reports and semi-structured interviews,  which are recorded and/or documented with minutes, pictures or video. the terminology  of the business model was introduced to all participants, and especially the use of  the business model canvas (osterwalder & pigneur 2009), and narratives exemplifying existing, successful business models. the evolution of “eye in the sky” network the following is an account of how the eye in the sky (eis) network evolved through a series of phases. this case study illustrates how the business models of the related companies affect one another and how they form the value creation of the core company. the eye in the sky (eis) network was one of the first projects in ici and is a remarkable example on how a new business arises from a network of companies supported by a public innovation program. from the start in the ici project, it was the assumption that the ideal network pattern for a network-based business model would follow the structure of a so-called “partner business model” figure 1, where it was hypothesized that at least five partners added their core resources and activities into a joint business model creating a pure network-based business model. this ideal network pattern was the platform for founding a new network based business model that in the case of the “eye in the sky network” evolved in a number of network stages providing us significant data showing how the network dimension evolves in stages. phase 1. the birth of a new network based business model the eye in the sky network was initiated by access2innovation, a research program situated at aalborg university with the aim of bringing together ngos, universities and private companies in a triple helix construction, in order to contribute with a series of innovative solutions for the work done by relief organizations in third world countries. in the spring of 2008, five companies were invited to take part in a project working with a product development idea at the department for automation and control at aalborg university. the idea was originally identified by danchurchaid’s humanitarian mine action group, a danish ngo. journal of business models (2014), vol. 2, no. 1 pp. 105-121 113 figure 5: the partner business model the starting point of the dialogue was an autonomous mine-seeking drone helicopter developed at aalborg university. danchurchaid had vast experience in landmine seeking and landmine removal, and could therefore provide knowhow. relatively quickly they rejected the sustainability of the idea because their experience told them that such areas often were often prone to heavy competition. they instead identified a need for aerial photography to map out areas and creating an automated overview. these data are often outdated or not existing for landmine-infested areas in developing countries. combining the idea of an airborne mine-seeker and the demand for areal photos spawned the idea of a small versatile unmanned drone helicopter, which could take the required aerial photos of the minefields. with the project defined, the notion of a pure network-based business model was initiated by identifying which key resources and activities were necessary for developing, producing and manufacturing the drone helicopter. this led to the gathering of 5 partners; mekan contributing with mechanical competences, essential to manufacturing the first prototype. danish aerotech having competences on the manufacturing of mechanical, structural and electrical components for airplanes and the design of these. additionally, they had experience with airplane and helicopter maintenance, and provided especially the mechanical knowledge and the maintenance of flying units had relevance to the project. gomspace worked on components for satellites and the control hereof, offering knowledge on power source for the drone. netimage had expertise delivering web-based solutions within e-trade, e-service and digital billing, and had therefore competences within data control and data-structure, along with competences within construction of the user interfaces to be utilized in the control of the helicopter. spacecom had knowhow in the field of satellite communication and radio connections, which were vital for the communication between the control-unit and the helicopter, and for controlling the geo-referencing of the picture material. danchurchaid was, as mentioned, providing the demand for the product, and therefore constituted the reference customer for the drone. as such they were treated as a partner too, because of their ability to provide knowhow on the customer value proposition needed. the five companies all had a natural interest in the project because their individual contributions were similar to what they were doing in their existing businesses, and at the same time not competing with their existing market. furthermore another motivation was that the financial crises had started kicking in, and all of the involved companies were experiencing tougher times due to a downturn in the business cycle. this added to the interest for the project and the expectation of getting development activities fully funded by ici was welcomed. this led to the start of the development of a prototype of the drone, and during this work it became clear that in order to lift the project each and every partner would have to commit to investing part of his or her own capital too. in this phase of the network, we identify elements of the problems that zott and amit (2007) encounter in relation to the counterproductive problems when entrepreneurs attempt to incorporate both efficiencyand novelty-centered design elements into their business models. phase 2. a shake and bake setup the project was left in a critical state because the partners started losing interest in it. this was primarily due to the fact that they had been given the impression that journal of business models (2014), vol. 2, no. 1 pp. 105-121 114 the development would receive full external funding via the ici project, which was a misunderstanding. after a period of standstill, one of the employees started raising money for the project on his own. as the project was in a seed phase, only few funding opportunities were available. however, he managed to convince his father to invest and at the same time involved a local business incubator as a source of syndicated funding. this led to the registration of a separate company, skywatch a/s. the partners were still relevant to the project of developing a drone helicopter, but only a one of them was willing to invest money in the project. therefore, the network making up the business model changed from the pure network model to what could be defined as a shake a bake setup (fig 6). figure 6: the shake and bake model the shake and bake setup differs from the pure setup by having an entity that is the project owner, and that only assembles the ingredients from the other partners, combining their resources and activities into the final product. an ideal shake and bake setup is owned by all or most of the relevant stakeholders making up the business model or the stakeholders have some other significant incentive committing them to the project. in this case the “non owning partners” were still committed to the project through the anticipation of receiving a subsidy for product development, alternatively creating a potential customer for their existing business. this phase is identical to zott and amit’s (2009) conception of a network-based business model, where there is a focal firm at the core of the network. phase 3. a “normal” business model most “normal” business models replicate the structure of the value chain, and thus consist of a central company that buys raw materials and components etc. from suppliers and where external stakeholders interact and affect the business model through relationships and monetary and physical transactions. figure 7: the normal sky-watch business model sky-watch a/s was developing more and more into a separate company, devaluing the retention of its partners’ stakes in the. due to its organic growth, skywatch started experiencing limitations in relying on its original partners, their technology and knowhow and identified the need of starting their own r&d department, which took place in the summer of 2010. this led to a regular break with the shake and bake setup. on the one hand, sky-watch experienced problems in relation to their original partners’ ability to deliver on time, which made it difficult to coordinate development and production. most importantly, the software/hardware solution previously employed was very difficult to configure to the original purpose with the drone. this was in part due to a poorly managed database, along with inflexible hardware. sky-watch realized that in order to build a profitable business, they needed to be able to access several different customer segments. this in turn required them to take control on the central hardand software competences, in order to produce a solution that was flexible enough to be quickly adapted to new market segments. concurrently, this would also journal of business models (2014), vol. 2, no. 1 pp. 105-121 115 increase the value of the firm, as they would come to possess a range of vital product competences within their field. many of the electrical components were bought off the shelf, while central circuit boards were designed in-house and subsequently made to order from suppliers. the manufacturing of the shell was to be handled by suppliers, based on the blueprints from sky-watch. yet, the demand for rapid prototypes and the unreasonable costs associated with small batch productions later led the company to acquire a 3d printer. this was in part used to manufacture prototypes, but also to produce special parts for limited batch productions. this entailed a large substitution of partners in and around the business model. with the control system in-house, gomspace became largely redundant, yet collaboration with this partner continued on various shared components. netimage proved not to possess the necessary competences for designing a user interface for a helicopter, as this required significant knowledge on how a helicopter operated. furthermore, mekan proved less relevant, as a larger part of the new design was to be in plastic. danish aerotech continued as a central partner, as they worked within a non-competing product in a similar segment. in that respect, danish aerotech had significant insights into the legislation within the field, while sky-watch could provide them with insights into a new interesting market segments. danishchurchaid also continued as a partner, as they maintained an interest in the products and could help introduce sky-watch to the ngo segment. in that respect, they proved a valuable partner, by actively pushing the story of the collaboration to the press. this generated some attention towards the project, which in turn provided legitimacy, which could be used towards military and other commercial segments. as such, the network encompassing sky-watch was structured in such a manner that it was consistent with the changed structure and purpose of the firm. in that respect, a new network was configured based on the more value-chain based approach, in which skywatch would carefully choose which activities were essential to the company, and which were best served by outsourcing. phase 4. the channel partnership as the drone moved closer to a commercial product ready for the market, sky-watch began looking thoroughly into the sales possibilities on the ngo market. this proved significantly difficult to penetrate, as ngo’s typically do not contain the means to make investments. any investments are typically brought in through sponsorships of specific projects. this meant that the lead-time would be very long and wrought with uncertainty. furthermore, sales to the un-system required suppliers to have an established sales record, along with inventory stock and other resources, which sky-watch, at the time, simply did not possess. as a consequence, the firm began uncovering the possibilities for serving other segments, especially focusing on industrial inspection and military usage. in that respect, the company continued to emphasize a network approach, by searching for potential partnerships with organizations that had existing distribution and sales channels in those segments. therefore, we denote this the “the channel partnership” phase. this resulted in a partnership with a stakeholder that opened to sales and a service organization to the global market. phase 5. moving towards a platform-based business model. in our work with sky-watch we introduced the idea of a “platform business model”. this is a business model where the product becomes a platform for new business models and at the same time provides value for existing customers. an example of a successful platform is apple’s products. when steve jobs back in 2010 introduced the ipad he showed us a new product and at the same time manifested their business model as being a digital supermarket. in the process of working with the apple-metaphor the company began uncovering more application possibilities, which emphasized the potential of the product. through talks with different agents in different business segments that could be related to the drone helicopter, many different possibilities surfaced. however, each and every one of these different application possibilities would require specialized equipment beyond the current camera functionality. this made sky-watch realize that fulfilling this business potential would be extremely difficult. they would have to develop or purchase specific components and journal of business models (2014), vol. 2, no. 1 pp. 105-121 116 reconsidering what constituted their core competencies. rather than only considering themselves to be a development company specialized within uav helicopter solutions, they realized that their competences were not necessarily specific to helicopter drones. rather, it was the actual control of autonomous units that was their core competence. this indicated that the control and guidance competences of the firm could be applied to other units, for example drone submarines. yet, the helicopter solution remained the core product, which was to drive the firm forward. this necessitated that the product was finished, manufactured and distributed. as such, the firm had laid out the groundwork for a two-sided business model, in which one targeted selling control and guidance competences, while the other targeted the helicopter solution. in order to build profitability, the firm chose to focus specifically on the helicopter solution, by building production capacity and distribution network for the helicopter specifically. through this platform-based business model, sky-watch was able to turn potential competitors into customers, thus replicating one the three ways companies can compete through their business model (casadesus-masanell and ricart, 2011). figure 8: the channel partnership integrate the necessary data treatment processes, associated with areas which they were not competent in. the solution was a new business model developed in collaboration with ici. the helicopter was to be considered a basic unit, which contained different possibilities for attaching other components. thereby, the functionality could be extended significantly. on the product level, this meant that the helicopter was to contain new functionalities, which would enable the unit to send data back to the control station along with the ability to control the attached equipment. in that respect, sky-watch changed character. from having been a company focused on visual documentation through a camera, this functionality became a subcomponent in the guidance of the helicopter, on to which other components could be attached. in that respect, the firm created a platform where the possibilities would be highly dependent on the application possibilities developed by other partners. this enabled sky-watch to overcome the limitations they previously operated under, in relation to spreading the product to new segments. this would just require them to find the right partners to develop the application possibilities. the context for this is also that sky-watch began journal of business models (2014), vol. 2, no. 1 pp. 105-121 117 discussion and concluding remarks the empirical section above is a detailed elaboration of the implementation process of a new network-based business models. it illustrates the involved entrepreneurs managed the uncertainties they were confronted with in their innovation process through five consecutive phases. most importantly, it illustrates how the changes in network configuration over the five depicted phases challenge the existing frameworks for generating and analyzing business models. particularly the application of the business model canvas (osterwalder and pigneur 2009) and how it incorporates the relationships between stakeholders and their respective impacts on each other’s value creation and value configurations are advanced. through the research conducted on the 10 networkbased business models constituting the ici project, several start-up business models have been analyzed. initial evidence suggests that they often have a very poor overview over the relationships between the activities performed, the necessary resources, and how to configure the involvement of partners in their business model. the sky-watch case study presented in this article suggests that the entrepreneurs’ ability to understand the business model and the ability to manage the network-evolution pattern are key success factors. sky-watch’s success is particularly due to their ability to adapt the business model continuously and to understand and coordinate activities, resources, and how partners became involved in value creation. in the first phase of the eis network, the network of stakeholders took the form of a pure network. here the core business model becomes a fusion of actors’ activities, resources and partners. in the initiation phase they had not taken a position on the future form of the company but rather focused on how the stakeholders could create a joint product. the association/glue between the partners was a potential project financing, whereby the individual stakeholders would get subsidized for product development. when reality showed a more complicated financing structure, the network gradually dissolved. at the same time the stakeholders kept sympathy for the project they themselves had helped to set up, which meant that the “new company” sky-watch could create a shake and bake model where they were able to capitalize on the goodwill from the initial stakeholders. in the ici project three networks that attempted to maintain a network-based business model in a pure form with a varying number of key stakeholders. however none have been successful. among the key problems is that it is difficult to create an ownership model and it is difficult to find projects where stakeholders are able to mix their existing business models to something new, without the new business models potentially interfering, hurting or directly cannibalizing their existing business. sky-watch established itself initially as a shake and bake setup. it enabled them to have access to resources and activities through the involvement of committed stakeholders. this simultaneously reduced the need for a number of costly resources such as know-how, production equipment and technology, at the same time reducing the need for capital. the shake and bake setup enabled them to successfully create proof of concept and gain access to additional financing. finally, through the platform-based business model implemented in phase five, sky-watch were able to turn potential competitors into customers, thus replicating the mantra of casadesus-masanell and ricart (2011, 8) who exclaim that the ability to build complementarities with rivals’ cycles can result in substitutes turning into complements. this is precisely what sky-watch had succeeded in doing. when juxtaposed to stabell & fjellstad’s (1998) three types of value configurations, the sky-watch case illustrates how the network evolves from a value shop configuration to a value network configuration over the five network phases. this is surprising, as the pure network form starting out in phase one and the platform-based business model form ending in phase five each lend themselves more naturally to the opposite. the explanation is perhaps that the explorative nature of the network in phase one has a higher impact on the choice of value configuration. however, part of the explanation in this case study is the way in which the partners were joined and the particularities of the network partners, including their objectives for entering the initial research project. one might ponder if this journal of business models (2014), vol. 2, no. 1 pp. 105-121 118 company had existed at all today if there had not have been a misunderstanding as to how the finance and subsidy structure at the beginning of the project was set up? as such this study touches upon the missing focus on networks in entrepreneurial contexts identified by stuart and sorensen (2007), who argue that a disproportionate quantity of research focuses on the consequences of networks at the expense of research on their origins. the sky-watch case likewise shows us how a new network-based business model is implemented and legitimated through the application of storytelling about successful metaphors of doing business – in our case the platform-based business model applied by apple and groupon. the development of new interdisciplinary networks like for example apples, however, contains a number of barriers and challenges going forward both for businesses and for researchers. a significant paradox is, that although network-based business models have the potential to become vital catalysts of value creation through by becoming a hub for innovation and development of global business models, very few companies are potentially ”leveraged” to practice the innovation of business models in networks. it goes without saying that companies are ”handicapped” by their corporate culture and not least their “learning culture” which is typically characterized by hierarchy, ”single business model thinking,”, planning, and push and pull economy. it may require an entirely new knowledge set to cope with the ”multiple collaboration” and ”multibusiness model” economy (see also lindgren, taran & boer 2010). however, it is not enough to be able to get the ideas and concepts for new business models ”merged” together but it is also necessary to act on them commercialize them quickly, globally and thus to different markets. as such, this article also contributes to understanding the institutional factors both favoring and impeding the emergence and success of network-based business models. the success in this particular network-based business model lies in the ability create multiple collaboration, by rindova et al. (2012) denoted configuring partner portfolios. references allee, v. (2008), “value network analysis for accelerating conversion of intangibles”, journal of intellectual capital, vol. 9 no. 1, pp. 5-24. alt, r. & h.-d. zimmermann. 2001. preface: introduction to special section – business models. electronic markets, vol. 11, no. 1, pp. 3-9. anderson, j.c., hakansson, h. & johanson, j. (1994), “dyadic business relationships within a business network context”, journal of marketing, 58, october, 1-15 batonda, g. & perry, c., (2003),”approaches to relationship development processes in inter-firm networks”, european journal of marketing, 37,10, 1457–1484 bell, t., f. marrs, i. solomon & h. thomas. 1997. auditing organizations through a strategic-systems lens: the kpmg business measurement process. kpmg llp. betz, f. 2002. strategic business models. engineering management journal, vol. 14, no. 1, pp. 21-27. boulton, r.e.s., b.d. libert & s.m. samek. 1997. cracking the value code: how successful businesses are creating wealth in the new economy. new york: harper collins publishers. casadesus-masanell, r., & ricart, j. e. 2011. how to design a winning business model, harvard business review, vol. 89, no. 1-2, pp. 1-9. journal of business models (2014), vol. 2, no. 1 pp. 105-121 119 castells, m., (2000), ”the rise of the network society”, oxford: blackwell publishers chesbrough, h. & r.s. rosenbloom. 2002. the role of the business model in capturing value from innovation: evidence from xerox corporation’s spin-off companies. industrial and corporate change, vol. 11, no. 3, pp. 529-555. chesbrough, h. 2006. open business models: how to thrive in the new innovation landscape, boston: harvard business school press, 2006 covin, t.j. & b.p. stivers. 1997. knowledge management focus in us and canadian firms. creativity and innovation management, vol. 6, no. 3, pp. 140-150. ford, d., (1980), “the development of buyer-seller relationships in industrial markets”, european journal of marketing, 5.6, 339-54. granovetter, m., 1973. the strength of weak ties. american journal of sociology, vol. 78, no. 6, pp. 1360-80. gulati, r. & gargiulo, m., (1999), “where do interorganizational networks come from”, american journal of sociology, 104:5, 1439-1493 gulati, r., (1998), “alliances and networks”, strategic management journal, vol. 19, 293-317. hamel, g. 2000. leading the revolution. boston: harvard business school press. hedman, j. & t. kalling. 2003. the business model concept: theoretical underpinnings and empirical illustrations. european journal of information systems, vol. 12, no. 1, pp. 49-59. hakansson, h. & snehota, i., (1995), developing relationship in business networks, routledge, london. klaila, d. 2000. knowledge as a transformation agent. journal of knowledge management, vol. 4, no. 2, pp. 138-144. kleinbaum, a.m. and tushman, m.l. 2007. building bridges: the social structure of interdependent innovation, strategic entrepreneurship journal, vol. 1, pp. 103–122. lazzarini, s.g., chaddad, f.r. and cook, m.l. 2001. integrating supply chain and network analyses: the study of netchains. journal of chain and network science, vol. 1, no. 1, pp. 7-22. lindgren, p., taran, y., and boer, h. 2010. from single firm to network-based business model innovation. int. j. of entrepreneurship and innovation management vol. 12, no.2, pp. 122 – 137. lukka, k. (2005), “approaches to case research in management accounting: the nature of empirical intervention and theory linkage”, in jönsson, s. and mouritsen, j. (eds.), accounting in scandinavia – the northern lights, liber & copenhagen business school press, kristianstad, sw, pp. 375-99. miller, d., r. eisenstat & n. foote. 2002. strategy from the inside out: building capability-creating organizations. california management review, vol. 44, no. 3, pp. 37-54. nohria, n., 1992. introduction: is a network perspective a useful way to studying organizations? in nohria, n. and r.g. eccles, networks and organizations, boston, harvard university press, 1-22. osterwalder, a. 2004. the business model ontology: a proposition in a design science approach. university of lausanne, switzerland. osterwalder, a. and y. pigneur. 2009. business model generation. hoboken nj: john wiley and sons. osterwalder, a., y. pigneur & l.c. tucci. 2004. clarifying business models: origins, present, and future of the concept. communications of ais, vol. 16, pp. 1-25. journal of business models (2014), vol. 2, no. 1 pp. 105-121 120 peng, t.j.a. (2011),”resource fit in inter-firm partnership: intellectual capital perspective”, journal of intellectual capital, vol. 12 no. 1, pp. 20-42. porter, m.e. 1985. competitive advantage: creating and sustaining superior performance. new york: the free press. ramirez, r. 1999. value co-production: intellectual origins and implications for practice and research. strategic management journal, vol. 20, no. 1, pp. 49–65. rindova, v.p., yeow, a., martins l.l. and s. faraj. 2012. partnering portfolios, value-creation logics, and growth trajectories: a comparison of yahoo and google (1995 to 2007), strategic entrepreneurship journal, vol. 6, pp. 133-151. sandberg, k.d. 2002. is it time to trade in your business model? harvard management update, vol. 7, no. 1january, pp. 3-5. sawhney, m., e. prandelli & g. verona. 2003. the power of innomediation: exploiting the power of mediated innovation. mit sloan management review, vol. 44, no. 2, pp. 77–82. seddon, p.b., g.p.lewis, p.freenman and g. shanks. 2004. the case for viewing business models as abstractions of strategy. communications of the association for information systems, vol.13, no. 1, pp.427-442. shank, j.k. & v. govindarajan. 1992. strategic cost management: the value chain perspective. journal of management accounting research, vol. 4, no. 4 fall, pp. 179-197. solitander, m. & tidström, a. (2010), competitive flows of intellectual capital in value creating networks, journal of intellectual capital, 11(1), 23-38. stabell, c.b. & ø.d. fjeldstad. 1998. configuring value for competitive advantage: on chains, shops and networks. strategic management journal, vol. 19, no. 5, pp. 413–437. stuart, t.e. and sorenson, o. 2007. strategic networks and entrepreneurial ventures, strategic entrepreneurship journal, vol. 1, pp. 211–227. sweet, p. 2001. strategic value configuration logics and the ‘new’ economy: a service economy revolution? international journal of service industry management, vol. 12, no.1, pp.70-83. thompson, j. d. 1967. organizations in action: social science bases of administrative theory. new york: mcgraw-hill. thorelli, h. b., (1986), “networks: between markets and hierarchies”, strategic management journal, 7, 1, 37-51. van de ven, a. h., (1992), “suggestions for studying strategy process: a research note”, strategic management journal, 13, 169-88 yin, r. k. (2003). case study research: design and methods (3rd ed.). thousand oaks, ca: sage. zott, c., amit, r. and massa, l. 2011. the business model: recent developments and future research. journal of management vol. 37 no. 4, pp. 1019-1042. zott, c., & amit, r. 2009. the business model as the engine of network-based strategies. in p. r. kleindorfer &y. j wind (eds.), the network challenge: 259-275. upper saddle river, nj: wharton school publishing. zott, c., & amit, r. 2010. designing your future business model: an activity system perspective. long range planning, 43: 216-226. zott, c., & amit, r. 2007. business model design and the performance of entrepreneurial firms. organization science, 18: 181-199. journal of business models (2014), vol. 2, no. 1 pp. 105-121 121 about the authors morten lund, ma in business, ph.d. fellow at aalborg university in denmark. he is an experienced entrepreneur and executive, with a combined pragmatic and creative profile. he believes in mixing knowledge and creativity with methods and structure. he has a wide knowledge and experience both practically and methodologically/theoretically that he has gained through a natural curiosity and eagerness to discover new dimensions of business. he is among the founding group of bmdc (business model design center www. crebs.aau.dk), the worlds first interdisciplinary research center focusing on business models. christian nielsen, phd, is professor at aalborg university in denmark. he is director of crebs (center for research excellence in business models, www.crebs.aau.dk), the world’s first interdisciplinary research centre focusing on business models. christian has previously worked as an equity strategist and macro economist focusing specifically on integrating intellectual capital and esg factors into business model valuations. his phd dissertation from 2005 won the emerald/efmd annual outstanding doctoral research award, and in 2011 he received the emerald literati network outstanding reviewer award. christian nielsen has a substantial number of international publications to his record and his research interests concern analysing, evaluating and measuring the performance of business models. public profile available on http://www. linkedin.com/in/christianhnielsen and http:// personprofil.aau.dk/profil/115869#/minside 31 journal of business models (2022), vol. 10, no. 2, pp. 31-57 the role of privacy protection in business models for sustainability: a conceptual integration from an ecosystem perspective fabien rezac1 abstract purpose: the principal purpose of this article is to address a critical issue emerging in the realm of interorganizational dependencies heavily impacted by digitalization, namely developing business models that would protect privacy in a sustainable way. on the one hand, companies have been jointly proposing, creating, delivering, and capturing value through an excessive, unethical exploitation of personal data and information. on the other, restricting and controlling flows of data and information hampers the processes that lead to social well-being. this article reflects on this paradox by building on the theories of business models for sustainability and contextual integrity, while offering a holistic conceptual narrative guiding the sustainable transition towards digital equity and inclusivity. design/methodology/approach: this conceptual article can be classified as a theory synthesis paper with the ambition to achieve an outcome that enhances knowledge on concepts and a phenomenon by a conceptual integration across two different, previously unconnected literature streams and theories. findings: this article suggests that businesses which play any role in transmission of data and information cannot be sustainable without protecting privacy as a social value. furthermore, it argues that privacy cannot be protected without addressing the appropriateness of both flow and use of data and information with respect to all involved stakeholders. ultimately, via linking two distinct yet interrelated and rigorously developed research streams, a heuristic framework for privacy and sustainability in business models is proposed as a system of key considerations for managers to apply in assessing and planning a business practice, so it protects privacy in a sustainable way. originality/value: the key theoretical contribution of this article can be considered twofold. firstly, it unfolds the relevance of privacy protection for the stream of business model research directed toward sustainable development in a way that is theoretically rigorous, complementary with the stakeholder theory, and reflecting the changing interorganizational dependencies affected by digitalization. secondly, it contributes to the contemporary debate on privacy as a social value through identifying theoretically thorough avenue for adapting the theory of contextual integrity to a social domain where value proposition, creation, delivery, and capture with and for stakeholders involves transmission of data and information. keywords: privacy, privacy protection, contextual integrity, ecosystems, sustainability, social sustainability, business models, business models for sustainability please cite this paper as: rezac, f. (2022), the role of privacy protection in business models for sustainability: a conceptual integration from an ecosystem perspective, journal of business models, vol. 10, no. 2, pp. 31-57 1 aarhus university, denmark issn: 2246-2465 doi: https://doi.org/10.54337/jbm.v10i2.6952 https://doi.org/10.54337/jbm.v10i2.6952 journal of business models (2022), vol. 10, no. 2, pp. 31-57 3232 introduction it is obvious that data-driven technologies have significantly impacted the way how business is conducted (e.g., johnson, christensen and kagermann, 2008; amit and zott, 2012; iansiti and lakhani, 2014; porter and heppelmann, 2015). literally every aspect of the business landscape has been radically shifting (westerman and bonnet, 2015) and with the fourth industrial revolution underway, the biological, physical, and digital worlds have been gradually fusing. people have never been so close to technology before (schwab, 2016; rigby, 2014) and, in fact, each of us can now be considered a “walking data generator” (mcafee and brynjolfsson, 2012, p. 63). just to illustrate, it is estimated that by 2023, there will be 29.3 billion networked devices, which is approximately 10 billion more than 5 years earlier (cisco, 2020). with the contribution of the covid-19 pandemic causing a sudden increase in online presence, more than 59 zettabytes of data were predicted to be created, captured, copied, and consumed solely in 2020 (idc, 2020). this amount of data is expected to grow with a five-year compound annual growth rate of 26 percent through 2024, and despite the ratio of unique data to replicated data being approximately 1:9, the data created by 2023 will amount for creation of more data than in the past 30 years (idc, 2020). in the same breath, however, it is necessary to add that technology per se has no single objective value (chesbrough, 2010) and the same applies to all the data it generates. these barely imaginable volumes mean nothing unless they are processed and used for various purposes – including those of commercial character. generally, business environments consist of interdependent bundles of resources, markets and technologies controlled by many (astley and fombrun, 1983). therefore, when proposing, creating, delivering, and capturing value, we can see companies navigating these nowadays highly digitalized spaces jointly, by managing such dependencies with focus on establishing complementarity. on the one hand, they do so by actively engaging in different networks where the interorganizational relationships are governed by an interplay of contractual and relational mechanisms (aagaard and rezac, 2022). on the other, we can also see companies becoming embedded in ecosystems – sets of actors with varying degrees of multi-lateral, non-generic complementarities that are not fully hierarchically controlled and cannot be decomposed into an aggregation of bilateral interactions (jacobides, 2019; shipilov and gawer, 2020; adner, 2017). underpinned by modularity, the jointly created value ultimately covers customer needs broader than the needs an individual firm would be ever able to address in isolation. thus, facing the reality that offering alternative value proposition has little or no effect on building up a competitive advantage, the innately self-interested companies cope with the major paradigm shift by co-specializing and opening up for collaboration even with their competitors (jacobides, cennamo and gawer, 2018; gnyawali and charleton, 2018, jacobides, 2019). zooming in on the dynamics of ecosystems in particular, we can see companies co-creating products and services that span the traditionally clearly demarcated organizational as well as industrial boundaries – typically by using digital platforms, application programming interfaces, internet of things, and other tools for gathering, sharing and analysing data (desai, fountaine and rowshankish, 2022; fuller, jacobides and reeves, 2019, porter and heppelmann, 2014). and while there is no doubt that such a substantial datadriven progress has all the required potential to serve as a major catalyst for socially sustainable development, it simultaneously encompasses a number of critical concerns, with privacy protection being one of the most imperative (e.g., acquisti, taylor and wagman, 2016; world economic forum, 2021; gstrein and beaulieu, 2022). the endless array of notorious scandals of big-tech behemoths has drawn attention to the colossal imbalance of the value created for companies compared to value created for society. it has become widely recognised that organizations capitalize on customers’ personal data and often use it on a massive scale without their permission or awareness (cf. cochrane, 2018; burt, 2019). despite the fierce deployment of various regulatory mechanisms the mitigation by external interventions seems to be ineffective or, in fact, even counterproductive for innovation per se (cf. bansal, zahedi and gefen, 2015; burt, 2018; martin, matt, niebel and blind, 2019). while the infamous trade-off between customers’ convenience versus their privacy gradually escalates into a journal of business models (2022), vol. 10, no. 2, pp. 31-57 3333 crisis of society-wide proportions (e.g., meyer and kirby, 2010; li and unger, 2012; wang, 2013; cloarec, 2020), the business models of many paradigm-setting companies still rely on exploitation of data and information, essentially ignoring their cumulative impact on the social bottom line. since their products and services embody the very cornerstone of some of the most fundamental daily-life operations, giving up privacy has become seen simply as an inevitable collateral damage of living in this day and age – an ordinary price expected to be paid to be able to fulfil one’s basic needs. the practice of leveraging data for the commercial purpose has become so far-reaching that some researchers even resorted to using terms as expressive as “data capitalism” (west, 2017, p. 20). and although the rise of distributed-ledger created a number of opportunities for levelling out the playing field and establishing digital sovereignty (montes and goertzel, 2019), reclaiming the ideals that revolve around the notion of human-centricity requires to stop applying intrusive techniques and find a safer, more inclusive way to develop business (esteve, 2017; caputo, pizzi, pellegrini and dabić, 2021). the current status quo residing in pseudo-competition dominated by gatekeeping platforms gradually closing their ecosystems and perpetually reinforcing their walled gardens calls for revisiting privacy protection from a perspective that reflects the current situation underpinned by redefined interorganizational dependencies. on the one hand, it is desirable for customers to share data and information – it makes their life swiftly convenient. on the other, however, one must simultaneously consider the picture in full; when used for generating profit across ecosystems, the data and information must be combined and used only in ways that are sustainable not only for an individual but also for the society at large. this article attempts to tackle the abovementioned issue by answering the research question “how can companies propose, create, deliver, and capture value while protecting privacy in a sustainable way?” and unfolds followingly. first, due to the generally ambiguous understanding of conceptual articles, the applied process is delineated by presenting the deliberations that constitute the research design. second, most relevant debates on the topic of concern are introduced and, adopting a perspective that reflects the current multilaterality of interdependencies in the digitalized world, the main limitations stemming from the nexus of the respective concepts are identified. third, the concepts are integrated and a heuristic framework for sustainable privacy protection through business models is presented. finally, the article reflects on the presented contribution in terms future research and managerial implications. research design as salomone (1993, p. 73) puts it, “a sound conceptual article can be a quantum leap, in terms of value and usefulness, beyond a typical literature review.” overall, as pointed out by gilson and goldberg (2015), the difference between a review and a conceptual paper is the question “what’s new.” although a conceptual article should include a concise overview of the domain that also describes the state of the affairs in the scientific field in question (i.e., “what do we know, where have we come from, and what are the areas yet to be examined,” p. 128), this section should be written in a concise fashion, allowing the author to focus on a specific area that requires attention as well as propose and integrate relationships between constructs that have not been tested before. although a conceptual article should include a concise overview of the domain that also describes the state of the affairs in the scientific field in question (i.e., “what do we know, where have we come from, and what are the areas yet to be examined,” p. 128), this section should be written in a concise fashion, allowing the author to focus on a specific area that requires attention as well as propose and integrate relationships between constructs that have not been tested before. although the distinction between empirical and conceptual articles is commonly drawn through the assumption that empirical articles have data while conceptual ones do not, not all papers without data are considered to be conceptual (elder and paul, 2009; macinnis, 2004; cropanzano, 2009). journal of business models (2022), vol. 10, no. 2, pp. 31-57 3434 the understanding of conceptual papers applied throughout this manuscript can be considered in line with a recently published contribution by jaakkola (2020). this article concurs with her proposition that “a well-designed conceptual paper must explicitly justify and explicate decisions about key elements of the study” (p. 19) and shares her view on the research design elements a conceptual paper should comprise. firstly, the argumentation in conceptual literature is based “less on data in the traditional sense, but involve the assimilation and combination of evidence that may come from a variety of sources” (hirschheim, 2008, p. 434); therefore, it is necessary to be explicit about the choice of theories and concepts used to generate novel insights, which could be based on either a focal phenomenon or a focal theory. furthermore, the authors should clarify their choice of theories and concepts that are being analysed and draw distinction between domain theory (i.e., “particular set of knowledge on a substantive topic area situated in a field or domain”) and method theory (i.e., “meta-level conceptual system for studying the substantive issue(s) of the domain theory at hand”) (lukka and vinnari, 2014). other elements necessary to consider are the level of perspective, level of analysis, level of aggregation, key concepts used for analysis and explanation, key concepts to be analysed and explained, translating the focal phenomenon in a conceptual language, method of integrating the well-defined concepts, and quality of argumentation (jaakkola, 2020, p. 20). as presented further on, the approach towards reviewing literature in writing this article has been predominantly focused on two pertinent research streams, i.e., business models for sustainability and privacy. in both cases, the respective streams have been traced to their very inception and, searching for potential parallels, a theoretical narrative highlighting their emerging complementarity have been developed. resultingly, adopting an ecosystem angle, this effort allowed for discovering a crucial significance of relating privacy protection to business models that are directed toward sustainable development. this phenomenon focal to the contribution of this article is observable, but not adequately addressed in the extant research (i.e., literature on sustainability in business models and literature exploring with privacy as a social value). the key concepts (i.e., business models for sustainability, contextual integrity) were chosen based on the fit with the phenomenon. furthermore, due to the complementarity of these concepts, an interdisciplinary synthesis has been found exceptionally promising to address the emerging blind spots in both streams. while empirically interrelated, the research focused on privacy as a social value has foundations in philosophy and does not address business in combination with sustainability, while research on sustainability in business is rooted in management and does not address privacy as a social value in a way that would reflect privacy as a self-contained concept. the selection of papers used for building the argument has, therefore, been based on their relevance to the focal phenomenon and the conducted synthesis. the overview of choices related to this paper are illustrated in table 1. adopting a perspective that takes into account the differences in methodological approach (i.e., how the argument is structured) introduced by jaakkola (2020), this article can be classified as a synthesis paper, i.e., an article with the ambition to achieve an outcome that enhances knowledge on a concept or a phenomenon by conceptual integration across different, previously unconnected literature streams or theories. to elaborate, adopting the typology of conceptual contributions developed by macinnis (2011), the general conceptual goal of this article is to relate the concepts of business models for sustainability and contextual integrity by integrating them, i.e., “seeing the simplicity from the complex” (p. 146). the process of integration requires linking the previously unconnected phenomena, seeking a parsimonious and higher-order perspective unfolding the previously unexplored relations. the role of authors is to act as metaphorical “architects” who project an original building from a set of materials through portraying the construction as a whole, while pointing out how the individual elements fit together in an unprecedented way. journal of business models (2022), vol. 10, no. 2, pp. 31-57 3535 understanding business models for sustainability although there seems to be a consensus that the motivation of business model research is to systematically and holistically explain how companies do business (zott, amit and massa, 2011), how it is run, and how it is developed (spieth, schneckenberg and ricart, 2014); it is still apparent that the research area suffers from a significant ambiguity caused by a high number of different conceptualizations as well as taxonomies that systematically classify them. to cite teece, “there are almost as many definitions of a business model as there are business models” (teece, 2018, p. 41). although the concept of business models has evolved extensively over the last two decades, it is still being referred to as an “unclear idea with a cannibalizing tendency towards other management terms” (dasilva and trkman, 2014, s. 379). on the other hand, explaining its importance for the field of business and management, massa, tucci and afuah (2017) offer a comprehensive account of the key reasons for studying business models. first, business models are instrumental for strategy and competitiveness. table 1. empirical research conceptual paper equivalent research design elements of this article theoretical framing choice of theories and concepts used to generate novel insights privacy protection in sustainable business models from an ecosystem perspective data (source, sample, method of collection) choice of theories and concepts analysed business models for sustainability, contextual integrity unit of analysis perspective; level(s) of analysis/ aggregation meta-perspective variables studied (independent/dependent) key concepts to be analysed/explained or used to analyse/explain sustainable privacy protection in business models operationalization, scales, measures translation of target phenomenon in conceptual language; definitions of key concepts based on a thorough review of relevant literature approach to data analysis approach to integrating concepts; quality of argumentation figure 1. table 1: decisions about the key elements of this study in accordance with jaakkola (2020) journal of business models (2022), vol. 10, no. 2, pp. 31-57 3636 second, business models embody a new dimension that complements the traditional foci of innovation, i.e., product, process, organization. third, macrolevel changes in the business landscape are blurring the boundaries between formerly distinct industries, and companies are under pressure to rethink the ways of achieving their desired outcomes. this is only evidenced by the expanding body of work carried out by scholars who tap into the increasingly topical field of ecosystems (e.g., moore, 1993; iansiti and levinen, 2004; adner, 2017; senyo, liu and effah, 2019; kohtamäki, parida, oghazi, gebauer and baines, 2019; jacobides, 2019). fourth, as explored in the further sections, the business model perspective allows organizations to align their economic interests with the creation of environmental and/or social value, while enabling the researchers to utilize the discussed concept for exploring such angle holistically. during the last decade, several global economic and financial crises have highlighted the impact of companies on society, leading to calls for revisiting the relationship between business and sustainable development as defined more than thirty years ago, i.e., “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (world commission on environmental development, 1987, p. 41). although the sustainability and green growth policy agenda is evident (aagaard, 2019; beltramello, haiefayle and pilat, 2013), there is also a realization that technology innovation alone cannot resolve all of our sustainability issues (wells, 2013). hence, building on teece’s (2010) seminal definition and a literature review by boons and lüdeke-freund (2013), schaltegger, hansen and lüdeke-freund (2016) came up with a concept of business model for sustainability and defined it thusly: “[a] business model for sustainability helps describing, analysing, managing, and communicating (i) a company ’s sustainable value proposition to its customers, and all other stakeholders, (ii) how it creates and delivers this value, (iii) and how it captures economic value while maintaining or regenerating natural, social, and economic capital beyond its organizational boundaries (p. 6).” conventionally, value creation has predominantly been considered in terms of product or service bundles offered to customers in order satisfy their needs, or in relation to economic value created for the business in question. in the vein of the frequently referenced triple bottom line approach by elkington (2004), the business models for sustainability broaden the scope of the field by emphasizing the social and ecological aspects of value creation in connection to stakeholders that lie outside the narrowly bounded scope of parties directly involved in the key processes and activities. moving beyond the commonly maintained orientation toward customer-centric value proposition and pointing out the lack of research in the area of stakeholder relationships in value creation, freudenreich, lüdeke-freund and schaltegger (2020) expand the conventional one-directional understanding of value creation by exploring it from the stakeholder theory perspective, which considers business “a set of relationships among groups which have a stake in the activities that make [it] up” (freeman, 2010, p. 7). the authors hence highlight the importance a joint purpose around which a business is built and argue mutually beneficial value creation, i.e., with the stakeholders as well as for them. the stakeholder approach is especially resonant in the context of sustainability management, as elaborately discussed by hörisch, freeman and schaltegger (2014). firstly, both perspectives explore business beyond the limited egocentric focus on creating value only for the customer and the company itself. acknowledging broader societal and natural embeddedness of businesses, they both reject separating business and ethics, hence condemning various forms of philanthropy, unless the value creation that leads to the resources distributed is sustainable and responsible by design. followingly, they both resolutely oppose the thesis that profit is immoral, but also expand the shortterm business outlook by seeking for value creation in a long-term horizon, especially in terms of financial, societal, and/or natural considerations, which connect them to the domain of strategic management. the key higher-level argument is that business and ethics are interrelated and inseparable. asserting relationships and joint purpose as the key elements of business models, freudenreich et al. (2020) hence developed a stakeholder value creation framework that diverges from the classical customer value proposition view by considering not only journal of business models (2022), vol. 10, no. 2, pp. 31-57 3737 what is the value and how is it created, but also with and for whom. this framework distinguishes between five interdependent stakeholder groups (i.e., customers, business partners, employees, societal stakeholders, and financial stakeholders) and explicitly considers the value flows that take place in their relationships. given the presumption that value creation occurs between multiple different actors, it is necessary to view the outcome of the process as a portfolio. naturally, this contribution has significant implications for the discussed concept of business models for sustainability, manifested through four theoretical propositions. firstly, the identification and solving of sustainability issues as a part of value creation processes involve all relevant stakeholders (stubbs and cocklin, 2008; aagaard and ritzén, 2020). secondly, how the particular stakeholders contribute to achieve the business model’s joint purpose, which is oriented toward sustainable development, is clearly formulated (bocken, short, rana and evans, 2014; lüdeke-freund and dembek 2017; schaltegger, hörisch and freman, 2017; upward and jones, 2015) thirdly, the interests of the stakeholders are aligned and the social, ecological, and economic value they receive is integrated (freeman, 2010; hörisch, freeman and schaltegger 2014). and finally, the value creation with and for stakeholders embodies and integrated perspective of ethical and business considerations (freudenreich et al., 2020). each of these propositions allows for evaluation of business models in terms of their capacity to perform in line with the business models for sustainability. while further contemplations on the topic of sustainable value creation through business models can be also found in several other outlets (e.g., upward and jones, 2015; schneider and clauß, 2019; lüdeke-freund, rauter, pedersen and nielsen, 2020), commercialization of technological innovations while aspiring to create sustainable value with and for stakeholders entails a number of barriers. for instance, besides appropriability regime, complementary assets, discursive ambiguity, directional risks, methodological constraints or issues with double externality, the list also includes unsustainable dominant designs which can be changed only by radical innovation and interventions of system-level scale (teece, 1986; boons, montalvo, quist and wagner, 2013; lüdeke‐freund, 2020). as lüdeke‐freund (2020) argues, the knowledge about what prevents sustainable value creation is “extensive but not yet conlusive” and requires further insight. for instance, brem and puente-díaz (2020) highlight that “[the] social dimension of sustainability has not received the same amount of attention as environmental or economic sustainability. hence, the construct of social sustainability lacks conceptual and operational clarity (p. 4).” while the field is still in its nascent stage, the body of literature on socially sustainable business is growing and offers a “huge scope and impetus for future scholarly works” (soni, mangla, singh, dey and dora, 2021). at the same time, however, it is crucial to point out that although business model literature acknowledges the importance of the social side of sustainability, it basically overlooks that in the interconnected world which essentially relies on flows of data and information, one simply cannot discuss sustainability without involving privacy as well as its protection. the following sections hence introduce privacy as a major social issue within the stream of sustainability focused business model research and suggest how to tackle it. the role of privacy in business development establishing the interdisciplinarity between the domains of business model and sustainability allows to shift focus to a gently smouldering platform that is about to burst into flames—a highly interrelated and far-reaching issue of privacy. the quest for discovering how to jointly propose, create, deliver, and capture value while protecting privacy have not only had a prominent spot in the research agendas of scholars running the academic gamut from engineering to philosophy. it has also been raison d’être for some of the key public, private and non-profit institutions. according to the oecd digital economy outlook 2020 report (2020), the absolute majority of oecd member countries consider the main challenge to their privacy and data protection regulatory frameworks to be catching up with the technological developments and business models of online platforms. what is more, in order to journal of business models (2022), vol. 10, no. 2, pp. 31-57 3838 prevent their value creation from being hampered, the digital platforms have been even encouraged to self-regulate (cusumano, gawer and yoffie, 2021). ultimately, more than 80 percent of the countries consider artificial intelligence (ai) and big data to pose the main challenge for privacy and personal data protection. these findings are also very much in line with further global projections, which consider privacy to be one of the great tensions of the coming years (reinsel, rydning and gantz, 2020). to explain the reasons behind such an upset, in the words of montes and goertzel, ai space is essentially “dominated by an oligopoly of centralized megacorporations (2019, p. 354)” that expand into an increasing number of verticals. such actors seemingly enhance privacy at the cost of creating bottlenecks, raise barriers to entry, and strengthen their position as ecosystem orchestrators controlling majority of the core society-wide operations. looking under the proverbial hood of these hyperscalers, it can be seen that compared to the traditional operating models that rely predominantly on the processing power of employees, the value creation capacity of enterprises centring their business models around ai becomes far superior. in this environment, differentiation takes place through finding a right position within particular ecosystems and integrating algorithms into the very core of value creation processes. as iansiti and lakhani (2020a) point out, due to the push for constant innovation and improvement, we witness that companies holistically embracing the potential of algorithms can be scaled up at a faster pace, allowing for much broader scope and create unprecedented learning opportunities. although having more data and information does not necessarily equal higher competitive advantage, through a thorough consideration and careful cultural alignment, companies can create network effects that enable almost exponential and longlasting value creation without diminishing returns (hagiu and wright, 2020). these disruptive changes are naturally followed by consequences of the same magnitude. besides other factors, the performance of ai depends extensively on the nature, type and volume of data and associated information – including the circumstances and conditions under which they were collected. the consent-based rules of the game are notoriously illsuited to tackle the social challenges, as they only nurture trading data and information for a particular outcome in a quid pro quo fashion, or in other words, in the vein of the so called “privacy paradox,” i.e., the flawed logic of a phenomenon where people say they highly value privacy, and subsequently decide not to protect it, or even voluntarily exchange it for goods and services of inadequate value (solove, 2020; berinato, 2018). the concern of people over exploitation of their personal data generally differs (e.g., cecere, le guel and soulié, 2015) and, to cite acquisti et al., “consumers’ ability to make informed decisions about their privacy is severely hindered because consumers are often in a position of imperfect or asymmetric information regarding when their data is collected, for what purposes, and with what consequences” (2016, p. 442). thus, in digital economies where data and information are aggregated, combined, and distributed across ecosystems, informing individuals and empowering them with higher control while calling for firms to be transparent about their practices not only does not result in privacy being protected – in a number of cases, it can also backfire (acquisti, brandimarte and loewenstein, 2015). as can be summarized by using citation from a recent world health organization report reflecting on the sustainability of ai in healthcare “[the] pursuit of data, whether by government or companies, could undermine privacy and autonomy at the service of government or private surveillance or commercial profit. (p. 2, 2021)”. while the regulators have been indefatigably attempting to curb the power of the key industry-shaping players, their efforts have not been particularly effective (e.g., jacobides, bruncko and langen, 2020). to cite véliz, “digital technologies can only constitute progress if they serve the wellbeing of citizens and the flourishing of democracy” (2021, p. 11). many have discussed that a threat to privacy means a direct threat to democratic principles (e.g., gavison, 1980; simitis, 1987; regan, 1995; reiman, 1995; roessler, 2005; lever, 2006; goold, 2009; hughes, 2015; richards, 2015); however, nowadays, individuals as well as organizations have basically two options – get locked-in into the prevalent journal of business models (2022), vol. 10, no. 2, pp. 31-57 3939 business models or reconcile with their demise as a functioning part of the society. based on the ongoing developments, it is reasonable to assume that until creating superior value requires exploitation of personal information, doing so will remain to be a justifiable modus operandi. at the same time, as long as protecting privacy remains understood as contradicting the idea of creating value through leveraging network effects, modularity and complementarity, it will remain a niche endeavour of seemingly utopistic enthusiasts struggling to scale their ventures to the level of economically self-sufficient business cases. understanding privacy as a social value in 1945, after the end of world war ii, the united nations was founded. three years later, its general assembly set forth the universal declaration of human rights as a “common standard of achievements for all peoples and all nations.” in article 12, the declaration recognized that “no one shall be subjected to arbitrary interference with [her] privacy, family, home or correspondence, nor to attacks upon [her] honour and reputation” and that “everyone has the right to the protection of the law against such interference or attacks.” privacy thus became one of the fundamental human rights (united nations, 1945, 1948). although the core focus of this paper does not allow for discussing the full background of the originally predominant liberal perception of privacy rooted in warren and brandeis (1890), shaped by prosser (1960), westin (1967), or roessler (2005), it is critical to mention that the perception on privacy has always reflected the major societal changes (keulen and kroeze, 2018). notably, to illustrate, the diminution of printing regulations in 18th-century england resulted in the upheaval of newspapers and the rise of the first indications of celebrity culture. trading private life as a public commodity has led to further efforts to separate private and public personae, establishing the archetypal link between privacy and technology (fawcett, 2016). according to margulis (2003), the understanding of privacy has been significantly influenced by the work of altman. defining privacy as “the selective control of access to the self” (1975, p. 24), altman proposes that privacy has five properties. first, privacy is a temporal dynamic process of controlling the interpersonal boundaries, regulating interaction with others through determining how open or closed a person is in response to changes in their internal states and external conditions. second, there is a difference between the desired and actual levels of privacy. third, privacy is non-monotonic, meaning that the optimal level of privacy is achieved when the actual level of privacy corresponds to the desired, creating the possibility of too much privacy in cases when the actual level of privacy is higher than desired (e.g., social isolation) and the possibility of too little privacy in cases when the actual level of privacy is lower that desired (e.g., crowds). fourth, the nature of privacy is bi-directional and entail inputs from others (e.g., noise) and outputs to others (e.g., oral communication). finally, there are two levels of analysis at which privacy applies, i.e., individual level as well as group level. altman’s contribution rooted in projecting privacy as an inherently social process has challenged the liberal view on privacy revolving around autonomy as social detachment. as argued by mokrosinska (2018), “saying that privacy protects autonomy is to say that privacy also protects the practices in which the agent exercises her autonomy” (p. 123); therefore, one cannot discuss the privacy of an individual, without the privacy of her social relations. in addition, building on the relational perspective maintained by fried (1968) and rachels (1975), roessler and mokrosinska (2013) further argue that privacy not only regulates and facilitates the “social conditions of the meaningful exercise of autonomy” (p. 779) but that it also constitutes the social relations as a condition of autonomy. this, in essence, means that a threat to privacy is a threat to society as such. the focus on autonomy, control, and right of an individual has notably shifted toward a broader social value, not coincidentally in parallel with the development of some pivotal technologies, including the invention and commercial application of microprocessors in 1971 (intel, 2020), transition of the arpanet host protocol from ncp to tcp/ip (i.e., birth of internet) in 1983 (leiner, cerf, clark, kahn, journal of business models (2022), vol. 10, no. 2, pp. 31-57 4040 kleinrock, lynch, postel, roberts and wolff, 1997), and the launch of the world wide web in 1993 (cern, 2020). scholars, including friedrich (1971), simmel (1971), thomson (1975), scanlon (1975) and rachels (1975), started to recognize the social value of privacy and, to cite simitis (1987), who reviewed the concept of privacy in in the context of information society, it was necessary to move away from discussing privacy as a “tolerated contradiction” of the right to be let alone and the need to be informed, toward understanding it as a “constitutive element of a democratic society” (p. 732). along these lines, arguing that privacy is not only of value to individuals but to society in general as well, regan (1995) proposed three bases for the social importance of privacy. first, on the basis of mill (1863), gavison (1980), and data-evidenced public opinion, regan (1995) proposes that privacy is a common value as it is valued by all individuals and all individuals share some perceptions about it. second, reflecting on the importance of privacy to the democratic political process (e.g., targeting political messages through the exploitation of personal information), regan defines privacy as a public value. and third, considering that market forces and technology make it hard for an individual to have privacy without all individuals having similar minimum level of privacy, she regards privacy as a collective value. furthermore, drawing on coase’s paper “the lighthouse in economics” (1974), regan presents three key reasons why privacy can virtually be considered a “collective or public good” (regan, 2018, p. 59). firstly, due to the non-voluntary nature of record-keeping in various relationships, one cannot simply acquire or establish privacy to the level that is desired. the cost of unwillingness to take part in essential relationships (e.g., healthcare, education, or banking) for the sake of protecting privacy would lead to serious issues on the individual as well as societal level. secondly, market is an inefficient mechanism for supplying an optimal supply of privacy. regan states that privacy choices are often hidden transaction costs and considers privacy invasions to be the result of market failures. furthermore, she argues that in this matter, privacy is in fact similar to clean air or national defence. thirdly, the interrelatedness and complexity of the communication infrastructures increases the difficulty of dividing privacy. in other words, the design of the technology that enables the communication to take place determines the level of privacy possible to be achieved. as regan concludes, “if we did recognize the collective or public-good value of privacy, as well as the common and public value of privacy, those advocating privacy protections would have a stronger basis upon which to argue for its protection” (regan, 1995, p. 231). a related issue of fundamental importance is discussed by solove, who denies the possibility of articulating the meaning privacy at all, calling it a “concept of disarray” that among other things encompasses “freedom of thought, control over one’s body, solitude in one’s home, control over personal information, freedom from surveillance, protection of one’s reputation, and protection from searches and interrogations” (solove, 2008, p. 1). asserting that privacy “consists of many different yet related things” (solove, 2008, p. 9), he suggests that the traditional way of conceptualizing privacy should be abandoned for an approach based on wittgenstein’s philosophical idea of family resemblance, i.e., concepts drawing from a common pool of similar elements rather than having a single common characteristic. solove argues that the nature of privacy and its social value is pluralistic and highly dependent on its context (2015) and further points out a key discourse concerning the trade-off between privacy and security where “privacy often loses to security where it shouldn’t” (2011, p. 2). he proposes that people are encouraged to accept that in order to be more secure, they need to sacrifice their privacy. this presumption is also widely present in management literature. for instance, casadesusmasanell and hervas-drane emphasize that trading off privacy for use of various “information-sensitive” services are “defining business models and the role of privacy in online marketplaces” (2015, p. 229). building on this article, the authors recently developed a framework that helps firms that accumulate and exploit personal information to manage privacy, i.e., delivering the benefits while mitigating the threats (casadesus-masanell and hervas-drane, 2020). this firm-centric roadmap divides privacy landscape into four domains and corresponding external players: government (political environment); hackers (security environment); third parties (market environment); journal of business models (2022), vol. 10, no. 2, pp. 31-57 4141 and peers (social environment). they argue that on the one hand, disclosure allows companies to tap into new revenue streams and can be profitable and desirable when generating positive impact to consumers. on the other, it can be also harmful as it “generates distraction, distress, or detrimental consequences (such as higher prices)” (p. 8). the authors suggest that this “conflict of interest” can be resolved by compensating consumers for disclosure, limiting disclosure and sacrifice revenues, or in the worst case ceasing the disclosure altogether (p. 8). in this article, however, such logic is challenged. approaches built on refining the mechanisms of control and access only feed the faulty perception that giving up privacy is necessary (and sometimes even reasonable) if the consumers “name the price” for such a practice. not only that individuals assign markedly different values to the privacy of their data, their assumptions are also based on different factors, and the market to trade data in a fair way does not exist (acquisti, john and loewenstein, 2013). the rationale upon which such imbalanced deliberations stand is per se based on misleading views about the understanding of privacy protection, its costs, and benefits, which resultingly lead to unfair, inadequate, and unnecessarily skewed compromises at the expense social well-being (solove, 2011; acquisti et al., 2016). building our digital future on a principle that wrongdoing can be justified by a certain amount of money sets a dangerous precedent that one can buy a privilege to exploit others, hence undermines the very core idea of egalitarianism. people cannot avoid sharing data and information, the question is how to do that in a way that is sustainable for everyone – individual, society, as well as companies. privacy and contextual integrity protecting personal data against sharing can have both positive and negative effects on societal and individual welfare (acquisti et al., 2016). according to the highly influential and thoroughly developed theory of contextual integrity by nissenbaum (2010), protecting privacy is not about restricting the flow of information or ensuring the right to control it. opposing the ineffective procedural approaches (e.g., informed consent practice) rooted in the five fair information practice principles coined by us secretary ’s advisory committee on automated personal data systems (u.s. department of health, 1973), nissenbaum (2011) argues that “notice-and-consent, however refined, will [not] result in better privacy online as long as it remains a procedural mechanism divorced from the particularities of relevant online activity” (p. 35). she suggests that the pivotal rationale lies in making the flow of the personal information appropriate. the appropriate flow of information is, in essence, defined by its conformity with entrenched social norms that meet the context-relative expectations. therefore, when the flow of information conforms with the norms, it can be considered appropriate, hence privacy can be deemed preserved. in short, the information norms are constructed by three independent parameters whose value must be specified in order to allow for determining whether an information flow is appropriate, i.e., conforming the context-specific social domain. these parameters are actors (i.e., subject, sender, recipient), attributes (i.e., information types), and transmission principles. when identifying actors, it is necessary to identify their contextual roles “to the extent possible,” i.e., “capacities in which each are acting” (nissenbaum, 2010, p. 141). followingly, attributes describe the nature of information in question, i.e., “kind and degree of knowledge” (rachels, 1975, p. 71). finally, the parameter of transmission principle is embodied in particular terms and conditions under which the transfer of information should or should not happen (e.g., confidentiality). in order to operationalize the descriptive framework, nissenbaum further also offer a nine-step augmented contextual integrity decision heuristic adapted for situations where nonconforming practices outperform the entrenched norms (nissenbaum, 2010, pp. 181–182): 1. describe the new practice in terms of information flows. 2. identify the prevailing context. establish context at a familiar level of generality (e.g., “healthcare”) and identify potential impacts from contexts nested within it, such as “teaching hospital.” 3. identify information subjects, senders, and recipients. 4. identify transmission principles. journal of business models (2022), vol. 10, no. 2, pp. 31-57 4242 5. locate applicable entrenched informational norms and identify significant points of departure. 6. prima facie assessment 7. evaluation i … 8. evaluation ii … 9. on the basis of these findings, contextual integrity recommends in favor of or against systems or practices under study. the suitedness of this theory for the digital economy as well as its potential to guide further regulatory steps is often emphasized. this can be for instance evidenced by its influence on the privacy bill of rights presented by the obama administration (the white house, 2012), which recognized “respect for context,” as consumers’ “right to expect that companies will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data.” such a contested definition, however, opened door for various biased interpretations that could be misused for the benefit of the affected incumbents. in her response, nissenbaum (2015) argued that one of the key issues emerged from the related discourse is understanding context as business model. asserting that it “offers no prospect of advancement beyond the present state-of-affairs” as “its proponents seem to expect individuals and regulators to sign a blank check to businesses, in collection, use, and disclosure of information based on exigencies of individual businesses,” she suggests that respecting context as social domain equals “to respect contextual integrity, and, in turn, to respect information norms that promote general ethical and political values, as well as context specific ends, purposes, and values” (p. 848). although this argument is very much in line with the theories that focus on sustainability research, this article argues that for the contextual integrity to be suitable for viable and feasible application in a social domain where a transmission of data and information plays any role in the process of value proposition, creation, delivery, and capture, one necessarily needs to consider the use of the data and calibrate it with respect to the social domain as well. as previously mentioned, nowadays, we witness self-interested companies with varying degrees of multilateral nongeneric complementarities being interdependently embedded in non-hierarchical structures and jointly creating value through redefined business models adapted for exponential data-driven growth (jacobides et al., 2018; bogers, sims and west, 2019; iansiti and lakhani, 2020b). therefore, in the environment that consists of ecosystems, the assumption that the contextual role of an actor is bounded, defined, and fixed is no longer valid. an actor can have multiple roles in multiple contexts and can use the data and information in multiple, non-contextual ways. even data aggregates can ultimately result in far-reaching impacts on individuals as well as society. moreover, when actors a and b both individually transmit data and information in conformity with contextual integrity, the conformity cannot be guaranteed if these actors combine and/or accumulate the data and information, for instance for the purposes of value proposition, creation, delivery, and capture. based on that, it is necessary to argue that a business model which is based on transmission of data and information cannot be considered sustainable if it does not function in compliance with contextual integrity, while contextual integrity cannot be considered applicable in business environment unless the use of data is considered. this proposition is hence elaborated in the following section. mutual embeddedness of contextual integrity and business models for sustainability as manifested by the stream coined business models for sustainability (schaltegger et al., 2016), the relation between business models and sustainability has received an increasing amount of scholarly attention. with the almost exponential rise of information technologies, we have been experiencing since the 1970s, the issue of protecting privacy as a social value has increased in importance and popularity, especially in the areas of technology and philosophy. considering the current state of global affairs, the most suited approach to privacy protection can be considered the theory of contextual integrity (nissenbaum, 2010). synthesizing the two so far siloed but mutually relevant theories, this article posits journal of business models (2022), vol. 10, no. 2, pp. 31-57 4343 that businesses which protect privacy in a sustainable way have to treat privacy as a social value constituted by two key elements, i.e., appropriate flow of data and information and appropriate use of data and information. while appropriate flow of data and information is rigorously addressed by the theory of contextual integrity, the appropriate use of data and information by businesses can be addressed by the theory of business models for sustainability. the suggested synthesis is schematically demonstrated in figure 1. based on this assumption, there needs to be a close, proactive interplay between the prescriptive elements of the theories mentioned above. therefore, on the basis of the augmented contextual integrity decision heuristic and the business models for sustainability assessment questions stemming from the stakeholder value creation framework, a heuristic framework for privacy and sustainability in business models has been developed. this framework consists of a foundational dimension that facilitates mapping of the necessary indicators of privacy in business models for sustainability, followed by an assessment dimension comprising evaluation principles lined up in a continuum. the core purpose of this theoretical framework is to suggest a system of key considerations that needs to be in place when assessing whether a particular business practice sustainably protect privacy. the framework is illustrated in figure 2 and the considerations further elaborated in the following sections. figure 1: business models for sustainability and contextual integrity – schema of synthesis figure 2: heuristic framework for privacy and sustainability in business models journal of business models (2022), vol. 10, no. 2, pp. 31-57 4444 mapping dimension components actors in exploring the area of actors, first, there is a need to determine the boundaries of the context in question. furthermore, it is also important to explore its sub-contexts and their potential impacts on that very context (nissenbaum, 2010). companies operating in different contexts interact with a number of distinct stakeholders that play particular roles in value creation as well as in the transmission of data and information for doing so (adner, 2017; jacobides et al., 2018; bogers et al., 2019; iansiti and lakhani, 2020b). for that reason, it is not only necessary to distinguish between employees, customers, business partners, financial stakeholders, and societal stakeholders (and possibly also other relevant stakeholders) (stubbs and cocklin, 2008; aagaard and ritzén, 2020; freudenreich et al., 2020). it is equally important to determine what is the nature of the information in transmission (rachels, 1975) who is sending the data and information, who is the subject, and who is the recipient of the data and information (nissenbaum, 2010). most probably, the interests and expectations of these stakeholders might differ (freeman, pierce and dodd, 2000). thus, it is crucial to determine to what extent their interests are in collision or alignment and what the resulting implications or risks for the overall outcome could be (freeman, 2010; hörisch et al., 2014; patala, jalkala, keränen, väisänen, tuominen and soukka, 2016). relationships and data flows besides identifying the key actors, it is equally important to specify the flows of data and information that take place between them as the business model is being operationalized (nissenbaum, 2010). these flows should be in line with the core principles of the business models for sustainability, i.e., adjusted in a way that pro-actively contributes creating to social, economic, and potentially also ecological value (schaltegger et al., 2016). it is also required to determine the interests and vulnerabilities of the particular entities, who co-creates what value with whom, and who the recipient of the particular value is (freudenreich et al., 2020). furthermore, it is important to carefully consider the terms and conditions under which the transmission of data and information ought (and ought not) to happen (nissenbaum, 2010). this principle must be in line with the contextual norms of the particular social domain and clearly understood by all the stakeholders. it is necessary to understand that in order to protect privacy in a sustainable way, the business model must be by design compliant with contextual integrity. therefore, even if a person gives an explicit permission to the business to sell her data and information to a third party, if a social domain is not respected, the business should be considered neither sustainable nor protecting privacy. purpose and norms in order to be able to see whether a business model is protecting privacy, it is necessary to identify the entrenched norms of the particular social domain (nissenbaum, 2010). besides that, it must be explored whether the business model of interest provides sufficient foundations for the stakeholders to co-create value without violating these norms. since the value operations are being carried out in an interrelated manner, it is pivotal to determine the joint purpose of all the involved actors and whether the purpose is directed toward creating a sustainable value (bocken et al., 2014; lüdeke-freund and dembek 2017; schaltegger et al., 2017; upward and jones, 2015). importantly, the focus should be on the actual actions and real contributions toward sustainability. ultimately, it is necessary to explicitly specify what the joint purpose is and how it helps to achieve a particular sustainable development goal in a contextually appropriate way (nissenbaum, 2010, stubbs and cocklin 2008). assessment dimension components prima facie assessment after identifying the key components of the framework, it is necessary to evaluate the dynamic aspects of the business model, i.e., the operationalization of value-related activities in relation to the identified entrenched norms and joint purpose. the goal of the prima facie assessment is to determine whether the business model in question involves major discrepancies that would reveal its insufficiency straight away. this step involves making sure that all of the components are mapped to the fullest extent possible and determining whether they raise any issues by themselves. are the data and information flows journal of business models (2022), vol. 10, no. 2, pp. 31-57 4545 used for operationalization of the business model in line with entrenched norms? if not, does the business model have an innovation potential which could result in a significant sustainable improvement of the status quo? does the business model have the capacity to facilitate the relationships that jointly create value in line with sustainability principles? are the relationships ethical, respectful, and fair? if the business model is found to be in contradiction with the basic principles of the framework, it can be deemed unsatisfactory to comply with the idea of sustainable privacy protection in business as such. finally, it is also crucial to consider that business models designed or innovated to exploit a new technology, i.e., ai, might operate in an environment where no norms have been established yet. in such cases, the business model cannot be rejected prima facie, and can, therefore, be subjected to the next step of evaluation. macro evaluation the second step of the assessment part is evaluation of social, economic, and environmental macro factors affected by the business model. besides considering whether the business model could harm autonomy and freedom (i.e., what is its effect on power structures within society, what are its implications for social hierarchy, justice, fairness, democracy, equality, and other factors pointed out by the theory of contextual integrity itself), there is also a need to consider whether the actors can actually ethically exploit the appropriate flows of data and information to propose, create, deliver, and capture value with and for stakeholders while being economically prosperous without harming the environment (or even pro-actively contribute to its recovery). contextual evaluation after determining how the business model impacts the environment from the higher perspective, its concrete impacts on the particular context within which it operates should be further determined. furthermore, as the types of value that need to be proposed vary across the spectrum of stakeholders within the context, it is important to find out whether the proposition reflects the diversity of stakeholders sufficiently. essentially, this phase of evaluation is set to ascertain whether the business model exploits data flows in a way that impacts the ecosystem of actors in a way that threatens the sustainability of the context per se. decision and recommendation when approaching the final phase of this high-perspective heuristic framework, it should be possible to carry out a fair judgement as of whether a particular business model protects privacy while operating in line with the core principles of sustainable value proposition, creation, delivery, and capture. if the business model is not found suitable, it is important to implement changes and iterate until appropriate flow and use of data and information is achieved. conclusion and discussion this article posits that in order to operate sustainably, businesses playing any role in proposing, creating, delivering, or capturing value through transmission of data and information must approach privacy as a social value. furthermore, they also need to protect it by ensuring that the flow and use of data and information across their ecosystems is appropriate. this means that the flow of data and information must be in line with the theory of contextual integrity (nissenbaum, 2010), while the use of data and information must be in line with the theory of business models for sustainability (schaltegger et al., 2016). while synthesizing these two rigorously developed streams of research, this article proposes a heuristic framework for privacy and sustainability in business models, which prescriptively operationalizes the theories in line with the augmented contextual integrity decision heuristic (nissenbaum, 2010) and the stakeholder value creation framework (freudenreich et al., 2020). firstly, this article unfolds the relevance of privacy protection for the stream of business model research directed toward sustainable development in a way that is theoretically rigorous, complementary with the stakeholder theory, and reflecting the impact of technology on business. this contributes especially to addressing the need for further research on specific sustainable value creation barriers identified by journal of business models (2022), vol. 10, no. 2, pp. 31-57 4646 lüdeke‐freund (2020), as well as extends the theory of business models for sustainability (schaltegger et al., 2016; freudenreich et al., 2020). secondly, the synthesis contributes to the contemporary debate on privacy as a social value, mainly through identifying theoretically thorough avenue for adapting the theory of contextual integrity (nissenbaum, 2010) to a social domain where value proposition, creation, delivery, and capture with and for multilaterally interdependent stakeholders involves transmission of data and information. considering the foresight of increasing dependency on data processing, the success of cultivating the underlying fabric of our society is directly related to the effectivity of privacy protection mechanisms. hence, from the perspective of future research, the developed framework can be especially useful for constructing narratives of how the inevitable technological progress can be leveraged in ensuring ultimate equity and inclusivity in the digitalized world. this article ultimately posits that the future of democracy in digital society leans upon the efforts to move beyond the implicit tolerance of the chokehold imposed by the omnipresent centralization (cf. hensmans, 2021). and despite the obvious drawback residing in the lack of empirical perspective, it may be suggested that the presented contributions can be also reflected in managerial practice. first of all, based on its prescriptive nature, it shall be implied that professionals can use the heuristic framework for privacy and sustainability in business models to evaluate what elements in their business model portfolios have to be amended in order for their company to sustainably protect privacy. this proposition differs from the standalone theories especially by the fact that it postulates the mutual relationship between privacy protection and sustainability. in practice, this means that a business model that involves transmission of data and information cannot be considered sustainable unless it protects privacy. besides creating a stepping-stone for addressing the issue of sustainable privacy protection holistically, this synthesis also entails a number of implications. from a theoretical angle, this contribution proposes a revision of the theory of contextual integrity by considering not only the flow of the data and information but also their use. this article addresses the use by considering how value is proposed, created, delivered, and captured by an organization and its stakeholders. however, the unprecedented data-processing operations are not detectable only in cases when actors are involved in business activities. for that reason, it should be explored how the use of data and information can be addressed in cases of various backgrounds. finally, this synthesis introduces the privacy research stream to the stream of business model literature and argues that under current circumstances escalated by the covid-19 pandemic, there is a need for a genuine interdisciplinarity – one that builds on stable theoretical foundations rooted in diverse research domains. this contribution is to be considered offering a vision delineating and emphasizing the privacy protection aspect for future sustainable transitions. and although this meta-perspective suffices the needs of an architect drawing up a blueprint (as mentioned in the research design section), it does not allow for diving deep into the particularities of the constituent fragments and implications. for that reason, the synthesis should not be challenged only theoretically but also through further empirical research, possibly investigating how businesses actually attempt to sustainably protect privacy, how privacy-centric focus impacts the business model development of companies in different ecosystems, and what role privacy plays in the business models of incumbents. furthermore, there is a vast research potential in exploring how can companies in diverse ecosystems co-create and co-capture value through sharing data and information without compromising human-centricity. similarly, from a different angle, a promising research avenue emerges within the realm of start-ups and entrepreneurs that put privacy protection and social values as a keystone of their existence. based on the proposition that privacy can be only protected when a business model is economically feasible, it is important to explore how can such entities become financially stable. what are the drivers and challenges of their efforts? what are the characteristics of their ecosystems and their relationship with the previously illustrated “oligopolies”? how do they interact with incumbents when entering established ecosystems? these questions journal of business models (2022), vol. 10, no. 2, pp. 31-57 4747 need to be explored particularly in industries where privacy protection is outweighed by a higher cause goal of immediate importance and effect, such as healthcare (e.g., grundy, chiu, held, continella, bero and holz, 2019; panch, mattie and celi, 2019; sharma and bashir, 2020; rezaei, jafari-sadeghi, cao and mahdiraji, 2021). when conducted comprehensively, by understanding the social domain as a context, these studies may have an immensely informative effect on regulations – because improving the state of society by regulating ai-based ecosystem actors using rules and sanctions that require them to revise their consent has no chance to succeed. journal of business models (2022), vol. 10, no. 2, pp. 31-57 4848 references aagaard, a. (2019). sustainable business models—innovation, implementation and success. london: palgrave macmillan. aagaard, a. and rezac, f. (2022). governing the interplay of inter-organizational relationship mechanisms in open innovation projects across ecosystems. industrial marketing management, 105, 131–146. aagaard, a. and ritzén, s. (2020). the critical aspects of co‐creating and co‐capturing sustainable value in service business models. creativity and innovation management, 29(2), 292–302. acquisti, a. john, l. and loewenstein, g. (2013). what is privacy worth? journal of legal studies, 42(2), 249274. acquisti, a., brandimarte, l. and loewenstein, g. (2015). privacy and human behavior in the age of information. science, 347(6221), 509–514. acquisti, a., taylor, c. r. and wagman, l. (2016). the economics of privacy. journal of economic literature, 52(2), 1–64. adner, r. (2017). ecosystem as structure: an actionable construct for strategy. journal of management, 43(1), 39–58. altman, i. (1975). the environment and social behavior: privacy, personal space, territory, and crowding. monterey: brooks/cole. amit, r. and zott, c. (2012). creating value through business model innovation. mit sloan management review, 53(3), 41 –49. astley, w. g. and fombrun, c. j. (1983). collective strategy: social ecology of organizational environments. academy of management review, 8(4), 576-587. bansal, g., zahedi, f. and gefen, d. (2015). the role of privacy assurance mechanisms in building trust and the moderating role of privacy concern. european journal of information systems 24, 624–644. beltramello, a., haie-fayle, l. and pilat, d. (2013). why new business models matter for green growth. oecd green growth papers, 2013-01, oecd publishing, paris. berinato, s. (2018). stop thinking about consent: it isn’t possible and it isn’t right. harvard business school cases, 2965. retrieved from harvard business review: https://hbr.org/2018/09/stop-thinking-about-consent-it-isnt-possible-and-it-isnt-right bocken, n., short, s., rana, p. and evans, s. (2014). a literature and practice review to develop sustainable business model archetypes. journal of cleaner production, 65, 42–56. bogers, m., sims, j. and west, j. (2019). what is an ecosystem? incorporating 25 years of ecosystem research. academy of management proceedings, 2019(1), 1–29. journal of business models (2022), vol. 10, no. 2, pp. 31-57 4949 boons, f. and lüdeke-freund, f. (2013). business models for sustainable innovation: state-of-the-art and steps towards a research agenda. journal of cleaner production, 45, 9–19. boons, f., montalvo, c., quist, j. and wagner, m. (2013). sustainable innovation, business models and economic performance: an overview. journal of cleaner production, 45, 1–8. brem, a. and puente-díaz, r. (2020). are you acting sustainably in your daily practice? introduction of the fours model of sustainability. journal of cleaner production, 267, 122074. burt, a. (2018, october 23). why privacy regulations don’t always do what they ’re meant to. retrieved from harvard business review: https://hbr.org/2018/10/why-privacy-regulations-dont-always-do-what-theyremeant-to burt, a. (2019, january 03). privacy and cybersecurity are converging. here’s why that matters for people and for companies. retrieved from harvard business review: https://hbr.org/2019/01/privacy-and-cybersecurityare-converging-heres-why-that-matters-for-people-and-for-companies caputo, a., pizzi, s., pellegrini, m.m. and dabić, m. (2021). digitalization and business models: where are we going? a science map of the field. journal of business research, 123(2021), 489–501. casadesus-masanell, r. and hervas-drane, a. (2020). strategies for managing the privacy landscape. long range planning, 53(4), 101949. casadesus-masanell, r. and hervas-drane, a. (2015). competing with privacy. management science, 61(1), 229– 246. cecere, g., le guel, f., soulié, n. (2015). perceived internet privacy concerns on social networks in europe. technological forecasting and social change, 96, 277–287. cern. (2020). the birth of the web. retrieved from https://home.cern/science/computing/birth-web chesbrough, h. (2010). business model innovation: opportunities and barriers. long range planning, 43(2–3), 354–363. cisco. (2020, march 9). cisco annual internet report (2018–2023) white paper. retrieved from https:// www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/annual-internet-report/white-paperc11-741490.html cloarec, j. (2020). the personalization–privacy paradox in the attention economy. technological forecasting and social change, 161, 120299. coase, r. h. (1974). the lighthouse in economics. journal of law and economics, 17(2), 357–376. cochrane, k. (2018, june 13). to regain consumers’ trust, marketers need transparent data practices. retrieved from harvard business review: https://hbr.org/2018/06/to-regain-consumers-trust-marketers-need-transparent-data-practices journal of business models (2022), vol. 10, no. 2, pp. 31-57 5050 cropanzano, r. (2009). writing nonempirical articles for journal of management: general thoughts and suggestions. journal of management, 35(6), 1304–1311. cusumano, m. a., gawer, a. and yoffie, d. b. (2021, january 15). social media companies should self-regulate. now. retrieved from harvard business review: https://hbr.org/2021/01/social-media-companies-shouldself-regulate-now dasilva, c. m. and trkman, p. (2014). business model: what it is and what it is not. long range planning, 47(6), 379–389. desai, v., fountaine, t. and rowshankish, k. (2022). a better way to put your data to work. harvard business review, 100(4), 100–107. elder, l. and paul, r. (2009). a glossary of critical thinking terms of concepts: the critical analytic vocabulary of the english language. dillon beach, ca: foundation for critical thinking. elkington, j. (2004). enter the triple bottom line. in a. henriques and j. richardson (eds.), the triple bottom line: does it all add up? (pp. 1–16). oxon: earthscan. esteve, a. (2017). the business of personal data: google, facebook, and privacy issues in the eu and the usa. international data privacy law, 7(1), 36–47. fawcett, j. (2016). spectacular disappearances: celebrity and privacy, 1696–1801. ann arbor, mi: university of michigan press. freeman, r. e., pierce, j. and dodd, r. h. (2000). environmentalism and the new logic of business: how firms can be profitable and leave our children a living planet. oxford: oxford university press. freeman, e. r. (2010). managing for stakeholders: trade-offs or value creation. journal of business ethics, 96, 7–9. freudenreich, b., lüdeke-freund, f. and schaltegger, s. (2020). a stakeholder theory perspective on business models: value creation for sustainability. journal of business ethics, 166, 3–18. fried, c. (1968). privacy. the yale, 77(3), 475–493. friedrich, c. j. (1971). secrecy versus privacy: the democratic dilemma. in r. j. pennock and j. w. chapman (eds.), privacy and personality (pp. 105–120). new york: routledge. fuller, j., jacobides, m. g. and reeves, m. (2019). j. fuller, m.g. myths and realities of ecosystems, mit sloan management review, 60(3), 1–9. gavison, r. (1980). privacy and the limits of law. the yale law journal, 89(3), 421–471. gilson, l. l. and goldberg, c. b. (2015). editors’ comment: so, what is a conceptual paper? group and organization management, 40(2), 127–130. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5151 gnyawali, d. r. and charleton, t. r. (2018). nuances in the interplay of competition and cooperation: towards a theory of coopetition. journal of management, 44(7), 2511–2534. goold, b. (2009). surveillance and the political value of privacy. amsterdam law forum, 1(2), 3–6. grundy q., chiu k., held f., continella, a., bero l., holz r. (2019). data sharing practices of medicines related apps and the mobile ecosystem: traffic, content, and network analysis. bmj, 364, l920. gstrein, o. j. and beaulieu, a. (2022). how to protect privacy in a datafied society? a presentation of multiple legal and conceptual approaches. philosophy & technology, 3(2022). hagiu, a. and wright, j. (2020). when data creates competitive advantage. harvard business review, 98(1), 94–101. hensmans, m. (2021). exploring the dark and bright sides of internet democracy: ethos-reversing and ethosrenewing digital transformation. technological forecasting and social change, 168, 120777. hirschheim, r. (2008). some guidelines for the critical reviewing of conceptual papers. journal of the association for information systems, 9(8), 432–441. hörisch, j., freeman, e. and schaltegger, s. (2014). applying stakeholder theory in sustainability management: links, similarities, dissimilarities, and a conceptual framework. organization and environment, 27(4), 328–346. hughes, k. (2015). the social value of privacy, the value of privacy to society and human rights discourse. in b. roessler and d. m. mokrosinska (eds.), social dimensions of privacy: interdisciplinary perspectives (pp. 403– 418). cambridge: cambridge university press. iansiti, m. and lakhani, k. r. (2014). digital ubiquity: how connections, sensors, and data are revolutionizing business. harvard business review, 92, 90–99. iansiti, m. and lakhani, k. r. (2020a). competing in the age of ai: how machine intelligence changes the rules of business. harvard business review, 98(1), 60–67. iansiti, m. and lakhani, k. r. (2020b). competing in the age of ai: strategy and leadership when algorithms and networks run the world. boston: harvard business review press. iansiti, m. and levinen, r. (2004). strategy as ecology. harvard business review, 82, 68–78. idc. (2020, may 8). idc’s global datasphere forecast shows continued steady growth in the creation and consumption of data. retrieved from https://www.idc.com/getdoc.jsp?containerid=prus46286020 intel. (2020). announcing a new era of integrated electronics. retrieved from https://www.intel.com/content/ www/us/en/history/virtual-vault/articles/the-intel 4004.html jaakkola, e. (2020). designing conceptual articles: four approaches. ams review, 10, 18–26. jacobides, m. g. (2019). in the ecosystem economy, what’s your strategy? harvard business review, 97(5), 128–137. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5252 jacobides, m. g., bruncko, m. and langen, r. (2020, december 20). regulating big tech in europe: why, so what, and how understanding their business models and ecosystems can make a difference. retrieved from https://www.evolutionltd.net/post/regulating-big-tech-in-europe jacobides, m. g., cennamo, c. and gawer, a. (2018). towards a theory of ecosystems. strategic management journal, 39(8), 2255–2276. johnson, m. w., christensen, c. m. and kagermann, h. (2008). reinventing your business model. harvard business review, 87, 52–60. keulen, s. and kroeze, r. (2018). privacy from a historical perspective. in b. van der sloot and a. de groot (eds.), the handbook of privacy studies (pp. 21–56). amsterdam, netherlands: amsterdam university press b.v. kohtamäki, m., parida, v., oghazi, h., gebauer, h. and baines, t. (2019). digital servitization business models in ecosystems: a theory of the firm. journal of business research, 104, 380–392. leiner, b., cerf, v., clark, d. d., kahn, r., kleinrock, l., lynch, d., postel, j., roberts, l. g. and wolff, s. (1997). brief history of the internet. retrieved from https://www.internetsociety.org/wp-content/uploads/2017/09/ isoc-history-of-the-internet_1997.pdf lever, a. (2006). privacy rights and democracy: a contradiction in terms? contemporary political theory, 5(2), 142–162. li, t. and unger, t. (2012). willing to pay for quality personalization? trade-off between quality and privacy. european journal of information systems, 21(6), 621–642. lüdeke‐freund, f. (2020). sustainable entrepreneurship, innovation and business models: integrative framework and propositions for future research. business strategy and the environment, 29(2), 665–681. lüdeke-freund, f. and dembek, k. (2017). sustainable business model research and practice: emerging field or passing fancy? journal of cleaner production, 168, 1668–1678. lüdeke-freund, f., rauter, r., pedersen, e. r. and nielsen, c. (2020). sustainable value creation through business models: the what, the who and the how. journal of business models, 8(3), 62–90. lukka, k. and vinnari, e. (2014). domain theory and method theory in management accounting research. accounting, auditing and accountability journal, 27(8), 1308–1338. macinnis, d. (2004). where have all the papers gone? reflections on the decline of conceptual articles. association for consumer research newsletter, spring, 1–3. macinnis, d. j. (2011). a framework for conceptual contributions in marketing. journal of marketing, 75, 136–154. margulis, s. t. (2003). on the status and contribution of westin’s and altman’s theories of privacy. journal of social issues, 59(2), 411–429. martin, n., matt, c., niebel, c. and blind, k. (2019). how data protection regulation affects startup innovation. information systems frontier, 21, 1307–1324. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5353 massa, l., tucci, c. l. and afuah, a. (2017). a critical assessment of business model research. academy of management annals, 11(1), 73–104. mcafee, a. and brynjolfsson, e. (2012). big data: the management revolution. harvard business review, 90(10), 60–68. mill, j. (1863). on liberty (2nd ed.). boston, ma: ticknor and fields. mokrosinska, d. (2018). privacy and autonomy: on some misconceptions concerning the political dimensions of privacy. law and philosophy, 37, 117–143. montes, g.a., goertzel, b. (2019). distributed, decentralized, and democratized artificial intelligence. technological forecasting and social change, 141, 354–358. moore, j. f. (1993). predators and prey: a new ecology of competition. harvard business review, 71(3), 75–86. nissenbaum, h. (2010). privacy in context: technology, policy, and the integrity of social life. stanford: stanford university press. nissenbaum, h. (2011). a contextual approach to privacy online. dædalus, fall, 32–48. nissenbaum, h. (2015). respecting context to protect privacy: why meaning matters. science and engineering ethics, 24(24), 2018. oecd. (2020). oecd digital economy outlook 2020. paris: oecd publishing. panch, t., mattie, h. and celi, l.a. the “inconvenient truth” about ai in healthcare. npj digital medicine, 2(77). patala, s., jalkala, a., keränen, j., väisänen, s., tuominen, v. and soukka, r. (2016). sustainable value propositions: framework and implications for technology suppliers. industrial marketing management, 59, 144–156. porter, m. and heppelmann, j. (2014). how smart, connected products are transforming competition. harvard business review, 92, 64–88. porter, m. and heppelmann, j. (2015). how smart, connected products are transforming companies. harvard business review, 93, 96–114. prosser, w. l. (1960). privacy. california law review, 48(3), 383–423. rachels, j. (1975). why is privacy important. philosophy and public affairs, 4(4), 323–333. regan, p. (2018). legislating privacy: technology, social values, and public policy. in b. van der sloot and a. de groot (eds.), the handbook of privacy studies (pp. 57–61). amsterdam: amsterdam university press. regan, p. m. (1995). legislating privacy: technology, social values, and public policy. chapel hill: the university of north carolina press. reiman, j. (1995). driving to the panopticon: a philosophical exploration of the risks to privacy posed by the highway technology of the future. santa clara high technology law journal, 11(1), 27–44. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5454 reinsel, d., rydning, j. and gantz, j. f. (2020). worldwide global datasphere forecast, 2020–2024: the covid-19 data bump and the future of data growth. needham, ma: idc. rezaei, m., jafari-sadeghi, v., cao, d., mahdiraji, h.a. (2021). key indicators of ethical challenges in digital healthcare: a combined delphi exploration and confirmative factor analysis approach with evidence from khorasan province in iran. technological forecasting and social change, 167, 120724. ribeiro-navarrete, s., saura, j.r. and palacios-marqués, d. (2021). towards a new era of mass data collection: assessing pandemic surveillance technologies to preserve user privacy. technological forecasting and social change, 167, 120681. richards, n. (2015). intellectual privacy: rethinking civil liberties in the digital age. oxford: oxford university press. rigby, d. k. (2014). digital-physical mashups. harvard business review, 92(9), 84–92. roessler, b. (2005). the value of privacy. cambridge: polity press. roessler, b. and mokrosinska, d. (2013). privacy and social interaction. philosophy and social criticism, 39(8), 771–791. salomone, p. r. (1993). trade secrets for crafting a conceptual article. journal of counseling and development, 72(1), 73–76. scanlon, t. (1975). thomson on privacy. philosophy and public affairs, 4(4), 315–322. schaltegger, s., hansen, e. g. and lüdeke-freund, f. (2016). business models for sustainability: origins, present research, and future avenues. organization and environment, 29(1), 3–10. schaltegger, s., hörisch, j. and freeman, r. e. (2017). business cases for sustainability: a stakeholder theory perspective. organization and environment, 32(5), 191-212. schneider, s. and clauß, t. (2019). business models for sustainability: choices and consequences. organization and environment, 33(3), 384–407. schwab, k. (2016). the fourth industrial revolution: what it means and how to respond. london: portfolio. senyo, p. k., liu, k. and effah, j. (2019). digital business ecosystem: literature review and a framework for future research. international journal of information management, 47, 52–64. sharma, t. and bashir, m. (2020). use of apps in the covid-19 response and the loss of privacy protection. nature medicine, 26, 1165–1167. shipilov, a. and gawer, a. (2019). integrating research on inter-organizational networks and ecosystems. academy of management annals, 14(1), 92, 121. simitis, s. (1987). reviewing privacy in an information society. university of pennsylvania law review, 135, 707–746. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5555 simmel, a. (1971). privacy is not an isolated freedom. in j. r. pennock and j. w. chapman (eds.), privacy and personality (pp. 71–87). new york: routledge. solove, d. j. (2008). understanding privacy. london: harvard university press. solove, d. j. (2011). nothing to hide: the false tradeoff between privacy and security. london: yale university press. cambridge: cambridge university press. solove, d. j. (2020). the myth of privacy paradox. the george washington law review, 89(1), pp. 1-51. soni, g., mangla, s.k., singh, p., dey, b.l., dora, m. (2021). technological interventions in social business: mapping current research and establishing future research agenda. technological forecasting and social change, 169, 120818. spieth, p., schneckenberg, d. and ricart, j. e. (2014). business model innovation—state of the art and future challenges for the field. r&d management, 44(3), 237–247. stubbs, w. and cocklin, c. (2008). conceptualizing a “sustainability business model.” organization and environment, 21(2), 103–127. teece, d. j. (1986). profiting from technological innovation: implications for integration, collaboration, licensing and public policy. research policy, 15(6), 285–305. teece, d. j. (2010). business models, business strategy and innovation. long range planning, 43(2–3), 172–194. teece, d. j. (2018). business models and dynamic capabilities. long range planning, 51(1), 40–49. the white house. (2012). consumer data privacy in a networked world. washington, d.c.: a framework for protecting privacy and promoting innovation in the global digital economy. thomson, j. j. (1975). the right to privacy. philosophy and public affairs, 4(4), 295–314. u.s. department of health. (1973). records, computers and the rights of citizens. washington, d.c.: u.s. department of health and human services. united nations. (1945, june 26). charter of the united nations. retrieved from https://www.un.org/en/charter-united-nations/index.html united nations. (1948, december 10). universal declaration of human rights. retrieved from https://www. un.org/en/universal-declaration-human-rights/index.html upward, a. and jones, p. (2015). an ontology for strongly sustainable business models: defining an enterprise framework compatible with natural and social science. organization and environment, 29(1), 97–123. véliz, c. (2021). privacy and digital ethics after the pandemic. nature electronics 4, 10-11. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5656 wang, r. (2013, june 13). beware trading privacy for convenience. retrieved from harvard business review: https://hbr.org/2013/06/beware-trading-privacy-for-con warren, s. and brandeis, l. (1890). the right to privacy. harvard law review, 4(5), 193–220. wells, p. (2013). business models for sustainability. cheltenham: edward edgar. west, s. m. (2017). data capitalism: redefining the logics of surveillance and privacy. business and society, 58(1), 20–41. westerman, g. and bonnet, d. (2015). revamping your business through digital transformation. mit sloan management review, 3(56), 2–5. westin, a. f. (1967). privacy and freedom. new york: atheneum. world commission on environmental development. (1987). our common future. oxford, england: oxford university press. world health organization. (2021). ethics and governance of artificial intelligence for health: who guidance. geneva: who. world economic forum. (2021). the global risks report 2021. retrieved from http://www3.weforum.org/docs/ wef_the_global_risks_report_2021.pdf zott, c., amit, r. and massa, l. (2011). the business model: recent developments and future research. journal of management, 37(4), 1019–1042. journal of business models (2022), vol. 10, no. 2, pp. 31-57 5757 about the authors fabien rezac is a phd fellow at the interdisciplinary centre for digital business development, department business development and technology, aarhus university, denmark, and a recognised dphil student at the saïd business school, university of oxford, uk. he holds an award-winning msc degree in economics and business administration, has consultancy experience from deloitte, managerial experience from the public as well as non-profit sector, and conducted research for european commission. in his research, he focuses on exploring the dynamics of management and business development in relation to technology and sustainability. journal of business models (2013), vol. 1, no. 1 pp. 61-84 61 do we need one business model definition? anders bille jensen1 abstract purpose: different applications and conceptualizations of the business model concept have created discussions on what it actually is. the purpose of this paper is twofold: 1) to establish an overview of current usages of the business model construct, its nature and role in theory building, and – building on this 2) to derive guiding principles applicable for achieving better clarity of the business model construct in future research. design/methodology: variances in roles, nature and forms of current and diverse applications of the business model concept are discussed from a vertical and a horizontal dimension. based on the analysis, key issues for achieving construct clarity are proposed. findings: this paper 1) demonstrates that there are at least three levels of understanding business models (general, conceptual and as a research construct), 2) that the business model construct is heavily influenced by the research view, 3) that the establishment of specific constructs can be informed by the existing literature, and 4) discusses how the emergent business model concept can be strengthened. implications different and complementary business model perspectives may provide a better understanding and reflection of reality than a single, general and detailed definition. for specific applications, definitions need to explicitly clarify the particular role, nature and boundaries of the business model. originality/value the paper provides a methodological contribution in the discussion on business model definitions by adding clarity on the value of the multi-levels and multi-views of current understandings as well as contributing on how to create specific constructs. keywords: business model, strategy, value capture, value creation, innovation, definition 1: university of southern denmark, department of leadership and corporate strategy, sdr. stationsvej 28b, 4200 slagelse, email: abj@sdu.dk please cite this paper as: jensen, a.b. 2014, ‘do we need one business model definition?’, journal of business models, vol. 1, no. 1, pp. 61-84. mailto:abj@sdu.dk journal of business models (2013), vol. 1, no. 1 pp. 61-84 62 introduction what is a business model? this question is of relevance for anyone considering applying the business model construct or just reading the diverse contributions in the field. although the business model idea addresses general, fundamental and familiar challenges of strategic nature (sandberg, 2002; verstraete and jouison-lafitte, 2011), there is still discussion about what business models are, and, consequently, their usefulness (most recently arend, 2013; and a direct response, zott and amit, 2013). the business model concept was initially important for understanding e-business (amit and zott, 2001; zott et al., 2011; wirtz et al., 2010) and commercialization of technology and innovation (chesbrough, 2006, chesbrough and rosenbloom, 2002, johnson, 2010). however, porter (2001) described the unclear nature of the business model as an “invitation for faulty thinking and delusion” as he analyzed unhealthy business practices rated to the internet. on the other hand, pohle and chapman (2006) found that business model innovation, i.e. defined as innovation incorporating both product and service generated comparatively better returns than isolated initiatives, which has been partly supported by aspara et al. (2010). by tracking the application of the business model term in the literature (ghaziani and ventresca, 2005), it has been possible to see how it has been diffusing into new communities during the internet expansion in the 90ties with new meanings related to value creation (and delivery). at the same time, however, older meanings of the business model co-existed in old environments, albeit often in tacit versions. in this way the term business model has become a keyword, with a global meaning as well as local meanings. business models appear to be a complex and multifaceted phenomena which “integrates a variety of academic and functional disciplines, gaining prominence in none” (chesbrough and rosenbloom, 2002), and shafer et al. (2005) talked about an identity crisis for the business model. others claimed that the confusion resulted in the lack of progress of business model research. this wave of criticism apparently culminated around 201011. in a review, schneider and spieth (2012) summarized the situation as: “academic research on the topic is blamed to lag behind practice and in particular to lack formalization and structure (zott et al.; 2011, casadesus-masanell and ricart, 2010; plé et al., 2010). furthermore, the concept is argued to miss sufficient theoretical grounding (sahu and marko, 2007; morris et al., 2005; teece, 2010; george and bock, 2011; nenonen and storbacka, 2010) and to be based on a multitude of differing and inconsistent theoretical approaches (camisón and villar-lópez, 2010; zott et al., 2011; casadesus-masanell and ricart, 2010)”. it has recently been questioned if some of the energy going into this definition discussion may have been applied for more useful purposes (baden-fuller and haefliger, 2013). some of the above and other academics have explored the background and implications of the differences in business model understandings. this approach seems to be in line with the multidisciplinary presence and the inclusive nature of the business model field, pointing in the direction of seeing business models as a boundary object playing an important sense-making and sense-creating role for various stakeholders, despite their individual approaches and understandings of the term. empirically, this has been addressed by verstraete and jouison-lafitte (2011) and doganova and eyquem-renault (2009) seeing business model as important in the mobilization of resources in the entrepreneurial process. further, verstraete and jouison-lafitte (2011) propose a conventionalist approach arguing that business model definitions – despite the variety in terms and language addresses the same type of problems which is why there is some homogeneity of the concept. on a broader scale, while addressing the criticism in their review, zott et al. (2011) also found emergent common ground in the business model literature. it has also been suggested that business model research exhibits the features of “progressive science” by lakatos (lecocq et al., 2010) in which science develops as a series of progressive research programmes. but this raises the general critical questions about how we identify what the research programmes are and in particular when and how we identify “progressive shifts” in problems. this perspective, however, emphasize that putting frustrations aside – these discussions are related to how science learns and build knowledge in the business model field. journal of business models (2013), vol. 1, no. 1 pp. 61-84 63 a central thesis of this paper is that much of the discussion and confusion is due to lack of clarity of more fundamental aspects in the different applications of the concept. in general definitions assist us in understanding the topic of interest – i.e. for classification and guidance of activities. but definitions (the content) and how we arrive at them (the process of defining) is complex. first of all, there is the actual content and what we accept as a general definition. several reviews have addressed this in different ways, but the result is often consolidating the findings, restating the problem, and providing no real solution. secondly, the actual process of defining depends on the audience and how definitions make sense and contribute to learning. there are substantial, traditional issues of different scientific and methodological approaches between different areas of business research, which is often neglected and not discussed in the calls for definitions. in addition it is rarely discussed if it is necessary, useful and possible to have a general definition accommodating and transcending different disciplines, their paradigms and traditions. understanding the nature of the business model concept has important implications for researchers and practitioners in 1. establishing and maintaining an overview of its meaning and 2. for dialogues about and positioning of their research, both within and between different communities and disciplines, and 3. in theory building, as this depends on constructs and the ability to establish ties between these constructs. as already stated, there have been many attempts to define business models. it is beyond the scope of this paper to add new dimensions to actual definitions. however, there have only been few – if any – contributions on how we can arrive at definitions which simultaneously capture the broad meaning as well as the focus for specific applications which may indicate that the role, the process and context of definitions, may deserve more attention than what has been the case in the current literature, especially as the business model field is cross-disciplinary. the purpose of this paper is therefore twofold: 1. to establish an overview of current usages of the business model construct, and in particular its nature and role in theory building, and – building on this – 2. to derive guiding principles applicable for achieving better clarity of the business model construct in future research. some of the fundamental questions we explore are: how can we apprehend, measure and discuss a construct with multiple understandings? how precise definitions do we need and when? the paper proceeds as follows: first part presents the methodology and key terms. second part explores the central understanding of the business model from different levels and views, trying to understand its role, nature and format. finally, this understanding is being discussed in relation to the need for a definition in specific contexts. methodology and key terms this paper suggests that business model understandings can and must be explicated for specific purposes of knowledge creation, including the communication with different audiences. the paper takes an eclectic and pragmatic approach as it builds on existing contributions, and it does not, in general, claim that one view or definition is superior compared to another. to support this view and to provide some pragmatic guidance as to determine what type of definition is needed in different situations, it is proposed that business model definitions can be seen as a semantic field which can be described in a vertical as well as a horizontal dimension: first part examines the vertical, hierarchical level of understandings with different degrees of abstraction which may be relevant for different purposes and audiences, by “unpacking” the literal meaning of business models. this is followed by a (brief) review of the literature and the apparent common ground which paves the way for a conceptual definition. this part also proposes the existence of three levels of understandings (as a general reference, as a conceptual definition and as a specific construct). journal of business models (2013), vol. 1, no. 1 pp. 61-84 64 part two provides a horizontal dimension, i.e. different views, of business model understandings and their role in theory building. the analysis is based on contrasting business model understandings, sometimes in a stylized way, according to dimensions of classic characterization of scientific work, such as inductive versus deductive, nomothetic versus ideographic etc. contributions were selected from databases, conferences, consulting reports, and books based on the key word “business models”. for the contrasting analysis, diversity of the contributions was important. the number of papers analyzed was determined by the saturation principle, i.e. the process was stopped when no further insights appeared (some, but not all, of the contributions are referred to in the text). two brief examples can serve as an illustration of the analysis: a deductive approach (from the general to the applied) would require a predefined understanding (construct) in the research design, whereas a more inductive approach allow a more open construct. a nomothetic understanding would indicate some kind of broader, normative (objective) generalization, whereas a more ideographic approach would indicate a more local understanding of business models. this process generated insights with implications for the construct in terms of e.g. content, scope, ability to deal with dynamics etc.. in addition, the insights were also evaluated in various paradigmatic views (lincoln et al., 2011; scott and davis, 2007; arbnor and bjerke, 2009; skyttner, 2006; teddlie and tashakkori, 2009; gioia and pitre, 1990), but for presentation purposes in this journal, the insights are organized according to four views identified in the business model literature: the representational, the functionalist, the pragmatic and the systemic view. the findings are applied in the discussion and implications section to address the “do we need one business model definition” question in contexts of designing constructs in research projects, when communicating with practice and when communicating with colleagues. as definitions, concepts and constructs are not used consistently in the literature we initially focus on the role of definitions and how we arrive at them. key terms: definitions, concepts and constructs understanding the “essence” of things (aristotle) has been a major question debated in philosophy and science since ancient greece. without being entangled in a philosophical debate this is not without problems. a definition is the outcome of an activity which explains to an audience the meaning of an expression (longworth, 2006). this sentence is in itself a definition consisting of a definiendum (what we define, i.e. definition) and definiens (how we do it – in this case by activity). defining imply the usage of definiens i.e. other constructs which may be more or less precise. this may be especially challenging in new areas and in social science as definiens may be ambiguous and vague. the process of gaining acceptance and usage of a definition, i.e. “the activity of explaining”, can take several forms, depending on the context. in academia we rely to a heavy extent on writing. in practice oriented settings other senses may be involved. as such, the activity and validation of definitions may differ in form and process, including formal techniques emphasizing logic and rigor; convention logics; peer reviews; coercive power; opinion leaders; study of literature; empirical evidence; exemplary cases etc.. central to this, however, is the definition’s capacity to provide meaning (in some cases classification) and eventually guide the behavior of its audience. audiences, however, may differ and their preconception and knowledge of the area may also be heterogeneous. therefore, the context – the audience – is central, as the audience validates and eventually applies a successful definition, i.e. what is a “necessary and sufficient” description in a classic sense of definitions. as shown by ghaziani & ventresca (2005) the business model has achieved both global as well as local meanings in different communities. as the business model concept reflects a complex reality and has a large and diversified audience, it is no surprise that we find different perceptions and applications of the term. the calls for definitions are often rooted in the particular disciplines of the specific researcher(s). these are deeply rooted in different scientific traditions and approaches (ontologically, epistemologically and methodologically). for the same reason we see different uses of the terms definitions, construct and concepts in different fields. for the sake of clarity we establish the following definitions to be applied for the remainder of the paper: a lexical definition is used to describe a general understanding of a term to a wide audience. a theoretical definition uses explanations which have journal of business models (2013), vol. 1, no. 1 pp. 61-84 65 (potential) theoretical and/or empirical underpinnings. it is often used in science as part of theory, which – in this paper – is seen rather broadly as a coherent description or explanation of observed or experienced phenomena (gioia and pitre, 1990). to describe and investigate phenomena of interest we use concepts and constructs. concepts are used to describe ideas, in their own existence, without necessarily being connected to specific measures or facts, although we specify them through conceptualization or conceptual definitions which have the potential to become theoretical definitions whether these are based on empirical research, reasoning, disciplined imagination (weick, 1989) or yet more flexible terms (astley, 1985). concepts may have looser or tighter structural characteristics i.e. embracing different features and/or some kind of hierarchical structure (laurence and margolis, 1999). constructs, albeit embracing both objective and subjective dimensions, are more explicitly (defined and understood) related to facts and measures of inquiry. a major part of theory building and verification is the linkage of constructs as theory can be seen as a “system of constructs in which the constructs are related to each other by propositions” (bacharach, 1989). achieving clarity on constructs is therefore essential for achieving validity (traceability) and reliability (replication) (van maanen et al., 2007). lack of construct clarity is a typical cause of rejection (suddaby, 2010) why we return to characteristics of high quality constructs and concepts later. a vertical dimension: levels of business model understandings this section argues that business model understanding has a vertical dimension, with different degrees of abstraction which may be useful for different purposes. this is demonstrated by the literal meaning of the business model term as well as some major trends in the current literature. business model = “business” + “model” the “business model” is from its inception a two-dimensional construct. the “business model” (definiendum) – what we try to define – is dependent on the definiens – the terms “business” and “model”. both terms can be used as nouns and verbs and have been discussed extensively in the literature. for this reason we will constrain ourselves to summarize some of the major points indicating the challenges. “business1” – and doing business to do business is to perform activities (such as transactions) to exchange valuables. traditionally, a business is related to an entity labeled as “organization”, “firm” or “company”. more recently, however, a major claim in the literature is that business is based on opportunities and activities across organizational entities, thereby partly disconnecting it with the organizational entity. + “models” and modeling literally a “model” is a representation of reality2 or an example (role model) to follow. a model can be expressed more or less accurately, with different levels of details, as a pattern, image, physical 3-dimensional model of some fabric, descriptions, mathematical formulas or the like. similar to other concepts in social sciences, business models are not physical objects, but social constructs which may be communicated in words or pictures. as business models are embedded in the organization “the actual business model is a highly complex entity that can only be represented through abstraction – so when we talk about a real, objective business model, we are really working with its abstraction” (casadesus-masanell and ricart, 2010). in order to understand a model we apply words, frameworks and tools view grounded in specific disciplines or contexts and we use different levels of aggregation and decomposition depending on the purpose and the audience. at the highest level and without the possibilities to see the details and specification this model may only make sense to a few. on the other hand, a very detailed level may result in a very precise and exhaustive model at the risk of losing the overview of the model. for a cross-disciplinary concept, there may be good reasons to reflect on what influences our perception of models as this may range from ideographic understandings to general and prescriptive (nomothetic) formats of “what constitute a business model”. further, the different perspectives of models are likely to be present simultaneously thereby posing a potential source of discourse. models are the outcome of the activity of modeling. this particular aspect is important as modeling begins with an idea or object which is articulated in the modjournal of business models (2013), vol. 1, no. 1 pp. 61-84 66 eling process. modeling, especially in unknown areas, may also contain an element of learning – some parts may not be possible to realize, linkages or causal relations may be different from what was first anticipated. these processes may actually feedback into the original idea of the model, and as a result the model changes during under the process. business models can therefore be seen as both static and dynamic entities in addition to being viewed by biased (subjective) individuals. this literal unpacking of the terms gives us a lexical level of understanding, which make sense and appeals to a broad range of audiences in academia and practice, but it is still a polysemous construct, which meaning can differ – even within communities. additional definiens in the construct can provide the basis for a more exact positioning. a brief review of the development of the business model field this brief review focuses on the major tendencies as well as adding further definiens to establish a definition for the discussion to follow. business model definitions grew out of new developments in businesses such as the commercial application of the internet. these new ways of doing businesses seriously challenged the established literature e.g. as a result of challenging organizational borders, transparency in markets, connection of markets (complementary and multi-sided) etc.. early definitions, however, were heavily influenced by idiosyncratic perceptions of business models (ostensive type of definitions) or stereotyped (archetypical) ways of doing business. however, simple definitions such as a “statement of how a firm will make money” (stewart and qin, 2000) have proved to be incomplete, focus only on partial components and ignoring the depth of the business model concept. it also neglects the social impact or even promise of business models (yunus et al., 2010; thompson and macmillan, 2010; seelos and mair, 2007) and the emphasis on a broad range of stakeholders which has been a theme in the some parts of the literature. in a few years perception of business models expanded to emphasize its systemic, boundary spanning nature, reflecting that competition was not just about position, resources or technology (chesbrough, 2007). it was everything in a dynamic blend. the business model became both a vehicle of change and subject to change it self, thereby raising the question of how it could be understood. afuah (2004) focused on the value dimensions of business models and provided a framework linking it to established methods in strategic management. the change related aspects of business models led linder and cantrell (2000) to suggest avenues of change between existing and latent business models. in addition, it was proposed that business models were also narratives tied together with numbers in “stories that explain how enterprises work” (magretta, 2002). the systemic properties of the business model became focus of attention. the original definition of osterwalder and pigneur (2005) stresses the systemic nature of business models: “a business model is a conceptual tool containing a set of objects, concepts, and their relationships with the objective to express the business logic of a specific firm. therefore we must consider which concepts and relationships allow a simplified description and representation of what value is provided to customers, how this is done and with which financial consequences”. in this variety of definitions, zott et al. (2011) found similarities and emerging common ground: 1. the business model is emerging as a new unit of analysis, 2. business models emphasize a system-level, holistic approach towards explaining how firms do business, 3. organizational activities play an important role in business model conceptualizations, 4. business models explains both value creation and value capture. as they mainly addressed peer reviewed publications it is a bit surprising that 37% of the reviewed contributions (n=103) had no definition of the business model at all (19 % used that of others, and the remaining 44% had its own definition (zott et al., 2011)). journal of business models (2013), vol. 1, no. 1 pp. 61-84 67 some of the common ground identified by zott and colleagues is also present in a series of comparative studies around 2005 aiming to identify common characteristics of existing definitions (osterwalder, 2004, scheer et al., 2003). often cited is shafer et al. (2005) who examined 12 definitions by assigning 42 different and unique attributes. they concluded that definitions embrace 4 general categories: 1. strategic choices, 2. value creation, 3. value capture and 4. value network. they propose to “define a business model as a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network” (shafer et al., 2005). they explicitly stated that the “core logic” element is to emphasize the strategic choices on cause-effect relationships. since 2005 there seems to be a convergence around this core understanding of business model. the labelling, however, differs and this is not without significance due to the semantic change of meaning. in particular, the “logic” dimension appears ambiguous. teece (2010) suggests that business models are a “design or architecture of the value creation, delivery, and capture mechanisms”. casadesus-masanell and ricart (2010), sees business models as a result of “a set of committed choices that lays the groundwork for competitive interactions”, and zott and amit (2010) maintain a transaction and activity view. despite these differences it seems plausible to conclude that there are not an infinite number of possible meanings at the conceptual level. for the following discussion we apply a conceptual definition of business models as “a focal firm’s core logic for creating, delivering and capturing value within a stakeholder network”. the different conceptions of value remain key in this definition. to maintain a firm perspective, the “focal firm” is included. similarly, the boundary spanning nature of business models is included in the “network” aspect, which is further emphasized by the “stakeholder” term rather than the narrower “value network”. “strategic choices” is left out to apply business models “as unit of analysis” and manipulation, e.g. strategy. “core logic” is maintained in order to emphasize the systemic nature, related to governance, strategic decision, activities or something different. this conceptual definition is not exhaustive, but it represents the general features in the literature as well it has an underlying cognitive coherence providing us with an understanding of what a business model is (the criteria of necessary and sufficient). it also provides a starting point for more operational definitions as we will see. three vertical levels of business model understanding the analysis moved us from a highly abstract two-dimensional to a more specific multi-dimensional construct which can be summarized in three levels (see also table 1): level 1: the literal meaning of business models are about describing ways, realities – current or to be, of how to do business. the level of abstraction is high and so is the range of potential meanings and audiences. at the best, this first, two-dimensional construct can point to the domain of the business model field and invoke already present associations and knowledge. further explication is needed in order to provide a clearer understanding. level 2: a conceptual definition is achieved by assigning more dimensions to the above definition. this brings us a step further toward a theoretical definition. it is suggested to apply the convergent understanding of business models as “a focal firm’s core logic for creating, delivering and capturing value within a stakeholder network”. this core understanding is apparently able to embrace the many variants of definitions. it is also a conceptual understanding which refers to theoretical constructs, indicating a potential of increasingly establishing itself as a theoretical definition. this conceptual definition requires much more of its audience than the level 1 definition. level 3: consists of an operational explicit, construct with a domain of defined observable dimensions and measures for a specific undertaking, such as a research journal of business models (2013), vol. 1, no. 1 pp. 61-84 68 table 1: the vertical levels and properties of the business model concept definition application, nature and scope definition type coherence and semantic relations (level 1) “business model” general understanding pointing to domain two dimensional construct linking with practice simple literal, polysemous not explicated ambiguous – key word with global as well as local meanings (level 2) “a focal firm’s core logic for creating, delivering and capturing value within a stakeholder network” template for operationalizing multi-dimensional construct indicating domain such as content/features, systemic structure and linkages advanced linking with practice lexical, wide audience appeal conceptual definition and/ or theoretical definition with scientific underpinnings intuitively connected, indication of specifics bridging options with established literature, discourses bridging with practice (level 3) compliant with level 2 and/or dependent on research objective operational construct for specific research multidimensional construct – with explicit focus and delimitation of domain theoretical stipulative explicated bridging with established literature, discourses (research gaps) project in academia or a managerial model in practice related situations. a major part of the remaining paper is dedicated to how this can be created and informed by the existing literature. a horisontal dimension: four views in business model understanding this section presents four different views which may be perceived as a horizontal dimension of business model understanding. the four views represent different perspectives on business models identified in the literature. the four views are; the representational view (as depicting what they are); the functionalist view (how they work); the pragmatic view (as a result of practice); the systemic view (how they are linked internally and externally). for each view the aim is to understand the role, perception and nature of the business model construct. the representational view the representational view reflects an ideal of business models as a perfect, general, objective (and ultimately true) representation of reality. the business model concept is given denotative meaning by adding dimensions and characteristic attributes. removing attributes will lead to corresponding loss of meaning. the representational view provides a core understanding incorporating important features such as the components, configurations and boundaries. it emphasizes a business model understanding as the core unit of analysis, applicable both at macro and micro level. at the macro level this view can provide a general and often decontextualized understanding of platforms of current and potential/latent dimensions and configurations which may be theoretically underpinned and/or operationalized for more specific applications, for instance to journal of business models (2013), vol. 1, no. 1 pp. 61-84 69 develop typologies of business models (zook and allen, 2011; malone et al.; 2011, gassmann et al., 2012). at the micro level, a business model may be viewed as the result of past behavior (casadesus-masanell and ricart, 2010; tikkanen et al., 2005) as well as a platform, or “template” of initiatives (zott and amit, 2010) the brief introduction clearly shows that a representational view – to the extent that it claims a global and stable view is challenged by the complexity of the real world, such as connotative understandings (e.g. related to industry contexts), as well as threats to the stability of the construct in periods of change in which unknown or latent dimensions of the construct may become visible and critical. for instance, in the early entrepreneurial phases it is evident, that the emergent business model changes significantly as a result of learning, new customers, changes in power balances etc. the current debate in the financial community on the use of narratives and business models in reporting can also be seen as an attempt to “repair” on the shortcomings of a single perspective providing a “true and fair view” of a firm (beattie and smith, 2013). although an objective representational view is more of an ambition than a reality, it has a strong history and roots in hard (nature) sciences, which still influence our thinking often implicitly without reflection. as it always strives for perfection, a “better way”, it tends to be elitist driven by theory and historically with a tendency to deny other perspectives (deetz, 1996). new knowledge is created on top of existing in a cumulative way, and builds on an advanced, consistent and stable system of language and methods which emphasize generalizations / de-contextualization, validity, rigor, causality, validity and replication. the research process is linear and constructs are determined before data collection. in general, it is silent on actors and the sensemaking and narrative character of business models. the functional view the functional view focuses on the role of the business model in an institutionalized context. it is a classic foundation for organization and management literature. we briefly explore 3 business model themes within this view: the commercialization of technology, the role in strategy, and an expansion of this with more dynamic perspectives. the first view is that business models act as means of commercializing technology and ideas into new businesses (chesbrough, 2006; chesbrough and rosenbloom, 2002; morris et al., 2005; yunus et al., 2010). as a demonstrative example, chesbrough (2007) specifically assign the following roles to business models: 1. articulate the value proposition, that is, the value created for users by the offering. 2. identify a market segment, that is, the users to whom the offering is useful and for what purpose. 3. define the structure of the value chain required by the firm to create and distribute the offering, and determine the complementary assets needed to support the firm’s position in this chain. this includes the firm’s suppliers and customers, and should extend from raw materials to the final customer. 4. specify the revenue generation mechanism(s) for the firm, and estimate the cost structure and profit potential of producing the offering, given the value proposition and value chain structure chosen. 5. specify the revenue generation mechanism(s) for the firm, and estimate the cost structure and profit potential of producing the offering, given the value proposition and value chain structure chosen. 6. formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals. chesbrough and appleyard (2007) also provide a framework for assessing the business model awareness of companies, ranging from the unarticulated to sophisticated situations of establishing and nurturing own ecosystems, thereby covering both planned as well as emergent approaches to business model dynamics. a second functionalist view addresses business models fit with strategy processes. examples of this is the “design” and instrumentalist type of literature such as osterwalder and pigneur’s (2010) business model canvass, wirtz’s (2011) discussion on organizational roles of business models and chatterjee’s (2013) “simple journal of business models (2013), vol. 1, no. 1 pp. 61-84 70 rules of business model design”. these contributions address the questions of “who has the responsibility for the business model” and the “how and when” it can be applied. an extension of this adds dynamics to the discussion, incorporating process, cognitive, and structural elements, position, resources, and knowledge dimensions. as already stated business models can be seen as outcomes of strategic decisions (casadesus-masanell and ricart, 2010; tikkanen et al., 2005), which still leave many manifestations at the tactical and operational level open. in particular, some of these options may create mutually reinforcing virtuous circles of actions and processes (casadesus-masanell and ricart, 2011), thereby opening an discussion on the balance between replication and innovation of business models (dunford et al., 2010; aspara et al.) and evolution of business models (demil and lecocq, 2010; morris et al., 2005). common for these is an ambition to look for patterns in the development. the underlying consistency view also becomes apparent in potential synergies and conflicts when multiple business models are present (zott and amit, 2008; velu and stiles, 2013; casadesusmasanell and tarziján, 2012; markides and charitou, 2004). the functionalist view does not necessarily require a very precise ex ante definition of a business model but it does assign an, ex ante, often deterministic role to business models and what type of questions they address. this classic functionalist view contributes more to theory refinement and improvements of (instrumental) knowledge than in more radical types of change with less predictability and un-linear nature. further, the classic functionalist view emphasizes the institutional context and it is silent on the role of actors as they act within the institutional frames. the pragmatic view as the research community failed to identify a generally accepted definition, it was suggested to “trust the practitioners” and their use of business models (doganova and eyquem-renault, 2009; lecocq et al., 2010). the pragmatic view assigns value to concepts by their successful practical application, i.e. it assigns greater value to the connotative than the denotative meaning of business models, and tends to avoid the definition challenge. in this view the business model is the solution to a problem and a result of entrepreneurial activity. the view is supported by observing the activities of entrepreneurs in the process of taking an idea and turning it into a new business. the emergent business model circulates in various and shifting manifestations (business plans, elevator pitches, budgets etc.) among actors in different worlds. in doing so it exhibits the capacity as a boundary object being simultaneously robust enough to maintain meaning while adapting in a process which answers questions related to the balance of resource contributions and rewards (doganova and eyquem-renault, 2009; verstraete and jouison-lafitte, 2011). similarly, ahokangas and myllykoski (2013) show us that business models change in content and risk, and lund and nielsen (2013) that the role, contribution and value capture dimensions may change significantly during the process, following the “effectuation” behavior of entrepreneurs (sarasvathy, 2001) and pointing to the limits of the functionalist and essentialist view. the business model works both as a narrative and calculative device (magretta, 2002), thereby linking sense-making literature and actors (e.g. entrepreneurs, managers) in what perkman and spicer (2010) describe as elements of a theory of performative representation, providing three core roles of convincing, legitimizing, and guiding social action. this is also an important aspect in periods of significant change in established organizations and this could link the business model field and “strategy-as-a-practice” field (johnson et al., 2007). the pragmatic view is not limited to new businesses or organizations in isolation. lindgren et al. (2010) examines innovation of business models in networks, and wikström et al. (2010) demonstrate how business models in project based firms are influenced by actors, and heikkilä and heikkilä (2010) discuss alignments and conflicts in establishing joint business models. in the pragmatic view the business model is a result of problem solution. there are possible, but no exact pre-defined formats, roles or functions assigned to the model. the business model serves as a boundary object but it has no ex ante predefined format as this is created and changed in the process between the actors. the business model has a fundamentally subjective nature, due the linkages with the surrounding actors. existing journal of business models (2013), vol. 1, no. 1 pp. 61-84 71 theory and reviews are therefore playing a less dominant role than in the other views but may provide first input (e.g. frameworks) for initiating a process. the research process is likely to be shifting between practice and theory (abduction) and is often very close to the field. although research in this view is basically local and emergent of nature, the final model and findings can still be mirrored against more general definitions or used for analytical generalization (yin, 2014). the systemic view the development of systems theory – although dating further back – accelerated after 2ww. it is worth noting that especially biologist bertalanffy saw systems thinking as an important way to link different disciplines and avoid compartmentalization of science (scott and davis, 2007). there have been many applications of a systems perspective in business research, including operations, it and organizational learning (skyttner, 2006; scott and davis, 2007) and the systems perspective is also clearly present in various management methodologies and representational models of business activity, including the previous views. although the systemic nature of business models has been stressed consistently, it is rarely addressed more explicit. amit and zott (2012) apply a systems view by elaborating on their original business model definition amit and zott (2001) as “content, structure and governance of transactions designed so as to create value through the exploitation of business opportunities”. business model innovation can therefore be seen as either directed inwards or adjusting to the environment. they also draw on their previous empirical research to show how business models can generate competitive advantage from novelty, lock-in, complementarity or efficiency effects. also applying a systems view berglund and sandström (2013) focus on the relation between a focal firm and its environment and develop hypothesis of development on the interaction. in a larger perspective this connect the business model to the relative importance of the firm based business model vs. multisided markets, complementarity of business models, networks or eco-systems in competition and development dynamics (hamel, 2002; chesbrough, 2006). sánchez and ricart (2010) specifically address the openness/closedness dimension of business models and the relation to low income markets. these perspectives may be important in understanding whether business models can “create” new markets by turning latent demand into actual demand. the systems perspective and the business model concept can be seen as compatible concepts as they both deal with purpose oriented input-output relations directed at stakeholders and with transformative mechanisms in-between. since a system is more than the sum of its parts, removing one or more dimensions will make it incomplete and incoherent. other characteristics are shared with the business model concept: 1. the specific content / conceptualization is not predefined and potentially rich in aspects, 2. the level of abstraction is not pre-defined, 3. an open system is in principle without boundaries, 4. systems are rich on relations (logic, architecture …), and 5. they can both be manipulated by agents. both systems and models can be broken down in subsystems which can be analyzed in further depth (e.g. ecosystem, industry, stakeholders). for instance each of the possible dimensions of the business model construct may be perceived as a system on its own (e.g. value creation system, value delivery system etc.). also complexities such as system dynamics, system “fits” i.e. interactions (alignment and misalignment) of systems applies equally well for both models and systems. it should be noted, however, that the systems perspective has received critique similar to the business model concept. at the general level, systems are not easily defined and too open for some audiences (see e.g. (skyttner, 2006)). it is also evident that the systemic nature is present in the background of the other views (e.g. organizations as rational systems to attain specific goals in the functional view). applying an explicit system view provides a more general approach to business models – it applies equally well to entrepreneurial as well as more “established” settings, although still bounded by the context of the defined systems. by linking business models, the sysjournal of business models (2013), vol. 1, no. 1 pp. 61-84 72 tems perspectives and connecting to the disciplines and nomological worlds of business research and management it becomes less abstract and offers new opportunities for bridging across disciplines. additionally, in the academic environment a systems view may provide a potential platform for mapping, coordinating and operationalizing research projects which may also include new methods and fields (e.g. complex systems theory). business models the horizontal views as we have shown there are several ways to understand business models, but the call for definition may intended or not be rooted in the representational and influenced by a functionalist view. the definitions and constructs generated by these views may not be equally relevant or appropriate in all cases. some common themes across the views are: first of all, the purpose, the origin of the research question, and the type of data needed, has important implications for establishing a proper business model construct and when this can take place. this may sound obvious, but reflections on the deeper scientific aspects and the current practice so far, reveal that the cross-disciplinary and multi-view nature has been a source of confusion when researchers try to understand contributions from other views. this aspect is also related to issues of general validity and generalization, i.e. whether these apply at a local level, relativist level, within particularities of the specific study, within the related disciplines, or a general (universal) level of claims. secondly, a large part of the discussion is centered on how business models relate to actors, processes, and outcomes, i.e. whether they are part of or “external” to the model. for purposes of understanding, analysis and theory building it will be useful if this is explicated. for instance, business model dynamics may change from being dependent on a visionary entrepreneurial leader to being embedded and institutionalized in organizational structures and processes. this has clear implications for how actors should be included or related to the business model definition. in fact, business models are not always the main subject of analysis, but a vehicle to understand other phenomena. thirdly, the stability and format of business models and constructs are not given. businesses change both in terms of resources, relations and “logic”. this challenges the possibility of having an accurate depiction of reality. a too narrow construct may not be able to capture empirical observations and therefore not be able to explain causality, especially in longitudinal research. a broad construct will generally be able to capture a broader scale of change. a possibility is to define latent dimensions of business model change. fourthly, it should also be noted that the views are often mixed in practice: for instance, research conducted in the pragmatic view may have conclusions delivered as “tools” which may have the character of functionalist determinism. the views can be seen as competing, but probably a better way is to see them as complementary, especially when dynamics are present (see also discussion and implications). fifthly: although the systemic point of view is embedded in the other views, it is worthwhile to separate it out, to understand its potential benefit for both single research purposes but also as a perspective on business model research at a more general level. the findings are summarized in table 2 and 3. table 2 provides a general overview, and table 3 provides details of the business model constructs. these are ideal representations of the views for the purpose of establishing completeness, pointing to meaningful differences rather than exclusive classification, and with a note that they may not be without internal challenges. journal of business models (2013), vol. 1, no. 1 pp. 61-84 73 table 2: business model views, their purposes and examples of presence view business models as representations of reality business models serves specific functions business models as outcomes of relations between actors business models as (open) systems purpose objective representations, “snap shots” search for general and causal relations – grand theory theory refinement fit with role, hierarchies and consensus insights and/or normative understand practice of problem solution challenging established theories, new insights understand interplay between actors holistic understanding of different systems, their components, interactions and dynamics at macro and micro level integrative platform examples of presence and usage theoretically driven research, business model frameworks, business model typologies theoretically based research on existing, renewed and new business models in established companies grounded research in entrepreneurial and change oriented situations exemplary cases for inspiration understanding of interplay between businesses and their environment, e.g. ecosystems, clusters, complementarity, multisided markets table 3: variations in the business model constructs in the 4 views view business models as representations of reality business models serve specific functions business models as outcomes of relations between actors business models as (open) systems role of theory theory driven / testing linear, planned, deductive, causality theory testing / driven, causality, deductive, linear theory creation /application / challenging looking for the unfamiliar abduction integrative views / dependencies integrative platform for research programmes context de-contextualized contextualized by disciplines and institutional frames contextualizing within stakeholder environment contextualizing and contextualized within focal system(s) nature of b u s i n e s s model construct unit of analysis objective, measurable, depicting (actual and possibly latent) components and configurations exact, stable construct and identifiable causal linkages construct fulfills objective (real), general functions flexible construct within boundaries of generic purposes boundary object frameworks and facilitation may guide business model conceptualization dynamic construct under transformation emphasis on part-systems, components, linkages, and feedback boundaries / openclosed / levels / static -dynamic multiple business models continues on next page journal of business models (2013), vol. 1, no. 1 pp. 61-84 74 table 3: variations in the business model constructs in the 4 views t i m i n g : availability of construct construct ready before research – desk predefined assumptions on function – desk business model becomes conceptualized in process business model becomes conceptualized and/or modified in interactive processes in field ex ante perception or creation through explorative investigation actor role external (silent) silent adapting to institutional regime actors as creators self-regulating or actor influenced systems risks too narrow lack in c o m p r e h e n s i v e n e s s and practical applicability too constrained by existing knowledge reinvention of existing knowledge too general, losing relevance and meaning continued from previous page discussion and implications to discuss the implications we initially discuss the issue of not having a definition at all, the benefits and challenges of multiple views, and then proceeds with a discussion of different situations where we need definitions: when establishing research projects, communicating with practice, and finally, when communicating with colleagues. advantages of not having a definition? in general it can be argued that a grounded – or feyerabendish – approach with no or limited prior concepts and methodology is appropriate in contexts with no or limited prior knowledge or if a fresh approach is needed. the business model field is not virgin territory as there is currently a wide range of perceptions of business models, ranging from more systematic approaches to more intuitive approaches. typically, all kind of actors will have some kind of prior bias, assumptions and predefined ideas about business models which cannot be ignored. consequently, it can be argued that having no definition imply the risks of 1. being misunderstood as readers base their judgment on their own business model perceptions, 2. insufficient positioning of – and weak constructs in the research, and 3. bad “research economics” by not building in existing knowledge. all risks are latent in the 4 different views, but highest when ex ante designs are needed. it generally seems appropriate to apply a reflexive approach to the existing body of knowledge and explicate the definition. business models understandings as a semantic field embracing a core understanding with multi-levels and multiple-views the business model field can be seen as a large semantic web of multi-levels and multi-views with a common, core understanding. based on astley (1985) this situation may be ascribed to three causes: 1. the business model field is immature and the core definition will develop as our knowledge accumulate, 2. the business model field is a multi-view field and cannot be embraced from a single view, 3. the popularity of the business model field is due to publication driven need for “newness” and interesting stories. a call for a single, all-embracing definition rooted in the essentialist tradition mirrors a specific view on science as progressing linearly by building cumulatively journal of business models (2013), vol. 1, no. 1 pp. 61-84 75 on prior knowledge. although valuable as a platform of potential dimensions of more operational definitions, the underlying “consistency view” of such a position is not without problems as reality is difficult to embrace in one view. further, it may lead to incremental and insignificant findings with limited application (astley, 1985). instead of trying to force-fitting other perspectives into one view, with potential side effects of rejecting other perspectives, it seems more productive to allow multiple perspectives to co-exist and inform each other: multiple perspectives generate more complete knowledge for a complex construct phenomena as business models, just as it is characteristic that a multidimensional construct is more than the sum of its parts (suddaby, 2010). in addition to this, the interest in the business model as well as the different perspectives may be seen as a result of necessary additions to the established knowledge. as it will be noted, the above arguments are based on complementarity and does not suggest that the views are necessarily (fully) comparable or compatible (the debate of the paradigms and compatibility – incompatibility theses). in specific projects, a combination of views could be seen as a way of triangulating. this may provide further insights of inspiration (in case of variance in findings), strengthening findings (parallel findings), or – especially in dynamic settings tracking changes and shifts in relevance across the views. another part of the critique is related to the theoretical underpinning and the theoretical maturity of the business model. rather than trying to connect it exclusively to one specific theory, it may be possible to connect it to more theories due to its cross-disciplinary nature. it may be argued that the relevance of the business model concept is related to its holistic nature and embracement of multiple views. all research carries limitations and we always view business models with only a partial view. however, the limitations and focus of a specific research project may reduce the relevance of the business model concept to a point where the project may be approached in a traditional “silo”-way by established disciplines. this touches on a related question of “what is business model research?” key elements of an answer may include elements of its systemic nature, involving multiple levels, components and perspectives across disciplines. allowing multiple perspectives on business models to co-develop may be the best way to inform the understanding of the core definition. definitions for research projects: need for construct clarity (level 3 definition) construct development in the business model field is challenging due the scope of the concept. in general it is recommended that academics should define their purpose and usage of the business model concept and avoid implicit definitions which have been the case in the past (zott et al., 2011; zott and amit, 2013). to facilitate knowledge accumulation, it is suggested for the lack of better – that academics join the emerging core understanding (level 2 conceptual definition) or at least explain plausible deviations (such as challenging it) from this. this level of understanding may be sufficient for cases of general references and discussions when the business model is not the main unit of analysis. for other purposes it needs operationalization, by clarifying what aspects of the business model concepts are investigated as well as clarifying the relation to the conceptual definition. suddaby (2010) argues that clarity of a construct can be assessed by four characteristics which mutually reinforce each other: 1. clear definition, 2. a clear sense of the scope, 3. semantic relation to other constructs, 4. coherence. specifically, our analysis point to the importance of the origin of the research question in combination with a view, or mix of these, with implications in relation to the research design and the research process, the static/dynamic aspect, the focal area of the business model, the components and their linkages, and the level of operationalization. finally, the semantic relations to the involved disciplines and the business model field must be explained to ensure relevance and theoretical underpinning. building on the previous analysis and discussion – this can be integrated in five steps as suggested in table 4. journal of business models (2013), vol. 1, no. 1 pp. 61-84 76 table 4: five steps to achieve clarity of business model construct for specific research project key questions to consider 1. what is the origin of the research question? theoretical or empirical origin of research question timing of conceptualization of business model 2. which perspective(s) are relevant? the role of the business model: depicting reality, general causality – a representational view understanding role – managerial and organizational – a functional view understanding motivation, actors and outcome – a pragmatic view understand feedback, regulation and dynamics – a systems view a mix of above – fit with research design 3. what content is needed? required breadth/focus of business model component/functions required level / depth of each component / function static / dynamic, stable or flexible – prior, current and latent components boundaries (to other systems, levels, actors etc.) 4. which ties are important? ties between content elements static / dynamic, stable / flexible e.g. new prior, current, latent ties 5. what are the semantic relations and position of the research? semantic relation to high level business model concept semantic relations and potential discourses with established management research and practice areas position and relation to business model research definitions when dealing with practice one reason for the popularity of the business model is quite simple: business models may be good stories, providing cases for inspiration. they constitute good bridging options between academia and practice, whether this is at the more general level on the role and utility of science, general communication or in specific engagements (clegg and starbuck, 2009). in both cases, however, academics face two audiences: their academic peers and practitioners. these may have different prior knowledge on business models, why it may be necessary with simultaneous and dual constructs. a practice oriented audience cannot be expected, at least initially, to have the same in-depth knowledge of state of the art definitions and perspectives as academics. therefore simpler (lexical), abbreviated definitions or exemplary (ostensive) definitions may be useful for such audiences to convey the meaning of the concept. depending on the circumstances, the initial understanding can be enhanced / deepened over time, possibly by the application of various frameworks. in such situations the researcher uses a level 2 definition in the communication with practice and a level 3 definition in the actual project. in practice this may require considerable attention in the communication and analysis in order to achieve precision and avoid confusion (e.g. by mixing definiens and definiendum). definitions when communicating with colleagues; improving business model understanding the business model literature has been able to capture many of the recent ways of doing business related to new opportunities, new technologies and the increasing awareness of other stakeholders than shareholdjournal of business models (2013), vol. 1, no. 1 pp. 61-84 77 ers. in this way, the business model literature has challenged established theories. this is still reflected in special journal issues where it is common to see very broad research agendas covering customer responses, eco-systems, scalability, internal processes, competition, and organizational linkages with business models (björkdahl and holmen, 2013; laplaca, 2013; robins, 2013). responses, however, are often – and naturally – unorganized and fragmented. the holistic characteristics of business models create a potential to bridge management research across disciplines. the business model concept has different theoretical status and maturity in different fields. the semantic and nomological relations of the business model construct are critical for bridging the business model field and these disciplines, across deeply institutionalized meanings of the terms. for instance, “value” has different meaning in marketing and finance. this sort of linguistic ambiguity is not unusual in administrative science, it can be a source of fruitful insights, and often theory development actually depends on it (astley, 1985). a second aspect of bridging is the motivation, ability and potential conflicts of joining a more holistically based perspective rather than pursuing a strong disciplinary and narrow path. this may require adaption of research practices and terms in the disciplines involved. for instance, the perceived importance of empirical evidence and more conceptual thinking (disciplined imagination) may differ between disciplines. therefore, such initiatives as reviews seen from special disciplines, such as industrial marketing (coombes and nicholson, 2013), or suggestions for positioning the business model in an extended strategic research domain (priem et al., 2013), or open research agendas (e.g.zott and amit, 2013, baden-fuller and mangematin, 2013) must be welcomed. bridging would probably create a win-win situation: our understanding of the business model concept may be improved, theoretically underpinned and individual disciplines may achieve a better understanding of their contributions to the holistic idea of a business. this may facilitate both inspiration, better positioning and focus of research and maybe even provide a kind of more elaborate lakatonian style research programmes. systematically organized programs with a portfolio consisting of multiple views may be one practical way of doing this. other ways could be to include researchers from different disciplines in specific project teams. it may be a relevant to ask if anyone – and in that case, who – should take responsibility of the concept and its development? should the concept be reserved for the strategy field? or should it have its own domain or be incorporated / diffused into specific fields. where will it have its greatest value and impact? is there a need for “middle layers” of business model definitions between the general definition and specific disciplines reflecting the strategic dimensions of these (strategic marketing, strategic it, etc.)? concluding remarks – do we need one business model definition? definitions – to some extent – share purposes and characteristics with models. they help us understand and classify constructs, and they guide us in situations where we have to orientate our behavior. neither definitions nor models are necessarily exhaustive, precise and static and heavily dependent on the audience. the relevance of the business model concept must be judged on its ability to reflect the real world of business in a better way than alternative approaches, i.e. whether we better understand the reality of 5, as 5 itself or by seeing it as the sum of 3+2=5 or i+i+iii = v. reflecting this, the business model literature is wide spanning, cross-disciplinary, cross-organizational, boundary spanning and systemic by nature. at the higher level we find the broad understanding pointing to the domain of the business model. we also find a multi-dimensional concept indicating the business model components and their potential linkages, sharing an understanding of business models as embracing critical elements of the “logic” of value creation, value delivery and value capture and the ways these are organized in a stakeholder network. this concept maintains its meaning but takes different forms depending on perspectives such as depicting reality, element of process, its outcome or as a part a system. rather than trying to achieve one single, generally applicable and exhaustive definition, these complementary and different views may be applied to build and elaborate on this core business model understanding. in sum, journal of business models (2013), vol. 1, no. 1 pp. 61-84 78 the views provide an understanding on the “what, why, how and when” of business models as a holistic and dynamic concept. in conclusion: we need – not one – but more definitions building on a shared understanding. the current and shared convention may be sufficient for the general understanding; in many cases a more explicit definition is needed, important determinants being the audience and the purpose. as such, it may be argued that the real value of the business model construct lies not in the precision of its definition, but in its role as a boundary object between different disciplines and between academia and practice. at least for a period, a more systematic approach to coordinating business model research around the emerging core understanding may be more fruitful than trying to develop new definitions. endnotes 1 websters dictionary (1989) offers more than 17 definitions on business and 21 on models. only the relevant and central ideas are provided here. 2 many more aspects of models in the introduction to long range planning, april 2010 issue, baden-fuller & morgan journal of business models (2013), vol. 1, no. 1 pp. 61-84 79 bibliography afuah, a. 2004. business models – a strategic management approach, new york, mcgraw-hill/irwin. ahokangas, p. & myllykoski, j. 2013. creating and transforming business models as practice. nordic academy of management conference. iceland. amit, r. & zott, c. 2001. value creation in e-business. strategic management journal, 22, 493. amit, r. & zott, c. 2012. creating value through business model innovation. mit sloan management review, 53, 41-49. arbnor, i. & bjerke, b. 2009. methodology for creating business knowledge, london, sage. arend, r. j. 2013. the business model: present and future—beyond a skeumorph. strategic organization, 11, 390-402. aspara, j., hietanen, j. & tikkanen, h. 2010. business model innovation vs replication: financial performance implications of strategic emphases. journal of strategic marketing, 18, 39-56. aspara, j., lamberg, j.-a., laukia, a. & tikkanen, h. corporate business model transformation and inter-organizational cognition: the case of nokia. long range planning. astley, w. g. 1985. administrative science as socially constructed truth. administrative science quarterly, 30, 497513. bacharach, s. b. 1989. organizational theories: some criteria for evaluation. academy of management review, 14, 496-515. baden-fuller, c. & haefliger, s. 2013. business models and technological innovation. long range planning, 46, 419426. baden-fuller, c. & mangematin, v. 2013. business models: a challenging agenda. strategic organization, 11, 418-427. beattie, v. & smith, s. j. 2013. value creation and business models: refocusing the intellectual capital debate. the british accounting review, 45, 243-254. berglund, h. & sandström, c. 2013. business model innovation from an open systems perspective: structural challenges and managerial solutions. international journal of product development, 18, 274-285. björkdahl, j. & holmen, m. 2013. editorial: business model innovation the challenges ahead. international journal of product development, 18, 213-225. camisón, c. & villar-lópez, a. 2010. business models in spanish industry: a taxonomy-based efficacy analysis. m@n@gement, 13, 298-317. casadesus-masanell, r. & ricart, j. e. 2010. from strategy to business models and onto tactics. long range planning, 43, 195-215. casadesus-masanell, r. & ricart, j. e. 2011. how to design a winning business model. harvard business review, 89, 100-107. casadesus-masanell, r. & tarziján, j. 2012. when one business model isn’t enough. harvard business review, 90, 132-137. journal of business models (2013), vol. 1, no. 1 pp. 61-84 80 chatterjee, s. 2013. simple rules for designing business models. california management review, 55, 97-124. chesbrough, h. 2006. open business models, boston, ma, usa, harvard business school press. chesbrough, h. 2007. business model innovation: it’s not just about technology anymore. strategy & leadership, 35, 12-17. chesbrough, h. & rosenbloom, r. s. 2002. the role of the business model in capturing value from innovation: evidence from xerox corporation’s technology spin-off companies. industrial & corporate change, 11, 529-555. chesbrough, h. w. & appleyard, m. m. 2007. open innovation and strategy. california management review, 50, 57-76. clegg, s. r. & starbuck, w. h. 2009. can we still fix m@n@gement? the narrow path towards a brighter future in organizing practices. m@n@gement,, 12, 332-359. coombes, p. h. & nicholson, j. d. 2013. business models and their relationship with marketing: a systematic literature review. industrial marketing management, 42, 656-664. deetz, s. 1996. describing differences in approaches to organization science: rethinking burrell and morgan and their legacy. organization science, 7, 191-207. demil, b. & lecocq, x. 2010. business model evolution: in search of dynamic consistency. long range planning, 43, 227-246. doganova, l. & eyquem-renault, m. 2009. what do business models do?: innovation devices in technology entrepreneurship. research policy, 38, 1559-1570. dunford, r., palmer, i. & benveniste, j. 2010. business model replication for early and rapid internationalisation: the ing direct experience. long range planning, 43, 655-674. gassmann, o., frankenberger, k. & csik, m. 2012. the st. gallen business model navigator. available: http://www. bmi-lab.ch/fileadmin/images/home/st_galler_business_model_navigator.pdf [accessed 2013-09-20]. george, g. & bock, a. j. 2011. the business model in practice and its implications for entrepreneurship research. entrepreneurship: theory & practice, 35, 83-111. ghaziani, a. & ventresca, m. j. 2005. keywords and cultural change: frame analysis of business model public talk, 1975–2000. sociological forum, 20, 523-559. gioia, d. a. & pitre, e. 1990. multiparadigm perspectives on theory building. academy of management review, 15, 584-602. hamel, g. 2002. leading the revolution, new york, usa, penguin. heikkilä, m. & heikkilä, j. 2010. conscription of network business models. iup journal of business strategy, 7, 7-23. johnson, g., langley, a., melin, l. & whittington, r. 2007. strategy as a practice. research directions and resources, cambridge, cambridge university press. johnson, m. w. 2010. seizing the white space: business model innovation for growth and renewal, boston, ma, harvard business press. laplaca, p. j. 2013. letter from the editor. industrial marketing management, 42, 645-648. journal of business models (2013), vol. 1, no. 1 pp. 61-84 81 laurence, s. & margolis, e. 1999. concepts and cognitive science. in: margolis, e. & laurence, s. (eds.) concepts: core readings. cambridge, ma: mit press. lecocq, x., demil, b. & ventura, j. 2010. business models as a research program in strategic management: an appraisal based on lakatos. m@n@gement, 13, 214-225. lincoln, y. s., lynham, s. a. & guba, e. g. 2011. paradigmatic controversies, contradictions, and emerging confluences, revisited. the sage handbook of qualitative research. 4 ed. usa: sage. linder, j. c. & cantrell, s. 2000. changing business models: surveying the landscape. usa: institute for strategic change, accenture. lindgren, p., taran, y. & boer, h. 2010. from single firm to network-based business model innovation. international journal of entrepreneurship & innovation management, 12, 122-137. longworth, g. 2006. definitions: uses and varieties of. encyclopedia of language & linguistics. 2 ed. lund, m. & nielsen, c. 2013. the evolution of network-based business models illustrated through the case study of an entrepreneurship project. nordic academy of management conference. iceland. magretta, j. 2002. why business models matter. harvard business review, 80, 86-92. malone, t. w., weill, p. & apel, t. g. 2011. the business models investors prefer. mit sloan management review, 52, 17-19. markides, c. & charitou, c. d. 2004. competing with dual business models: a contingency approach. academy of management executive, 18, 22-36. morris, m., schindehutte, m. & allen, j. 2005. the entrepreneur’s business model: toward a unified perspective. journal of business research, 58, 726-735. nenonen & storbacka 2010. business model design: conceptualizing networked value co-creation. the 2009 naples forum on services. osterwalder, a. 2004. the business model ontology: a proposition in a design science approach. switzerland doctoral, university de lausanne. osterwalder, a. & pigneur, y. 2005. clarifying business models: origins, present, and future of the concept. communications of ais, 2005, 1-25. osterwalder, a. & pigneur, y. 2010. business model generation, new jersey, john wiley & sons, inc. perkman & spicer 2010. what are business models? in: phillips, n., sewell, g. & griffiths, d. (eds.) research in the sociology of organizations. bingley, united kingdom: emerald group publishing ltd. plé, l., lecocq, x. & angot, j. 2010. customer-integrated business models: a theoretical framework. m@n@gement, 13, 226-265. pohle, g. & chapman, m. 2006. ibms global ceo report 2006: business model innovation matters. strategy and leadership, 34, 34-40. porter, m. e. 2001. strategy and the internet. harvard business review, 79, 62-78. priem, r. l., butler, j. e. & li, s. 2013. toward reimagining strategy research: retrospection and prospection on the 2+11 amr decade award article. academy of management review, 38, 471-489. journal of business models (2013), vol. 1, no. 1 pp. 61-84 82 robins, j. 2013. editorial. long range planning, 46, 417-418. sahu, m. & marko, s. 2007. assessing business model concepts with taxonomical research criteria: a preliminary study. management research news, 30, 735-748. sánchez, p. & ricart, j. e. 2010. business model innovation and sources of value creation in low-income markets. european management review, 7, 138-154. sandberg, k. d. 2002. is it time to trade in your business model? harvard management update, 7, 3. sarasvathy, s. d. 2001. causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency. academy of management review, 26, 243-263. scheer, c., deelman, t. & loos, p. 2003. geschäftsmodelle und internetbasierte geschäftsmodelle – begriffsbestimmung und teilnehmermodell. isym information systems & management. johannes gutenberg-university mainz: dr. peter loos, lehrstuhl für wirtschaftsinformatik und bwl. schneider, s. & spieth, p. 2012. business model innovation: towards an integrated future research agenda. paper presented at euram 2012. rotterdam, nl. scott, r. e. & davis, g. f. 2007. organizations and organizing; rational, natural and open systems perspectives, new jersey, usa, pearson education, inc. seelos, c. & mair, j. 2007. profitable business models and market creation in the context of deep poverty: a strategic view. academy of management perspectives, 21, 49-63. shafer, s. m., smith, h. j. & linder, j. c. 2005. the power of business models. business horizons, 48, 199-207. skyttner, l. 2006. general systems theory: problems, perspectives, practice. 2 ed. river edge, nj, usa. stewart, d. w. & qin, z. 2000. internet marketing, business models, and public policy. journal of public policy & marketing, 19, 287-296. suddaby, r. 2010. editor’s comments: construct clarity in theories of management and organization. academy of management. teddlie, c. & tashakkori, a. 2009. foundations of mixed methods research, integrating quantitative and qualitative approaches in social and behavioural sciences, usa, sage publications, inc. teece, d. j. 2010. business models, business strategy and innovation. long range planning, 43, 172-194. thompson, j. d. & macmillan, i. c. 2010. business models: creating new markets and societal wealth. long range planning, 43, 291-307. tikkanen, h., lamberg, j.-a., parvinen, p. & kallunki, j.-p. 2005. managerial cognition, action and the business model of the firm. management decision, 43, 789-809. van maanen, j., sørensen, j. b. & mitchell, t. r. 2007. the interplay between theory and method. academy of management review, 32, 1145-1154. velu, c. & stiles, p. 2013. managing decision-making and cannibalization for parallel business models. long range planning, 46, 443-458. verstraete, t. & jouison-lafitte, e. 2011. a conventionalist theory of the business model in the context of business journal of business models (2013), vol. 1, no. 1 pp. 61-84 83 creation for understanding organizational impetus. management international/international management/gestión international, 15, 109-124. weick, k. e. 1989. theory construction as disciplined imagination. academy of management review, 14, 516-531. wikström, k., artto, k., kujala, j. & söderlund, j. 2010. business models in project business. international journal of project management, 28, 832-841. wirtz, b. w. 2011. business model management – design – instruments – success factors, wiesbaden, germany, gabler. wirtz, b. w., schilke, o. & ullrich, s. 2010. strategic development of business models: implications of the web 2.0 for creating value on the internet. long range planning, 43, 272-290. yin, r. k. 2014. case study research: design and methods, thousand oaks, california, us, sage. yunus, m., moingeon, b. & lehmann-ortega, l. 2010. building social business models: lessons from the grameen experience. long range planning, 43, 308-325. zook, c. & allen, j. 2011. the great repeatable business model. harvard business review, 89, 106-114. zott, c. & amit, r. 2008. the fit between product market strategy and business model: implications for firm performance. strategic management journal, 29, 1-26. zott, c. & amit, r. 2010. business model design: an activity system perspective. long range planning, 43, 216-226. zott, c. & amit, r. 2013. the business model: a theoretically anchored robust construct for strategic analysis. strategic organization, 11, 403-411. zott, c., amit, r. & massa, l. 2011. the business model: recent developments and future research. journal of management, 37, 1019-1042. journal of business models (2013), vol. 1, no. 1 pp. 61-84 84 about the author anders bille jensen holds a m.sc. in business administration from copenhagen business school. he has a professional background from the fast moving consumer goods, the venture industry, the “green energy” industry and has a strong interest in the maritime sector. he has also been an entrepreneur and served as a consultant. for the last decade anders has been teaching courses in marketing; strategy; organization & management; innovation and entrepreneurship, as well as turnaround management. anders is currently finishing his ph.d. on business models at the department of leadership and corporate strategy at university of southern denmark, slagelse. journal of business models (2014), vol. 2, no. 1 pp. 33-55 33 competing with the use of business model innovation an exploratory case study of the journey of born global firms. marlene johansson1 & jan tony abrahamsson2 abstract purpose: the purpose of this article is to investigate how business models are used by born global firms to act upon new business opportunities and how they manage business model innovation over time to prosper and grow. design/methodology: the study is based on three exploratory case studies of born global firms in mobile communication, financial services and digital music distribution. findings: three interrelated capabilities to manage business model innovation are articulated in the context of born global firms; sensing capabilities, entrepreneurial capabilities and relational capabilities and four propositions are formulated. we find that business model innovations are used as a tool by maturing born global firms to navigate the value chains and achieve international growth. we further propose that born global need the capabilities to balance different business model designs simultaneously and to manage its business model innovation in a timely manner. originality: this article contributes to both the business model literature and research of international entrepreneurship. by putting business model research into the dynamic context of rapidly internationalizing born global firms, we contribute to the field of business model research with findings of how business models are used in the internationalization processes. certain capabilities are needed to manage business model innovation for born global firms to dynamically use business models as a tool in the international growth overtime. keywords: internationalization, born global firms, business model innovation, dynamic capabilities 1 marlene johansson, department of business administration, centre for inter-organizational innovation research, umeå school of business and economics, umeå university, sweden, marlene.johansson@usbe.umu.se 2 jan abrahamsson, department of business administration, centre for inter-organizational innovation research, umeå school of business and economics, umeå university, sweden, jan.abrahamsson@usbe.umu.se please cite this paper as: johansen, m & abrahamsson j.t. 2014 ‘competing with the use of business model innovation an exploratory case study of the journey of born global firms.’, journal of business models, vol. 2, no. 1, pp. 33-55. journal of business models (2014), vol. 2, no. 1 pp. 33-55 34 introduction during the last few decades, drivers such as open innovation systems, rapid development of new technologies and the globalization of markets have changed the competitive game (chesbrough, 2006; casadesus-masanell and ricart, 2010). these changes have re-arranged previously closed value chains and competitive structures and opened up for new business opportunities (bengtsson and johansson, 2012). a type of firms that have capitalized on these emerging business opportunities are born global firms; young firms characterized by a rapid international growth and innovativeness from their inception (oviatt and mcdougall, 1994; moen and servais, 2002; gabrielsson, et al. 2008). born global firms can identify and act upon novel opportunities due to fast access to international networks, (coviello, 2006) international customers (gabrielsson, et al., 2008) and international financing (makela and makula, 2005). however, with new business opportunities also comes remarkable challenges in regards to how to design the business model to present and package its value proposition to customers, and to create, deliver and capture value in a marketplace where competition could be global from day one (teece, 2007: 2010; chesbrough, 2007). these aforementioned challenges embedded in the global business environment are arguably compounded for born global firms, as they often are small and new firms with limited resources and market presence, and acting in a context of uncertainty exploring new and nascent markets (katila, et al., 2008; santos and eisenhardt, 2009). thus, the ability to design business models for navigating this landscape of turbulence and uncertainty are crucial for born global firms and could be considered a distinguishing feature for this type of firms. until now, little is known specifically about how born global firms design their business model to act upon new opportunities in the international marketplace, and how they create and capture value over time in a global context. due to both the lack of resources and the uncertainty of new markets, value is often cocreated with partners, suppliers and customers as well as competitorswith the challenge to generate value for the firm as well as for its stakeholders. the born global firm’s performance is thus dependent upon boundary-spanning organizational arrangements which imply another set of challenges in itself. the business model is argued to be one of these boundaryspanning activities, and involves a simultaneous co-creation and capture of value in an ecosystem of partners (zott and amit, 2007; 2010). moreover, in order to prosper and grow the firms need capabilities to adapt and transform its business model design over time, which is a complex art. more research is called for to provide insights into the process of business model innovation over time (trimi and berbegal-mirabent, 2012). business model innovation can be viewed as changes in how the firm does business in respect to how it creates, delivers and captures value (amit and zott, 2012; teece, 2010; teece, 2007). it can for instance be to redefine an existing product, service and value proposition and/or how the firm profit from the customer offering (björkdahl 2009; björkdahl and holmen, 2013). despite the increasing academic attention to business models and born global firms, there is a dearth of research focused on why born global firms adopt a certain business model design, and how born global firms undergo processes of business model innovation to pursue rapid growth in multiple countries (with some exceptions see e.g. dunford et al., 2010). thus we ask the following research questions: how do born global firms use business models to act upon business opportunities? how does the born global firm manage business model innovation over time in order to grow in international markets? the purpose of this paper is to investigate how business model design is used by born global firms to act upon new business opportunities, and how they manage business model innovation over time to grow on international markets. to reach that purpose, we employ the dynamic capability perspective. dynamic capabilities could be said to be based on the notion of the firm’s need to build new competences, skills and reconfigure existing routines leveraging both internal and external resources (teece 1997; 2007). in line with recent papers on dynamic capabilities (helfat and peteraf 2009; schilke, 2013) we highlight a set of relevant business processes or challenges, which are journal of business models (2014), vol. 2, no. 1 pp. 33-55 35 derived from our empirical material. in the context of the born global firms in this study, these process and challenges relate to partner relationships, value chain positions, retention of entrepreneurial mindset of the firm and the foresight to navigate a dynamic business environment. going through these processes and dealing with the aforementioned challenges required a particular set of dynamic capabilities behalf of the case firms. we identified three distinct types of dynamic capabilities affecting business model design, innovation and international growth. empirically, we have conducted three exploratory case studies of born global firms that all have acted upon novel opportunities and created new market niches in their journey of internationalization. this article contributes both to the field of international entrepreneurship and born global research and to the emerging business model literature. firstly, it provides longitudinal insights of born global firms past their early internationalization stage and provides insight to how they have sustained international operations and remained competitive for over a decade since inception, which is concurrent with research calls by dimitratos (2005), keupp et al. (2009) and jones et al. (2011). secondly, it enriches our understanding of how the use of business model designs and capabilities to manage business model innovation can contribute to firms’ internationalization and growth. in order to advance the business model research we argue with other entrepreneurship scholars that focus must develop from what business models are towards what business models do (doganova and eyquem-renault, 2009), and consequently how business models are used by the entrepreneurs. finally, the paper identifies and articulates three interrelated type of dynamic capabilities to manage business model innovation in the context of born global firms: sensing capabilities, entrepreneurial capabilities and relational capabilities. theoretical background born globals acting in a highly competitive and turbulent context starting in the early 90’s, research noted that some young entrepreneurial firms followed a different pattern of internationalization, i.e. doing it rapidly after inception and often with a large scope. this contradicted past research of firms internationalization processes, which advocating slow, incremental patterns of internationalization. these young entrepreneurial firms have commonly been labeled either born global firms (knight and cavusgil, 1996) or international new ventures (oviatt and mcdougall, 1994) in the academic literature. they however tend to share a broad common definition, which we also follow in this study: “a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of output in multiple countries” (oviatt and mcdougall, 1994:50). born global firms are often found in knowledge intensive and high tech industries with environmental turbulence (oviatt and mcdougall 1994; autio et. al., 2000: gabrielsson et al., 2004). however, these new and small firms often face dilemmas as characteristics which have facilitated the emergence of these firms, are also providing a set of challenges. these challenges could be in terms of internal and external pressures on the firm to innovate in a fast-phase and being internationally competitive, while these firms often are resource-scarce, niche-oriented, with limited market presence and international experience (weeravardena et al., 2007; sainio et al., 2011). this could provide for difficult tradeoff decisions as how to allocate a limited bulk of resources. (autio et al., 2000; gilbert et al., 2006). arguably, this impacts business model design and business model innovation decisions for born global firms, as resource scarcity and other limitations might inhibit business model innovation. business model design of born global firms the academic interest in business models has increased during the past decade with extensive research focusing on what business models are in form of definitions and conceptualizations, although the construct is still being disperse and inconsistent in scope and focus (se eg. teece, journal of business models (2014), vol. 2, no. 1 pp. 33-55 36 2010; zott et al.,2011). business models have been related to strategy (teece, 2010; chesbrough, 2010), entrepreneurship (george &; bock 2011; huarng 2013) and international entrepreneurship (sainio, et al., 2011). while our research aim is not to involve in the debate of definition of the concept, we contribute to the research field by revealing how business models and business model innovation are used in the context of born global firms, being a specific type of entrepreneurial venture. business model design represents an important component in the opportunity recognition and exploitation of these firms (downing, 2005; franke et al., 2008; george &; bock, 2011). the identification, evaluation and exploitation of opportunities are also an emergent theme in the international entrepreneurship literature (dimitratos and jones, 2005; sainio et al., 2011). the concept of business model being opportunity centric is therefore helpful in further understanding the behavior of born global firms. we follow the broad definition of business models by teece (2010) as the design of how to identify, create and deliver value and how to capture parts of this value. chesbrough et al. (2002) argues that a business model focuses more on value creation and value delivery rather than value capturing and competitive threats, where the latter concepts are more in the realm of strategy. however, as it is claimed by teece (2010) that understanding how to capture value from innovation is a key element of business model design. these two logics of creating and capturing value are therefore intertwined and difficult to separate, in particular in situations of co-creation of value with other actors. zott and amit (2010) defines business models as firms’ activity systems consisting of certain dominant value creation drivers such as novelty, efficiency, complementarity and customer lockin. the efficiency-centered business model design relates to exploitation of business opportunities and the measures taken to achieve transaction efficiency through the business models. a business model designed for lock-in of either customers or partners can be manifested by high switching costs and network externalities derived from the business model design. a noveltycentered business model design relates to the exploration phase in the identification of new opportunities and new ways of doing businesses, which could include different constellation of partners, suppliers, customers and competitors. however the development of new opportunities is challenging for small firms, as is sustaining them over time (bengtsson and johansson 2012). an important capability is therefore how to balance the novelty and efficiency-based business models as well as managing the lockins, in order to sustain competitive over time. over time and as the firm grow, these different value creation drivers and related structures often need to be managed simultaneously and tensions can emanate from their different logic of actions (march 1991). it requires a capability of the entrepreneur to manage a balance in particular between novelty and efficiency as they arguably are based on partially contradictory logics. taken into consideration that born global firms are likely to face a limitation of resources this balance is even more important in order to prosper and grow on international markets. business model innovation business models and their designs are not static structures, but something which constantly needs to be reassessed and re-evaluated, as the hypotheses provided by the business model continuously are tested against a changing reality in the marketplace (teece, 2010; dunford et al., 2010). hence, the need for business model innovation, which could be a pathway to a competitive advantage for firms as well as a form of corporate renewal. similar to amit and zott (2012), we view business model innovation as changes in “how to do business”. specifically, we then consider changes in how firms create, deliver and capture value as business model innovations. thus in concrete terms, this paper will operationalize business model innovation in accordance with björkdahl and holmén (2013) as “…to redefine an existing product or service, how it is delivered to customer and/or how the firm profit from the customer offering.” in terms of firms operating in high-tech industries (as born global firms often are), it is often argued that journal of business models (2014), vol. 2, no. 1 pp. 33-55 37 technological innovation needs to be accompanied by business model innovation in order to capture value (teece, 2010). in essence, a business model could both be a vehicle driving the innovation of the firms as well as being a subject of innovation by itself (zott et al., 2011). however, as prior research indicates, once a business model has been set in an organization with activities and dedicated resources the structure can be difficult to change due to built-up routines with a risk of inertia and resistance to change (zott and amit, 2010). business model innovation is though challenging and barriers for business model innovation could include a cognitive inability by managers to see the value of a new business model as well as resistance in form of established configurations of resources and processes within the firm, which could lead to a state of inertia. (chesbrough, 2010) taken together, the born global firms need certain capabilities to manage a balance between existing business models and business model innovation over time. similarly, both a balance in acting upon novelty and efficiency in business model design, as well as capabilities to re-shape strategic choices according to different and changing market demands are needed (trimi and berbegalmirabent, 2012). capabilities to manage business model innovation george and bock (2011) call for further research into how business models and capability development of entrepreneurial firms may interplay. as born global firms are operating in a highly dynamic and competitive international business environment, with high demands of innovation, the firms arguably need to realign organizational practices, such as business models, to meet ever changing challenges, as discussed in the previous section. thus, going by teece’s (2007) definition of dynamic capabilities: “...capabilities of sensing business opportunities, seizing them and managing threats/transforming the business”, one can pinpoint a connection with change and innovation of the business model with the concept of dynamic capabilities. thus, dynamic capabilities could then be viewed upon as capabilities of sensing business opportunities, seizing them and managing threats/ transforming the business (teece 2007). however, a conceptual paper by zahra et al. (2006) advocates the notion that dynamic capabilities are a higherorder capability, reshaping or reconfiguring lowerorder capabilities, called substantive capabilities. substantive capabilities are fundamentally based on existing functional competences within the firm, whereas, consequently, dynamic capabilities could be utilized for changing or re-configuring those capabilities. (zahra et al. 2006; autio et al. 2011) firms could though be more or less characterized by either substantive or dynamic capabilities at different circumstances or developmental stage and the interplay and balance between the two types of capabilities could be crucial for the firm’s wealth creation (zahra et al., 2006; kreiser, 2011). methodology this paper is built on three exploratory case studies of born global firms in the turbulent global industries of mobile communication, financial services and music distribution. a case study approach has been chosen as we study a context-dependent, complex and understudied phenomenon of how born global firm use business models to act upon opportunities (eisenhardt and graebner, 2007) this approach is most appropriate for understanding how and why firms act and react in managing business model innovations. the case study method allows both the description of network structures of the firms and their development processes over time. the firms studied are seamless ltd., xelerated ltd and toontrack ltd. these three firms have all acted upon new opportunities, used their business models to create and capture value and managed to grow with the use of business model innovation. this is expressed by their growth in number of employees and turnover. all three case companies have during their journeys capitalized on new opportunities and internationalized in a fast phase. descriptive data of the born global firms are provided in table 1. journal of business models (2014), vol. 2, no. 1 pp. 33-55 38 in order to increase the understanding of how business model innovation is managed over time we did undertake a longitudinal approach. we have followed the three case companies over a ten year period. the case study of xelerated was conducted from year 2000 to 2012 (years 2000-2004 were studied retrospectively). the case study of seamless was conducted from 2010 to 2013 (years 2001-2010 were studied retrospectively). similarly the third case study of toontrack was conducted from 2012 to 2013 and retrospectively from its start up. this approach with three case studies in different settings and studied over time can yield further accurate and robust theories compared to a single case study (eisenhardt and graebner, 2007). it also answers calls for longitudinal research on born globals firms and entrepreneurial firms in general (jones and coviello 2004; mckelvie and davidsson 2009). business models can be depicted by “the stories that explain how the enterprise works” (margetta 2002: 97). in order to understand how the entrepreneurs depict their business model and how it evolved, we listen to the entrepreneurs’ stories of how different events and critical incidents emerged during their growth from identifying new opportunity, pursue of technological innovation and how they managed their expansion and growth with the use of business model innovations (maitlis, 2005). these entrepreneurs offer their stories which link their personal aspiration and mindset to the operations, internationalization and growth of the firm, and the social context, therefore their stories offer a substantial ground to identify meaningful patterns (dimov, 2010). data collection the primary data for the study consist of ten interviews with entrepreneurs/ceos and managers table 1: descriptive data of the firms seamless ltd. xelerated toontrack founding year 2001 2000 1999 number of employees (2012) 120 91 (2011) 24 turnover (year 2012) 20, 1 million usd 14,6 million usd (2011) 5,2 million usd international sales % (2012) 80% 100% (2011) 90% isic code 61200 wireless telecommunications 62010 data programing 72190 other science and technological r&d 59200 sound recording and music key innovation platform for pre-paid electronic distribution, mobile payment ecosystem. dataflow architecture for high-speed programmable network processing audio library software for professional and hobby music production. journal of business models (2014), vol. 2, no. 1 pp. 33-55 39 within the firms. the interviews were semistructured and the questions were thematically arranged. the interviews fell in the range of 90120 minutes each. the interviews were recorded and transcribed verbatim close after the interview. the initial interviews focused around the company background, perception of its development from the startup and growth on the international market, and structural questions about its ecosystems of customers, partners, suppliers and competitors and business model design. the following interviews became more structured and theme-based. see appendix 1 for the interview guide used. the respondents were asked to talk freely about their venture, how they sensed and acted upon opportunities in different situations, how and why its business model did change over time as the venture internationalize and grow, critical incidents in their journey and its effects, as well as processes and capabilities needed. the answers were followed up with questions such as “how,” “why,” and requests to “exemplify”. we have systematically analyzed archival data in form of company reports, industry reports, pressreleases and newspaper articles. the archival data was used as important complement to the stories of the entrepreneurs and as historical reference points to capture how and when the companies changed business model in order to capture new opportunities, new customers or entering new market niches. data analysis we started the analytic work by analyzing each entrepreneur’s narratives of their startups, how they acted upon opportunities, and how and why their business model have evolved and changed over time. from the narratives, complemented by archival data, the cases were written up in rather extensive detail to provide a general understanding of the context and chronology of the events. these early case descriptions were sent out to the respondents for approval and correction of any misinterpretations. the aim of this study is to develop theory and the analytic work has been an iterative process going back and forth, coding the empirical data (maanen 1979; nag et al. 2007), and comparing the findings to concept within the literature of born globals and more specifically opportunity identification, use of business models and firms’ capabilities to manage business model innovation. findings seamless our first case is seamless, a born global firm with a very insightful global journey where the firm continuously have used and transformed its business model to innovate, compete and grow on an international market. seamless started as a spin-off in 1999 by an entrepreneur who identified a novel opportunity to rationalize the handling of all mobile pre-paid distributions by making it possible for users to recharge their pre-paid mobile account digitally. seamless pioneered within this niche and with the use of its business model the entrepreneur created a new market. the journey of the firm show how it successfully have innovated, competed and grown on an international market and with several business model innovations over time. the initial business model was designed as a joint venture with the world’s largest card distributor, brightpoint. brightpoint had the market position, the customer base, the codes and seamless had the technology to rationalize the pre-paid distribution. however, at this time the financial crisis came in early 2000 and the entrepreneurs realized that nothing was going to happen on a short-term basis. the entrepreneurs forced themselves to take a step back and reconsider how to proceed. seamless decided at this stage to transform their business model and focus its activities becoming a software license company. with the corresponding business model brightpoint became its customer and seamless could reach the global market through the global customers’ market channel. during this time seamless technological innovation was launched globally in twenty countries and with seamless product the entire market of pre-paid distribution was converted into electronic top up. journal of business models (2014), vol. 2, no. 1 pp. 33-55 40 “we developed a business model that was very successful and long-term it was remarkable nice. we were able to enter into an existing business and converge it into a digital business” founder, vp business development seamless the value creation in this business model was built on a revenue share agreement, with no significant investments required from the customers, or the partners, which opened up for seamless to enter into international markets through established distribution channels. “if we look back it was successful, we travelled all around the world and signed contracts with a number of different companies that wanted to invest in this technology”. seamless grew rapidly on the global markets, however, in 2001 the entrepreneurs found themselves trapped in the design elements of its business model, the company did not capture enough value although it grew rapidly in multiple countries. their partners, sales agents and customers did not invest enough time and resources in order to develop into a viable and scalable business over time. “here we learned the hard way the advantages and disadvantages to not have a business model that requires a firm to commit time and resources or capital investment”, founder, vp business development seamless at this stage, the company transformed its business model once again in order to capture a higher level of value. during this time the company also brought in a new ceo with a background in the telecommunication industry. seamless had operated indirectly with the telecommunication companies, but now it changed its focus and decided to sell directly to the large telecom system providers or to mobile operators. in 2005 seamless started to collaborate with ericsson in selected markets. the business model design at this phase was opposite from the first one. it focused on short-term revenues and mirrored ericsson’s business model of selling licenses. another change with this business model was that seamless took a step back in the value chain, from its position in direct relation with the distributors back to the oem system solutions. in 2007, seamless signed a global partnership agreement with ericsson which enabled the born global firm to reach the leading mobile operators worldwide. this led to several important deals with mobile operators in africa, middle east and asia and the born global firm grew on the international market together with the customer. with this business model seamless technology eventually became an integrated part of ericsson’s prepaid charging portfolio. the set up with ericsson helped seamless to continue to grow on the international market and to learn about the business model design of “pay-as-you-grow” into different market. seamless also directly signed a group frame agreement for the supply of its topup solution with mtn group, the largest mobile network operator in africa and middle east. through the relationship with ericsson and the mobile operators seamless hence successfully entered and grew in the market. the integration of its platform into the system of these multinational partners gave value capture advantages such as long-term revenues and network externalities with a global reach as well as high switching costs. however, the disadvantage was that seamless was a third party supplier, positioned far from the end-customer and more or less invisible as the system is sold as an ericsson product, with a socalled white label model. “we have continued to work with these two business models during the years, we have just refined and configured them towards different customers’ demands”, founder, vp business development seamless in a third phase during 2011-2012, seamless once again innovated with a new business model, building on the established technological platform and distribution system of the company. seamless journal of business models (2014), vol. 2, no. 1 pp. 33-55 41 got a new shareholder and ceo with background in the financial service segment and developed a new, third business model for the mobile money segment. at this stage, the organization found itself very colored by firstly the internet-based business model build on transaction and secondly the oem model from telecommunication. however, seamless now made a strategic move from selling products to become a service provider and released its solution seqr for mobile payment. the value proposition to the customer, retail stores builds on cost-effectiveness and seamless mobile money solution offer a decrease of 50 percent of the retailer’s costs of transaction. by business model innovation could seamless entered into the mobile money market and were able to position it selves on the top of the value chain in direct interface with the end-customer. “for the first time with seqr we are taking the “elevator“ up to the top of the value chain, we are no longer at the bottom floor, now we are in the penthouse”, founder, vp business development seamless in 2013 seamless had signed contracts with a number of international retail chains such as mcdonalds as well as leading retail chains in sweden (such as axfood, mekonomen and nilson group) and other segment such as q-park, one of the largest car parking operators. seamless saw the potential with the existing customer base of millions of customers and billions of transactions from the digital distribution system and by innovating with the business model and position themselves on the top of the value chain. with this third business model innovation the company felt confident to not be a sub-supplier position under a bank or a telecom vendor as it includes the risk of being dependent as well as exchangeable during time when the technology matures and the competition is built on price. with the business model invented for the mobile money segment the strategy is to expand the company and raise the volume of transaction and businesses; comparing its business model to google’s, building on scale and large volumes and to charge for added value services. however, although this business model holds a number of potential it is also comes with huge risks. building an own brand towards end-customer are very costly, especially for a sme. however, it is a strategic choice made by seamless and it’s seqr portfolio to not position itself further back in the value chain. “coincidently, we are in a way closer to the business model in stage one again, however, this time the revenues are higher and we are in control, which is a combination of financing and position in the value chain” founder, vp business development seamless the company currently uses all of the above mentioned business models as each business opportunities require a unique business model. the challenge with having multiple business models is however how to manage a balance and to combine the different business model designs. “it’s the challenge to balance these to gain revenue and invest in the new business model which is very expensive ...it is gas and brake applied all the time” the company also changed its internationalization strategies and decided to internationalize and grow through setting up own offices globally. in 2012 seamless had offices in cities such as accra, calcutta, lahore, mumbai, riga, lodz and sweden. in january 2013 it opened offices in england and poland. xelerated the second case is xelerated, a born global firm that has gone through a process of pursuing technological innovation where both technological and market opportunities have been capitalized with the use of the firms boundary spanning business model. xelerated is specialized on programmable network processors with a patent journal of business models (2014), vol. 2, no. 1 pp. 33-55 42 of a technology for programmable processing i.e. the dataflow architecture. its business model has throughout journey focused on r&d, design and sales as the production of the hardware is outsourced to a silicon foundry in taiwan. xelerated has deliberately changed the design elements in form of structure and content of the firm’s eco system and network relationship of internationalization and growth. xelerated started in august 2000 as a spin-off by four experienced engineers. the founders had an innovative idea about how to control the data flow and invented architecture for programmable network processing of data at a very high speed. in the start-up phase the business model design was to develop the product, define and patent the dataflow architecture surrounding the application, search for external funding and recruit key staff. the network relations of the founders have always been the cornerstone in the company’s action and vital part of the firm’s creation of value. the founders had a list with names of people they wanted to recruit; former colleagues, people they knew to be competent engineers and trustworthy persons with extended personal networks in the industry. xelerated went from eight to thirty employees in eight months during the start-up phase. already in the start-up phase xelerated started to build an ecosystem of partners around its product. these partnerships are an important cornerstone in xelerated’s business model as its product is dependent upon interoperability with a number of partners. for example, in 2001 xelerated initiated a partnership agreement with netlogic, a partnership that have followed the born global firm through its journey to being recognized worldwide as a leading technology partner for high-speed network processing. “having a best-in-class network search engine supplier like netlogic is critical to our success”, founder, ceo xelerated in 2003 xelerated received their network processor chip from its foundry, two and a half year after the company started and during this time the major market and sales phase began. the customers were multinational it and telecom system vendors, such as fuijitsu and huawei. in this phase, xelerated initiated cooperation with large partners to gain legitimacy in the sales activities with the global customers. xelerated initiated a distribution agreement with infineon a large supplier of semiconductor chips. through this collaboration xelerated accessed a global customer base. “our joint efforts have already paid off and by working with infineon’s worldwide sales force we will be able to go after an even larger customer” founder, ceo xelerated the business model arrangement between the two firms was that infineon had production rights that could be used if xelerated were unable to deliver its product. this arrangement reduced the customer’s perceived risk of doing business with a small firm. xelerated benefited from infineon’s credibility and resource strength as a large firm in their interactions with global customers, which was important for their development and growth. xelerated continued to build the ecosystem around its product as a part of the firm’s boundaryspanning business model activities and made a number of joint sales trips with partners. in year 2002 xelerated built strategic alliances with companies such as pmc sierra, idt and dune network to secure interoperability and to do joint sales activities. the ecosystem of partners and interoperability between the parts was needed in order to deliver value to the global customers, which is illustrated with the following quotations. “demonstrating interoperability at highspeeds is a significant milestone that clearly shows xelerated is on track and delivering on its promises”, analyst the linley group journal of business models (2014), vol. 2, no. 1 pp. 33-55 43 “the partnership enables the development and deployment of system solutions that meet the rigorous demands for new generation”, vp strategic marketing idt. “our joint customers want to leverage their development investment across entire product families rather than point products”, founder, ceo xelerated. in 2006 the large chinese equipment vendors huawei and zte selects xelerated product for its next generation network. china is an important growing market for xelerated and gaining these leading firms as global customer made a clear footprint. in 2010, huawei recognizes xelerated as its best supplier, with ibm and xilinx; shortly after, xelerated was recognized as a core competence partner within a network of hundred companies. this strong recognition increased its legitimacy in negotiations with other large telecom providers. throughout the journey xelerated have kept a business model where 60 percent is focused on r&d activities with the strategy to sustain a front position and value proposition as being a best-of breed company. companies with best-of-breed products have pioneered a segment and have developed most features of their products. the global customers want to include best-of-breed products into their solutions to deliver the most cutting edge technology to the market. 4.3 toontrack toontrack, our third case company, started out in 1999 and was founded by a team of entrepreneurs with a passion for music and knowledge in writing computer software. the founders recognized an opportunity for simplifying music production for professionals and enthusiasts alike and in turn creating value for them by decreasing the time and costs involved by producing music. “i believe that the timing was right for this when we first started out, as previously normal pc’s would not yet be powerful enough for this type software to create much value”, ceo toontrack toontrack’s software permitted the user to use a pre-recorded audio library of drum sounds and insert those sounds into a music production by the user. this was a novel concept in the music industry at the time and soon the founder’s found themselves getting email orders through the website from around the world to their office in one of the founder’s apartment. the software was then just burnt on a cd and physically shipped by postal mail to the customer. since then, the company has grown to 24 full-time employees and a turnover of almost 5.2 million usd the vast majority coming from international sales, by the end of the fiscal year 2012. over time, the business model of the firm has evolved as well, to facilitate this international growth of the firm. with the software and corresponding business model toontrack developed a new market niche as illustrated by the following quotation; “you can say that we started out just like a classical type of mail-order company. there was also no market for this before us, as we developed the product, we developed the market”, ceo toontrack rather quickly, toontrack decided to supplement the initial online sales business model, which existed from day one, with physical distribution to music stores. in 2002, toontrack had already secured a contract with sony and other international video game developers, for usage of the toontrack audio library in video games. the following year, the company reached a distribution agreement with a large north american distributor, journal of business models (2014), vol. 2, no. 1 pp. 33-55 44 for a wider release of toontrack’s products in the united states through retailers in physical stores. as quoted in 2004: “this is the world’s most innovative and highly developed audio library and it will set a future international standard for this type of software”, co-founder and then ceo toontrack even today, the sales revenues from the physical stores exceed those from the online sales. “the gap (between the sales channels) is closing in and will probably continue to do so, but at the moment the majority of our sales comes from the physical stores”, ceo toontrack one of the advantages with selling through physical stores is that it decreases the costs of marketing for the young firm, which is still today only owned by its original founders and has never taken in any external ownership or capital. toontrack soon learned the upsides of getting contracts with international distribution firms to get access to resellers abroad and thus tap into the international demand for their products, across both geographical as well as cultural boundaries. “obviously it is difficult for us here in sweden to even know the five best stores to get into in say france or japan, much less getting in touch with them. that is why the distribution contracts have been very beneficial for us in that regard. it could save us time, money and increases the scope of our market”, ceo toontrack initially, this paid off quite well for toontrack, by the end of 2005; the company had doubled its turnover for three consecutive years and had been profitable since its inception. however, having these distribution agreements also comes with a set of challenges, such as lack of control of the product for toontrack and also the risk of losing the distributor if toontrack’s product does not meet certain sales targets and sometimes the distributor’s willingness of marketing the product could decrease as well if they see a lack of interest from the re-seller side. obviously, enlarging its value chain with distributors and resellers of course also cuts in the firm’s value capturing ability in this business model. recently, toontrack cancelled the agreements with the distributors in germany and the united states and exchanged it with a business model to deal directly with the stores for the purpose of gaining increased control of its products in those markets. technological development, such as the increasing ease of downloading the software, is also contributing to the decreasing importance of distributors. as a function of that, the value delivery and value capturing aspects of toontrack’s business model will likely adapt to these changes in both technology and customer behavior. “it was not really possible to do the download type of business model before 2005, but today it is an established way of buying and delivering software. i think it will develop more as well, meaning that the customer will be more and more likely to buy directly from the producer.” ceo toontrack today, the niche market for music producing software has matured considerably and toontrack could identify 3-4 main competitors to them on the international market and they are all using largely the same type of business models. instead, the firms are mainly competing with price. even though there are constant, albeit rather incremental, innovations in the product lines, such as toontrack recently launching software set for piano sounds, leap-frogging away from the competitors is not easily accomplished. “there is constantly a low-intensity war going on and everyone is watching what everyone is doing. if we release a new product today, journal of business models (2014), vol. 2, no. 1 pp. 33-55 45 everyone else will be doing the same or similar things tomorrow. or vice versa.” ceo toontrack however, the launch of the piano sound library in 2012, was however considered as a significant innovative step by the firm themselves and by their customers. “some of the customers think it is strange since our focus is drums. this is a completely different thing than we normally do; it is the same if volvo would create bikes.” ceo toontrack at the same time, toontrack still has to leverage and exploit its current product line and relationships, while actively trying to scan for input from a variety of stakeholders, such as partners and customers, to come up with both new and innovative products and well as potential business model innovations. in a rapidly changing business context such as computer software, toontrack has evolved from burning cd’s at an private apartment and posting physical goods to its customers, to a business model having customers directly download the software and receiving updates online from toontrack, diminishing the importance of a vast network of international distributors, the decreases both control and sales margins for the focal firm. the latter business model also provides toontrack with more avenues for direct contact with the customer and thus learning more about the customer’s ideas, behavior and needs. “we can see that we have room for making things easier for the customer in terms of purchasing and registering the products online. i also believe that customer contact is becoming more and more important, we want to be a firm that the customer could access easily to provide feedback and that really helps us as well.”, ceo toontrack “i guess that few people know what will happen to a company’s business model in five years or whatever amount of time. the only certainty is change, one way or the other. obviously we have to be ready for that, while still capitalizing what we are good at right now.” ceo toontrack by the end of 2012, toontrack was nominated for “digital gazelle company of the year” in sweden, an awarded jointly given by google and the swedish business media. the aim of the award is to celebrate companies which are in the cutting edge of capturing online business opportunities creatively and efficiently. in the motivation for the nomination, the steps towards the newer business model of toontrack were highlighted in the press release: “toontrack is a first-rate example of how the internet is not merely a sales channel, but has the ability to act as an international storefront towards a global market”. discussion and analysis design of business models to act upon new opportunities in line with previous research, our study demonstrates how the firms acted upon new opportunities to create and capture value with the use of business model designs, which in turn helped the firms to shape, and modify the business opportunity (downing, 2005; franke et al., 2008; george and bock, 2011). previous conceptual research proposes that entrepreneurial firms in early stages need to experiment with business model design to test the market and to act upon, or reject business opportunities (trimi and berbegal-mirabent, 2012). the empirical insights in this article reveal how the three case companies differed in the ways they identified and created value of novel business opportunities in emerging markets niches. seamless identified an journal of business models (2014), vol. 2, no. 1 pp. 33-55 46 opportunity to digitalize the prepaid distribution of mobile accounts. the initial business model design aimed at establishing a joint venture with a large distributor, brightpoint, which resulted in an important customer relationship that enabled them to reach the global market with its invention. xelerated invented a new data architecture and network processor and needed similar to seamless to collaborate with large partners, or customers to exploit the market and internationalize. xelerated further needed to build an ecosystem of complementary partners from its inception, in order to deliver value to the global customers. while toontrack, in turn, could implement its online mail order business model to generate sales from day one, but at the later stage found itself in a situation where partnering with distributors and resellers were necessary for facilitating efficiency in terms of value delivery and further international growth. the three cases thus imply the importance of the designing a boundary spanning business model and to include partnering with large actors in the early internationalization of born global firms. which is also in line with that business models in high-tech smes do not develop without significant cooperative relationships with other actors in the field (nummela et al,. 2004). this leads us to the first proposition: consequently, the following proposition is developed: p1: early-stage born global firms can utilize its partnering agreements with large actors to break out on international markets through a dynamic use of its business model design. the initial value creation driver for all three companies was built on novelty in creating new technologies and value offerings (zott and amit, 2010). the novelty-based business models by the case companies were to a different extent combined with elements of lock-ins of customers and/or complementary partners (sainio et al., 2011; oviatt and mcdougall, 1994). we find that the partnering and the capability to build an ecosystem to cocreate value are deeply integrated and virtually inseparable from the business models as such. this finding partially contradicts that of hennart (2013), who diminishes the importance of networks in favor of the business model as an explanation for born global firms’ internationalization. moreover, in line with previous studies, the present study demonstrates that designing an opportunity centric business model requires intuition and a deep understanding of the key customer’s needs (teece, 2010). through the close relationship with large, global customer, xelerated and seamless developed a deep understanding of the customers’ needs and future roadmaps, which enhanced the sme’s abilities to foresee future demands on international markets. xelerated managed to develop elements of lock-in effects with both its large customers and ecosystem partners, due to the long product life cycles of the established systems, including both high switching costs of components and the customer advantages of network externalities (zott and amit, 2010). seamless initial business model around its platform of prepaid distribution created similar customer lock in as once its platform is integrated into an oem system, the switching costs are high as well as it generates advantages of network externalities. toontrack, however, differs from seamless and xelerated in the sense that they target two different types of end-consumers, professional and “hobby” musicians. thus it managed to create a lock in effect in their business model by the use of building legitimacy from users of the software, (podolny 1994; dacin et al., 2007). in form of well-known professional musicians, such as members in rock bands like motley crue, megadeth, def leppard and meshuggah. this leads us to the second propositions: p2: through lock in strategies together with a close understanding of customer needs, born global firms’ can enter the larger customers international markets and capture value. capabilities to manage business model innovation for internationalization our study further demonstrates how the born global firms developed and renewed their business models through processes of learning, experiencing journal of business models (2014), vol. 2, no. 1 pp. 33-55 47 and adopting to changes (chesbrough, 2010; doz and kosonen, 2010). specifically, we articulate three critical and interrelated capabilities facilitating business model innovation for born global firms to internationalize and grow in our analysis. these dynamic capabilities are sensing capability, entrepreneurial capability and relational capability, and are in line with teece (2007; 2010), in regards to how dynamic capabilities could interplay with changes in the business model. the capabilities are manifesting themselves in different forms and fashions, depending on the firm’s internal dynamics, roles and positions in value chains, and the overall industry context at a given time. seamless had new perspectives infused through their different market strategies and position in the value chain, while xelerated drove towards enhancing its ecosystem and its own position by well-known, legitimacy building partners (dacin et al., 2007). toontrack in turn acted upon the opportunity when it recognized that the industry and customer acceptance had reached a point were direct downloading were commercially viable. the overarching commonality between these dynamic capabilities is however that they contribute to change where the capability to manage business model innovation drive these changes. the journey of seamless, from the firm’s inception, demonstrate a sensing capability of capturing new opportunities to develop and build from its first technological innovation, the platform for prepaid distribution, to continuously sense and act upon new opportunities with a process of business model innovation. seamless’ journey show the capability to assemble resources for acting on and creating new business opportunities, which in accordance to karra (2008) would make the firm’s entrepreneurial capability high (see also zang et al., 2009). however, in seamless case the entrepreneurial capability created internal tensions as the company found itself being locked-in by the oem business model with its large customers. in order to manage this situation seamless uses relational capabilities in combination with continuous business model innovation to maneuver in its networks and enter new product markets and customers (lee 2007; andries and debackere, 2007). in the case of xelerated, the born global firms’ business model has been continuously characterized by a strong focus on r&d, design and sales activities and thus technology as well as market sensing for development purposes. entrepreneurial capabilities and strong relational capabilities have also been evident in the firm’s journey, as it enabled it to create a new market and to retain its position and best-of-breed status of its products over time. the cases of seamless and xelerated further show how lock-in strategies are two-sided in the relationship between large and small firms. the large customer use lock-in strategies to take control and incorporate the technology into its oem solution (bengtsson and johansson, 2012). however, the small firm uses business model design to lock in the large customers as well. these action and reactions need to be managed through business model innovation over time in order for the small firm to sustain competitiveness and independence. toontrack have honed a strong sensing capability and actively scans competitors, customers and technological trends for the purpose of potential change and reconfiguration. the entrepreneurial capability of toontrack manifested itself for instance in the launch of the piano audio library, thus acting on a new opportunity in the market, in line with karra’s (2008) notion of entrepreneurial capability. as for relational capability, toontrack have been able to leverage resources from a dynamic usage of partners such as distributors and resellers for international growth and increasing the firm’s own knowledge base, thus spurring further innovation in the firm. p3: born global firms idiosyncratically utilize its sensing, entrepreneurial and relational capabilities to manage business model innovation over time. moreover, as presented by zahra et al. (2006) and kreiser (2011), we also found that these firms possesses substantive capabilities as journal of business models (2014), vol. 2, no. 1 pp. 33-55 48 well and that they at different points in time of the firm’s development and growth, could be more characterized by influences of substantive rather than dynamic capabilities. this could delay business model innovation or slowing down the process. which could be exemplified in our cases by firms being locked-in into a oem business model or a position in a value chain through their partnerships, generating substantive “being good at what you do” type of capabilities. it is mostly evident in the cases of seamless and xelerated. for toontrack, the issue could be seen in a reluctance of venturing into new products, when they were already established with the drum audio software and arguably reaching a “comfort zone”, honing the development of substantive capabilities in the firm. the same could be said about the firm’s rather slow process towards direct downloading of the software as the model for purchase. the often young and resource-scarce born global firms are depending on its ability to make the correct tradeoff decisions in a highly competitive international marketplace. hence, we argue that the balancing capability of the firm’s management could balance the dynamic and the substantive capabilities of the firm and thus moderating the speed and scope of business model innovation. this leads us to the following proposition: p4: born global firms need to utilize a balancing capability for managing explorative and exploitive elements of business model innovation this notion is highlighted in the cases, where for instance seamless through its continuous business model innovation and changes in its management structure allowed the balance between the capabilities to be favorable changed for the firm at different points in time. for toontrack, its strong sensing capability have played a large role for the management towards balancing tendencies towards complacency with the instilling the need to respond to market and technological shifts with changes in the business model. similar could be noted for xelerated, as through its intensive r&d efforts and sensing capability, have pushed the firm’s management to effectively balance the overall dynamic and substantive capabilities to avoid lock-ins and business model inertia (chesbrough 2010; zott and amit 2010). conversely, the balancing capability could also come into play for making sure that the business model innovation does not go too fast for the market. case in point could for instance be toontrack’s slow shift towards direct downloads, where the business model innovation is balanced and moderated by the management, in order for the market to adjust to the technological shift incrementally. conclusions this paper contributes to both the literature of born globals and business models in different ways. first, several calls for further research in the area of international entrepreneurship and born global firms have asked for studies of firms beyond early internationalization and firms of a very young age (dimitratos, 2005; keupp 2009; jones et al. 2011). secondly, how these firms can sustain their international operations and remain competitive over time, have been another recurring theme in research calls (keupp, 2009). thirdly, the concept of business models has not been used in born global research to a large extent previously (dunford et al. 2010). therefore, this study contributes to the literature of born global firms by looking at born global firms which are all more than 10 years of age and who has managed to sustain their competitiveness internationally since their inception. specifically, we shed lights upon how the business models and the capabilities to manage business model innovation have contributed to the growth and development of these born global firms. fourth, we identify and articulate three critical and interrelated capabilities used in the processes of business model innovation for the studied born global firms, namely opportunity sensing capability, entrepreneurial capability and relational capability. these inter-related capabilities are important for the firms to identify new opportunities and manage business model innovation over time in order to prosper and grow. this paper extend prior research of smes alliance journal of business models (2014), vol. 2, no. 1 pp. 33-55 49 portfolio management capabilities (bengtsson and johansson 2012) with the specific focus on born global firms business model design and capability to manage business model innovation over time, explicitly using these three capabilities to sensing novel opportunities, leverage network relationships to enhance its visibility and climb the ladders of their value chains. moreover, born global firms could then be argued to have a need for balancing the dynamic and the substantive elements of their capability portfolio for facilitating optimized value capturing from their business model innovation efforts. this as novelty-based business models, business model innovation and dynamic capabilities (zott and amit 2010; teece 2007; 2010) for spurring the former, could be considered explorative efforts. similarly, efficiency-based business models and substantive capabilities could be seen as exploitative measures in this context. thus, this study highlights how these born global firms needs are utilizing a balancing capability from their management for effectively balancing the elements of exploration and exploitation in regards to business model innovation. this line of thought in regards to the exploration-exploitation duality is line with nielsen and gudergan (2012), as we thus argue that exploration and exploitation in this context represents different objectives and intentions, resulting in different outcomes for the firm. this differs from the continuum view of exploration and exploitation (i.e. march, 1991). as the cases have highlighted, business model innovation could be more incremental or radical depending on the context and the situation facing the firm at a particular point in time. finally, prior conceptually based research states that “the process of defining, adjusting and improving a business model is a complex art that needs further research efforts” (trimi and berbegalmirabent 2012: 455). this study complement previous studies of born global firms as well as the growing research on business model innovation by providing insights of the journey of three born global spanning over a ten year period, how these firms design business models to act upon business opportunities and the capabilities to manage business model innovation over time in order to internationalize and grow. future research this paper provides several interesting potential avenues for further research in the area of how business models are used. for instance, in our cases we noted that firms often used multiple different business models in parallel to each other. this is an issue not explicitly looked at in past research and we believe more knowledge is needed in order to understand how multiple business models are balanced by often resource-constrained smes, as well as drivers for opting to work with parallel business models. this could be viewed upon in the context of born global firms as well as in other types of firms; arguably this avenue of research is best suited for qualitative case studies. another interesting venue for further research is to further scrutinize the lock in and lock out strategies as act of balancing the asymmetric relationship of small and large firms and its effects. we also see a need to further explore the role of networks in the business model of born global firms. hennart (2013) for instance, treat networks and collaborations separately from business models, while arguing that latter are a more significant driver for the development of born global firms. in our paper, we see a rather distinct connection between the use of networks, business models and dynamic capabilities in the context of born global firms. this could be further investigated quantitatively, through survey data, as well as through case studies. for instance, by looking at the dynamic capabilities involved and potential business model implications of network re-configurations by born global firms. additionally, the set of propositions provided here could use further empirical testing, either as a part of a survey or through qualitative work in different industry or geographical settings. managerial implications this study provides a set of practical implications for managers in growing and maturing born global firms. journal of business models (2014), vol. 2, no. 1 pp. 33-55 50 these implications are not limited to born global firms and can, to some extent, be transferable to other, similar types of firms as well. firstly, we see that without a carefully designed business model, relevant for the current stage the firm is in, technological innovations will fail to capture a market. thus, the business model is at least as important for the success of ventures as the technical innovativeness. secondly, as the firm evolves, so should the business model. the business model which allowed the firm to enter global markets in first place will likely not be the business model for sustained growth as the firm matures. this is due to ever-increasing global competition, technological advancements and changes in customer behavior, for instance. thirdly, as the cases in this study have highlighted, business model innovation is a process which require certain capabilities and needs to be managed carefully. at one hand, the firm needs to sustain competitiveness and avoid inertia, even at a rather young age, but at the same time not moving too fast and alienate customers. finally, the firm’s external networks and partnerships should be treated dynamically and hence be adjusted and/or re-configured as the firm’s business model changes overtime. references amit, r. & zott, c. (2012). strategy in changing markets: new business models creating value through business model innovation. mit sloan management reviews, 53, pp. 41–49. andries p. & debackere k. (2007) adaptation and performance in new businesses: understanding the moderating effects of independence and industry, small business economics, 29(1-2), pp. 81-99 autio, e., george, g. & alexy, o. (2011.) international entrepreneurship and capability development-qualitative evidence and future research directions. entrepreneurship: theory &; practice, 35, pp.11–37. bengtsson, m. & johansson, m. (2012). managing coopetition to create opportunities for small firms. international small business journal, (december). available at: http://isb.sagepub.com/cgi/doi/10.1177/0266242612461288 [accessed january 11, 2013]. björkdahl j. & holmén m. (2013) editorial: business model innovation – the challenges ahead. int. j. product development, vol. 18, no 3-4. pp. 213-255. chesbrough, h. & rosenbloom, r.s. (2002). the role of the business model in capturing value from innovation : evidence from xerox corporation’s technology spinoff companies. business, 11(3), pp.529–555. chesbrough, h. (2006) open business models: how to thrive in the new innovation landscape. harvard business school press. casadesus-masanell, r. & ricart j.e. (2010) from strategy to business models and onto tactics. long range planning 43.(2) pp. 195-215. coviello, n. e., & jones, m. v. (2004). methodological issues in international entrepreneurship research. journal of business venturing, 19(4), pp. 485-508. coviello, n.e. (2006) the network dynamics of international new ventures. journal of international business studies 37(5) pp. 713-731. dacin t.m., oliver c. & roy j-p. (2007) the legitimacy of strategic alliances: an institutional perspective. strategic management journal 28(2), pp.169-187. de clercq, d. & voronov, m. (2009) toward a practice perspective of entrepreneurship: entrepreneurial legitimacy as habitus. international small business journal, 27(4), pp.395–419. journal of business models (2014), vol. 2, no. 1 pp. 33-55 51 downing, s. (2005) the social construction of entrepreneurship: narrative and dramatic processes in the coproduction of organizations and identities.entrepreneurship theory and practice 29.2 (2005) pp. 185-204. dimov, d. (2010) nascent entrepreneurs and venture emergence: opportunity confidence, human capital, and early planning. journal of management studies, 47(6), pp.1123–1153. dimitratos, p. & jones m.v. (2008) future directions for international entrepreneurship research.international business review 14.2, pp. 119-128. doganova, l. & eyquem-renault, m. (2009). what do business models do? research policy, 38(10), pp.1559–1570. dunford r. & palmer i., benveniste (2010) business model replication for early and rapid internationalization, the ing direct experience, long range planning 43(5-6) pp. 655-674. fernhaber, s.a., mcdougall, p.p. & oviatt, b.m., 2007. exploring the role of industry structure in new venture internationalization. entrepreneurship: theory and practice, 31(4), pp.517–542. franke, n., gruber m., harhoff d., henkel j. (2008) venture capitalists; evaluations of start-up teams trade-offs, knock-out criteria, and the impact of vc experience. entrepreneurship theory and practice 32, 3, pp. 459-483. gabrielsson, m. et al. (2008). born globals: propositions to help advance the theory. international business review, 17, pp.385–401 george, g. & bock, a.j., (2011). the business model in practice and its implications for entrepreneurship research. entrepreneurship: theory and practice, 35(1), pp.83–111. gilbert, b.a., mcdougall, p.p. & audretsch, d.b., (2006). new venture growth: a review and extension. journal of management, 32(6), pp.926–950. helfat, c.e. & peteraf, m. a., 2009. understanding dynamic capabilities: progress along a developmental path. strategic organization, 7(1), pp.91–102. hennart, j. (2013). internationalists : a theory of born globals. entrepreneurship theory and practice.in press: doi:10.1111/etap.12076 huarng, k-h. (2013) a two-tier business model and its realization for entrepreneurship. journal of business researchm in press. jones, marian v, nicole coviello, and yee kwan tang (2011). international entrepreneurship research (1989–2009): a domain ontology and thematic analysis. journal of business venturing 26.6 pp. 632-659. keupp, m.m. & gassmann o. (2009) the past and the future of international entrepreneurship: a review and suggestions for developing the field.. journal of management 35(3) knight, gary a, & tamer cavusgil s. (2005). a taxonomy of born-global firms. mir: management international review (2005), pp. 15-35. kreiser, p.m. (2011) entrepreneurial orientation and organizational learning: the impact of network range and network closure. entrepreneurship theory and practice 35.5 pp. 1025-1050. lee g.k. (2007). the significance of network resources in the race to enter emerging product markets: the convergence of telephony communications and computer networking 1989-2001. strategic management journal, 28 pp. 17-37 nielsen, b. b., & gudergan, s. (2012). exploration and exploitation fit and performance in international strategicalliances. international business review, 21(4), 558–574. journal of business models (2014), vol. 2, no. 1 pp. 33-55 52 maanen, j. van, (1979). the fact of fiction in organizational ethnography. administrative science quarterly, 24(december). march j. (1991) exploration and exploitation in organizational learning, organizational science 2, pp. 71-87. magretta, j. (2002) why business models matter. harvard business review, 80(5) pp. 86-92. maitlis, s. (2005). the social process of organizational sensemaking, university of british columbia. , 48(1), pp.21–49. mcdougall, p.p., shane, s. & oviatt, b.m. (1994) explaining the formation of international new ventures. the limits of theories from international-business-research. journal of business venturing, 9, pp.469–487 mckelvie, a., & davidsson, p. (2009). from resource base to dynamic capabilities: an investigation of new firms. british journal of management, 20(1), pp. 63-s80. moen, o. &; servais, p. (2002) born global or gradual global? examining the export behavior of small and mediumsized enterprises. journal of international marketing, 10, pp.49–72. oviatt, b.m. & mcdougall, p.p. (1994). toward a theory of international new ventures. journal of international business studies, 25, pp.29–41. podolny jm (1994). market uncertainty and the social character of economic exchange. administrative science quarterly 39(3) pp. 458–483. prange, c. &; verdier, s. (2011). dynamic capabilities, internationalization processes and performance. journal of world business, 46(1), pp.126–133. saino l.m., saarenketo s., nummela n., eriksson t. (2011) value creation of an internationalizing entrepreneurial firm, the business model perspective, journal of small business and enterprise development, 18(3) pp. 556-570. santos, f.m. &; eisenhardt, k.m.. (2009). constructing markets and shaping boundaries: entrepreneurial power in nascent fields. academy of management journal, 52(4), pp.643–671. schilke, o., 2013. on the contingent value of dynamic capabilities for competitive advantage: the nonlinear moderating effect of environmental dynamism. strategic management journal, 203(january 2012), pp.179–203. strauss a and corbin j (1990) basics of qualitative research. newbury park ca: sage. teece, d.j. (2010) business models, business strategy and innovation. long range planning, 43(2-3), pp.172–194. teece, d.j. (2007). explacing dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance, strategic management journal, 1350(august), pp.1319–1350. trimi, s., & berbegal-mirabent, j. (2012). business model innovation in entrepreneurship. international entrepreneurship and management journal, 8(4), 449-465. zahra, s.a., sapienza, h.j. & davidsson, p.(2006) entrepreneurship and dynamic capabilities: a review, model and research agenda. journal of management studies, 43(4), pp.917–955. zott, c. & amit, r, (2007). business model design and the performance of entrepreneurial firms. organization science, 18(2), pp.181–199. zott, christoph &; amit, raphael, (2010) business model design: an activity system perspective. long range planning, 43(2-3), pp.216–226. weerawardena, j.. mort g.s., liesch p.w., knight g. (2007). conceptualizing accelerated internationalization in the born global firm: a dynamic capabilities perspective. journal of world business, 42, pp.294–306 journal of business models (2014), vol. 2, no. 1 pp. 33-55 53 appendix 1: interview guide background: can you briefly describe your business today? overall on the network, the present situation: customers suppliers partners competitors business models how does your business model look like? (if possible, draw it) why have you chosen / developed this model? has it changed over time, if so how and why? what are the driving forces have been behind the change of the business model, what effects have it had? business models cases can you describe two different internationalization cases that you have done recently with a client or with partners? the process, from product/service introduction to customer contracts (or vice versa). can you describe one or more critical incidents that had an impact on how the project / business evolved? business models and international growth do you believe that the business model and the innovations made to the business model overtime (if any) has contributed to the growth of the firm , and in that case , how and why? do you believe that your current business model is replicable across the international markets you are current active on and consider to be active on? if so/not, why? what challenges do you see for the future with the business model you have today and your international growth? o organizational o technological / knowledgebase o relational ( customers , partners, competitors ) what opportunities do you see your business model and your international growth? a technological / knowledgebase b. related market c. strategic journal of business models (2014), vol. 2, no. 1 pp. 33-55 54 business models and capabilities what do you see in terms of skills / abilities in the company? how does your network and even competitors affect the learning the building of competences/skills/capabilities within the company and it has affected the business model? do you work actively to create market changes on your own/ create new markets? how, if so? how can it affect the business model? are there any mental barriers in the organization that makes it difficult to change the business model? § for example, we are so used to doing this it’s hard to see it any other way how can you characterize your company´s willingness to act upon changes; do you act or react upon changes in the environment? summering up do you think that your business model(s) are the same in three, five or ten years? how, why, can you give examples. is there anything else you would like to add that we have not discussed related to the business models and internationalization? journal of business models (2014), vol. 2, no. 1 pp. 33-55 55 about the authors dr marlene johansson is an assistant professor of entrepreneurship and innovation at the entrepreneurship section, umeå school of business and economics. marlenes current research interest focus on business model innovation, entreprenurship, coopetition and strategic alliances. she has published in journals such as international small business journal, the imp journal, and european business review. apart from research she is currently studio director for sliperiet, a unit for collaboration, creativity and innovation at umeå university. jan abrahamsson is ph.d candidate at umeå school of business and economics, within the unit of entrepreneurship and innovation. jan’s position is partially financed through the ciir (centre for inter-organizational innovation research) project, a swedish national excellence centre within business research. his research focuses on internationalization, development and business models of entrepreneurial firms. he furthermore has a bsc degree from luleå university of technology in business administration, focusing on both management accounting and industrial marketing as well as a msc from umeå school of business and economics, focused on business development and internationalization. he also have previous professional working experience from entrepreneurial firms within the ict sector.